Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 11, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | Surna Inc. | |
Entity Central Index Key | 1,482,541 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 121,855,390 | |
Trading Symbol | SRNA | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash | $ 979,309 | $ 689,963 |
Accounts receivable (net of allowance for doubtful accounts of $30,000 and $10,000 respectively) | 954,965 | 394,830 |
Note receivable | 235,000 | 100,000 |
Inventory | 879,159 | 264,031 |
Prepaid expenses | 515,435 | 57,089 |
Total Current Assets | 3,563,868 | 1,505,913 |
Noncurrent Assets | ||
Property and equipment, net | 145,035 | 163,815 |
Intangible assets, net | 646,277 | 651,564 |
Total Noncurrent Assets | 791,312 | 815,379 |
TOTAL ASSETS | 4,355,180 | 2,321,292 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 1,863,802 | 411,828 |
Deferred revenue | 1,489,781 | 408,199 |
Current portion long term debt | 188,716 | 9,731 |
Amounts due shareholders | $ 63,238 | 303,672 |
Derivative liability on conversion feature | 847,438 | |
Derivative liability on warrants | 304,432 | |
Total Current Liabilities | $ 3,605,537 | 2,285,300 |
NONCURRENT LIABILITIES | ||
Convertible promissory notes, net | 1,268,666 | 488,544 |
Convertible accrued interest | 200,067 | 202,123 |
Promissory note due shareholders | 135,760 | 195,759 |
Vehicle loan | 33,318 | 33,318 |
Total Noncurrent Liabilities | 1,637,811 | 919,744 |
TOTAL LIABILITIES | 5,243,348 | 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; 121,855,390 and 113,511,250 shares issued and outstanding | 1,219 | 1,135 |
Paid in capital | 8,607,893 | 4,881,918 |
Accumulated deficit | (9,498,052) | (5,767,577) |
Total Stockholders' Deficit | (888,168) | (883,752) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 4,355,180 | $ 2,321,292 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 30,000 | $ 10,000 |
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
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 | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 121,855,390 | 113,511,250 |
Common stock, shares outstanding | 121,855,390 | 113,511,250 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $ 3,634,091 | $ 859,488 | $ 6,182,936 | $ 1,206,047 |
Cost of revenue | 2,954,670 | 377,786 | 4,964,175 | 660,391 |
Gross profit | 679,421 | 481,702 | 1,218,761 | 545,656 |
Operating Expenses: | ||||
Advertising and marketing | 148,656 | 8,976 | 324,110 | 14,342 |
Product development costs | 224,365 | 140,395 | 533,808 | 148,162 |
General and administrative expenses | 846,806 | 791,570 | 2,471,568 | 1,191,104 |
Total operating expenses | 1,219,827 | 940,941 | 3,329,486 | 1,353,608 |
Operating loss | (540,406) | (459,239) | (2,110,725) | (807,952) |
Other income (expense): | ||||
Interest expense | (78,938) | (32,725) | (367,497) | (46,359) |
Amortization of debt discount on convertible notes | $ (716,078) | (139,420) | 1,727,126 | (207,585) |
Gain on change in derivative liabilities | 2,110,586 | 474,873 | 372,445 | |
Total other income (expenses) | $ (795,016) | 1,938,441 | (1,619,750) | 118,501 |
Income (Loss) from continuing operations before provision for income taxes | $ (1,335,422) | $ 1,479,202 | $ (3,730,475) | $ (689,451) |
Provision for income taxes | ||||
Loss from continuing operations | $ (1,335,422) | $ 1,479,202 | $ (3,730,475) | $ (689,451) |
Loss from discontinued operations | (6,521) | |||
Net income (loss) | $ (1,335,422) | $ 1,479,202 | $ (3,730,475) | $ (695,972) |
Comprehensive Income (Loss) | ||||
Comprehensive Income (Loss) | $ (1,335,422) | $ 1,479,202 | $ (3,730,475) | $ (695,972) |
Loss per common share from continuing operations - basic and diluted | $ (0.01) | $ 0.01 | $ (0.03) | $ (0.01) |
Loss per common share from discontinued operations - basic and diluted | 0 | |||
Loss per common share - basic and diluted | $ (0.01) | $ 0.01 | $ (0.03) | $ (0.01) |
Weighted average number of common shares outstanding, Basic | 119,997,166 | 100,222,948 | 119,124,053 | 99,660,755 |
Weighted average number of common shares outstanding, Fully diluted | 146,816,336 | 112,988,948 | 145,943,222 | 99,660,755 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Cash Flows [Abstract] | ||
Net loss | $ (3,730,475) | $ (695,972) |
Loss from discontinued operations | (6,521) | |
Loss from continuing operations | $ (3,730,475) | (689,451) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization expense | 46,586 | 14,342 |
Amortization of debt discounts | 1,727,126 | (207,585) |
Change in derivative liability | $ (474,873) | (372,445) |
Consulting services paid in stock | 29,400 | |
Accrued and imputed interest | $ 2,925 | $ 3,500 |
Allowance for bad debt | 20,000 | |
Changes in operating assets and liabilities: | ||
Accounts and notes receivable | (580,135) | $ (230,500) |
Inventory and prepaid expenses | (1,073,474) | (80,007) |
Accounts payable and accrued liabilities | 1,683,607 | $ 69,767 |
Deferred revenue | $ 1,081,582 | |
Amount due to related parties | ||
Cash used in operating activities | $ (1,297,131) | $ (1,047,809) |
Cash Flows From Investing Activities | ||
Purchase of intangible assets | (20,500) | |
Purchase of equipment | $ (22,519) | (66,066) |
Leasehold improvements | $ (25,794) | |
Investment in Agrisoft | $ (135,000) | |
Net cash used in investing activities | (157,519) | $ (112,360) |
Cash Flows From Financing Activities | ||
Proceeds from convertible debt | 1,859,850 | 1,324,283 |
Payment on loans | (43,763) | (8,448) |
Payments on loans from shareholders | (72,091) | (5,000) |
Net cash provided by financing activities | 1,743,996 | 1,310,835 |
Net increase/(decrease) in cash | 289,346 | $ 150,666 |
Cash, beginning of period | 689,963 | |
Cash, end of period | 979,309 | $ 150,666 |
Supplemental cash flow information: | ||
Interest paid | $ 4,790 | $ 3,607 |
Income tax paid | ||
Non-cash investing and financial activities: | ||
Discount on convertible notes | $ 1,220,051 | |
Beneficial conversion feature on convertible notes and warrants | $ (1,324,283) | $ 1,324,283 |
Sale of subsidiaries to related party, credited to APIC | $ 2,643,881 | |
Debt retirement former CEO | $ 194,958 | |
Vehicle purchase by loan | $ 47,286 | |
Intangible assets acquired by debt | $ 631,064 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 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., a Nevada corporation (Safari), 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), pursuant to which Hydro became a wholly-owned subsidiary of the Company. 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 Medias 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 and nine months ended September 30, 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, 2014, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP 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 Medias subsidiaries, Surna HK and Flying Cloud. Certain reclassifications have been made to amounts in prior periods to conform to 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. Summary of Significant Accounting Policies There have been no material changes in our significant accounting policies as of and for the first nine months 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 units 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 Companys 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 of one percent of sales, accordingly no separate provision was deemed necessary as of September 30, 2015 and December 31, 2014 respectively. Fair Value Measurement: ASC 820, Fair Value Measurement 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, approximates 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. 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 the instruments as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entitys Own Stock (ASC 815-40). Certain of the convertible debentures have a variable exercise price, and thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares with which to settle the transaction. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. We evaluated the application of ASC 815-40-25 to the warrants to purchase common stock issued with our Series 2 convertible debt instruments 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 Companys 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 three and nine months ended September 30, 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 United States Dollars (USD). The functional currency of the Companys former subsidiary, Surna HK, was the Hong Kong Dollar (HKD). The functional currency of Surna HKs operating subsidiary in the PRC, Flying Cloud, was the Renminbi (RMB), the PRCs currency. Monetary assets and liabilities denominated in currencies other than the functional currency 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 Companys reporting currency, 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: September 30, 2015 December 31, 2014 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 and nine months ended September 30, 2015. Concentrations: The Companys accounts receivable from four customers make up 82% of the total balance as of September 30, 2015. One customer made up 12% of the total revenue for the nine months ended September 30, 2015, and four customers made up 44% of the total revenue for the three months ended September 30, 2015. The Company made 45% of its purchases from three vendors during the quarter ended September 30, 2015 and 48% of its purchases from three vendors during the nine months ended September 30, 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-owner 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: September 30, 2015 December 31, 2014 Convertible notes 11,511,919 10,852,708 Stock options 10,296,000 10,296,000 Warrants 5,011,250 1,625,000 Diluted shares outstanding 26,819,169 22,773,708 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 entitys 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 entitys 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 Companys 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 believe that the adoption of these will not have a material impact on our financial statements. |
Going Concern
Going Concern | 9 Months Ended |
Sep. 30, 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 working capital deficits of $41,669 and $779,387 as of September 30, 2015 and December 31, 2014, respectively. Additionally, the Company has generated cumulative net losses of $9,498,052 during the period from inception through September 30, 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 a placement agent 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 offered up to 60 investment units (each, a Unit) in a Private Placement with each Unit sold at a price of $50,000 and consisting of (i) two hundred fifty thousand (250,000) shares of the Companys common stock, par value $0.00001; (ii) a $50,000 10% convertible note; and (iii) warrants for the purchase of 50,000 shares of the Companys common stock. The Company had raised $2,536,250 from this Private Placement. During the quarter ended September 30, 2015, Surna, Inc. (the Company) entered into several financing agreements totaling $1,175,400 consisting of securities purchase agreements and secured promissory notes as follows: Securities Purchase Agreements: In July 2015, the Company entered into securities purchase agreements with two accredited investors pursuant to which the Company sold an investor an 11% convertible note in the original principal amount of $106,000 and the other investor purchased a 10% convertible note in the original principal amount of $165,000, with an aggregate original issue discount of $21,000, and warrants to purchase up to an aggregate of 1,250,000 shares of the Companys common stock, subject to adjustment, for aggregate cash proceeds of $250,000. In September 2015, the Company entered into securities purchase agreements with three accredited investors, pursuant to which the Company sold and the investors purchased 10% convertible notes in the aggregate original principal amount of $440,000, with an aggregate original issue discount of $40,000, one year term and warrants to purchase up to an aggregate of 1,750,000 shares of the Companys common stock, subject to adjustment , for aggregate cash proceeds equal to $400,000. Secured Promissory Notes: In July and September 2015, the Company entered into secured promissory notes in the aggregate original principal amount of $464,400 with an aggregate discount of $34,400. The notes each have a term of five months, carry an interest charge of two percent (2%) per month on the outstanding balance and can be prepaid in whole or part without penalty. The notes are secured by a purchase money security agreement under which the Company granted a security interest in: (i) inventory purchased or assembled using the proceeds of the Notes and (ii) an assignment of payment from the customer purchasing the inventory. Additionally, the Company has reserved 8,000,000 shares of its common stock as additional security for these notes. All or a portion of the reserved shares would be available to the investor to satisfy a default by the Company. As of September 30, 2015, the Company has not taken down one of the notes in the amount of $226,400. These conditions may raise substantial doubt about the Companys ability to continue as a going concern without the raising of necessary additional financing. The Companys 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 | 9 Months Ended |
Sep. 30, 2015 | |
Balance Sheet Components | |
Balance Sheet Components | NOTE 3 - BALANCE SHEET COMPONENTS Receivables, net: Our receivables are summarized below: September 30, 2015 December 31, 2014 Accounts receivable $ 984,965 $ 404,830 Less allowances for collection losses (30,000 ) (10,000 ) $ 954,965 $ 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 managements 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 September 30, 2015 and December 31, 2014: 2015 2014 Finished goods $ 262,305 $ 56,297 Raw materials 601,320 207,734 Work in progress 15,534 - Total inventories $ 879,159 $ 264,031 Property and Equipment: At September 30, 2015 and December 31, 2014, property and equipment consists of: 2015 2014 Furniture & equipment $ 128,765 $ 106,844 Molds 31,063 31,063 Vehicles 62,286 62,286 Leasehold Improvements 35,804 32,994 257,918 233,187 Accumulated depreciation (112,883 ) (69,372 ) Property and equipment, net $ 145,035 $ 163,815 Depreciation expense amounted to $15,013 and $45,422 for the three and nine months ended September 30, 2015 and $5,366 for the three and nine months ended September 30, 2014. |
Acquisitions and Divestitures
Acquisitions and Divestitures | 9 Months Ended |
Sep. 30, 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 Companys 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 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 Companys 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, pursuant to that certain merger agreement, Safari Resource Group, Inc. was merged with and into the Company, with the Company surviving as the surviving corporation. As a result of the merger, Safaris 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 (Hydro 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 Hydro Purchase Agreement. The transaction was consummated on July 25, 2014 on 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 Keens 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 pays her an annual base salary of $96,000, which is subject to review annually by the Companys 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 Companys discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with her duties. Brandy Keens employment is at-will and may be terminated at any time, with or without cause. Pursuant to the terms of Stephen Keens 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 Companys Board of Directors. In August 2015, Stephen Keen became the Companys CEO. 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 Companys discretion from time to time and reimbursement of out of pocket expenses for business entertainment in connection with his duties. Stephen Keens 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 September 30, 2015. Unaudited supplemental pro forma financial information: The following unaudited supplemental pro forma financial information represents the consolidated results of operations of the Company as if the Hydro 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 Companys 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 Companys future results of operations after the Hydro acquisition. Nine Months Ended September 30, 2015 2014 Revenue $ 6,182,936 $ 1,855,972 Cost of sales 4,964,175 1,033,707 Gross Margin 1,218,761 822,265 Operating Expenses: Advertising and marketing 324,110 185,158 Product development costs 533,808 170,374 General and administrative expenses 2,471,568 1,507,470 Total operating expenses 3,329,486 1,863,003 Operating Loss (2,110,725 ) (1,040,737 ) Other Income (Expense) Interest expense (356,922 ) (55,524 ) Amortization of Debt Discount on Convertible Notes (1,727,126 ) (207,585 ) Change in Derivative Liability 474,873 372,445 Loss From Continuing Operations (1,609,175 ) (931,402 ) Loss From Discontinued Operations - (6,521 ) Net Loss (3,719,900 ) (937,923 ) Comprehensive loss: Foreign currency translation loss - - Comprehensive loss: $ (3,719,900 ) $ (937,923 ) Earnings per share attributable to Surna, Inc. Basic and fully diluted $ (0.03 ) $ (0.01 ) Weighted average number of common shares outstanding, Basic 119,997,166 100,222,948 Fully diluted 146,816,336 112,988,948 (1) Interest related to the promissory note issued for the Hydro acquisition of $10,575 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 a related party (LFL), whereby the Company sold 100% of the issued and outstanding stock of Surna Media to LFL, along with Surna Medias subsidiaries Surna HK and Surna HKs 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 LFLs assumption of all of the liabilities of the Surna Media Entities. The $2,643,878 represented 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 the 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: Nine months Ended September 30, 2015 2014 Revenues $ $ 5 Expenses 6,526 Income (loss) from discontinued $ $ (6,521 ) Income taxes Income (loss) from discontinued operations $ $ (6,521 ) |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value | NOTE 5 - FAIR VALUE ASC Topic 820, Fair Value Measurements and Disclosures 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 Level 2 Level 3 On a Recurring Basis: A financial asset or liabilitys 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 September 30, 2015 and December 31, 2014: (In thousands) Classification Total Level 1 Level 2 Level 3 Derivative Liabilities Conversion feature September 30, 2015 Current Liabilities $ $ December 31, 2014 Current Liabilities $ 847,438 $ 847,438 Derivative Liability - warrants September 30, 2015 Current Liabilities $ $ December 31, 2014 Current Liabilities $ 304,432 $ 304,432 Our Level 3 fair value liabilities represent contingent consideration recorded related to the embedded conversion features in the convertible notes issued in 2014. The change in the balance of the conversion feature derivative liabilities and warrant liabilities during the three month period ended September 30, 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 Companys stock price, historical volatility, and risk free interest rate, which do have observable Level 1 or Level 2 inputs. During the nine months ended September 30, 2015, the Company converted all of the series 1 convertible notes issued in 2014 into common stock, which gave rise to the fair value liabilities for the embedded conversion features. As a result, $910,757 has been credited to additional paid in capital in the condensed consolidated balance sheet. On a Non-Recurring Basis: In accordance with the provisions of ASC Topic 350, Intangibles Goodwill and Other 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 Companys 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 September 30, 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 | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 6 - INTANGIBLE ASSETS At September 30, 2015 and December 31, 2014, intangible assets primarily consisted of goodwill in the amount of $631,064 and other intangibles of $15,212 and $17,263, net of accumulated amortization of $5,287 and $3,238, 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 and $3,075 for the three and nine months ended September 30, 2015 and nil for the three and nine months ended September 30, 2014. |
Promissory Notes and Vehicle Lo
Promissory Notes and Vehicle Loan | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Promissory Note and Vehicle Loan | NOTE 7 - PROMISSORY NOTES AND VEHICLE LOAN In connection with the purchase of 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. 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 combined balance of the Note and Hydro Note at September 30, 2015 was $198,998, with $63,238 reflected as a current liability and $135,760 as a long term liability 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 per month for 60 months. The balance of the loan at September 30, 2015 was $36,382. As of September 30, 2015, future principal payments for our vehicle loan are as follows: Year Ended December 31 2015 (one remaining quarter) $ 3,064 2016 9,287 2017 9,664 2018 10,057 2019 4,315 $ 36,382 In July and September 2015, the Company entered into secured promissory notes in the aggregate original principal amount of $464,400 with an aggregate discount of $34,400. The notes each have a term of five months, carry an interest charge of two percent (2%) per month on the outstanding balance and can be prepaid in whole or part without penalty. The notes are secured by a purchase money security agreement under which the Company granted a security interest in: (i) inventory purchased or assembled using the proceeds of the Notes and (ii) an assignment of payment from the customer purchasing the inventory. Additionally, the Company has reserved 8,000,000 shares of its common stock as additional security for these notes. All or a portion of the reserved shares would be available to the investor to satisfy a default by the Company. As of September 30, 2015, the Company has not taken down one of the notes in the amount of $226,400. At September 30, 2015, the Secured Note had a carrying value of $185,652. |
Convertible Debt
Convertible Debt | 9 Months Ended |
Sep. 30, 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 issued (Series 3) 711,000 Convertible notes converted (Series 1) (1,336,783 ) Total 774,011 Debt discount 558,384 Less: Deferred finance charges (63,728 ) Balance September 30, 2015 1,268,667 Less: current portion (- ) Long-term portion $ 1,268,667 Convertible Promissory 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) were unsecured, (ii) bore interest at the rate of 10% per annum, and (iii) were due two years from the date of issuance. The convertible promissory notes were convertible at any time at the option of the investor into shares of the Companys 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 Companys common stock. During the nine months ended September 30, 2015, all of the series 1 convertible promissory notes were converted into 25,169,786 shares of common stock. Due to the variable conversion price the number of shares issuable upon conversion was variable and the fact that there was 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 was 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. Upon the issuance of the convertible notes, 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 was being amortized over the two year term of the convertible promissory notes. Upon conversion of each convertible note the unamortized portion of the debt discount was recorded as amortization of debt discount on convertible notes The Company recognized a charge of $406,658 for the quarter ended September 30, 2015 for amortization of this debt discount. As a result of the conversion of all of the series 1 convertible notes during the nine month period ended September 30, 2015, all of the accrued interest was converted along with the principal balance of the respective notes. Interest expenses for the nine months ended September 30, 2015 and 2014 is $140,934 and nil respectively. During the nine months ended September 30, 2015, the Company issued 25,169,786 shares of its common stock in connection with conversions of its series 1 convertible notes for $1,336,783principal amount and $216,141 accrued interest. The total of $1,552,924 was allocated to common stock and additional paid in capital as a result of the conversion. Convertible Promissory Notes Series 2 In October 2014, the Company engaged a placement agent 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. The Company offered up to 60 investment units (each, a Unit) with each Unit sold at a price of $50,000 and consisting of (i) two hundred fifty thousand (250,000) shares of the Companys 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 Companys 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 Companys common stock that is determined by dividing the amount to be converted by the $0.60 conversion price. Additionally, the entire principal amount due on each convertible note shall be automatically converted into Common Stock at the Automatic Conversion Price (the greater of $0.50 per share or 75% of the public offering price per share) 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 Companys 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 at a VWAP of at least $2.00 per share for a period of ten (10) consecutive trading days. The Company raised $2,536,250 from the sale of these Units. The gross proceeds from the sale of the convertible notes 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 $ 230,501 The Company recognized a charge of $290,588 and $792,200 for the three and nine months ended September 30, 2015 for amortization of this debt discount and a $1,990 charge for transaction costs. The carrying value of the notes as of September 30, 2015 was $1,116,249 and the unamortized debt discount was $1,411,985. Accrued interest on the series 2 convertible notes above as of September 30, 2015 and 2014 is $ 193,349 and nil, respectively. Interest expenses for the three and nine months ended September 30, 2015 is $63,927 and $179,247, respectively, and for the three and nine months ended September 30, 2014 is nil. Convertible Promissory Notes Series 3 In July 2015, the Company entered into securities purchase agreements with two accredited investors (each a Purchaser and together the Purchasers), pursuant to which the Company sold and the Purchasers purchased a 11% convertible note in the original principal amount of $106,000 and a one year term, 10% convertible note in the original principal amount of $165,000, with an aggregate original issue discount of $21,000 (each a Note and together the Notes), and warrants (the Warrants) to purchase up to an aggregate of 1,250,000 shares of the Companys common stock, subject to adjustment (the Common Stock), for aggregate cash proceeds of $250,000. In September 2015,the Company entered into securities purchase agreements with three accredited investors, pursuant to which the Company sold and the Purchasers purchased a one year term, 10% convertible notes in the aggregate original principal amount of $440,000, with an aggregate original issue discount of $40,000 (each a Note and together the Notes), and warrants (the Warrants) to purchase up to an aggregate of 1,750,000 shares of the Companys common stock, subject to adjustment , for aggregate cash proceeds equal to $400,000. The gross proceeds from the sale of the convertible notes are recorded net of a discount related to the conversion feature of the embedded conversion option. 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 charged to operations as interest expense in accordance with effective interest method within the period of the promissory notes. The following table sets forth the initial carrying value of the notes: Balance at January 1, 2014 $ - Issuance of convertible notes 711,000 Less: Fair value of warrants (171,976 ) Less: Original issue discount (61,000 ) Less: Debt discount- conversion feature (349,726 ) Initial carrying value of notes $ 128.298 As of September 30, 2015, future principal payments for our long-term convertible loans were as follows: Year Ended December 31, 2015 $ - 2016 3,247,250 Thereafter - $ 3,247,250 |
Derivative Liabilities
Derivative Liabilities | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liabilities | NOTE 9 - DERIVATIVE LIABILITIES The Series 1 convertible promissory notes 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 Series 1 convertible notes, 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). During the nine months ended September 30, 2015, the Company converted all of the series 1 convertible notes issued in 2014 into common stock, which gave rise to fair value liabilities for the embedded conversion features. At conversion, the balance of the derivative liability of $910,757 was credited to additional paid in capital in the consolidated condensed balance sheet. The following table represents the Companys derivative liability activity from the initial measurement at Issuance date through September 30, 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 233,760 Change in derivative liability during the nine months ended September 30, 2015 (1,385,630 ) Derivative liabilities balance, September 30, 2015 $ - |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 10 - RELATED PARTY TRANSACTIONS As of September 30, 2015, the Company had a balance of $198,998 due to the Chief Executive Officer and his wife, who is Vice President of Sales. The debt 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. During the nine months ended September 30, 2015, $194,958 of debt due the Companys former CEO was retired for a one-time, immediate cash payment of $100. The retirement has been recognized as a credit to additional paid in capital. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 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 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 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 | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 12 - COMMITMENTS AND CONTINGENCIES Operating Leases In connection with its acquisition of 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: October 1, 2015 through December 31, 2015 $ 48,882 January 1 through September 30, 2016 146,646 $ 195,528 Rent expense for office space amounted to $72,487 and $168,418 for the three and nine months ended September 30, 2015, respectively, and $21,809 for the three and nine months ended September 30, 2014. 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 two years for the two agreements totals $336,000. 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 Companys 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 Companys business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. |
Patents and Trademarks
Patents and Trademarks | 9 Months Ended |
Sep. 30, 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 November 11, 2015, the Company has thirteen 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 | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Shareholders' Equity | NOTE 14 - SHAREHOLDERS EQUITY Preferred Stock As of both September 30, 2015 and December 31, 2014, there were 77,220,000 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock has no conversion rights, liquidation priorities, or other preferences; it 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), Safaris 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 September 30, 2015 and December 31, 2014, there were 121,855,390 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 Consulting Agreement). 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 Consulting Agreement called for the consultant 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 September 30, 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 25,169,786 shares of its common stock in connection with conversions of its series 1 convertible notes. $1,668,176 was allocated to common stock and additional paid in capital as a result of the conversion. On August 10, 2015, Mr. Bollich transferred 21,408,023 shares of the Companys common stock to the Company. This transfer was not the result of any agreements between the Company and Mr. Bollich. On August 11, 2015, the Company authorized cancelation of the shares. During the three months ended September 30, 2015, the Company issued 46,127 shares of its common stock for services to the Company. The changes in shareholders equity for the nine months ended September 30, 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 Shares issued for services 46,127 Conversion of Convertible Notes to Common Shares 25,169,786 252 Retirement of shares (21,428,023 ) (214 ) End of Period 121,855,390 1,219 Paid-in capital Beginning of Period 4,881,918 Sale of Common Shares 949,107 Conversion of Convertible Notes to Common Shares 2,578,771 Retirement of common shares 195,172 Imputed Interest 2,925 End of Period 8,607,893 Accumulated Deficit Beginning of Period (5,767,577 ) Loss for the nine months ended September 30, 2015 (3,730,475 ) End of Period (9,498,052 ) Total Stockholders Deficit $ (888,168 ) |
Warrants and Options
Warrants and Options | 9 Months Ended |
Sep. 30, 2015 | |
Warrants And Options | |
Warrants and Options | NOTE 15 - WARRANTS AND OPTIONS Warrant activity since January 1, 2014 is as follows: Warrants Weighted- Average Exercise Price Aggregate Intrinsic Value Outstanding at January 1, 2014 - $ - $ - Granted (Series 2 convertible debt) 1,625,000 3.00 - Exercised - - - Expired - - - Outstanding at December 31, 2014 1,625,000 $ 3.00 $ - Granted (Series 2 convertible debt) 911,250 3.00 - Granted (Series 3 convertible debt) 2,475,000 0.25 - Exercised - - - Expired - - - Outstanding at September 30, 2015 5,011,250 $ 1.64 $ - During the nine months ended September 30, 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 the series 2 convertible notes. These warrants have an exercise price of $3.00 per share and expire within four years from the date of issue. Additionally, during the quarter ended September 30, 2015 the Company issued warrants to purchase 2,475,000 shares of common stock in connection with the series 3 convertible notes with an exercise price of $0.25 per share which expire five years from issuance. Total warrants outstanding as of September 30, 2015 were 5,011,250 with an average exercise price of $1.64 per share. The following table is a summary of the warrants calculation, which was determined using the Black-Scholes model with the following assumptions: 2015 2014 (1) risk free interest rate of 1.32%-1.58 % 1.38 % (2) dividend yield of 0.00 % 0.00 % (3) volatility factor of 144%-162 % 137 % (4) an expected life of the conversion feature of 3.5-5 years 4 years (5) estimated fair value of the companys common stock of $0.05-$0.13 per share $ 0.32 per share The fair value of the warrants issued as of September 30, 2015 and December 31, 2014 was $0.10 and $0.12 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 September 30, 2015 or year ended December 31, 2014 and no new options granted during the quarter ended September 30, 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 September 30, 2015 10,296,000 $ - The stock options outstanding are the result of converting the existing options in Safari into options in Surna 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 September 30, 2015 was $1,235,520. The options expire in March 2017. |
Kind Agrisoft Note
Kind Agrisoft Note | 9 Months Ended |
Sep. 30, 2015 | |
Kind Agrisoft Note | |
Agrisoft Development Group Note | NOTE 16 KIND AGRISOFT NOTE On January 8, 2015, the Company agreed to acquire 66% of the total membership interests in Agrisoft Development Group, LLC (Agrisoft). Prior to the closing of the transaction, however, Kind Agrisoft, LLC (Kind Agrisoft), with the Companys consent, agreed to purchase 100% of Agrisofts assets. On June 23, 2015, in exchange for the Companys consent to its asset purchase agreement, Kind Agrisoft conveyed the Company a Note for payment of $272,217 plus annual interest of eight percent (8%), and it granted to the Company a secured interest in its accounts receivable and intellectual property to guarantee such payment. The Company agreed to subordinate its security interest (if required by Kinds credible lenders) once the amounts owing under the Note were less than $100,000. As of November 11, 2015, Kind Agrisoft had repaid $65,000 in two payments and is obligated to make additional payments of $50,000 on the first of every quarter. Furthermore, Kind Agrisoft is obligated to make additional ongoing payments to the Company in the form of a 1% quarterly royalty on EBITDA (earnings before interest, taxes, depreciation, and amortization) until Kind Agrisofts total payments to the Company (including payments under the Note and royalty on EBITDA) reach $600,000. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 17 - SUBSEQUENT EVENTS On October 27, 2015, Bryon Jorgenson, Chief Operating Officer of Surna, Inc. (the Company), informed the Company of his intent to resign his position effective at the end of October. Jorgenson and the Company have agreed to terms of a consulting agreement under which Jorgenson may be engaged to provide services on certain projects at an hourly rate as needed. position effective at the end of the month. On November 11, 2015, the Company appointed Trent Doucet as its Chief Operating Officer. In 2003, Doucet founded Primus Networks, Inc., which was acquired in 2011 by mindSHIFT Technologies, a leading managed IT service provider. Subsequently, Doucet joined mindSHIFT as VP and Managing Director, where he was responsible for revenue growth in mindSHIFT's strategic services group. Doucet will initially be compensated at the annual rate of $120,000. Adjustment or additions to his compensation will be reviewed by the Board of Directors following 120 days of employment. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 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., a Nevada corporation (Safari), 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), pursuant to which Hydro became a wholly-owned subsidiary of the Company. |
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 Medias 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 and nine months ended September 30, 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, 2014, has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP 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 Medias subsidiaries, Surna HK and Flying Cloud. Certain reclassifications have been made to amounts in prior periods to conform to 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 units 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 Companys 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 of one percent of sales, accordingly no separate provision was deemed necessary as of September 30, 2015 and December 31, 2014 respectively. |
Fair Value Measurements | Fair Value Measurement: ASC 820, Fair Value Measurement 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, approximates 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. |
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 the instruments as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entitys Own Stock (ASC 815-40). Certain of the convertible debentures have a variable exercise price, and thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares with which to settle the transaction. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. We evaluated the application of ASC 815-40-25 to the warrants to purchase common stock issued with our Series 2 convertible debt instruments 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 Companys 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 three and nine months ended September 30, 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 United States Dollars (USD). The functional currency of the Companys former subsidiary, Surna HK, was the Hong Kong Dollar (HKD). The functional currency of Surna HKs operating subsidiary in the PRC, Flying Cloud, was the Renminbi (RMB), the PRCs currency. Monetary assets and liabilities denominated in currencies other than the functional currency 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 Companys reporting currency, 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: September 30, 2015 December 31, 2014 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 and nine months ended September 30, 2015. |
Concentration | Concentrations: The Companys accounts receivable from four customers make up 82% of the total balance as of September 30, 2015. One customer made up 12% of the total revenue for the nine months ended September 30, 2015, and four customers made up 44% of the total revenue for the three months ended September 30, 2015. The Company made 45% of its purchases from three vendors during the quarter ended September 30, 2015 and 48% of its purchases from three vendors during the nine months ended September 30, 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-owner 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 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: September 30, 2015 December 31, 2014 Convertible notes 11,511,919 10,852,708 Stock options 10,296,000 10,296,000 Warrants 5,011,250 1,625,000 Diluted shares outstanding 26,819,169 22,773,708 |
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 entitys 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 entitys 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 Companys 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 believe that the adoption of these will not have a material impact on our financial statements. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 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: September 30, 2015 December 31, 2014 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 and nine months ended September 30, 2015. |
Schedule of Anti-dilutive Shares Outstanding | Potential participating securities that were deemed to be anti-dilutive are noted below: September 30, 2015 December 31, 2014 Convertible notes 11,511,919 10,852,708 Stock options 10,296,000 10,296,000 Warrants 5,011,250 1,625,000 Diluted shares outstanding 26,819,169 22,773,708 |
Balance Sheet Components (Table
Balance Sheet Components (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Balance Sheet Components | |
Schedule of Accounts Receivable | Our receivables are summarized below: September 30, 2015 December 31, 2014 Accounts receivable $ 984,965 $ 404,830 Less allowances for collection losses (30,000 ) (10,000 ) $ 954,965 $ 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 September 30, 2015 and December 31, 2014: 2015 2014 Finished goods $ 262,305 $ 56,297 Raw materials 601,320 207,734 Work in progress 15,534 - Total inventories $ 879,159 $ 264,031 |
Schedule of Property and Equipment | At September 30, 2015 and December 31, 2014, property and equipment consists of: 2015 2014 Furniture & equipment $ 128,765 $ 106,844 Molds 31,063 31,063 Vehicles 62,286 62,286 Leasehold Improvements 35,804 32,994 257,918 233,187 Accumulated depreciation (112,883 ) (69,372 ) Property and equipment, net $ 145,035 $ 163,815 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 9 Months Ended |
Sep. 30, 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 | Nine Months Ended September 30, 2015 2014 Revenue $ 6,182,936 $ 1,855,972 Cost of sales 4,964,175 1,033,707 Gross Margin 1,218,761 822,265 Operating Expenses: Advertising and marketing 324,110 185,158 Product development costs 533,808 170,374 General and administrative expenses 2,471,568 1,507,470 Total operating expenses 3,329,486 1,863,003 Operating Loss (2,110,725 ) (1,040,737 ) Other Income (Expense) Interest expense (356,922 ) (55,524 ) Amortization of Debt Discount on Convertible Notes (1,727,126 ) (207,585 ) Change in Derivative Liability 474,873 372,445 Loss From Continuing Operations (1,609,175 ) (931,402 ) Loss From Discontinued Operations - (6,521 ) Net Loss (3,719,900 ) (937,923 ) Comprehensive loss: Foreign currency translation loss - - Comprehensive loss: $ (3,719,900 ) $ (937,923 ) Earnings per share attributable to Surna, Inc. Basic and fully diluted $ (0.03 ) $ (0.01 ) Weighted average number of common shares outstanding, Basic 119,997,166 100,222,948 Fully diluted 146,816,336 112,988,948 |
Schedule of Operations | Summary results of operations for the Surna Media Entities business were as follows: Nine months Ended September 30, 2015 2014 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) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Asset Liabilities Recurring Basis | (In thousands) Classification Total Level 1 Level 2 Level 3 Derivative Liabilities Conversion feature September 30, 2015 Current Liabilities $ $ December 31, 2014 Current Liabilities $ 847,438 $ 847,438 Derivative Liability - warrants September 30, 2015 Current Liabilities $ $ December 31, 2014 Current Liabilities $ 304,432 $ 304,432 |
Promissory Notes and Vehicle 28
Promissory Notes and Vehicle Loan (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Future Principal Payments | As of September 30, 2015, future principal payments for our vehicle loan are as follows: Year Ended December 31 2015 (one remaining quarter) $ 3,064 2016 9,287 2017 9,664 2018 10,057 2019 4,315 $ 36,382 |
Convertible Debt (Tables)
Convertible Debt (Tables) | 9 Months Ended |
Sep. 30, 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 issued (Series 3) 711,000 Convertible notes converted (Series 1) (1,336,783 ) Total 774,011 Debt discount 558,384 Less: Deferred finance charges (63,728 ) Balance September 30, 2015 1,268,667 Less: current portion (- ) Long-term portion $ 1,268,667 |
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 $ 230,501 |
Schedule of Future Principal Payments of Convertible Loan | The following table sets forth the initial carrying value of the notes: Balance at January 1, 2014 $ - Issuance of convertible notes 711,000 Less: Fair value of warrants (171,976 ) Less: Original issue discount (61,000 ) Less: Debt discount- conversion feature (349,726 ) Initial carrying value of notes $ 128.298 |
Schedule of Debt Carrying Value | As of September 30, 2015, future principal payments for our long-term convertible loans were as follows: Year Ended December 31, 2015 $ - 2016 3,247,250 Thereafter - $ 3,247,250 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Liabilities Activity | The following table represents the Companys derivative liability activity from the initial measurement at Issuance date through September 30, 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 233,760 Change in derivative liability during the nine months ended September 30, 2015 (1,385,630 ) Derivative liabilities balance, September 30, 2015 $ - |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Lease Yearly Payment | The lease term extends through September 30, 2016 and calls for payment as follows: October 1, 2015 through December 31, 2015 $ 48,882 January 1 through September 30, 2016 146,646 $ 195,528 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Schedule of Shareholder's Equity | The changes in shareholders equity for the nine months ended September 30, 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 Shares issued for services 46,127 Conversion of Convertible Notes to Common Shares 25,169,786 252 Retirement of shares (21,428,023 ) (214 ) End of Period 121,855,390 1,219 Paid-in capital Beginning of Period 4,881,918 Sale of Common Shares 949,107 Conversion of Convertible Notes to Common Shares 2,578,771 Retirement of common shares 195,172 Imputed Interest 2,925 End of Period 8,607,893 Accumulated Deficit Beginning of Period (5,767,577 ) Loss for the nine months ended September 30, 2015 (3,730,475 ) End of Period (9,498,052 ) Total Stockholders Deficit $ (888,168 ) |
Warrants and Options (Tables)
Warrants and Options (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Warrants And Options | |
Schedule of Stock Warrants Activity | Warrant activity during the years ended, is as follows: Warrants Weighted- Average Exercise Price Aggregate Intrinsic Value Outstanding at January 1, 2014 - $ - $ - Granted (Series 2 convertible debt) 1,625,000 3.00 - Exercised - - - Expired - - - Outstanding at December 31, 2014 1,625,000 $ 3.00 $ - Granted (Series 2 convertible debt) 911,250 3.00 - Granted (Series 3 convertible debt) 2,475,000 0.25 - Exercised - - - Expired - - - Outstanding at September 30, 2015 5,011,250 $ 1.64 $ - |
Schedule of Fair Value of Option Award Valuation Assumptions | The following table is a summary of the warrants calculation, which was determined using the Black-Scholes model with the following assumptions: 2015 2014 (1) risk free interest rate of 1.32%-1.58 % 1.38 % (2) dividend yield of 0.00 % 0.00 % (3) volatility factor of 144%-162 % 137 % (4) an expected life of the conversion feature of 3.5-5 years 4 years (5) estimated fair value of the companys common stock of $0.05-$0.13 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 September 30, 2015 10,296,000 $ - |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details Narrative) | Mar. 27, 2012USD ($) | Sep. 02, 2011shares | Sep. 30, 2015Integer | Sep. 30, 2014Integer | Sep. 30, 2015 | Jul. 31, 2014 | Jul. 25, 2014 |
Number of reportable segment | 1 | 1 | |||||
Four Customers [Member] | Accounts Receivable Member] | |||||||
Percentage of revenue earned | 44.00% | 82.00% | |||||
One Customer [Member] | Accounts Receivable Member] | |||||||
Percentage of revenue earned | 12.00% | ||||||
Three Vendors [Member] | Purchases [Member] | |||||||
Percentage of revenue earned | 45.00% | ||||||
Four Vendors [Member] | Purchases [Member] | |||||||
Percentage of revenue earned | 48.00% | ||||||
Vendors [Member] | Minimum [Member] | |||||||
Percentage of revenue earned | 10.00% | ||||||
Hydro Innovations, LLC [Member] | |||||||
Percentage of membership interest acquired | 100.00% | 100.00% | |||||
Surna Media Inc [Member] | |||||||
Stock issued during period, shares, acquisitions | shares | 20,000,000 | ||||||
Surna Networks Inc And Surna Networks Inc [Member] | |||||||
Total sales price | $ | $ 1 |
Summary of Significant Accoun35
Summary of Significant Accounting Policies - Schedule of Foreign Exchange Contracts (Details) | Sep. 30, 2015 | [1] | Dec. 31, 2014 |
Period End HKD [Member] | |||
Foreign currency exchange rate | 7.75 | ||
Average Period HKD [Member] | |||
Foreign currency exchange rate | 7.75 | ||
Period End RMB [Member] | |||
Foreign currency exchange rate | 6.21 | ||
Average Period RMB [Member] | |||
Foreign currency exchange rate | 6.15 | ||
[1] | Not applicable to the three and nine months ended September 30, 2015. |
Summary of Significant Accoun36
Summary of Significant Accounting Policies - Schedule of Anti-dilutive Shares Outstanding (Details) - shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Diluted shares outstanding | 26,819,169 | 22,773,708 |
Convertible Notes [Member] | ||
Diluted shares outstanding | 11,511,919 | 10,852,708 |
Stock Option [Member] | ||
Diluted shares outstanding | 10,296,000 | 10,296,000 |
Warrant [Member] | ||
Diluted shares outstanding | 5,011,250 | 1,625,000 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) | Mar. 28, 2014USD ($) | Jul. 31, 2015USD ($)shares | Oct. 31, 2014USD ($)Integer$ / sharesshares | Sep. 30, 2015USD ($)$ / sharesshares | Sep. 30, 2015USD ($)$ / sharesshares | Dec. 31, 2014USD ($)$ / sharesshares | Oct. 16, 2014USD ($) |
Working capital deficits | $ 41,669 | $ 41,669 | $ 779,387 | ||||
Cumulative net losses | $ 9,498,052 | $ 9,498,052 | $ 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 | Integer | 60 | ||||||
Each unit consisting number of shares | shares | (250,000) | ||||||
Common stock, par value | $ / shares | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||
Convertible debt amount | $ 50,000 | ||||||
Percentage of convertible debt | 10.00% | ||||||
Number of warrants issued | shares | 50,000 | ||||||
Issuance of warrants to purchase of common stock | shares | 50,000 | 911,250 | 1,625,000 | ||||
Issuance of shares raised | $ 2,536,250 | ||||||
Secured promissoy note | 1,175,400 | $ 1,175,400 | |||||
Notes payable amount | $ 226,400 | 226,400 | |||||
Secured Promissory [Member] | |||||||
Debt conversion original amount | $ 464,400 | $ 464,400 | |||||
Notes term | 5 months | 5 months | |||||
Percentage of interest charge per month on outstanding | 2.00% | 2.00% | 2.00% | ||||
Original debt issue discount | $ 34,400 | $ 34,400 | |||||
Number of shares reserve for future issuance | shares | 8,000,000 | 8,000,000 | 8,000,000 | ||||
Securities Purchase Agreements [Member] | |||||||
Issuance of warrants to purchase of common stock | shares | 1,250,000 | 1,750,000 | |||||
Issuance of shares of common stock, convertible notes and warrants | $ 250,000 | $ 400,000 | |||||
Notes term | 1 year | ||||||
Original debt issue discount | $ 21,000 | $ 40,000 | |||||
Securities Purchase Agreements [Member] | 11% Convertible Note [Member] | |||||||
Percentage of original convertible note sold | 11.00% | 10.00% | |||||
Debt conversion original amount | $ 106,000 | $ 440,000 | |||||
Securities Purchase Agreements [Member] | 10% Convertible Note [Member] | |||||||
Percentage of original convertible note sold | 10.00% | ||||||
Debt conversion original amount | $ 165,000 | ||||||
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 | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Balance Sheet Components | ||||
Depreciation expense | $ 15,013 | $ 5,366 | $ 45,422 | $ 5,366 |
Balance Sheet Components - Sche
Balance Sheet Components - Schedule of Accounts Receivable (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Balance Sheet Components | ||
Accounts receivable | $ 984,965 | $ 404,830 |
Less allowances for collection losses | (30,000) | (10,000) |
Accounts receivable, net | $ 954,965 | $ 394,830 |
Balance Sheet Components - Comp
Balance Sheet Components - Components of Inventories (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Balance Sheet Components | ||
Finished goods | $ 262,305 | $ 56,297 |
Raw materials | 601,320 | $ 207,734 |
Work in progress | 15,534 | |
Total inventories | $ 879,159 | $ 264,031 |
Balance Sheet Components - Sc41
Balance Sheet Components - Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Property and equipment, Gross | $ 257,918 | $ 233,187 |
Accumulated depreciation | (112,883) | (69,372) |
Property and equipment, net | 145,035 | 163,815 |
Furniture & Equipment [Member] | ||
Property and equipment, Gross | 128,765 | 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 | $ 35,804 | $ 32,994 |
Acquisitions and Divestitures42
Acquisitions and Divestitures (Details Narrative) - USD ($) | Sep. 30, 2014 | Jul. 18, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | Jul. 31, 2014 | Jul. 25, 2014 | Mar. 31, 2014 |
Promissory note | $ 135,760 | $ 195,759 | |||||
Additional paid in capital | 8,607,893 | $ 4,881,918 | |||||
Surna Media Entities [Member] | |||||||
Due to related party | 2,643,878 | ||||||
Additional paid in capital | 2,643,878 | ||||||
Surna Media Entities [Member] | |||||||
Annual base salary | 250,000 | ||||||
Sales price | $ 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] | |||||||
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 | $ 0.00024 | ||||||
Payment of sale price in cash | $ 1 | ||||||
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% | 100.00% | |||||
Note bear interest rate | 6.00% | ||||||
Note payable in monthly installment | $ 5,000 | ||||||
Accrued interest and principal due date | Jul. 18, 2016 | ||||||
Promissory note | $ 250,000 |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Fair Values of Hydro Assets Acquired and Liabilities Assumed (Details) | Jun. 30, 2014USD ($) |
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 Divestitures44
Acquisitions and Divestitures - Unaudited Supplemental Pro Forma Financial Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Business Combinations [Abstract] | ||
Revenue | $ 6,182,936 | $ 1,855,972 |
Cost of sales | 4,964,175 | 1,033,707 |
Gross Margin | 1,218,761 | 822,265 |
Advertising and marketing | 324,110 | 185,158 |
Product development costs | 533,808 | 170,374 |
General and administrative expenses | 2,471,568 | 1,507,470 |
Total operating expenses | 3,329,486 | 1,863,003 |
Operating loss | (2,110,725) | (1,040,737) |
Interest expense | (356,922) | (55,524) |
Amortization of Debt Discount on Convertible Notes | (1,727,126) | (207,585) |
Change in Derivative Liability | 474,873 | 372,445 |
Loss from continuing operations | $ (1,609,175) | (931,402) |
Loss From Discontinued Operations | (6,521) | |
Net Loss | $ (3,719,900) | $ (937,923) |
Foreign currency translation loss | ||
Comprehensive loss: | $ (3,719,900) | $ (937,923) |
Basic and fully diluted | $ (0.03) | $ (0.01) |
Basic | 119,997,166 | 100,222,948 |
Fully diluted | 146,816,336 | 112,988,948 |
Acquisitions and Divestitures45
Acquisitions and Divestitures - Unaudited Supplemental Pro Forma Financial Information (Details) (Parenthetical) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Hydro [Member] | ||
Interest related to promissory note issued | $ 10,575 | $ 10,575 |
Acquisitions and Divestitures46
Acquisitions and Divestitures - Schedule of Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues | $ 3,634,091 | $ 859,488 | $ 6,182,936 | $ 1,206,047 |
Expenses | $ 1,219,827 | $ 940,941 | $ 3,329,486 | 1,353,608 |
Income (loss) from discontinued operations | (6,521) | |||
Surna Media Entities [Member] | ||||
Revenues | 5 | |||
Expenses | 6,526 | |||
Income (loss) from discontinued | $ (6,521) | |||
Income taxes | ||||
Income (loss) from discontinued operations | $ (6,521) |
Fair Value (Details Narrative)
Fair Value (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Paid in capital | $ 8,607,893 | $ 4,881,918 |
Convertible Notes [Member] | ||
Paid in capital | $ 910,757 |
Fair Value - Fair Value of Asse
Fair Value - Fair Value of Asset Liabilities Recurring Basis (Details) | Sep. 30, 2015USD ($) |
Derivative Liabilities - Conversion feature, beginning | $ 847,438 |
Derivative Liabitility - warrants, beginning | $ 304,432 |
Derivative Liabitility - warrants, ending | |
Derivative Liabilities - Conversion feature, ending | |
Level 1 [Member] | |
Derivative Liabilities - Conversion feature, beginning | |
Derivative Liabitility - warrants, beginning | |
Derivative Liabitility - warrants, ending | |
Derivative Liabilities - Conversion feature, ending | |
Level 2 [Member] | |
Derivative Liabilities - Conversion feature, beginning | |
Derivative Liabitility - warrants, beginning | |
Derivative Liabitility - warrants, ending | |
Derivative Liabilities - Conversion feature, ending | |
Level 3 [Member] | |
Derivative Liabilities - Conversion feature, beginning | $ 847,438 |
Derivative Liabitility - warrants, beginning | $ 304,432 |
Derivative Liabitility - warrants, ending | |
Derivative Liabilities - Conversion feature, ending |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Intangible assets, net | $ 631,064 | $ 631,064 | $ 631,064 | ||
Other intangible assets | 15,212 | 15,212 | 17,263 | ||
Accumulated amortization of Intangible assets | 5,287 | 5,287 | $ 3,238 | ||
Amortization expense for intangible assets | $ 1,025 | $ 3,075 |
Promissory Notes and Vehicle 50
Promissory Notes and Vehicle Loan (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended |
Jul. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | |
Promissory note | $ 135,760 | $ 195,759 | |
Long term note payable | 226,400 | ||
Current portion long term debt | $ 188,716 | 9,731 | |
Hydro Note [Member] | |||
Annual interest rate on promissory note | 12.00% | ||
Maturity date of promissory note | Feb. 1, 2016 | ||
Current value on notes payable | $ 63,238 | ||
Long term note payable | 198,998 | ||
Current portion long term debt | 135,760 | ||
Secured Promissory [Member] | |||
Debt conversion original amount | $ 464,400 | $ 464,400 | |
Notes term | 5 months | 5 months | |
Percentage of interest charge per month on outstanding | 2.00% | 2.00% | |
Original debt issue discount | $ 34,400 | $ 34,400 | |
Number of shares reserve for future issuance | 8,000,000 | 8,000,000 | |
Secured Promissory Note [Member] | |||
Promissory note | $ 185,652 | ||
Percentage of interest charge per month on outstanding | 2.00% | ||
Number of shares reserve for future issuance | 8,000,000 | ||
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 | 872 | |
Maturity date of promissory note | Jul. 18, 2016 | ||
Current value on notes payable | 47,286 | ||
Balance on loan | $ 36,382 | ||
Interest rate on loan | 3.99% | ||
Installment period on loan payable | 60 months |
Promissory Notes and Vehicle 51
Promissory Notes and Vehicle Loan - Schedule of Future Principal Payments (Details) | Sep. 30, 2015USD ($) |
2015 (one remaining quarter) | |
2,016 | $ 3,247,250 |
Vehicle Loan [Member] | |
2015 (one remaining quarter) | 3,064 |
2,016 | 9,287 |
2,017 | 9,664 |
2,018 | 10,057 |
2,019 | 4,315 |
Promissory note | $ 36,556 |
Convertible Debt (Details Narra
Convertible Debt (Details Narrative) - USD ($) | Oct. 31, 2014 | Jul. 31, 2015 | Oct. 31, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 |
Convertible promissory notes, aggregate principal amount | $ 3,247,250 | $ 3,247,250 | ||||||
Amortization of debt discount | (716,078) | $ (139,420) | 1,727,126 | $ (207,585) | ||||
Accrued interest expenses | $ 200,067 | $ 200,067 | $ 202,123 | |||||
Conversion of Convertible notes to Common Shares, shares | 25,169,786 | |||||||
Conversion of Convertible notes to Common Shares | $ 427,858 | |||||||
Common stock shares, issued | 121,855,390 | 121,855,390 | 113,511,250 | |||||
Common stock par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||
Convertible note | $ 50,000 | $ 50,000 | ||||||
Percentage of convertible debt | 10.00% | 10.00% | ||||||
Common stock price per share | $ 772 | $ 772 | ||||||
Proceeds from issuance of common stock | $ 911,250 | $ 1,625,000 | ||||||
Notes payable | $ 226,400 | 226,400 | ||||||
Secured promissoy note | $ 1,175,400 | 1,175,400 | ||||||
Issuance of warrants to purchase of common stock | 50,000 | 911,250 | 1,625,000 | |||||
Securities Purchase Agreements [Member] | ||||||||
Original debt issue discount | $ 21,000 | $ 40,000 | ||||||
Issuance of warrants to purchase of common stock | 1,250,000 | 1,750,000 | ||||||
Issuance of shares of common stock, convertible notes and warrants | $ 250,000 | $ 400,000 | ||||||
VWAP [Member] | ||||||||
Common stock price per share | $ 2 | $ 2 | ||||||
Proceeds from issuance of common stock | 2,536,250 | |||||||
Newbridge Securities Corporation [Member] | ||||||||
Investment unit sold at price | $ 50,000 | |||||||
Common stock shares, issued | (250,000) | (250,000) | ||||||
Common stock par value | $ 0.00001 | $ 0.00001 | ||||||
Convertible note | $ 50,000 | $ 50,000 | ||||||
Percentage of convertible debt | 10.00% | 10.00% | ||||||
Warrants issued | 50,000 | |||||||
Purchase of common stock | 50,000 | |||||||
Conversion price per share | $ 0.60 | $ 0.60 | ||||||
Maximum conversion price per share | $ .50 | $ .50 | ||||||
Public offering price percentage | 75.00% | 75.00% | ||||||
Common stock price per share | $ 2 | $ 2 | ||||||
Proceeds from issuance of common stock | $ 5,000,000 | |||||||
Convertible Promissory Notes Series 1 [Member] | ||||||||
Convertible promissory notes, aggregate principal amount | $ 1,336,783 | |||||||
Convertible Debt [Member] | ||||||||
Convertible promissory notes, aggregate principal amount | $ 1,336,783 | $ 1,336,783 | ||||||
Convertible promissory notes, interest rate | 10.00% | 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 Companys 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 Companys common stock. | |||||||
Fair value of embedded derivative | $ 1,324,283 | $ 1,324,283 | ||||||
Convertible promissory notes, amortization discount period | 2 years | |||||||
Unamortized debt discount | 1,324,283 | $ 1,324,283 | ||||||
Conversion of debt into shares | 25,169,786 | |||||||
Amortization of debt discount | $ 406,658 | |||||||
Common stock and additional paid in capital | 1,552,924 | 1,552,924 | ||||||
Convertible note | 711,000 | 711,000 | $ 2,961,783 | |||||
Series One Notes [Member] | ||||||||
Interest expenses | $ 140,934 | |||||||
Conversion of Convertible notes to Common Shares, shares | 25,169,786 | |||||||
Conversion of Convertible notes to Common Shares | $ 1,336,783 | |||||||
Conversion accrued interest | 216,141 | |||||||
Series Two Notes [Member] | ||||||||
Unamortized debt discount | 1,411,985 | 1,411,985 | ||||||
Amortization of debt discount | 290,588 | 792,200 | ||||||
Accrued interest expenses | 193,349 | 193,349 | ||||||
Interest expenses | 63,927 | 179,247 | ||||||
Transaction cost | 1,990 | |||||||
Notes payable | $ 1,116,249 | 1,116,249 | ||||||
Convertible Promissory Notes Series 3 [Member] | Securities Purchase Agreements [Member] | ||||||||
Original debt issue discount | $ 21,000 | $ 40,000 | ||||||
Issuance of warrants to purchase of common stock | 1,250,000 | 1,750,000 | ||||||
Issuance of shares of common stock, convertible notes and warrants | $ 250,000 | $ 400,000 | ||||||
11% Convertible Note [Member] | Securities Purchase Agreements [Member] | ||||||||
Percentage of original convertible note sold | 11.00% | 10.00% | ||||||
Debt conversion original amount | $ 106,000 | $ 440,000 | ||||||
11% Convertible Note [Member] | Securities Purchase Agreements [Member] | Convertible Promissory Notes Series 3 [Member] | ||||||||
Percentage of original convertible note sold | 11.00% | 10.00% | ||||||
Debt conversion original amount | $ 106,000 | $ 440,000 | ||||||
10% Convertible Note [Member] | Securities Purchase Agreements [Member] | ||||||||
Percentage of original convertible note sold | 10.00% | |||||||
Debt conversion original amount | $ 165,000 | |||||||
10% Convertible Note [Member] | Securities Purchase Agreements [Member] | Convertible Promissory Notes Series 3 [Member] | ||||||||
Percentage of original convertible note sold | 10.00% | |||||||
Debt conversion original amount | $ 165,000 |
Convertible Debt - Schedule of
Convertible Debt - Schedule of Future Principal Payments of Convertible Loan (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Oct. 31, 2014 |
Total | $ 50,000 | ||
Less: debt discount | $ 558,384 | $ (2,473,239) | |
Less: Deferred finance charges | $ (63,728) | 488,544 | |
Less: current portion | |||
Long-term portion | $ 1,265,787 | 488,544 | |
Convertible Notes Issued Series One [Member] | |||
Total | (1,336,783) | 1,336,783 | |
Convertible Notes Issued Series Two [Member] | |||
Total | 911,250 | $ 1,625,000 | |
Convertible Notes Converted [Member] | |||
Total | |||
Convertible Debt [Member] | |||
Total | 711,000 | $ 2,961,783 | |
Convertible Notes Issued Series Three [Member] | |||
Total | $ 711,000 |
Convertible Debt - Schedule o54
Convertible Debt - Schedule of Non Cash Issuance Cost (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 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 notes | $ 230,501 |
Convertible Debt - Schedule o55
Convertible Debt - Schedule of Debt Carrying Value (Details) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Debt Disclosure [Abstract] | |
Balance at January 1, 2014 | |
Issuance of convertible notes | $ 711,000 |
Less: Fair value of warrants | (171,976) |
Less: Original issue discount | (61,000) |
Less: Debt discount- conversion feature | (349,726) |
Initial carrying value of notes | $ 128,298 |
Convertible Debt - Schedule o56
Convertible Debt - Schedule of Convertible Promissory Notes Movement (Details) | Sep. 30, 2015USD ($) |
Debt Disclosure [Abstract] | |
2,015 | |
2,016 | $ 3,247,250 |
Thereafter | |
Long term convertible loan | $ 3,247,250 |
Derivative Liabilities (Details
Derivative Liabilities (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative liability recorded as additional paid in capital | $ 910,757 |
Derivative Liabilities - Schedu
Derivative Liabilities - Schedule of Derivative Liabilities Activity (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 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 | 233,760 | $ 2,203,759 |
Change in derivative liability during the period | $ (1,385,630) | (1,051,889) |
Derivative liabilities balance, ending | $ 1,151,870 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Imputed interest expense | $ 100 |
Chief Executive Officer And Vice President Sales [Member] | |
Due to related parties | 198,998 |
Debt instrument periodic payment | $ 5,000 |
Debt maturity date | Jul. 18, 2016 |
Former CEO [Member] | |
Due to related parties | $ 194,958 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Income Taxes Details Narrative | |||||
Penalties or interest liability accrued | |||||
Penalties or interest costs |
Commitments and Contingencies61
Commitments and Contingencies (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($)ft² | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)ft² | Sep. 30, 2014USD ($) | |
Rent expense | $ 72,487 | $ 21,809 | $ 168,418 | $ 21,809 |
Lease agreement, manufacturing and office space, square feet | ft² | 18,000 | 18,000 | ||
Lease term | 3 years | |||
Next Three Years [Member] | ||||
Annual base salary | $ 336,000 | |||
Vice President [Member] | ||||
Annual base salary | $ 96,000 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Lease Yearly Payment (Details) | Sep. 30, 2015USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
October 1, 2015 through December 31, 2015 | $ 48,882 |
January 1 through September 30, 2016 | 146,646 |
Operating lease amount | $ 195,528 |
Patents and Trademarks (Details
Patents and Trademarks (Details Narrative) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Design patents protected years | 15 years |
Utility patent application granted years | 20 years |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) - USD ($) | Jan. 07, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | Aug. 10, 2015 |
Preferred stock, shares issued | 77,220,000 | 77,220,000 | ||
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 | ||
Number of common stock issued during period | 4,556,250 | |||
Common stock, shares issued | 121,855,390 | 113,511,250 | ||
Common stock, shares outstanding | 121,855,390 | 113,511,250 | ||
Stock shares issued for service, shares | 46,127 | |||
Conversion of Convertible notes to Common Shares | $ 427,858 | |||
Transaction costs | $ 19,042 | |||
Conversion of Convertible notes to Common Shares, shares | 25,169,786 | |||
Additional Stock shares issued for service, shares | 1,668,176 | |||
Newbridge Financial [Member] | ||||
Stock shares issued for service, shares | 1,000,000 | |||
Deemed issuance shares value | $ 330,000 | |||
Mr. Bollich [Member] | ||||
Common stock, shares issued | 21,408,023 | |||
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 | ||
Number of common stock issued during period | (77,220,000) |
Shareholder's Equity - Schedule
Shareholder's Equity - Schedule of Shareholder's Equity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Oct. 31, 2014 | |
Preferred stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||
Preferred stock, shares authorized | 150,000,000 | 150,000,000 | 150,000,000 | |||
Common stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | ||
Common stock, shares authorized | 350,000,000 | 350,000,000 | 350,000,000 | |||
Number of shares authorized total | 500,000,000 | 500,000,000 | ||||
Preferred stock, shares issued | 77,220,000 | 77,220,000 | 77,220,000 | |||
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 | 77,220,000 | |||
Preferred stock per share value | $ 772 | $ 772 | ||||
Beginning of Period | $ (888,168) | $ (883,752) | ||||
Number of common stock issued during period | 4,556,250 | |||||
Shares issued for services | 46,127 | |||||
Conversion of Convertible notes to Common Shares | $ 427,858 | |||||
Conversion of Convertible notes to Common Shares, shares | 25,169,786 | |||||
Net loss | (1,335,422) | $ 1,479,202 | $ (3,730,475) | $ (695,972) | ||
Ending of Period | (888,168) | (888,168) | $ (883,752) | |||
Common Stock [Member] | ||||||
Beginning of Period | $ 1,135 | |||||
Beginning of Period, shares | 113,511,250 | |||||
Sale of common shares | $ 46 | |||||
Number of common stock issued during period | 4,556,250 | |||||
Value of shares issued for services | ||||||
Shares issued for services | 46,127 | |||||
Conversion of Convertible notes to Common Shares | $ 252 | |||||
Conversion of Convertible notes to Common Shares, shares | 25,169,786 | |||||
Retirement of shares | $ (214) | |||||
Retirement of shares, shares | (21,428,023) | |||||
Ending of Period | $ 1,219 | $ 1,219 | $ 1,135 | |||
Ending of Period, shares | 121,855,390 | 121,855,390 | 113,511,250 | |||
Additional Paid In Capital [Member] | ||||||
Beginning of Period | $ 4,881,918 | |||||
Sale of common shares | 949,107 | |||||
Conversion of Convertible notes to Common Shares | $ 2,578,771 | |||||
Retirement of shares, shares | 195,172 | |||||
Imputed interest | $ 2,925 | |||||
Exercise of Stock Options, shares | 8,607,893 | |||||
Ending of Period | $ 4,881,918 | |||||
Accumulated Deficit [Member] | ||||||
Beginning of Period | $ (5,767,577) | |||||
Net loss | (3,730,475) | |||||
Ending of Period | $ (9,498,052) | $ (9,498,052) | $ (5,767,577) |
Warrants and Options (Details N
Warrants and Options (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended |
Oct. 31, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | |
Issuance of warrants to purchase of common stock | 50,000 | 911,250 | 1,625,000 |
Warrants exercise price | $ 3 | ||
Warrants outstanding | 5,011,250 | ||
Warrants exercise price ranging | $ 1.64 | ||
Fair value of warrant issued price per share | $ 0.10 | $ 0.12 | |
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 | $ 0.000245 | ||
Intrinsic value of vested stock options | $ 1,235,520 | ||
Stock option expiration month year | expire in March 2017 | ||
Series 3 Convertible Notes [Member] | |||
Warrants issued to purchase common stock | 2,475,000 | ||
Warrant expiration year | 5 years | ||
Warrants exercise price ranging | $ 0.25 |
Stock Options and Warrants - Sc
Stock Options and Warrants - Schedule of Stock Warrants Activity (Details) - Warrant [Member] - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Warrants Outstanding, Beginning Balance | 1,625,000 | |
Warrants Exercised | ||
Warrants Expired | ||
Warrants Outstanding, Ending Balance | 5,011,250 | 1,625,000 |
Weighted Average Exercise Price, Outstanding, Beginning | $ 3 | |
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Expired | ||
Weighted Average Exercise Price, Outstanding, Ending | $ 1.64 | $ 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 | ||
Series 2 Convertible Debt [Member] | ||
Warrants Outstanding, Beginning Balance | ||
Warrants Granted | 911,250 | 1,625,000 |
Warrants Exercised | ||
Warrants Expired | ||
Weighted Average Exercise Price, Outstanding, Beginning | ||
Weighted Average Exercise Price, Granted | $ 3 | $ 3 |
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Expired | ||
Weighted Average Exercise Price, Outstanding, Ending | ||
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 | ||
Series 3 Convertible Debt [Member] | ||
Warrants Granted | 2,475,000 | |
Weighted Average Exercise Price, Outstanding, Beginning | ||
Weighted Average Exercise Price, Granted | $ 0.25 | |
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Expired | ||
Weighted Average Exercise Price, Outstanding, Ending | ||
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] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
(1) risk free interest rate of | 1.38% | |
2) dividend yield of | 0.00% | 0.00% |
(3) volatility factor of | 137.00% | |
(4) an expected life of the conversion feature of | 4 years | |
(5) estimated fair value of the company's common stock of | $ 0.32 | |
Minimum [Member] | ||
(1) risk free interest rate of | 1.32% | |
(3) volatility factor of | 144.00% | |
(4) an expected life of the conversion feature of | 3 years 6 months | |
(5) estimated fair value of the company's common stock of | $ 0.05 | |
Maximum [Member] | ||
(1) risk free interest rate of | 1.58% | |
(3) volatility factor of | 162.00% | |
(4) an expected life of the conversion feature of | 5 years | |
(5) estimated fair value of the company's common stock of | $ 0.13 |
Warrants and Options - Schedu69
Warrants and Options - Schedule of Restricted Stock Options (Details) - $ / shares | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | |
Weighted-Average Grand-Date Fair Value, exercised | $ 0.000245 | ||
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 | 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 |
Kind Agrisoft Note (Details Nar
Kind Agrisoft Note (Details Narrative) - USD ($) | Nov. 11, 2015 | Jun. 23, 2015 | Jan. 08, 2015 |
Payment One [Member] | |||
Payable in quarterly installments | $ 65,000 | ||
Payment Two [Member] | |||
Payable in quarterly installments | $ 50,000 | ||
Agrisoft Development Group LLC [Member] | |||
Acquired interest rate | 66.00% | ||
Principal amount | $ 272,217 | ||
Percentage of accrued interest | 8.00% | ||
Payable in quarterly installments | $ 272,216 | ||
Subordinate security interest required minimum note value | $ 100,000 | ||
Royalty percentage | 1.00% | ||
Payments for note and royalty | $ 600,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Nov. 11, 2015USD ($) |
Subsequent Event [Member] | Chief Operating Officer [Member] | |
Compensation expences | $ 120,000 |