Document and Entity Information
Document and Entity Information - USD ($) | 3 Months Ended | |
Apr. 30, 2015 | Jul. 31, 2014 | |
Document and Entity Information: | ||
Entity Registrant Name | Strainwise, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Apr. 30, 2015 | |
Trading Symbol | stwc | |
Amendment Flag | true | |
Amendment Description | Amendment 1 | |
Entity Central Index Key | 1,400,683 | |
Current Fiscal Year End Date | --01-31 | |
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 | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited for April 30, 2015) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 | ||
Current assets: | ||||
Cash and cash equivalents | $ 507,310 | $ 674,495 | ||
Due from affiliated entities | 0 | [1] | 0 | [2] |
Prepaid expenses and other assets - current | 2,855 | 9,512 | ||
Total current assets | 510,165 | 684,007 | ||
Commercial operating property | 649,333 | [3] | 654,359 | [4] |
Tenant improvements and office equipment | 1,573,889 | [5] | 1,647,710 | [6] |
Prepaid expenses and other assets - noncurrent | 396,187 | 346,187 | ||
Trademark | 10,034 | [7] | 10,217 | [8] |
Total assets | 3,139,608 | 3,342,480 | ||
Current liabilities: | ||||
Accounts payable | 98,943 | 156,416 | ||
Accrued interest | 26,712 | |||
Current portion of tenant allowance note and mortgage payable | 370,864 | 338,489 | ||
Total current liabilities | 496,519 | 494,905 | ||
Convertible notes payable | 1,800,000 | 550,000 | ||
Note payable for tenant allowances | 1,036,960 | 1,099,690 | ||
Mortgage payable | 308,129 | 356,830 | ||
Deferred rent and interest payable discount | 587,692 | 416,573 | ||
Total liabilities | $ 4,229,300 | $ 2,917,998 | ||
COMMITMENTS AND CONTINGENCIES | ||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||
Additional paid in capital | $ 2,509,325 | $ 2,509,325 | ||
Retained (deficit) | (3,599,017) | (2,084,843) | ||
Total stockholders' equity | (1,089,692) | 424,482 | ||
Total liabilities and stockholders' (deficit) equity | $ 3,139,608 | $ 3,342,480 | ||
[1] | Net of collection allowance reserve of $3,319,182. | |||
[2] | Net of collection allowance reserve of $2,375,533. | |||
[3] | Net of accumulated depreciation of $10,667. | |||
[4] | Net of accumulated depreciation of $5,641. | |||
[5] | Net of accumulated amortization and depreciation of $170,395. | |||
[6] | Net of accumulated amortization and depreciation of $96,574. | |||
[7] | Net of accumulated amortization of $976. | |||
[8] | Net of accumulated amortization of $793. |
Statement of Financial Position
Statement of Financial Position - Parenthetical - $ / shares | Apr. 30, 2015 | Jan. 31, 2015 |
Statement of Financial Position | ||
Common Stock, Par Value | $ 0 | $ 0 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares Issued | 27,147,217 | 27,147,217 |
Common Stock, Shares Outstanding | 27,147,217 | 27,147,217 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Apr. 30, 2015 | Apr. 30, 2014 | |
Revenues from affiliated entities | ||
Cultivation facilities usage fees | $ 1,223,386 | $ 107,167 |
Fulfillment services fees | 270,000 | 240,000 |
Sale of nutrient supplies | 205,912 | 189,042 |
Total revenues from affiliated entities | 1,699,298 | 536,209 |
Consulting services | 2,000 | |
Total revenues | 1,701,298 | 536,209 |
Operating costs and expenses | ||
Collection reserve for amounts due from Affiliated Entities | 943,649 | |
Rents and other occupancy | 1,156,406 | 78,046 |
Compensation | 327,540 | 241,711 |
Nutrient purchases | 158,394 | 99,496 |
Professional, legal and consulting | 302,142 | 26,323 |
Depreciation and amortization | 79,031 | 22,860 |
General and administrative | 68,085 | 34,187 |
Total operating costs and expenses | 3,035,247 | 502,623 |
Loss from operations | (1,333,949) | 33,586 |
Other costs and expenses | ||
Interest expense | (180,225) | (39,718) |
Loss before provision for taxes on income | (1,514,174) | (6,132) |
Net Loss | $ (1,514,174) | $ (6,132) |
Basic loss per common share | $ (0.06) | $ 0 |
Weighted average number of shares outstanding | 27,147,217 | 20,430,000 |
Fully diluted weighted average number of shares outstanding | 29,617,483 | 20,930,000 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | ||
Apr. 30, 2015 | Apr. 30, 2014 | ||
Cash flows from operating activities: | |||
Net Loss | $ (1,514,174) | $ (6,132) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Increase (decrease) in amounts due to/from Affiliated Entities | (943,648) | 121,118 | |
Increase in collection allowance reserve for amounts due from Affiliated Entities | 943,648 | ||
Increase in accrued interest payable | 26,712 | ||
Increase in prepaid expenses and other assets | (43,343) | (393,248) | |
Depreciation and amortization (increase/decrease) | 78,848 | 22,860 | |
Increase (decrease) in accounts payable | (57,473) | ||
Increase in deferred rent and interest discount | 171,119 | (11,723) | |
Decrease in trademark | 183 | 183 | |
Net cash flow used in operating activities | (1,338,128) | (266,942) | |
Cash flows from investing activities: | |||
Investment in tenant improvements and office equipment | (235,579) | ||
Net cash flow used in investing activities | (235,579) | ||
Cash flows from financing activities: | |||
Proceeds from convertible notes | 1,250,000 | ||
Payments on tenant allowances note and mortgage | (79,057) | ||
Proceeds from convertible note | [1] | 0 | 895,000 |
Payments on convertible note | (75,000) | ||
Net cash flows from financing activities | 1,170,943 | 820,000 | |
Net cash flows | (167,185) | 317,479 | |
Cash and equivalent, beginning of period | 674,495 | 100 | |
Cash and equivalent, end of period | 507,310 | 317,579 | |
Supplemental cash flow disclosures: | |||
Cash paid for interest | $ 153,513 | $ 26,587 | |
[1] | Including discount of $45,000. |
Note 1 - Organization and Summa
Note 1 - Organization and Summary of Significant Accounting Policies | 3 Months Ended |
Apr. 30, 2015 | |
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 - The Company provides sophisticated Fulfillment Services to (i) the two cultivation facilities and nine retail stores ( five of which sell both recreational and medical marijuana to the public, three of which only sells medical marijuana to the public, and one of which only sells recreational 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 cultivation 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 cultivation 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 Affiliated Entities 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 Cultivation Facilities and Equipment: We lease cultivation equipment and facilities on a turn-key basis to customers in the cannabis industry. We will also enter into a sale-lease-back agreement with our customers for grow lights, tenant improvements and other cultivation 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 - 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 are 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 - Use of estimates - Cash and cash equivalents - The balance of cash and cash equivalents at April 30, 2015 includes $500,000 of proceeds received on May 1, 2015 from a convertible note. Since the obligation was considered to have been legally incurred as of April 30, 2015, the $500,000 was deemed to have been received as of April 30, 2015 and was recognized for financial statement reporting purposes as cash and cash equivalents at that date. Prepaid expenses and other assets - The amount of prepaid expenses and other assets as of April 30 and January 31, 2015 is $399,042 and $355,699, respectively. April 30, 2015 January 31, 2015 Prepaid insurance $ 2,855 $ 9,512 Prepaid expenses and other assets - current $ 2,855 $ 9,512 Noncurrent prepaid expenses and other assets are comprised of the following: April 30, 2015 January 31, 2015 Prepaid rent $ 83,308 $ 83,308 Security deposits 312,879 262,879 Prepaid expenses and other assets - noncurrent $ 396,187 $ 346,187 Fair value of financial instruments and derivative financial instruments 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. 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. All assets and liabilities are based upon Level 1 inputs. Commercial Operating Property - Tenant improvements and office equipment - Tenant improvements and office equipment, net of accumulated amortization and depreciation are comprised of the following: April 30, 2015 January 31, 2015 Tenant improvements: Upgrades of HVAC systems $ 659,586 $ 659.586 Upgrades of electrical generators and power equipment 468,589 468.589 Structural improvements 468,400 468.400 Fire suppression, alarms and surveillance systems 59,258 59,258 Office equipment: Computer equipment 41,200 41,200 Office furniture and fixtures 22,251 22,251 Machinery 25,000 25,000 1,744,284 1,744,284 Accumulated amortization and depreciation (170,395) (96,574) Tenant improvements and office equipment $ 1,573,889 $ 1,647,710 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 three months and twelve months ended April 30 and January 31, 2015 was $73,821 and $173,972, respectively. Income taxes - Long-Lived Assets - Trademarks - Gross Carrying Amount Accumulated Amortization Net Trademarks $ 11,010 $ 976 $ 10,034 Deferred Rent - Revenue Recognition 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 cultivation 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 cultivation 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 cultivation facility. Under the terms of the ten year 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 10 year 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 the ten year 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 that approximates the amount of bulk purchase discount we receive from our nutrient suppliers. 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. Cultivation Facilities Revenue: Under the terms of a ten year master service agreement, we lease cultivation 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. Sublease of Cultivation Facility. Comprehensive Income (Loss) - Net income per share of common stock Earnings per Share |
Note 2 - Going Concern
Note 2 - Going Concern | 3 Months Ended |
Apr. 30, 2015 | |
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. We have incurred net losses of $3,599,017 since inception and have not achieved profitable operations, raising substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our achieving a sustainable level of profitability. The Company intends to continue financing its future development activities and its working capital needs largely from the private sale of our securities, with additional funding from other traditional financing sources, including convertible 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 Transact
Note 3 - Related Party Transactions and Collection Reserve For Amounts Due From Affiliated Entities | 3 Months Ended |
Apr. 30, 2015 | |
Notes | |
Note 3 - Related Party Transactions and Collection Reserve For Amounts Due From Affiliated Entities: | Note 3 Related Party Transactions and Collection Reserve for Amounts Due from Affiliated Entities: Substantially all of our revenues to date have been derived from long term contracts with the Affiliated 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 between the Company and the Affiliated Entities are determined by related parties and these terms can change at any time. Related party revenue was $1,699,298 and $5,765,481, respectively, for the three months ended April 30, 2015. As of April 30 and January 31, 2015, we had accounts receivable from affiliated entities of $3,319,182 and $2,375,533, respectively. The Company made an investment in cultivation facilities that we sublease to our Affiliated Entities. The cultivation facilities presently produce more product than can be sold by the medical and recreational dispensaries and stores operated by the Affiliated Entities. As a result, the Affiliated Entities have costs in excess of revenue, a negative production variance, that are estimated to continue until the Affiliated Entities are able to add several new dispensaries or retail stores that fully utilize the production capacity. Although the Affiliated Entities have been able to pay us approximately $4,145,254 of the amounts billed to them through April 30, 2015, including the payment of $755,649 during the three months ended April 30, 2015, there is no assurance that they will be able to generate enough positive cash flow to repay the full amount they presently owe to us. Thus, a reserve in the amount of $3,319,182 and $2,375,533 at April 30 and January 31, 2015, respectively, has been recorded to recognize the uncertainty of collecting the full amount presently owed to us from the Affiliated Entities. |
Note 4 - Operating Leases
Note 4 - Operating Leases | 3 Months Ended |
Apr. 30, 2015 | |
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 January 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 cultivation 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 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 cultivation facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the cultivation 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 cultivation facility to We entered into a lease agreement on April 1, 2014 to lease from an independent third party a cultivation 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.. 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 cultivation facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the cultivation 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 cultivation 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 cultivation 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 cultivation facility of approximately 38,000 square feet (Nome Lease) for a term of seven years. 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. As more fully described in Note 8 herein, 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 amount of tenant improvement financing provided by the lessor is to be amortized over the extended term of the modified lease as a component of the monthly lease payments. 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 are responsible to provide all of the tenant improvements that will enable the continuous cultivation of marijuana plants. 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 cultivation facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the cultivation 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 cultivation 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 cultivation 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 September 11, 2014 to lease a cultivation 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 months 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 cultivation facility as a component of the lease, the terms of the lease are less than 75% of the economic life of the cultivation 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 cultivation 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 cultivation facility is recognized on a monthly basis as the user is charged for the amount of the sublease. Future minimum payments for these leases are: For the twelve Months Ending April 30, 2016 2017 2018 2019 2020 Thereafter $ 4,390,800 $ 4,545,200 $ 4,736,000 $ 4,290,200 $ 1,270,100 $ 5,561,600 |
Note 5 - Issuance of Shares
Note 5 - Issuance of Shares | 3 Months Ended |
Apr. 30, 2015 | |
Notes | |
Note 5 - Issuance of Shares: | Note 5 Issuance of Shares: Between March and August 2014, by means of a private offering of our common stock at $1 per share, we sold 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 Note 7 herein, the Share Exchange described in Note 1 herein, and the 198,333 shares issued as stock-based compensation described in Note 8 herein, the total number of shares of common stock issued and outstanding at April 30, 2015 was 27,147,217 shares. |
Note 6 - Income Taxes
Note 6 - Income Taxes | 3 Months Ended |
Apr. 30, 2015 | |
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 Companys 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: 02/01/2015 to 04/30/2015 02/01/2014 to 04/30/2014 02/01/2014 to 01/31/2015 Income tax expense (benefit) Current: Federal $ (579,936) $ 13,205 $ (794,474) State (70,106) (3,536) (96,812) Deferred income tax expense benefit (650,042) 9,670 (891,286) Valuation allowance 650,042 (9,670) 891,682 Provision for taxes on income $ - $ - $ - We have a net operating loss carryforward for financial statement reporting purposes of $2,090,075 from the year ended January 31, 2015. |
Note 7 - Notes Payable
Note 7 - Notes Payable | 3 Months Ended |
Apr. 30, 2015 | |
Notes | |
Note 7 - Notes Payable: | Note 7 Notes Payable: Notes payable consisted of the following: April 30, 2015 January 31, 2015 Current Long Term Total Current Long Term Total Convertible notes $ - $ 1,800,000 $ 1,800,000 $ - $ 550,000 $ - Mortgage 180,249 308,129 488,378 170,955 356,830 527,785 Tenant improvement loan 190,615 1,036,960 1,227,575 167,534 1,099,690 1,267,224 $ 370,864 $ 3,145,089 $ 3,515,953 $ 338,489 $ 2,006,520 $ 2,345,009 On March 20, 2014, the Company issued a convertible note in the amount of $850,000 (the Note) to an individual. 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. On January 31, 2015, the Company issued a three convertible notes totaling up to $2,500,000, of which $1,800,000 had been received by the Company at April 30, 2015. The convertible notes are being funded by the noteholders in varying amounts from approximately $250,000 to $550,000 per month. The convertible notes are unsecured, have an interest rate of 25%, with the interest is payable monthly. The principal amount of the convertible notes are due twenty-four months from the date of the funding. At any time prior to the due date of the convertible notes, the unpaid principal amount of the convertible note, plus any accrued but unpaid interest, may be converted into common stock of the Company at a per-share price of $1 per share. The convertible loans are personally guaranteed by Shawn Phillips, an officer of the Company and affiliate, and Erin Phillips, the majority shareholder of the Company. Subsequent to April 30, 2015, the Company has received proceeds of $200,000 from additional fundings of the convertible notes. On July 26, 2014 the Company entered into a mortgage payable for the purpose of purchasing a commercial operating property that contains a cultivation 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. On December 31, 2015, we entered into a modification of the Nome operating lease agreement (Nome Lease) which included financing for certain tenant improvements. The Nome Lease stipulates that the Company retains ownership of the tenant improvements, so accordingly, the Company recorded a long-lived asset and a corresponding liability for the amount of tenant improvement financing. The tenant improvement financing is being amortized over a 60 month period, at an imputed annual interest rate of 29%. Monthly payments on the tenant financing is included as a component of the monthly lease payment. The lease is guaranteed by Shawn Phillips, an officer and affiliate of the Company. The amount of principal and interest payments on the notes for the five year period ending April 30, 2020 are, as follows: April 30, 2016 2017 2018 2019 2020 Convertible notes interest only $ 493,200 $ 369,900 $ - $ - $ - Convertible notes principal - 1,800,000 - - - Mortgage 232,000 232,000 184,000 - - Tenant improvement loan 528,700 528,700 528,700 528,700 - $ 1,235,900 $ 2,930,600 $ 712,700 $ 528,700 $ - |
Note 8 - Stock-Based Compensati
Note 8 - Stock-Based Compensation | 3 Months Ended |
Apr. 30, 2015 | |
Notes | |
Note 8 - Stock-Based Compensation | Note 8 Stock-Based Compensation The Company issued 198,333 shares of common stock as compensation to employees during the year ended January 31, 2015, and recognized $198,333 of expense. The shares were fully vested upon issuance and were valued at $1.00 per share, the value on the grant date of January 31, 2015. |
Note 9 - New Accounting Pronoun
Note 9 - New Accounting Pronouncements | 3 Months Ended |
Apr. 30, 2015 | |
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. The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow. |
Note 10 - Contingencies
Note 10 - Contingencies | 3 Months Ended |
Apr. 30, 2015 | |
Notes | |
Note 10 - Contingencies | Note 10 Contingencies In April 2015, the Company advised the lessor of one of our operating leases that we had elected to abandon the lease and would not be occupying the premises. The leased premises were originally intended to be subleased to the Affiliated Entities for use as a cultivation facility. We elected to abandon the lease, because of our belief that the lessor was not acting in good faith, and had breached major terms of the lease agreement. The lessor filed a lawsuit against the Company seeking possession of the leased premises and alleging breach of the lease; but, the lessor has not quantified the amount of any claimed damages resulting from the alleged breach of the lease agreement. The Company stipulated to the lessors demand for possession of the leased property, but we are vigorously defending the remaining claims in this action. At this time, we cannot estimate the amount of damages, if any, and accordingly, we have not recorded any corresponding liability. |
Note 11 - Subsequent Events
Note 11 - Subsequent Events | 3 Months Ended |
Apr. 30, 2015 | |
Notes | |
Note 11 - Subsequent Events: | Note 11 Subsequent Events: Subsequent to April 30, 2015 the Company received proceeds in the amount of $200,000 from additional fundings of the series of convertible notes described in Note 7 herein. On May 12, 2015, a reduction in work force was made at one of the cultivation facilities operated by our Affiliated Entities. The reduction was made in order to help decrease the negative production volume variance being caused by the underutilization of the respective cultivation facility. At present, the affected cultivation facility has been granted only one medical marijuana license, which license does not allow for the production of sufficient product to operate the facility at a profit. |
Note 1 - Organization and Sum17
Note 1 - Organization and Summary of Significant Accounting Policies: Nature of Operations (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Nature of Operations | Organization and nature of business - The Company provides sophisticated Fulfillment Services to (i) the two cultivation facilities and nine retail stores ( five of which sell both recreational and medical marijuana to the public, three of which only sells medical marijuana to the public, and one of which only sells recreational 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 cultivation 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 cultivation 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 Affiliated Entities 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 Cultivation Facilities and Equipment: We lease cultivation equipment and facilities on a turn-key basis to customers in the cannabis industry. We will also enter into a sale-lease-back agreement with our customers for grow lights, tenant improvements and other cultivation 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 Sum18
Note 1 - Organization and Summary of Significant Accounting Policies: Business Combinations and Other Purchase of Business Transactions, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Business Combinations and Other Purchase of Business Transactions, Policy | Share exchange - 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 are 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 Sum19
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Accounting, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Basis of Accounting, Policy | Basis of presentation - |
Note 1 - Organization and Sum20
Note 1 - Organization and Summary of Significant Accounting Policies: Use of Estimates, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Use of Estimates, Policy | Use of estimates - |
Note 1 - Organization and Sum21
Note 1 - Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Cash and Cash Equivalents, Policy | Cash and cash equivalents - The balance of cash and cash equivalents at April 30, 2015 includes $500,000 of proceeds received on May 1, 2015 from a convertible note. Since the obligation was considered to have been legally incurred as of April 30, 2015, the $500,000 was deemed to have been received as of April 30, 2015 and was recognized for financial statement reporting purposes as cash and cash equivalents at that date. |
Note 1 - Organization and Sum22
Note 1 - Organization and Summary of Significant Accounting Policies: Prepaid Expenses and Other Assets (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Prepaid Expenses and Other Assets | Prepaid expenses and other assets - The amount of prepaid expenses and other assets as of April 30 and January 31, 2015 is $399,042 and $355,699, respectively. April 30, 2015 January 31, 2015 Prepaid insurance $ 2,855 $ 9,512 Prepaid expenses and other assets - current $ 2,855 $ 9,512 Noncurrent prepaid expenses and other assets are comprised of the following: April 30, 2015 January 31, 2015 Prepaid rent $ 83,308 $ 83,308 Security deposits 312,879 262,879 Prepaid expenses and other assets - noncurrent $ 396,187 $ 346,187 |
Note 1 - Organization and Sum23
Note 1 - Organization and Summary of Significant Accounting Policies: Fair Value of Financial Instruments, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Fair Value of Financial Instruments, Policy | Fair value of financial instruments and derivative financial instruments 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. 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. All assets and liabilities are based upon Level 1 inputs. |
Note 1 - Organization and Sum24
Note 1 - Organization and Summary of Significant Accounting Policies: Lease, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Lease, Policy | Commercial Operating Property - |
Note 1 - Organization and Sum25
Note 1 - Organization and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Property, Plant and Equipment, Policy | Tenant improvements and office equipment - Tenant improvements and office equipment, net of accumulated amortization and depreciation are comprised of the following: April 30, 2015 January 31, 2015 Tenant improvements: Upgrades of HVAC systems $ 659,586 $ 659.586 Upgrades of electrical generators and power equipment 468,589 468.589 Structural improvements 468,400 468.400 Fire suppression, alarms and surveillance systems 59,258 59,258 Office equipment: Computer equipment 41,200 41,200 Office furniture and fixtures 22,251 22,251 Machinery 25,000 25,000 1,744,284 1,744,284 Accumulated amortization and depreciation (170,395) (96,574) Tenant improvements and office equipment $ 1,573,889 $ 1,647,710 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 three months and twelve months ended April 30 and January 31, 2015 was $73,821 and $173,972, respectively. |
Note 1 - Organization and Sum26
Note 1 - Organization and Summary of Significant Accounting Policies: Income Tax, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Income Tax, Policy | Income taxes - |
Note 1 - Organization and Sum27
Note 1 - Organization and Summary of Significant Accounting Policies: Impairment or Disposal of Long-Lived Assets, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Impairment or Disposal of Long-Lived Assets, Policy | Long-Lived Assets - |
Note 1 - Organization and Sum28
Note 1 - Organization and Summary of Significant Accounting Policies: Deferred Rent (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Deferred Rent | Deferred Rent - |
Note 1 - Organization and Sum29
Note 1 - Organization and Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Revenue Recognition | Revenue Recognition 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 cultivation 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 cultivation 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 cultivation facility. Under the terms of the ten year 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 10 year 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 the ten year 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 that approximates the amount of bulk purchase discount we receive from our nutrient suppliers. 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. Cultivation Facilities Revenue: Under the terms of a ten year master service agreement, we lease cultivation 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. Sublease of Cultivation Facility. |
Note 1 - Organization and Sum30
Note 1 - Organization and Summary of Significant Accounting Policies: Comprehensive Income, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Comprehensive Income, Policy | Comprehensive Income (Loss) - |
Note 1 - Organization and Sum31
Note 1 - Organization and Summary of Significant Accounting Policies: Earnings Per Share, Policy (Policies) | 3 Months Ended |
Apr. 30, 2015 | |
Policies | |
Earnings Per Share, Policy | Net income per share of common stock Earnings per Share |
Note 1 - Organization and Sum32
Note 1 - Organization and Summary of Significant Accounting Policies: Prepaid Expenses and Other Assets: Other Current Liabilities (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Other Current Liabilities | April 30, 2015 January 31, 2015 Prepaid insurance $ 2,855 $ 9,512 Prepaid expenses and other assets - current $ 2,855 $ 9,512 |
Note 1 - Organization and Sum33
Note 1 - Organization and Summary of Significant Accounting Policies: Prepaid Expenses and Other Assets: Other Noncurrent Liabilities (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Other Noncurrent Liabilities | April 30, 2015 January 31, 2015 Prepaid rent $ 83,308 $ 83,308 Security deposits 312,879 262,879 Prepaid expenses and other assets - noncurrent $ 396,187 $ 346,187 |
Note 1 - Organization and Sum34
Note 1 - Organization and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy: Property, Plant and Equipment (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Property, Plant and Equipment | April 30, 2015 January 31, 2015 Tenant improvements: Upgrades of HVAC systems $ 659,586 $ 659.586 Upgrades of electrical generators and power equipment 468,589 468.589 Structural improvements 468,400 468.400 Fire suppression, alarms and surveillance systems 59,258 59,258 Office equipment: Computer equipment 41,200 41,200 Office furniture and fixtures 22,251 22,251 Machinery 25,000 25,000 1,744,284 1,744,284 Accumulated amortization and depreciation (170,395) (96,574) Tenant improvements and office equipment $ 1,573,889 $ 1,647,710 |
Note 1 - Organization and Sum35
Note 1 - Organization and Summary of Significant Accounting Policies: Schedule of Intangible Assets and Goodwill (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Schedule of Intangible Assets and Goodwill | Gross Carrying Amount Accumulated Amortization Net Trademarks $ 11,010 $ 976 $ 10,034 |
Note 4 - Operating Leases_ Sche
Note 4 - Operating Leases: Schedule of Future Minimum Lease Payments for Capital Leases (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Schedule of Future Minimum Lease Payments for Capital Leases | For the twelve Months Ending April 30, 2016 2017 2018 2019 2020 Thereafter $ 4,390,800 $ 4,545,200 $ 4,736,000 $ 4,290,200 $ 1,270,100 $ 5,561,600 |
Note 6 - Income Taxes_ Schedule
Note 6 - Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Schedule of Components of Income Tax Expense (Benefit) | 02/01/2015 to 04/30/2015 02/01/2014 to 04/30/2014 02/01/2014 to 01/31/2015 Income tax expense (benefit) Current: Federal $ (579,936) $ 13,205 $ (794,474) State (70,106) (3,536) (96,812) Deferred income tax expense benefit (650,042) 9,670 (891,286) Valuation allowance 650,042 (9,670) 891,682 Provision for taxes on income $ - $ - $ - |
Note 7 - Notes Payable_ Schedul
Note 7 - Notes Payable: Schedule of Debt (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Schedule of Debt | April 30, 2015 January 31, 2015 Current Long Term Total Current Long Term Total Convertible notes $ - $ 1,800,000 $ 1,800,000 $ - $ 550,000 $ - Mortgage 180,249 308,129 488,378 170,955 356,830 527,785 Tenant improvement loan 190,615 1,036,960 1,227,575 167,534 1,099,690 1,267,224 $ 370,864 $ 3,145,089 $ 3,515,953 $ 338,489 $ 2,006,520 $ 2,345,009 |
Note 7 - Notes Payable_ Sched39
Note 7 - Notes Payable: Schedule of Maturities of Long-term Debt (Tables) | 3 Months Ended |
Apr. 30, 2015 | |
Tables/Schedules | |
Schedule of Maturities of Long-term Debt | April 30, 2016 2017 2018 2019 2020 Convertible notes interest only $ 493,200 $ 369,900 $ - $ - $ - Convertible notes principal - 1,800,000 - - - Mortgage 232,000 232,000 184,000 - - Tenant improvement loan 528,700 528,700 528,700 528,700 - $ 1,235,900 $ 2,930,600 $ 712,700 $ 528,700 $ - |
Note 1 - Organization and Sum40
Note 1 - Organization and Summary of Significant Accounting Policies: Prepaid Expenses and Other Assets (Details) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Prepaid Expense | $ 399,042 | $ 355,699 |
Note 1 - Organization and Sum41
Note 1 - Organization and Summary of Significant Accounting Policies: Prepaid Expenses and Other Assets: Other Current Liabilities (Details) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Prepaid expenses and other assets - current | $ 2,855 | $ 9,512 |
Note 1 - Organization and Sum42
Note 1 - Organization and Summary of Significant Accounting Policies: Prepaid Expenses and Other Assets: Other Noncurrent Liabilities (Details) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Prepaid expenses and other assets - noncurrent | $ 396,187 | $ 346,187 |
Note 1 - Organization and Sum43
Note 1 - Organization and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy: Property, Plant and Equipment (Details) - USD ($) | Apr. 30, 2015 | [1] | Jan. 31, 2015 | [2] |
Details | ||||
Tenant improvements and office equipment | $ 1,573,889 | $ 1,647,710 | ||
[1] | Net of accumulated amortization and depreciation of $170,395. | |||
[2] | Net of accumulated amortization and depreciation of $96,574. |
Note 1 - Organization and Sum44
Note 1 - Organization and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Apr. 30, 2015 | Jan. 31, 2015 | |
Details | ||
Accumulated Depreciation, Depletion and Amortization, Reclassifications from Property, Plant and Equipment | $ 73,821 | $ 173,972 |
Note 1 - Organization and Sum45
Note 1 - Organization and Summary of Significant Accounting Policies (Details) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Finite-Lived Intangible Assets, Accumulated Amortization | $ 976 | $ 793 |
Note 2 - Going Concern (Details
Note 2 - Going Concern (Details) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Retained (deficit) | $ 3,599,017 | $ 2,084,843 |
Note 3 - Related Party Transa47
Note 3 - Related Party Transactions and Collection Reserve For Amounts Due From Affiliated Entities (Details) - USD ($) | 3 Months Ended | ||
Apr. 30, 2015 | Apr. 30, 2014 | Jan. 31, 2015 | |
Details | |||
Total revenues from affiliated entities | $ 1,699,298 | $ 536,209 | |
Accounts Receivable, Related Parties, Current | 3,319,182 | $ 2,375,533 | |
Proceeds from (Repayments of) Related Party Debt | 755,649 | ||
Allowance for Doubtful Accounts Receivable, Current | $ 3,319,182 | $ 2,375,533 |
Note 5 - Issuance of Shares (De
Note 5 - Issuance of Shares (Details) - shares | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Common Stock, Shares Outstanding | 27,147,217 | 27,147,217 |
Note 6 - Income Taxes_ Schedu49
Note 6 - Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Apr. 30, 2015 | Apr. 30, 2014 | Jan. 31, 2015 | |
Details | |||
Deferred Federal Income Tax Expense (Benefit) | $ (579,936) | $ 13,205 | $ (794,474) |
Deferred State and Local Income Tax Expense (Benefit) | (70,106) | (3,536) | (96,812) |
Deferred Income Tax Expense (Benefit) | (650,042) | 9,670 | (891,286) |
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount | $ 650,042 | $ (9,670) | $ 891,682 |
Note 6 - Income Taxes (Details)
Note 6 - Income Taxes (Details) | Jan. 31, 2015USD ($) |
Details | |
Operating Loss Carryforwards | $ 2,090,075 |
Note 7 - Notes Payable (Details
Note 7 - Notes Payable (Details) - USD ($) | Apr. 30, 2015 | Jan. 31, 2015 |
Details | ||
Convertible notes payable | $ 1,800,000 | $ 550,000 |