Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 25, 2016 | Jun. 30, 2015 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | MJ Holdings, Inc. | ||
Entity Central Index Key | 1,456,857 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 4,116,586 | ||
Entity Common Stock, Shares Outstanding | 14,027,939 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Real estate property: | ||
Land | $ 747,389 | $ 551,251 |
Buildings and improvements | 3,141,193 | $ 2,442,188 |
Computer equipment and software | 2,000 | |
Real estate property, gross | 3,890,582 | $ 2,993,439 |
Accumulated depreciation | (140,699) | (38,173) |
Real estate property, net | 3,749,883 | 2,955,266 |
Cash | 303,368 | 175,792 |
Deferred leasing costs | 157,463 | 202,545 |
Deferred rent receivable | 54,664 | 6,936 |
Prepaid expenses and other assets | 17,450 | 73,377 |
Total Assets | 4,282,828 | 3,413,916 |
Liabilities | ||
Note payable - related party | 2,725,000 | 1,800,000 |
Security deposits | 95,203 | 102,045 |
Accounts payable and accrued liabilities | 118,983 | 195,582 |
Total Liabilities | $ 2,939,186 | $ 2,097,627 |
Stockholders' Equity (Deficit) | ||
Preferred stock, par value $0.001, 5,000,000 shares authorized; 0 shares issued and outstanding | ||
Common stock, par value $0.001, 95,000,000 shares authorized; 14,027,939 and 13,878,522 shares issued and outstanding, respectively | $ 14,028 | $ 13,879 |
Additional paid-in capital | 2,779,105 | 2,640,120 |
Accumulated deficit | (1,449,491) | (1,337,710) |
Total Stockholders' Equity | 1,343,642 | 1,316,289 |
Total Liabilities and Stockholders' Equity | $ 4,282,828 | $ 3,413,916 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value per share | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value per share | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 95,000,000 | 95,000,000 |
Common stock, shares issued | 14,027,939 | 13,878,522 |
Common stock, shares outstanding | 14,027,939 | 13,878,522 |
Consolidated Statement of Opera
Consolidated Statement of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Revenues: | ||
Rental income | $ 625,864 | $ 108,871 |
Operating Expenses: | ||
Property expenses | 123,589 | 72,859 |
General and administrative expenses | 257,318 | 1,058,569 |
Depreciation expense | 102,526 | 38,173 |
Total operating expenses | 483,433 | 1,169,601 |
Operating income (loss) | 142,431 | (1,060,730) |
Interest expense, net - related party | (241,002) | (99,132) |
Interest expense, net | (13,210) | (5,218) |
Loss before income taxes | $ (111,781) | $ (1,165,080) |
Provision for income taxes | ||
Net Loss | $ (111,781) | $ (1,165,080) |
Basic and diluted net loss per common share: | ||
Weighted average shares outstanding | 13,958,592 | 13,457,822 |
Net loss per common share | $ (0.01) | $ (0.09) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2013 | $ 12,218 | $ 57,190 | $ (172,630) | $ (103,222) | |
Balance, shares at Dec. 31, 2013 | 12,218,205 | ||||
Sale of common stock | $ 1,615 | 1,613,385 | 1,615,000 | ||
Sale of common stock, shares | 1,615,000 | ||||
Common stock issued for services | $ 15 | 77,485 | 77,500 | ||
Common stock issued for services, shares | 14,602 | ||||
Warrants issued to consultant | 784,976 | $ 784,976 | |||
Cashless exercise of warrants | $ 11 | (11) | |||
Cashless exercise of warrants, shares | 10,825 | ||||
Accounts payable paid by principal stockholders | 7,665 | $ 7,665 | |||
Conversion of notes payable and accrued interest to common stock | $ 20 | $ 99,430 | 99,450 | ||
Conversion of notes payable and accrued interest to common stock, shares | 19,890 | ||||
Net Loss | $ (1,165,080) | (1,165,080) | |||
Balance at Dec. 31, 2014 | $ 13,879 | $ 2,640,120 | $ (1,337,710) | 1,316,289 | |
Balance, shares at Dec. 31, 2014 | 13,878,522 | ||||
Common stock issued for services | $ 149 | $ 138,985 | 139,134 | ||
Common stock issued for services, shares | 149,417 | ||||
Net Loss | $ (111,781) | (111,781) | |||
Balance at Dec. 31, 2015 | $ 14,028 | $ 2,779,105 | $ (1,449,491) | $ 1,343,642 | |
Balance, shares at Dec. 31, 2015 | 14,027,939 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flow from operating activities: | ||
Net Loss | $ (111,781) | $ (1,165,080) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation | 102,526 | 38,173 |
Stock-based compensation | 139,134 | 862,476 |
Deferred rental income | (47,728) | (6,936) |
Amortization of deferred leasing and debt costs | 40,782 | 7,750 |
Changes in operating assets and liabilities: | ||
Deferred leasing costs | 17,511 | (205,077) |
Prepaid and other assets | 53,351 | (59,443) |
Security deposits | (6,842) | 102,045 |
Accounts payable and accrued liabilities | (76,600) | 198,797 |
Net Cash Provided by (Used in) Operating Activities | 110,353 | (227,295) |
Cash flow from investing activities: | ||
Acquisition of real estate property | (895,143) | $ (2,993,439) |
Acquisition of computer equipment and software | (2,000) | |
Net Cash Used in Investing Activities | $ (897,143) | $ (2,993,439) |
Cash flow from financing activities: | ||
Proceeds from the sale of common stock | 1,615,000 | |
Proceeds from note payable - related party | $ 925,000 | 1,800,000 |
Payment for debt issuance costs | $ (10,634) | (19,152) |
Proceeds from loans from stockholders | 200 | |
Net Cash Provided by Financing Activities | $ 914,366 | 3,396,048 |
Net increase in cash | 127,576 | 175,314 |
Cash at beginning of period | 175,792 | 478 |
Cash at end of period | 303,368 | 175,792 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest to related party | $ 233,346 | 80,918 |
Supplemental schedule of non-cash financing activities: | ||
Accounts payable paid by principal stockholders | 7,665 | |
Stockholder loans and accrued interest converted to common stock | $ 99,450 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Note 1 - Description of Business MJ Holdings acquires real estate zoned for legalized marijuana operations and leases the acquired real estate to licensed marijuana operators, including but not limited to providing complete turnkey growing space and related facilities to licensed marijuana growers and dispensary owners. In addition to our portfolio of income producing real estate, MJ Holdings owns, operates and is developing a portfolio of business units related to the regulated marijuana industry, including internet websites, mobile apps and consumer products. The Company does not and will not, until such time as Federal law allows, grow, harvest, distribute or sell marijuana or any substances that violate the laws of the United States of America. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, 5353 Joliet, LLC, MJ Havana, LLC and MJ Sheridan, LLC. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions are required in the determination of the fair value of financial instruments and the valuation of long-lived and indefinite-lived assets. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Fair Value of Financial Instruments Financial instruments include cash, payables, and debt obligations. Except as described below, due to the short-term nature of the financial instruments, the book value is representative of their fair value. Warrants to Purchase Common Stock and Other Derivative Financial Instruments We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock. We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess the classification of warrants issued to purchase our common stock and any other financial instrument at each reporting date to determine whether a change in classification between assets and liabilities is required. Cash At times the Company has cash in financial institutions in excess of federally insured limits. However, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its cash balances. Deferred Leasing Costs Commissions and other direct costs associated with the acquisition of tenants, or lessees, are capitalized and amortized on a straight-line basis over the terms of the related leases. Costs associated with unsuccessful leasing opportunities are expensed as incurred. Leasing commissions of $205,077 were deferred during the year ended December 31, 2014. Leasing commissions of $17,511 were refunded during the year ended December 31, 2015. Deferred leasing costs charged to property expenses for the years ended December 31, 2015 and 2014, were $27,571 and $2,532, respectively. As of December 31, 2015, $157,463 of deferred leasing costs are included on the Balance Sheet as a deferred asset. Debt Issuance Costs Costs associated with obtaining, closing, and modifying loans and/or debt instruments such as, but not limited to placement agent fees, attorney fees and state documentary fees are capitalized and charged to interest expense over the term of the loan. Debt issuance costs of $10,634 and $19,152 were capitalized during the years ended December 31, 2015 and 2014, respectively. Debt issuance costs charged to interest expense for the years ended December 31, 2015 and 2014, were $13,210 and $5,218, respectively. As of December 31, 2015, $11,357 of debt issuance costs are included on the Balance Sheet within Prepaid expenses and other assets. Real Estate Property Real estate property is recorded at cost, less accumulated depreciation and amortization. Real estate property, excluding land, is depreciated using the straight-line method over the estimated useful life of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the related lease term or useful life. Maintenance, repairs, and minor improvements are charged to expense as incurred; major renewals and betterments that extend the useful life of the associated asset are capitalized. When real estate property is sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in results of operations for the period. Long –lived Assets Long-lived assets, including real estate property and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If the assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. We did not record any impairments of long-lived assets during the year ended December 31, 2015. Revenue Recognition Before revenue can be recognized, four basic criteria must be met: persuasive evidence of an arrangement exists; the delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The Company's revenues are rental income generated by leasing acquired real estate properties to licensed marijuana operators. All leases are classified as operating leases. Rental income is recognized on a straight-line basis over the terms of the leases. Straight-line rent is recognized for all tenants with contractual fixed increases in rent. Deferred rent receivable represents rental revenue recognized on a straight-line basis in excess of billed rents. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as rental income in the period the applicable costs are incurred. Stock-Based Compensation The Company estimates the fair values of share-based payments on the date of grant using a Black-Scholes option pricing model, which requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based financial instrument. Since the number of outstanding and free-trading shares of the Company’s common stock is limited and the trading volume is relatively low, we do not have sufficient company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the average historical volatilities of similar entities within our industry as the expected volatility of our share price. The expected dividend yield is 0% as the Company has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award. For stock-based financial instruments issued to parties other than employees, we use the contractual term of the financial instruments as the expected term of the stock-based financial instruments. The assumptions used in calculating the fair value of stock-based financial instruments represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented. Advertising Costs Costs related to advertising are expensed as incurred and are included in general and administrative expenses. Research and Development Costs Costs related to research and development activities of new business units related to the regulated marijuana industry are expensed as incurred and are included in general and administrative expenses. These costs for 2015 and 2014 were primarily third-party consulting fees. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued guidance to clarify the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a comprehensive framework for revenue recognition that supersedes current general revenue guidance and most industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative adjustment at the date of the initial application. In July 2015, the FASB delayed the effective date of the new guidance to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is now permitted after the original effective date of December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of the new accounting guidance on its consolidated financial statements and has not determined the impact of adoption on its consolidated financial statements. In August 2014, FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The new guidance is effective for the annual period ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. Since this guidance primarily addresses certain disclosures to the financial statements, we anticipate no impact on our financial position, results of operations or cash flows from adopting this standard. The Company is currently in the process of evaluating the additional disclosure requirements of the new guidance and has not determined the impact of adoption on its financial statement disclosures. In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. This guidance provides that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for fiscal years and interim periods beginning after December 15, 2015, and is required to be applied on a retrospective basis. Early adoption is permitted for financial statements that have not been previously issued. As of December 31, 2015, we had $11,357 in debt issuance costs associated with $2.7 million of notes payable that would be reclassified from other assets to a reduction in the carrying amount of the note payable. The adoption of this standard is not expected to have a material impact on our financial position and will not impact our results of operations or cash flows. |
Going Concern
Going Concern | 12 Months Ended |
Dec. 31, 2015 | |
Going Concern [Abstract] | |
Going Concern | Note 3 - Going Concern The CompanyÂ’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. During the year ended December 31, 2015, the Company incurred a net loss of $111,781. The Company had an accumulated deficit of $1,449,491 as of December 31, 2015. These factors, among others, raise substantial doubt about the CompanyÂ’s ability to continue as a going concern. The CompanyÂ’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. Although we can provide no assurances, we believe our cash on hand, coupled with revenues generated by rental income and our ability to refinance our equity in the real estate we own, will provide sufficient liquidity and capital resources to fund our business for the next twelve months. In the event the Company experiences liquidity and capital resource constraints because of unanticipated operating losses, we may need to raise additional capital in the form of equity and/or debt financing. If such additional capital is not available on terms acceptable to us or at all, then we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material adverse effect on our financial position, results of operations, and our ability to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Real Estate Property Acquisitio
Real Estate Property Acquisitions | 12 Months Ended |
Dec. 31, 2015 | |
Business Combinations [Abstract] | |
Real Estate Property Acquisitions | Note 4 - Real Estate Property Acquisitions 5353 Joliet Street In June 2014, through its wholly-owned subsidiary, 5353 Joliet LLC, the Company acquired an owner-occupied 22,144 square feet industrial building situated on 1.4 acres of land in Denver, Colorado for $2,214,000. The acquisition was funded with proceeds from the issuance of a secured promissory note in the amount of $1,800,000 and $414,000 of cash on-hand. The promissory note is held by Chemtov Mortgage Group ("CMG"), an entity wholly-owned by the Company's co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to the promissory note to 5353 Mortgage Loan, LLC, a single purpose entity created solely for the purpose of this transaction. CMG invested $100,000 of the $1,800,000 of funds used to finance the purchase of the promissory note. CMG acts as the loan servicing entity for the promissory note, administering the note, processing payments from the Company, and transferring all payments to 5353 Mortgage Loan, LLC. CMG charges no administration fees for servicing the promissory note. The promissory note bears interest at 10% per annum, provides for cash interest payments on a monthly basis, matures on June 1, 2016, and is callable at the option of the Company at any time after June 19, 2015. The Company has guaranteed the promissory note and has pledged its ownership interest in 5353 Joliet LLC, and as such its fee-simple ownership interest in the property as security for the promissory note. The promissory note does not restrict the Company's ability to incur future indebtedness. For the years ended December 31, 2015 and 2014, the Company recorded $180,000 and $95,918, respectively, of interest expense related to the promissory note. In September 2014, the Company entered into a lease agreement contingent upon the lessee obtaining city and state licenses and permits for its intended operations at the premises. The contingencies were met by the lessee, and the lease agreement became effective December 1, 2014. The lease agreement is for a term of seven years and a monthly rent obligation of $25,835, subject to annual increases of 2% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the lessee as additional rent based on the actual expenses incurred - see Note 5 below for additional lease details. 503 Havana Street In September 2014, through its wholly-owned subsidiary, MJ Havana LLC, the Company acquired an owner-occupied 1,250 square foot building situated on 23,625 square feet of land in Aurora, Colorado for $756,000, exclusive of closing costs. The acquisition was funded with cash on-hand. The property is zoned B-2 and has been approved by the city of Aurora as a retail dispensary for recreational marijuana. Prior to closing on the property acquisition, the Company had pre-negotiated a 10-year lease agreement with a third-party, a licensed marijuana dispensary company serving both medical and adult (21+) customers in Colorado. Once the closing of the property was completed with the seller, the pre-negotiated lease was executed in September 2014 with the third-party. Pursuant to the terms of the lease agreement, the Company agreed to contribute $150,000 to improvements to the property - see Note 5 below for additional lease details. As of December 31, 2015, the Company had paid $146,026 towards the tenant's building improvements. 1126 South Sheridan Boulevard In May 2015, through its wholly-owned subsidiary, MJ Sheridan LLC, the Company acquired real estate property located at 1126 South Sheridan Boulevard in Denver, Colorado, for $771,750, exclusive of closing costs. The Company funded the acquisition through the issuance of a promissory note in the amount of $925,000 to a related party of which $771,750 was used to purchase the property. The balance of the funds will be used by the Company as working capital. The acquired property is 17,729 square feet with a 3,828 square foot one story free-standing building. The property is zoned B-2 and has been approved by the city of Denver as a retail dispensary for recreational marijuana. The promissory note is held by CMG, an entity wholly-owned by the Company's co-CEO, Shawn Chemtov. CMG has assigned all ownership and security interest granted to it pursuant to the promissory note to a single purpose entity created solely for the purpose of this transaction. CMG acts as the loan servicing entity for the promissory note, administering the note and processing payments from the Company. CMG charges no administration fees for servicing the promissory note. The promissory note bears interest at 10% per annum, provides for cash interest payments on a monthly basis, matures on June 1, 2017. The promissory note is collateralized with the Company's ownership interest in the newly acquired property and its previously acquired property located at 503 Havana Street in Aurora, Colorado. The promissory note does not restrict the Company's ability to incur future indebtedness. For the year ended December 31, 2015, the Company recorded $61,054 of interest expense related to the promissory note. Prior to closing on the property acquisition, the Company had pre-negotiated a 10-year lease agreement with a third-party, a licensed marijuana dispensary company serving both medical and adult (21+) customers in Colorado. Once the closing of the property was completed with the seller, the pre-negotiated lease was executed in May 2015 with the third-party - see Note 5 below for additional lease details. A summary of real estate property at December 31, 2015, is as follows: Estimated December 31, Life 2015 Buildings 30 years $ 2,995,167 Improvements 9-10 years 146,026 Land Not depreciated 747,389 Computer equipment and software 3 years 2,000 Total real estate property 3,890,582 Less: Accumulated depreciation (140,699 ) Real estate property, net $ 3,749,883 |
Operating Leases
Operating Leases | 12 Months Ended |
Dec. 31, 2015 | |
Leases, Operating [Abstract] | |
Operating Leases | Note 5 - Operating Leases The Company generates revenues by leasing its acquired real estate properties through operating leasing arrangements. A summary of revenues generated from our rental properties for the years ended December 31, 2015 and 2014, is as follows: 2015 2014 Revenues: Rental payments $ 520,913 $ 88,778 Reimbursed operating expenses 57,223 13,157 Deferred rental income 47,728 6,936 Total revenues from rental properties $ 625,864 $ 108,871 503 Havana Street In September 2014, the Company entered into a non-cancelable operating lease agreement with a marijuana dispensary (the "Lessee") to move into the Company's acquired property located at 503 Havana Street in Aurora, Colorado. The lease agreement is for a term of ten years and a monthly rent obligation of $11,250, subject to annual increases of 3% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the Lessee as additional rent based on the actual expenses incurred. Pursuant to the terms of the lease agreement, the Company has agreed to contribute $150,000 to improvements to the property. Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for one additional ten-year term, on the same terms as provided in the lease agreement. During the third year of the lease agreement, the Lessee may exercise an option to purchase the Property. 5353 Joliet Street In September 2014, the Company entered into a lease agreement for its property and warehouse building located at 5353 Joliet Street in Denver, Colorado. The lease agreement is for a term of seven years and a monthly rent obligation of $25,835, subject to annual increases of 2% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the lessee as additional rent based on the actual expenses incurred. The lease was contingent upon the lessee, obtaining city and state licenses and permits for its intended operations at the premises, within the dates provided in the lease agreement. The contingencies were met by the lessee, and the lease agreement became effective December 1, 2014. Upon the expiration of the seven-year term, the lessee has the option to renew the lease for two separate five-year terms, subject to rent reviews and adjustments, as set out in the lease agreement. 1126 South Sheridan Boulevard In May 2015, the Company entered into a lease agreement for its acquired property located at 1126 South Sheridan Boulevard in Denver, Colorado. The lease agreement is for a term of ten years and a monthly rent obligation of $10,945, subject to annual increases of 3% per year. Insurance and real property taxes shall be paid by the Company and, subsequently, charged to the Lessee as additional rent based on the actual expenses incurred. Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for one additional ten-year term, on the same terms as provided in the lease agreement. During the third year of the lease agreement, the Lessee may exercise an option to purchase the Property. Future minimum rental payments, excluding the reimbursement of specified operating expenses, for non-cancelable operating lease agreements are as follows as of December 31, 2015: 2016 574,387 2017 588,457 2018 602,886 2019 617,681 2020 632,857 Thereafter 1,489,861 Total minimal rental payments $ 4,506,129 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 6 - Related Party Transactions In February 2014, in connection with the change in control of the Company, the principal stockholders paid $7,665 of the Company's accounts payable, which was recorded as a capital contribution to the Company. During year ended December 31, 2014, the Company borrowed $5,277 from its principal stockholders and repaid $5,077 of the borrowings to its principal shareholders, resulting in $200 of net borrowings from related parties. The $200 of net borrowings was included as part of the stockholder loans converted into shares of the Company's common stock on August 31, 2014, discussed below in Note 7. During the years ended December 31, 2015 and 2014, the Company paid $233,346 and $80,918, respectively, for interest due pursuant to $2,725,000 of promissory notes held by CMG, wholly-owned by the Company's co-CEO and shareholder, Shawn Chemtov - see Note 4 above for additional details regarding promissory note held by related party. |
Stockholder Loans Payable
Stockholder Loans Payable | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Stockholder Loans Payable | Note 7 - Stockholder Loans Payable Stockholder loans payable consisted of three promissory notes with each of two of its stockholders in which the Company may borrow up to $25,000, $20,000, and $10,000, respectively. These borrowings accrued interest at 5%, 8%, and 8% per annum, respectively. They were due in part in December 2014 and December 2016. In February 2014, in connection with the change of control of the Company, Messrs. Chemtov and Laufer, purchased the Stock holder loans from Messrs. Peraman and Sarfoh. On August 31, 2014, the outstanding balance of $99,450 for the stockholder loans and the associated accrued interest were converted to 19,890 shares of the CompanyÂ’s common stock at a conversion price of $5.00 per share. For the year ended December 31, 2014, the Company accrued interest expense of $3,214 related to the stockholder loans, which was included as part of the stockholder loans converted to shares of the company's common stock on August 31, 2014, discussed above. |
Sale of Unregistered Securities
Sale of Unregistered Securities | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders' Equity Note [Abstract] | |
Sale of Unregistered Securities | Note 8 - Sale of Unregistered Securities The Company conducted a private placement of its shares of common stock, whereby we sold 1,615,000 shares of common stock for an aggregate of $1,615,000. We began accepting subscriptions on March 24, 2014 and closed the private placement on April 9, 2014. For the year ended December 31, 2014, the Company received proceeds from the private placement of $1,615,000. The shares were issued pursuant to an exemption from the registration requirements under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder (“Regulation D”) since, among other things, the transactions did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof. Offers and sales were made solely to persons qualifying as “accredited investors” (as such term is defined by Rule 501 of Regulation D). The securities offered will not be and have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Based Compensation | Note 9 - Stock Based Compensation Warrants In May 2014, the Company entered into a consulting services agreement for the generation of qualified leads and referrals for the Company’s real estate financing products, with a wholly-owned subsidiary of Medbox, Inc ("Medbox"), a leader in dispensing technologies and consulting services in the regulated marijuana industry. During the term of the Agreement, the Company had agreed to pay Medbox (i) 50% of any management fee and (ii) 50% of the Net Revenue generated by the Medbox clients. Additionally, during the term of the agreement, Medbox was to receive warrants to purchase 33,333 shares of the Company’s common stock each month until Medbox had been issued an aggregate of 600,000 warrants. The warrants have a five-year term. The exercise price for each monthly warrant was determined based on the volume weighted average price of the Company's common stock for the thirty days prior to the grant date of the warrant. The Agreement’s initial term was for six months, and was to renew automatically for successive one month terms and could be canceled by either party with 5 days written notice. In October 2014, the agreement with Medbox was terminated and no additional warrants were issued to Medbox pursuant to the agreement. The fair values of the warrants granted during the term of the agreement were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: Risk-free interest rate: 1.64% Expected term: 5 years Expected dividend yield: 0.00% Expected volatility: 131.22% For the year ended December 31, 2014, the Company recorded $784,976 of stock-based compensation expense related to warrants issued for services, which has been classified as General and administrative expenses. In May 2014, Medbox exercised 33,333 shares of warrants pursuant to a cashless exercise provision, in which Medbox received 10,825 shares of the Company's common stock based on an exercise price of $6.42 per share. A summary of warrants issued, exercised and expired during the years ended December 31, 2014 and 2015, is as follows: Weighted Avg. Exercise Warrants: Shares Price Balance at January 1, 2014 — $ — Issued 199,998 5.97 Exercised (33,333) 6.42 Expired — — Balance at December 31, 2014 166,665 $ 5.88 Issued — — Exercised — — Expired — — Balance at December 31, 2015 166,665 $ 5.88 Common Stock During the years ended December 31, 2015 and 2014, the Company issued 149,417 and 14,602 shares of common stock, respectively, for consulting services and recorded $139,134 and $77,500, respectively, of stock-based compensation expense for these consulting services, which has been classified as General and administrative expenses. The stock-based compensation expense was calculated based on the grant date fair value of the common stock shares issued in exchange for the consulting services. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10 - Income Taxes The Company did not incur any federal or state income tax expense or benefit for the years ended December 31, 2015 and 2014. The provision for income taxes differs from the amounts which would result from applying the federal statutory rate of 34% to the Company’s loss before income taxes as follows: For the years ended December 31, 2015 2014 Computed "expected" income tax benefit $ (38,006) $ (396,127) State income tax benefit, net of federal benefit (5,773) (31,398) Change in valuation allowance 70,007 323,344 Write-off of prior year net operating losses — 57,406 Nondeductible expenses 122 27,523 True-up of deferred tax asset for stock compensation (26,350) 19,481 Prior year differences — (229) Provision for income taxes $ — $ — Temporary differences that give rise to the components of deferred tax assets and liabilities are as follows: As of December 31, 2015 2014 Deferred tax assets: Deferred expenses $ 174,384 $ 191,915 Net operating loss carry-forwards 253,278 184,747 Property and equipment 14,492 4,088 Advance payment 8,603 — Deferred tax assets 450,757 380,750 Less: Valuation allowance (450,757) (380,750) Net deferred tax assets $ — $ — As of December 31, 2015, the Company had net operating losses of approximately $684,000 for federal and state income tax purposes that can be carried forward for up to twenty years and deducted against future federal taxable income. The net operating loss carryforwards expire in various years through 2035. All of the federal and state net operating losses incurred prior to 2014 are subject to 100 percent limitation under the provisions of Internal Revenue Code section 382 due to an ownership change and the continuity of business requirement. As of December 31, 2015 and 2014, management determined a valuation allowance against the net deferred tax assets of $450,757 and $380,750, respectively. In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making the assessment. The Company files federal and state income tax returns. These returns remain subject to examination by taxing authorities for all years after December 31, 2011. |
Schedule III - Real Estate and
Schedule III - Real Estate and Accumulated Depreciation | 12 Months Ended |
Dec. 31, 2015 | |
SEC Schedule III, Real Estate and Accumulated Depreciation Disclosure [Abstract] | |
Schedule III - Real Estate and Accumulated Depreciation | MJ Holdings, Inc. Schedule III - Real Estate and Accumulated Depreciation December 31, 2015 Initial Cost Total Cost Life on Which Depreciation in Latest Income Statement is Computed Description / Location of Property Encumbrances Land Buildings & Improvements Improvement Costs Capitalized Subsequent to Acquisition Land Buildings & Improvements Total Accumulated Depreciation Net Real Estate Year of Construction Date Acquired 5353 Joliet Street Industrial Building Denver, Colorado $ 1,800,000 $ 324,912 $ 1,889,088 $ — $ 324,912 $ 1,889,088 $ 2,214,000 $ 96,378 $ 2,117,622 1980 6/19/2014 30 yrs. (1) 503 Havana Street Retail Store Aurora, Colorado — 226,339 530,467 146,026 226,339 676,493 902,832 22,447 880,385 1967 9/24/2014 30 yrs. (1) 9 yrs. (2) 1126 S Sheridan Blvd Retail Store Denver, Colorado 925,000 196,138 575,612 — 196,138 575,612 771,750 21,763 749,987 1973 5/4/2015 30 yrs. (1) $ 2,725,000 $ 747,389 $ 2,995,167 $ 146,026 $ 747,389 $ 3,141,193 $ 3,888,582 $ 140,588 $ 3,747,994 (1) (2) The following table reconciles the changes in the balance of real estate during the years ended December 31, 2015 and 2014: 2015 2014 Balance at beginning of period $ 2,993,439 $ — Additions: Acquisitions during period 771,750 2,970,806 Improvements 123,393 22,633 Deductions: Dispositions during period — — Balance at end of period $ 3,888,582 $ 2,993,439 The following table reconciles the changes in the balance of accumulated depreciation during the years ended December 31, 2015 and 2014: 2015 2014 Balance at beginning of period $ 38,173 $ — Depreciation expense during period 102,415 38,173 Dispositions during period — — Balance at end of period |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, 5353 Joliet, LLC, MJ Havana, LLC and MJ Sheridan, LLC. Intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions are required in the determination of the fair value of financial instruments and the valuation of long-lived and indefinite-lived assets. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Financial instruments include cash, payables, and debt obligations. Except as described below, due to the short-term nature of the financial instruments, the book value is representative of their fair value. |
Warrants to Purchase Common Stock and Other Derivative Financial Instruments | Warrants to Purchase Common Stock and Other Derivative Financial Instruments We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock. We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess the classification of warrants issued to purchase our common stock and any other financial instrument at each reporting date to determine whether a change in classification between assets and liabilities is required. |
Cash | Cash At times the Company has cash in financial institutions in excess of federally insured limits. However, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its cash balances. |
Deferred Leasing Costs | Deferred Leasing Costs Commissions and other direct costs associated with the acquisition of tenants, or lessees, are capitalized and amortized on a straight-line basis over the terms of the related leases. Costs associated with unsuccessful leasing opportunities are expensed as incurred. Leasing commissions of $205,077 were deferred during the year ended December 31, 2014. Leasing commissions of $17,511 were refunded during the year ended December 31, 2015. Deferred leasing costs charged to property expenses for the years ended December 31, 2015 and 2014, were $27,571 and $2,532, respectively. As of December 31, 2015, $157,463 of deferred leasing costs are included on the Balance Sheet as a deferred asset. |
Debt Issuance Costs | Debt Issuance Costs Costs associated with obtaining, closing, and modifying loans and/or debt instruments such as, but not limited to placement agent fees, attorney fees and state documentary fees are capitalized and charged to interest expense over the term of the loan. Debt issuance costs of $10,634 and $19,152 were capitalized during the years ended December 31, 2015 and 2014, respectively. Debt issuance costs charged to interest expense for the years ended December 31, 2015 and 2014, were $13,210 and $5,218, respectively. As of December 31, 2015, $11,357 of debt issuance costs are included on the Balance Sheet within Prepaid expenses and other assets. |
Real Estate Property | Real Estate Property Real estate property is recorded at cost, less accumulated depreciation and amortization. Real estate property, excluding land, is depreciated using the straight-line method over the estimated useful life of the respective assets. Leasehold improvements are amortized using the straight-line method over the shorter of the related lease term or useful life. Maintenance, repairs, and minor improvements are charged to expense as incurred; major renewals and betterments that extend the useful life of the associated asset are capitalized. When real estate property is sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in results of operations for the period. |
Long -lived Assets | Long –lived Assets Long-lived assets, including real estate property and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If the assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. We did not record any impairments of long-lived assets during the year ended December 31, 2015. |
Revenue Recognition | Revenue Recognition Before revenue can be recognized, four basic criteria must be met: persuasive evidence of an arrangement exists; the delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The Company's revenues are rental income generated by leasing acquired real estate properties to licensed marijuana operators. All leases are classified as operating leases. Rental income is recognized on a straight-line basis over the terms of the leases. Straight-line rent is recognized for all tenants with contractual fixed increases in rent. Deferred rent receivable represents rental revenue recognized on a straight-line basis in excess of billed rents. Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as rental income in the period the applicable costs are incurred. |
Stock-Based Compensation | Stock-Based Compensation The Company estimates the fair values of share-based payments on the date of grant using a Black-Scholes option pricing model, which requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based financial instrument. Since the number of outstanding and free-trading shares of the CompanyÂ’s common stock is limited and the trading volume is relatively low, we do not have sufficient company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the average historical volatilities of similar entities within our industry as the expected volatility of our share price. The expected dividend yield is 0% as the Company has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award. For stock-based financial instruments issued to parties other than employees, we use the contractual term of the financial instruments as the expected term of the stock-based financial instruments. The assumptions used in calculating the fair value of stock-based financial instruments represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented. |
Advertising Costs | Advertising Costs Costs related to advertising are expensed as incurred and are included in general and administrative expenses. |
Research and Development Costs | Research and Development Costs Costs related to research and development activities of new business units related to the regulated marijuana industry are expensed as incurred and are included in general and administrative expenses. These costs for 2015 and 2014 were primarily third-party consulting fees. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (the “FASB”) issued guidance to clarify the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a comprehensive framework for revenue recognition that supersedes current general revenue guidance and most industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative adjustment at the date of the initial application. In July 2015, the FASB delayed the effective date of the new guidance to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is now permitted after the original effective date of December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of the new accounting guidance on its consolidated financial statements and has not determined the impact of adoption on its consolidated financial statements. In August 2014, FASB issued guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. The new guidance is effective for the annual period ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. Since this guidance primarily addresses certain disclosures to the financial statements, we anticipate no impact on our financial position, results of operations or cash flows from adopting this standard. The Company is currently in the process of evaluating the additional disclosure requirements of the new guidance and has not determined the impact of adoption on its financial statement disclosures. In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. This guidance provides that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for fiscal years and interim periods beginning after December 15, 2015, and is required to be applied on a retrospective basis. Early adoption is permitted for financial statements that have not been previously issued. As of December 31, 2015, we had $11,357 in debt issuance costs associated with $2.7 million of notes payable that would be reclassified from other assets to a reduction in the carrying amount of the note payable. The adoption of this standard is not expected to have a material impact on our financial position and will not impact our results of operations or cash flows. |
Real Estate Property Acquisit19
Real Estate Property Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Business Combinations [Abstract] | |
Summary of Real Estate Property | A summary of real estate property at December 31, 2015, is as follows: Estimated December 31, Life 2015 Buildings 30 years $ 2,995,167 Improvements 9-10 years 146,026 Land Not depreciated 747,389 Computer equipment and software 3 years 2,000 Total real estate property 3,890,582 Less: Accumulated depreciation (140,699 ) Real estate property, net $ 3,749,883 |
Operating Leases (Tables)
Operating Leases (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Leases, Operating [Abstract] | |
Summary of Revenues From Rental Properties | A summary of revenues generated from our rental properties for the years ended December 31, 2015 and 2014, is as follows: 2015 2014 Revenues: Rental payments $ 520,913 $ 88,778 Reimbursed operating expenses 57,223 13,157 Deferred rental income 47,728 6,936 Total revenues from rental properties $ 625,864 $ 108,871 |
Schedule of Future Minimum Rental Payments | Future minimum rental payments, excluding the reimbursement of specified operating expenses, for non-cancelable operating lease agreements are as follows as of December 31, 2015: 2016 574,387 2017 588,457 2018 602,886 2019 617,681 2020 632,857 Thereafter 1,489,861 Total minimal rental payments $ 4,506,129 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of weighted-average assumptions used in determining fair values of the warrants granted using the Black-Scholes option pricing model | The fair values of the warrants granted during the term of the agreement were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: Risk-free interest rate: 1.64% Expected term: 5 years Expected dividend yield: 0.00% Expected volatility: 131.22% |
Summary of warrants issued, exercised and expired | A summary of warrants issued, exercised and expired during the years ended December 31, 2014 and 2015, is as follows: Weighted Avg. Exercise Warrants: Shares Price Balance at January 1, 2014 — $ — Issued 199,998 5.97 Exercised (33,333) 6.42 Expired — — Balance at December 31, 2014 166,665 $ 5.88 Issued — — Exercised — — Expired — — Balance at December 31, 2015 166,665 $ 5.88 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of reconciliation between effective tax rate and statutory federal rate | The provision for income taxes differs from the amounts which would result from applying the federal statutory rate of 34% to the Company’s loss before income taxes as follows: For the years ended December 31, 2015 2014 Computed "expected" income tax benefit $ (38,006) $ (396,127) State income tax benefit, net of federal benefit (5,773) (31,398) Change in valuation allowance 70,007 323,344 Write-off of prior year net operating losses — 57,406 Nondeductible expenses 122 27,523 True-up of deferred tax asset for stock compensation (26,350) 19,481 Prior year differences — (229) Provision for income taxes $ — $ — |
Schedule of components of deferred tax assets and liabilities | Temporary differences that give rise to the components of deferred tax assets and liabilities are as follows: As of December 31, 2015 2014 Deferred tax assets: Deferred expenses $ 174,384 $ 191,915 Net operating loss carry-forwards 253,278 184,747 Property and equipment 14,492 4,088 Advance payment 8,603 — Deferred tax assets 450,757 380,750 Less: Valuation allowance (450,757) (380,750) Net deferred tax assets $ — $ — |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Deferred Leasing Costs | ||
Deferred Leasing commissions (refunds) | $ (17,511) | $ 205,077 |
Deferred leasing costs charged to property expenses | 27,571 | 2,532 |
Deferred leasing costs included in deferred asset | 157,463 | 202,545 |
Debt Issuance Costs | ||
Debt issuance costs capitalized | 10,634 | 19,152 |
Debt issuance costs charged to interest expense | 13,210 | $ 5,218 |
Debt issuance costs included in Prepaid expenses and other assets | $ 11,357 | |
Stock-Based Compensation | ||
Expected dividend yield | 0.00% | |
Note payable | $ 2,700,000 |
Going Concern (Details)
Going Concern (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Going Concern [Abstract] | ||
Net loss | $ 111,781 | $ 1,165,080 |
Accumulated deficit | $ 1,449,491 | $ 1,337,710 |
Real Estate Property Acquisit25
Real Estate Property Acquisitions (Narrative) (Details) | 1 Months Ended | 12 Months Ended | |||
May. 31, 2015USD ($)ft² | Sep. 30, 2014USD ($)ft² | Jun. 30, 2014USD ($)aft² | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Business Acquisition [Line Items] | |||||
Interest expense | $ 241,002 | $ 99,132 | |||
Owner Occupied Building Situated On Land In Aurora Colorado [Member] | |||||
Business Acquisition [Line Items] | |||||
Area of building acquired (in square foot) | ft² | 1,250 | ||||
Area of land on which building is situated (in acres) | ft² | 23,625 | ||||
Purchase consideration | $ 756,000 | ||||
Obligation to improvements to the property | 150,000 | ||||
Payments for tenant's building improvements | 146,026 | ||||
Owner Occupied Industrial Building Situated on Land in Denver Colorado [Member] | |||||
Business Acquisition [Line Items] | |||||
Area of building acquired (in square foot) | ft² | 22,144 | ||||
Area of land on which building is situated (in acres) | a | 1.4 | ||||
Purchase consideration | $ 2,214,000 | ||||
Proceeds from the issuance of a secured promissory note used to fund acquisition | 1,800,000 | ||||
Cash on-hand used to fund acquisition | 414,000 | ||||
Lease agreement term | 7 years | ||||
Monthly rent obligation | $ 25,835 | ||||
Annual increases percentage | 2.00% | ||||
Chemtov Mortgage Group [Member] | |||||
Business Acquisition [Line Items] | |||||
Interest expense | 233,346 | 80,918 | |||
Chemtov Mortgage Group [Member] | Owner Occupied Industrial Building Situated on Land in Denver Colorado [Member] | |||||
Business Acquisition [Line Items] | |||||
Amount invested to finance the purchase of the promissory note | $ 100,000 | ||||
Administration fees for servicing the promissory note | |||||
Interest rate of promissory note | 10.00% | ||||
Promissory note, maturity date | Jun. 1, 2016 | ||||
Promissory note, date callable | Jun. 19, 2015 | ||||
Interest expense | 180,000 | $ 95,918 | |||
Real Estate Property Located at South Sheridan Boulevard in Denver, Colorado [Member] | |||||
Business Acquisition [Line Items] | |||||
Area of building acquired (in square foot) | ft² | 17,729 | ||||
Area of land on which building is situated (in acres) | ft² | 3,828 | ||||
Purchase consideration | $ 771,750 | ||||
Proceeds from the issuance of a secured promissory note used to fund acquisition | 925,000 | ||||
Amount invested to finance the purchase of the promissory note | $ 771,750 | ||||
Lease agreement term | 10 years | ||||
Monthly rent obligation | $ 10,945 | ||||
Annual increases percentage | 3.00% | ||||
Real Estate Property Located at South Sheridan Boulevard in Denver, Colorado [Member] | Chemtov Mortgage Group [Member] | |||||
Business Acquisition [Line Items] | |||||
Interest rate of promissory note | 10.00% | ||||
Promissory note, maturity date | Jun. 1, 2017 | ||||
Interest expense | $ 61,054 |
Real Estate Property Acquisit26
Real Estate Property Acquisitions (Schedule of Real Estate Property) (Details) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Property, Plant and Equipment [Line Items] | |
Total real estate property | $ 3,890,582 |
Less: Accumulated depreciation | (140,699) |
Real estate property, net | $ 3,749,883 |
Building [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Life | 30 years |
Total real estate property | $ 2,995,167 |
Computer equipment and software [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Life | 3 years |
Total real estate property | $ 2,000 |
Building Improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Total real estate property | $ 146,026 |
Building Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Life | 9 years |
Building Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Life | 10 years |
Land [Member] | |
Property, Plant and Equipment [Line Items] | |
Total real estate property | $ 747,389 |
Operating Leases (Narrative) (D
Operating Leases (Narrative) (Details) - USD ($) | 1 Months Ended | |
May. 31, 2015 | Sep. 30, 2014 | |
Real Estate Property Located at South Sheridan Boulevard in Denver, Colorado [Member] | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Lease agreement term | 10 years | |
Monthly rent obligation | $ 10,945 | |
Annual increases percentage | 3.00% | |
Option to renew term | 10 years | |
5353 Joliet Street Denver Colorado [Member] | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Lease agreement term | 7 years | |
Monthly rent obligation | $ 25,835 | |
Annual increases percentage | 2.00% | |
Option to renew term | 5 years | |
503 Havana Street Aurora, Colorado [Member] | ||
Property Subject to or Available for Operating Lease [Line Items] | ||
Lease agreement term | 10 years | |
Monthly rent obligation | $ 11,250 | |
Annual increases percentage | 3.00% | |
Obligation to improvements to the property | $ 150,000 | |
Option to renew term | 10 years |
Operating Leases (Schedule of R
Operating Leases (Schedule of Revenues From Rental Properties) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Revenues: | ||
Rental payments | $ 520,913 | $ 88,778 |
Reimbursed operating expenses | 57,223 | 13,157 |
Deferred rental income | 47,728 | 6,936 |
Total revenues from rental properties | $ 625,864 | $ 108,871 |
Operating Leases (Schedule of F
Operating Leases (Schedule of Future Minimum Rental Revenues) (Details) | Dec. 31, 2015USD ($) |
Leases, Operating [Abstract] | |
2,016 | $ 574,387 |
2,017 | 588,457 |
2,018 | 602,886 |
2,019 | 617,681 |
2,020 | 632,857 |
Thereafter | 1,489,861 |
Total minimal rental payments | $ 4,506,129 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Feb. 28, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Related Party Transaction [Line Items] | |||
Accounts payable paid by principal stockholders | $ 7,665 | ||
Net borrowings from related parties | 200 | ||
Interest paid to the promissory note held by CMG | $ 241,002 | 99,132 | |
Promissory note held by related party | 2,725,000 | 1,800,000 | |
Investor [Member] | |||
Related Party Transaction [Line Items] | |||
Accounts payable paid by principal stockholders | $ 7,665 | ||
Proceeds from loans from stockholders | 5,277 | ||
Borrowings from principal shareholders repaid | 5,077 | ||
Net borrowings from related parties | 200 | ||
Chemtov Mortgage Group [Member] | |||
Related Party Transaction [Line Items] | |||
Interest paid to the promissory note held by CMG | $ 233,346 | 80,918 | |
Promissory note held by related party | $ 2,725,000 |
Stockholder Loans Payable (Deta
Stockholder Loans Payable (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | ||
Debt instrument, maturity information | They were due in part in December 2014 and December 2016 | |
Accrued interest - stockholder loans | $ 3,214 | |
Stockholder loans and accrued interest converted to common stock | $ 99,450 | |
Stockholder loans, shares converted | 19,890 | |
Stockholder loans, conversion price | $ 5 | |
Promissory Note One [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate | 5.00% | |
Promissory Note One [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument, face amount | $ 25,000 | |
Promissory Note Two [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate | 8.00% | |
Promissory Note Two [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument, face amount | $ 20,000 | |
Promissory Note Three [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument, interest rate | 8.00% | |
Promissory Note Three [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Debt instrument, face amount | $ 10,000 |
Sale of Unregistered Securiti32
Sale of Unregistered Securities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Issuance of common stock | $ 1,615,000 | |
Proceeds from the sale of common stock | $ 1,615,000 | |
Common Stock [Member] | ||
Issuance of common stock (in shares) | 1,615,000 | |
Issuance of common stock | $ 1,615 |
Stock Based Compensation (Narra
Stock Based Compensation (Narrative) (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
May. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 139,134 | $ 862,476 | ||
Medbox, Inc. [Member] | Consulting services agreement [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Percentage of management fee payable to counterparty | 50.00% | |||
Percentage of net revenue generated by counterparties client payable to counterparty | 50.00% | |||
Initial term of agreement | 6 months | |||
Renewal term of agreement | 1 month | |||
Period of written notice required to cancel agreement by either party | 5 days | |||
Warrant [Member] | Medbox, Inc. [Member] | Consulting services agreement [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares of common stock that can be purchased with warrants issued to counterparty each month | 33,333 | 166,665 | 166,665 | |
Aggregate warrants that can be issued to counterparty | 600,000 | |||
Term of warrants | 5 years | |||
Period prior to the date of issuance of warrants used to calculate the volume weighted average price of the common stock | 30 days | |||
Stock-based compensation expense | $ 784,976 | |||
Warrants exercised | 33,333 | 33,333 | ||
Shares of common stock issued upon exercise of warrants | 10,825 | 199,998 | ||
Exercise price of warrants | $ 6.42 | $ 6.42 | ||
Common Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares of common stock for consulting services | 14,602 | |||
Stock-based compensation expense | $ 139,134 | $ 77,500 |
Stock Based Compensation (Sched
Stock Based Compensation (Schedule of Assumptions in Determining the Fair Value of Warrants Granted) (Details) - Warrant [Member] - Medbox, Inc. [Member] - Consulting services agreement [Member] | 12 Months Ended |
Dec. 31, 2014 | |
Weighted-average assumptions used in determining fair values of the warrants granted using the Black-Scholes option pricing model | |
Risk-free interest rate: | 1.64% |
Expected term: | 5 years |
Expected dividend yield: | 0.00% |
Expected volatility: | 131.22% |
Stock Based Compensation (Sch35
Stock Based Compensation (Schedule of Warrants Issued, Exercised and Expired) (Details) - Warrant [Member] - Medbox, Inc. [Member] - Consulting services agreement [Member] - $ / shares | 1 Months Ended | 12 Months Ended | |
May. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Shares | |||
Balance at the beginning of the period | 166,665 | ||
Issued | 10,825 | 199,998 | |
Exercised | (33,333) | (33,333) | |
Expired | |||
Balance at the end of the period | 33,333 | 166,665 | 166,665 |
Weighted Avg. Exercise Price | |||
Balance at the beginning of the period | $ 5.88 | ||
Issued | $ 5.97 | ||
Exercised | $ 6.42 | 6.42 | |
Expired | |||
Balance at the end of the period | $ 5.88 | $ 5.88 |
Income Taxes (Narratives) (Deta
Income Taxes (Narratives) (Details) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Income Tax Disclosure [Abstract] | |
Federal statutory rate (as a percent) | 34.00% |
Net operating losses | $ 684,000 |
Operating loss carryforwards,expiration period | 20 years |
Operating loss carryforwards,expiration date | Dec. 31, 2035 |
Limitation on use of operating loss carryforwards | All of the federal and state net operating losses incurred prior to 2014 are subject to 100 percent limitation under the provisions of Internal Revenue Code section 382 due to an ownership change and the continuity of business requirement. |
Income Taxes (Schedule of Recon
Income Taxes (Schedule of Reconciliation Between Effective Tax Rate And Statutory Federal Rate) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Computed "expected" income tax benefit | $ (38,006) | $ (396,127) |
State income tax benefit, net of federal benefit | (5,773) | (31,398) |
Change in valuation allowance | $ 70,007 | 323,344 |
Write-off of prior year net operating losses | 57,406 | |
Nondeductible expenses | $ 122 | 27,523 |
True-up of deferred tax asset for stock compensation | $ (26,350) | 19,481 |
Prior year differences | $ (229) | |
Provision for income taxes |
Income Taxes (Schedule of Compo
Income Taxes (Schedule of Components Of Deferred Tax Assets And Liabilities) (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets: | ||
Deferred expenses | $ 174,384 | $ 191,915 |
Net operating loss carry-forwards | 253,278 | 184,747 |
Property and equipment | 14,492 | $ 4,088 |
Advance payment | 8,603 | |
Deferred tax assets | 450,757 | $ 380,750 |
Less: Valuation allowance | $ (450,757) | $ (380,750) |
Net deferred tax assets |
Schedule III - Real Estate an39
Schedule III - Real Estate and Accumulated Depreciation (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | ||
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items] | ||||
Encumbrances | $ 2,725,000 | |||
Initial Cost | ||||
Land | 747,389 | |||
Buildings & Improvements | 2,995,167 | |||
Improvement Costs Capitalized Subsequent to Acquisition | 146,026 | |||
Total Cost | ||||
Land | 747,389 | |||
Buildings & Improvements | 3,141,193 | |||
Total | 3,888,582 | $ 2,993,439 | ||
Accumulated Depreciation | 140,588 | $ 38,173 | ||
Net Real Estate | 3,747,994 | |||
5353 Joliet Street Denver Colorado [Member] | ||||
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items] | ||||
Encumbrances | 1,800,000 | |||
Initial Cost | ||||
Land | 324,912 | |||
Buildings & Improvements | $ 1,889,088 | |||
Improvement Costs Capitalized Subsequent to Acquisition | ||||
Total Cost | ||||
Land | $ 324,912 | |||
Buildings & Improvements | 1,889,088 | |||
Total | 2,214,000 | |||
Accumulated Depreciation | 96,378 | |||
Net Real Estate | $ 2,117,622 | |||
Year of Construction | Dec. 31, 1980 | |||
Date Acquired | Jun. 19, 2014 | |||
Life on Which Depreciation in Latest Income Statement is Computed | 30 years | |||
503 Havana Street Aurora, Colorado [Member] | ||||
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items] | ||||
Encumbrances | ||||
Initial Cost | ||||
Land | $ 226,339 | |||
Buildings & Improvements | 530,467 | |||
Improvement Costs Capitalized Subsequent to Acquisition | 146,026 | |||
Total Cost | ||||
Land | 226,339 | |||
Buildings & Improvements | 676,493 | |||
Total | 902,832 | |||
Accumulated Depreciation | 22,447 | |||
Net Real Estate | $ 880,385 | |||
Year of Construction | Dec. 31, 1967 | |||
Date Acquired | Sep. 24, 2014 | |||
503 Havana Street Aurora, Colorado [Member] | Building [Member] | ||||
Total Cost | ||||
Life on Which Depreciation in Latest Income Statement is Computed | [1] | 30 years | ||
503 Havana Street Aurora, Colorado [Member] | Building Improvements [Member] | ||||
Total Cost | ||||
Life on Which Depreciation in Latest Income Statement is Computed | [2] | 9 years | ||
Real Estate Property Located at South Sheridan Boulevard in Denver, Colorado [Member] | ||||
SEC Schedule III, Real Estate and Accumulated Depreciation [Line Items] | ||||
Encumbrances | $ 925,000 | |||
Initial Cost | ||||
Land | 196,138 | |||
Buildings & Improvements | $ 575,612 | |||
Improvement Costs Capitalized Subsequent to Acquisition | ||||
Total Cost | ||||
Land | $ 196,138 | |||
Buildings & Improvements | 575,612 | |||
Total | 771,750 | |||
Accumulated Depreciation | 21,763 | |||
Net Real Estate | $ 749,987 | |||
Year of Construction | Dec. 31, 1973 | |||
Date Acquired | May 4, 2015 | |||
Life on Which Depreciation in Latest Income Statement is Computed | 30 years | |||
[1] | Estimated useful life for buildings | |||
[2] | Estimated useful life for building improvements |
Schedule III - Real Estate an40
Schedule III - Real Estate and Accumulated Depreciation (Schedule of change in the balance of real estate) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Change in the balance of real estate | ||
Balance at beginning of period | $ 2,993,439 | |
Additions: | ||
Acquisitions during period | 771,750 | $ 2,970,806 |
Improvements | $ 123,393 | $ 22,633 |
Deductions: | ||
Dispositions during period | ||
Balance at end of period | $ 3,888,582 | $ 2,993,439 |
Schedule III - Real Estate an41
Schedule III - Real Estate and Accumulated Depreciation (Schedule of change in the balance of accumulated depreciation) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Change in the balance of accumulated depreciation | ||
Balance at beginning of period | $ 38,173 | |
Depreciation expense during period | $ 102,415 | $ 38,173 |
Dispositions during period | ||
Balance at end of period | $ 140,588 | $ 38,173 |