Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 20, 2014 | |
Document And Entity Information | ||
Entity Registrant Name | Advanced Cannabis Solutions, Inc. | |
Entity Central Index Key | 1477009 | |
Document Type | S-1 | |
Document Period End Date | 30-Sep-14 | |
Amendment Flag | TRUE | |
Amendment Description | This amendment is being filed to comply with regulation | |
Trading Symbol | CANN | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 13,709,933 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2014 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current assets | ||
Cash | $1,120,636 | $427,436 |
Tenant receivables | 16,282 | |
Prepaid expenses and other current assets | 14,908 | |
Prepaid expenses | 2,244 | |
Inventory | 62,805 | 0 |
Total current assets | 1,214,631 | 429,680 |
Property and equipment, net | 489,907 | 452,753 |
Deferred financing costs | 89,444 | 0 |
Tenant receivables | 17,316 | |
Intangible assets, net | 35,467 | |
Other receivables, net | 0 | |
Other capitalized costs | 0 | |
Total Assets | 1,846,765 | 882,433 |
Current liabilities | ||
Accounts payable and accrued expenses | 76,287 | 43,212 |
Accrued interest payable | 0 | |
Derivative liability | 1,041,397 | 0 |
Convertible notes payable (net of debt discount), current portion | 5,927 | 5,356 |
Total current liabilities | 1,123,611 | 48,568 |
Long term liabilities | ||
Convertible notes payable (net of debt discount), less current portion | 767,059 | 609,950 |
Accrued stock payable | 122,500 | |
Tenant deposits | 1,250 | 1,250 |
Total long term liabilities | 890,809 | 611,200 |
Total Liabilities | 2,014,420 | 659,768 |
Stockholders' Equity (Deficiency) | ||
Preferred stock, no par value; 5,000,000 share authorized; no shares issued and outstanding at September 30, 2014 and December 31, 2013 | 0 | 0 |
Common Stock, $0.01 par value; 100,000,000 shares authorized; 13,684,933 shares and 15,137,200 shares issued and outstanding on September 30, 2014 and December 31, 2013, respectively | 136,849 | 151,372 |
Additional paid-in capital | 3,581,847 | 782,255 |
Accumulated deficit | -3,886,351 | |
Deficit accumulated during development stage | -710,962 | |
Total Stockholders' Equity (Deficiency) | -167,665 | 222,665 |
Total Liabilities and Stockholders' Equity (Deficiency) | $1,846,765 | $882,433 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Stockholders' Equity | ||
Preferred stock, par value | $0 | $0 |
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 | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 13,684,933 | 15,137,200 |
Common stock, shares outstanding | 13,684,933 | 15,137,200 |
CONSOLIDATED_STATEMENT_OF_OPER
CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | 3 Months Ended | 4 Months Ended | 7 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | |
Revenues | |||||
Wholesale sales | $39,263 | $57,021 | |||
Cost of wholesale goods sold | -25,085 | -42,408 | |||
Net wholesale sales | 14,178 | 14,613 | |||
Tenant rental | 28,764 | 86,294 | |||
Consulting fees, net of bad debt expenses | -13,600 | 40,000 | |||
Total revenues | 29,342 | 140,907 | |||
Operating expenses: | |||||
General and administrative | 38,341 | 2,916 | 2,916 | 53,265 | 135,872 |
Payroll and related | 136,470 | 42,199 | 42,199 | 108,588 | 373,048 |
Share-based compensation | 1,006,500 | 1,006,500 | |||
Professional fees | 143,237 | 256,640 | 256,640 | 391,132 | 344,291 |
Office expense | 17,447 | 11,304 | 11,304 | 8,269 | 46,591 |
Loss on expired option to acquire real estate | 150,000 | ||||
Depreciation and amortization | 12,598 | 18,830 | |||
Total operating expenses | 1,354,593 | 313,059 | 313,059 | 711,254 | 1,925,132 |
Operating loss | -1,325,251 | -313,059 | -313,059 | -711,254 | -1,784,225 |
Other (expense): | |||||
Loss on derivative liability, net | -117,633 | -541,397 | |||
Amortization of debt discount | -227,977 | -794 | -645,858 | ||
Loss on option to purchase property | -150,000 | -150,000 | |||
Interest expense | -75,799 | -871 | -203,909 | ||
Total other (expense): | -421,409 | -150,000 | -150,000 | -1,665 | -1,391,164 |
Loss from continuing operations | -1,746,660 | -463,059 | -463,059 | -3,175,389 | |
Loss from discontinued operations | -8,957 | -8,957 | 1,957 | ||
Net loss | -1,746,660 | -472,016 | -472,016 | -710,962 | -3,175,389 |
From continuing operations | ($0.13) | ($0.04) | ($0.04) | ($0.05) | ($0.24) |
From discontinued operations | $0 | ||||
Net loss per share - basic and diluted | ($0.13) | ($0.04) | ($0.04) | ($0.05) | ($0.24) |
Weighted average number of common shares Outstanding - basic and fully diluted | 13,545,738 | 12,792,820 | 12,792,820 | 14,026,127 | 13,476,962 |
CONSOLIDATED_STATEMENT_OF_CHAN
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) | Common Stock | Deficit Accumulated During Development Stage | Total |
Beginning Balance, Amount at Jun. 04, 2013 | $0 | $0 | |
Beginning Balances, Shares at Jun. 04, 2013 | 0 | ||
Common stock issued for cash at $0.001 per share, June 30, 2013, Shares | 12,400,000 | ||
Common stock issued for cash at $0.001 per share, June 30, 2013, Amount | 12,400 | 12,400 | |
Common stock Issued for cash at $1.00 per share, July 11 through August 8, 2013, Shares | 707,000 | ||
Common stock Issued for cash at $1.00 per share, July 11 through August 8, 2013, Amount | 707,000 | 707,000 | |
Recapitalization on August 14, 2013, Shares | 9,724,000 | ||
Recapitalization on August 14, 2013, Amount | -10,663 | -10,663 | |
Purchase and cancellation of shares of common stock on August 14, 2013, Shares | -8,000,000 | ||
Purchase and cancellation of shares of common stock on August 14, 2013, Amount | -100,000 | -100,000 | |
Common stock issued for cash at $1.00 per share, August 14 through September 19, 2013, Shares | 266,000 | ||
Common stock issued for cash at $1.00 per share, August 14 through September 19, 2013, Amount | 266,000 | 266,000 | |
Common stock issued for services December 9, 2013 | 40,000 | ||
Common stock issued for services December 9, 2013 | 40,000 | 40,000 | |
Loss on sale of mapping business to related party | -452 | -452 | |
Net loss for the year ended December 31, 2013 | -710,962 | -710,962 | |
Ending Balance, Amount - as restated at Dec. 31, 2013 | $933,627 | ($710,962) | $222,665 |
Ending Balance, Shares - as restated at Dec. 31, 2013 | 15,137,200 |
CONSOLIDATED_STATEMENT_OF_CHAN1
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) (USD $) | 7 Months Ended |
Dec. 31, 2013 | |
Statement of Stockholders' Equity [Abstract] | |
Common stock Issued for cash par value | $1 |
CONSOLIDATED_STATEMENS_OF_CASH
CONSOLIDATED STATEMENS OF CASH FLOWS (USD $) | 4 Months Ended | 7 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | |
Cash Flows Provided By (Used In) Operating Activities: | |||
Net loss | ($472,016) | ($710,962) | ($3,175,389) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Loss on expired option to acquire property | 150,000 | 150,000 | |
Depreciation and amortization | 18,830 | ||
Issuance of stock for services | 40,000 | ||
Amortization of debt discount | 794 | 645,858 | |
Amortization of deferred financing cost | 25,556 | ||
Loss on derivative liability, net | 541,397 | ||
Issuance of common stock to pay interest expense | 3,669 | ||
Issuance of common stock for services | 884,000 | ||
Changes in operating assets and liabilities | |||
(Increase) / decrease in accounts receivable | 6,726 | -33,598 | |
Increase in inventory | -62,805 | ||
Increase in prepaid expenses and other current assets | 23,320 | -2,244 | -12,664 |
Increase in accounts payable and accrued expenses | 20,516 | 43,212 | 33,075 |
Increase in accrued stock payable | 122,500 | ||
Net cash used in operating activities – continuing operations | -479,200 | ||
Net cash used in operating activities – discontinued operation | -9,871 | ||
Net cash used in operating activities | -271,454 | -488,192 | -1,009,571 |
Cash Flows Provided By (Used In) Investing Activities: | |||
Cash acquired in reverse merger with Promap | 1,238 | ||
Purchase of property and equipment | -282,753 | -53,251 | |
Purchase of intangible assets | -38,200 | ||
Purchase of option to acquire real estate | -150,000 | ||
Option to acquire property | -150,000 | ||
Net cash used in investing activities | -148,762 | -432,753 | -91,451 |
Cash Flows Provided By (Used In) Financing Activities: | |||
Purchase and cancellation of shares of common stock | -100,000 | -100,000 | |
Sales of common stock for cash | 985,400 | 985,400 | |
Proceeds from loan payable | 530,000 | ||
Debt acquisition costs paid | -66,140 | ||
Proceeds from sale of warrants | 400,000 | ||
Principal repayment on convertible notes payable | -3,178 | ||
Proceeds from issuance of convertible notes payable, net of cash expenses | 1,412,400 | ||
Deferred financing costs | -15,000 | ||
Net cash provided by financing activities | 885,400 | 1,349,260 | 1,794,222 |
Net Increase In Cash | 465,184 | 427,436 | 693,200 |
Cash At The Beginning of the Period | 427,436 | ||
Cash At The End of the Period | 427,436 | 1,120,636 | |
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION | |||
Cash paid for interest | 201,111 | ||
Supplementary disclosure of noncash financing activities | |||
Net liabilities acquired on recapitalization | 2,944 | 10,663 | |
Cancellation of shares of common stock | 100,000 | ||
Net assets transferred on disposal of mapping division | 452 | ||
Purchase of property with mortgage | 170,000 | ||
Issuance of common shares for services | 40,000 | ||
Non-cash financing costs | 100,000 | ||
Interest on convertible notes payable settled in stock | 3,669 | ||
Warrants issued as payment for deferred financing costs | 92,600 | ||
Beneficial conversion feature and warrants | $1,412,400 |
1_NATURE_OF_OPERATIONS_HISTORY
1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
NATURE OF OPERATIONS, HISTORY AND PRESENTATION | Nature of Operations | 1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION |
Promap Corporation (“Promap”, “the Company” “we” or “us”) was incorporated in the State of Colorado on November 12, 1987. Prior to December 31, 2013, the Company was an independent GIS and custom draft energy mapping company for the oil and gas industry in the United States and Canada. The Company provided hard copy and digital format oil and gas production maps which cover various geologic basins in numerous areas including: Denver Basin, Powder River Basin, Michigan Basin, Williston Basin, Arkoma Basin, Illinois Basin, Cincinnati Arch, Uintah - Piceance Basins and The Nevada Basin. The Company also provided maps of the North American Coal Basin and Coal Bed Methane Activity and North American Devonian - Mississippian Shale Map with detailed pipeline locations. | Nature of Operations | |
On August 14, 2013, the Company acquired 94% of the issued and outstanding share capital of Advanced Cannabis Solutions (“ACS”) (“the Share Exchange Agreement”), a development-stage company, planning to provide real estate leasing services to the regulated cannabis industry throughout the United States. While the Company will continue to provide energy mapping services on an ongoing basis as a non-core activity, it is planned that the combined companies will focus on ACS’ business plan as its core activity and operate under the name Advanced Cannabis Solutions, Inc. The Company has completed a change in trading symbol to CANN (OTCQB) and has completed its official name change. | Advanced Cannabis Solutions, Inc. (“ACS,” the “Company,” “we” or “us”) was incorporated in the State of Colorado on June 5, 2013 (“Inception”). ACS provides real estate leasing services to the regulated cannabis industry throughout the United States by purchasing real estate assets and leasing growing space and related facilities to licensed marijuana growers and dispensary owners for their operations. In addition, ACS plans to provide a variety of ancillary services to the industry, including the development of a proprietary line of grow mediums and plant nutrient lines, product tracking technology, and comprehensive consulting services to current and future cannabis entrepreneurs. | |
The Share Exchange Agreement has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisition. Under reverse acquisition accounting, ACS, the legal acquiree, is treated as the accounting acquirer of the Company. Consequently, ACS’ financial results are disclosed for all periods presented, while the Company’s financial results have only been consolidated with those of the existing ACS business from August 14, 2013 onward. All outstanding shares have been restated to reflect the effect of the Agreement. | While ACS does not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future, ACS may be irreparably harmed by a change in enforcement by the federal or state governments. | |
ACS was incorporated in the State of Colorado on June 5, 2013. As a development-stage company, ACS plans to provide real estate leasing services to the regulated cannabis industry throughout the United States by purchasing real estate assets and leasing growing space and related facilities to licensed marijuana growers and dispensary owners for their operations. In addition, ACS plans to provide a variety of ancillary services to the industry, including the development of a proprietary line of grow mediums and plant nutrient lines, product tracking technology, and comprehensive consulting services to current and future cannabis entrepreneurs. | Reverse merger | |
In the period from July through September, 2013, the Company raised $973,000 in capital by issuing 973,000 shares of common stock at $1.00 per share through a private placement. These funds allowed us to rent offices, hire our executive team, and fund the initial operation of the Company. In addition, we raised $530,000 in debt through the issuance of 12% convertible notes in December, 2013. We also purchased our first commercial property on December 31, 2013, consisting of a 5,000 square foot facility located in Pueblo West, Colorado. This property was leased on the same day to an established grower under an eight year lease averaging $9,588 per month. The Company is currently in the process of negotiating several additional real estate purchases. | Promap Corporation (“Promap” or “the Predecessor Company”) was incorporated in the State of Colorado on November 12, 1987. Promap was an independent GIS and custom draft energy mapping company for the oil and gas industry in the United States and Canada. | |
Our initial focus will be on opportunities within Colorado, which has allowed its citizens to use medical marijuana since 2000. Voters in Colorado approved a ballot measure in November 2012 to legalize marijuana for adult use. Starting Jan 1, 2014, adult Colorado citizens and visiting adults became able to purchase marijuana without any medical licenses. Several studies have predicted that the retail cannabis market in Colorado will increase from $200 million annually to over $900 million after the new law takes effect. While the national regulated cannabis market is estimated to be $1.5 billion annually, many experts expect it to reach $30 billion by 2018 as additional states approve cannabis use for its citizens. | On August 14, 2013, Promap, in a share exchange agreement (“the Share Exchange Agreement”) acquired 94% of the issued and outstanding share capital of Advanced Cannabis Solutions, Inc. (“ACSI”), a private Colorado corporation. On November 9, 2013, Promap acquired the remaining 6% of the share capital of ACSI. It was planned that the ongoing Company operations would focus on ACSI’s business plan as its core activity and operate under the name ACS. On March 27, 2014 the Securities and Exchange Commission (“SEC” or “Commission”) issued a trading halt order on the Company’s common stock, and issued a statement that they were investigating affiliated shareholders who may have made illegal sales of common stock. The order was not directed at the management of the Company and is considered a private investigation. The common stock began trading again, unlisted, on the OTC on April 10, 2014. The Company has completed a change in trading symbol to CANN (OTCQB) and has completed its official name change. In December 2013 the previous oil and gas mapping operations of Promap, as described above, were sold to the former Chief Executive Officer of Promap. | |
ACS will not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future. | The Share Exchange Agreement has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions. Under reverse acquisition accounting, ACS, the acquired entity, is treated as the accounting acquirer of Promap. Consequently, the accompanying condensed consolidated financial statements reflect only the operations of ACS for all periods presented, as they replace the historical financial statements of Promap, the legal acquirer. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Accounting Policies [Abstract] | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The consolidated financial statements include the results of 1) the parent company, Advanced Cannabis Solutions Corporation, formed in the state of Colorado on June 5, 2013, 2) Advanced Cannabis Solutions Corporation’s wholly owned subsidiary company, ACS Corp., formed in the state of Colorado on June 6, 2013, and 3) ACS Corp.’s wholly owned subsidiary company, ACS Colorado Corp., formed in the state of Colorado on October 21, 2013. All intercompany balances and transactions have been eliminated in consolidation. | This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company's financial statements. The condensed consolidated financial statements and notes are the representation of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied to the preparations of the financial statements. | |
Basis of Presentation | Principles of Consolidation | |
The accompanying financial statements have been prepared, under accounting principles generally accepted in the United States, assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability. | The consolidated financial statements include the results of ACS and its two wholly owned subsidiary companies, ACS Colorado Corp. and Advanced Cannabis Solutions Corporation, from the dates of their incorporation and for Promap Corporation from August 14, 2013 onwards. Advanced Cannabis Solutions Corporation has one wholly owned subsidiary: ACS Corp. All of these corporations are incorporated in Colorado. All intercompany balances and transactions have been eliminated in consolidation and the financial statements herein represent the Company’s consolidated balances and financial results. | |
Development Stage Company | In October 2014, the Company purchased a property in Denver, Colorado. The property, which will be rebranded the “Greenberg”, was purchased by 6565 E. Evans Avenue LLC, a Colorado limited liability company, which is a wholly-owned subsidiary of the Company (See Note 18). | |
The Company is a development stage company in accordance with Financial Accounting Standards Codification (“ASC”) 915 "Development Stage Entities". Among the disclosures required as a development stage company are that the Company's financial statements are identified as those of a development stage company, and that the statements of operations, stockholders' deficit and cash flows disclose activity since the date of our Inception (June 5, 2013) as a development stage company. | Basis of Presentation | |
Use of Estimates | The accompanying (a) condensed consolidated balance sheet at December 31, 2013 has been derived from audited statements and (b) the unaudited condensed consolidated financial statements as of September 30, 2014 and 2013, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the Inception to Date period ended December 31, 2013 (the “2013 Annual Report”), as amended, filed with the Commission on August 20, 2014. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine month periods ended September 30, 2014 are not necessarily indicative of the results of operations for the year ending December 31, 2014. | |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | Use of Estimates | |
Cash and cash equivalents | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the related notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. These deposits are insured up to $250,000 by the FDIC. None of our bank accounts, as of December 31, 2013, exceeded this threshold and therefore were all covered by FDIC insurance. | Reclassifications | |
Accounts receivable | We have reclassified certain income statement and balance sheet items within the accompanying Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements for the prior year in order to be comparable with the current presentation. These reclassifications did not have material impact on the Company's reported stockholders’ equity (deficiency), results of operations or cash flows. | |
The Company reviews accounts receivables periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. | Receivables | |
Property and equipment | The Company reviews receivables periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Receivables are primarily contract-based billings to tenants and consulting engagement receivables. | |
Property and equipment are recorded at cost and depreciated under accelerated or straight line methods over each asset's estimated useful life. | Inventory | |
We review our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. | Inventory consisting of wholesale items purchased for retail sale is stated at lower of cost or market, with cost being determined on average cost basis, and consists primarily of finished goods. The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on management’s estimated forecast of product demand and production requirements. | |
Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations | Amounts paid to suppliers for inventory not yet received is classified as prepaid inventory. Once received, the cost of inventory is reclassified into inventory. | |
Income tax | Property and Equipment, Net | |
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. | Property and equipment are recorded at cost and depreciated under the straight-line method over each asset’s estimated useful life, typically thirty (30) years for buildings and five (5) years for warehouse leasehold improvements, and the Company’s equipment, and furniture and fixtures. For office space leased to tenants, related property and equipment are depreciated under the straight-line method over each asset’s estimated useful life, typically seven (7) years for office leasehold improvements, and three (3) years for equipment and furniture and fixtures. Construction in progress, including purchased equipment, represents capital expenditures incurred for assets not yet placed in service. | |
Fair Value Measurements | Deferred Financing Costs, Net | |
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows: | Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized as debt discount over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful. | |
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange. | Conventional Convertible Debt | |
Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs. | The Company records conventional convertible debt in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic No. (“Topic”) 470-20, Debt with Conversion and Other Options. Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 debt issuance and an 8 ½% Convertible Notes Payable as conventional convertible debt (see Note 11). | |
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial instruments. | Derivatives Liabilities, Beneficial Conversion Features and Debt Discounts | |
Our financial instruments consist of prepaid expenses, accounts payable and accrued liabilities and convertible notes payable and approximate their fair value because of the short-term maturities of these instruments or bear market rates of interest. | The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date. | |
Long-Lived Assets | The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants using the binomial method. The Company has recorded a derivative liability related to the Series C Warrants (see Note 14). | |
In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. | If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. The convertible debt is recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the straight-line method, which approximates the effective interest rate method. The Company has recorded a BCF to the notes issued in January 2014 (see Note 11). | |
Conventional Convertible Debt | Fair Value Measurements | |
The Company records conventional convertible debt in accordance with ASC Topic 470-20, “ Debt with Conversion and Other Options .” Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 issuance and the 8 1/2 % Convertible Note Payable as conventional convertible debt (see Note 10). | ASC Topic 820, Fair Value Measurements and Disclosures, provides a comprehensive framework for measuring fair value and expands disclosures, which are required about fair value measurements. Specifically, ASC Topic 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC Topic 820 defines the hierarchy as follows: | |
Revenue recognition | Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange. | |
The Company will recognize revenue in accordance with ASC. 605, “Revenue Recognition”. ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. | Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs. | |
Advertising costs | Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights. | |
Advertising costs are expensed as incurred. No advertising costs were incurred during the period of inception through December 31, 2013. | Our financial instruments consist of cash, accounts receivable, other receivables, prepaid expenses, deferred financing costs, accounts payables and accrued expenses, notes payable and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. | |
Comprehensive Income (Loss) | The Company's derivative liability is a Level 3 estimated fair market value instrument (see Note 14). | |
Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there have been no differences between our comprehensive loss and net loss. | Revenue Recognition | |
Net income (loss) per share | Revenue is recognized on an accrual basis as earned under contract terms. Specifically, revenue from tenant rentals is recognized on a straight-line basis over the reasonably assured lease term, and collectability is reasonably assured. Consulting revenue is recognized based upon the payment terms within the contracts, and collectability is reasonably assured. Revenue relating to our wholesale business is recognized at the time goods are sold. | |
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. | Income Tax | |
Business Segments | The Company accounts for income taxes pursuant to ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. | |
During 2013, the Company operated two reportable business segments – a petroleum mapping business and a real estate leasing business. On December 31, 2013 the petroleum mapping business was transferred to an unaffiliated shareholder in return for the assumption of liabilities of the business. | Net Income (Loss) Per Share | |
Recently Issued Accounting Standards | The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding in accordance with ASC Topic 260, Earnings Per Share. Diluted earnings or loss per share is computed using the weighted average common shares and diluted potential common shares outstanding. Warrants and common stock issuable upon the conversion of the Company's convertible notes payable have not been included in the computation as the effect would be anti-dilutive and would decrease the loss per share as the Company has incurred losses in all periods reported. | |
We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. | Business Segments | |
Following the sale of its oil and gas mapping operations effective December 31, 2013, the Company operates in three segments in accordance with ASC Topic 280, Segment Reporting. The Company’s three segments are Real Estate, Wholesale Supply, and Finance, Consulting and Ancillary Services. Our Chief Executive Officer has been identified as the chief decision maker. | ||
Recently Issued Accounting Standards | ||
Development Stage Entity Reporting | ||
In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-10 Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , (“ASU 2014-08”), which removes the definition of development stage entity, as was previously defined under generally accepted accounting principles in the United States (“U.S. GAAP”), from the accounting standards codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. | ||
In addition, ASU 2014-10 eliminates the requirements for development stage entities to (i) present inception-to-date information in the statement of income, cash flow and stockholders' equity, (ii) label the financial statements as those of a development stage entity, (iii) disclose a description of the development stage activities in which the entity is engaged, and (iv) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. | ||
The Company has chosen to early adopt ASU 2014-10 for the Company’s financial statements as of June 30, 2014. The adoption of this ASU impacted the Company’s reporting by eliminating the requirement to report inception to date financial information and describe the Company as a development stage company as previously required. | ||
Discontinued Operations | ||
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08), which limits dispositions that qualify for discontinued operations presentation to those that represent strategic shifts that have or will have a major effect on an entity’s operations and financial results. Strategic shifts could include a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of the business. ASU 2014-08 is effective prospectively for the Company in its first quarter of fiscal 2015, with early adoption permitted. The Company does not believe the adoption of this standard will have a significant impact on its consolidated financial statements. | ||
Going Concern | ||
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern . ASU 2014-15 requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. ASU 2014-15 requires management to evaluate, for each reporting period, whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. We do not expect the adoption of ASU 2014-15 to have a significant impact on our consolidated financial statements. | ||
Revenue Recognition | ||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. This ASU’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company is carefully evaluating its existing revenue recognition practices to determine whether any contracts in the scope of the guidance will be affected by the new requirements. The effects may include identifying performance obligations in existing arrangements, determining the transaction price and allocating the transaction price to each separate performance obligation. The Company will also establish practices to determine when a performance obligation has been satisfied, and recognize revenue in accordance with the new requirements. The new standard is effective for the Company on January 1, 2017. Early adoption is not permitted. ASU 2014-09 allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company is currently evaluating the transition method that will be elected. | ||
3_GOING_CONCERN
3. GOING CONCERN | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Going Concern | ||
GOING CONCERN | The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred a loss since Inception (June 5, 2013) resulting in an accumulated deficit of $710,962 as of December 31, 2013 and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. | 3. GOING CONCERN |
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no guarantee that the Company will be successful in achieving these objectives. | The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management believes that actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate additional revenues. | |
The Company had an accumulated deficit of approximately $3,886,000 and $711,000 as of September 30, 2014 and December 31, 2013, respectively, and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. | ||
On April 10, 2014 , trading in the Company’s common stock resumed on the OTCQB after having been suspended by the SEC on March 27, 2014. |
4_SHARE_EXCHANGE_AGREEMENT
4. SHARE EXCHANGE AGREEMENT | 7 Months Ended | 9 Months Ended | ||
Dec. 31, 2013 | Sep. 30, 2014 | |||
Share Exchange Agreement | ||||
SHARE EXCHANGE AGREEMENT | On August 14, 2013, pursuant to a Share Exchange Agreement (the “The Share Exchange Agreement”), Promap Corporation (the “Company”) acquired approximately 94% of the outstanding common stock of Advanced Cannabis Solutions, Inc. (“ACS”) in exchange for 12,400,000 shares of the Company’s common stock. | 4. SHARE EXCHANGE AGREEMENT | ||
In connection with the Share Exchange Agreement: | On August 14, 2013, pursuant to the Share Exchange Agreement, Promap acquired approximately 94% of the outstanding common stock of ACS in exchange for 12,400,000 shares of Promap's common stock. | |||
· The Company purchased 8,000,000 shares of its outstanding common stock from a former officer of the Company for $100,000. These shares were then cancelled and returned to the status of authorized but unissued shares; | In connection with the Share Exchange Agreement: | |||
· Robert Frichtel was appointed as a director and the Principal Executive and Financial Officer of the Company; | ||||
· Roberto Lopesino was appointed Vice President of the Company; and | · | |||
· Steven Tedesco and Robert Carrington, Jr., resigned as officers and directors of the Company. | Promap purchased 8,000,000 shares of its outstanding common stock from a former officer of the Company for $100,000. These shares were then cancelled and returned to the status of authorized but unissued shares; | |||
As a result of the acquisition, ACS is the Company’s 94% owned subsidiary and the former shareholders of ACS own approximately 88% of the Company’s common stock. The Company plans to acquire the remaining outstanding shares of ACS at a later date (see Note 11 Subsequent Events below). | · | |||
Robert Frichtel was appointed as a director and the Principal Executive and Financial Officer of the Company; and | ||||
The acquisition has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisition. Under reverse acquisition accounting, ACS, the legal acquiree, is treated as the accounting acquirer of the Company. Consequently, CSA financial results are disclosed for all periods presented, while the Company’s financial results have only been consolidated with those of the existing ACS business from August 14, 2013 onward. All outstanding shares have been restated to reflect the effect of the Agreement. | ||||
· | ||||
The following table summarizes the estimated fair values of the Company’s assets acquired and liabilities assumed by the existing ASC business as on August 14, 2013: | Steven Tedesco and Robert Carrington, Jr., resigned as officers and directors of Promap. | |||
As a result of the acquisition, ACS was Promap’s 94% owned subsidiary and the former shareholders of ACS owned approximately 88% of Promap’s common stock. On November 9, 2013, Promap acquired the remaining 6% of the share capital of Advanced Cannabis Solutions, Inc. | ||||
Cash | $ | 1,790 | ||
Accounts receivable | 8,370 | The Share Exchange Agreement has been accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions. Under reverse acquisition accounting, ACS, the legal acquired entity, is treated as the accounting acquirer of the predecessor company. Consequently, ACS’ financial results are disclosed for all periods presented. All outstanding shares have been restated to reflect the effect of the Share Exchange Agreement. | ||
Accounts payable | -20,823 | |||
The fair value of the company’s net liabilities at the August 14, 2013 recapitalization | $ | -10,663 |
5_PROPERTY_AND_EQUIPMENT
5. PROPERTY AND EQUIPMENT | 9 Months Ended | ||||||
Sep. 30, 2014 | |||||||
Property, Plant and Equipment [Abstract] | |||||||
PROPERTY AND EQUIPMENT | 5. PROPERTY AND EQUIPMENT | ||||||
On December 31, 2013 the Company purchased a property in Pueblo County, Colorado (the “Pueblo West Property”) for approximately $450,000. The property, which is located in a suburb of Pueblo, consists of approximately three acres of undeveloped land, a 5,000 square foot steel building, and a parking lot. The purchase price was allocated $12,340 for land and $437,660 for buildings and related equipment. | |||||||
The purchase price was paid for cash of $280,000 and a promissory note in the principal of $170,000. The note bears interest at 8.5% interest per annum and is payable in monthly installments, including principal and interest, in the amount of $1,674. All unpaid principal and interest is due December 31, 2018. The promissory note is convertible at any time on or before the maturity date at $5 per common share (See Note 11). | |||||||
The property is zoned for growing marijuana and is leased to a licensed medical marijuana grower through December 31, 2022 on a triple net lease basis. The Company has agreed with the tenant to begin construction of a light deprivation greenhouse on the property at a cost not to exceed $400,000 during first quarter 2015. Depreciation on the Pueblo West Property building facility began effective January 1, 2014. | |||||||
Depreciation expense was $9,865 and $0 for the three months ended September 30, 2014 and 2013, respectively, and $16,097 and $0 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||
The following table summarizes property and equipment and related accumulated depreciation: | |||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
(unaudited) | (audited) | ||||||
Land | $ | 12,340 | $ | 12,340 | |||
Buildings and Equipment | 448,664 | 440,413 | |||||
Leasehold improvements | 45,000 | - | |||||
Property and Equipment , gross | 506,004 | 452,753 | |||||
Less: Accumulated Depreciation | -16,097 | - | |||||
Property and Equipment, net | $ | 489,907 | $ | 452,753 |
6_INTANGIBLE_ASSETS
6. INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2014 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | 6. INTANGIBLE ASSETS |
Intangible assets were $38,200 and $0 at September 30, 2014 and December 31, 2013, respectively. Intangible assets consisted of costs capitalized for the development of educational and marketing webinars on various industry topics surrounding marijuana. The intangible assets have an anticipated useful life of up to one year. Amortization expense for the three and nine month periods ended September 30, 2014 were $2,733 and $2,733, respectively. | |
7_RECEIVABLES
7. RECEIVABLES | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Receivables [Abstract] | ||||
RECEIVABLES | 7. RECEIVABLES | |||
The Company operates three reportable business segments: Real Estate Leasing, Wholesale Supply, and Finance, Consulting and Ancillary Services. Real Estate Leasing owns, operates, and leases warehouse and office space to tenants. The Company’s Wholesale Supply segment primarily serves as reseller of packaging products and supplies to retail and manufacturing companies. Inventory for the Wholesale Supply segment is primarily comprised of packaging products for retailers and materials for manufacturers and there was no reserve for excess and obsolete inventory at September 30, 2014. The Company’s Finance, Consulting and Ancillary Services segment provides business advice and management services. | ||||
Receivables consist of the following at September 30, 2014. (There were no comparable amounts at December 31, 2013.): | ||||
September 30, | ||||
2014 | ||||
(unaudited) | ||||
Tenant receivable, current | $ | 16,282 | ||
Tenant receivable, non-current | 17,316 | |||
Receivables | 33,598 | |||
Less: Allowance for doubtful accounts | - | |||
Receivables, net | $ | 33,598 | ||
Tenant rental income invoiced but not earned was $17,713 and $0 for the three months ended September 30, 2014 and 2013 , respectively. Tenant rental income earned but not invoiced was $17,316 and $0 for the nine months ended September 30, 2014 and 2013, respectively. During the three months and nine month periods ended September 30, 2014, the Company wrote-off the remaining consulting services receivable balance of $33,600 and $60,000, respectively, due to the mutual cancellation of the consulting contract. | ||||
The following discloses scheduled tenant receipts for the remainder of 2014, the next five fiscal years, and thereafter (see Note 18): | ||||
Scheduled | ||||
Tenant | ||||
Receipts | ||||
Remainder of 2014 | $ | 46,477 | ||
2015 | 148,205 | |||
2016 | 110,536 | |||
2017 | 112,753 | |||
2018 | 115,008 | |||
2019 | 117,308 | |||
Thereafter | 246,203 | |||
Total scheduled rental receipts | $ | 896,490 | ||
8_DEFERRED_FINANCING_COSTS_NET
8. DEFERRED FINANCING COSTS, NET | 9 Months Ended |
Sep. 30, 2014 | |
Deferred Revenue Disclosure [Abstract] | |
DEFERRED FINANCING COSTS, NET | 8. DEFERRED FINANCING COSTS, NET |
As of September 30, 2014, we had recognized $115,000 of deferred financing costs. On January 10, 2014 the Company paid $15,000 to Full Circle Capital Corporation (“Full Circle”) as a deposit for deal-related expenses related to the long-term financing commitment. On January 21, 2014 as part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle out of the total consideration of $500,000 to cover legal and deal-related expenses in connection with the long-term financing commitment from Full Circle (see Note 12). | |
The deferred financing costs of $115,000 are being amortized over the estimated term of the long-term financing agreement of three years (see Note 12). Amortization expense was approximately $10,000 and $0 for the three months ended September 30, 2014 and 2013, respectively, and approximately $26,000 and $0 for the nine months ended September 30, 2014 and 2013, respectively. The unamortized deferred financing balance at September 30, 2014 was approximately $89,000. | |
9_BUSINESS_SEGMENTS
9. BUSINESS SEGMENTS | 9 Months Ended | ||||||||||||||
Sep. 30, 2014 | |||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||
BUSINESS SEGMENTS | 9. BUSINESS SEGMENTS | ||||||||||||||
The Company operates three reportable business segments: Real Estate Leasing, Wholesale Supply, and Finance, Consulting and Ancillary Services. Real Estate Leasing owns, operates, and leases warehouse and office space to tenants. The Company’s Wholesale Supply segment primarily serves as reseller of packaging products and supplies to retail and manufacturing companies. Inventory for the Wholesale Supply segment is primarily comprised of packaging products for retailers and materials for manufacturers and there was no reserve for excess and obsolete inventory at September 30, 2014. The Company’s Consulting Services segment provides business advice and management services. | |||||||||||||||
For the three months ended September 30, 2014: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | 14,178 | $ | 28,764 | $ | -13,600 | $ | 29,342 | |||||
Operating expenses and other | 1,638,929 | 18,702 | 91,371 | 27,000 | 1,776,002 | ||||||||||
Loss from continuing operations | $ | -1,638,929 | $ | -4,524 | $ | -62,607 | $ | -40,600 | $ | -1,746,660 | |||||
For the three months ended September 30, 2013: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
Operating expenses and other | 313,059 | - | 150,000 | - | 463,059 | ||||||||||
Loss from continuing operations | $ | -313,059 | $ | - | $ | -150,000 | $ | - | $ | -463,059 | |||||
For the nine months ended September 30, 2014: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | 14,613 | $ | 86,294 | $ | 40,000 | $ | 140,907 | |||||
Operating expenses and other | 3,006,692 | 63,982 | 164,592 | 81,030 | 3,316,296 | ||||||||||
Loss from continuing operations | $ | -3,006,692 | $ | -49,369 | $ | -78,298 | $ | -41,030 | $ | -3,175,389 | |||||
Property and equipment, net | $ | - | $ | - | $ | 489,907 | $ | - | $ | 489,907 | |||||
Receivables, net | $ | - | $ | - | $ | 33,598 | $ | - | $ | 33,598 | |||||
Inventory | $ | - | $ | 62,805 | $ | - | $ | - | $ | 62,805 | |||||
From June 5, 2013 (Inception) to September 30, 2013: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
Operating expenses and other | 313,059 | - | 150,000 | - | 463,059 | ||||||||||
Loss from continuing operations | $ | -313,059 | $ | - | $ | -150,000 | $ | - | $ | -463,059 | |||||
10_DISCONTINUED_OPERATIONS
10. DISCONTINUED OPERATIONS | 9 Months Ended | ||
Sep. 30, 2014 | |||
Discontinued Operations and Disposal Groups [Abstract] | |||
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS | ||
Prior to December 31, 2013, the Company provided hard copy and digital format oil and gas production maps for the oil and gas industry. On December 31, 2013, the Company sold its oil and gas mapping business to its former Chief Executive Officer in consideration for his agreement to assume all liabilities associated with the mapping business. At the time of the transfer, the mapping business had assets of $2,729 and liabilities of $2,277. The Company recognized a loss on the transfer of $452 which was charged to equity. There was no gain or loss on disposal relating to the Company’s discontinued operations. | |||
The components of the discontinued operations are as follows: | |||
5-Jun-13 | |||
(Inception) to | |||
31-Dec-13 | |||
Revenues | $ | 455 | |
Cost of services | 183 | ||
Gross profit | 272 | ||
Operating expenses | |||
General administrative | 9,229 | ||
Total operating expenses | 9,229 | ||
Net loss | $ | -8,957 | |
11_CONVERTIBLE_NOTES_PAYABLE
11. CONVERTIBLE NOTES PAYABLE | 7 Months Ended | 9 Months Ended | |||||||||||||||||||||
Dec. 31, 2013 | Sep. 30, 2014 | ||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||
CONVERTIBLE NOTES PAYABLE | 12% Convertible notes | 11. CONVERTIBLE NOTES PAYABLE | |||||||||||||||||||||
The Company issued $530,000 in convertible notes on December 27, 2013. These notes have an interest rate of 12%, paid quarterly, and mature on October 31, 2018. They are convertible at any time to shares of stock at $5.00 per share. After November 1, 2015, the Company can force conversion of these notes if the trading stock price has exceeded $10 for 20 consecutive trading days. | 12% Convertible Notes | ||||||||||||||||||||||
The Company paid commission of $63,600 and incurred other debit issuance costs of $2,540. The Company also issued 10,600 warrants with an exercise price of $5.00 per share as further compensation to the broker dealer who raised this funding for us. | December 2013 Issuance | ||||||||||||||||||||||
We valued the convertible feature of the 12% convertible notes and the warrants issued to the broker dealer using the Black Scholes valuation model, assuming an expected life of 4.8 years, an annual volatility factor of 127%, a risk free interest rate of 1.65%, and $0 dividends. The debt discount on these convertible notes payable will be amortized over the life of the notes from December 27, 2013 through October 31, 2018 on a straight line basis that approximates the effective interest rate method. | In December 2013, the Company entered into various unsecured convertible promissory notes with various third parties totaling $530,000 (the “December 2013 Issuance”), of which the entire amount was outstanding at September 30, 2014 and December 31, 2013. The principal amounts of these notes range between $10,000 and $300,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of the Company’s common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits, etc.). They are convertible at any time on or before maturity date at $5.00 per common share. After November 1, 2015, the Company can force conversion of these notes if the trading stock price has exceeded $10 for 20 consecutive trading days. The Company paid $63,600 to a placement agent for finder’s fees which the Company recorded as a debt discount as of September 30, 2014 and December 31, 2013. In addition, the Company granted the placement agent warrants to purchase 10,600 shares at a price of $5.00 per share, (with standard dilution clause for dividends, stock splits, etc.) which vest immediately, and expire October 31, 2018. The value of the warrants was $21,271 based on the Black-Scholes pricing model. The Company recorded the value of warrants as additional debt discount at issuance. The debt discount is being amortized to interest expense over the life of the notes. Amounts amortized to interest expense were approximately $3,000 and $10,000 for the three and nine month periods ended September 30, 2014, respectively. The unamortized debt discount balance at September 30, 2014 is approximately $75,000. | ||||||||||||||||||||||
8 ½% Convertible Note Payable | To properly account for the December 2013 Issuance, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed ASC Topic 815, to identify whether any equity-linked features in the December 2013 Issuance are freestanding or embedded. The Company determined that there were no free standing features. The December 2013 Issuance was then analyzed in accordance with ASC Topic 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet the requirements for bifurcation pursuant to ASC Topic 815 and therefore accounted for the December 2013 Issuance as conventional debt. The Company then reviewed ASC Topic 470-20, and determined that the December 2013 Issuance met the criteria of a conventional convertible note and that none of the December 2013 Issuance had a beneficial conversion feature. As a result, pursuant to ASC Topic 470-20, the Company recorded the conventional convertible note as a debt instrument in its entirety. | ||||||||||||||||||||||
The Company executed a mortgage on their Pueblo West property in the amount of $170,000 at 8 ½% interest amortized over 15 years with a maturity date of December 31, 2018. This note is convertible at any time at $5.00 per share. | January 2014 Issuance | ||||||||||||||||||||||
We valued the convertible feature of the 8 ½% Convertible note payable using the Black-Scholes valuation model, assuming an expected life of 4.8 years, an annual volatility factor of 104%, a risk free interest rate of 1.65%, and $0 dividends. The debt discount on this convertible note payable will be amortized over the life of the note from January 1, 2014 through January 2019 on a straight line basis that approximates the effective interest rate method. | In January 2014, the Company entered into various unsecured convertible promissory notes with various third parties totaling $1,605,000 (the “January 2014 Issuance”), of which $1,120,000 was outstanding at September 30, 2014. The principal amounts of these notes range between $10,000 and $200,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of the Company’s common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits, etc.). They are convertible at any time on or before maturity date at $5.00 per common share. After November 1, 2015, the Company can force conversion of these notes if the trading stock price has exceeded $10 for 20 consecutive trading days. The Company paid $160,500 in debt issuance costs and $32,100 to a placement agent for finder’s fees which the Company recorded as a debt discount as of September 30, 2014. In addition, the Company granted the placement agent warrants to purchase 32,100 shares at a price of $5.00 per share, (with standard dilution clause for dividends, stock splits, etc.) which vest immediately, and expire October 31, 2018. The value of the warrants was $83,452 based on the Black-Scholes pricing model. The Company recorded the relative value of warrants as additional debt discount at issuance. | ||||||||||||||||||||||
12% Convertible notes | To properly account for the January 2014 Issuance, The Company evaluated the debt instruments pursuant to ASC Topic 815, to identify whether any equity-linked features in the convertible debt are freestanding or embedded. The January 2014 Issuance was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that the conversion feature was embedded in the January 2014 Issuance, but did not meet the definition of a derivative pursuant to ASC Topic 815 and therefore should not be bifurcated. The Company concluded that the January 2014 Issuance was conventional debt and assessed under ASC Topic 470-20 whether the January 2014 Issuance had a beneficial conversion feature. Since the initial conversion price of the security was less than the market value of the common stock at the time of issuance, it was determined that a beneficial conversion feature existed. The Company calculated the value of the beneficial conversion feature using the intrinsic value method. The stock price on the date of issuance was $13.75 and the conversion price was $5.00. | ||||||||||||||||||||||
The Company has entered into various unsecured convertible promissory notes with various third parties totaling $530,000, of which the entire amount was outstanding at December 31, 2013. The principal amounts of these notes are between $10,000 and $300,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of our common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits). After November 1, 2015, the Company can force conversion of these notes if the trading stock price has exceeded $10 for 20 consecutive trading days. The Company paid $63,600 to a placement agent for finders fees which the Company recorded as a debt discount as of December 31, 2013. In addition, the Company granted the placement agent warrants to purchase 10,600 shares at a price of $5.00 per share, (with standard dilution clause for dividend, stock splits) vests immediately, and expires October 31, 2018. The value of the warrants was $21,271 based on the Black-Scholes pricing model. The Company recorded the value of warrants as additional debt discount at December 31, 2013. The debt discount will be amortized to interest expense over the life of the notes. As of December 31, 2013, no amounts have been amortized to interest expense. | The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $1,605,000. | ||||||||||||||||||||||
8 ½% Convertible Note Payable | The debt discount is being amortized to interest expense over the life of the notes. Amounts amortized to interest expense were approximately $225,000 and $636,000 for the three and nine month periods ended September 30, 2014, respectively. The unamortized discount balance at September 30, 2014 was approximately $969,000. | ||||||||||||||||||||||
The Company executed a mortgage on their Pueblo West property in the amount of $170,000 at 8 ½% interest amortized over 15 years with a maturity date of December 31, 2018. This note is convertible at any time at $5.00 per share. | Conversion of 12% Convertible Notes | ||||||||||||||||||||||
The table below summarizes our Convertible Notes activity during the year ended December 31, 2013: | Since the issuance of the January 2014 notes, seven (7) of the January 2014 Issuance note holders converted their loan notes with principal balances totaling $485,000 and accrued interest of $3,669 into 97,733 shares of the Company’s common stock at a conversion price of $5.00 per share. Any remaining unamortized portion of debt discount related to the converted notes were expensed immediately at the date of conversion, amounting to $271,413 and $426,054 for the three and nine months ended September 30, 2014, respectively. | ||||||||||||||||||||||
8 ½% Convertible Note Payable | |||||||||||||||||||||||
Convertible | Debt | Convertible Notes Payable, Net | |||||||||||||||||||||
Notes Payable | Discount | The Company executed a mortgage on its Pueblo West Property in the amount of $170,000 at 8 ½% interest amortized over 15 years with a maturity date of December 31, 2028 (the “Pueblo Mortgage”). This note is convertible at any time at $5.00 per share. | |||||||||||||||||||||
June 5, 2013 (Inception) | $ | - | $ | - | $ | - | |||||||||||||||||
Proceeds from issuance of convertible debt | To properly account for the Pueblo Mortgage, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed ASC Topic 815, to identify whether any equity-linked features in the Pueblo Mortgage are freestanding or embedded. The Company determined that there were no free standing features. The Pueblo Mortgage was then analyzed in accordance with ASC Topic 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet the requirements for bifurcation pursuant to ASC Topic 815 and therefore accounted for the Pueblo Mortgage as conventional debt. The Company then reviewed ASC Topic 470-20, and determined that the Pueblo Mortgage met the criteria of a conventional convertible note and that none of the Pueblo Mortgage had a beneficial conversion feature As a result, pursuant to ASC Topic 470-20, the Company recorded the conventional convertible note as a debt instrument in its entirety. | ||||||||||||||||||||||
12% convertible notes issued December 27,2013 | 530,000 | -85,488 | 444,512 | ||||||||||||||||||||
8% convertible notes issued December 31,2013 | 170,000 | - | 170,000 | The table below summarizes our convertible notes activity during the nine months ended September 30, 2014: | |||||||||||||||||||
Amortization of debt discount | - | 794 | 794 | ||||||||||||||||||||
Total | 700,000 | -84,694 | 615,306 | ||||||||||||||||||||
Current portion of debt | -5,356 | - | -5,356 | Principal | Debt | Accrued | |||||||||||||||||
Long term portion at December 31, 2013 | $ | 694,644 | $ | -84,694 | $ | 609,950 | Balance | Discount | Interest | Total | |||||||||||||
Balance at December 31, 2013 | $ | 700,000 | $ | -84,694 | $ | 871 | $ | 616,177 | |||||||||||||||
To properly account for certain Convertible Notes Payable, the Company performed a detailed analysis to obtain a thorough understanding of the transactions, including understanding the terms of each instrument issued, and any related derivatives entered into. The Company reviewed ASC Topic 815, to identify whether any equity-linked features in the Notes are freestanding or embedded. The Company determined that there were no free standing features. The Notes were then analyzed in accordance with Topic 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet | Issued in the period | 1,605,000 | -1,605,000 | - | - | ||||||||||||||||||
Converted into shares of common stock | -485,000 | 426,054 | -3,669 | -62,615 | |||||||||||||||||||
the requirements for bifurcation pursuant to Topic 815 and therefore accounted for the Notes as conventional debt. The Company then reviewed ASC Topic 470-20, and determined that the Notes met the criteria of a conventional convertible note and that none of the Notes had a beneficial conversion feature As a result, pursuant to ASC Topic 470-20, the Company recorded the Conventional Convertible note as a debt instrument in its entirety. | Amortization of debt discount | - | 219,804 | - | 219,804 | ||||||||||||||||||
Payment of loan principal | -3,178 | - | - | -3,178 | |||||||||||||||||||
Interest accrued during period | - | - | 203,909 | 203,909 | |||||||||||||||||||
Interest paid during period | - | - | -201,111 | -201,111 | |||||||||||||||||||
Balance at September 30, 2014 | 1,816,822 | -1,043,836 | - | 772,986 | |||||||||||||||||||
Less: Current portion | -5,927 | - | - | -5,927 | |||||||||||||||||||
Long-term debt | $ | 1,810,895 | $ | -1,043,836 | $ | - | $ | 767,059 | |||||||||||||||
-1 | The current portion represents the principal balance payable on the 8 ½% convertible note payable in the twelve months following the balance sheet date |
12_COMMITMENTS_AND_CONTINGENCI
12. COMMITMENTS AND CONTINGENCIES | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
COMMITMENTS AND CONTINGENCIES | Operating Leases and Long term Contracts | 12. COMMITMENTS AND CONTINGENCIES |
The Company rents office space for its corporate needs. The Company entered into a month-to-month lease agreement in July 2013 to lease 2,000 square feet for an annual rate of $12,000, paid monthly. We paid $6,000 for the lease of our corporate offices for the period ended December 31, 2013. | Long-term financing commitment | |
In addition, the Company has a second mortgage on its Pueblo property in the amount of $170,000, with an interest rate of 8 1/2 %, a 15 year amortization, and a maturity date of December 31, 2018. | On January 21, 2014, the Company signed a Securities Purchase Agreement (the “SPA”) with Full Circle. The SPA provides that Full Circle will initially provide $7.5 million to the Company in the form of Senior Secured Convertible Notes, subject to certain named conditions. The Company can borrow an additional $22.5 million with the mutual agreement of Full Circle and the Company. | |
Legal | At least 95% of any loan proceeds will be used to acquire properties, which the Company will lease to licensed marijuana growers. | |
To the best of the Company’s knowledge and belief, no legal proceedings are currently pending or threatened. | Full Circle will provide the Company with the initial $7.5 million when: | |
· | ||
Full Circle agrees on the location of property to be purchased; | ||
· | ||
The specified property’s appraised value is satisfactory to Full Circle; | ||
· | ||
A Phase I environmental inspection is completed to the satisfaction of Full Circle; and | ||
· | ||
The Company is able to provide a first priority lien on the property in favor of Full Circle. | ||
The six-year loan(s) will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% a year, payable monthly. As of September 30, 2014, no amounts have been funded to the Company pursuant to the SPA. | ||
The initial loan can, at any time, be converted into shares of the Company’s common stock at a conversion price of $5.00 per common share. It is contemplated that further advances will be convertible at 110% of the market price of our stock on the day of any advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower. | ||
The funding of the loan(s) is subject to the execution of additional documents between the parties. | ||
Full Circle also purchased, for $500,000, warrants which allow Full Circle to purchase up to 1,000,000 shares of the Company’s common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. Of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions. | ||
On September 24, 2014, the Company and Full Circle entered into Amendment No. 1 to the SPA, which changed the conversion price of the initial $7,500,000 promissory note to $4.00 per share of the Company’s common stock. Also on September 24, 2014, and in connection with Amendment No.1 to the SPA, the Company and Full Circle entered into Amendment No. 1 to the Series C Warrants, which changed the exercise price of these warrants to $4.00 per share of the Company’s common stock, and increased the amount of warrants issuable to 1,400,000 warrants to purchase shares of the Company’s common stock. (See Note 13). | ||
Operating Leases | ||
The Company rents office space for its corporate needs. The Company entered into a month-to-month lease agreement in July 2013 to lease 2,000 square feet for an annual rate of $12,000, paid monthly. This lease was terminated effective April 1, 2014. | ||
The Company entered into a new three-year lease agreement effective April 2, 2014 for its corporate offices. The facility leased is 3,000 square feet and expires March 31, 2017. This lease was terminated effective November 1, 2014 (see Note 18). The Company’s lease for office space at 4445 Northpark Avenue, Colorado Springs, Colorado, 80907 was cancelled without penalty, effective November 1, 2014. As a result, the Company anticipates that its office rental contractual obligations will decrease approximately $26,700, $29,400, and $7,500 for years 2015, 2016 and 2017, respectively. The Company entered into a three-year agreement effective April 21, 2014 for a warehouse supply and distribution facility. The facility leased is 1,800 square feet and expires April 30, 2017. Lease expense relating to these leases was $9,150 and $0 for the three months ended September 30, 2014 and 2013, respectively, and $16,250 and $0 for the nine months ended September 30, 2014 and 2013, respectively. The future obligations under this lease amount to approximately $3,000 for the remainder of 2014, $13,000 for 2015, $13,000 for 2016, and $5,000 for 2017. | ||
Legal | ||
To the best of the Company’s knowledge and belief, no legal proceedings of merit are currently pending or threatened against the Company. |
13_STOCK_HOLDERS_EQUITY
13. STOCK HOLDERS' EQUITY | 7 Months Ended | 9 Months Ended | |||||||||||||||
Dec. 31, 2013 | Sep. 30, 2014 | ||||||||||||||||
Equity [Abstract] | |||||||||||||||||
STOCK HOLDERS' EQUITY | Preferred Stock | 13. STOCKHOLDERS’ EQUITY | |||||||||||||||
The Company is authorized to issue 5,000,000 shares of preferred stock, with no par value. No shares of preferred stock have been issued or are outstanding, and no rights, privileges or preferences have been determined and designated by the board of directors. | Common Stock | ||||||||||||||||
Common Stock | On January 5, 2014, the Company re-acquired 1,750,000 shares of its common stock for no consideration from existing common stockholders. The re-acquired shares were returned to the Company’s, authorized but unissued share account. The $1,750 gain on the return of these shares of common stock has been charged to stockholders’ equity. | ||||||||||||||||
The Company is authorized to issue 100,000,000 shares of no-par value common stock. | Since the issuance of the January 2014 notes, seven (7) of the January 2014 Issuance note holders converted their loan notes with principal balances totaling $485,000 and accrued interest of $3,669 into 97,733 shares of the Company’s common stock at a conversion price of $5.00 per share. | ||||||||||||||||
On June 30, 2013, the Company issued 12,400,000 shares of common stock to its founders for cash consideration of $0.001 per share. | Warrants | ||||||||||||||||
Between July 11, 2013 and August 8, 2013, the Company sold 707,000 shares of its common stock for cash consideration of $1.00 per share. Each of these shares has a Series A Warrant attached with an exercise price of $10.00. The company may force this exercise at any time, as the requirement for 10 days of consecutive trading at a price at or greater than $10 has already been met. | Series A Warrants | ||||||||||||||||
On August 14, 2013, following the reverse merger of ACS with the Company, existing shareholders of the Company owned 9,724,200 shares of its common shares However, 8,000,000 of these shares were then immediately purchased by the Company for cash consideration of $100,000 and cancelled. | Between July 11, 2013 and August 8, 2013, the Company issued 707,000 shares of its common stock and 707,000 Series A Warrants for cash consideration of $1.00 per share. Each Series A Warrant entitles the holder to purchase one share of the Company’s common stock at a price of $10.00 per share. The Series A Warrants expire on the earlier of August 1, 2016, or twenty days following written notification from the Company that its common stock had a closing bid price at or above $12.00 for any ten consecutive trading days. This condition has been met as of April 30, 2014; however, the Company has chosen not to force this conversion feature at this time. | ||||||||||||||||
Between August 14, 2013 and September 19 2013, the Company sold a further 266,000 shares of its common stock for cash consideration of $1.00 per share. Each of these shares has a Series A Warrant attached with an exercise price of $10.00. The company may force this exercise at any time, as the requirement for 10 days of consecutive trading at a price at or greater than $10 has already been met. | Between August 14, 2013 and September 19, 2013, the Company issued an additional 266,000 shares and 266,000 Series A Warrants of its common stock for cash consideration of $1.00 per share. The Series A Warrants expire on the earlier of August 1, 2016, or twenty days following written notification from the Company that its common stock had a closing bid price at or above $12.00 for any ten consecutive trading days. This condition has been met as of April 30, 2014; however, the Company has chosen not to force this conversion feature at this time. | ||||||||||||||||
On December 9, 2014, the Company issued 40,000 shares of stock in return for professional services. | At September 30, 2014, there were 973,000 Series A Warrants issued and outstanding. | ||||||||||||||||
On December 27, 2014, the Company issued 10,600 warrants to the placement agent for our convertible note offering. Each warrant entitles the agent to purchase a one share of our common stock at a price of$5 per share. | Series B Warrants | ||||||||||||||||
On January 29, 2014, the Company issued 160.5 Series B Warrants, convertible to 32,100 shares of its common stock, to a broker-dealer as compensation for placement of convertible notes payable totaling $1,605,000. Each Series B Warrant allows the holder to purchase 200 shares of the Company’s common stock at an exercise price of $5.00 per share at any time on or before October 31, 2018. At the time the warrants were issued, they had an estimated fair market value of $83,452, based on the Black-Scholes pricing model which has been recognized as part of the debt discount related to this note issuance and is being amortized over the life of the notes from January 29, 2014 through October 31, 2018 on a straight-line basis that approximates the effective interest method. | |||||||||||||||||
At December 31, 2013, the Company had 15,137,200 shares of its common stock issued and outstanding. | |||||||||||||||||
At the times the Series B Warrants were issued, the following assumptions were used to derive the value of the warrants using the Black-Scholes pricing model: | |||||||||||||||||
Common Stock | Warrants | ||||||||||||||||
June 5, 2013 (Inception) | - | - | Stock price | 13.75 | |||||||||||||
Issued for cash proceeds of $985,400 | 13,373,000 | 973,000 | Risk-free interest rate | 1.81 | % | ||||||||||||
Issued as part of exchange agreement | 9,724,200 | Expected dividend yield | 0 | % | |||||||||||||
Terminated as part of exchange agreement | -8,000,000 | Expected term (in years) | 4.8 | ||||||||||||||
Issued as compensation under a consulting agreement | 40,000 | - | Expected volatility | 171 | % | ||||||||||||
Warrants issued to placement agent | - | 10,600 | |||||||||||||||
31-Dec-13 | 15,137,200 | 983,600 | At September 30, 2014, there were 213.5 Series B Warrants issued and outstanding in respect of 42,700 shares of the Company’s common stock. | ||||||||||||||
The following table summarizes information about warrants outstanding December 31, 2013: | Series C Warrants | ||||||||||||||||
On January 21, 2014, the Company issued to Full Circle, for $500,000, warrants which allow Full Circle to purchase up to 1,000,000 shares of the Company’s common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions, which was recorded as deferred financing costs (see Note 8). On September 24, 2014, the Company and Full Circle entered into Amendment No. 1 to the SPA, which changed the exercise price of the warrants issuable to $4.00 per share of the Company’s common stock, and increased the amount of warrants issuable to 1,400,000 warrants to purchase shares of the Company’s common stock. See Note 14 for discussion of accounting for value of the revisions. | |||||||||||||||||
Exercise Price | Warrants Outstanding | Weighted Average Life of Outstanding Warrants In Months | Date of Expiration | ||||||||||||||
$5.00 | 10,600 | 58 | 10/31/18 | At September 30, 2014, there were 1,400,000 Series C Warrants issued and outstanding (see Notes 13 and 14). | |||||||||||||
$1.00 | 973,000 | 31 | 7/31/16 | ||||||||||||||
$1.04 | 983,600 | 31.3 | The following table summarizes information about warrants outstanding as of September 30, 2014: | ||||||||||||||
Exercise | Warrants | Weighted | Date of | ||||||||||||||
Price | Outstanding | Average | Expiration | ||||||||||||||
Life of | |||||||||||||||||
Outstanding | |||||||||||||||||
Warrants in | |||||||||||||||||
Months | |||||||||||||||||
Series A Warrants | $ | 10 | 973,000 | 22 | 7/31/16 | ||||||||||||
Series B Warrants | 5 | 42,700 | 49 | 10/31/18 | |||||||||||||
Series C Warrants | 4 | 1,400,000 | 28 | 1/21/17 | |||||||||||||
$ | 6.43 | 2,415,700 | 26 | ||||||||||||||
The following table summarizes the changes in shares of common stock and warrants issued and outstanding for the nine months ended September 30, 2014: | |||||||||||||||||
Common | Warrants | ||||||||||||||||
Stock | |||||||||||||||||
Balance at December 31, 2013 | 15,137,200 | 983,600 | |||||||||||||||
Re-acquired shares of common stock | -1,750,000 | - | |||||||||||||||
Warrants issued to Full Circle for $500,000 consideration – Series C Warrants | - | 1,400,000 | |||||||||||||||
Warrants issued to placement agent – Series B Warrants | - | 32,100 | |||||||||||||||
Shares issued for services | 200,000 | - | |||||||||||||||
Issued in settlement of $485,000 convertible notes payable and accrued interest of $3,669 | 97,773 | - | |||||||||||||||
Balance at September 30, 2014 | 13,684,933 | 2,415,700 |
14_DERIVATIVE_WARRANT_LIABILIT
14. DERIVATIVE WARRANT LIABILITY | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Derivative Warrant Liability | |||||
DERIVATIVE WARRANT LIABILITY | 14. DERIVATIVE WARRANT LIABILITY | ||||
The Series C Warrants issued in connection with our agreement, as amended, with the Full Circle private placement offering initially provided Full Circle with the opportunity to purchase 1,000,000 shares of the Company’s common stock at the exercise price of $5.50 per share. In September 2014, through amendment, the shares of common stock were increased to 1,400,000 and the exercise price reduced to $4.00 per share. The Series C Warrants have non-standard anti-dilution protection provisions and, under certain conditions, grant the right to the holder to require the Company to adjust the warrant’s exercise price to a lower price. Accordingly, through September 30, 2014, these warrants were accounted for as derivative liabilities. On January 21, 2014, the value of the initial warrant derivative liability was calculated to be $1,368,908. | |||||
The Company received $500,000 in cash of which $100,000 was identified as deferred financing costs, resulting in an initial loss on the fair value of the derivative liability of $868,908 on the grant date. The price of $5.00 per share of the Series A and Series B Warrants granted in conjunction with the December 2013 Issuance and the January 2014 Issuance resulted in the revaluation of the Series C Warrants granted to Full Circle and an increase to the derivative liability of $153,994. | |||||
The Company used the binomial pricing model and assumptions that consider, among other factors, the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. The Company’s common stock has been thinly traded since being delisted in the first quarter of 2014, and all conversions of debt from the January 2014 Issuance during the first and second quarters of 2014 were converted using a stock price of $5.00 per share. Using the binomial pricing model and a stock price of $5.00 per share, management utilized initial scenario stock prices of $3.00, $4.00, $6.00, and $7.00. Assuming a three-year expected term, management assessed the probabilities of the stock prices for each year, with probabilities more heavily weighted toward lower stock prices, in light of the Company’s delisted status, changes in leadership, and the Company’s current inability to execute its initial financing with Full Circle. | |||||
The underlying assumptions used for the nine months ended September 30, 2014 were: | |||||
Nine Months | |||||
Ended | |||||
30-Sep-14 | |||||
(unaudited) | |||||
Risk-free interest rate | 0.02 | % | |||
Expected dividend yield | 0 | % | |||
Expected term (in years) | 3 years | ||||
Expected volatility | 33 | % | |||
Changes in fair value of the derivative financial instruments are recognized in the Company’s consolidated statements of operations as a derivative gain or loss and are included in other income (expense). The warrant derivative gains (losses) are non-cash income (expenses); and for the three and nine month periods ended September 30, 2014, related a net derivative gain (loss) of $179,909 and $(541,397), respectively, was included in other income (expense) in the Company’s consolidated statements of operations. The increase during the three months ended September 30, 2014 was primarily due to the additional 400,000 warrants and the decrease in the warrant price to $4.00, relating to Amendment No. 1 of the SPA with Full Circle. The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying common stock for each reporting period. | |||||
Changes in the derivative warrant liability for the three and nine months ended September 30, 2014 are as follows: | |||||
Three Months | Nine Months | ||||
Ended | Ended | ||||
September 30, | September 30, | ||||
2014 | 2014 | ||||
Balance at beginning of period | — | — | |||
Fair value of warrants issued | $ | 923,764 | $ | 1,368,908 | |
Increase in derivative liability resulting from anti-dilution provision in agreement, as amended with Full Circle | — | 153,994 | |||
Increase in derivative liability resulting from additional warrants issued to Full Circle | 297,542 | — | |||
Decrease in the fair value of warrant liability, net | -179,909 | -481,505 | |||
Balance at end of period | $ | 1,041,397 | $ | 1,041,397 | |
Change in Aggregate Loss on Derivative Liability | Three Months | Nine Months | |||
Ended | Ended | ||||
September 30, | September 30, | ||||
2014 | 2014 | ||||
Beginning balance at beginning of period | $ | 423,764 | $ | — | |
Initial loss on recognition of derivative liability | — | 868,908 | |||
Increase in derivative liability resulting from additional warrants issued to Full Circle | 297,542 | — | |||
Change in estimated fair market value | -179,909 | -327,511 | |||
Balance at end of period | $ | 541,397 | $ | 541,397 |
15_INCOME_TAXES
15. INCOME TAXES | 7 Months Ended | 9 Months Ended | ||||||
Dec. 31, 2013 | Sep. 30, 2014 | |||||||
Income Tax Disclosure [Abstract] | ||||||||
INCOME TAXES | The Company accounts for income taxes in accordance with FASB ASC 740 “Income Taxes”. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized. | 15. INCOME TAXES | ||||||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: | The Company accounts for income taxes in accordance with ASC Topic 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. If there were any unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. | |||||||
No provision was made for income taxes for the period September 30, 2014. The Company, from the date of Inception, has incurred net operating losses for tax purposes of approximately $3,886,000. The net operating loss carry-forward may be used to reduce taxable income through the year 2033. | ||||||||
Inception | ||||||||
(June 5, 2013) to | There was no significant difference between reportable income tax and statutory income tax. A 100% valuation allowance has been established against the deferred tax asset, as the utilization of the loss carry-forwards cannot be reasonably assured. A reconciliation between the income taxes computed in the United States is as follows: | |||||||
December 31, | ||||||||
2013 | ||||||||
Deferred tax attributed: | September 30, | |||||||
Net operating loss carryover | $ | -241,727 | 2014 | |||||
Less: change in valuation allowance | $ | -241,727 | (unaudited) | |||||
Net deferred tax asset | $ | - | Deferred tax asset | $ | 1,321,359 | |||
Valuation allowance | -1,321,359 | |||||||
At December 31, 2013 the Company had an unused net operating loss carry-forward approximating ($710,962) that is available to offset future taxable income; the loss carry-forward will expire in 2033. | $ | - | ||||||
US federal income tax rate | 34 | % | ||||||
Valuation allowance | -34 | % | ||||||
Provision for income tax | 0 | % |
16_RELATED_PARTY_TRANSACTIONS
16. RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 16. RELATED PARTY TRANSACTIONS |
On June 30, 2013, ACS sold 1,000,000 shares of its common stock to Robert Frichtel and 1,150,000 shares of its common stock to Roberto Lopesino at a price of $0.001 per share. On June 30, 2013 ACS also sold 10,250,000 shares of its common stock to an unaffiliated group of private investors at a price of $0.001 per share. On August 14, 2013, the shareholders of ACS exchanged 12,400,000 shares of their ACS common stock for 12,400,000 shares of the Company’s common stock. | |
Subsequently, one unaffiliated person who received 2,000,000 shares in August 2013 transferred 100,000 shares to Christopher Taylor and 150,000 to another non-affiliated shareholder. The remaining 1,750,000 shares held by this person were returned to treasury and canceled on January 14, 2014. | |
On August 4, 2014, the Company appointed Michael Feinsod as a member of the Company’s board of directors (the “Board”) and Executive Chairman of the Board. Mr. Feinsod is the Managing Member and holds controlling interest of Infinity Capital, LLC (“Infinity”), an investment management company he founded in 1999. The Board approved the issuance of 200,000 shares of the Company’s common stock, with a par value of $0.01 per share to Infinity. On the date of issue, the 200,000 shares issued to Infinity had an initial fair value of $1,040,000, based on a closing price per share of the Company of $5.20 on August 4, 2014. Due to restrictions on the ability to trade the Company’s shares, a discount of fifteen percent (15%) was applied to the fair value of the shares issued to Infinity. After taking into consideration the illiquidity of the shares, the fair value of the shares issued to Infinity on August 4, 2014 was $884,000 and was recorded to stock-based compensation for the quarter ended September 30, 2014. | |
The Board also approved terms that may result in the issuance of additional common stock to Infinity, provided Mr. Feinsod meets specific performance criteria, which could include: (i) the issuance of 1,000,000 shares of the Company’s common stock to Infinity upon the uplisting of the Company’s common stock. If the Company’s stock had been uplisted at September 30, 2014, the estimated additional liability recognized by the Company would have been be approximately $4,000,000, based on a closing price per share at September 30, 2014 of $4.00. (No liability or expense was recognized by the Company at or for the nine-month period ended September 30, 2014); (ii) the issuance of 150,000 shares of common stock to Infinity on August 4, 2015, provided that Mr. Feinsod remains a member of the Board on that date, and (iii) the issuance of 150,000 shares of common stock to Infinity on August 4, 2016, provided that Mr. Feinsod remains a member of the Board on that date. Management expects that Mr. Feinsod will remain a member of the Board through August 4, 2016, and as such, in conjunction with items (ii) and (iii) of this agreement, the Company accrued $122,500 and $122,500, for the three months and nine months ended September 30, 2014, respectively. The Company is accruing this expense on a straight line basis and | |
records the expense as earned to match the recognition of expense with the timing of services rendered. The Company’s accrual at the end of the period was calculated based on the pro-rata shares earned through September 30, 2014 and a closing price per share at September 30, 2014 of $4.00. This accrual will fluctuate based on market price until the shares are issued to Infinity. Stock compensation expense recorded by the Company in conjunction with stock issued to Infinity on August 4, 2014 and with the pro-rata shares earned but not issued through September 30, 2014 was $1,006,500. | |
The agreement with Mr. Feinsod requires the issuance of a number of shares of common stock to Infinity equal to 10% of any new issuance not to exceed 600,000 shares of common stock in the aggregate during the time that Mr. Feinsod remains a member of the Board, which will not be triggered upon issuances relating to convertible securities existing as of the date hereof. | |
17_RESTATEMENT_OF_PRIOR_PERIOD
17. RESTATEMENT OF PRIOR PERIOD FINANCIALS | 7 Months Ended | 9 Months Ended | |||||||||||||||
Dec. 31, 2013 | Sep. 30, 2014 | ||||||||||||||||
Restatement Of Prior Period Financials | |||||||||||||||||
Restatement of Prior Period Financials | Conventional Convertible Debt | 17. RESTATEMENT OF PRIOR PERIOD FINANCIALS | |||||||||||||||
In connection with the Company’s second quarter 2014 review procedures and internal control analysis, management conducted an analysis of the Company’s various financial instruments and agreements involving its convertible debt, and in particular, the $530,000 in unsecured convertible notes issued in December 2013 (the “12% December 2013 Notes”), and the $170,000 convertible debt mortgage relating to the Company’s property in Pueblo (the “Pueblo Mortgage”) (collectively, the “Convertible Debt”). Management’s analysis was particularly focused on the accounting treatment of derivative financial instruments and debt under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 815, “Derivatives and Hedging” (“ASC 815”) and ASC Topic 470, “Debt” (“ASC 470”), respectively. | Conventional Convertible Debt | ||||||||||||||||
Management’s analyses included reviewing its previous analysis and accounting of the convertible debt noted above to see if any events may have occurred subsequent to the original issuance which would cause the Company’s original accounting and classification to change. Through the Company’s reevaluation process which included the Company obtaining a thorough understanding of the transactions, including gaining a thorough understanding of the terms of each instrument issued, and any potential derivative features. The Company reevaluated the debt instruments pursuant to ASC 815, to identify whether any equity-linked features in the Convertible Debt are freestanding or embedded. The Convertible Debt was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that conversion feature was embedded in the debt instrument and was therefore not a free standing features. The Convertible Debt were then analyzed in accordance with ASC 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the | In connection with the Company’s second quarter 2014 review procedures and internal control analysis, management conducted an analysis of the Company’s various financial instruments and agreements involving its convertible debt and related warrants, and in particular, the December 2013 Issuance of $530,000 unsecured convertible notes, and the $170,000 convertible Pueblo Mortgage (collectively, the “Convertible Debt”). See Note 10. Management’s analysis was particularly focused on the accounting treatment of derivative financial instruments and debt under ASC Topic 815, Derivatives and Hedging and ASC Topic 470, Debt, respectively. | ||||||||||||||||
embedded conversion feature did not meet the definition of a derivative pursuant to ASC Topic 815 and therefore should not be bifurcated pursuant to ASC 815 and therefore should be evaluated and accounted for as conventional convertible debt. The Company then reviewed ASC 470-20, and determined that the Convertible Debt met the criteria of conventional convertible notes and that none of the Convertible Debt instruments had a beneficial conversion feature as the conversion price was greater than the market price of the Company’s common stock on the date of issuance(s). As a result, pursuant to ASC 470-20, the Company concluded that the Convertible Debt should have been recorded as a conventional convertible debt instrument in its entirety. | Management’s analyses included reviewing its previous analysis and accounting of the Convertible Debt noted above to see if any events may have occurred subsequent to the original issuance which would cause the Company’s original accounting and classification to change. Through the Company’s reevaluation process, which included the Company obtaining a thorough understanding of the transactions, including gaining a thorough understanding of the terms of each instrument issued, and any potential derivative features. The Company reevaluated the debt instruments pursuant to ASC Topic 815, to identify whether any equity-linked features in the Convertible Debt are freestanding or embedded. The Convertible Debt was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that conversion feature was embedded in the debt instrument and was therefore not a free standing features. The Convertible Debt were then analyzed in accordance with ASC Topic 815 to determine if the embedded conversion feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the embedded conversion feature did not meet the definition of a derivative pursuant to ASC Topic 815 and therefore should not be bifurcated pursuant to ASC Topic 815 and therefore should be evaluated and accounted for as conventional convertible debt. The Company then reviewed ASC Topic 470-20, and determined that the Convertible Debt met the criteria of conventional convertible notes and that none of the Convertible Debt instruments had a beneficial conversion feature as the conversion price was greater than the market price of the Company’s common stock on the date of issuance(s). As a result, pursuant to ASC Topic 470-20, the Company concluded that the Convertible Debt should have been recorded as a conventional convertible debt instrument in its entirety. | ||||||||||||||||
The Company had originally accounted for embedded conversion feature associated with the Convertible Debt as beneficial conversion features in the previously issued consolidated financial statements. In addition, the Company originally valued the conversion features using the Black-Scholes option pricing model as the Company originally identified that the Conversion price of the debt was greater than then value of the Company’s common stock on the date of issuance. Based on our reevaluation analyses performed during the second quarter 2014, we concluded that our original accounting for the embedded conversion feature as a debt discount on the Convertible Debt was incorrect, as the embedded conversion features did not meet the definition of a derivative and therefore should not have been bifurcated and the embedded conversion feature did not have a beneficial conversion, therefore the Company should not have accounted for the embedded conversion feature as a debt discount. | The Company had originally accounted for embedded conversion feature associated with the Convertible Debt as beneficial conversion features in the previously issued consolidated financial statements. In addition, the Company originally valued the conversion features using the Black-Scholes pricing model as the Company originally identified that the conversion price of the debt was greater than the value of the Company’s common stock on the date of issuance. Based on the Company’s reevaluation analyses performed during the second quarter 2014, the Company concluded that its original accounting for the embedded conversion feature as a debt discount on the Convertible Debt was incorrect, as the embedded conversion features did not meet the definition of a derivative and therefore should not have been bifurcated and the embedded conversion feature did not have a beneficial conversion, and, therefore the Company should not have accounted for the embedded conversion feature as a debt discount. | ||||||||||||||||
On August 15, 2014, as a result of this analysis, management, along with Company’s Board of Directors, concluded that it was necessary to restate its previously filed consolidated financial statements for the period from June 5, 2013 (Inception) to December 31, 2013 filed on Form 10-K. | On August 15, 2014, as a result of this analysis, management, along with Company’s Board, concluded that it was necessary to restate the Company’s previously filed consolidated financial statements for the period from June 5, 2013 (Inception) to December 31, 2013 as filed on Form 10-K. | ||||||||||||||||
As a result of the restatement, the table below sets forth the changes to be made in the consolidated financial statements included in the Reports noted above. The effect on the consolidated balance sheets for the periods described in the Reports noted above is due to the reclassification of debt discount from Common stock to Convertible notes payable. Accordingly, the consolidated balance sheet and statement of shareholders’ equity for the period from June 5, 2013 (Inception) to December 31, 2013 have been retroactively adjusted as summarized below: | Restatement Impact | ||||||||||||||||
As a result of the restatement, the table below sets forth the changes made in the consolidated financial statements for the restated period: | |||||||||||||||||
Effect of Correction | As Previously | As | |||||||||||||||
Reported | Adjustments | Restated | |||||||||||||||
Balance Sheet as of December 31, 2013 | Effect of Corrections | As | Adjustments | As | |||||||||||||
Convertible notes payable (net of debt discount) – | $ | 2,930 | $ | 2,426 | $ | 5,356 | Previously | Restated | |||||||||
current portion | Reported | (audited) | |||||||||||||||
Total current liabilities | 46,142 | 2,426 | 48,568 | Balance Sheet as of December 31, 2013 | |||||||||||||
Convertible notes payable (net of debt discount), less current portion | 341,907 | 268,043 | 609,950 | Convertible notes payable (net of debt discount) – current portion | $ | 2,930 | $ | 2,426 | -1 | $ | 5,356 | ||||||
Total long term liabilities | 343,157 | 268,043 | 611,200 | Total current liabilities | 46,142 | 2,426 | -1 | 48,568 | |||||||||
Common stock | 1,204,096 | -270,469 | 933,627 | Convertible notes payable (net of debt discount), less current portion | 341,907 | 268,043 | -1 | 609,950 | |||||||||
Total stockholders’ equity | 493,134 | -270,469 | 222,665 | Total long-term liabilities | 343,157 | 268,043 | -1 | 611,200 | |||||||||
Statement of Changes in Shareholders’ Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | Common stock | 1,204,096 | -270,469 | -2 | 933,627 | ||||||||||||
Discount on convertible notes December 27, 2013 | 289,811 | -270,469 | 19,342 | Total stockholders’ equity (deficiency) | 493,134 | -270,469 | -2 | 222,665 | |||||||||
Common stock | 1,204,096 | -270,469 | 933,627 | Statement of Changes in Stockholders’ Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | |||||||||||||
Total stockholders’ equity | 493,134 | -270,469 | 222,665 | Discount on convertible notes December 27, 2013 | 289,811 | -270,469 | -2 | 19,342 | |||||||||
Common stock | 1,204,096 | -270,469 | -2 | 933,627 | |||||||||||||
-1 | Total stockholders’ equity (deficiency) | 493,134 | -270,469 | -2 | 222,665 | ||||||||||||
To reclassify debt discount previously recognized as a beneficial conversion feature to current and noncurrent convertible notes payable from discount on convertible notes and common stock. | |||||||||||||||||
-2 | |||||||||||||||||
To reclassify debt discount previously recognized as a beneficial conversion feature from discount on convertible notes and common stock to current and noncurrent convertible notes payable. | -1 | To reclassify debt discount, net of amortization, previously recognized as a beneficial conversion feature to current and noncurrent convertible notes payable from discount on convertible notes and common stock. | |||||||||||||||
-2 | To reclassify debt discount, net of amortization, previously recognized as a beneficial conversion feature from discount on convertible notes and common stock to current and noncurrent convertible notes payable. |
18_SUBSEQUENT_EVENTS
18. SUBSEQUENT EVENTS | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Subsequent Events [Abstract] | ||
SUBSEQUENT EVENTS | On January 5, 2014, we acquired 1,750,000 shares of our common stock for no consideration and returned these shares to the status of authorized but unissued shares. | 18. SUBSEQUENT EVENTS |
On January 21, 2014 we signed an agreement with Full Circle Capital Corporation, a closed-end investment company. The agreement provides that Full Circle will initially provide $7.5 million to us in the form of Senior Secured Convertible Notes, subject to certain conditions. We can borrow an additional $22.5 million with the mutual agreement of us and Full Circle. | On October 21, 2014, the Company purchased a retail bank property, located in Denver, Colorado. The purchase price of the property was approximately $1.1 million. The property was purchased by 6565 E. Evans Avenue LLC, a Colorado limited liability company, which is a wholly-owned subsidiary of the Company. The Company paid approximately $500,000 in cash and assumed a note for $600,000 bearing 14% interest per annum, which was financed by Evans Street Lendco, LLC (“Evans Street”). The terms of the note provide for interest-only payments for the first two years, and allow the Company an optional payment abatement of nine months from the execution date of the note. In connection with the purchase of the building, the Company issued 600,000 warrants to Evans Street. Each warrant allows Evans Street to purchase one share of the Company’s common stock at an exercise price of $4.40 per share at any time on or before October 21, 2016. | |
At least 95% of the loan proceeds will be used to acquire properties which will lease to licensed marijuana growers. | On October 29, 2014, the Board authorized the adoption of the Company's 2014 Equity Incentive Plan (the “Plan”), which, subject to stockholder approval, is designed to provide an additional incentive to executives, employees, directors and key consultants, aligning the long term interests of participants in the Plan with those of the Company and the Company's stockholders. The Plan provides that up to 10 million shares of the Company's common stock may be issued under the Plan. | |
Full Circle will provide us with the $7.5 million when: | Also on October 29, 2014, the Company's board of directors granted certain Plan participants 175,000 non-qualified options to purchase shares of the Company's common stock pursuant to the Plan. The exercise price of the options is $3.70 per share and the options expire three years from the date of issuance. Although the options vested immediately upon being granted, the Plan has not yet been adopted by the Company's stockholders, so the options will be exercisable only upon approval of the plan by the Company's stockholders. If stockholder approval of the Plan is not obtained, the options will be cancelled and deemed void. | |
· | On November 7, 2014, the Company officially relocated its corporate offices. The new address of the Company is: 6565 E. Evans Avenue, Denver, CO 80224. The Company’s lease for office space at Northpark Avenue, Colorado Springs, Colorado, was cancelled without penalty, effective November 1, 2014. As a result, the Company anticipates that its office rental contractual obligations will decrease approximately $26,700, $29,400, and $7,500 for years 2015, 2016 and 2017, respectively. | |
Full Circle agrees on the location of property to be purchased; | ||
· | The Company filed a lawsuit (the “Action”) against Stephen G. Calandrella (“Calandrella”) under Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). According to the complaint filed in federal court, while a principal stockholder, Calandrella, unbeknownst to the Company, engaged in a series of purchases and sales of the Company’s stock within a six-month period. The Action is captioned Advanced Cannabis Solutions, Inc. v. Stephen G. Calandrella, Colorado District Court Civil Action No. 14-CV-02649. | |
The property’s appraised value is satisfactory to Full Circle; | ||
· | The Action stemmed from the Company’s investigation into Calandrella’s conduct, as prompted by the SEC’s suspension of trading in the Company’s stock on March 27, 2014. After the Action was filed, the Company continued its investigation into, among other things, the circumstances surrounding Calandrella’s acquisition and dispositions of his common stock of the Company. The Company’s investigation culminated in this settlement of the Action. | |
A Phase I environmental inspection is completed to the satisfaction of Full Circle; and | ||
· | On December 2, 2014, the Company agreed to settle and dispose of the claims asserted by it against Calandrella in the Action provided that Calandrella returns or causes to be returned for cancellation an aggregate of 1,125,000 shares of the Company’s common stock to the Company (the “Settlement Agreement”). The shares of common stock to be returned for cancellation represent approximately 8.22% of the total outstanding shares of common stock of the Company. As of December 22, 2014, the shares were returned and subsequently cancelled by the Company. | |
We are able to provide a first priority lien on the property to Full Circle. | ||
On December 12, 2014, the Company engaged Spector Group II, LLP, a New York limited liability partnership (“Spector Group”), to act as the design architect for The Greenhouse, the Company’s shared workspace facility located at 6565 East Evans Avenue, Denver, Colorado 80224. The Spector Group’s design of The Greenhouse in Denver, Colorado, will become the model for future locations. In connection with this agreement, the Company issued Spector Group 50,000 shares of the Company’s common stock and warrants (the “Spector Warrants”) to purchase 150,000 shares of the Company’s common stock at a conversion price of $4.40 per share, subject to customary adjustments in the event of reclassification of the Company, consolidation of the Company, merger, subdivision of shares of the Company’s common stock, combination of shares of the Company’s common stock or payment of dividends in the form of the Company’s common stock. The Spector Warrants expire two years after their initial issuance date. | ||
We can borrow an additional $22.5 million on terms acceptable to us and Full Circle. | ||
The six-year loan will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% per year. | In accordance with ASC Topic 855, Subsequent Events, the Company has evaluated events that occurred subsequent to the balance sheet date through January 13, 2015, the date of available issuance of these unaudited financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed. | |
The initial loan can, at any time, be converted into shares of our common stock at a conversion price of $5.00 per share. It is contemplated that further advances will be convertible at 110% of the market price of our stock on the day of advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower. | ||
The funding of the loan is subject to the execution of additional documents between the parties. | ||
Full Circle also purchased, for $500,000, warrants which allow Full Circle to purchase up to 1,000,000 shares of our common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. | ||
On January 29, 2014, the Company sold $1,605,000 worth of 12% convertible notes, convertible at $5 per share. These notes mature on October 31, 2018. The note holder may convert at any time and the Company has the right to force conversion any time after December 31, 2015 provided the stock price trades above $10 per share for 20 consecutive trading days. | ||
Except for our agreement with Full Circle, we do not have any commitments or arrangements from any person to provide us with any additional capital. We may not be successful in raising the capital we will need. | ||
On March 27, 2014 the SEC issued a trading halt order on our stock, and issued a statement that they were investigating affiliated shareholders that may have made illegal sales of stock. The order was not directed at the management of the Company and is considered a private investigation. The stock began trading again unlisted on the OTCQB on April 10, 2014. | ||
On April 4, 2014, the Company entered into a three year lease agreement to lease 3,000 square feet for an annual rate of $24,000, paid monthly. | ||
The Company has evaluated all subsequent events through the date these financial statements were issued. Other than those set out above, there have been no subsequent events after December 31, 2013. |
19_FIXED_ASSETS
19. FIXED ASSETS | 9 Months Ended |
Sep. 30, 2014 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
FIXED ASSETS | On December 31, 2013, the Company acquired a 5,000 square foot commercial building in Pueblo West for the purchase price of $452,753. We did not book any depreciation expense for the asset in 2013. In future years, the building will be depreciated using straight-line depreciation and an estimated useful life of 25 years. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Principles of Consolidation | The consolidated financial statements include the results of 1) the parent company, Advanced Cannabis Solutions Corporation, formed in the state of Colorado on June 5, 2013, 2) Advanced Cannabis Solutions Corporation’s wholly owned subsidiary company, ACS Corp., formed in the state of Colorado on June 6, 2013, and 3) ACS Corp.’s wholly owned subsidiary company, ACS Colorado Corp., formed in the state of Colorado on October 21, 2013. All intercompany balances and transactions have been eliminated in consolidation. | The consolidated financial statements include the results of ACS and its two wholly owned subsidiary companies, ACS Colorado Corp. and Advanced Cannabis Solutions Corporation, from the dates of their incorporation and for Promap Corporation from August 14, 2013 onwards. Advanced Cannabis Solutions Corporation has one wholly owned subsidiary: ACS Corp. All of these corporations are incorporated in Colorado. All intercompany balances and transactions have been eliminated in consolidation and the financial statements herein represent the Company’s consolidated balances and financial results. |
~ | In October 2014, the Company purchased a property in Denver, Colorado. The property, which will be rebranded the “Greenberg”, was purchased by 6565 E. Evans Avenue LLC, a Colorado limited liability company, which is a wholly-owned subsidiary of the Company (See Note 18). | |
Basis of Presentation | The accompanying financial statements have been prepared, under accounting principles generally accepted in the United States, assuming that the Company will continue as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon the ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, the ability to successfully raise additional financing, and the ability to ultimately attain profitability. | The accompanying (a) condensed consolidated balance sheet at December 31, 2013 has been derived from audited statements and (b) the unaudited condensed consolidated financial statements as of September 30, 2014 and 2013, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the Inception to Date period ended December 31, 2013 (the “2013 Annual Report”), as amended, filed with the Commission on August 20, 2014. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine month periods ended September 30, 2014 are not necessarily indicative of the results of operations for the year ending December 31, 2014. |
~ | ||
Development Stage Company | The Company is a development stage company in accordance with Financial Accounting Standards Codification (“ASC”) 915 "Development Stage Entities". Among the disclosures required as a development stage company are that the Company's financial statements are identified as those of a development stage company, and that the statements of operations, stockholders' deficit and cash flows disclose activity since the date of our Inception (June 5, 2013) as a development stage company. | |
~ | ||
Receivables | The Company reviews accounts receivables periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. | The Company reviews receivables periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Receivables are primarily contract-based billings to tenants and consulting engagement receivables. |
Deferred Financing Costs, net | Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized as debt discount over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful. | |
Revenue recognition | The Company will recognize revenue in accordance with ASC. 605, “Revenue Recognition”. ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. | Revenue is recognized on an accrual basis as earned under contract terms. Specifically, revenue from tenant rentals is recognized on a straight-line basis over the reasonably assured lease term, and collectability is reasonably assured. Consulting revenue is recognized based upon the payment terms within the contracts, and collectability is reasonably assured. Revenue relating to our wholesale business is recognized at the time goods are sold. |
Net income (loss) per share | The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. | The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding in accordance with ASC Topic 260, Earnings Per Share. Diluted earnings or loss per share is computed using the weighted average common shares and diluted potential common shares outstanding. Warrants and common stock issuable upon the conversion of the Company's convertible notes payable have not been included in the computation as the effect would be anti-dilutive and would decrease the loss per share as the Company has incurred losses in all periods reported. |
Inventory | Inventory consisting of wholesale items purchased for retail sale is stated at lower of cost or market, with cost being determined on average cost basis, and consists primarily of finished goods. The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on management’s estimated forecast of product demand and production requirements. | |
Amounts paid to suppliers for inventory not yet received is classified as prepaid inventory. Once received, the cost of inventory is reclassified into inventory. | ||
Conventional Convertible Debt | The Company records conventional convertible debt in accordance with ASC Topic 470-20, “ Debt with Conversion and Other Options .” Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 issuance and the 8 1/2 % Convertible Note Payable as conventional convertible debt (see Note 10). | The Company records conventional convertible debt in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic No. (“Topic”) 470-20, Debt with Conversion and Other Options. Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 debt issuance and an 8 ½% Convertible Notes Payable as conventional convertible debt (see Note 11). |
Derivatives Liabilities, Beneficial conversion features and Debt Discounts | The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date. | |
The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an active securities market. The Company estimates the fair value of these warrants using the binomial method. The Company has recorded a derivative liability related to the Series C Warrants (see Note 14). | ||
If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount. The convertible debt is recorded net of the discount related to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the straight-line method, which approximates the effective interest rate method. The Company has recorded a BCF to the notes issued in January 2014 (see Note 11). | ||
Business Segments | During 2013, the Company operated two reportable business segments – a petroleum mapping business and a real estate leasing business. On December 31, 2013 the petroleum mapping business was transferred to an unaffiliated shareholder in return for the assumption of liabilities of the business. | Following the sale of its oil and gas mapping operations effective December 31, 2013, the Company operates in three segments in accordance with ASC Topic 280, Segment Reporting. The Company’s three segments are Real Estate, Wholesale Supply, and Finance, Consulting and Ancillary Services. Our Chief Executive Officer has been identified as the chief decision maker. |
Recently Issued Accounting Standards | We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations. | Development Stage Entity Reporting |
In June 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-10 Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , (“ASU 2014-08”), which removes the definition of development stage entity, as was previously defined under generally accepted accounting principles in the United States (“U.S. GAAP”), from the accounting standards codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. | ||
In addition, ASU 2014-10 eliminates the requirements for development stage entities to (i) present inception-to-date information in the statement of income, cash flow and stockholders' equity, (ii) label the financial statements as those of a development stage entity, (iii) disclose a description of the development stage activities in which the entity is engaged, and (iv) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. | ||
The Company has chosen to early adopt ASU 2014-10 for the Company’s financial statements as of June 30, 2014. The adoption of this ASU impacted the Company’s reporting by eliminating the requirement to report inception to date financial information and describe the Company as a development stage company as previously required. | ||
Discontinued Operations | ||
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08), which limits dispositions that qualify for discontinued operations presentation to those that represent strategic shifts that have or will have a major effect on an entity’s operations and financial results. Strategic shifts could include a disposal of a major geographical area, a major line of business, a major equity method investment or other major parts of the business. ASU 2014-08 is effective prospectively for the Company in its first quarter of fiscal 2015, with early adoption permitted. The Company does not believe the adoption of this standard will have a significant impact on its consolidated financial statements. | ||
Going Concern | ||
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern . ASU 2014-15 requires management of public and private companies to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. ASU 2014-15 requires management to evaluate, for each reporting period, whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The new standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. We do not expect the adoption of ASU 2014-15 to have a significant impact on our consolidated financial statements. | ||
Revenue Recognition | ||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. This ASU’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company is carefully evaluating its existing revenue recognition practices to determine whether any contracts in the scope of the guidance will be affected by the new requirements. The effects may include identifying performance obligations in existing arrangements, determining the transaction price and allocating the transaction price to each separate performance obligation. The Company will also establish practices to determine when a performance obligation has been satisfied, and recognize revenue in accordance with the new requirements. The new standard is effective for the Company on January 1, 2017. Early adoption is not permitted. ASU 2014-09 allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company is currently evaluating the transition method that will be elected. | ||
Reclassifications | We have reclassified certain income statement and balance sheet items within the accompanying Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements for the prior year in order to be comparable with the current presentation. These reclassifications did not have material impact on the Company's reported stockholders’ equity (deficiency), results of operations or cash flows. | |
Use of Estimates | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the related notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and cash equivalents | The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. These deposits are insured up to $250,000 by the FDIC. None of our bank accounts, as of December 31, 2013, exceeded this threshold and therefore were all covered by FDIC insurance. | |
~ | ||
Property and equipment | Property and equipment are recorded at cost and depreciated under accelerated or straight line methods over each asset's estimated useful life. | Property and equipment are recorded at cost and depreciated under the straight-line method over each asset’s estimated useful life, typically thirty (30) years for buildings and five (5) years for warehouse leasehold improvements, and the Company’s equipment, and furniture and fixtures. For office space leased to tenants, related property and equipment are depreciated under the straight-line method over each asset’s estimated useful life, typically seven (7) years for office leasehold improvements, and three (3) years for equipment and furniture and fixtures. Construction in progress, including purchased equipment, represents capital expenditures incurred for assets not yet placed in service. |
We review our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. | ||
Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations. | ||
Long-Lived Assets | In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. | |
Advertising Costs | Advertising costs are expensed as incurred. No advertising costs were incurred during the period of inception through December 31, 2013. | |
Income tax | The Company accounts for income taxes pursuant to ASC Topic 740, Income Taxes. Under ASC Topic 740, deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. | |
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. | ||
Comprehensive Income (Loss) | Comprehensive income is defined as all changes in stockholders' equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. From our Inception there have been no differences between our comprehensive loss and net loss. | |
Fair Value Measurements | ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows: | ASC Topic 820, Fair Value Measurements and Disclosures, provides a comprehensive framework for measuring fair value and expands disclosures, which are required about fair value measurements. Specifically, ASC Topic 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC Topic 820 defines the hierarchy as follows: |
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange. | Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange. | |
Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs. | Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs. | |
Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial instruments. | Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights. | |
Our financial instruments consist of prepaid expenses, accounts payable and accrued liabilities and convertible notes payable and approximate their fair value because of the short-term maturities of these instruments or bear market rates of interest. | Our financial instruments consist of cash, accounts receivable, other receivables, prepaid expenses, deferred financing costs, accounts payables and accrued expenses, notes payable and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. | |
The Company's derivative liability is a Level 3 estimated fair market value instrument (see Note 14). |
4_SHARE_EXCHANGE_AGREEMENT_Tab
4. SHARE EXCHANGE AGREEMENT (Tables) | 7 Months Ended | ||
Dec. 31, 2013 | |||
Share Exchange Agreement | |||
Estimated fair value assets acquired and liabilities | The following table summarizes the estimated fair values of the Company’s assets acquired and liabilities assumed by the existing ASC business as on August 14, 2013: | ||
Cash | $ | 1,790 | |
Accounts receivable | 8,370 | ||
Accounts payable | -20,823 | ||
The fair value of the company’s net liabilities at the August 14, 2013 recapitalization | $ | -10,663 |
5_DISCONTINUED_OPERATIONS_Tabl
5. DISCONTINUED OPERATIONS (Tables) | 9 Months Ended | ||
Sep. 30, 2014 | |||
Discontinued Operations and Disposal Groups [Abstract] | |||
Components of the discontinued operations | The components of the discontinued operations are as follows: | ||
5-Jun-13 | |||
(Inception) to | |||
31-Dec-13 | |||
Revenues | $ | 455 | |
Cost of services | 183 | ||
Gross profit | 272 | ||
Operating expenses | |||
General administrative | 9,229 | ||
Total operating expenses | 9,229 | ||
Net loss | $ | -8,957 |
7_PROPERTY_AND_EQUIPMENT_Table
7. PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended | ||||||
Sep. 30, 2014 | |||||||
Property, Plant and Equipment [Abstract] | |||||||
PROPERTY AND EQUIPMENT | The following table summarizes property and equipment and related accumulated depreciation: | ||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
(unaudited) | (audited) | ||||||
Land | $ | 12,340 | $ | 12,340 | |||
Buildings and Equipment | 448,664 | 440,413 | |||||
Leasehold improvements | 45,000 | - | |||||
Property and Equipment , gross | 506,004 | 452,753 | |||||
Less: Accumulated Depreciation | -16,097 | - | |||||
Property and Equipment, net | $ | 489,907 | $ | 452,753 |
9_RECEIVABLES_Tables
9. RECEIVABLES (Tables) | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Notes to Financial Statements | ||||
Receivables | Receivables consist of the following at September 30, 2014. (There were no comparable amounts at December 31, 2013.): | |||
September 30, | ||||
2014 | ||||
(unaudited) | ||||
Tenant receivable, current | $ | 16,282 | ||
Tenant receivable, non-current | 17,316 | |||
Receivables | 33,598 | |||
Less: Allowance for doubtful accounts | - | |||
Receivables, net | $ | 33,598 | ||
Schedule of receipts | The following discloses scheduled tenant receipts for the remainder of 2014, the next five fiscal years, and thereafter (see Note 18): | |||
Scheduled | ||||
Tenant | ||||
Receipts | ||||
Remainder of 2014 | $ | 46,477 | ||
2015 | 148,205 | |||
2016 | 110,536 | |||
2017 | 112,753 | |||
2018 | 115,008 | |||
2019 | 117,308 | |||
Thereafter | 246,203 | |||
Total scheduled rental receipts | $ | 896,490 | ||
11_BUSINESS_SEGMENTS_Tables
11. BUSINESS SEGMENTS (Tables) | 9 Months Ended | ||||||||||||||
Sep. 30, 2014 | |||||||||||||||
Business Segments Tables | |||||||||||||||
BUSINESS SEGMENTS | . The Company’s Consulting Services segment provides business advice and management services. | ||||||||||||||
For the three months ended September 30, 2014: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | 14,178 | $ | 28,764 | $ | -13,600 | $ | 29,342 | |||||
Operating expenses and other | 1,638,929 | 18,702 | 91,371 | 27,000 | 1,776,002 | ||||||||||
Loss from continuing operations | $ | -1,638,929 | $ | -4,524 | $ | -62,607 | $ | -40,600 | $ | -1,746,660 | |||||
For the three months ended September 30, 2013: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
Operating expenses and other | 313,059 | - | 150,000 | - | 463,059 | ||||||||||
Loss from continuing operations | $ | -313,059 | $ | - | $ | -150,000 | $ | - | $ | -463,059 | |||||
For the nine months ended September 30, 2014: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | 14,613 | $ | 86,294 | $ | 40,000 | $ | 140,907 | |||||
Operating expenses and other | 3,006,692 | 63,982 | 164,592 | 81,030 | 3,316,296 | ||||||||||
Loss from continuing operations | $ | -3,006,692 | $ | -49,369 | $ | -78,298 | $ | -41,030 | $ | -3,175,389 | |||||
Property and equipment, net | $ | - | $ | - | $ | 489,907 | $ | - | $ | 489,907 | |||||
Receivables, net | $ | - | $ | - | $ | 33,598 | $ | - | $ | 33,598 | |||||
Inventory | $ | - | $ | 62,805 | $ | - | $ | - | $ | 62,805 | |||||
From June 5, 2013 (Inception) to September 30, 2013: | |||||||||||||||
ACS | Wholesale Supply | Real Estate | Finance, | Total | |||||||||||
Corporate | Leasing | Consulting | |||||||||||||
and Ancillary | |||||||||||||||
Services | |||||||||||||||
Net revenue | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
Operating expenses and other | 313,059 | - | 150,000 | - | 463,059 | ||||||||||
Loss from continuing operations | $ | -313,059 | $ | - | $ | -150,000 | $ | - | $ | -463,059 |
12_CONVERTIBLE_NOTES_PAYABLE_T
12. CONVERTIBLE NOTES PAYABLE (Tables) | 7 Months Ended | 9 Months Ended | |||||||||||||||||||||
Dec. 31, 2013 | Sep. 30, 2014 | ||||||||||||||||||||||
Convertible Notes Payable Tables | |||||||||||||||||||||||
Convertible Notes activity | The table below summarizes our Convertible Notes activity during the year ended December 31, 2013: | The table below summarizes our convertible notes activity during the nine months ended September 30, 2014: | |||||||||||||||||||||
Convertible | Debt | Convertible Notes Payable, Net | Principal | Debt | Accrued | ||||||||||||||||||
Notes Payable | Discount | Balance | Discount | Interest | Total | ||||||||||||||||||
June 5, 2013 (Inception) | $ | - | $ | - | $ | - | Balance at December 31, 2013 | $ | 700,000 | $ | -84,694 | $ | 871 | $ | 616,177 | ||||||||
Proceeds from issuance of convertible debt | Issued in the period | 1,605,000 | -1,605,000 | - | - | ||||||||||||||||||
12% convertible notes issued December 27,2013 | 530,000 | -85,488 | 444,512 | Converted into shares of common stock | -485,000 | 426,054 | -3,669 | -62,615 | |||||||||||||||
8% convertible notes issued December 31,2013 | 170,000 | - | 170,000 | Amortization of debt discount | - | 219,804 | - | 219,804 | |||||||||||||||
Amortization of debt discount | - | 794 | 794 | Payment of loan principal | -3,178 | - | - | -3,178 | |||||||||||||||
Total | 700,000 | -84,694 | 615,306 | Interest accrued during period | - | - | 203,909 | 203,909 | |||||||||||||||
Current portion of debt | -5,356 | - | -5,356 | Interest paid during period | - | - | -201,111 | -201,111 | |||||||||||||||
Long term portion at December 31, 2013 | $ | 694,644 | $ | -84,694 | $ | 609,950 | Balance at September 30, 2014 | 1,816,822 | -1,043,836 | - | 772,986 | ||||||||||||
Less: Current portion | -5,927 | - | - | -5,927 | |||||||||||||||||||
Long-term debt | $ | 1,810,895 | $ | -1,043,836 | $ | - | $ | 767,059 |
14_STOCK_HOLDERS_EQUITY_Tables
14. STOCK HOLDERS' EQUITY (Tables) | 7 Months Ended | 9 Months Ended | |||||||||||||||
Dec. 31, 2013 | Sep. 30, 2014 | ||||||||||||||||
Stock Holders Equity Tables | |||||||||||||||||
Assumptions used to derive the value of the warrants | At the times the Series B Warrants were issued, the following assumptions were used to derive the value of the warrants using the Black-Scholes pricing model: | ||||||||||||||||
Stock price | 13.75 | ||||||||||||||||
Risk-free interest rate | 1.81 | % | |||||||||||||||
Expected dividend yield | 0 | % | |||||||||||||||
Expected term (in years) | 4.8 | ||||||||||||||||
Expected volatility | 171 | % | |||||||||||||||
Warrants outstanding | The following table summarizes information about warrants outstanding December 31, 2013: | The following table summarizes information about warrants outstanding as of September 30, 2014: | |||||||||||||||
Exercise Price | Warrants Outstanding | Weighted Average Life of Outstanding Warrants In Months | Date of Expiration | Exercise | Warrants | Weighted | Date of | ||||||||||
$5.00 | 10,600 | 58 | 10/31/18 | Price | Outstanding | Average | Expiration | ||||||||||
$1.00 | 973,000 | 31 | 7/31/16 | Life of | |||||||||||||
$1.04 | 983,600 | 31.3 | Outstanding | ||||||||||||||
Warrants in | |||||||||||||||||
Months | |||||||||||||||||
Series A Warrants | $ | 10 | 973,000 | 22 | 7/31/16 | ||||||||||||
Series B Warrants | 5 | 42,700 | 49 | 10/31/18 | |||||||||||||
Series C Warrants | 4 | 1,400,000 | 28 | 1/21/17 | |||||||||||||
$ | 6.43 | 2,415,700 | 26 | ||||||||||||||
Common stock issued and outstanding | At December 31, 2013, the Company had 15,137,200 shares of its common stock issued and outstanding. | The following table summarizes the changes in shares of common stock and warrants issued and outstanding for the nine months ended September 30, 2014: | |||||||||||||||
Common Stock | Warrants | Common | Warrants | ||||||||||||||
June 5, 2013 (Inception) | - | - | Stock | ||||||||||||||
Issued for cash proceeds of $985,400 | 13,373,000 | 973,000 | Balance at December 31, 2013 | 15,137,200 | 983,600 | ||||||||||||
Issued as part of exchange agreement | 9,724,200 | Re-acquired shares of common stock | -1,750,000 | - | |||||||||||||
Terminated as part of exchange agreement | -8,000,000 | Warrants issued to Full Circle for $500,000 consideration – Series C Warrants | - | 1,400,000 | |||||||||||||
Issued as compensation under a consulting agreement | 40,000 | - | Warrants issued to placement agent – Series B Warrants | - | 32,100 | ||||||||||||
Warrants issued to placement agent | - | 10,600 | Shares issued for services | 200,000 | - | ||||||||||||
31-Dec-13 | 15,137,200 | 983,600 | Issued in settlement of $485,000 convertible notes payable and accrued interest of $3,669 | 97,773 | - | ||||||||||||
Balance at September 30, 2014 | 13,684,933 | 2,415,700 | |||||||||||||||
15_DERIVATIVE_WARRANT_LIABILIT
15. DERIVATIVE WARRANT LIABILITY (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Derivative Warrant Liability Tables | |||||
Schedule of liabilities | The underlying assumptions used for the nine months ended September 30, 2014 were: | ||||
Nine Months | |||||
Ended | |||||
30-Sep-14 | |||||
(unaudited) | |||||
Risk-free interest rate | 0.02 | % | |||
Expected dividend yield | 0 | % | |||
Expected term (in years) | 3 years | ||||
Expected volatility | 33 | % | |||
Changes in derivative warranty liability | Changes in the derivative warrant liability for the three and nine months ended September 30, 2014 are as follows: | ||||
Three Months | Nine Months | ||||
Ended | Ended | ||||
September 30, | September 30, | ||||
2014 | 2014 | ||||
Balance at beginning of period | — | — | |||
Fair value of warrants issued | $ | 923,764 | $ | 1,368,908 | |
Increase in derivative liability resulting from anti-dilution provision in agreement, as amended with Full Circle | — | 153,994 | |||
Increase in derivative liability resulting from additional warrants issued to Full Circle | 297,542 | — | |||
Decrease in the fair value of warrant liability, net | -179,909 | -481,505 | |||
Balance at end of period | $ | 1,041,397 | $ | 1,041,397 | |
Change in Gain (loss) on derivative liability | |||||
Change in Aggregate Loss on Derivative Liability | Three Months | Nine Months | |||
Ended | Ended | ||||
September 30, | September 30, | ||||
2014 | 2014 | ||||
Beginning balance at beginning of period | $ | 423,764 | $ | — | |
Initial loss on recognition of derivative liability | — | 868,908 | |||
Increase in derivative liability resulting from additional warrants issued to Full Circle | 297,542 | — | |||
Change in estimated fair market value | -179,909 | -327,511 | |||
Balance at end of period | $ | 541,397 | $ | 541,397 |
16_INCOME_TAXES_Tables
16. INCOME TAXES (Tables) | 7 Months Ended | 9 Months Ended | ||||||
Dec. 31, 2013 | Sep. 30, 2014 | |||||||
Income Taxes Tables | ||||||||
Schedule of income tax reconciliation | The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: | There was no significant difference between reportable income tax and statutory income tax. A 100% valuation allowance has been established against the deferred tax asset, as the utilization of the loss carry-forwards cannot be reasonably assured. A reconciliation between the income taxes computed in the United States is as follows: | ||||||
Inception | September 30, | |||||||
(June 5, 2013) to | 2014 | |||||||
December 31, | (unaudited) | |||||||
2013 | Deferred tax asset | $ | 1,321,359 | |||||
Deferred tax attributed: | Valuation allowance | -1,321,359 | ||||||
Net operating loss carryover | $ | -241,727 | $ | - | ||||
Less: change in valuation allowance | $ | -241,727 | US federal income tax rate | 34 | % | |||
Net deferred tax asset | $ | - | Valuation allowance | -34 | % | |||
Provision for income tax | 0 | % |
19_RESTATEMENT_OF_PRIOR_PERIOD
19. RESTATEMENT OF PRIOR PERIOD FINANCIALS (Tables) | 7 Months Ended | 9 Months Ended | |||||||||||||||
Dec. 31, 2013 | Sep. 30, 2014 | ||||||||||||||||
Restatement Of Prior Period Financials Ttables | |||||||||||||||||
Effects of prior period adjustments | Accordingly, the consolidated balance sheet and statement of shareholders’ equity for the period from June 5, 2013 (Inception) to December 31, 2013 have been retroactively adjusted as summarized below: | As a result of the restatement, the table below sets forth the changes made in the consolidated financial statements for the restated period: | |||||||||||||||
Effect of Correction | As Previously | As | Effect of Corrections | As | Adjustments | As | |||||||||||
Reported | Adjustments | Restated | Previously | Restated | |||||||||||||
Balance Sheet as of December 31, 2013 | Reported | (audited) | |||||||||||||||
Convertible notes payable (net of debt discount) – | $ | 2,930 | $ | 2,426 | $ | 5,356 | Balance Sheet as of December 31, 2013 | ||||||||||
current portion | Convertible notes payable (net of debt discount) – current portion | $ | 2,930 | $ | 2,426 | -1 | $ | 5,356 | |||||||||
Total current liabilities | 46,142 | 2,426 | 48,568 | Total current liabilities | 46,142 | 2,426 | -1 | 48,568 | |||||||||
Convertible notes payable (net of debt discount), less current portion | 341,907 | 268,043 | 609,950 | Convertible notes payable (net of debt discount), less current portion | 341,907 | 268,043 | -1 | 609,950 | |||||||||
Total long term liabilities | 343,157 | 268,043 | 611,200 | Total long-term liabilities | 343,157 | 268,043 | -1 | 611,200 | |||||||||
Common stock | 1,204,096 | -270,469 | 933,627 | Common stock | 1,204,096 | -270,469 | -2 | 933,627 | |||||||||
Total stockholders’ equity | 493,134 | -270,469 | 222,665 | Total stockholders’ equity (deficiency) | 493,134 | -270,469 | -2 | 222,665 | |||||||||
Statement of Changes in Shareholders’ Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | Statement of Changes in Stockholders’ Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | ||||||||||||||||
Discount on convertible notes December 27, 2013 | 289,811 | -270,469 | 19,342 | Discount on convertible notes December 27, 2013 | 289,811 | -270,469 | -2 | 19,342 | |||||||||
Common stock | 1,204,096 | -270,469 | 933,627 | Common stock | 1,204,096 | -270,469 | -2 | 933,627 | |||||||||
Total stockholders’ equity | 493,134 | -270,469 | 222,665 | Total stockholders’ equity (deficiency) | 493,134 | -270,469 | -2 | 222,665 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 9 Months Ended |
Sep. 30, 2014 | |
Warehouse leasehold improvements [Member] | |
Property and equipment estimated useful life | 5 years |
Office leasehold improvements, [Member] | |
Property and equipment estimated useful life | 7 years |
furniture and fixtures, [Member] | |
Property and equipment estimated useful life | 3 years |
Building [Member] | |
Property and equipment estimated useful life | 30 years |
3_GOING_CONCERN_Details_Narrat
3. GOING CONCERN (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Going Concern | ||
Accumulated deficit | ($3,886,351) | ($710,962) |
4_SHARE_EXCHANGE_AGREEMENT_Det
4. SHARE EXCHANGE AGREEMENT (Details) (USD $) | Aug. 14, 2013 |
Share Exchange Agreement Details | |
Cash | $1,790 |
Accounts receivable | 8,370 |
Accounts payable | -20,823 |
The fair value of the Company's net liabilities at the August 14, 2013 recapitalization | ($10,663) |
SHARE_EXCHANGE_AGREEMENT_Detai
SHARE EXCHANGE AGREEMENT (Details Narrative) | 9 Months Ended | ||
Sep. 30, 2014 | Nov. 09, 2013 | Aug. 14, 2013 | |
Notes to Financial Statements | |||
Shares acquired | 94.00% | ||
Remaining shares acquired | 0.60% | ||
Common stock shares | 12,400,000 |
5_PROPERTY_AND_EQUIPMENT_Detai
5. PROPERTY AND EQUIPMENT (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Abstract] | ||
Land | $12,340 | $452,753 |
Buildings and Equipment | 448,664 | 440,413 |
Leasehold improvements | 45,000 | |
Furniture, Fixtures and Equipment | 0 | |
Property and Equipment , gross | 506,004 | 452,753 |
Less: Accumulated Depreciation | -16,097 | 0 |
Property and Equipment, net | $489,907 | $452,753 |
7_PROPERTY_AND_EQUIPMENT_Detai
7. PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
Area | |||
Property, Plant and Equipment [Abstract] | |||
Purchase price land | $12,340 | $452,753 | |
Purchase price buildings and related equipment | 437,660 | 437,660 | |
Undeveloped land | 5,000 | ||
Purchase price of land | 12,340 | 12,340 | |
Purchase price was paid for cash | 280,000 | ||
Cash paid | 280,000 | ||
Principal Amount | 170,000 | ||
Interest rate | 8.50% | ||
Principal and interest | 1,674 | ||
Monthly installments | 1,674 | ||
Depreciation expense | 9,865 | ||
Convertible promissory note | $5 |
INTANGIBLE_ASSETS_Details_Narr
INTANGIBLE ASSETS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Intangible assets | $38,200 | $38,200 | $0 |
Amortization expense | $2,733 | $2,733 |
9_RECEIVABLES_Details
9. RECEIVABLES (Details) (USD $) | Sep. 30, 2014 |
Notes to Financial Statements | |
Tenant receivable, current | $16,282 |
Tenant receivable, non-current | 17,316 |
Receivables | $33,598 |
9_RECEIVABLES_Details_1
9. RECEIVABLES (Details 1) (USD $) | Sep. 30, 2014 |
Receivables [Abstract] | |
Remainder of 2014 | $46,477 |
2015 | 148,205 |
2016 | 110,536 |
2017 | 112,753 |
2018 | 115,008 |
2019 | 117,308 |
Thereafter | 246,203 |
Total scheduled rental receipts | $896,490 |
9_RECEIVABLES_Details_Narrativ
9. RECEIVABLES (Details Narrative) (USD $) | 3 Months Ended | 4 Months Ended | 9 Months Ended | |
Jun. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2014 | |
Receivables [Abstract] | ||||
Tenant rental income invoiced but not earned | $0 | $17,713 | ||
Tenant rental income earned but not invoiced | 0 | 17,316 | ||
Receivables written off | $33,600 | $60,000 |
10_DEFERRED_FINANCING_COSTS_De
10. DEFERRED FINANCING COSTS (Details Narrative) (USD $) | 3 Months Ended | 4 Months Ended | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Deferred Financing Costs | ||||
Deferred financing costs. | $115,000 | |||
Amortization expense | 10,000 | 0 | 26,000 | 0 |
Unamortized deferred financing | $89,000 |
5_DISCONTINUED_OPERATIONS_Deta
5. DISCONTINUED OPERATIONS (Details) (USD $) | 3 Months Ended | 4 Months Ended | 7 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | |
Discontinued Operations and Disposal Groups [Abstract] | |||||
Revenues | $455 | ||||
Cost of services | 183 | ||||
Gross profit | 272 | ||||
General administrative | -1,685 | ||||
Total operating expenses | -1,685 | ||||
Net income | ($8,957) | ($8,957) | $1,957 |
5_DISCONTINUED_OPERATIONS_Deta1
5. DISCONTINUED OPERATIONS (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Discontinued Operations and Disposal Groups [Abstract] | ||
Discontinued assets | $2,729 | $2,729 |
Discontinued liabilities | 2,277 | 2,277 |
Recognized a loss | $452 | $452 |
BUSINESS_SEGMENTS_Details
BUSINESS SEGMENTS (Details) (USD $) | 3 Months Ended | 4 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
Net revenue | $14,178 | $14,613 | ||||
Operating expenses and other | 1,776,002 | 463,059 | 463,059 | 3,316,296 | ||
Loss from continuing operations | -1,746,660 | -463,059 | -463,059 | -3,316,296 | ||
Property and equipment, net | 489,907 | 489,907 | 489,907 | 452,753 | ||
Receivables, net | 17,316 | 17,316 | 17,316 | |||
Inventory | 62,805 | 62,805 | 62,805 | |||
Services [Member] | ||||||
Net revenue | -13,600 | |||||
Operating expenses and other | 27,000 | 150,000 | ||||
Loss from continuing operations | -40,600 | -150,000 | ||||
Wholesale Supply | ||||||
Net revenue | 14,178 | 14,613 | ||||
Operating expenses and other | 18,702 | 63,982 | ||||
Loss from continuing operations | -4,524 | -49,369 | ||||
Inventory | 62,805 | 62,805 | 62,805 | |||
Real Estate Leasing [Member] | ||||||
Net revenue | 28,764 | 86,294 | ||||
Operating expenses and other | 91,371 | 150,000 | 164,592 | |||
Loss from continuing operations | -62,607 | -150,000 | -78,298 | |||
Property and equipment, net | 489,907 | 489,907 | 489,907 | |||
Receivables, net | 33,598 | 33,598 | 33,598 | |||
ACS Corporate [Member] | ||||||
Operating expenses and other | 1,638,929 | 313,059 | 313,059 | 3,006,692 | ||
Loss from continuing operations | -1,638,929 | -313,059 | -313,059 | -3,006,692 | ||
Consulting Services | ||||||
Net revenue | 40,000 | |||||
Operating expenses and other | 81,030 | |||||
Loss from continuing operations | ($41,030) |
12_CONVERTIBLE_NOTES_PAYABLE_D
12. CONVERTIBLE NOTES PAYABLE (Details) (USD $) | 9 Months Ended | 7 Months Ended | ||
Sep. 30, 2014 | Dec. 31, 2013 | Dec. 01, 2013 | Dec. 31, 2014 | |
12% convertible notes issued December 27,2013 | ($62,415) | |||
Amortization of debt discount | 219,804 | |||
Payment of loan principal | -3,178 | |||
Interest accrued during the period | 203,909 | |||
Interest paid during the period | -201,111 | |||
Balance at September 30, 2014 | 772,986 | |||
Less: Current portion | -5,927 | |||
Long term debt | 767,658 | |||
Debt Discount | ||||
Balance at December 31, 2013 | -84,694 | |||
Issued during the period | -1,605,000 | |||
12% convertible notes issued December 27,2013 | -435,000 | |||
Amortization of debt discount | 219,804 | 794 | ||
Balance at September 30, 2014 | 1,043,836 | |||
Long term debt | -1,043,836 | |||
ConvertibleNotes Payable, Net | ||||
Amortization of debt discount | 794 | |||
Less: Current portion | -5,356 | |||
Long term debt | 694,644 | |||
Principal Balance | ||||
Issued during the period | 1,605,000 | |||
12% convertible notes issued December 27,2013 | 426,054 | |||
Payment of loan principal | -3,178 | |||
Less: Current portion | -5,927 | -5,356 | ||
Long term debt | 1,810,895 | 609,950 | ||
Accrued Interest | ||||
Balance at December 31, 2013 | 871 | |||
12% convertible notes issued December 27,2013 | -3,669 | |||
Interest accrued during the period | 203,909 | |||
Interest paid during the period | -201,111 | |||
Less: Current portion | -5,927 | |||
Long term debt | 1,810,895 | |||
Debt Discount one | ||||
Long term debt | ($84,694) |
CONVERTIBLE_NOTES_PAYABLE_Deta
CONVERTIBLE NOTES PAYABLE (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
Outstanding unsecured convertible promissory notes | $530,000 | $530,000 | $530,000 | $530,000 |
Debt discount | 63,600 | 63,600 | 63,600 | 63,600 |
Amortized to interest expense | 3,000 | 10,000 | ||
Unamortized debt discount | 75,000 | |||
Debt issuance costs | 160,500 | |||
Additional debt discount | 83,452 | |||
Unamortized debt discount related to the converted notes | 271,413 | 426,054 | ||
January 2014 Issuance [Member] | ||||
Outstanding unsecured convertible promissory notes | 1,120,000 | 1,120,000 | 1,120,000 | |
Debt discount | 32,100 | 32,100 | 32,100 | |
Amortized to interest expense | 225,000 | 636,000 | ||
Unamortized debt discount | $969,000 | $969,000 | $969,000 |
13_COMMITMENTS_AND_CONTINGENCI
13. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 3 Months Ended | 7 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | |||||
Lease | $0 | $9,150 | $12,000 | $16,250 | $0 |
14_STOCK_HOLDERS_EQUITY_Detail
14. STOCK HOLDERS' EQUITY (Details) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Stock Holders Equity Tables | |
Stock Price | $13.75 |
Risk-free interest rate | 1.81% |
Expected dividend yield | 0.00% |
Expected term (in years) | 4 years 9 months 18 days |
Expected volatility | 171.00% |
14_STOCK_HOLDERS_EQUITY_Detail1
14. STOCK HOLDERS' EQUITY (Details 1) (USD $) | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Exercise Price | $6.43 | |
Warrants Outstanding | 2,415,700 | |
Weighted Average Life of Outstanding Warrants In Months | 26 months | |
Series A Warrants | ||
Exercise Price | $5 | $10 |
Warrants Outstanding | 10,600 | 973,000 |
Weighted Average Life of Outstanding Warrants In Months | 58 months | 22 months |
Date of Expiration | 10/31/18 | 7/31/16 |
Series B Warrants | ||
Exercise Price | $1 | $5 |
Warrants Outstanding | 973,000 | 42,700 |
Weighted Average Life of Outstanding Warrants In Months | 31 months | 49 months |
Date of Expiration | 7/31/16 | 10/31/18 |
Series C Warrants | ||
Exercise Price | $1.04 | $4 |
Warrants Outstanding | 983,600 | 1,400,000 |
Weighted Average Life of Outstanding Warrants In Months | 31 months | 28 months |
Date of Expiration | 1/21/17 |
14_STOCKHOLDERS_EQUITY_Details
14. STOCKHOLDERS' EQUITY (Details 2) (USD $) | 7 Months Ended | 9 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Common Stock | ||
June 5, 2013 (Inception) | ||
Issued for cash proceeds of $985,400 | 973,000 | |
Issued as compensation under a consulting agreement | ||
Warrants issued to placement agent | 10,600 | |
Balance at December 31, 2013 | $15,137,200 | |
Re-acquired shares of common stock | -1,750,000 | |
Shares issued for services | 200,000 | |
Issued in settlement of convertible notes payable and accrued interest | 97,773 | |
Balance at September 30, 2014 | 15,137,200 | 2,415,700 |
Warrants | ||
June 5, 2013 (Inception) | ||
Issued for cash proceeds of $985,400 | 13,373,000 | |
Issued as part of exchange agreement | 9,724,200 | |
Terminated as part of exchange agreement | -8,000,000 | |
Issued as compensation under a consulting agreement | 40,000 | |
Warrants issued to placement agent | ||
Balance at December 31, 2013 | 983,600 | |
Warrants issued to Full Circle for $500,000 consideration - Series C Warrants | 1,000,000 | |
Warrants issued to placement agent - Series B Warrants | 32,100 | |
Balance at September 30, 2014 | $983,600 | $13,684,933 |
15_DERIVATIVE_WARRANT_LIABILIT1
15. DERIVATIVE WARRANT LIABILITY (Details) | 9 Months Ended |
Sep. 30, 2014 | |
Derivative Warrant Liability Details | |
Risk-free interest rate | 0.02% |
Expected dividend yield | 0.00% |
Expected term (in years) | 3 years |
Expected volatility | 33.00% |
DERIVATIVE_WARRANT_LIABILITY_D
DERIVATIVE WARRANT LIABILITY (Details 1) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Fair value of warrants issued | $923,764 | $1,368,908 |
Increase in derivative liability resulting from anti-dilution provision in agreement with Full Circle | 153,994 | |
Increase in derivative liability resulting from additonal warrants issued to Full Circle | 297,542 | |
Decrease in the fair value of warrant liability | -179,909 | -481,505 |
Balance ending | $1,041,397 | $1,041,397 |
DERIVATIVE_WARRANT_LIABILITY_D1
DERIVATIVE WARRANT LIABILITY (Details 2) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Change in Gain (Loss) on Derivative Liability | ||
Beginning balance at beginning of period | $423,764 | |
Initial loss on recognition of derivative liability | 868,908 | |
Increase in derivative liability resulting from additonal warrants issued to Full Circle | 297,542 | |
Balance at end of period | $541,397 | $541,397 |
DERIVATIVE_WARRANT_LIABILITY_D2
DERIVATIVE WARRANT LIABILITY (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Net derivative loss | $179,909 | $541,397 |
Additional warrants | $400,000 | |
Decrease in the warrant price | $4 | $4 |
16_INCOME_TAXES_Details
16. INCOME TAXES (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | |
Income Taxes Tables | ||
Deferred tax asset | $1,321,359 | |
Net operating loss carryover | -241,727 | |
Valuation allowance | -1,321,359 | -241,727 |
Net deferred tax asset | $0 | |
US federal income tax rate | 34.00% | |
Valuation allowance | -34.00% | |
Provision for income tax | 0.00% |
16_INCOME_TAXES_Details_Narrat
16. INCOME TAXES (Details Narrative) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | |
Income Taxes Details Narrative | ||
Operating loss for tax purposes | $3,886,000 | ($710,962) |
Taxable income year | 2033 |
Recovered_Sheet1
19. Restatement of Prior Period Financials (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Sep. 30, 2014 | |
Balance Sheet as of December 31, 2013 | ||
Convertible notes payable (net of debt discount) - current portion | $5,356 | $5,927 |
Total current liabilities | 48,568 | 1,123,611 |
Total long term liabilities | 611,200 | 890,809 |
Common stock | 151,372 | 136,849 |
Adjustments | ||
Balance Sheet as of December 31, 2013 | ||
Convertible notes payable (net of debt discount) - current portion | 2,426 | |
Total current liabilities | 2,426 | |
Convertible notes payable (net of debt discount), less current portion | 268,043 | |
Total long term liabilities | 268,043 | |
Common stock | -270,469 | |
Total stockholdersb equity (deficiency) | -270,469 | |
Statement of Changes in Shareholdersb Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | ||
Discount on convertible notes December 27, 2013 | -270,469 | |
Common stock | -270,469 | |
Total stockholdersb equity (deficiency) | -270,469 | |
As Restated | ||
Balance Sheet as of December 31, 2013 | ||
Convertible notes payable (net of debt discount) - current portion | 5,356 | |
Total current liabilities | 48,568 | |
Convertible notes payable (net of debt discount), less current portion | 609,950 | |
Total long term liabilities | 611,200 | |
Common stock | 933,627 | |
Total stockholdersb equity (deficiency) | 222,665 | |
Statement of Changes in Shareholdersb Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | ||
Discount on convertible notes December 27, 2013 | 19,342 | |
Common stock | 933,627 | |
Total stockholdersb equity (deficiency) | 222,665 | |
As Previously Reported | ||
Balance Sheet as of December 31, 2013 | ||
Convertible notes payable (net of debt discount) - current portion | 2,930 | |
Total current liabilities | 46,142 | |
Convertible notes payable (net of debt discount), less current portion | 341,907 | |
Total long term liabilities | 343,157 | |
Common stock | 1,204,096 | |
Total stockholdersb equity (deficiency) | 493,134 | |
Statement of Changes in Shareholdersb Equity for the Period from June 5, 2013 (Inception) to December 31, 2013 | ||
Discount on convertible notes December 27, 2013 | 289,811 | |
Common stock | 1,204,096 | |
Total stockholdersb equity (deficiency) | $493,134 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ||
Estimated additional liability | $4,000,000 | $4,000,000 |
Price per share | $4 | $4 |
Accrued stock payable | $122,500 | $122,500 |