Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 8-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | Surna Inc. | |
Entity Central Index Key | 1482541 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 122,073,707 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash | $365,244 | $689,963 |
Accounts receivable (net of allowance for doubtful accounts of $10,000) | 598,500 | 394,830 |
Note receivable | 260,000 | 100,000 |
Inventory | 508,641 | 264,031 |
Prepaid expenses | 114,195 | 57,089 |
Total Current Assets | 1,846,580 | 1,505,913 |
Noncurrent Assets | ||
Property and equipment, net | 154,841 | 166,028 |
Intangible assets, net | 648,327 | 649,351 |
Total Noncurrent Assets | 803,168 | 815,379 |
TOTAL ASSETS | 2,649,747 | 2,321,292 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 433,151 | 411,828 |
Deferred revenue | 786,987 | 408,199 |
Current portion long term debt | 9,731 | 9,731 |
Amounts due shareholders | 253,001 | 303,672 |
Derivative liability on conversion feature | 1,154,748 | 847,438 |
Derivative liability on warrants | 182,719 | 304,432 |
Total Current Liabilities | 2,820,337 | 2,285,300 |
NONCURRENT LIABILITIES | ||
Convertible promissory notes, net | 1,043,227 | 488,544 |
Convertible accrued interest | 303,298 | 202,123 |
Promissory note due shareholders | 195,760 | 195,759 |
Vehicle loan | 31,852 | 33,318 |
Total Noncurrent Liabilities | 1,575,137 | 919,744 |
TOTAL LIABILITIES | 4,394,474 | 3,205,044 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock, $0.00001 par value; 150,000,000 shares authorized; 77,220,000 shares issued and outstanding | 772 | 772 |
Common stock, $0.00001 par value; 350,000,000 shares authorized; 119,682,768 and 113,511,250 shares issued and outstanding | 1,197 | 1,135 |
Paid in capital | 5,439,323 | 4,881,918 |
Accumulated deficit | -7,186,020 | -5,767,577 |
Total Stockholders' Deficit | -1,744,727 | -883,752 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $2,649,747 | $2,321,292 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $10,000 | $10,000 |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 150,000,000 | 150,000,000 |
Preferred stock, shares issued | 77,220,000 | 77,220,000 |
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 119,682,768 | 113,511,250 |
Common stock, shares outstanding | 119,682,768 | 113,511,250 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Revenue | $870,895 | |
Cost of revenue | 682,736 | |
Gross profit | 188,159 | |
Operating Expenses: | ||
Advertising and marketing | 82,974 | |
Research and development | 180,989 | |
General and administrative expenses | 803,742 | 47,086 |
Total operating expenses | 1,067,705 | 47,086 |
Operating loss | -879,546 | -47,086 |
Other income (expenses): | ||
Interest expense | -160,260 | |
Amortization of debt discount on convertible notes | -426,800 | |
Gain on derivative liabilities | 48,163 | |
Loss from continuing operations before provision for income taxes | -1,418,443 | -47,086 |
Provision for income taxes | ||
Loss from continuing operations | -1,418,443 | -47,086 |
Loss from discontinued operations | -6,521 | |
Net loss | -1,418,443 | -53,607 |
Other comprehensive Income (Loss) | 0 | |
Comprehensive Income (Loss) | ($1,399,200) | ($53,607) |
Loss per common share from continuing operations - basic and diluted | ($0.01) | $0 |
Loss per common share from discontinued operations - basic and diluted | $0 | $0 |
Loss per common share - basic and diluted | ($0.01) | $0 |
Weighted average number of common shares outstanding, basic and diluted | 115,852,402 | 99,375,000 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Statement of Cash Flows [Abstract] | ||
Net loss | ($1,418,443) | ($53,607) |
Loss from continuing operations | -1,418,443 | -47,086 |
Loss from discontinued operations | -6,521 | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization expense | 14,811 | 3,333 |
Amortization of debt discount | 426,800 | |
Change in derivative liability | -48,163 | |
Expense of issuing warrants | -19,130 | |
Accrued interest | 137,435 | |
Changes in operating assets and liabilities: | ||
Accounts and notes receivable | -203,670 | -20,005 |
Inventory and prepaid expenses | -301,716 | -2,050 |
Accounts payable and accrued liabilities | 21,302 | 8,430 |
Deferred revenue | 378,788 | |
Amount due to related parties | 3,231 | |
Cash used in operating activities | -1,011,984 | -60,668 |
Cash Flows From Investing Activities | ||
Purchase of intangible assets | -10,000 | |
Purchase of equipment | -2,600 | |
Loan to Agrisoft | -160,000 | |
Cash flow used in investing activities | -162,600 | -10,000 |
Cash Flows From Financing Activities | ||
Proceeds from convertible debt | 911,250 | 109,283 |
Payment on vehicle loan | -1,466 | |
Payments on loans from shareholders | -59,919 | |
Net cash provided by financing activities | 849,865 | 109,283 |
Net increase/(decrease) in cash | -324,719 | 38,615 |
Cash, beginning of period | 689,963 | 752 |
Cash, end of period | 365,244 | 39,367 |
Supplemental cash flow information: | ||
Interest paid | 1,387 | |
Non-cash investing and financial activities: | ||
Discount on convertible notes | $446,988 |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounting Policies [Abstract] | |||||||||
Summary of Significant Accounting Policies | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||
Company: | |||||||||
Surna Inc. was incorporated in Nevada on October 15, 2009. On March 26, 2014, we acquired Safari Resource Group, Inc. (“Safari”), a Nevada Corporation, whereby we became the sole surviving corporation after the acquisition of Safari. In July 2014, we acquired 100 percent of the membership interest in Hydro Innovations, LLC, a Colorado limited liability company (“Hydro”). | |||||||||
History: | |||||||||
On September 1, 2011, Surna Inc. acquired Surna Media, Inc. (“Surna Media”) for 20,000,000 shares of its common stock. The merger was accounted for as among entities under common control. Surna Media’s predecessor entity, Surna Hong Kong Limited (“Surna HK”), was formed on June 14, 2010. Surna Media was formed October 29, 2010 by the same owners and Surna HK became a wholly-owned subsidiary. Flying Cloud Information Technology Co. Ltd. was incorporated in China in April 2011 as a wholly-owned subsidiary of Surna HK (“Flying Cloud”). All of the Surna HK, Surna Media, and Flying Cloud transactions were consolidated with those of the Company beginning at the formation of Surna HK on June 14, 2010. Surna Networks, Inc. (“Surna Networks I”) and Surna Networks Ltd. (“Surna Networks II”) were wholly-owned subsidiaries of the Company, formed on July 19, 2011 and August 2, 2011, respectively. On March 27, 2012, the Company sold Surna Networks I and Surna Networks II to Chan Kam Ming for a total sales price of US$1 and assumption of liability related to those companies. All significant intercompany transactions are eliminated. We sold Surna Media and its subsidiaries in 2014. | |||||||||
Financial Statement Presentation: | |||||||||
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. The balance sheet at December 31, 2015, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the 2014 Form 10-K. The notes to the unaudited condensed consolidated financial statements are presented on a continuing basis unless otherwise noted. | |||||||||
Basis of Consolidation and Reclassifications: | |||||||||
The condensed consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiaries. Intercompany transactions, profits, and balances are eliminated in consolidation effective June 30, 2014, when the Company sold all of its interest in its wholly owned subsidiary Surna Media, along with Surna Media’s subsidiaries, Surna HK and Flying Cloud. | |||||||||
Certain reclassifications have been made to amounts in prior periods to conform with the current period presentation. All reclassifications have been applied consistently to the periods presented. | |||||||||
Use of Estimates: | |||||||||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Key estimates include: valuation of derivative liabilities, valuation of intangible assets, and valuation of deferred tax assets and liabilities. | |||||||||
There have been no material changes in our significant accounting policies as of and for the first quarter of fiscal 2015, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2014. | |||||||||
Goodwill and Other Intangible Assets: | |||||||||
Assets and liabilities acquired in business combinations are accounted for using the acquisition method and recorded at their respective fair values. Substantially all goodwill is a result of the Hydro acquisition in 2014. Pursuant to guidance in ASC 280, Segment Reporting, we have one segment in 2015 and 2014, and there is no other operating segment for which discrete financial information for that business segment/unit is prepared and regularly reviewed by the segment manager. | |||||||||
We conduct annual impairment tests of goodwill in the fourth quarter. If an initial assessment indicates it is more likely than not goodwill might be impaired, it is evaluated by comparing the reporting unit’s estimated fair value to its carrying value. Goodwill is also tested for impairment between annual tests if events or circumstances indicate the fair value of a unit may be less than its carrying value. If the carrying amount exceeds the estimated fair value, impairment is recognized to the extent that recorded goodwill exceeds the implied fair value of that goodwill. Estimated fair values of reporting units are Level 3 measures and are developed generally under an income approach that discounts estimated future cash flows using risk-adjusted interest rates. | |||||||||
All of the Company’s identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Identifiable intangibles consist of intellectual property such as patents and trademarks, and capitalized software. Identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable. | |||||||||
Product Warranty: | |||||||||
Warranties vary by product line and are competitive for the markets in which the Company operates. Warranties generally extend for a period of one to two years from the date of sale or installation. In 2015 and 2014, the Provision for warranty is determined primarily based on historical warranty cost as a percentage of sales or a fixed amount per unit sold based on failure rates, adjusted for specific problems that may arise. Product warranty expense is less than one-half percent of sales, accordingly no separate provision was deemed necessary as of March 31, 2015 and December 31, 2014 respectively. | |||||||||
Fair Value Measurement: | |||||||||
ASC 820, Fair Value Measurement, (“ASC 820”) establishes a formal hierarchy and framework for measuring certain financial statement items at fair value, and requires disclosures about fair value measurements and the reliability of valuation inputs. Under ASC 820, transactions to sell an asset or transfer a liability occur in the principal or at least the most advantageous market for that asset or liability. Within the hierarchy, Level 1 instruments use observable market prices for the identical item in active markets and have the most reliable valuations. Level 2 instruments are valued through broker/dealer quotation or other approaches using market-observable inputs for similar items in active markets, including forward and spot prices, interest rates, and volatilities. Level 3 instruments are valued using inputs not observable in an active market, such as company-developed future cash flow estimates, and are considered the least reliable. Valuations for all of the Company’s financial instruments fall within Level 2. The fair value of the Company’s derivative liabilities are classified as Level 3, and are estimated using the Black-Scholes option pricing model. | |||||||||
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. | |||||||||
The carrying value of financial instruments, including accrued liabilities and accounts payable, approximate fair value because of the short maturity of these instruments. The carrying amount of amounts due to related parties approximates fair value primarily because all amounts due to related parties are due on demand or have relatively short maturities and are considered short term. | |||||||||
Derivative Financial Instruments: | |||||||||
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes-Merton pricing model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. | |||||||||
We have determined that certain convertible debt instruments outstanding as of the date of these financial statements include an exercise price “reset” adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock (“ASC 815-40”). Certain of the convertible debentures have a variable exercise price, thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. | |||||||||
We evaluate the application of ASC 815-40-25 to the Warrants to purchase common stock issued with the Convertible Notes, and determined that the warrants were required to be accounted for as derivatives due to the provisions in certain convertible notes that result in our being unable to determine if we have sufficient authorized shares to settle the instrument. See Note 8 for discussion of the impact the derivative financial instruments had on the Company’s consolidated financial statements and results of operations. | |||||||||
Accordingly, the embedded conversion option and the warrants are derivative liabilities and are marked to market through earnings at the end of each reporting period. Any change in fair value during the period recorded in earnings as “Other income (expense) - gain (loss) on change in derivative liabilities.” | |||||||||
Revenue Recognition: | |||||||||
We recognize the majority of our revenues through the sale of manufactured products and record the sale when products are shipped or delivered and title passes to the customer with collection reasonably assured. In certain limited circumstances, revenue could be recognized using the percentage-of-completion method as performance occurs, or in accordance with ASC 985-605 related to software. Management believes that all relevant criteria and conditions are considered when recognizing revenue. | |||||||||
Sales arrangements sometimes involve delivering multiple elements, including services such as installation. In these instances, the revenue assigned to each element is based on vendor-specific objective evidence, third-party evidence or a management estimate of the relative selling price. Revenue is recognized individually for delivered elements only if they have value to the customer on a stand-alone basis and the performance of the undelivered items is probable and substantially in our control, or the undelivered elements are inconsequential or perfunctory and there are no unsatisfied contingencies related to payment. In the quarter ended March 1, 2015 and year ended December 31, 2014, we did not have any revenues arise from qualifying sales arrangements that include the delivery of multiple elements. The vast majority of these deliverables are tangible products, with a small portion attributable to installation. We do not provide any separate maintenance. Generally, contract duration is short term and cancellation, termination, or refund provisions apply only in the event of contract breach, and have historically not been invoked. | |||||||||
The Company provides climate control equipment, integrated solutions, and installation designed for the controlled environment agriculture industry. The term of these types of contracts is typically less than one year. We recognize revenue when all criteria are met as noted above. | |||||||||
Foreign Currency Translation: | |||||||||
The Company translates the foreign currency financial statements into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of Accounting Standards Codification subtopic 830-10 Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity (deficit). Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in consolidated results of operations. | |||||||||
Functional Currency: | |||||||||
The functional currency of the Company is the United States Dollars (“USD”). The functional currency of the Company’s former subsidiary, Surna HK, was the Hong Kong Dollar (“HKD”). The functional currency of Surna HK’s operating subsidiary in PRC, Flying Cloud, was the Renminbi (“RMB”), the PRC’s currency. Monetary assets and liabilities denominated in currencies other than the functional currenvcy are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods. | |||||||||
For financial reporting purposes, the consolidated financial statements of the Company are translated into the Company’s reporting currency, United States Dollars (“USD”). Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. | |||||||||
The exchange rates used to translate amounts in HKD and RMB into USD for the purposes of preparing the December 31, 2014 consolidated financial statements were as follows: | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Period-end HKD: USD exchange rate | * | $ | 7.75 | ||||||
Average Period HKD: USD exchange rate | * | $ | 7.75 | ||||||
Period-end RMB: USD exchange rate | * | $ | 6.21 | ||||||
Average Period RMB: USD exchange rate | * | $ | 6.15 | ||||||
* - Not applicable to the three months ended March 31, 2015. | |||||||||
Concentrations: | |||||||||
The Company’s accounts receivable from three customers make up 50% of the total balance as of March 31, 2015. Two customers made up 26% of the total revenue for the three months ended March 31, 2015. | |||||||||
The Company made 60% of its purchases from four vendors during the quarter ended March 31, 2015. Each vendor supplies greater than 10% of the purchases. | |||||||||
Comprehensive Income (Loss): | |||||||||
The Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”) which establishes standards for the reporting and displaying of comprehensive income (loss) and its components. Comprehensive income (loss) is defined as the change in stockholders’ equity (deficit) of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in stockholders’ equity (deficit) during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available securities. | |||||||||
Basic and Diluted Net Loss per Common Share: | |||||||||
Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period and adjusting for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Potential participating securities that were deemed to be anti-dilutive are noted below: | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Convertible notes | 13,875,521 | 10,852,708 | |||||||
Stock options | 10,296,000 | 10,296,000 | |||||||
Warrants | 2,536,625 | 1,625,000 | |||||||
Diluted shares outstanding | 26,707,771 | 22,774,083 | |||||||
Commitments and Contingencies: | |||||||||
In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, environment liability, and tax matters. An accrual for a loss contingency is recognized when it is probable that an asset has been impaired or a liability has been incurred, and the amount of loss can be reasonably estimated. | |||||||||
Recent Accounting Pronouncements: | |||||||||
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows. | |||||||||
In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows. | |||||||||
In August 2014, the FASB issued guidance regarding disclosures of uncertainties about an entity’s ability to continue as a going concern. The guidance applies prospectively to all entities, requiring management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and disclose certain information when substantial doubt is raised. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The Company does not expect this guidance to impact its financial statements. | |||||||||
In May 2014, the FASB issued guidance regarding the accounting for revenue from contracts with customers. The guidance may be applied retrospectively or using a modified retrospective approach to adjust retained earnings. The guidance is effective for interim and annual periods beginning on or after December 15, 2017. The Company is currently evaluating the impact of this guidance on its financial statements. | |||||||||
In April 2014, the FASB issued guidance regarding the reporting of discontinued operations. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. The guidance is effective for interim and annual periods beginning on or after December 15, 2014. The Company does not expect this guidance to impact its financial statements. There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. | |||||||||
We continually assess any new accounting pronouncements to determine their applicability to us. Where it is determined that a new accounting pronouncement affects our financial reporting, we undertake a study to determine the consequence of the change to our financial statements and assure that there are proper controls in place to ascertain that our financial statements properly reflect the change. We have evaluated all other ASUs issued through the date the condensed financials were issued and believes that the adoption of these will not have a material impact on our financial statements. |
Going_Concern
Going Concern | 3 Months Ended |
Mar. 31, 2015 | |
Going Concern | |
Going Concern | NOTE 2 - GOING CONCERN |
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a working capital deficit of $954,515. Additionally, the Company has generated cumulative net losses of $7,166,777 during the period from inception through March 31, 2015. | |
In the course of its development activities, the Company has sustained and continues to sustain losses. The Company cannot predict if or when the Company will generate profits. The Company expects to finance its operations primarily through debt or equity financing. On March 28, 2014, the Company commenced a private placement in the form of convertible promissory notes for up to $5,000,000 (“Initial Private Placement”). On October 16, 2014, the Company closed the Initial Private Placement in which it raised $1,336,783 and filed a Form D with the SEC disclosing the closing of the Initial Private Placement. | |
In October 2014, subsequent to the closing of the Initial Private Placement, the Company engaged Newbridge Securities Corporation to act on a “best efforts” basis as a placement agent for the Company in connection with the structuring, issuance, and sale of debt and/or equity “Securities” to obtain up to $3,000,000 in additional capital. For this purpose, the Company sold Securities, which are defined as up to 60 Units (each, a “Unit”) with each Unit consisting of (i) Two Hundred Fifty Thousand (250,000) shares of the Company’s common stock, par value $0.00001; (ii) a $50,000 10% Convertible Note; and (iii) 50,000 Warrants for the purchase of 50,000 shares of the Company’s common stock. Through March 31, 2015, the Company had raised $2,536,250. | |
These conditions may raise substantial doubt about the Company’s ability to continue as a going concern without the raising of necessary additional financing. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until such time as it can generate sources of recurring revenues and to ultimately attain profitability. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Although there can be no guarantee of the Company successfully obtaining additional ongoing financing, the Company has engaged in activities to address these financial concerns. |
Balance_Sheet_Components
Balance Sheet Components | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Balance Sheet Components | |||||||||
Balance Sheet Components | NOTE 3 - BALANCE SHEET COMPONENTS | ||||||||
Receivables, net: | |||||||||
Our receivables are summarized below: | |||||||||
March 31, 2015 | 31-Dec-14 | ||||||||
Accounts receivable | $ | 608,500 | $ | 404,830 | |||||
Less allowances for collection losses | (10,000 | ) | (10,000 | ) | |||||
$ | 598,500 | $ | 394,830 | ||||||
Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. | |||||||||
Inventories: | |||||||||
Inventories are stated at the lower of cost or market. The majority of inventory is valued based on a first-in, first-out basis. Following are the components of inventory as of March 31, 2015 and December 31, 2014: | |||||||||
2015 | 2014 | ||||||||
Finished goods | $ | 179,584 | $ | 56,297 | |||||
Raw materials and work in progress | 218,457 | 207,734 | |||||||
Inventory in transit | 110,600 | - | |||||||
Total inventories | $ | 508,641 | $ | 264,031 | |||||
Property and Equipment: | |||||||||
At March 31, 2015 and December 31, 2014, property and equipment consists of: | |||||||||
2015 | 2014 | ||||||||
Furniture & equipment | $ | 111,656 | $ | 106,844 | |||||
Molds | 31,063 | 31,063 | |||||||
Vehicles | 62,286 | 62,286 | |||||||
Leasehold Improvements | 32,994 | 32,994 | |||||||
237,999 | 233,187 | ||||||||
Accumulated depreciation | (83,158 | ) | (67,160 | ) | |||||
Property and equipment, net | $ | 154,841 | $ | 166,027 | |||||
Depreciation expense amounted to $14,811 and $3,333 for the quarters ended March 31, 2015 and 2014 respectively. |
Acquisitions_and_Divestitures
Acquisitions and Divestitures | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Business Combinations [Abstract] | |||||||||
Acquisitions and Divestitures | NOTE 4 - ACQUISITIONS AND DIVESTITURES | ||||||||
Qoo Games Limited (“Qoo Games”) was incorporated in Hong Kong on February 21, 2012. It was intended that this company operate as the publisher of mobile games, including for the iOS and Android operating systems, but this restructuring did not take place. Surna Media disposed of Qoo Games on January 24, 2014 for HK$1 (par value of the shares), and there were no assets, liabilities, or any transactions for Qoo Games during its existence. This transaction was not considered material to the Company’s financial position or results of operations. | |||||||||
Effective March 25, 2014, we completed the issuance of a dividend of all of our ownership in Trebor Resource Management Group, Inc. (“Trebor”), a wholly owned subsidiary, to our shareholders, resulting in Trebor becoming a separate entity. | |||||||||
The dividend shares of Trebor are and shall remain restricted securities as defined in Rule 144, promulgated under the Securities Act of 1933, as amended. The issuance of Trebor restricted stock was completed on a one for one basis to the Company’s shareholders of record on March 21, 2014. | |||||||||
Trebor is a party to a Memorandum of Understanding (“MOU”) dated March 24, 2014, with RMA Holdings, an entity formed under the laws of the Philippines (“RMA”). RMA and its associated companies are in the mining and smelting business with existing assets and operating permits for mineral extraction and refining in the Philippines. The MOU requires the parties to work together to identify and develop joint opportunities in the mining business in the Philippines, including a specific gold mining property (the “Pargum Mine”). The MOU also requires the parties to develop a plan of operation for the Pargum Mine, including financing and expansion. It is expected that RMA will secure necessary permits required for the development, construction, and plant operations. It is expected that Trebor will provide the necessary financing and technology for the anticipated operations at Pargum Mine. In addition to the Pargum Mine, the MOU contemplates that the parties will jointly work to identify and develop other mining opportunities. | |||||||||
Acquisition of Safari Resource Group, Inc.: | |||||||||
On March 26, 2014, we acquired Safari Resource Group, Inc. (“Safari”), a Nevada Corporation, whereby we became the sole surviving corporation after the acquisition of Safari. As a result of the merger, Safari’s shareholder group received eighty million two hundred and one thousand two hundred and fifty (80,201,250) newly issued shares of our common stock and seventy-seven million two hundred twenty thousand (77,220,000) newly issued shares of our series A preferred stock. In connection with the merger, 77,220,000 shares of issued and outstanding common stock were returned to the Company and canceled. Additionally, Safari had stock options that had previously been granted to its founders totaling 10,000 shares that were fully vested. At the date of grant, Safari had no operations and nominal assets. As a result, the options were deemed to have no value and no charge was made to the income statement. The options were converted at the same rate as the common shares resulting in 10,296,000 options, with an exercise price of $0.00024. | |||||||||
Acquisition of Hydro Innovations, LLC: | |||||||||
On March 31, 2014, we entered into a binding membership interest purchase agreement with Hydro Innovations, LLC, a Colorado limited liability company (“Hydro”) and its owners, Stephen Keen and Brandy Keen (collectively referred to as “the Keens”), pursuant to which we agreed to acquire 100% of the membership interests of Hydro, as well as all assets of Hydro, including all intellectual property, trade names, customer lists, physical properties, and any and all leasehold interests. The purchase of Hydro was completed on July 25, 2014. | |||||||||
Effective as of July 1, 2014, we entered into a modification and amendment (the “Hydro Amendment”) to the previously disclosed March 31, 2014 membership purchase agreement we entered into with Hydro to acquire a 100% interest in Hydro. The transaction closed on July 25, 2014 at which day we acquired 100% of the Hydro membership interests and Hydro became our wholly owned subsidiary. Pursuant to the terms of the Hydro Amendment, we paid to the Keens $250,000 by the delivery to the Keens of a $250,000 promissory note from the Company. The note bears interest at the rate of 6% per annum and is payable in monthly installments of $5,000 with a balloon payment for the balance of accrued interest and principal due on July 18, 2016. The note may be prepaid in whole or in part at any time. | |||||||||
As additional consideration for the purchase of Hydro, the Company entered into employment agreements with the Keens. Pursuant to the terms of Brandy Keen’s employment agreement, the Company agreed to employ Brandy Keen as its Vice President of Operations for a period of three years beginning on July 18, 2014 and pay her an annual base salary of $96,000 which is subject to review annually by the Company’s Board of Directors. Brandy Keen will be entitled to stock compensation in an amount and on terms to be agreed on at a later date, vacation, leave, and other benefits as may be in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with her duties. Brandy Keen’s employment is at-will and may be terminated at any time, with or without cause. | |||||||||
Pursuant to the terms of Stephen Keen’s employment agreement, the Company agreed to employ Stephen Keen as its Vice President of Research and Development for a period of three years beginning on July 18, 2014 and pay him an annual base salary of $96,000 which is subject to review annually by the Company’s Board of Directors. Stephen Keen will be entitled to stock compensation in an amount and on terms to be agreed on at a later date, vacation, leave, and other benefits as may be in effect at the Company’s discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with his duties. Stephen Keen’s employment is at-will and may be terminated at any time, with or without cause. | |||||||||
The Hydro acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The fair value measurements utilize estimates based on key assumptions of the acquisition and historical and current market data. The excess of the purchase price over the total of estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill. The Company estimated the purchase price allocations based on historical inputs and data as of June 30, 2014. | |||||||||
The following table summarizes the fair values of the Hydro assets acquired and liabilities assumed as of the effective acquisition date of June 30, 2014: | |||||||||
Purchase price: | |||||||||
Promissory Note | $ | 250,000 | |||||||
Liabilities assumed | 509,015 | ||||||||
Total purchase price | $ | 759,015 | |||||||
Fair value of assets: | |||||||||
Current assets | $ | 96,712 | |||||||
Property and equipment | 29,808 | ||||||||
Other assets | 1,432 | ||||||||
Goodwill | 631,064 | ||||||||
Fair value of assets acquired | $ | 759,015 | |||||||
All of the assets were recorded at book value which approximated fair value and are amortized or depreciated at their respective existing rates at the acquisition date. The Goodwill is not amortizable but subject to an annual impairment review as prescribed by the Accounting Standards Codification (ASC) 350 (formerly SFAS No. 142). No impairment has been recognized for the quarter ended March 31, 2015. | |||||||||
Unaudited supplemental pro forma financial information: | |||||||||
The following unaudited supplemental pro forma financial information represents the consolidated results of operations of the Group as if the Acquisition had occurred as of the beginning of January 1, 2014. The unaudited supplemental pro forma financial information is not necessarily indicative of what the Group’s consolidated results of operations actually would have been had it completed the Hydro acquisition at the beginning of the period. In addition, the unaudited supplemental pro forma financial information does not attempt to project the Group’s future results of operations after the Hydro acquisition. | |||||||||
For the Quarter Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Revenue | $ | 870,895 | $ | 380,317 | |||||
Cost of revenue | 682,736 | 214,592 | |||||||
Gross profit | 188,159 | 165,724 | |||||||
Operating Expenses: | |||||||||
Advertising and marketing | 82,974 | 32,026 | |||||||
Research and development | 180,989 | 16,985 | |||||||
General and administrative expenses | 803,742 | 273,316 | |||||||
Total operating expenses | 1,067,705 | 322,328 | |||||||
Operating loss | (879,546 | ) | (156,603 | ) | |||||
Other income (expense): | |||||||||
Interest expense | (156,735 | ) | (1,230 | ) | |||||
Amortization of debt discount on convertible notes | (426,800 | ) | - | ||||||
Gain on derivative liabilities | 48,163 | - | |||||||
(535,372 | ) | (1,230 | ) | ||||||
Loss from continuing operations before provision for income taxes | (1,414,918 | ) | (157,833 | ) | |||||
Provision for income taxes | - | - | |||||||
Loss from continuing operations | (1,414,918 | ) | (157,833 | ) | |||||
Comprehensive Income (Loss) | - | - | |||||||
Comprehensive Income (Loss) | 1,414,918 | $ | (157,833 | ) | |||||
Loss per common share from continuing operations - basic and diluted | $ | (0.01 | ) | $ | (0 | ) | |||
Loss per common share from discontinued operations - basic and diluted | - | - | |||||||
Loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0 | ) | |||
Weighted average number of common shares outstanding, basic and diluted | 115,852,402 | 99,375,000 | |||||||
(1) Interest related to the promissory note issued for the Hydro acquisition of $3,525 was eliminated. | |||||||||
In connection with the purchase of Hydro Innovations, LLC, the company issued a $250,000 promissory note as part of the purchase price. | |||||||||
Divestiture: | |||||||||
On June 30, 2014, the Company executed a separation agreement (“Separation Agreement”) with Lead Focus Limited, a British Virgin Islands company and related party (“LFL”), whereby the Company sold 100% of the issued and outstanding stock of Surna Media to LFL, along with Surna Media’s subsidiaries Surna HK and Surna HK’s subsidiary Flying Cloud (collectively “Surna Media Entities”). | |||||||||
The sales price for the Surna Media Entities was $2,643,878, comprising a payment of $1 in cash and LFL’s assumption of all of the liabilities of the Surna Media Entities. The $2,643,878 was amounts due to related parties and is recorded as a capital transaction in the statement of changes in stockholders’ equity. As a result of this sale, the Company eliminated from its balance sheet all assets and liabilities associated with Surna Media Entities and recorded a credit of $2,643,878 to its additional paid in capital. | |||||||||
The Company began accounting for the Surna Media Entities’ business as a discontinued operation and, therefore, the operating results of our Surna Media Entities’ business were included in discontinued operations in our condensed consolidated financial statements for all periods presented. There was immaterial operating activity in the first quarters of 2014 and none in 2015. | |||||||||
Summary results of operations for the Surna Media Entities business were as follows: | |||||||||
Three Months Ended | |||||||||
31-Mar-15 | 31-Mar-14 | ||||||||
Revenues | $ | — | $ | 5 | |||||
Expenses | — | 6,526 | |||||||
Income (loss) from discontinued | $ | — | $ | (6,521 | ) | ||||
Income taxes | — | — | |||||||
Income (loss) from discontinued operations | $ | — | $ | (6,521 | ) |
Fair_Value
Fair Value | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||
Fair Value | NOTE 5 - FAIR VALUE | ||||||||||||||||||
ASC Topic 820, Fair value Measurements and Disclosures, (“ASC Topic 820”) defines fair value, establishes a framework for measuring fair value, and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements. The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. ASC Topic 820 defines fair value based upon an exit price model. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and involves consideration of factors specific to the asset or liability. | |||||||||||||||||||
ASC Topic 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: | |||||||||||||||||||
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. | |||||||||||||||||||
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. | |||||||||||||||||||
Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. | |||||||||||||||||||
On a Recurring Basis: | |||||||||||||||||||
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2015 and December 31, 2014: | |||||||||||||||||||
(In thousands) | Classification | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||
Derivative Liabilities – Conversion feature | |||||||||||||||||||
31-Mar-15 | Current Liabilities | $ | 1,154,748 | — | — | $ | 1,154,748 | ||||||||||||
31-Dec-14 | Current Liabilities | 847,438 | — | — | $ | 847,438 | |||||||||||||
$ | |||||||||||||||||||
Derivative Liability - warrants | |||||||||||||||||||
31-Mar-15 | Current | $ | 182,719 | — | — | $ | 182,719 | ||||||||||||
Liabilities | |||||||||||||||||||
31-Dec-14 | Current | $ | 304,432 | — | — | $ | 304,432 | ||||||||||||
Liabilities | |||||||||||||||||||
Our Level 3 fair value liabilities represent contingent consideration recorded related to the embedded conversion features in the convertible notes issued in 2014 and 2014. The change in the balance of the conversion feature derivative liabilities and warrant liabilities during the three month period ended March 31, 2015 is calculated using the Black Scholes Model, which is classified as gain/loss in derivative liabilities in the consolidated condensed statement of operations. The Black-Scholes model does take into consideration the Company’s stock price, historical volatility, and risk free interest rate, which do have observable Level 1 or Level 2 inputs. | |||||||||||||||||||
On a Non-recurring Basis: | |||||||||||||||||||
In accordance with the provisions of ASC Topic 350, Intangibles – Goodwill and Other, (“ASC Topic 350”) the Company estimates the fair value of reporting units, utilizing unobservable Level 3 inputs. Level 3 inputs require significant management judgment due to the absence of quoted market prices or observable inputs for assets of a similar nature. The Company utilizes a discounted cash flow analysis to estimate the fair value of reporting units utilizing unobservable inputs. The fair value measurement for goodwill under the step-one and step-two analysis of the quantitative goodwill impairment test are classified as Level 3 inputs. | |||||||||||||||||||
Intangible assets that are amortized are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount. Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value. For the Company’s indefinite-lived intangible asset, the impairment test consists of comparing the fair value, determined using the market value method, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value. . As of March 31, 2015, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed. | |||||||||||||||||||
Due to their short-term nature, the carrying value of cash and equivalents, accounts receivable, accounts payable, and notes payable approximate fair value. The carrying amount of amounts due to related party approximates fair value primarily because all amounts due to related parties are due on demand or have relatively short maturities and considered short term. |
Intangible_Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 6 - INTANGIBLE ASSETS |
At March 31, 2015 and December 31, 2014, intangible assets primarily consisted of goodwill in the amount of $631,064 and other intangibles of $23,262 and $24,287, net of accumulated amortization of $3,238 and $2,213, respectively. Goodwill of an acquired company is neither amortized nor deductible for tax purposes and is primarily related to expected improvements in sales growth from future product and service offerings and new customers and productivity. Amortization expense for the intangible assets was $1,025 for the three months ended March 31, 2015 and nil for the three months ended March 31, 2014. |
Promissory_Note_and_Vehicle_Lo
Promissory Note and Vehicle Loan | 3 Months Ended | |||||
Mar. 31, 2015 | ||||||
Debt Disclosure [Abstract] | ||||||
Promissory Note and Vehicle Loan | NOTE 7 - PROMISSORY NOTE AND VEHICLE LOAN | |||||
In connection with the purchase of Hydro Innovations, LLC (“Hydro”) the Company issued a $250,000 promissory note (“Note”) as part of the purchase price. The Note bears interest at the rate of 6% per annum and is payable in monthly installments of $5,000 with a balloon payment for the balance of accrued interest and principal due on July 18, 2016. At March 31, 2015, the Note had a balance of $248,240, with $52,481 and $195,759 reflected on the balance sheet as current and long-term respectively. Additionally, the Company assumed a Note Payable to the former owners of Hydro (the “Hydro Note”). The Hydro Note bears interest at the rate of 12%, per annum, with interest due and payable monthly and expires on February 1, 2016. The balance of the Hydro Note was $212,220 at March 31, 2015 and reflected as current on the balance sheet. | ||||||
During the year ended December 31, 2014, the Company financed a vehicle. The original balance of the loan was $47,286. The loan bears interest at the rate of 3.99% and is payable in installments of $872.07 per month for 60 months. The balance of the loan at March 31, 2015 was 41,583. | ||||||
As of March 31, 2015, future principal payments for our vehicle loan are as follows: | ||||||
Year Ended December 31 | ||||||
2015 (three remaining quarters) | $ | 8,265 | ||||
2016 | 9,287 | |||||
2017 | 9,664 | |||||
2018 | 10,057 | |||||
2019 | 4,310 | |||||
$ | 41,583 |
Convertible_Debt
Convertible Debt | 3 Months Ended | |||||
Mar. 31, 2015 | ||||||
Debt Disclosure [Abstract] | ||||||
Convertible Debt | NOTE 8 - CONVERTIBLE DEBT | |||||
The following table summarizes the convertible promissory notes movement:: | ||||||
Balance at January 1, 2014 | $ | - | ||||
Convertible notes issued (Series 1) | 1,336,783 | |||||
Convertible notes issued (Series 2) | 1,625,000 | |||||
Convertible notes converted | (-) | |||||
Total | 2,961,783 | |||||
Less: debt discount | (2,473,239 | ) | ||||
Balance at December 31, 2014 | 488,544 | |||||
Convertible notes issued (Series 2) | 911,250 | |||||
Convertible notes converted (Series 1) | (160,000 | ) | ||||
Total | 1,239,794 | |||||
Less: debt discount | (187,319 | ) | ||||
Less: Deferred finance charges | (9,248 | ) | ||||
Balance March 31, 2015 | 1,043,227 | |||||
Less: current portion | (-) | |||||
Long-term portion | $ | 1,043,227 | ||||
Convertible Notes – Series 1 | ||||||
During the period ended December 31, 2014, the Company issued series 1 convertible promissory notes to investors in the aggregate principal amount of $1,336,783. The convertible promissory notes (i) are unsecured, (ii) bear interest at the rate of 10% per annum, and (iii) are due two years from the date of issuance. The convertible promissory notes are convertible at any time at the option of the investor into shares of the Company’s common stock that is determined by dividing the amount to be converted by the lesser of (i) $1.00 per share or (ii) eighty percent (80%) of the prior thirty day weighted average market price for the Company’s common stock. | ||||||
Due to the variable conversion price the number of shares issuable upon conversion is variable and there is no cap on the number of shares that can be issued associated with these convertible promissory notes, the Company has determined that the conversion feature is considered a derivative liability. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Note, the Company determined a fair value of $1,324,283 of the embedded derivative. The fair value of the embedded derivative was determined using intrinsic value up to the face amount of the convertible promissory notes. | ||||||
The initial fair value of the embedded debt derivative of $1,324,283 was allocated as a debt discount and a conversion feature derivative liability. The debt discount is being amortized over the two year term of the convertible promissory notes. The Company recognized a charge of $166,367 for the quarter ended March 31, 2015 for amortization of this debt discount. | ||||||
Accrued interest expenses on the above series 1 notes as of March 31, 2015 and 2014 is $270,424 and nil respectively. Interest expenses for the quarters ended March 31, 2015 and 2014 is $82,404 and nil, respectively. | ||||||
Convertible Notes – Series 2 | ||||||
In October 2014, the Company engaged a placement agent to act on a “best efforts” basis for the Company in connection with the structuring, issuance, and private placement for the sale of debt and/or equity “Securities” as defined. For this purpose, Securities is defined as up to 60 Units (each, a “Unit”) with each Unit consisting of (i) Two Hundred Fifty Thousand (250,000) shares of the Company’s common stock, par value $0.00001; (ii) a $50,000 10% Convertible Note, (“Series 2”); and (iii) Warrants for the purchase of 50,000 shares of the Company’s common stock. The Series 2 convertible promissory notes (i) are unsecured, (ii) bear interest at the rate of 10% per annum, and (iii) are due two years from the date of issuance. The Series 2 convertible promissory notes are convertible after 360 days from the issuance date at the option of the investor into shares of the Company’s common stock that is determined by dividing the amount to be converted by $0.60 conversion price. Additionally, the entire principal Amount Due on this Note shall be automatically converted into Common Stock at the Automatic Conversion Price without any action of the Purchaser on the earlier of: (x) the date on which the Company closes on a financing transaction involving the sale of the Company’s Common Stock at a price of no less than $2.00 per share with gross proceeds to the Company of no less than $5,000,000; or (y) the date which is three (3) days after the Common Stock shall have traded on the Trading Market at a VWAP of at least $2.00 per share for a period of ten (10) consecutive Trading Days. Through March 31, 2015, the Company has raised $2,536,250 from the sale of these Units. | ||||||
The gross proceeds from the sale of the debentures are recorded net of a discount related to the conversion feature of the embedded conversion option. When the fair value of conversion options is in excess of the debt discount the amount has been included as a component of interest expense in the statement of operations. The fair value of the Warrants underlying the promissory notes issued at the time of their issuance was calculated pursuant to the Black-Scholes option pricing model. The fair value was recorded as a reduction to the promissory notes payable and was charged to operations as interest expense in accordance with effective interest method within the period of the promissory notes. Transaction costs are apportioned to the debt liability, common stock, and derivative liabilities. The portion of transaction costs attributed to the conversion feature, warrants, and common stock are immediately expensed, because the derivative liabilities are accounted for at fair value through the statement of operations. Any non-cash issuance costs are accounted for separately and apart from the allocation of proceeds. However, if the non-cash issuance costs are paid in the form of convertible instruments, the convertible instruments issued are subject to the same accounting guidance as those sold to investors after first applying the guidance of ASC 505-50 (Stock-Based Compensation Issued to Nonemployees). There were no non-cash issuance costs. | ||||||
Balance at January 1, 2014 | $ | - | ||||
Proceeds from sale of Units | 1,625,000 | |||||
Less: Fair value of warrants | (393,240 | ) | ||||
Fair value assigned to common stock | (803,951 | ) | ||||
Debt discount- conversion feature | (427,809 | ) | ||||
Initial carrying value of notes at December 31, 2014 | $ | - | ||||
Proceeds from sale of Units | 911,250 | |||||
Less: Fair value of warrants | (135,258 | ) | ||||
Fair value assigned to common stock | (446,988 | ) | ||||
Debt discount- conversion feature | (98,180 | ) | ||||
Initial carrying value of notes at March 31, 2015 | $ | 230,501 | ||||
The Company recognized a charge of $426,988 for the quarter ended March 31, 2015 for amortization of this debt discount and $10,005 charge for transaction costs. The carrying value of the notes as of March 31, 2015 was $592,497.22 and the unamortized debt discount was $1,943,753. | ||||||
Accrued interest expenses on the series 2 convertible notes above as of March 31, 2015 and 2014 is $66,189 and nil, respectively. Interest expenses for the year ended March 31, 2015 and 2014 is $ 52,087 and nil, respectively. | ||||||
As of March 31, 2015, future principal payments for our long-term convertible loans were as follows: | ||||||
Year Ended December 31, | ||||||
2015 | $ | - | ||||
2016 | 3,713,033 | |||||
Thereafter | - | |||||
$ | 3,713,033 |
Derivative_Liabilities
Derivative Liabilities | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||
Derivative Liabilities | NOTE 9 – DERIVATIVE LIABILITIES | ||||
The convertible promissory notes Series 1 discussed in Note 8 have a variable conversion price which results in a variable number of shares needed for settlement that gave rise to a derivative liability for the embedded conversion feature. Due to the variable conversion price in the convertible notes Series 1, the warrants to purchase shares of common stock are also classified as a liability. The fair value of the conversion feature derivative liability is recorded and shown separately under noncurrent liabilities. Changes in the fair values of the derivative liabilities related to the embedded conversion feature and the warrants are recorded in the statement of operations under other income (expense). | |||||
The fair value of the described conversion feature derivative liability and warrant liability is $1,337,468 at March 31, 2015 and was determined using the Black-Scholes model with the following assumptions: | |||||
(1) risk free interest rate of | 0.56 | % | |||
(2) dividend yield of | 0 | % | |||
(3) volatility factor of | 132 | % | |||
(4) an expected life of the conversion feature | 2-4 years | ||||
(5) estimated fair value of the company’s common stock of | $0. 32 - 0.16/share | ||||
The Company recorded the change in fair value of the conversion feature derivative liability from December 31, 2014 to March 1, 2015, resulting in non-cash, non-operating income of $48,163 for the quarter ended March 1, 2015. | |||||
The following table represents the Company’s derivative liability activity from the initial measurement at Issuance date through March 31, 2015: | |||||
Derivative liabilities balance, December 31, 2013 | $ | - | |||
Initial measurement at Issuance date of the notes | 2,203,759 | ||||
Change in derivative liability during the year ended December 31, 2014 | (1,051,889 | ) | |||
Derivative liabilities balance, December 31, 2014 | $ | 1,151,870 | |||
Initial measurement at Issuance date of the notes | 233,761 | ||||
Change in derivative liability during the quarter ended March 31, 2015 | (48,163 | ) | |||
Derivative liabilities balance, March 31, 2015 | $ | 1,337,468 |
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 10 - RELATED PARTY TRANSACTIONS |
As of March 31, 2015, the Company had a balance due to related parties of $448,761. Of this balance, $194,958 is from various advances from the Company’s CEO and which are non-interest bearing, unsecured and due on demand. The Company imputed interest expense of $2,924 on these advances. The balance of $253,803 is due to key employees and shareholders of the Company. (See Note 7 – Promissory Note and Vehicle Loan). |
Income_Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 11 - INCOME TAXES |
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of tax benefits which are not expected to be realized. Additionally, our losses prior to the March 31, 2014 are limited due to IRC 382 guidelines. During interim periods, we have recorded a full valuation allowance for the deferred tax assets primarily resulting from operating loss carryforwards due to uncertainty regarding their recoverability. | |
ASC Topic 740-10, Overall - Uncertainty in Income Taxes, (“ASC Topic 740-10”) clarifies the accounting and disclosure for uncertainty in tax positions. ASC Topic 740-10 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company is subject to the provisions of ASC Topic 740-10 and has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. Should the Company need to accrue a liability for uncertain tax benefits, any interest associated with that liability will be recorded as interest expense. Penalties, if any, would be recognized as operating expenses. There were no penalties or interest liability accrued as of March 31, 2015 or December 31, 2014, nor were any penalties or interest costs included in expense for the three month periods ending March 31, 2015 and 2014. | |
The years under which we conducted our evaluation coincided with the tax years currently still subject to examination by major federal and state tax jurisdictions, those being 2009 through 2014 for federal purposes and 2013 through 2014 for state purposes. |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
Commitments and Contingencies | NOTE 12 - COMMITMENTS AND CONTINGENCIES | ||||
Operating Leases | |||||
In connection with its acquisition of Hydro Innovations, LLC (“Hydro”) in July 2014 (see Note 4 – Acquisitions and Divestitures), the Company assumed a lease agreement for manufacturing and office space consisting of approximately 18,000 square feet. The lease term extends through September 30, 2016 and calls for payment as follows: | |||||
April 1 2015 through December 31 2015 | $ | 137,489 | |||
January 1 through September 30 2016 | 138,404 | ||||
$ | 275,893 | ||||
Rent expense for office space amounted to $47,049 and $0 for the quarters ended March 31, 2015 and 2014, respectively. | |||||
Employment agreements | |||||
Also in connection with its acquisition of Hydro, the Company entered into employment agreements with Brandy Keen as its Vice President of Operations and Stephen Keen as its Vice President of Research and Development. Each employment agreement has a three year term and annual base salary of $96,000. The amount payable over the next three years for the two agreements totals $576,000. The terms of these agreements and the acquisition are discussed in Note 1. | |||||
Other Commitments | |||||
In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. The Company has also agreed to indemnify certain former officers, directors, and employees of acquired companies in connection with the acquisition of such companies. | |||||
It is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses. | |||||
Litigation | |||||
From time to time, the Company may become subject to legal proceedings, claims, and litigation arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. |
Patents_and_Trademarks
Patents and Trademarks | 3 Months Ended |
Mar. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Patents and Trademarks | NOTE 13 - PATENTS AND TRADEMARKS |
We rely on a combination of patent and trademark filings, laws that protect intellectual property, confidentiality procedures, and contractual restrictions with our employees and others to establish and protect our intellectual property rights. As of April 14, 2015, the Company has ten pending patent applications. The pending patent applications are a combination of Utility and Design patent applications that provide coverage around certain core Company technology. If issued, Design patents provide protection for 15 years from the date of issue. Utility patents provide protection for 20 years from the earliest non-Provisional application filing date. We also are actively pursuing trademark registration around our core brand (“Surna”) in the United States and select foreign jurisdictions, as well as the Surna logo and the combined Surna logo and name in the United States. Subject to ongoing use and renewal, trademark protection is potentially perpetual. |
Shareholders_Equity
Shareholders' Equity | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Equity [Abstract] | |||||||||
Shareholders' Equity | NOTE 14 - SHAREHOLDERS’ EQUITY | ||||||||
Preferred Stock | |||||||||
As of both March 31, 2015 and December 31, 2014, there were 77,220,000 shares of preferred stock Series A issued and outstanding. The Preferred Stock Series A is non-participating and only has voting rights equal to the common stock. During 2014, at the closing of the merger with Safari Resources Group (see Note 4 - Acquisitions and Divestitures), Safari’s shareholders received seventy-seven million two hundred twenty thousand (77,220,000) newly issued shares of our series A preferred stock. | |||||||||
Common Stock | |||||||||
As of March 31, 2015 and December 31, 2014, there were 121,432,768 and 113,511,250 shares of common stock issued and outstanding, respectively. | |||||||||
A total of 1,000,000 shares of our common stock were issued on January 7, 2015 in connection with a Consulting Services Agreement (the “Agreement”) with Newbridge Financial Services Group (“Newbridge”). These shares were authorized in 2014 and were deemed issued at December 31, 2014 and valued at $330,000, but were not issued until January 7, 2015. The Agreement called for Newbridge to provide business advisory and related consulting services, including but not limited to: study and review of the business, operations, financial performance, and development initiatives; and formulating the optimal strategy to meet working capital needs. | |||||||||
During the period from January 1, 2015 through March, 31, 2015, the Company issued 4,556,250 shares of its common stock in connection with the issuance of convertible debt (See Note 8 – Convertible Debt). $427,858 of the proceeds, net of transaction costs of $19,042 were allocated to common stock and additional paid in capital. | |||||||||
Additionally, the Company issued 1,615,268 shares of its common stock in connection with conversions of its series 1 convertible notes. $126,669 was allocated to common stock and additional paid in capital as a result of the conversion. | |||||||||
The changes in shareholders’ equity for the three months ended March 31, 2015 are summarized as follows: | |||||||||
Shares | Amount | ||||||||
Authorized shares | |||||||||
Preferred Stock and par value | 150,000,000 | $ | 0.00001 | ||||||
Common Stock and par value | 350,000,000 | $ | 0.00001 | ||||||
500,000,000 | |||||||||
Preferred Stock, Issued and Outstanding | |||||||||
Beginning and End of Period | 77,220,000 | $ | 772 | ||||||
Common Stock, Issued and Outstanding | |||||||||
Beginning of Period | 113,511,250 | 1,135 | |||||||
Sale of Common Shares | 4,556,250 | 46 | |||||||
Conversion of Convertible notes to Common Shares | 1,615,268 | 16 | |||||||
End of Period | 119,682,768 | 1,197 | |||||||
Paid-in capital | |||||||||
Beginning of Period | 4,881,918 | ||||||||
Sale of Common Shares | 427,812 | ||||||||
Conversion of Convertible notes to Common Shares | 126,669 | ||||||||
Imputed Interest | 2,924 | ||||||||
End of Period | 5,439,323 | ||||||||
Accumulated Deficit | |||||||||
Beginning of Period | (5,767,577 | ) | |||||||
Loss for the three months ended March 31, 2015 | (1,418,443 | ) | |||||||
End of Period | (7,186,020 | ) | |||||||
Total Stockholders’ Deficit | $ | (1,744,727 | ) |
Warrants_and_Options
Warrants and Options | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Warrants And Options | ||||||||||||||
Warrants and Options | NOTE 15 - WARRANTS AND OPTIONS | |||||||||||||
Warrant activity during the years ended, is as follows: | ||||||||||||||
Weighted-Average | Aggregate | |||||||||||||
Warrants | Exercise Price | Intrinsic Value | ||||||||||||
Outstanding at January 1, 2014 | - | $ | - | $ | - | |||||||||
Granted | 1,625,000 | 3 | - | |||||||||||
Exercised | - | - | - | |||||||||||
Expired | - | - | - | |||||||||||
Outstanding at December 31, 2013 | 1,625,000 | $ | 3 | $ | - | |||||||||
Granted | 911,250 | 3 | - | |||||||||||
Exercised | - | - | - | |||||||||||
Expired | - | - | - | |||||||||||
Outstanding at March 31, 2015 | 2,536,250 | $ | 3 | $ | - | |||||||||
During the quarter ended March 31, 2015 and year ended December 31, 2014, the Company issued warrants to purchase 911,250 and 1,625,000 shares of common stock, respectively, in connection with convertible notes. These warrants have an exercise price of $3.00 per share and expire within four years from the date of issue. Total warrants outstanding as of March 31, 2015 were 2,536,250 with an exercise price of $3.00 per share. | ||||||||||||||
The following table is a summary of the warrants calculation was determined using the Black-Scholes model with the following assumptions: | ||||||||||||||
2015 | 2014 | |||||||||||||
(1) risk free interest rate of | 1.13 | % | 1.38%; | |||||||||||
(2) dividend yield of | 0 | % | 0.00%; | |||||||||||
(3) volatility factor of | 132 | % | 137.43%; | |||||||||||
(4) an expected life of the conversion feature of | 4 years | 4 years | ||||||||||||
(5) estimated fair value of the company’s common stock of | $ | 0.16 per share | $0.32 per share | |||||||||||
The fair value of the warrants issued as of March 31, 2015 and December 31, 2014 was $0.07 and $0.18 per share, respectively. The warrants had zero intrinsic value. | ||||||||||||||
Stock Option Plan | ||||||||||||||
At the closing of the merger with Safari Resource Group (See Note 4 – Acquisitions and Divestitures), Safari had stock options that had previously been granted to its founders totaling 10,000 shares, and were fully vested. At the date of grant, Safari had no operations and nominal assets. As a result, the options were deemed to have no value and no charge was made to the income statement. The options were converted at the same rate as the common shares resulting in 10,290,000 options, with an exercise price of $0.000245. There were no stock options exercised in the quarter ended March 31, 2015 or year ended December 31, 2014 and no new options granted during the quarter ended March 31, 2015. | ||||||||||||||
The following table summarizes our restricted stock option activity: | ||||||||||||||
Weighted Average | ||||||||||||||
Number | Grant-Date | |||||||||||||
of Options | Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | - | $ | - | |||||||||||
Options granted | 10,296,000 | - | ||||||||||||
Options exercised | - | - | ||||||||||||
Options forfeited | - | - | ||||||||||||
Outstanding as of December 31, 2014 | 10,296,000 | - | ||||||||||||
Options granted | - | - | ||||||||||||
Options exercised | - | - | ||||||||||||
Options forfeited | - | - | ||||||||||||
Outstanding as of March 31, 2015 | 10,296,000 | $ | - | |||||||||||
The stock options outstanding are result of converting the existing options in Safari into our options as a result of the Safari acquisition. The options were all fully vested at the date of the acquisition. Accordingly, there was no unrecognized compensation. The intrinsic value of vested stock options at March 31, 2015 was $1,647,360. The options expire in March 2017. |
Agrisoft_Development_Group_Not
Agrisoft Development Group Note | 3 Months Ended |
Mar. 31, 2015 | |
Agrisoft Development Group Note | |
Agrisoft Development Group Note | NOTE 16 - AGRISOFT DEVELOPMENT GROUP NOTE |
On January 8, 2015 the Company agreed to acquire 66% of the total membership interests in Agrisoft Development Group, LLC (“Agrisoft”) from its members for an aggregate purchase price of $4,000,001 (the “Agreement”). The purchase price will be paid 50% in our common stock and 50% will be in the form of a promissory note. The note will be a two-year note in the aggregate principal amount of $2,000,000, with interest accruing at 8% annually, payable in quarterly installments of $150,000, with the first $150,000 payment due 90 days following the closing date, and with a balloon payment due at maturity. On February 23, 2015 we amended our Agreement whereby each of the parties to the agreement agreed that they may terminate the agreement at any time and if the sellers terminate, we may elect to have all loans we made to Agrisoft converted to equity. For purposes of determining the ownership interest we may acquire upon conversion of such loan, Agrisoft will be valued at $6,000,000. The closing for this transaction was extended to be July 1, 2015. In connection with the Agreement the Company has advanced a total of $260,000 through March 31, 2015 which is reflected as a note receivable on the balance sheet. These advances are secured by the assets of Agrisoft. |
Subsequent_Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 17 - SUBSEQUENT EVENTS |
Subsequent to March 31, 2015, the Company issued 2,390,912 shares of its common stock to four convertible note holders in connection with such holders’ conversion of series 1 convertible notes equal to $185,000 in principal and $13,041.10 in interest. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounting Policies [Abstract] | |||||||||
Company | Company: | ||||||||
Surna Inc. was incorporated in Nevada on October 15, 2009. On March 26, 2014, we acquired Safari Resource Group, Inc. (“Safari”), a Nevada Corporation, whereby we became the sole surviving corporation after the acquisition of Safari. In July 2014, we acquired 100 percent of the membership interest in Hydro Innovations, LLC, a Colorado limited liability company (“Hydro”). | |||||||||
History | History: | ||||||||
On September 1, 2011, Surna Inc. acquired Surna Media, Inc. (“Surna Media”) for 20,000,000 shares of its common stock. The merger was accounted for as among entities under common control. Surna Media’s predecessor entity, Surna Hong Kong Limited (“Surna HK”), was formed on June 14, 2010. Surna Media was formed October 29, 2010 by the same owners and Surna HK became a wholly-owned subsidiary. Flying Cloud Information Technology Co. Ltd. was incorporated in China in April 2011 as a wholly-owned subsidiary of Surna HK (“Flying Cloud”). All of the Surna HK, Surna Media, and Flying Cloud transactions were consolidated with those of the Company beginning at the formation of Surna HK on June 14, 2010. Surna Networks, Inc. (“Surna Networks I”) and Surna Networks Ltd. (“Surna Networks II”) were wholly-owned subsidiaries of the Company, formed on July 19, 2011 and August 2, 2011, respectively. On March 27, 2012, the Company sold Surna Networks I and Surna Networks II to Chan Kam Ming for a total sales price of US$1 and assumption of liability related to those companies. All significant intercompany transactions are eliminated. We sold Surna Media and its subsidiaries in 2014. | |||||||||
Financial Statement Presentation | Financial Statement Presentation: | ||||||||
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2015, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. The balance sheet at December 31, 2015, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the 2014 Form 10-K. The notes to the unaudited condensed consolidated financial statements are presented on a continuing basis unless otherwise noted. | |||||||||
Basis of Consolidation and Reclassifications | Basis of Consolidation and Reclassifications: | ||||||||
The condensed consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiaries. Intercompany transactions, profits, and balances are eliminated in consolidation effective June 30, 2014, when the Company sold all of its interest in its wholly owned subsidiary Surna Media, along with Surna Media’s subsidiaries, Surna HK and Flying Cloud. | |||||||||
Certain reclassifications have been made to amounts in prior periods to conform with the current period presentation. All reclassifications have been applied consistently to the periods presented. | |||||||||
Use of Estimates | Use of Estimates: | ||||||||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Key estimates include: valuation of derivative liabilities, valuation of intangible assets, and valuation of deferred tax assets and liabilities. | |||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets: | ||||||||
Assets and liabilities acquired in business combinations are accounted for using the acquisition method and recorded at their respective fair values. Substantially all goodwill is a result of the Hydro acquisition in 2014. Pursuant to guidance in ASC 280, Segment Reporting, we have one segment in 2015 and 2014, and there is no other operating segment for which discrete financial information for that business segment/unit is prepared and regularly reviewed by the segment manager. | |||||||||
We conduct annual impairment tests of goodwill in the fourth quarter. If an initial assessment indicates it is more likely than not goodwill might be impaired, it is evaluated by comparing the reporting unit’s estimated fair value to its carrying value. Goodwill is also tested for impairment between annual tests if events or circumstances indicate the fair value of a unit may be less than its carrying value. If the carrying amount exceeds the estimated fair value, impairment is recognized to the extent that recorded goodwill exceeds the implied fair value of that goodwill. Estimated fair values of reporting units are Level 3 measures and are developed generally under an income approach that discounts estimated future cash flows using risk-adjusted interest rates. | |||||||||
All of the Company’s identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Identifiable intangibles consist of intellectual property such as patents and trademarks, and capitalized software. Identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable. | |||||||||
Product Warranty | Product Warranty: | ||||||||
Warranties vary by product line and are competitive for the markets in which the Company operates. Warranties generally extend for a period of one to two years from the date of sale or installation. In 2015 and 2014, the Provision for warranty is determined primarily based on historical warranty cost as a percentage of sales or a fixed amount per unit sold based on failure rates, adjusted for specific problems that may arise. Product warranty expense is less than one-half percent of sales, accordingly no separate provision was deemed necessary as of March 31, 2015 and December 31, 2014 respectively. | |||||||||
Fair Value Measurements | Fair Value Measurement: | ||||||||
ASC 820, Fair Value Measurement, (“ASC 820”) establishes a formal hierarchy and framework for measuring certain financial statement items at fair value, and requires disclosures about fair value measurements and the reliability of valuation inputs. Under ASC 820, transactions to sell an asset or transfer a liability occur in the principal or at least the most advantageous market for that asset or liability. Within the hierarchy, Level 1 instruments use observable market prices for the identical item in active markets and have the most reliable valuations. Level 2 instruments are valued through broker/dealer quotation or other approaches using market-observable inputs for similar items in active markets, including forward and spot prices, interest rates, and volatilities. Level 3 instruments are valued using inputs not observable in an active market, such as company-developed future cash flow estimates, and are considered the least reliable. Valuations for all of the Company’s financial instruments fall within Level 2. The fair value of the Company’s derivative liabilities are classified as Level 3, and are estimated using the Black-Scholes option pricing model. | |||||||||
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. | |||||||||
The carrying value of financial instruments, including accrued liabilities and accounts payable, approximate fair value because of the short maturity of these instruments. The carrying amount of amounts due to related parties approximates fair value primarily because all amounts due to related parties are due on demand or have relatively short maturities and are considered short term. | |||||||||
Derivative Financial Instruments | Derivative Financial Instruments: | ||||||||
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes-Merton pricing model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. | |||||||||
We have determined that certain convertible debt instruments outstanding as of the date of these financial statements include an exercise price “reset” adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock (“ASC 815-40”). Certain of the convertible debentures have a variable exercise price, thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. | |||||||||
We evaluate the application of ASC 815-40-25 to the Warrants to purchase common stock issued with the Convertible Notes, and determined that the warrants were required to be accounted for as derivatives due to the provisions in certain convertible notes that result in our being unable to determine if we have sufficient authorized shares to settle the instrument. See Note 8 for discussion of the impact the derivative financial instruments had on the Company’s consolidated financial statements and results of operations. | |||||||||
Accordingly, the embedded conversion option and the warrants are derivative liabilities and are marked to market through earnings at the end of each reporting period. Any change in fair value during the period recorded in earnings as “Other income (expense) - gain (loss) on change in derivative liabilities.” | |||||||||
Revenue Recognition | Revenue Recognition: | ||||||||
We recognize the majority of our revenues through the sale of manufactured products and record the sale when products are shipped or delivered and title passes to the customer with collection reasonably assured. In certain limited circumstances, revenue could be recognized using the percentage-of-completion method as performance occurs, or in accordance with ASC 985-605 related to software. Management believes that all relevant criteria and conditions are considered when recognizing revenue. | |||||||||
Sales arrangements sometimes involve delivering multiple elements, including services such as installation. In these instances, the revenue assigned to each element is based on vendor-specific objective evidence, third-party evidence or a management estimate of the relative selling price. Revenue is recognized individually for delivered elements only if they have value to the customer on a stand-alone basis and the performance of the undelivered items is probable and substantially in our control, or the undelivered elements are inconsequential or perfunctory and there are no unsatisfied contingencies related to payment. In the quarter ended March 1, 2015 and year ended December 31, 2014, we did not have any revenues arise from qualifying sales arrangements that include the delivery of multiple elements. The vast majority of these deliverables are tangible products, with a small portion attributable to installation. We do not provide any separate maintenance. Generally, contract duration is short term and cancellation, termination, or refund provisions apply only in the event of contract breach, and have historically not been invoked. | |||||||||
The Company provides climate control equipment, integrated solutions, and installation designed for the controlled environment agriculture industry. The term of these types of contracts is typically less than one year. We recognize revenue when all criteria are met as noted above. | |||||||||
Foreign Currency Translation | Foreign Currency Translation: | ||||||||
The Company translates the foreign currency financial statements into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of Accounting Standards Codification subtopic 830-10 Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive gain (loss) within shareholders’ equity (deficit). Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in consolidated results of operations. | |||||||||
Functional Currency | Functional Currency: | ||||||||
The functional currency of the Company is the United States Dollars (“USD”). The functional currency of the Company’s former subsidiary, Surna HK, was the Hong Kong Dollar (“HKD”). The functional currency of Surna HK’s operating subsidiary in PRC, Flying Cloud, was the Renminbi (“RMB”), the PRC’s currency. Monetary assets and liabilities denominated in currencies other than the functional currenvcy are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods. | |||||||||
For financial reporting purposes, the consolidated financial statements of the Company are translated into the Company’s reporting currency, United States Dollars (“USD”). Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. | |||||||||
The exchange rates used to translate amounts in HKD and RMB into USD for the purposes of preparing the December 31, 2014 consolidated financial statements were as follows: | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Period-end HKD: USD exchange rate | * | $ | 7.75 | ||||||
Average Period HKD: USD exchange rate | * | $ | 7.75 | ||||||
Period-end RMB: USD exchange rate | * | $ | 6.21 | ||||||
Average Period RMB: USD exchange rate | * | $ | 6.15 | ||||||
* - Not applicable to the three months ended March 31, 2015. | |||||||||
Concentrations: | |||||||||
The Company’s accounts receivable from three customers make up 50% of the total balance as of March 31, 2015. Two customers made up 26% of the total revenue for the three months ended March 31, 2015. | |||||||||
The Company made 60% of its purchases from four vendors during the quarter ended March 31, 2015. Each vendor supplies greater than 10% of the purchases. | |||||||||
Concentration | Concentrations: | ||||||||
The Company’s accounts receivable from three customers make up 50% of the total balance as of March 31, 2015. | |||||||||
The Company made 60% of its purchases from four vendors during the quarter ended March 31, 2015. Each vendor supplies greater than 10% of the purchases. | |||||||||
Comprehensive Income (Loss) | Comprehensive Income (Loss): | ||||||||
The Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”) which establishes standards for the reporting and displaying of comprehensive income (loss) and its components. Comprehensive income (loss) is defined as the change in stockholders’ equity (deficit) of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in stockholders’ equity (deficit) during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available securities. | |||||||||
Research and Development | Research and Development: | ||||||||
The Company accounts for research and development cost in accordance with Accounting Standards Codification subtopic 730-10, Research and Development, (“ASC 730-10”). ASC 730-10 requires research and development costs to be charged to expenses as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. For the quarters ended March 31, 2015 and 2014, we incurred approximately $180,989 and nil, respectively, for research and development expenses which are included in the consolidated statements of operations. | |||||||||
Fair Value Measurements | Fair Value Measurements: | ||||||||
The carrying value of finanvcial instruments, including accrued liabilities and accounts payable, approximate fair value because of the short maturity of these instruments. The carrying amount of amounts due to related party approximates fair value primarily because all amounts due to related parties are due on demand or have relatively short maturities and considered short term. | |||||||||
Basic and Diluted Net Loss per Common Share | Basic and Diluted Net Loss per Common Share: | ||||||||
Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period and adjusting for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Potential participating securities that were deemed to be anti-dilutive are noted below: | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Convertible notes | 13,875,521 | 10,852,708 | |||||||
Stock options | 10,296,000 | 10,296,000 | |||||||
Warrants | 2,536,625 | 1,625,000 | |||||||
Diluted shares outstanding | 26,707,771 | 22,774,083 | |||||||
Commitments and Contingencies | Commitments and Contingencies: | ||||||||
In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, environment liability, and tax matters. An accrual for a loss contingency is recognized when it is probable that an asset has been impaired or a liability has been incurred, and the amount of loss can be reasonably estimated. | |||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements: | ||||||||
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows. | |||||||||
In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows. | |||||||||
In August 2014, the FASB issued guidance regarding disclosures of uncertainties about an entity’s ability to continue as a going concern. The guidance applies prospectively to all entities, requiring management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and disclose certain information when substantial doubt is raised. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The Company does not expect this guidance to impact its financial statements. |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounting Policies [Abstract] | |||||||||
Schedule of Foreign Exchange Contracts | The exchange rates used to translate amounts in HKD and RMB into USD for the purposes of preparing the December 31, 2014 consolidated financial statements were as follows: | ||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Period-end HKD: USD exchange rate | * | $ | 7.75 | ||||||
Average Period HKD: USD exchange rate | * | $ | 7.75 | ||||||
Period-end RMB: USD exchange rate | * | $ | 6.21 | ||||||
Average Period RMB: USD exchange rate | * | $ | 6.15 | ||||||
* - Not applicable to the three months ended March 31, 2015. | |||||||||
Schedule of Anti-dilutive Shares Outstanding | 31-Mar-15 | 31-Dec-14 | |||||||
Convertible notes | 13,875,521 | 10,852,708 | |||||||
Stock options | 10,296,000 | 10,296,000 | |||||||
Warrants | 2,536,625 | 1,625,000 | |||||||
Diluted shares outstanding | 26,707,771 | 22,774,083 |
Balance_Sheet_Components_Table
Balance Sheet Components (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Balance Sheet Components | |||||||||
Schedule of Accounts Receivable | Our receivables are summarized below: | ||||||||
March 31, 2015 | 31-Dec-14 | ||||||||
Accounts receivable | $ | 608,500 | $ | 404,830 | |||||
Less allowances for collection losses | (10,000 | ) | (10,000 | ) | |||||
$ | 598,500 | $ | 394,830 | ||||||
Components of Inventories | Inventories are stated at the lower of cost or market. The majority of inventory is valued based on a first-in, first-out basis. Following are the components of inventory as of March 31, 2015 and December 31, 2014: | ||||||||
2015 | 2014 | ||||||||
Finished goods | $ | 179,584 | $ | 56,297 | |||||
Raw materials and work in progress | 218,457 | 207,734 | |||||||
Inventory in transit | 110,600 | - | |||||||
Total inventories | $ | 508,641 | $ | 264,031 | |||||
Schedule of Property and Equipment | At March 31, 2015 and December 31, 2014, property and equipment consists of: | ||||||||
2015 | 2014 | ||||||||
Furniture & equipment | $ | 111,656 | $ | 106,844 | |||||
Molds | 31,063 | 31,063 | |||||||
Vehicles | 62,286 | 62,286 | |||||||
Leasehold Improvements | 32,994 | 32,994 | |||||||
237,999 | 233,187 | ||||||||
Accumulated depreciation | (83,158 | ) | (67,160 | ) | |||||
Property and equipment, net | $ | 154,841 | $ | 166,027 |
Acquisitions_and_Divestitures_
Acquisitions and Divestitures (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Business Combinations [Abstract] | |||||||||
Preliminary Fair Values of Hydro Assets Acquired and Liabilities Assumed | The following table summarizes the fair values of the Hydro assets acquired and liabilities assumed as of the effective acquisition date of June 30, 2014: | ||||||||
Purchase price: | |||||||||
Promissory Note | $ | 250,000 | |||||||
Liabilities assumed | 509,015 | ||||||||
Total purchase price | $ | 759,015 | |||||||
Fair value of assets: | |||||||||
Current assets | $ | 96,712 | |||||||
Property and equipment | 29,808 | ||||||||
Other assets | 1,432 | ||||||||
Goodwill | 631,064 | ||||||||
Fair value of assets acquired | $ | 759,015 | |||||||
Unaudited Supplemental Pro Forma Financial Information | For the Quarter Ended March 31, | ||||||||
2015 | 2014 | ||||||||
Revenue | $ | 870,895 | $ | 380,317 | |||||
Cost of revenue | 682,736 | 214,592 | |||||||
Gross profit | 188,159 | 165,724 | |||||||
Operating Expenses: | |||||||||
Advertising and marketing | 82,974 | 32,026 | |||||||
Research and development | 180,989 | 16,985 | |||||||
General and administrative expenses | 803,742 | 273,316 | |||||||
Total operating expenses | 1,067,705 | 322,328 | |||||||
Operating loss | (879,546 | ) | (156,603 | ) | |||||
Other income (expense): | |||||||||
Interest expense | (156,735 | ) | (1,230 | ) | |||||
Amortization of debt discount on convertible notes | (426,800 | ) | - | ||||||
Gain on derivative liabilities | 48,163 | - | |||||||
(535,372 | ) | (1,230 | ) | ||||||
Loss from continuing operations before provision for income taxes | (1,414,918 | ) | (157,833 | ) | |||||
Provision for income taxes | - | - | |||||||
Loss from continuing operations | (1,414,918 | ) | (157,833 | ) | |||||
Comprehensive Income (Loss) | - | - | |||||||
Comprehensive Income (Loss) | 1,414,918 | $ | (157,833 | ) | |||||
Loss per common share from continuing operations - basic and diluted | $ | (0.01 | ) | $ | (0 | ) | |||
Loss per common share from discontinued operations - basic and diluted | - | - | |||||||
Loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0 | ) | |||
Weighted average number of common shares outstanding, basic and diluted | 115,852,402 | 99,375,000 | |||||||
Schedule of Operations | Summary results of operations for the Surna Media Entities business were as follows: | ||||||||
Three Months Ended | |||||||||
31-Mar-15 | 31-Mar-14 | ||||||||
Revenues | $ | — | $ | 5 | |||||
Expenses | — | 6,526 | |||||||
Income (loss) from discontinued | $ | — | $ | (6,521 | ) | ||||
Income taxes | — | — | |||||||
Income (loss) from discontinued operations | $ | — | $ | (6,521 | ) |
Fair_Value_Tables
Fair Value (Tables) | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||
Fair Value of Asset Liabilities Recurring Basis | The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2015 and December 31, 2014: | ||||||||||||||||||
(In thousands) | Classification | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||
Derivative Liabilities – Conversion feature | |||||||||||||||||||
31-Mar-15 | Current Liabilities | $ | 1,154,748 | — | — | $ | 1,154,748 | ||||||||||||
31-Dec-14 | Current Liabilities | 847,438 | — | — | $ | 847,438 | |||||||||||||
$ | |||||||||||||||||||
Derivative Liability - warrants | |||||||||||||||||||
31-Mar-15 | Current | $ | 182,719 | — | — | $ | 182,719 | ||||||||||||
Liabilities | |||||||||||||||||||
31-Dec-14 | Current | $ | 304,432 | — | — | $ | 304,432 | ||||||||||||
Liabilities |
Promissory_Note_and_Vehicle_Lo1
Promissory Note and Vehicle Loan (Tables) | 3 Months Ended | |||||
Mar. 31, 2015 | ||||||
Debt Disclosure [Abstract] | ||||||
Schedule of Future Principal Payments | Year Ended December 31 | |||||
2015 (three remaining quarters) | $ | 8,265 | ||||
2016 | 9,287 | |||||
2017 | 9,664 | |||||
2018 | 10,057 | |||||
2019 | 4,310 | |||||
$ | 41,583 |
Convertible_Debt_Tables
Convertible Debt (Tables) | 3 Months Ended | |||||
Mar. 31, 2015 | ||||||
Debt Disclosure [Abstract] | ||||||
Schedule of Convertible Promissory Notes Movement | The following table summarizes the convertible promissory notes movement:: | |||||
Balance at January 1, 2014 | $ | - | ||||
Convertible notes issued (Series 1) | 1,336,783 | |||||
Convertible notes issued (Series 2) | 1,625,000 | |||||
Convertible notes converted | (-) | |||||
Total | 2,961,783 | |||||
Less: debt discount | (2,473,239 | ) | ||||
Balance at December 31, 2014 | 488,544 | |||||
Convertible notes issued (Series 2) | 911,250 | |||||
Convertible notes converted (Series 1) | (160,000 | ) | ||||
Total | 1,239,794 | |||||
Less: debt discount | (187,319 | ) | ||||
Less: Deferred finance charges | (9,248 | ) | ||||
Balance March 31, 2015 | 1,043,227 | |||||
Less: current portion | (-) | |||||
Long-term portion | $ | 1,043,227 | ||||
Convertible Notes – Series 1 | ||||||
During the period ended December 31, 2014, the Company issued series 1 convertible promissory notes to investors in the aggregate principal amount of $1,336,783. The convertible promissory notes (i) are unsecured, (ii) bear interest at the rate of 10% per annum, and (iii) are due two years from the date of issuance. The convertible promissory notes are convertible at any time at the option of the investor into shares of the Company’s common stock that is determined by dividing the amount to be converted by the lesser of (i) $1.00 per share or (ii) eighty percent (80%) of the prior thirty day weighted average market price for the Company’s common stock. | ||||||
Due to the variable conversion price the number of shares issuable upon conversion is variable and there is no cap on the number of shares that can be issued associated with these convertible promissory notes, the Company has determined that the conversion feature is considered a derivative liability. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Note, the Company determined a fair value of $1,324,283 of the embedded derivative. The fair value of the embedded derivative was determined using intrinsic value up to the face amount of the convertible promissory notes. | ||||||
The initial fair value of the embedded debt derivative of $1,324,283 was allocated as a debt discount and a conversion feature derivative liability. The debt discount is being amortized over the two year term of the convertible promissory notes. The Company recognized a charge of $166,367 for the quarter ended March 31, 2015 for amortization of this debt discount. | ||||||
Accrued interest expenses on the above series 1 notes as of March 31, 2015 and 2014 is $270,424 and nil respectively. Interest expenses for the quarters ended March 31, 2015 and 2014 is $82,404 and nil, respectively. | ||||||
Convertible Notes – Series 2 | ||||||
In October 2014, the Company engaged a placement agent to act on a “best efforts” basis for the Company in connection with the structuring, issuance, and private placement for the sale of debt and/or equity “Securities” as defined. For this purpose, Securities is defined as up to 60 Units (each, a “Unit”) with each Unit consisting of (i) Two Hundred Fifty Thousand (250,000) shares of the Company’s common stock, par value $0.00001; (ii) a $50,000 10% Convertible Note, (“Series 2”); and (iii) Warrants for the purchase of 50,000 shares of the Company’s common stock. The Series 2 convertible promissory notes (i) are unsecured, (ii) bear interest at the rate of 10% per annum, and (iii) are due two years from the date of issuance. The Series 2 convertible promissory notes are convertible after 360 days from the issuance date at the option of the investor into shares of the Company’s common stock that is determined by dividing the amount to be converted by $0.60 conversion price. Additionally, the entire principal Amount Due on this Note shall be automatically converted into Common Stock at the Automatic Conversion Price without any action of the Purchaser on the earlier of: (x) the date on which the Company closes on a financing transaction involving the sale of the Company’s Common Stock at a price of no less than $2.00 per share with gross proceeds to the Company of no less than $5,000,000; or (y) the date which is three (3) days after the Common Stock shall have traded on the Trading Market at a VWAP of at least $2.00 per share for a period of ten (10) consecutive Trading Days. Through March 31, 2015, the Company has raised $2,536,250 from the sale of these Units. | ||||||
Schedule of Non Cash Issuance Cost | Balance at January 1, 2014 | $ | - | |||
Proceeds from sale of Units | 1,625,000 | |||||
Less: Fair value of warrants | (393,240 | ) | ||||
Fair value assigned to common stock | (803,951 | ) | ||||
Debt discount- conversion feature | (427,809 | ) | ||||
Initial carrying value of notes at December 31, 2014 | $ | - | ||||
Proceeds from sale of Units | 911,250 | |||||
Less: Fair value of warrants | (135,258 | ) | ||||
Fair value assigned to common stock | (446,988 | ) | ||||
Debt discount- conversion feature | (98,180 | ) | ||||
Initial carrying value of notes at March 31, 2015 | $ | 230,501 | ||||
Schedule of Future Principal Payments of Convertible Loan | As of March 31, 2015, future principal payments for our long-term convertible loans were as follows: | |||||
Year Ended December 31, | ||||||
2015 | $ | - | ||||
2016 | 3,713,033 | |||||
Thereafter | - | |||||
$ | 3,713,033 |
Derivative_Liabilities_Tables
Derivative Liabilities (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||
Fair Value of Embedded Derivative Using Black-Scholes Model | The fair value of the described conversion feature derivative liability and warrant liability is $1,337,468 at March 31, 2015 and was determined using the Black-Scholes model with the following assumptions: | ||||
(1) risk free interest rate of | 0.56 | % | |||
(2) dividend yield of | 0 | % | |||
(3) volatility factor of | 132 | % | |||
(4) an expected life of the conversion feature | 2-4 years | ||||
(5) estimated fair value of the company’s common stock of | $0. 32 - 0.16/share | ||||
Schedule of Derivative Liabilities Activity | The following table represents the Company’s derivative liability activity from the initial measurement at Issuance date through March 31, 2015: | ||||
Derivative liabilities balance, December 31, 2013 | $ | - | |||
Initial measurement at Issuance date of the notes | 2,203,759 | ||||
Change in derivative liability during the year ended December 31, 2014 | (1,051,889 | ) | |||
Derivative liabilities balance, December 31, 2014 | $ | 1,151,870 | |||
Initial measurement at Issuance date of the notes | 233,761 | ||||
Change in derivative liability during the quarter ended March 31, 2015 | (48,163 | ) | |||
Derivative liabilities balance, March 31, 2015 | $ | 1,337,468 |
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
Schedule of Lease Yearly Payment | April 1 2015 through December 31 2015 | $ | 137,489 | ||
January 1 through September 30 2016 | 138,404 | ||||
$ | 275,893 |
Shareholders_Equity_Tables
Shareholders' Equity (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Equity [Abstract] | |||||||||
Schedule of Shareholder's Equity | The changes in shareholders’ equity for the three months ended March 31, 2015 are summarized as follows: | ||||||||
Shares | Amount | ||||||||
Authorized shares | |||||||||
Preferred Stock and par value | 150,000,000 | $ | 0.00001 | ||||||
Common Stock and par value | 350,000,000 | $ | 0.00001 | ||||||
500,000,000 | |||||||||
Preferred Stock, Issued and Outstanding | |||||||||
Beginning and End of Period | 77,220,000 | $ | 772 | ||||||
Common Stock, Issued and Outstanding | |||||||||
Beginning of Period | 113,511,250 | 1,135 | |||||||
Sale of Common Shares | 4,556,250 | 46 | |||||||
Conversion of Convertible notes to Common Shares | 1,615,268 | 16 | |||||||
End of Period | 119,682,768 | 1,197 | |||||||
Paid-in capital | |||||||||
Beginning of Period | 4,881,918 | ||||||||
Sale of Common Shares | 427,812 | ||||||||
Conversion of Convertible notes to Common Shares | 126,669 | ||||||||
Imputed Interest | 2,924 | ||||||||
End of Period | 5,439,323 | ||||||||
Accumulated Deficit | |||||||||
Beginning of Period | (5,767,577 | ) | |||||||
Loss for the three months ended March 31, 2015 | (1,418,443 | ) | |||||||
End of Period | (7,186,020 | ) | |||||||
Total Stockholders’ Deficit | $ | (1,744,727 | ) |
Warrants_and_Options_Tables
Warrants and Options (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Warrants And Options | ||||||||||||||
Schedule of Stock Warrants Activity | Warrant activity during the years ended, is as follows: | |||||||||||||
Weighted-Average | Aggregate | |||||||||||||
Warrants | Exercise Price | Intrinsic Value | ||||||||||||
Outstanding at January 1, 2014 | - | $ | - | $ | - | |||||||||
Granted | 1,625,000 | 3 | - | |||||||||||
Exercised | - | - | - | |||||||||||
Expired | - | - | - | |||||||||||
Outstanding at December 31, 2013 | 1,625,000 | $ | 3 | $ | - | |||||||||
Granted | 911,250 | 3 | - | |||||||||||
Exercised | - | - | - | |||||||||||
Expired | - | - | - | |||||||||||
Outstanding at March 31, 2015 | 2,536,250 | $ | 3 | $ | - | |||||||||
Schedule of Fair Value of Option Award Valuation Assumptions | The following table is a summary of the warrants calculation was determined using the Black-Scholes model with the following assumptions: | |||||||||||||
2015 | 2014 | |||||||||||||
(1) risk free interest rate of | 1.13 | % | 1.38%; | |||||||||||
(2) dividend yield of | 0 | % | 0.00%; | |||||||||||
(3) volatility factor of | 132 | % | 137.43%; | |||||||||||
(4) an expected life of the conversion feature of | 4 years | 4 years | ||||||||||||
(5) estimated fair value of the company’s common stock of | $ | 0.16 per share | $0.32 per share | |||||||||||
Schedule of Restricted Stock Options | The following table summarizes our restricted stock option activity: | |||||||||||||
Weighted Average | ||||||||||||||
Number | Grant-Date | |||||||||||||
of Options | Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | - | $ | - | |||||||||||
Options granted | 10,296,000 | - | ||||||||||||
Options exercised | - | - | ||||||||||||
Options forfeited | - | - | ||||||||||||
Outstanding as of December 31, 2014 | 10,296,000 | - | ||||||||||||
Options granted | - | - | ||||||||||||
Options exercised | - | - | ||||||||||||
Options forfeited | - | - | ||||||||||||
Outstanding as of March 31, 2015 | 10,296,000 | $ | - |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 0 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Sep. 02, 2011 | Mar. 27, 2012 | |
Integer | Integer | |||
Number of reportable segment | 1 | 1 | ||
Research and development expense | $180,989 | |||
Two Customers [Member] | ||||
Percentage of revenue earned | 50.00% | |||
Four Vendors [Member] | ||||
Percentage of goods purchases | 60.00% | |||
Vendors [Member] | Minimum [Member] | ||||
Percentage of goods purchases | 10.00% | |||
Surna Media Inc [Member] | ||||
Stock issued during period, shares, acquisitions | 20,000,000 | |||
Surna Networks Inc & Surna Networks Inc [Member] | ||||
Total sales price | $1 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies - Schedule of Foreign Exchange Contracts (Details) | Mar. 31, 2015 | Dec. 31, 2014 | |
Period End HKD [Member] | |||
Foreign currency exchange rate | [1] | 7.75 | |
Average Period HKD [Member] | |||
Foreign currency exchange rate | [1] | 7.75 | |
Period End RMB [Member] | |||
Foreign currency exchange rate | [1] | 6.21 | |
Average Period RMB [Member] | |||
Foreign currency exchange rate | [1] | 6.15 | |
[1] | Not applicable to the three months ended March 31, 2015 |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies - Schedule of Anti-dilutive Shares Outstanding (Details) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Diluted shares outstanding | 26,707,771 | 23,685,333 |
Convertible Notes [Member] | ||
Diluted shares outstanding | 13,875,521 | 10,852,708 |
Stock Option [Member] | ||
Diluted shares outstanding | 10,296,000 | 10,296,000 |
Warrant [Member] | ||
Diluted shares outstanding | 2,536,625 | 2,536,625 |
Going_Concern_Details_Narrativ
Going Concern (Details Narrative) (USD $) | 0 Months Ended | 1 Months Ended | 3 Months Ended | ||
Mar. 28, 2014 | Oct. 31, 2014 | Mar. 31, 2015 | Dec. 31, 2014 | Oct. 16, 2014 | |
Integer | |||||
Working capital deficit | $954,515 | ||||
Cumulative net losses | -7,186,020 | -5,767,577 | |||
Fund raised through Private Placement | 5,000,000 | ||||
Convertible promissory notes in private placement | 1,336,783 | ||||
Number of units sold securities | 60 | ||||
Each unit consisiting number of shares | -250,000 | ||||
Common stock, par value | $0.00 | $0.00 | $0.00 | ||
Convertible debt amount | 50,000 | 1,136,597 | |||
Percentage of convertible debt | 10.00% | ||||
Number of warrants issued | 50,000 | ||||
Issuance of warrants to purchase of commpn stock | 50,000 | ||||
Issuance of shares raised | 2,536,250 | ||||
Newbridge Securities Corporation [Member] | |||||
Issuance of shares of common stock, convertible notes and warrants | $3,000,000 |
Balance_Sheet_Components_Detai
Balance Sheet Components (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Balance Sheet Components | ||
Depreciation expense | $14,811 | $3,333 |
Balance_Sheet_Components_Sched
Balance Sheet Components - Schedule of Accounts Receivable (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Balance Sheet Components | ||
Accounts receivable | $608,500 | $404,830 |
Less allowances for collection losses | -10,000 | -10,000 |
Accounts receivable, net | $598,500 | $394,830 |
Balance_Sheet_Components_Compo
Balance Sheet Components - Components of Inventories (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Balance Sheet Components | ||
Finished goods | $179,584 | $56,297 |
Raw materials and work in process | 218,457 | 207,734 |
Inventory in transit | 110,600 | |
Total inventories | $508,641 | $264,031 |
Balance_Sheet_Components_Sched1
Balance Sheet Components - Schedule of Property and Equipment (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Property and equipment, Gross | $237,999 | $233,187 |
Accumulated depreciation | -89,395 | -69,372 |
Property and equipment, net | 154,841 | 166,028 |
Furniture & Equipment [Member] | ||
Property and equipment, Gross | 111,656 | 106,844 |
Molds [Member] | ||
Property and equipment, Gross | 31,063 | 31,063 |
Vehicle [Member] | ||
Property and equipment, Gross | 62,286 | 62,286 |
Leasehold Improvements [Member] | ||
Property and equipment, Gross | $32,994 | $32,994 |
Acquisitions_and_Divestitures_1
Acquisitions and Divestitures (Details Narrative) (USD $) | 3 Months Ended | 0 Months Ended | ||||
Mar. 31, 2015 | Jun. 30, 2014 | Jul. 18, 2014 | Dec. 31, 2014 | Jul. 25, 2014 | Mar. 31, 2014 | |
Stock issued and outstanding shares were returned and canceled | 77,220,000 | |||||
Stock options granted | 10,000 | |||||
Number of options converted into shares | 10,296,000 | |||||
Stock option exercise price | $0.00 | |||||
Promissory note | $195,760 | $195,759 | ||||
Payment of sale price in cash | 1 | |||||
Due to related party | 448,761 | |||||
Additional paid in capital | 5,439,323 | 4,881,918 | ||||
Surna Media Entities [Member] | ||||||
Annual base salary | 250,000 | |||||
Payment of sale price in cash | 2,643,878 | |||||
Due to related party | 2,643,878 | |||||
Additional paid in capital | 2,643,878 | |||||
Separation Agreement [Member] | Lead Focus Limited [Member] | ||||||
Percentage sale of issued and outstanding common stock | 100.00% | |||||
Stephen Keen [Member] | ||||||
Annual base salary | 96,000 | |||||
Safari Security Holders [Member] | Common Stock [Member] | ||||||
Stock issued during period, shares, acquisitions | -80,201,250 | |||||
Safari Security Holders [Member] | Preferred Stock Series A [Member] | ||||||
Stock issued during period, shares, acquisitions | -77,220,000 | |||||
Hydro Innovations, LLC [Member] | ||||||
Equity ownership percentage | 100.00% | |||||
Percentage of interest acquired | 100.00% | |||||
Percentage of membership interest acquired | 100.00% | |||||
Note bear interest rate | 6.00% | |||||
Note payable in monthly installment | 5,000 | |||||
Accrued interest and principal due date | 18-Jul-16 | |||||
Promissory note | $250,000 |
Acquisitions_and_Divestitures_2
Acquisitions and Divestitures - Fair Values of Hydro Assets Acquired and Liabilities Assumed (Details) (USD $) | Mar. 31, 2015 |
Business Combinations [Abstract] | |
Promissory Note | $250,000 |
Liabilities assumed | 509,015 |
Total purchase price | 759,015 |
Current assets | 96,712 |
Property and equipment | 29,808 |
Other assets | 1,432 |
Goodwill | 631,064 |
Fair value of assets acquired | $759,015 |
Acquisitions_and_Divestitures_3
Acquisitions and Divestitures - Unaudited Supplemental Pro Forma Financial Information (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Business Combinations [Abstract] | ||
Revenue | $870,895 | $380,317 |
Cost of revenue | 682,736 | 214,592 |
Gross profit | 188,159 | 165,724 |
Advertising and marketing | 82,974 | 32,026 |
Research and development | 180,989 | 16,985 |
General and administrative expenses | 803,742 | 273,316 |
Total operating expenses | 1,067,705 | 322,328 |
Operating loss | -879,546 | -156,603 |
Interest expense | -156,735 | -1,230 |
Amortization of debt discount on convertible notes | -426,800 | |
Gain on derivative liabilities | 48,163 | |
Total, other income (expense) | -535,372 | -1,230 |
Loss from continuing operations before provision for income taxes | -1,414,918 | -157,833 |
Provision for income taxes | ||
Loss from continuing operations | -1,414,918 | -157,833 |
Comprehensive Income (Loss) | ||
Comprehensive Income (Loss) | ($1,414,918) | ($157,833) |
Loss per common share from continuing operations - basic and diluted | ($0.01) | $0 |
Loss per common share from discontinued operations - basic and diluted | ||
Loss per common share - basic and diluted | ($0.01) | $0 |
Weighted average number of common shares outstanding, basic and diluted | 115,852,402 | 99,375,000 |
Acquisitions_and_Divestitures_4
Acquisitions and Divestitures - Unaudited Supplemental Pro Forma Financial Information (Details) (Parenthetical) (Hydro [Member], USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Hydro [Member] | ||
Interest related to promissory note issued | $3,525 | $3,525 |
Acquisitions_and_Divestitures_5
Acquisitions and Divestitures - Schedule of Operations (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Revenues | $870,895 | |
Income (loss) from discontinued | -6,521 | |
Income taxes | ||
Income (loss) from discontinued operations | $0 | $0 |
Surna Media Entitites [Member] | ||
Revenues | ||
Income (loss) from discontinued | 3 | |
Gain on disposal | ||
Income taxes | ||
Income (loss) from discontinued operations | $0.30 |
Fair_Value_Fair_Value_of_Asset
Fair Value - Fair Value of Asset Liabilities Recurring Basis (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Derivative Liabilities, beginning | $1,154,748 | $847,438 |
Derivative Liabitility - warrants, beginning | 182,719 | 304,432 |
Derivative Liabitility - warrants, ending | 182,719 | 304,432 |
Derivative Liabilities, ending | 1,154,748 | 847,438 |
Level1 [Member] | ||
Derivative Liabilities, beginning | ||
Derivative Liabitility - warrants, beginning | ||
Derivative Liabitility - warrants, ending | ||
Derivative Liabilities, ending | ||
Level 2 [Member] | ||
Derivative Liabilities, beginning | ||
Derivative Liabitility - warrants, beginning | ||
Derivative Liabitility - warrants, ending | ||
Derivative Liabilities, ending | ||
Level 3 [Member] | ||
Derivative Liabilities, beginning | 1,154,748 | 847,438 |
Derivative Liabitility - warrants, beginning | 182,719 | 304,432 |
Derivative Liabitility - warrants, ending | 182,719 | 304,432 |
Derivative Liabilities, ending | $1,154,748 | $847,438 |
Intangible_Assets_Details_Narr
Intangible Assets (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Intangible assets, net | $648,327 | $649,351 | |
Other intangible assets | 23,262 | 24,287 | |
Accumulated amortization of Intangible assets | 3,238 | 2,213 | |
Amortization expense for intangible assets | $1,025 |
Promissory_Note_and_Vehicle_Lo2
Promissory Note and Vehicle Loan (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | |
Promissory note | $195,760 | $195,759 |
Current value on notes payable | 47,286 | |
Balance on loan | 41,583 | |
Amount payable for loan on monthly basis | 872 | |
Hydro Note [Member] | ||
Annual interest rate on promissory note | 12.00% | |
Hydro Innovations, LLC [Member] | ||
Promissory note | 250,000 | |
Annual interest rate on promissory note | 6.00% | |
Amount payable for promissory note on monthly basis | 5,000 | |
Maturity date of promissory note | 18-Jul-16 | |
Total value on notes payable | 248,240 | |
Current value on notes payable | 52,481 | |
Long term note payable | 195,759 | |
Balance on loan | $212,220 | |
Interest rate on loan | 3.99% | |
Installment period on loan payable | 60 months |
Promissory_Note_and_Vehicle_Lo3
Promissory Note and Vehicle Loan - Schedule of Future Principal Payments (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
2018 | ||
2019 | 3,713,033 | |
Promissory note | 195,760 | 195,759 |
Vehicle Loan [Member] | ||
2015 | 8,265 | |
2016 | 9,287 | |
2017 | 9,664 | |
2018 | 10,057 | |
2019 | 4,310 | |
Promissory note | $41,583 |
Convertible_Debt_Details_Narra
Convertible Debt (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 0 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Oct. 31, 2014 | |
Convertible promissory notes, aggregate principal amount | $3,713,033 | |||
Amortization of debt discount | 426,800 | |||
Accrued interest expenses | 303,298 | 202,123 | ||
Common stock shares, issued | 119,682,768 | 113,511,250 | ||
Common stock par value | $0.00 | $0.00 | $0.00 | |
Convertible note | 1,136,597 | 50,000 | ||
Percentage of convertible debt | 10.00% | |||
Proceeds from issuance of common stock | 911,250 | 1,625,000 | ||
VWAP [Membrer] | ||||
Common stock price per share | $2 | |||
Proceeds from issuance of common stock | 2,536,250 | |||
Newbridge Securities Corporation [Member] | ||||
Common stock shares, issued | -250,000 | |||
Common stock par value | $0.00 | |||
Convertible note | 50,000 | |||
Percentage of convertible debt | 10.00% | |||
Warrants issued | 50,000 | |||
Purchase of common stock | 50,000 | |||
Conversion price per share | $0.60 | |||
Common stock price per share | $2 | |||
Proceeds from issuance of common stock | 5,000,000 | |||
Convertible Debt [Member] | ||||
Convertible promissory notes, aggregate principal amount | 1,336,783 | |||
Convertible promissory notes, interest rate | 10.00% | |||
Convertible promissory notes, duration period | 2 years | |||
Convertible promissory notes, conversion description | The convertible promissory notes are convertible at any time at the option of the investor into shares of the Company’s common stock that is determined by dividing the amount to be converted by the lesser of (i) $1.00 per share or (ii) eighty percent (80%) of the prior thirty day weighted average market price for the Company’s common stock. | |||
Fair value of embedded derivative | 1,324,283 | |||
Convertible promissory notes, amortization discount period | 2 years | |||
Derivative debt discount | 1,324,283 | |||
Amortization of debt discount | 166,367 | |||
Convertible note | 1,239,794 | 2,961,783 | ||
Series 1 Notes [Member] | ||||
Derivative debt discount | 1,943,753 | |||
Amortization of debt discount | 426,988 | |||
Accrued interest expenses | 270,424 | |||
Interest expenses | 82,404 | |||
Transaction cost | 10,005 | |||
Notes payable | 592,497 | |||
Series 2 Notes [Member] | ||||
Accrued interest expenses | 66,189 | |||
Interest expenses | $52,087 | $0 |
Convertible_Debt_Schedule_of_F
Convertible Debt - Schedule of Future Principal Payments of Convertible Loan (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Oct. 31, 2014 |
Total | $1,136,597 | $50,000 | |
Less: debt discount | -187,319 | -2,473,239 | |
Less: Deferred finance charges | -9,248 | ||
Less: current portion | |||
Long-term portion | 1,043,227 | 48,444 | |
Convertible Notes Issued Series 1 [Member] | |||
Total | -160,000 | 1,336,783 | |
Convertible Notes Issued Series 2 [Member] | |||
Total | 911,250 | 1,625,000 | |
Convertible Notes Converted [Member] | |||
Total | |||
Convertible Debt [Member] | |||
Total | $1,239,794 | $2,961,783 |
Convertible_Debt_Schedule_of_N
Convertible Debt - Schedule of Non Cash Issuance Cost (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Debt Disclosure [Abstract] | ||
Proceeds from sale of Units | $911,250 | $1,625,000 |
Less: Fair value of warrants | -135,258 | -393,240 |
Fair value assigned to common stock | -446,988 | -803,951 |
Debt discount- conversion feature | -98,180 | -427,809 |
Initial carrying value of note | $230,501 |
Convertible_Debt_Schedule_of_C
Convertible Debt - Schedule of Convertible Promissory Notes Movement (Details) (USD $) | Mar. 31, 2015 |
Debt Disclosure [Abstract] | |
2015 | |
2016 | 3,713,033 |
Thereafter | |
Long term convertible loan | $3,713,033 |
Derivative_Liabilities_Details
Derivative Liabilities (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||
Fair value derivative liability and warrant liability | $1,337,468 | $1,151,870 | |
Non-cash, non-operating income | $48,163 |
Derivative_Liabilitities_Fair_
Derivative Liabilitities - Fair Value of Embedded Derivative Using Black-Scholes Model (Details) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Series 1 [Member] | |
(1) risk free interest rate of | 0.56% |
(2) dividend yield of | 0.00% |
(3) volatility factor of | 132.00% |
(4) an expected life of the conversion feature | 2 years |
Series 1 [Member] | Minimum [Member] | |
(5) estimated fair value of the company's common stock of | 0.32 |
Series 1 [Member] | Maximum [Member] | |
(5) estimated fair value of the company's common stock of | 0.98 |
Series 2 [Member] | |
(1) risk free interest rate of | 0.67% |
(2) dividend yield of | 0.00% |
(3) volatility factor of | 137.00% |
Series 2 [Member] | Minimum [Member] | |
(4) an expected life of the conversion feature | 2 years |
(5) estimated fair value of the company's common stock of | 0.49 |
Series 2 [Member] | Maximum [Member] | |
(4) an expected life of the conversion feature | 4 years |
(5) estimated fair value of the company's common stock of | 0.32 |
Derivative_Liabilitities_Sched
Derivative Liabilitities - Schedule of Derivative Liabilities Activity (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative liabilities balance, beginning | $1,151,870 | |
Initial measurement at Issuance date of the notes | 233,761 | 2,203,759 |
Change in derivative liability during the period | -48,163 | -1,051,889 |
Derivative liabilities balance, ending | $1,337,468 | $1,151,870 |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | Mar. 31, 2015 |
Due to related parties | $448,761 |
Chief Executive Officer [Member] | |
Due to related parties | 194,958 |
Employees And Affiliates [Member] | |
Due to related parties | $253,803 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
sqft | ||
Rent expense | $47,049 | $0 |
Lease agreement, manufacturing and office space, square feet | 18,000 | |
Lease term, extension date | 30-Sep-16 | |
Lease term | 3 years | |
Next Three Years [Member] | ||
Annual base salary | 576,000 | |
Vice President [Member] | ||
Annual base salary | $96,000 |
Commitments_and_Contingencies_2
Commitments and Contingencies - Schedule of Lease Yearly Payment (Details) (USD $) | Mar. 31, 2015 |
Commitments and Contingencies Disclosure [Abstract] | |
April 1 2015 through December 31 2015 | $137,489 |
January 1 through September 30, 2016 | 138,404 |
Operating lease amount | $275,893 |
Patents_and_Trademarks_Details
Patents and Trademarks (Details Narrative) | 3 Months Ended |
Mar. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Design patents protected years | 15 years |
Utility patent application granted years | 20 years |
Shareholders_Equity_Details_Na
Shareholders' Equity (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Preferred stock, shares issued | 77,220,000 | 77,220,000 |
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 |
Common stock, shares issued | 119,682,768 | 113,511,250 |
Common stock, shares outstanding | 119,682,768 | 113,511,250 |
Convesion of debt shares amount | $427,858 | |
Transaction costs | 19,042 | |
Convesion of debt into shares | 6,306,250 | |
Additional Stock shares issued for service, shares | 1,615,268 | |
Newbridge Financial [Member] | ||
Stock shares issued for service, shares | 1,000,000 | |
Deemed issuance shares value | $330,000 | |
Preferred Stock Series A [Member] | ||
Preferred stock, shares issued | 77,220,000 | 77,220,000 |
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 |
New issuance of shares | -77,220,000 |
Shareholders_Equity_Schedule_o
Shareholder's Equity - Schedule of Shareholder's Equity (Details) (USD $) | 3 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Oct. 31, 2014 | |
Preferred stock, par value | $0.00 | $0.00 | ||
Preferred stock, shares authorized | 150,000,000 | 150,000,000 | ||
Common stock, par value | $0.00 | $0.00 | $0.00 | |
Common stock, shares authorized | 350,000,000 | 350,000,000 | ||
Number of shares authorized total | 500,000,000 | |||
Preferred stock, shares issued | 77,220,000 | 77,220,000 | ||
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 | ||
Common stock, shares issued | 119,682,768 | 113,511,250 | ||
Common stock, shares outstanding | 119,682,768 | 113,511,250 | ||
Beginning of Period | ($883,752) | |||
Conversion of Convertible notes to Common Shares | 427,858 | |||
Conversion of Convertible notes to Common Shares, shares | 6,306,250 | |||
Net loss | -1,418,443 | -53,607 | ||
Ending of Period | -1,744,727 | |||
Common Stock [Member] | ||||
Beginning of Period | 1,135 | |||
Beginning of Period, shares | 113,511,250 | |||
Sale of common shares | 46 | |||
Sale of common shares, shares | 4,556,250 | |||
Conversion of Convertible notes to Common Shares | 16 | |||
Conversion of Convertible notes to Common Shares, shares | 1,615,268 | |||
Additional Paid In Capital [Member] | ||||
Beginning of Period | 4,881,918 | |||
Sale of common shares | 427,812 | |||
Conversion of Convertible notes to Common Shares | 126,669 | |||
Imputed interest | 2,924 | |||
Accumulted Deficit [Member] | ||||
Beginning of Period | -5,767,577 | |||
Net loss | -1,418,443 | |||
Ending of Period | ($7,186,020) |
Warrants_and_Options_Details_N
Warrants and Options (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Warrants And Options | ||
Issuance of warrants to purchase of common stock | 911,250 | 1,625,000 |
Warrants exercise price | $3 | |
Warrants outstanding | 2,536,250 | |
Warrants exercise price ranging | $3 | |
Number of stock option had at the closing of the merger | 10,000 | |
Stock option converted to common stock | 10,290,000 | |
Option exercise price per share | $0.00 | |
Intrinsic value of vested stock options | $1,647,360 | |
Fair value of warrant issued price per share | $0 | $0.18 |
Stock option expiration month year | expire in March 2017 |
Stock_Options_and_Warrants_Sch
Stock Options and Warrants - Schedule of Stock Warrants Activity (Details) (Warrant [Member], USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Warrant [Member] | ||
Warrants Outstanding, Beginning Balance | 1,625,000 | |
Warrants Granted | 911,250 | 1,625,000 |
Warrants Exercised | ||
Warrants Expired | ||
Warrants Outstanding, Ending Balance | 2,536,250 | 1,625,000 |
Weighted Average Exercise Price, Outstanding, Beginning | $3 | |
Weighted Average Exercise Price, Granted | $3 | $3 |
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Expired | ||
Weighted Average Exercise Price, Outstanding, Ending | $3 | $3 |
Aggregate Intrinsic Value, Outstanding, Beginning Balnace | ||
Aggregate Intrinsic Value, Outstanding, Granted | ||
Aggregate Intrinsic Value, Outstanding, Exercised | ||
Aggregate Intrinsic Value, Outstanding, Expired | ||
Aggregate Intrinsic Value, Outstanding, Ending Balance |
Warrants_and_Options_Schedule_
Warrants and Options - Schedule of Fair Value of Option Award Valuation Assumptions (Details) (Warrant [Member], USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Warrant [Member] | ||
(1) risk free interest rate of | 1.13% | 1.38% |
2) dividend yield of | 0.00% | 0.00% |
(3) volatility factor of | 132.00% | 137.43% |
(4) an expected life of the conversion feature of | 4 years | 4 years |
5) estimated fair value of the company's common stock of | $0.16 | $0.32 |
Warrants_and_Options_Schedule_1
Warrants and Options - Schedule of Restricted Stock Options (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Number of Options Outstanding, granted | 10,000 | |
Weighted-Average Grand-Date Fair Value, granted | $0.00 | |
Weighted-Average Grand-Date Fair Value, exercised | $0.00 | |
Restricted Stock Option [Member] | ||
Number of Options Outstanding, Beginning | 10,296,000 | |
Number of Options Outstanding, granted | 10,296,000 | |
Number of Options Outstanding, exercised | ||
Number of Options Outstanding, forfeited | ||
Number of Options Outstanding, Ending | 10,296,000 | 10,296,000 |
Weighted-Average Grand-Date Fair Value, Outstanding, Beginning | ||
Weighted-Average Grand-Date Fair Value, granted | ||
Weighted-Average Grand-Date Fair Value, exercised | ||
Weighted-Average Grand-Date Fair Value, forfeited | ||
Weighted-Average Grand-Date Fair Value, Outstanding, Ending |
Agrisoft_Development_Group_Not1
Agrisoft Development Group Note (Details Narrative) (Agrisoft Development Group LLC [Member], USD $) | 0 Months Ended | ||
Feb. 23, 2015 | Jan. 08, 2015 | Mar. 31, 2015 | |
Agrisoft Development Group LLC [Member] | |||
Acquired interest rate | 66.00% | ||
Purchase price of common stock | $4,000,001 | ||
Percentage of purchase price of common stock | 50.00% | ||
Percentage of promissory note | 50.00% | ||
Principal amount | 260,000 | 2,000,000 | |
Percentage of accrued interest | 8.00% | ||
Payable in quarterly installments | 150,000 | ||
First payment due of debt | 150,000 | ||
Debt maturity date | 31-Mar-15 | ||
Debt | $6,000,000 |
Subsequent_Events_Details_Narr
Subsequent Events (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Series 1 Convertible Notes [Member] | |
Conversion of debt amount | $185,000 |
Conversion of debt interest amount | $13,041 |
Four Convertible Note Holders [Member] | |
Sale of stock during period | 2,390,912 |