Document_and_Entity_Informatio
Document and Entity Information (USD $) | 9 Months Ended | |
Oct. 31, 2014 | Jul. 31, 2014 | |
Document and Entity Information: | ||
Entity Registrant Name | Strainwise, Inc. | |
Document Type | 10-Q | |
Document Period End Date | 31-Oct-14 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 1400683 | |
Current Fiscal Year End Date | -30 | |
Entity Common Stock, Shares Outstanding | 26,948,884 | |
Entity Public Float | $0 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q3 |
CONDENSED_BALANCE_SHEETS_Unaud
CONDENSED BALANCE SHEETS (Unaudited for October 31, 2014) (USD $) | Oct. 31, 2014 | Jan. 31, 2014 | ||
Current assets: | ||||
Cash | $180,840 | $100 | ||
Due from affiliated entities (assets) | 1,017,077 | |||
Prepaid expenses and other assets - current | 27,127 | 10,000 | ||
Total current assets | 1,225,044 | 10,100 | ||
Commercial operating property | 656,000 | [1] | 0 | [2] |
Tenant improvements and office equipment | 2,102,775 | [3] | 10,501 | [4] |
Prepaid expenses and other assets | 346,187 | 0 | ||
Trademark | 10,400 | [5] | 10,949 | [6] |
Total assets | 4,340,406 | 31,550 | ||
Current liabilities: | ||||
Accounts payable | 344,867 | |||
Deferred tax liability | 52,814 | |||
Due to affiliated entities (liabilities) | 50,203 | |||
Current portion of tenant allowance note and mortgage payable | 563,644 | |||
Total current liabilities | 961,325 | 50,203 | ||
Note payable for tenant allowances | 443,785 | |||
Mortgage payable | 297,460 | |||
Deferred rent | 207,201 | 3,273 | ||
Total liabilities | 1,909,771 | 53,476 | ||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||
Additional paid in capital | 2,310,992 | 48,292 | ||
Retained earnings (deficit) | 119,643 | -70,218 | ||
Total stockholders' equity | 2,430,635 | -21,926 | ||
Total liabilities and stockholders' equity (deficit) | $4,340,406 | $31,550 | ||
[1] | Net of accumulated amortization of $4,001 at October 31, 2014. | |||
[2] | Net of accumulated amortization of $0 at January 31, 2014. | |||
[3] | Net of accumulated amortization and depreciation of $110,991 at October 31, 2014. | |||
[4] | Net of accumulated amortization and depreciation of $0 at January 31, 2014. | |||
[5] | Net of accumulated amortization of $610 at October 31, 2014. | |||
[6] | Net of accumulated amortization of $61 at January 31, 2014. |
Statement_of_Financial_Positio
Statement of Financial Position - Parenthetical (USD $) | Oct. 31, 2014 | Jan. 31, 2014 |
Statement of Financial Position | ||
Common Stock, Par Value | $0 | $0 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares Issued | 26,948,884 | 20,430,000 |
Common Stock, Shares Outstanding | 26,948,884 | 20,430,000 |
CONDENSED_STATEMENTS_OF_OPERAT
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2014 | Oct. 31, 2013 | Oct. 31, 2014 | Oct. 31, 2013 | |
Revenues from affiliated entities | ||||
Grow facilities usage fees | $1,418,190 | $1,978,984 | ||
Sale of nutrient supplies | 188,070 | 550,017 | ||
Branding, marketing and administrative fees | 301,000 | 517,000 | ||
Accounting and financial services fees | 129,000 | 273,000 | ||
Compliance services fees | 107,500 | 227,500 | ||
Total revenues from affiliated entities | 2,143,760 | 3,546,501 | ||
Consulting services | 33,000 | 33,000 | ||
Total revenues | 2,176,760 | 3,579,501 | ||
Operating costs and expenses | ||||
Rent and other occupancy | 1,155,531 | 1,561,811 | ||
Compensation | 255,219 | 881,909 | ||
Nutrient purchases | 98,984 | 289,482 | ||
Professional, legal and consulting | 149,420 | 208,901 | ||
Depreciation and amortization | 56,678 | 115,536 | ||
General and administrative | 6,639 | 47,259 | ||
Total operating costs and expenses | 1,722,471 | 3,104,898 | ||
Income from operations | 454,289 | 474,603 | ||
Other costs and expenses | ||||
Loss on early extinguishment of debt | -93,000 | |||
Interest expense | -66,000 | -138,928 | ||
Earnings (loss) before taxes on income | 388,289 | 242,675 | ||
Provision for taxes on income | -113,716 | 0 | -52,814 | 0 |
Net income (loss) | $274,573 | $189,861 | ||
Basic earnings (loss) per common share | $0.02 | $0 | $0.01 | $0 |
Fully diluted earnings (loss) per common share | $0.01 | $0 | $0.01 | $0 |
Basic weighted average number of shares outstanding | 25,020,371 | 851,250 | 22,475,602 | 851,250 |
Fully diluted weighted average number of shares outstanding | 24,421,014 | 1,350,250 | 22,563,151 | 1,350,250 |
CONDENSED_STATEMENT_OF_CASH_FL
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) (USD $) | 9 Months Ended | |||
Oct. 31, 2014 | Oct. 31, 2013 | |||
Cash flows from operating activities: | ||||
Net income (loss) | $189,861 | |||
Increase in amounts due from affiliates | -1,067,279 | |||
Increase in prepaid expenses and other assets | -363,314 | |||
Increase in deferred taxes payable | 52,814 | |||
Depreciation and amortization (increase/decrease) | 114,991 | |||
Increase in accounts payable | 344,867 | |||
Increase in deferred rent and interest | 203,928 | |||
Decrease in trademark | 549 | |||
Net cash flow used in operating activities | -523,583 | |||
Cash flows from investing activities: | ||||
Investment in tenant improvements and office equipment | -2,203,266 | |||
Investment in commercial operating building | -660,000 | |||
Share exchange in reverse merger transaction | -255,000 | |||
Net cash flow used in investing activities | -3,118,266 | |||
Cash flows from financing activities: | ||||
Proceeds from common stock subscriptions | 2,517,700 | 100 | ||
Note payable for tenant allowances (increase/decrease) | 739,729 | |||
Proceeds from mortgage | 565,160 | |||
Proceeds from sale of convertible note | 895,000 | [1] | 0 | [1] |
Payments on convertible note | -895,000 | |||
Net cash flows from financing activities | 3,822,589 | 100 | ||
Net cash flows | 180,740 | 100 | ||
Cash and equivalent, beginning of period | 100 | |||
Cash and equivalent, end of period | 180,840 | 100 | ||
Supplemental cash flow disclosures: | ||||
Cash paid for interest | $117,666 | |||
[1] | Inclusive of discount of $45,000. |
Note_1_Organization_and_Summar
Note 1 - Organization and Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||
Oct. 31, 2014 | |||||||||||||
Notes | |||||||||||||
Note 1 - Organization and Summary of Significant Accounting Policies: | Note 1 – Organization and summary of significant accounting policies: | ||||||||||||
Following is a summary of our organization and significant accounting policies: | |||||||||||||
Organization and nature of business - STRAINWISE, INC. (identified in these footnotes as “we” “us” or the “Company”) provides branding marketing, administrative, accounting, financial and compliance services (“Fulfillment Services”) to entities in the cannabis retail and production industry. The Company was incorporated in the state of Colorado as a limited liability company on June 8, 2012, and subsequently converted to a Colorado corporation on January 16, 2014. | |||||||||||||
The Company provides sophisticated Fulfillment Services to (i) the four grow facilities and eight retail stores (seven of which sell recreational and medical marijuana to the public and one of which only sells medical marijuana to the public) owned by an officer and director of the Company (“Affiliated Entities”) and (ii) makes such services available to independent retail stores and grow facilities in the regulated cannabis industry throughout the United States. | |||||||||||||
The Fulfillment Services that we currently provide are summarized, as follows: | |||||||||||||
Branding, Marketing and Administrative Consulting Services: Customers may contract with us to use the Strainwise name, logo and affinity images in their retail store locations. A monthly fee permits our branding customer to use the Strainwise brand at one specific location. In addition, we will assist operators in marketing and managing their businesses, setting up new retail locations and general business planning and execution at an hourly rate. This includes services to establish an efficient, predictable production process, as well as, nutrient recipes for consistent and appealing marijuana strains. | |||||||||||||
Accounting and Financial Services: For a monthly fee, we provide our customers with a fully implemented general ledger system, with an industry centric chart of accounts, which enables management to readily monitor and manage all facets of a marijuana medical dispensary, retail store and grow facility. We provide bookkeeping, accounts payable processing, cash management, general ledger processing, financial statement preparation, state and municipal sales tax filings, and state and federal income tax compilation and filings on behalf of the Company and the Captive Stores on an ongoing basis. | |||||||||||||
Compliance Services: The rules, regulations and state laws governing the production, distribution and retail sale of marijuana can be complex, and may prove cumbersome with which to comply. Thus, customers may contract with us to implement a compliance process, based upon the number and type of licenses and permits for their specific business. We provide this service on both an hourly rate and stipulated monthly fee. | |||||||||||||
Nutrient Supplier: The Company presently is a bulk purchaser of nutrients and other cultivation supplies for the sole purpose of growing marijuana. As a result, we are able to make bulk purchases with price breaks, based upon volume. We serve as a sole source nutrient purchasing agent and distributor with pricing based upon our bulk purchasing power. | |||||||||||||
Lending: We will provide loans to individuals and businesses in the cannabis industry. However, Colorado State law does not allow entities operating under a cannabis license to pledge the assets or the license of the cannabis operation for any type of general borrowing activity. Thus, our lending will be on an unsecured basis, with reliance on a personal guarantee of the borrower. | |||||||||||||
Lease of Grow Facilities and Equipment: We lease grow equipment and facilities on a turn-key basis to customers in the cannabis industry. We will also enter into sale lease backs of grow lights, tenant improvements and other grow equipment. | |||||||||||||
We do not directly grow marijuana plants, produce marijuana infused products, sell marijuana plants and or sell marijuana infused products of any nature. | |||||||||||||
Share exchange - , On August 19, 2014, we entered into an Agreement to Exchange Securities ("Share Exchange"), pursuant to which we acquired approximately 90% of the outstanding shares of a privately held Colorado corporation (“Strainwise Colorado”) in exchange for 23,124,184 shares of our common stock. | |||||||||||||
As part of the Share Exchange, Strainwise Colorado paid $134,700 of our liabilities and purchased 1,038,000 shares of our common stock for $120,300 from two of our shareholders. The 1,038,000 shares were returned to treasury and cancelled. We also agreed to sell our rights to a motion picture, together with all related domestic and international distribution agreements, and all pre-production and other rights to the film, to a former officer and director in consideration for the assumption by one of our shareholders of all of our liabilities (net of the $134,700 paid by Strainwise Colorado) which were outstanding immediately prior to the closing of the transaction. | |||||||||||||
On September 12, 2014 we acquired the remaining outstanding shares of Strainwise Colorado in exchange for the issuance of 2,517,000 shares of our common stock. | |||||||||||||
The resulting business combination has been accounted for as a reverse acquisition and recapitalization, using accounting principles applicable to reverse acquisitions whereby the financial statements subsequent to the date of the transaction will be presented as a continuation of the Company. Under reverse acquisition accounting, Strainwise Colorado is treated as the accounting parent (acquirer) and we (parent) are treated as the accounting Subsidiary (acquiree). | |||||||||||||
Basis of presentation - The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required by GAAP for complete annual financial statement presentation. | |||||||||||||
These condensed financial statements as of and for the three and nine months ended October 31, 2014 and 2013, reflect all adjustments which, in the opinion of management, are necessary to fairly present the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. Operating results for the three and nine month periods ended October 31, 2014, are not necessarily indicative of the results to be expected for other interim periods or for the full year ending January 31, 2015. | |||||||||||||
Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||||||||
Cash and cash equivalents - For purposes of the statement of cash flows, we consider all cash in banks, money market funds, and certificates of deposit with a maturity of less than three months to be cash equivalents. During 2014, the Company entered into an agreement with our Chief Executive Officer to hold all of our cash funds in his personal bank account in trust for the Company. Because of current banking regulations, marijuana centric entities are not afforded normal banking privileges, and thus, we were not able to obtain a corporate bank account at a federally charted bank until well into the end of the second quarter of operations in 2014. Under the terms of our trust agreement with our Chief Executive Officer, he agreed to hold our cash in his personal bank account and to make payments of our funds only for our business purposes and to allow daily access to the bank account for ongoing oversight of his fiduciary responsibility to the Company. Additionally, the trust agreement required that the Chief Executive Officer make copies available of all transactions applicable to our operations to our accounting staff on a weekly, or as requested basis. At October 31, 2014 and January 31, 2014 there were no cash deposits in the personal bank account of the Chief Executive Officer held in trust for us. | |||||||||||||
Prepaid expenses and other assets - The Company pays rent in advance of the rental period. The Company records the carrying amount as of the balance sheet date of rental payments made in advance of the rental period; such amounts are charged against earnings within one year. The Company also capitalizes any prepaid expenses related to the reverse merger. | |||||||||||||
The amount of prepaid expenses and other assets as of October 31, 2014 and January 31, 2014 is $373,314 and $10,000, respectively. | |||||||||||||
Current prepaid expenses and other assets are comprised of the following: | |||||||||||||
October 31, | January 31, | ||||||||||||
2014 | 2014 | ||||||||||||
Prepaid insurance | 19,345 | - | |||||||||||
Legal retainer | 7,782 | - | |||||||||||
Rent deposits | -- | 10,000 | |||||||||||
Prepaid expenses and other assets - current | $ | 27,127 | $ | 10,000 | |||||||||
Noncurrent prepaid expenses and other assets are comprised of the following: | |||||||||||||
October 31, | January 31, | ||||||||||||
2014 | 2014 | ||||||||||||
Prepaid rent | $ | 54,108 | $ | - | |||||||||
Security deposits | 292,079 | - | |||||||||||
Prepaid expenses and other assets | $ | 346,187 | $ | 0 | |||||||||
Fair value of financial instruments and derivative financial instruments - The carrying amounts of cash and current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of our foreign exchange, commodity price or interest rate market risks. | |||||||||||||
The FASB Codification clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: | |||||||||||||
Level 1: Quoted prices in active markets for identical assets or liabilities. | |||||||||||||
Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. | |||||||||||||
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |||||||||||||
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. | |||||||||||||
Commercial Operating Property - On July 26, 2014 we purchased a commercial property that was previously leased by one of our affiliates, which we have leased back to the affiliate. The commercial property consists of land and a building that contains both a retail store and a grow facility. We have allocated $220,000 and $440,000 of the purchase price to the cost of land and to the cost of the improvements to the building, respectively, based upon management’s best estimate and belief. Management’s estimate and belief was based upon consideration of (i) replacement cost, (ii) limited knowledge of comparable sales, (iii) anticipated future income generation, and (iv) single use, internally. No intangible asset value was assigned to the existing lease on the property, because the existing lease was immediately cancelled upon the completion of the purchase of the commercial property. The cost of the improvements to the building will be depreciated on a straight line method over 27.5 years, which we believe is the useful life of this asset. | |||||||||||||
Tenant improvements and office equipment - Tenant improvements are recorded at cost, and are amortized over the lesser of the economic life of the asset or the term of the applicable lease period. We determined that term of the leases applicable to our tenant improvements are less than the economic life of the respective assets that comprise our tenant improvements. Office equipment is recorded at cost and is depreciated under straight line methods over each item's estimated useful life. We review our tenant improvements and office equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations. | |||||||||||||
Tenant improvements and office equipment, net of accumulated amortization and depreciation are comprised of the following: | |||||||||||||
October 31, | January 31, | ||||||||||||
2014 | 2014 | ||||||||||||
Tenant improvements: | |||||||||||||
Upgrades of HVAC systems | $ | 864,374 | $ | - | |||||||||
Upgrades of electrical generators and power equipment | 609,312 | - | |||||||||||
Structural improvements | 588,801 | ||||||||||||
Fire suppression, alarms and surveillance systems | 77,659 | - | |||||||||||
Office equipment: | |||||||||||||
Computer equipment | 26,369 | - | |||||||||||
Office furniture and fixtures | 22,251 | 10,501 | |||||||||||
Machinery | 25,000 | - | |||||||||||
2,213,766 | 10,501 | ||||||||||||
Accumulated amortization and depreciation | (110,991 | ) | - | ||||||||||
Tenant improvements and office equipment | $ | 2,102,775 | $ | 10,501 | |||||||||
Tenant improvements are amortized over the term of the lease, and office equipment is depreciated over its useful lives, which has been deemed by management to be three years. Amortization and depreciation expense for the nine months ended October 31, 2014 and 2013 was $112,960 and $0, respectively. | |||||||||||||
Income taxes - The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. | |||||||||||||
Long-Lived Assets - In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. | |||||||||||||
Trademarks - Trademarks and other intangible assets are stated at cost and are amortized using the straight-line method over fifteen years. Accumulated amortization was $610 and $0 at October 31, 2014 and 2013, respectively and consisted of the following at October 31, 2014: | |||||||||||||
Gross Carrying | Accumulated Amortization | Net | |||||||||||
Amount | |||||||||||||
Trademarks | $ | 11,010 | $ | 610 | $ | 10,400 | |||||||
Deferred Rent - The Company recognizes rent expense from operating leases on the straight-line basis. Differences between the expense recognized and actual payments are recorded as deferred rent. | |||||||||||||
Revenue recognition - Revenue is recognized on an accrual basis as earned under contract terms. Revenue from affiliated entities is recognized as follows: | |||||||||||||
Branding, Marketing and Administrative Services Revenue: Under the terms of a ten year master service agreement, we allow an affiliated entity to use the Strainwise brand for both retail and marketing purposes at one location, plus we provide administrative services to assist the employees of the affiliated entity to operate the business of that related location, Also, under a long term master service agreement, we provide administrative and management services to assist employees of affiliated entities to operate their grow facilities. We charge the affiliated entity a monthly fee of approximately $4,500 a month for the branding, marketing and administrative services and $4,500 to $20,000 for grow facility rent. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually providing the services, in accordance with ASC 605-45-45, the revenue is recognized on monthly basis in accordance with the terms of the applicable master service agreement. | |||||||||||||
Accounting and Financial Services Revenue: Under the terms of a ten year master service agreement, we have agreed to provide our affiliated entities with a fully implemented general ledger system, coupled with an industry centric chart of accounts, which enables management to readily monitor and manage all accounting and financial facets of a marijuana medical dispensary, retail store and/or grow facility. Under the terms of the master service agreement we have also agreed to provide bookkeeping, accounts payable processing, cash management, general ledger processing, financial statement preparation, state and municipal sales tax filings, and state and federal income tax compilation and filings. Under the terms of the master service agreement, we provide the above described accounting and financial services for a monthly fee of $3,000.Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually providing the above described service, in accordance with ASC 605-45-45, the revenue is recognized on monthly basis in accordance with the terms of the applicable master service agreement. | |||||||||||||
Compliance Services Revenue: Under the terms of a ten year master service agreement, we provide the affiliated entities with a compliance process that includes the preparation and filing of state, city and municipal applications and renewals of licenses in accordance with the rules, regulations and state laws governing the production, distribution and retail sale of marijuana. We provide this service to our affiliate entities under the terms of a master service agreement for a monthly fee of $2,500 per month. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually providing the above described service, in accordance with ASC 60545-45, the revenue is recognized on monthly basis in accordance with the terms of the applicable master service agreement. | |||||||||||||
Nutrient Sales: Under the terms of a ten year master service agreement, we serve as a sole source nutrient purchasing agent and distributor for our affiliated entities, with pricing based upon our bulk purchasing power. We charge the affiliated entities for nutrients supplied to them at the cost of the nutrients, plus a premium of ninety percent. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually buying and delivering the above nutrients to the affiliated entity, in accordance with ASC 605-45-45, the revenue is recognized in the month in which the nutrient is actually delivered to the related entity. | |||||||||||||
Grow Facilities Revenue: Under the terms of a ten year master service agreement, we lease grow facilities and equipment for a period equal to the term of the underlying lease with an independent, third party lessor in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, (iii) plus the amount of monthly amortization of tenant improvements, and (iv) plus a premium of forty percent. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually leasing the facilities and equipment to the respective affiliated entity, in accordance with ASC 605-45-45, the revenue is recognized in the month in which the lease payments are made by us to the respective independent, third party lessor. | |||||||||||||
Comprehensive Income (Loss) - Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there have been no differences between our comprehensive loss and net loss. | |||||||||||||
Net income per share of common stock - We have adopted applicable FASB Codification regarding Earnings per Share, which require presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. |
Note_2_Going_Concern
Note 2 - Going Concern | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 2 - Going Concern: | Note 2 – Going concern: |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the period ended October 31, 2014, the Company has had limited operations. As of October 31, 2014, the Company has only recently become minimally profitable. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to begin operations and to achieve a level of profitability. The Company intends to continue financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Note_3_Related_Party_Transacti
Note 3 - Related Party Transactions | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 3 - Related Party Transactions: | Note 3 – Related Party Transactions: |
Substantially all of our revenues to date have been derived from long term contracts with a group of entities that are majority owned by our Chief Executive Officer, who is also the husband of our majority owner and President. Note that all terms and contracts related to related party revenue are determined by related parties and these terms can change at any time. | |
Related party revenue was $3,878,051 and $0, respectively, for the nine months ended October 31, 2014 and 2013. As of October 31, 2014 and January 31, 2014, we had accounts receivable from affiliated entities of $1,011,652 and $0 respectively. |
Note_4_Operating_Leases
Note 4 - Operating Leases | 9 Months Ended | ||||
Oct. 31, 2014 | |||||
Notes | |||||
Note 4 - Operating Leases: | Note 4 – Operating Leases: | ||||
The Company entered into a lease agreement with an affiliate for our corporate office needs. The lease is for a 31 month period, commenced in January 2014 for 6,176 square feet at an annual rate of $64,848 for the first twelve months, $67,936 for the subsequent 12 months, and $41,431 for the subsequent 7 months paid monthly, through October 31, 2016. This lease to the Company is on the same terms and conditions as is the direct lease between the affiliate and the independent lessor. Consequently, we believe that the lease terms to the Company are comparable to lease terms we would receive directly from third party lessors in our market, because the related party terms mirror the terms of the direct lease between the independent, third party lessor and the affiliated entity. | |||||
We entered into a lease agreement on March 7, 2014 to lease from an independent third party a grow facility of approximately 26,700 square feet (“Custer Lease”) for a term of five years commencing on April 1, 2014. Lease payments are scheduled to be $29,200 per month for the first twelve months of the lease, and then are scheduled to be $27,500 per month for the subsequent 12 months, $28,325 per month for the subsequent 12 months, $29,170 per month for the subsequent 12 months and $30,035 per month for the final 12 months of the lease. Under the terms of the Custer Lease, we are obligated to reimburse the lessor for operating expenses applicable to the leased property, and we are obligated to pay a security deposit of $29,200 which was due and paid upon the execution of the Custer Lease. We have the option to renew the Custer Lease at the end of the term of the lease at a mutually agreed upon rate per square foot; there is no option to purchase the property underlying the Custer Lease. We are responsible to provide all of the tenant improvements that will enable the continuous cultivation of marijuana plants under approximately 460 grow lights. We account for this lease as an operating lease rather than as a capital lease, because the lease does not transfer ownership to us at the end of the lease, there is no bargain purchase price for the grow facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the grow facility, and the current present value of the minimum lease payments is less than 90% of the fair market value of the asset. We sublease this grow facility to an affiliated entity under the terms of a Master Service Agreement for a term of five years in an amount equal to the sum of (i) the monthly lease payment; (ii) plus the cost of reimbursed operating expenses paid to the lessor each month; (iii) plus the amount of monthly amortization of tenant improvements; and (iv) a premium of forty percent. Revenue from the sublease of the Custer grow facility is recognized on a monthly basis as the user is charged for the amount of the sublease. | |||||
We entered into a lease agreement on April 1, 2014 to lease from an independent third party a grow facility of approximately 65,000 square feet (“51st Ave Lease”) for a term of five years and nine months. The terms of the 51st Ave Lease stipulates the payment of $15,000 per month, prorated if necessary, until such time that the Lessor is able to deliver a Certificate of Occupancy, which occurred on August 1, 2014. Thereafter, lease payments are scheduled to be $176,456 per month for the first six months of the lease, and then are scheduled to be $221,833 per month for the subsequent 24 months, $231,917 per month for the subsequent 12 months, $242,000 per month for the subsequent 12 months and $247,041 per month for the final 12 months of the lease. Under the terms of the 51st Ave Lease, we are obligated to reimburse the lessor for operating expenses applicable to the leased property and we are obligated to pay a security deposit in the total amount $150,000, two thirds of which has been paid, with the remaining $50,000 due by December 1, 2014. We have the option to renew the 51st Ave Lease at the end of the term of the lease at a mutually agreed upon rate per square foot; there is no option to purchase the property underlying the 51st Avenue Lease. The Lessor will provide all of the tenant improvements that will enable the continuous cultivation of marijuana plants under approximately 1,940 grow lights. We account for this lease as an operating lease rather than as a capital lease, because the lease does not transfer ownership to us at the end of the lease, there is no bargain purchase price for the grow facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the grow facility, and the current present value of the minimum lease payments is less than 90% of the fair market value of the asset. We sublease this grow facility to an affiliated entity under the terms of a Master Service Agreement for a term of five years and nine months in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, and (iii) plus the amount of monthly amortization of tenant improvements, and (iv) a premium of forty percent. Revenue from the sublease of the 51st Avenue grow facility is recognized on a monthly basis as the user is charged for the amount of the sublease. | |||||
We entered into a lease agreement on April 22, 2014 to lease from an independent third party a grow facility of approximately 38,000 square feet (“Nome Lease”) for a term of seven years. The lease payments are scheduled to be $44,570 per month for the first twelve months of the lease, and then are scheduled to be $46,151 per month for the subsequent 12 months, $47,743 per month for the subsequent 12 months, $49,334 per month for the subsequent 12 months and $50,925 per month for the subsequent 12 months, $52,517 per month for the subsequent 12 months, and $54,108 for the final 12 months of the lease. Under the terms of the Nome Lease, we are obligated to reimburse the lessor for operating expenses applicable to the leased property, and we are obligated to pay a security deposit of $133,679 one half of which was due and paid upon the execution of the Nome Lease, the final half was due and payable 30 days after the commencement date. We have the option to renew the Nome Lease at the end of the term of the lease at a mutually agreed upon rate per square foot; there is no option to purchase the property underlying the Nome Lease. We are responsible to provide all of the tenant improvements that will enable the continuous cultivation of marijuana plants under approximately 920 grow lights. We account for this lease as an operating lease rather than as a capital lease, because the lease does not transfer ownership to us at the end of the lease, there is no bargain purchase price for the grow facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the grow facility, and the current present value of the minimum lease payments is less than 90% of the fair market value of the asset. We sublease this grow facility to an affiliated entity under the terms of a Master Service Agreement for a term of seven years in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, (iii) plus the amount of monthly amortization of tenant improvements, and (iv) a premium of forty percent. Revenue from the sublease of the Nome grow facility is recognized on a monthly basis as the user is charged for the amount of the sublease. | |||||
We entered into a lease agreement on June 10, 2014 to lease from an independent third party a grow facility of approximately 113,000 square feet (“32nd Ave Lease”) for a term of five years. The Lease will not become fully effective until we are awarded the necessary licenses, and the Lessor is able to deliver a Certificate of Occupancy, which is presently estimated to occur sometime during early to mid-2015. The terms of the 32nd Ave Lease stipulate the payment of $25,000 per month, prorated if necessary, until such time that the Lessor is able to deliver a Certificate of Occupancy Thereafter, lease payments are scheduled to be $282,500 per month for the first 24 months of the lease, and then are scheduled to be $301,333 per month for the subsequent 12 months, $320,167 per month for the subsequent 12 months, and $329,583 per month for the final 12 months of the lease. Under the terms of the 32nd Ave Lease, we are obligated to reimburse the lessor for operating expenses applicable to the leased property, and we are obligated to pay a security deposit of $250,000, $150,000 of which was due and paid upon the execution of the 32nd Ave Lease, and $100,000 due upon obtaining the Certificate of Occupancy. We have the option to renew the 32nd Ave Lease at the end of the term of the lease at a mutually agreed upon rate per square foot; there is no option to purchase the property underlying the 32nd Ave Lease. The lessor will provide all of the tenant improvements that will enable the continuous cultivation of marijuana plants under approximately 3,000 grow lights. We account for this lease as an operating lease rather than as a capital lease, because the lease does not transfer ownership to us at the end of the lease, there is no bargain purchase price for the grow facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the grow facility, and the current present value of the minimum lease payments is less than 90% of the fair market value of the asset. We will sublease this grow facility to an affiliated entity under the terms of a Master Service Agreement for a term of five years in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, (iii) plus the amount of monthly amortization of tenant improvements, and (iv) and a premium of forty percent. Revenue from the sublease of the 32nd Avenue grow facility will be recognized on a monthly basis as the user is charged for the amount of the sublease. | |||||
We entered into a lease agreement on September 11, 2014 to lease a grow facility of approximately 20,000 square feet (“Bryant St. Lease”) for a term of ten years. During the first 12 months of the lease, lease payments are scheduled to be $23,984 for the first four months and 24,531 for the next eight months, and then are scheduled to be $24,647, $25,140, $31,221, $31,845, $32,483, $33,132, $33,794, $34,470, and $35,160 for the second through the tenth year of the lease, respectively. We are not required to provide any security deposits or first and last month’s rental amounts. We have an option to purchase the building for $2,400,000 at any time during the first 36 months of the lease, provided that we deliver a purchase option notice to the Lessor prior to the end of the 33rd month of the lease. We are responsible to provide all of the tenant improvements that will enable the continuous cultivation of marijuana plants under approximately 370 grow lights. We account for this lease as an operating lease rather than as a capital lease, because the lease does not transfer ownership to us at the end of the lease, there is no bargain purchase price for the grow facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the grow facility, and the current present value of the minimum lease payments is less than 90% of the fair market value of the asset. We lease this grow facility to an affiliated entity under the terms of a Master Services Agreement on a long term basis in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, (iii) plus the amount of monthly amortization of tenant improvements, and (iv) a premium of forty percent. Revenue from the sublease of the Bryant Street grow facility is recognized on a monthly basis as the user is charged for the amount of the sublease. | |||||
Future minimum payments for these leases, including the increase in the Nome Lease payments per the amendment described under subsequent events in Note 10 herein, are: | |||||
For the 12 Months | |||||
Ending October 31, | Amount | ||||
2015 | $ | 5,989,627 | |||
2016 | $ | 7,845,004 | |||
2017 | $ | 8,086,492 | |||
2018 | $ | 8,523,339 | |||
2019 | $ | 8,441,104 | |||
Note_5_Issuance_of_Shares
Note 5 - Issuance of Shares | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 5 - Issuance of Shares: | Note 5 – Issuance of Shares: |
Through a private offering of our common stock at $1 per share, we collected $2,224,700 from subscribers, as of October 31, 2014, for 2,224,700 shares of our common stock. Coupled with the 293,000 common shares issued in connection with the conversion of the convertible note described in the following Note 7, and the Share Exchange described in Note 1, the total number of shares of common stock issued and outstanding at October 31, 2014 was 26,948,884 shares. |
Note_6_Income_Taxes
Note 6 - Income Taxes | 9 Months Ended | ||||||||||||||||
Oct. 31, 2014 | |||||||||||||||||
Notes | |||||||||||||||||
Note 6 - Income Taxes: | Note 6 – Income Taxes: | ||||||||||||||||
The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities. The deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences are expected to reverse. | |||||||||||||||||
The Company adopted the provisions of ASC 740, “Income Taxes” on July1, 2007. FASB ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FASB ASC 740 and in subsequent periods. The components of the income tax provision are as follows: | |||||||||||||||||
02/01/2014 to 10/31/2014 | 02/01/2013 to 10/31/2013 | 08/01/2014 to 10/31/2014 | 08/01/2013 to 10/31/2013 | ||||||||||||||
Income Tax Expense | |||||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 45,113 | $ | - | $ | 99,273 | $ | - | |||||||||
State | 7,701 | - | 14,443 | - | |||||||||||||
Provision for taxes on income | $ | 52,814 | $ | 0 | $ | 113,716 | $ | 0 | |||||||||
We have a net operating loss carryforward for financial statement reporting purposes of $76,351 from the year ended January 31, 2014. |
Note_7_Convertible_Note_Payabl
Note 7 - Convertible Note Payable | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 7 - Convertible Note Payable: | Note 7 – Convertible Note Payable: |
The Company issued a convertible note in the amount of $850,000 on March 20, 2014 (the “Note”). This Note was subsequently amended, and the unpaid principal balance was converted into common stock, as more fully described below. The Note had an interest rate of 25%, payable monthly, and was scheduled to mature on September 21, 2014. The outstanding principal balance of the Note, plus any accrued but unpaid interest on the Note, was convertible at any time on or before the maturity date at $1 per common share. The Note was personally guaranteed by our majority shareholder and by an officer and director of the Company. | |
On July 16, 2014, the terms of the Note were amended (“Amendment”) wherein the holder of the Note elected to convert $200,000 of the principal of the Note into 293,000 of our common shares of stock at a price of $.6825 per share. As a component of the Amendment, we in turn elected to prepay the remaining principal balance of the Note, after the scheduled payment of the principal and accrued interest due the holder on July 24, 2014, and to pay a prepayment penalty of $11,250. The difference of $93,000 in the premium of the per-share price of $0.6825 per share per the Amendment and the $1 per share per the Note, plus the amount of the prepayment penalty was charged to the loss on the early extinguishment of debt and interest expense, respectively. |
Note_8_Mortgage_Payable
Note 8 - Mortgage Payable | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 8 - Mortgage Payable | Note 8 – Mortgage Payable |
On July 26, 2014 the company entered into a mortgage payable for the purpose of purchasing a commercial operating property that contains a grow facility and retail store, which we lease to one of our affiliated entities. The amount of the mortgage is $595,000, has a three year term, and has no stated rate of interest. In accordance with ASC 835-30, we imputed an interest rate for the mortgage payable of 21.36%. The mortgage is payable in varying amounts from $11,000 to $36,000 per month, which includes interest at stated amount of $6,000 per month, with a balloon payment of $126,000 due in the thirty-sixth month of the term. We account for the mortgage on a straight line basis with an imputed monthly payment of principal and interests in the amount of $22,301 per month. The difference between the imputed monthly payment amount and actual payment amounts is recorded as an increase or decrease to deferred interest expense, at the time a monthly payment is made. Actual cash payments of principal and interest due under the terms of the mortgage over the subsequent three year period are, as follows: | |
Period ended October 31, | |
2015 - $221,000 | |
2016 - $232,000 | |
2017 - $232,000 | |
2018 - $126,000 | |
The mortgage is also personally guaranteed by Shawn Phillips, an affiliate of the Company. |
Note_9_New_Accounting_Pronounc
Note 9 - New Accounting Pronouncements | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 9 - New Accounting Pronouncements: | Note 9 – New Accounting Pronouncements: |
The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements and concluded that there are no new accounting standards are applicable to the Company. The Company elected to adopt ASU 2014-10, Development Stage Entities: Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage. We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow. |
Note_10_Subsequent_Events
Note 10 - Subsequent Events | 9 Months Ended |
Oct. 31, 2014 | |
Notes | |
Note 10 - Subsequent Events: | Note 10 – Subsequent Events: |
We entered into a lease agreement on November 11, 2014 to lease a retail location of approximately 2,976 square feet (“Federal Heights Lease”) for a term of 5 years and one month, with two 5 year renewal options. During term of the lease, lease payments are scheduled to be $5,704 per month. We are responsible to provide all of the tenant improvements that will enable the continuous sale of marijuana products at the Federal Heights retail location by an affiliated entity. We account for this lease as an operating lease rather than as a capital lease, because the lease does not transfer ownership to us at the end of the lease, there is no bargain purchase price for the grow facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the grow facility, and the current present value of the minimum lease payments is less than 90% of the fair market value of the asset. We will lease this retail location to an affiliated entity under the terms of a Master Services Agreement on a long term basis in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, (iii) plus the amount of monthly amortization of tenant improvements, and (iv) a premium of forty percent. Revenue from the sublease of the Federal Heights retail location will be recognized on a monthly basis as the user is charged for the amount of the sublease. | |
We entered into a modification of the Nome lease on December 1, 2014, wherein the lease was modified to extend the lease term through April 30, 2025; and, the lease payments were modified to be $88,616 per month for the five months ending April 30 2015, and then are scheduled to be $90,207, $91,799, $93,390, $94,981, $73,578, $75,169, $76,761, 78,352, and then $79,943 per month for the final 12 months of the lease. The modification of the lease included the cancellation of the $750,000 note payable to the lessor for the financing of tenant improvements, and the extension of an additional $800,000 to be used by us for future tenant improvements. The full amount of $1,550,000 of tenant improvement financing to be provided by the lessor is to be amortized over the extended term of the modified lease as a component of the monthly lease payments. |
Note_1_Organization_and_Summar1
Note 1 - Organization and Summary of Significant Accounting Policies: Nature of Operations (Policies) | 9 Months Ended | ||
Oct. 31, 2014 | |||
Policies | |||
Nature of Operations | Organization and nature of business - STRAINWISE, INC. (identified in these footnotes as “we” “us” or the “Company”) provides branding marketing, administrative, accounting, financial and compliance services (“Fulfillment Services”) to entities in the cannabis retail and production industry. The Company was incorporated in the state of Colorado as a limited liability company on June 8, 2012, and subsequently converted to a Colorado corporation on January 16, 2014. | ||
The Company provides sophisticated Fulfillment Services to (i) the four grow facilities and eight retail stores (seven of which sell recreational and medical marijuana to the public and one of which only sells medical marijuana to the public) owned by an officer and director of the Company (“Affiliated Entities”) and (ii) makes such services available to independent retail stores and grow facilities in the regulated cannabis industry throughout the United States. | |||
The Fulfillment Services that we currently provide are summarized, as follows: | |||
Branding, Marketing and Administrative Consulting Services: Customers may contract with us to use the Strainwise name, logo and affinity images in their retail store locations. A monthly fee permits our branding customer to use the Strainwise brand at one specific location. In addition, we will assist operators in marketing and managing their businesses, setting up new retail locations and general business planning and execution at an hourly rate. This includes services to establish an efficient, predictable production process, as well as, nutrient recipes for consistent and appealing marijuana strains. | |||
Accounting and Financial Services: For a monthly fee, we provide our customers with a fully implemented general ledger system, with an industry centric chart of accounts, which enables management to readily monitor and manage all facets of a marijuana medical dispensary, retail store and grow facility. We provide bookkeeping, accounts payable processing, cash management, general ledger processing, financial statement preparation, state and municipal sales tax filings, and state and federal income tax compilation and filings on behalf of the Company and the Captive Stores on an ongoing basis. | |||
Compliance Services: The rules, regulations and state laws governing the production, distribution and retail sale of marijuana can be complex, and may prove cumbersome with which to comply. Thus, customers may contract with us to implement a compliance process, based upon the number and type of licenses and permits for their specific business. We provide this service on both an hourly rate and stipulated monthly fee. | |||
Nutrient Supplier: The Company presently is a bulk purchaser of nutrients and other cultivation supplies for the sole purpose of growing marijuana. As a result, we are able to make bulk purchases with price breaks, based upon volume. We serve as a sole source nutrient purchasing agent and distributor with pricing based upon our bulk purchasing power. | |||
Lending: We will provide loans to individuals and businesses in the cannabis industry. However, Colorado State law does not allow entities operating under a cannabis license to pledge the assets or the license of the cannabis operation for any type of general borrowing activity. Thus, our lending will be on an unsecured basis, with reliance on a personal guarantee of the borrower. | |||
Lease of Grow Facilities and Equipment: We lease grow equipment and facilities on a turn-key basis to customers in the cannabis industry. We will also enter into sale lease backs of grow lights, tenant improvements and other grow equipment. | |||
We do not directly grow marijuana plants, produce marijuana infused products, sell marijuana plants and or sell marijuana infused products of any nature. |
Note_1_Organization_and_Summar2
Note 1 - Organization and Summary of Significant Accounting Policies: Development Stage Enterprises (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Development Stage Enterprises | Share exchange - , On August 19, 2014, we entered into an Agreement to Exchange Securities ("Share Exchange"), pursuant to which we acquired approximately 90% of the outstanding shares of a privately held Colorado corporation (“Strainwise Colorado”) in exchange for 23,124,184 shares of our common stock. |
As part of the Share Exchange, Strainwise Colorado paid $134,700 of our liabilities and purchased 1,038,000 shares of our common stock for $120,300 from two of our shareholders. The 1,038,000 shares were returned to treasury and cancelled. We also agreed to sell our rights to a motion picture, together with all related domestic and international distribution agreements, and all pre-production and other rights to the film, to a former officer and director in consideration for the assumption by one of our shareholders of all of our liabilities (net of the $134,700 paid by Strainwise Colorado) which were outstanding immediately prior to the closing of the transaction. | |
On September 12, 2014 we acquired the remaining outstanding shares of Strainwise Colorado in exchange for the issuance of 2,517,000 shares of our common stock. | |
The resulting business combination has been accounted for as a reverse acquisition and recapitalization, using accounting principles applicable to reverse acquisitions whereby the financial statements subsequent to the date of the transaction will be presented as a continuation of the Company. Under reverse acquisition accounting, Strainwise Colorado is treated as the accounting parent (acquirer) and we (parent) are treated as the accounting Subsidiary (acquiree). |
Note_1_Organization_and_Summar3
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Accounting (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Basis of Accounting | Basis of presentation - The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required by GAAP for complete annual financial statement presentation. |
These condensed financial statements as of and for the three and nine months ended October 31, 2014 and 2013, reflect all adjustments which, in the opinion of management, are necessary to fairly present the Company’s financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. Operating results for the three and nine month periods ended October 31, 2014, are not necessarily indicative of the results to be expected for other interim periods or for the full year ending January 31, 2015. |
Note_1_Organization_and_Summar4
Note 1 - Organization and Summary of Significant Accounting Policies: Use of Estimates, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Use of Estimates, Policy | Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Note_1_Organization_and_Summar5
Note 1 - Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Cash and Cash Equivalents, Policy | Cash and cash equivalents - For purposes of the statement of cash flows, we consider all cash in banks, money market funds, and certificates of deposit with a maturity of less than three months to be cash equivalents. During 2014, the Company entered into an agreement with our Chief Executive Officer to hold all of our cash funds in his personal bank account in trust for the Company. Because of current banking regulations, marijuana centric entities are not afforded normal banking privileges, and thus, we were not able to obtain a corporate bank account at a federally charted bank until well into the end of the second quarter of operations in 2014. Under the terms of our trust agreement with our Chief Executive Officer, he agreed to hold our cash in his personal bank account and to make payments of our funds only for our business purposes and to allow daily access to the bank account for ongoing oversight of his fiduciary responsibility to the Company. Additionally, the trust agreement required that the Chief Executive Officer make copies available of all transactions applicable to our operations to our accounting staff on a weekly, or as requested basis. At October 31, 2014 and January 31, 2014 there were no cash deposits in the personal bank account of the Chief Executive Officer held in trust for us. |
Note_1_Organization_and_Summar6
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy (Policies) | 9 Months Ended | ||||||||
Oct. 31, 2014 | |||||||||
Policies | |||||||||
Lease, Policy | Prepaid expenses and other assets - The Company pays rent in advance of the rental period. The Company records the carrying amount as of the balance sheet date of rental payments made in advance of the rental period; such amounts are charged against earnings within one year. The Company also capitalizes any prepaid expenses related to the reverse merger. | ||||||||
The amount of prepaid expenses and other assets as of October 31, 2014 and January 31, 2014 is $373,314 and $10,000, respectively. | |||||||||
Current prepaid expenses and other assets are comprised of the following: | |||||||||
October 31, | January 31, | ||||||||
2014 | 2014 | ||||||||
Prepaid insurance | 19,345 | - | |||||||
Legal retainer | 7,782 | - | |||||||
Rent deposits | -- | 10,000 | |||||||
Prepaid expenses and other assets - current | $ | 27,127 | $ | 10,000 | |||||
Noncurrent prepaid expenses and other assets are comprised of the following: | |||||||||
October 31, | January 31, | ||||||||
2014 | 2014 | ||||||||
Prepaid rent | $ | 54,108 | $ | - | |||||
Security deposits | 292,079 | - | |||||||
Prepaid expenses and other assets | $ | 346,187 | $ | 0 | |||||
Note_1_Organization_and_Summar7
Note 1 - Organization and Summary of Significant Accounting Policies: Fair Value of Financial Instruments, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Fair Value of Financial Instruments, Policy | Fair value of financial instruments and derivative financial instruments - The carrying amounts of cash and current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of our foreign exchange, commodity price or interest rate market risks. |
The FASB Codification clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: | |
Level 1: Quoted prices in active markets for identical assets or liabilities. | |
Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. | |
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. |
Note_1_Organization_and_Summar8
Note 1 - Organization and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Property, Plant and Equipment, Policy | Commercial Operating Property - On July 26, 2014 we purchased a commercial property that was previously leased by one of our affiliates, which we have leased back to the affiliate. The commercial property consists of land and a building that contains both a retail store and a grow facility. We have allocated $220,000 and $440,000 of the purchase price to the cost of land and to the cost of the improvements to the building, respectively, based upon management’s best estimate and belief. Management’s estimate and belief was based upon consideration of (i) replacement cost, (ii) limited knowledge of comparable sales, (iii) anticipated future income generation, and (iv) single use, internally. No intangible asset value was assigned to the existing lease on the property, because the existing lease was immediately cancelled upon the completion of the purchase of the commercial property. The cost of the improvements to the building will be depreciated on a straight line method over 27.5 years, which we believe is the useful life of this asset. |
Note_1_Organization_and_Summar9
Note 1 - Organization and Summary of Significant Accounting Policies: Depreciation, Depletion, and Amortization (Policies) | 9 Months Ended | ||||||||
Oct. 31, 2014 | |||||||||
Policies | |||||||||
Depreciation, Depletion, and Amortization | Tenant improvements and office equipment - Tenant improvements are recorded at cost, and are amortized over the lesser of the economic life of the asset or the term of the applicable lease period. We determined that term of the leases applicable to our tenant improvements are less than the economic life of the respective assets that comprise our tenant improvements. Office equipment is recorded at cost and is depreciated under straight line methods over each item's estimated useful life. We review our tenant improvements and office equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations. | ||||||||
Tenant improvements and office equipment, net of accumulated amortization and depreciation are comprised of the following: | |||||||||
October 31, | January 31, | ||||||||
2014 | 2014 | ||||||||
Tenant improvements: | |||||||||
Upgrades of HVAC systems | $ | 864,374 | $ | - | |||||
Upgrades of electrical generators and power equipment | 609,312 | - | |||||||
Structural improvements | 588,801 | ||||||||
Fire suppression, alarms and surveillance systems | 77,659 | - | |||||||
Office equipment: | |||||||||
Computer equipment | 26,369 | - | |||||||
Office furniture and fixtures | 22,251 | 10,501 | |||||||
Machinery | 25,000 | - | |||||||
2,213,766 | 10,501 | ||||||||
Accumulated amortization and depreciation | (110,991 | ) | - | ||||||
Tenant improvements and office equipment | $ | 2,102,775 | $ | 10,501 | |||||
Tenant improvements are amortized over the term of the lease, and office equipment is depreciated over its useful lives, which has been deemed by management to be three years. Amortization and depreciation expense for the nine months ended October 31, 2014 and 2013 was $112,960 and $0, respectively. |
Recovered_Sheet1
Note 1 - Organization and Summary of Significant Accounting Policies: Income Tax, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Income Tax, Policy | Income taxes - The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
Recovered_Sheet2
Note 1 - Organization and Summary of Significant Accounting Policies: Impairment or Disposal of Long-Lived Assets, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Impairment or Disposal of Long-Lived Assets, Policy | Long-Lived Assets - In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. |
Recovered_Sheet3
Note 1 - Organization and Summary of Significant Accounting Policies: Goodwill and Intangible Assets, Intangible Assets, Policy (Policies) | 9 Months Ended | ||||||||||||
Oct. 31, 2014 | |||||||||||||
Policies | |||||||||||||
Goodwill and Intangible Assets, Intangible Assets, Policy | Trademarks - Trademarks and other intangible assets are stated at cost and are amortized using the straight-line method over fifteen years. Accumulated amortization was $610 and $0 at October 31, 2014 and 2013, respectively and consisted of the following at October 31, 2014: | ||||||||||||
Gross Carrying | Accumulated Amortization | Net | |||||||||||
Amount | |||||||||||||
Trademarks | $ | 11,010 | $ | 610 | $ | 10,400 | |||||||
Recovered_Sheet4
Note 1 - Organization and Summary of Significant Accounting Policies: Deferred Rent (Policies) | 9 Months Ended | ||
Oct. 31, 2014 | |||
Policies | |||
Deferred Rent | Deferred Rent - The Company recognizes rent expense from operating leases on the straight-line basis. Differences between the expense recognized and actual payments are recorded as deferred rent. | ||
Revenue recognition - Revenue is recognized on an accrual basis as earned under contract terms. Revenue from affiliated entities is recognized as follows: | |||
Branding, Marketing and Administrative Services Revenue: Under the terms of a ten year master service agreement, we allow an affiliated entity to use the Strainwise brand for both retail and marketing purposes at one location, plus we provide administrative services to assist the employees of the affiliated entity to operate the business of that related location, Also, under a long term master service agreement, we provide administrative and management services to assist employees of affiliated entities to operate their grow facilities. We charge the affiliated entity a monthly fee of approximately $4,500 a month for the branding, marketing and administrative services and $4,500 to $20,000 for grow facility rent. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually providing the services, in accordance with ASC 605-45-45, the revenue is recognized on monthly basis in accordance with the terms of the applicable master service agreement. | |||
Accounting and Financial Services Revenue: Under the terms of a ten year master service agreement, we have agreed to provide our affiliated entities with a fully implemented general ledger system, coupled with an industry centric chart of accounts, which enables management to readily monitor and manage all accounting and financial facets of a marijuana medical dispensary, retail store and/or grow facility. Under the terms of the master service agreement we have also agreed to provide bookkeeping, accounts payable processing, cash management, general ledger processing, financial statement preparation, state and municipal sales tax filings, and state and federal income tax compilation and filings. Under the terms of the master service agreement, we provide the above described accounting and financial services for a monthly fee of $3,000.Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually providing the above described service, in accordance with ASC 605-45-45, the revenue is recognized on monthly basis in accordance with the terms of the applicable master service agreement. | |||
Compliance Services Revenue: Under the terms of a ten year master service agreement, we provide the affiliated entities with a compliance process that includes the preparation and filing of state, city and municipal applications and renewals of licenses in accordance with the rules, regulations and state laws governing the production, distribution and retail sale of marijuana. We provide this service to our affiliate entities under the terms of a master service agreement for a monthly fee of $2,500 per month. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually providing the above described service, in accordance with ASC 60545-45, the revenue is recognized on monthly basis in accordance with the terms of the applicable master service agreement. | |||
Nutrient Sales: Under the terms of a ten year master service agreement, we serve as a sole source nutrient purchasing agent and distributor for our affiliated entities, with pricing based upon our bulk purchasing power. We charge the affiliated entities for nutrients supplied to them at the cost of the nutrients, plus a premium of ninety percent. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually buying and delivering the above nutrients to the affiliated entity, in accordance with ASC 605-45-45, the revenue is recognized in the month in which the nutrient is actually delivered to the related entity. | |||
Grow Facilities Revenue: Under the terms of a ten year master service agreement, we lease grow facilities and equipment for a period equal to the term of the underlying lease with an independent, third party lessor in an amount equal to the sum of (i) the monthly lease payment, (ii) plus the cost of reimbursed operating expenses paid to the lessor each month, (iii) plus the amount of monthly amortization of tenant improvements, and (iv) plus a premium of forty percent. Since we (i) are the primary obligor, (ii) determine the price, (iii) perform the service, (iv) have the credit risk, and (v) since there are no additional milestone that need to be met other than actually leasing the facilities and equipment to the respective affiliated entity, in accordance with ASC 605-45-45, the revenue is recognized in the month in which the lease payments are made by us to the respective independent, third party lessor. |
Recovered_Sheet5
Note 1 - Organization and Summary of Significant Accounting Policies: Stockholders' Equity, Policy (Policies) | 9 Months Ended |
Oct. 31, 2014 | |
Policies | |
Stockholders' Equity, Policy | Comprehensive Income (Loss) - Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there have been no differences between our comprehensive loss and net loss. |
Net income per share of common stock - We have adopted applicable FASB Codification regarding Earnings per Share, which require presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. |
Recovered_Sheet6
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy: Schedule of Other Current Assets (Tables) | 9 Months Ended | ||||||||
Oct. 31, 2014 | |||||||||
Tables/Schedules | |||||||||
Schedule of Other Current Assets | |||||||||
October 31, | January 31, | ||||||||
2014 | 2014 | ||||||||
Prepaid insurance | 19,345 | - | |||||||
Legal retainer | 7,782 | - | |||||||
Rent deposits | -- | 10,000 | |||||||
Prepaid expenses and other assets - current | $ | 27,127 | $ | 10,000 |
Recovered_Sheet7
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy: Schedule of Other Assets, Noncurrent (Tables) | 9 Months Ended | ||||||||
Oct. 31, 2014 | |||||||||
Tables/Schedules | |||||||||
Schedule of Other Assets, Noncurrent | |||||||||
October 31, | January 31, | ||||||||
2014 | 2014 | ||||||||
Prepaid rent | $ | 54,108 | $ | - | |||||
Security deposits | 292,079 | - | |||||||
Prepaid expenses and other assets | $ | 346,187 | $ | 0 |
Recovered_Sheet8
Note 1 - Organization and Summary of Significant Accounting Policies: Depreciation, Depletion, and Amortization: Property, Plant and Equipment (Tables) | 9 Months Ended | ||||||||
Oct. 31, 2014 | |||||||||
Tables/Schedules | |||||||||
Property, Plant and Equipment | |||||||||
October 31, | January 31, | ||||||||
2014 | 2014 | ||||||||
Tenant improvements: | |||||||||
Upgrades of HVAC systems | $ | 864,374 | $ | - | |||||
Upgrades of electrical generators and power equipment | 609,312 | - | |||||||
Structural improvements | 588,801 | ||||||||
Fire suppression, alarms and surveillance systems | 77,659 | - | |||||||
Office equipment: | |||||||||
Computer equipment | 26,369 | - | |||||||
Office furniture and fixtures | 22,251 | 10,501 | |||||||
Machinery | 25,000 | - | |||||||
2,213,766 | 10,501 | ||||||||
Accumulated amortization and depreciation | (110,991 | ) | - | ||||||
Tenant improvements and office equipment | $ | 2,102,775 | $ | 10,501 |
Recovered_Sheet9
Note 1 - Organization and Summary of Significant Accounting Policies: Goodwill and Intangible Assets, Intangible Assets, Policy: Finite-lived Intangible Assets Amortization Expense (Tables) | 9 Months Ended | ||||||||||||
Oct. 31, 2014 | |||||||||||||
Tables/Schedules | |||||||||||||
Finite-lived Intangible Assets Amortization Expense | |||||||||||||
Gross Carrying | Accumulated Amortization | Net | |||||||||||
Amount | |||||||||||||
Trademarks | $ | 11,010 | $ | 610 | $ | 10,400 |
Note_4_Operating_Leases_Schedu
Note 4 - Operating Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Tables) | 9 Months Ended | ||||
Oct. 31, 2014 | |||||
Tables/Schedules | |||||
Schedule of Future Minimum Rental Payments for Operating Leases | |||||
For the 12 Months | |||||
Ending October 31, | Amount | ||||
2015 | $ | 5,989,627 | |||
2016 | $ | 7,845,004 | |||
2017 | $ | 8,086,492 | |||
2018 | $ | 8,523,339 | |||
2019 | $ | 8,441,104 |
Note_6_Income_Taxes_Schedule_o
Note 6 - Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Tables) | 9 Months Ended | ||||||||||||||||
Oct. 31, 2014 | |||||||||||||||||
Tables/Schedules | |||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | |||||||||||||||||
02/01/2014 to 10/31/2014 | 02/01/2013 to 10/31/2013 | 08/01/2014 to 10/31/2014 | 08/01/2013 to 10/31/2013 | ||||||||||||||
Income Tax Expense | |||||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 45,113 | $ | - | $ | 99,273 | $ | - | |||||||||
State | 7,701 | - | 14,443 | - | |||||||||||||
Provision for taxes on income | $ | 52,814 | $ | 0 | $ | 113,716 | $ | 0 |
Recovered_Sheet10
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy (Details) (USD $) | Oct. 31, 2014 | Jan. 31, 2014 |
Details | ||
Prepaid Expense and Other Assets | $373,314 | $10,000 |
Recovered_Sheet11
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy: Schedule of Other Current Assets (Details) (USD $) | Oct. 31, 2014 | Jan. 31, 2014 |
Details | ||
Prepaid expenses and other assets - current | $27,127 | $10,000 |
Recovered_Sheet12
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy: Schedule of Other Assets, Noncurrent (Details) (USD $) | Oct. 31, 2014 | Jan. 31, 2014 |
Details | ||
Prepaid expenses and other assets | $346,187 | $0 |
Recovered_Sheet13
Note 1 - Organization and Summary of Significant Accounting Policies: Depreciation, Depletion, and Amortization: Property, Plant and Equipment (Details) (USD $) | Oct. 31, 2014 | Jan. 31, 2014 | ||
Details | ||||
Tenant improvements and office equipment | $2,102,775 | [1] | $10,501 | [2] |
[1] | Net of accumulated amortization and depreciation of $110,991 at October 31, 2014. | |||
[2] | Net of accumulated amortization and depreciation of $0 at January 31, 2014. |
Recovered_Sheet14
Note 1 - Organization and Summary of Significant Accounting Policies: Depreciation, Depletion, and Amortization (Details) (USD $) | 9 Months Ended | |
Oct. 31, 2014 | Oct. 31, 2013 | |
Details | ||
Accumulated Depreciation, Depletion and Amortization, Property, Plant and Equipment, Period Increase (Decrease) | $112,960 | $0 |
Recovered_Sheet15
Note 1 - Organization and Summary of Significant Accounting Policies: Goodwill and Intangible Assets, Intangible Assets, Policy (Details) (USD $) | 9 Months Ended | |
Oct. 31, 2014 | Oct. 31, 2013 | |
Details | ||
Amortization of Intangible Assets | $610 | $0 |
Note_3_Related_Party_Transacti1
Note 3 - Related Party Transactions (Details) (USD $) | 9 Months Ended | ||
Oct. 31, 2014 | Oct. 31, 2013 | Jan. 31, 2014 | |
Details | |||
Regulated Operating Revenue | $3,878,051 | $0 | |
Accounts Receivable, Related Parties, Current | $1,011,652 | $0 |
Note_5_Issuance_of_Shares_Deta
Note 5 - Issuance of Shares (Details) | Oct. 31, 2014 | Jan. 31, 2014 |
Details | ||
Common Stock, Shares Issued | 26,948,884 | 20,430,000 |
Note_6_Income_Taxes_Schedule_o1
Note 6 - Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2014 | Oct. 31, 2013 | Oct. 31, 2014 | Oct. 31, 2013 | |
Details | ||||
Provision for taxes on income | $113,716 | $0 | $52,814 | $0 |
Note_8_Mortgage_Payable_Detail
Note 8 - Mortgage Payable (Details) (USD $) | Jul. 26, 2014 |
Details | |
Mortgage Loans on Real Estate, Face Amount of Mortgages | $595,000 |