Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 12, 2014 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q/A | |
Amendment Flag | TRUE | |
Amendment Description | This Amendment No. 1 to Medbox, Inc.’s Form 10-Q for the three and nine months ended September 30, 2014, initially filed with the U.S. Securities and Exchange Commission (the “SECâ€) on November 11, 2014 (the “Original Filingâ€), includes restated condensed consolidated financial statements for the three and nine months ended September 30, 2014 and 2013 (the “Restated Financialsâ€) and a revised Management’s Discussion and Analysis of Financial Condition and Results of Operations, which has been amended to provide disclosure regarding the effect of the Restated Financials. The unaudited condensed consolidated financial statements of the Company contained in the Original Filing have been restated to correct errors relating to (i) the timing of recognition of certain revenues for certain customer contracts prior to the period in which they were earned, (ii) recognition of investments from related parties as capital contributions, and (iii) improper capitalization of inventory costs. See Note 15 to the Company’s condensed consolidated financial statements included in “Item 1. Financial Statements†of this report and the information set forth in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations†for additional information. The Company also has restated its unaudited condensed consolidated financial statements as of and for the quarterly periods ended March 30 and June 30, 2014 and the audited condensed consolidated financial statements for the years ended December 31, 2013 and December 31, 2012 set forth in its General Form of Registration of Securities on Form 10 in connection herewith. The Company has amended and restated in its entirety each item of the Original Filing that required a change to reflect this restatement and to include certain additional information. These items include Item 1 and Item 2 of Part I and Item 6 of Part II of this report. No other information included in the Original Filing is amended hereby. Except as stated above, this Amendment speaks only as of November 11, 2014 (the “Original Filing Dateâ€), and this filing has not been updated to reflect any events occurring after such date or to modify or update disclosures affected by other subsequent events. In particular, forward-looking statements included in this Amendment represent management’s views as of the Original Filing Date. Such forward-looking statements should not be assumed to be accurate as of any future date. This Amendment should be read in conjunction with the Company’s other filings made with the SEC subsequent to the Original Filing Date, together with any amendments to those filings. As previously disclosed in the Company’s Current Reports on Form 8-K filed on December 30, 2014 and March 9, 2015, respectively, the Company’s unaudited condensed consolidated financial statements previously included in the Original Filing, the Company’s audited condensed consolidated financial statements for the years ended December 31, 2012 and 2013 reported in the Company’s General Form of Registration of Securities on Form 10 and the unaudited condensed consolidated financial statements as of and for the quarterly periods ended March 31, and June 30, 2014 and 2013 should not be relied upon until restatements thereof have been filed with the SEC. Pursuant to Rule 12b-15 under the Securities and Exchange Act of 1934, as amended, this Form 10-Q/A includes new certifications by our principal executive officer and principal financial officer under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. | |
Document Period End Date | 30-Sep-14 | |
Document Fiscal Year Focus | 2014 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | MDBX | |
Entity Registrant Name | Medbox, Inc. | |
Entity Central Index Key | 1547996 | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 30,442,517 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Current assets: | |||||
Cash and cash equivalents | $1,350,442 | $168,003 | $100,301 | $1,026,902 | |
Marketable securities | 208,025 | 184,800 | 184,800 | ||
Accounts receivable | 32,312 | 339,735 | |||
Note receivable | 75,000 | 115,000 | |||
Inventory | 522,198 | 632,986 | |||
Prepaid expenses and other current assets | 1,012,195 | 89,241 | |||
Total current assets | 3,200,172 | 1,529,765 | |||
Property and equipment, net of accumulated depreciation of $42,779 and $21,123, respectively | 151,984 | 140,658 | |||
Assets held for resale | 399,594 | 0 | |||
Investments, at cost | 0 | 1,200,000 | |||
Intangible assets, net of accumulated amortization of $70,459 and $32,750 respectively | 800,904 | 682,429 | |||
Note receivable | 155,000 | 0 | |||
Goodwill | 1,100,037 | 1,090,037 | |||
Deposits and other assets | 72,726 | 98,726 | |||
Total assets | 5,880,417 | 4,741,615 | |||
Current liabilities: | |||||
Accounts payable and accrued expenses | 1,321,998 | 448,314 | |||
Deferred revenue | 1,073,932 | 683,621 | |||
Notes payable | 299,605 | 75,000 | |||
Related party notes payable | 491,674 | 111,794 | |||
Convertible notes payable | 1,939,801 | 0 | |||
Derivative liability | 1,228,108 | 0 | |||
Customer deposits | 1,584,808 | 785,861 | |||
Total current liabilities | 7,939,926 | 2,104,590 | |||
Stockholders' Equity | |||||
Preferred stock, $0.001 par value: 10,000,000 authorized; 3,000,000 and 3,000,000 issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 3,000 | 3,000 | |||
Common stock, $0.001 par value: 100,000,000 authorized, 30,105,331 and 29,525,750 issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 30,105 | 29,526 | |||
Additional paid-in capital | 11,615,278 | 8,156,358 | |||
Common stock subscribed | 0 | -15,000 | |||
Treasury stock | -1,209,600 | 0 | |||
Accumulated deficit | -12,339,785 | -5,536,859 | |||
Accumulated other comprehensive loss | -158,507 | 0 | |||
Total stockholders' equity | -2,059,509 | 2,637,025 | -153,629 | ||
Total liabilities and stockholders' equity | $5,880,417 | $4,741,615 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Property and equipment, accumulated depreciation (in Dollars) | $42,779 | $21,123 |
Intangible assets, accumulated amortization (in Dollars) | $70,459 | $32,750 |
Common stock, par value (in Dollars per share) | $0.00 | $0.00 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 30,105,331 | 29,525,750 |
Common stock, outstanding | 30,105,331 | 29,525,750 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value (in Dollars per share) | $0.00 | $0.00 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 3,000,000 | 3,000,000 |
Preferred stock, outstanding | 3,000,000 | 3,000,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Income Statement [Abstract] | |||||
Revenues | $173,076 | $1,314,178 | $534,082 | $1,844,376 | |
Revenues, related parties | 0 | 0 | 50,110 | 0 | |
Less: allowances and refunds | 0 | 0 | -60,000 | 0 | |
Net revenue | 173,076 | 1,314,178 | 524,192 | 1,844,376 | |
Cost of revenues | 1,813,562 | 1,807,030 | 3,492,105 | 2,258,127 | |
Gross margin | -1,640,486 | -492,852 | -2,967,913 | -413,751 | |
Operating expenses | |||||
Selling and marketing | 319,204 | 91,136 | 749,212 | 506,393 | |
Research and development | 61,623 | 28,233 | 136,656 | 46,733 | |
General and administrative | 952,663 | 522,372 | 2,151,742 | 1,876,505 | |
Stock based compensation | 1,031,640 | 0 | 1,031,640 | 0 | |
Total operating expenses | 2,365,130 | 641,741 | 4,069,250 | 2,429,631 | |
Loss from operations | -4,005,616 | -1,134,593 | -7,037,163 | -2,843,382 | |
Other income (expense) | |||||
Interest income (expense), net | -339,231 | 4,311 | -314,078 | -1,884 | |
Change in fair value of derivative liabilities | 548,315 | 0 | 548,315 | 0 | |
Total other income (expense) | 209,084 | 4,311 | 234,237 | -1,884 | |
Loss before provision for income taxes | -3,796,532 | -1,130,282 | -6,802,926 | -2,845,266 | |
Provision for income taxes | 0 | -119,280 | 0 | -29,220 | |
Net loss | -3,796,532 | -1,011,002 | -6,802,926 | -2,816,046 | -3,791,440 |
Earnings per share attributable to common stockholders | |||||
Basic (in Dollars per share) | ($0.13) | ($0.03) | ($0.22) | ($0.10) | |
Diluted (in Dollars per share) | ($0.13) | ($0.03) | ($0.22) | ($0.10) | |
Weighted average shares outstanding | |||||
Basic (in Shares) | 30,371,299 | 29,298,284 | 30,472,447 | 28,658,556 | |
Diluted (in Shares) | 30,371,299 | 29,298,284 | 30,472,447 | 28,658,556 | |
Other Comprehensive loss | |||||
Net loss | -3,796,532 | -1,011,002 | -6,802,926 | -2,816,046 | -3,791,440 |
Unrealized loss from marketable securities | -158,507 | 0 | -158,507 | 0 | |
Comprehensive loss | ($3,955,039) | ($1,011,002) | ($6,961,433) | ($2,816,046) |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) | Total | Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-in Capital [Member] | Common Stock Subscribed [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Loss [Member] |
Balances at Dec. 31, 2012 | ($153,629) | $6,000 | $27,367 | $0 | $1,711,673 | ($153,250) | ($1,745,419) | |
Balances (in Shares) at Dec. 31, 2012 | 6,000,000 | 27,367,144 | ||||||
Issuance of common stock, net of issuance costs | 4,486,541 | 2,115 | 4,484,426 | |||||
Issuance of common stock, net of issuance costs (in Shares) | 2,115,100 | |||||||
Cancellation of preferred stock | -3,000 | 3,000 | ||||||
Cancellation of preferred stock (in Shares) | -3,000,000 | |||||||
Proceeds from common stock subscribed | -138,250 | 138,250 | ||||||
Issuance of warrants for acquisition of Vaporfection | 1,166,000 | 1,166,000 | ||||||
Issuance of common stock for accounts payable | 119,553 | 44 | 119,509 | |||||
Issuance of common stock for accounts payable (in Shares) | 43,506 | |||||||
Capital contributions, related parties | 810,000 | 810,000 | ||||||
Net loss | -3,791,440 | -3,791,440 | ||||||
Balances at Dec. 31, 2013 | 2,637,025 | 3,000 | 29,526 | 0 | 8,156,358 | -15,000 | -5,536,859 | |
Balances (in Shares) at Dec. 31, 2013 | 3,000,000 | 29,525,750 | ||||||
Issuance of common stock, net of issuance costs | 2,427,859 | 486 | 2,427,373 | |||||
Issuance of common stock, net of issuance costs (in Shares) | 485,830 | |||||||
Stock-based compensation | 1,031,640 | 93 | 1,031,547 | |||||
Stock-based compensation (in Shares) | 93,751 | |||||||
Proceeds from common stock subscribed | 15,000 | 15,000 | ||||||
Unrealized loss from marketable securities | -158,507 | -158,507 | ||||||
Treasury stock | -1,209,600 | -1,209,600 | ||||||
Treasury stock (in Shares) | -60,000 | |||||||
Net loss | -6,802,926 | -6,802,926 | ||||||
Balances at Sep. 30, 2014 | ($2,059,509) | $3,000 | $30,105 | ($1,209,600) | $11,615,278 | $0 | ($12,339,785) | ($158,507) |
Balances (in Shares) at Sep. 30, 2014 | 3,000,000 | 30,105,331 | -60,000 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Cash flows from operating activities | ||
Net income (loss) | ($6,802,926) | ($2,816,046) |
Adjustments to reconcile net income (loss) to net cash: | ||
Depreciation and amortization | 59,364 | 41,375 |
Provisions and allowances | 60,000 | 0 |
Profit on sale of the investments | -9,600 | 0 |
Market value of securities received for services | -190,132 | 0 |
Gain from fair value adjustment of derivative liability | -548,315 | 0 |
Amortization of debt discount charged as interest expense | 216,224 | 0 |
Stock based compensation | 1,031,640 | 0 |
Changes in operating assets and liabilities | ||
Accounts receivable | 213,424 | 598,906 |
Loan receivable | 0 | -55,000 |
Inventories | 110,788 | -135,888 |
Prepaid expenses and other assets | -896,954 | -177,287 |
Accounts payable and accrued expenses | 907,684 | -232,727 |
Customer deposits | 807,347 | 517,675 |
Deferred revenue | 390,311 | -783,899 |
Net cash used in operating activities | -4,651,146 | -3,042,891 |
Cash flows from investing activities | ||
Issuance of note receivable | -115,000 | 0 |
Purchase of property and equipment, net | -32,982 | -188,485 |
Purchase of real estate | -399,594 | 0 |
Purchase of intangible assets | -166,183 | 0 |
Advances for investments | 0 | -1,200,000 |
Net cash used in investing activities | -713,759 | -1,388,485 |
Cash flows from financing activities | ||
Related party notes payable, net | 379,880 | -934,035 |
Payments on long term loan | 0 | -62,280 |
Proceeds from issuance of notes payable | 299,605 | 150,000 |
Proceeds from issuance of common stock, net | 2,442,859 | 3,541,090 |
Proceeds from issuance of convertible notes payable | 3,500,000 | 0 |
Contributions to capital, related party | 0 | 810,000 |
Payments on notes payable | -75,000 | 0 |
Net cash provided by financing activities | 6,547,344 | 3,504,775 |
Net increase in cash | 1,182,439 | -926,601 |
Cash, beginning of period | 168,003 | 1,026,902 |
Cash, end of period | 1,350,442 | 100,301 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 37,078 | 8,940 |
Cash paid for income taxes | 0 | 9,068 |
Non - cash transactions: | ||
Liabilities assumed for Vaporfection International, Inc. | 0 | 469,000 |
Common stock warrants issued for Vaporfection International, Inc. | $0 | $1,166,000 |
BUSINESS_ORGANIZATION_NATURE_O
BUSINESS ORGANIZATION, NATURE OF OPERATIONS | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Accounting Policies [Abstract] | ||||
BUSINESS ORGANIZATION, NATURE OF OPERATIONS | NOTE 1 – BUSINESS ORGANIZATION, NATURE OF OPERATIONS | |||
Medbox, Inc. (the “Company”) was incorporated in the state of Nevada on June 16, 1977, originally as Rabatco, Inc., subsequently changing its name on May 12, 2000 to Mindful Eye, Inc., and again on August 30, 2011 to Medbox, Inc. The Company, through its subsidiaries, provides consulting and real estate management services and products for the medical and retail industries. The Company also sells patented biometrically controlled medicine storage and dispensing systems and a line of vaporizer and accessory products. The Company additionally provides management oversight and compliance services for retail dispensaries and cultivation facilities and procures real estate and enters into leases for retail dispensaries and cultivation centers. The Company is headquartered in West Hollywood, California with offices in Arizona and Florida. | ||||
During nine months ended September 30, 2014 the Company formed eight new subsidiaries, as follows: | ||||
• | Medbox CBD, Inc., specializing in hemp-oil concentrates and development of pharmaceutical products derived from cannabis to produce and distribute products based upon lifting of federal prohibitions of such activities. | |||
• | Medbox Property Investments, Inc., specializing in real property acquisitions and leases to dispensaries and cultivation centers. | |||
• | MJ Property Investments, Inc. specializing in real property acquisitions and leases to retail stores and cultivation centers in the state of Washington. (This is a wholly owned subsidiary of Medbox Property Investments, Inc.) | |||
• | Medbox Management Services, Inc., a California corporation specializing in dispensary management services to state licensed dispensaries for cultivation, dispensing, and marijuana infused products (MIPS). | |||
• | Medbox Merchant Service, Inc., specializing in banking transactions with prepaid debit cards, convenience checks, and cash depository needs for operators. This subsidiary is current inactive. | |||
• | Medbox Armored Transport, Inc., specializing in armored car transport of cash from dispensaries to participating banks. This subsidiary is current inactive. | |||
• | Medbox Investments, Inc., specializing in investments and strategic partnerships in other public companies in the marijuana ancillary service sector that Medbox believes are viable and have growth potential. | |||
• | Medbox Management Services, Inc., a Nevada corporation specializing in dispensary management services to state licensed dispensaries for cultivation, dispensing, and marijuana infused products. | |||
• | Medbox Management Services, Inc., an Illinois corporation specializing in dispensary management services to state licensed dispensaries for cultivation, dispensing, and marijuana infused products. | |||
In order to obtain the license for one of the Company’s clients the Company registered an affiliated nonprofit corporation Allied Patient Care, Inc. in the state of Oregon. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) | ||||||||||||||||||||||||||||||||
Principles of Consolidation | |||||||||||||||||||||||||||||||||
The consolidated financial statements include the accounts of Medbox, Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated. | |||||||||||||||||||||||||||||||||
Use of Estimates | |||||||||||||||||||||||||||||||||
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements as well as the reported expenses during the reporting periods. The Company’s significant estimates and assumptions include the valuation of the Company’s common stock used in the valuation of goodwill, accounts receivable and note receivable collectability, inventory, advances on investments, the valuation of restricted stock and warrants received from customers, the amortization and recoverability of capitalized patent costs and useful lives of long-lived assets the derivative liability, and income tax expense. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from these estimates. | |||||||||||||||||||||||||||||||||
Concentrations of Credit Risk (Restated) | |||||||||||||||||||||||||||||||||
The Company maintains cash balances at several financial institutions in the Los Angeles, California area and Florida. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2014 and December 31, 2013, the Company’s uninsured balances totaled $967,347 and $0, respectively. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. | |||||||||||||||||||||||||||||||||
At September 30, 2014, one customer, represented 77.4% of outstanding receivables | |||||||||||||||||||||||||||||||||
September 30, 2014 | January - | December 31, 2013 | January - | ||||||||||||||||||||||||||||||
September 2014 | September 2013 | ||||||||||||||||||||||||||||||||
Accounts | Revenue | Accounts | Revenue | ||||||||||||||||||||||||||||||
Receivable | Receivable | ||||||||||||||||||||||||||||||||
Amount, | % | Amount, | % | Amount, | % | Amount, | % | ||||||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||||||||||||
A | — | — | 190,131 | 32.5 | % | 150,000 | 44.2 | % | 325,000 | 17.6 | % | ||||||||||||||||||||||
B | — | — | 175,000 | 30 | % | 115,200 | 33.9 | % | |||||||||||||||||||||||||
C | 25,000 | 77.4 | % | — | — | ||||||||||||||||||||||||||||
D | |||||||||||||||||||||||||||||||||
E | |||||||||||||||||||||||||||||||||
25,000 | 77.4 | % | 365,131 | 62.5 | % | 265,200 | 78.1 | % | 325,000 | 17.6 | % | ||||||||||||||||||||||
Total | 32,312 | 100 | % | 584,191 | 100 | % | 339,736 | 100 | % | 1,844,376 | 100 | % | |||||||||||||||||||||
Advertising and Marketing Costs | |||||||||||||||||||||||||||||||||
Advertising and marketing costs are expensed as incurred. The Company incurred advertising and marketing costs of $319,204 and $91,136 for the three months ended September 30, 2014 and 2013, and $749,212 and $506,393 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||||||||||||||||||||||||||||
Research and Development | |||||||||||||||||||||||||||||||||
Research and development expenses are charged to operations as incurred. The Company incurred research and development costs of $61,623 and $28,233 for the three months ended September 30, 2014 and 2013, and $136,656 and $46,733 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||||||||||||||||||||
Pursuant to ASC No. 825, Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying value of cash, accounts receivable, other receivables, inventory, accounts payable and accrued expenses and notes payable, related party notes payable, customer deposits, provision for customer refunds and short term loans payable approximate their fair value due to the short period to maturity of these instruments. The Company’s marketable securities and related customer deposits require fair value measurement on a recurring basis as the Company has received advance payment of restricted stock in a publicly traded company for contracted services and received warrants for service provided to unrelated third party. The Company has no exposure to gain or loss on the increase or decrease in the value of the marketable securities received as a payment from customer as any shortfall in the ultimate liquidated value of the securities will be supplemented by additional restricted stock from the customer and any liquidation in excess above the Company’s billings will be returned to the customer. The securities received as a payment for services provided will be exposed to gains or losses following their initial evaluation as of the date the revenue was earned. | |||||||||||||||||||||||||||||||||
Warrants and other financial assets received as a payment for the services provided are recorded as “Marketable securities” under the current assets if they are expected to be realized within 12 months. The Company uses the Black-Scholes model to measure the value of the warrants. At each reporting date the Company will reevaluate the value of marketable securities and record any changes in value to other comprehensive income (loss) under “Unrealized gain or losses from marketable securities”. | |||||||||||||||||||||||||||||||||
Embedded derivative - The Company’s convertible notes payable include embedded features that require bifurcation and are accounted for as a separate embedded derivative (see Note 13). The Company has estimated the fair market value of the embedded derivative of the Notes as the difference between the fair market value of the Notes with the conversion feature and the fair market value of the Notes without the conversion feature associated with the embedded derivative, in both cases using relevant market data. In the case of the fair market value of the Notes with the conversion feature, a binomial lattice model was used utilizing a discount rate based on variable conversion probability. In the case of the fair market value of the Notes without the conversion feature associated with the embedded derivative, a discounted cash flow approach was used. The key valuation assumptions used consist of the price of the Company’s stock, a risk free interest rate based on the average yield of a one year Treasury note and expected volatility of the Company’s common stock all as of the measurement dates. The Company considers these inputs Level 3 assumptions. | |||||||||||||||||||||||||||||||||
A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows: | |||||||||||||||||||||||||||||||||
Level 1 | Quoted prices in active markets for identical assets or liabilities. | ||||||||||||||||||||||||||||||||
Level 2 | Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. | ||||||||||||||||||||||||||||||||
Level 3 | Significant unobservable inputs that cannot be corroborated by market data. | ||||||||||||||||||||||||||||||||
The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the liabilities that are measured at fair value on a recurring basis. | |||||||||||||||||||||||||||||||||
Total | Quoted Prices | Quoted Prices | Significant | ||||||||||||||||||||||||||||||
in Active | for Similar | Unobservable | |||||||||||||||||||||||||||||||
Markets for | Assets or | Inputs | |||||||||||||||||||||||||||||||
Identical | Liabilities in | (Level 3) | |||||||||||||||||||||||||||||||
Assets or | Active | ||||||||||||||||||||||||||||||||
Liabilities | Markets | ||||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | ||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||
Marketable securities | $ | 208,025 | $ | 208,025 | $ | — | $ | — | |||||||||||||||||||||||||
Conversion Feature | 1,228,108 | — | — | 1,228,108 | |||||||||||||||||||||||||||||
Total | $ | 1,436,133 | $ | 208,025 | $ | — | $ | 1,228,108 | |||||||||||||||||||||||||
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis: | |||||||||||||||||||||||||||||||||
For the nine months | |||||||||||||||||||||||||||||||||
ended | |||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||
Beginning balance | $ | — | |||||||||||||||||||||||||||||||
Initial recognition of conversion feature | 1,776,423 | ||||||||||||||||||||||||||||||||
Change in fair value of conversion feature | (548,315 | ) | |||||||||||||||||||||||||||||||
Ending balance | $ | 1,228,108 | |||||||||||||||||||||||||||||||
Revenue Recognition (Restated) | |||||||||||||||||||||||||||||||||
The Company applies the revenue recognition provisions pursuant to ASC No. 605, Revenue Recognition, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. The guidance outlines the basic criteria that must be met to recognize the revenue and provides guidance for disclosure related to revenue recognition policies. | |||||||||||||||||||||||||||||||||
Revenue is only recognized when the following four criteria are met: 1) persuasive evidence of an arrangement exists, 2) delivery has occurred or services have been rendered, 3) sales price is fixed and determinable and 4) collectability is reasonably assured. For multi-year contracts with upfront payments made by customers, the upfront payments are recognized over the longer of the contract period or the customer relationship. For contracts that include multiple deliverables such as the build out of customer facilities, the Company recognizes revenue when a milestone is reached in the contract such as securing the location, delivery of dispensing machines or completion of the facility. The contract terms are broken down in specific milestones with specific attributable revenue to be earned upon successful completion of the milestone terms – ( e.g – if a milestone is completing construction on a client dispensary, the condition for the revenue to be recorded is after issuance of a certificate of occupancy for the newly completed facility). The Company will record a specified amount of revenue attributable to this milestone based on the contract). Equipment sales not associated with a consulting contract are recognized as the product is shipped and title passes. Advance payments from clients in advance of work performed are recorded as customer deposits on the balance sheet. | |||||||||||||||||||||||||||||||||
An allowance for bad debt is established for any customer when their balance is deemed as possibly uncollectible. | |||||||||||||||||||||||||||||||||
Provisions for estimated returns and allowances, and other adjustments are usually provided in the same period the related sales are recorded. The Company will at times allow customers to receive full refunds should regulatory events prevent the customer from being able to operate his contracted location. The provision for returns as well as an allowance for doubtful accounts is included in the Company’s balance sheet as determined by management. | |||||||||||||||||||||||||||||||||
Provisions for estimated returns and allowances, and other adjustments are provided in the same period the related sales are recorded. The Company will at times allow customers to get full refunds should political events prevent the customer from being able to operate his or her contracted location. The provision for returns as well as an allowance for bad debts will be included in the Company’s balance sheet should the Company deem such allowances justified. | |||||||||||||||||||||||||||||||||
Cost of Revenues (Restated) | |||||||||||||||||||||||||||||||||
Cost of revenue consists primarily of expenses associated with the delivery and distribution of our products and services. These include expenses related to the manufacture of our dispensary units, construction expense related to the customer dispensary, site selection and establishment of licensing requirements, and consulting expense for the continued management of the dispensary unit build out, server and security equipment, rent expense, energy and bandwidth costs, and support and maintenance costs prior to when the client moves in. We only begin capitalizing costs when we have obtained a license and a site for operation of a customer dispensary or cultivation center. The previously capitalized costs are charged to cost of revenue in the same period that the associated revenue is earned. In the case where it is determined that previously inventoried costs are in excess of the projected net realizable value of the sale of the licenses then the excess cost above net realizable value is written off to cost of revenues. In addition, cost of revenue related to our vaporizer line of products consists of direct procurement cost of the products along with costs associated with order fulfillment, shipping, inventory storage and inventory management costs. | |||||||||||||||||||||||||||||||||
Basic and Fully Diluted Net Income/Loss Per Share | |||||||||||||||||||||||||||||||||
Basic net income/loss per share is computed by dividing net income/loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net incomes per share include the effects of any outstanding options, warrants and other potentially dilutive securities. The Company did not consider any potentially dilutive common shares in the computation of diluted loss per share for the periods ending September 30, 2014 and December 31, 2013, due to the net loss, as they would have an anti-dilutive effect on EPS. | |||||||||||||||||||||||||||||||||
As of September 30, 2014 and December 31, 2013, the Company had 3,000,000 shares of Series A preferred stock outstanding with par value of $0.001 that could be converted into 15,000,000 shares of the Company’s common stock. The Company also had 295,854 warrants to purchase common stock outstanding as of September 30, 2014. | |||||||||||||||||||||||||||||||||
Accounts Receivable and Allowance for Bad Debts (Restated) | |||||||||||||||||||||||||||||||||
The Company is subject to credit risk as it extends credit to our customers for work performed as specified in individual contracts. The Company extends credit to its customers, mostly on an unsecured basis after performing certain credit analysis. Our typical terms require the customer to pay a portion of the contract price up front and the rest upon certain agreed milestones. The Company’s management periodically reviews the creditworthiness of its customers and provides for probable uncollectible amounts through a charge to operations and a credit to an allowance for doubtful accounts based on our assessment of the current status of individual accounts. Accounts still outstanding after the Company has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts. As of September 30, 2014 and December 31, 2013, the Company’s management considered all accounts outstanding fully collectible. | |||||||||||||||||||||||||||||||||
Property and Equipment | |||||||||||||||||||||||||||||||||
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses accelerated depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows: | |||||||||||||||||||||||||||||||||
Vehicles | 5 years | ||||||||||||||||||||||||||||||||
Furniture and Fixtures | 5 years | ||||||||||||||||||||||||||||||||
Office equipment | 3 years | ||||||||||||||||||||||||||||||||
Assets Held for Resale | |||||||||||||||||||||||||||||||||
During 2014, the Company has entered into various real estate purchase agreements to support the filing of retail dispensary or cultivation facility licenses in certain states and localities. The cost of the acquired real estate is included in Assets Held for Resale on the balance sheet. The Company intends to sell the real estate to a long term investor after the license is granted. Accordingly, the company does not depreciate assets held for resale. | |||||||||||||||||||||||||||||||||
Income Taxes | |||||||||||||||||||||||||||||||||
The Company accounts for income taxes under the asset and liability method in accordance with ASC 740. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred tax assets and liabilities are classified as current and non-current based on their characteristics. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. | |||||||||||||||||||||||||||||||||
In addition, the Company’s management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing the Company’s income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorizes. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes. | |||||||||||||||||||||||||||||||||
Commitments and Contingencies | |||||||||||||||||||||||||||||||||
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |||||||||||||||||||||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. | |||||||||||||||||||||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. | |||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | |||||||||||||||||||||||||||||||||
There were various accounting updates recently issued which are not expected to a have a material impact on the Company’s consolidated financial position, consolidated results of operations or cash flows. |
ACQUISITION
ACQUISITION | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Business Combinations [Abstract] | |||||
ACQUISITION | NOTE 3 – ACQUISITION | ||||
On March 22, 2013, the Company entered into a purchase agreement for 100% of the issued and outstanding common stock of Vaporfection International Inc. (“VII”) owned by Vapor Systems International LLC. The Company closed the transaction on April 1, 2013. The Company issued 260,854 warrants to shareholders of VII allowing them to purchase one (1) share of Medbox common stock at $.001 per share beginning April 1, 2013. These warrants were valued for the Company’s accounting purposes at $4.47 per share which represented the fair value of the Company’s common stock as determined by the Company’s independent appraiser. In addition, the Company assumed certain liabilities and a 10% convertible note of VII in the aggregate amount of approximately $470,000. The total value of the acquisition was approximately $1,635,000 and has been allocated in accordance with ASC 805 as per the Company’s independent valuation as follows: | |||||
Machinery & Equipment | $ | 70,000 | |||
IP and related technology | 287,000 | ||||
Amortizable intangible assets: | |||||
Customer contracts and related relationships | 314,000 | ||||
Trade name, trademark, and domain name | 46,000 | ||||
Non-compete covenants | 23,000 | ||||
Goodwill | 895,000 | ||||
Total assets acquired | 1,635,000 | ||||
Fair value of liabilities assumed | (469,000 | ) | |||
Net fair value | $ | 1,166,000 | |||
The amortizable intangible assets have useful lives not exceeding ten years. No amounts have been allocated to in-process research and development and $895,000 was originally allocated to goodwill. In addition, from the date of acquisition through March 31, 2014 and December 31, 2013, the liabilities assumed have been increased by approximately $10,000 and $195,000 respectively as they have been accrued or settled. No additional adjustments to Goodwill occurred in the six months ended September 30, 2014. Accordingly, $205,000 has also been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and is not deductible for tax purposes. | |||||
The number of warrants available to selling VII shareholders was increased by 130,427 shares in connection with a settlement with such former VII shareholders. | |||||
In addition to the above warrants, the purchase agreement and associated consulting contract with the prior management company of the business unit calls for additional shares of common stock to be issued in the event that the performance of the business unit exceeds $11,818,140 of accumulated EBITBA over the subsequent 4 year operating period. The performance payout is contingent upon future events and accordingly the Company has treated the obtainment of that performance provision as being remote and consequently has not assigned any future value to the purchase price. |
INVESTMENTS
INVESTMENTS | 9 Months Ended |
Sep. 30, 2014 | |
Investments Schedule [Abstract] | |
INVESTMENTS | NOTE 4 – INVESTMENTS |
On February 8, 2013, the Company entered into an agreement with Bio-Tech Medical Software, Inc. (“Bio-Tech”) which would allow the Company to purchase 833,333 shares of common stock which would represent 25% of Bio-Tech’s issued and outstanding shares of common stock for $1,500,000. The Company advanced $600,000 upon execution of this agreement for the right to purchase with the remaining balance of $900,000 due and payable in installments at various dates by August 25, 2013. On June 26, 2013, the Company notified Bio-Tech that it was canceling the agreement. | |
On February 27, 2014, the Company signed a settlement agreement, and in connection therewith, a second amended and restated technology license agreement with Bio-Tech. Pursuant to the second amended and restated technology license agreement, the Company received full licensed right to biometric inventory tracking technology for the term of five years with no additional monies due. All stock transfer between companies was canceled and rescinded. | |
On June 5, 2014 the Company entered into a sale agreement with an affiliate company owned by the co-founder of the Company for the sale of all Bio-Tech rights and claims and a contribution for legal costs of $4,800 in exchange for the return of 30,000 shares of the Company’s common stock with a fair value of $604,800. These shares are treated as treasury stock and can be reissued. | |
On March 12, 2013, the Company entered into an agreement with three members of MedVend Holdings LLC (“MedVend”) whereby the Company would acquire 50% of their equity interest in MedVend. The purchase price of the equity interest was $4,100,000. The Company paid an advance of $300,000 upon execution of the contract for the right to purchase and another $300,000 was disbursed as an additional investment to MedVend. In May 2013, the three members of MedVend were named in a lawsuit by that entity’s minority shareholders alleging improper conveyance of the three members’ ownership interest in MedVend to the Company. Accordingly, also in May 2013, Medbox filed suit against MedVend and the three members of that entity that were involved in the transaction. | |
On June 5, 2014 the Company entered into a sale agreement with an affiliate company owned by the co-founder of the Company for the sale of all the MedVend rights and claims and a contribution for legal costs of $4,800 in exchange for 30,000 shares of the Company’s common stock with a fair value of $604,800. These shares are treated as treasury stock and can be reissued. | |
The shares of common stock received for the Bio-Tech and MedVend sales to the affiliate company are recorded as treasury stock at cost of $1,209,600 for 60,000 shares. |
INVENTORIES_Restated
INVENTORIES (Restated) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | |||||||||
INVENTORIES (Restated) | NOTE 5 – INVENTORIES (RESTATED) | ||||||||
Inventories are stated at the lower of cost or market value. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. | |||||||||
The consolidated inventories at September 30, 2014 and December 31, 2013 consist of the following: | |||||||||
September 30, 2014 | December 31, 2013 | ||||||||
(Restated) | |||||||||
Work in process and related capitalized costs | $ | — | $ | 242,488 | |||||
Deposits on dispensing machines | 336,583 | 138,423 | |||||||
Vaporizers and accessories | 164,030 | 193,575 | |||||||
Dispensing machines | 21,585 | 58,500 | |||||||
Total inventory, net | $ | 522,198 | $ | 632,986 | |||||
During the third quarter of 2014 the Company wrote down slow moving, older models of vaporizer inventory with a charge to cost of revenue of $329,154. |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
PROPERTY AND EQUIPMENT | NOTE 6 – PROPERTY AND EQUIPMENT | ||||||||
Property and equipment at September 30, 2014 and December 31, 2013 consists of: | |||||||||
Property and Equipment | September 30, 2014 | December 31, 2013 | |||||||
Office equipment | $ | 22,934 | $ | 17,192 | |||||
Furniture and fixtures | 74,404 | 73,567 | |||||||
Website development | 46,922 | 46,922 | |||||||
Product tooling | 50,503 | 24,100 | |||||||
194,763 | 161,781 | ||||||||
Less accumulated depreciation | (42,779 | ) | (21,123 | ) | |||||
Property and equipment, net | $ | 151,984 | $ | 140,658 | |||||
Product tooling costs are related to the tooling of a new product by VII. These tooling costs are accumulated and capitalized until launch date of the new product which is expected to commence in the fourth quarter of 2014. |
ASSETS_HELD_FOR_RESALE
ASSETS HELD FOR RESALE | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Text Block [Abstract] | |||||||||
ASSETS HELD FOR RESALE | NOTE 7 – ASSETS HELD FOR RESALE | ||||||||
In the course of seeking licenses for new locations, the Company has to enter into real estate purchase agreements in order to secure the sites to be developed for clients’ dispensaries and cultivation centers. The Company intends to close on the real estate where purchase agreements have been signed, or to seek partners to replace the Company on each property purchased. During the second quarter of 2014 one of the Company’s subsidiaries entered into a real estate purchase agreement in Washington state. The purchase transaction was closed during the third quarter for a total purchase price of $399,594 partially financed by a promissory note for $249,000. The note bears an interest rate of 12% per year and matures on January 30, 2015. The interest is payable monthly in the amount of $2,490 for six months from the execution date, which was July 28, 2014. In the event of a default, as defined, the interest rate increases to 18% and the note can be accelerated. | |||||||||
Assets held for resale | September 30, 2014 | December 31, 2013 | |||||||
Buildings held for resale | $ | 399,594 | $ | — | |||||
Assets held for resale | $ | 399,594 | $ | — | |||||
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||
INTANGIBLE ASSETS | NOTE 8 – INTANGIBLE ASSETS | ||||||||
The Company acquired certain intangible assets with its purchase of 100% of the outstanding common stock of VII on March 22, 2013. The Company accounts for intangible assets acquired in a business combination, if any, under the purchase method of accounting at their estimated fair values at the date of acquisition. Intangibles are either amortized over their estimated lives, if a definite life is determined, or are not amortized if their life is considered indefinite. | |||||||||
Intangible assets | September 30, 2014 | December 31, 2013 | |||||||
Distributor relationship | $ | 314,000 | $ | 314,000 | |||||
IP/technology/patents | 403,363 | 332,179 | |||||||
Domain names | 131,000 | 46,000 | |||||||
Non-compete covenants | 23,000 | 23,000 | |||||||
Subtotal | 871,363 | 715,179 | |||||||
Less accumulated amortization | (70,459 | ) | (32,750 | ) | |||||
Intangible assets, net | $ | 800,904 | $ | 682,429 | |||||
The estimated useful lives for significant intangible assets are as follows: | |||||||||
Distributor Relationship | 10 years | ||||||||
Domain Names | 10 years | ||||||||
IP/Technology/Patents | 10 years | ||||||||
Non-Compete covenants | 3 years | ||||||||
The Company’s management does not believe any impairment of intangible assets has occurred as of September 30, 2014. |
ACCOUNTS_AND_NOTES_RECEIVABLE_
ACCOUNTS AND NOTES RECEIVABLE (RESTATED) | 9 Months Ended |
Sep. 30, 2014 | |
Receivables [Abstract] | |
ACCOUNTS AND NOTES RECEIVABLE (RESTATED) | NOTE 9 – ACCOUNTS AND NOTES RECEIVABLE (RESTATED) |
Accounts receivables | |
Periodically the Company assesses and reviews the receivables for collectability. As of September 30, 2014 and December 31, 2013, the Company’s management considered all accounts outstanding fully collectible. | |
Notes Receivable current | |
During the third quarter of 2014 one of the Company’s clients signed a note for $75,000 as a payment on accounts receivable. The note is due on December 31, 2014 and bears an interest rate of 7.5%. | |
Notes Receivable non-current | |
During December 2013, the Company entered into a multiple advance secured promissory note for $1,000,000 with a Canadian partner, all transactions with whom are considered to be on an arms-length basis. This note is due and payable, together with interest at 5% per annum on December 10, 2018. As of September 30, 2014 and December 31, 2013 the outstanding balance of this note receivable was $155,000 and $115,000 respectively. |
MARKETABLE_SECURITIES
MARKETABLE SECURITIES | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||
MARKETABLE SECURITIES | NOTE 10 – MARKETABLE SECURITIES | ||||||||||||||||||||
Marketable securities of the Company represent the shares received as a payment from clients for services provided. | |||||||||||||||||||||
Marketable securities | Value as of | Value as of | |||||||||||||||||||
September 30, 2014 | December 30, 2013 | ||||||||||||||||||||
Shares received as a payment from client | $ | 176,400 | $ | 184,800 | |||||||||||||||||
Securities from MJ Holdings, Inc. | 31,625 | — | |||||||||||||||||||
Total marketable securities | $ | 208,025 | $ | 184,800 | |||||||||||||||||
As of September 30, 2014 and December 31, 2013 the fair value of these marketable securities was $208,025 and $184,800, respectively. | |||||||||||||||||||||
As of September 30, 2014, the Company held as a deposit 7,000,000 restricted shares (issued on September 5, 2013) as payment for $300,000 in accounts receivable billed to a customer. The fair value of the shares as of September 30, 2014 and December 31, 2013 (with 12% restricted stock discount as of December 31, 2013 and without a discount at September 30, 2014 because the restriction lapsed in 2014) was $176,400 and $184,800, respectively. The value of these unliquidated shares is offset against the outstanding amounts owed to the Company up to $300,000 (the value of receivable of the client) until such time that the shares are liquidated and only at that time that the cash proceeds are used to pay off the receivable will any excess cash received be returned to the client in accordance with the contract. | |||||||||||||||||||||
On May 19, 2014 the Company entered into an agreement with MJ Holdings, Inc., a publicly traded company that provides real estate financing and related solutions to licensed marijuana operators. The Company will market MJ Holdings’ real estate financial products and offerings to its consulting clients and will direct all incoming real estate related opportunities to MJ Holdings. Under the agreement, the Company will receive 50% of management fees and profits realized from the real estate opportunities it presents, in addition to warrants to purchase shares in MJ Holdings. The initial term of the agreement is six months, and will renew automatically for successive one month terms, unless one of the parties notifies the other in writing of its the intention to terminate the agreement. MJ Holdings, Inc. agreed to issue to the Company, for this six month term of the contract, 33,333 warrants to purchase common stock on each month’s anniversary of the contract. As of September 30, 2014 the Company received five warrants for the services provided under the agreement. The following table represents the initial recognition value and subsequent adjustment as of reporting date: | |||||||||||||||||||||
Warrants | Initial Fair | Fair Value at | Gain or (Loss) | Fair Value as of | |||||||||||||||||
Value | Conversion | September 30, | |||||||||||||||||||
2014 | |||||||||||||||||||||
Warrant #1 | $ | 95,866 | $ | (94,719 | ) | $ | (1,147 | ) | $ | — | |||||||||||
Conversion of the Warrant #1 to 10,825 shares | — | 94,719 | (72,961 | ) | 21,758 | ||||||||||||||||
Warrant #2 | 2,666 | (2,033 | ) | 633 | |||||||||||||||||
Warrant #3 | 53,867 | (53,033 | ) | 834 | |||||||||||||||||
Warrant #4 | 30,600 | (29,333 | ) | 1,267 | |||||||||||||||||
Warrant #5 | 7,133 | — | 7,133 | ||||||||||||||||||
Total | $ | 190,132 | $ | — | $ | (158,507 | ) | $ | 31,625 | ||||||||||||
At initial recognition the value of warrants is recorded as “Marketable securities” and “Revenue” for services provided. Subsequent to initial recognition all valuation adjustments are reflected through other comprehensive income (loss) as “Unrealized gain or losses from marketable securities”. In June 2014, warrant #1 was converted to 10,825 shares of MJ Holdings common stock through the cashless exercise option. The fair value of the shares as of September 30, 2014 was $21,758. The Company uses the published closing price of the stock to value the stock held by the Company. | |||||||||||||||||||||
The Company uses a Black-Scholes model to measure the value of the warrants. The following data were introduced in the model in order to assess the value of the warrants assuming that the Company expects to keep the warrants for six months: | |||||||||||||||||||||
Black-Scholes Calculator Data | Initial Valuation and Recognition | ||||||||||||||||||||
#1 | #2 | #3 | #4 | #5 | |||||||||||||||||
Warrant | |||||||||||||||||||||
Stock price, $ | 8.69 | 4 | 8 | 6.15 | 2.01 | ||||||||||||||||
Exercise price, $ | 6.41503521 | 8.454933 | 7.874619 | 6.953694 | 3.53412 | ||||||||||||||||
Time to maturity, Years | 0.5 | 0.5 | 0.5 | 0.5 | 1 | ||||||||||||||||
Annual risk-free rate, % | 0.05 | 0.05 | 0.05 | 0.05 | 0.04 | ||||||||||||||||
Annualized volatility, % | 70 | 70 | 70 | 70 | 70 | ||||||||||||||||
Black-Scholes Value per warrant, $ | 2.876 | 0.08 | 1.616 | 0.918 | 0.214 | ||||||||||||||||
Number of warrants/shares | 33,333 | 33,333 | 33,333 | 33,333 | 33,333 | ||||||||||||||||
Total value of warrants/shares, $ | 95,866 | 2,666 | 53,867 | 30,600 | 7,133 | ||||||||||||||||
The following data were used by the company for the Black-Scholes model valuation of the warrants as of September 30, 2014: | |||||||||||||||||||||
Fair Value of Warrants | As of September 30, 2014 | ||||||||||||||||||||
#2 | #3 | #4 | #5 | ||||||||||||||||||
Warrant | |||||||||||||||||||||
Stock price, $ | 2.01 | 2.01 | 2.01 | 2.01 | |||||||||||||||||
Exercise price, $ | 8.454933 | 7.874619 | 6.953694 | 3.53412 | |||||||||||||||||
Time to maturity, Years | 1 | 1 | 1 | 1 | |||||||||||||||||
Annual risk-free rate, % | 0.13 | 0.13 | 0.13 | 0.13 | |||||||||||||||||
Annualized volatility, % | 70 | 70 | 70 | 70 | |||||||||||||||||
Black-Scholes Value per warrant, $ | 0.019 | 0.025 | 0.038 | 0.214 | |||||||||||||||||
Number of warrants/shares | 33,333 | 33,333 | 33,333 | 33,333 | |||||||||||||||||
Total value of warrants/shares, $ | 633 | 834 | 1,267 | 7,133 |
CUSTOMER_DEPOSITS_RESTATED
CUSTOMER DEPOSITS (RESTATED) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Banking and Thrift [Abstract] | |||||||||
CUSTOMER DEPOSITS (RESTATED) | NOTE 11 – CUSTOMER DEPOSITS (RESTATED) | ||||||||
Advance payments from customers are recorded as customer deposits on the balance sheet. | |||||||||
Customer deposits | September 30, 2014 | December 31, 2013 | |||||||
(Restated) | |||||||||
Advance payments from customers | $ | 1,509,770 | $ | 710,225 | |||||
Advance payments for vaporizers | 75,038 | 75,636 | |||||||
Total customer deposits | $ | 1,584,808 | $ | 785,861 | |||||
SHORTTERM_DEBT
SHORT-TERM DEBT | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | |||||||||
SHORT-TERM DEBT | NOTE 12 – SHORT-TERM DEBT | ||||||||
Short-term debt as of September 30, 2014 and December 31, 2013 consisted of: | |||||||||
Short-term debt | September 30, 2014 | December 31, 2013 | |||||||
Notes payable to unrelated third party | $ | 299,605 | $ | 75,000 | |||||
Notes payable to related party | 491,674 | 111,794 | |||||||
Total short-term debt | $ | 791,279 | $ | 186,794 | |||||
On July 28, 2014 one of the Company’s subsidiaries executed a promissory note for $249,000 for the purchase of real estate (also see note 7). The note matures on January 30, 2015 and bears 12.0% interest annually. The interest is payable monthly starting August 1, 2014 with a final, sixth payment on January 1, 2015. In the event of a default, as defined, the interest rate increases to 18% and the note can be accelerated. The December 31, 2013 balance of the $75,000 note payable to an unrelated third party was paid in full during nine months of 2014. The notes payable to related parties bear no interest. | |||||||||
The short term loan represents the outstanding balance in the amount of $50,605 of the financing in the amount of $137,160 for the Directors’ & Officers’ (D&O) liability insurance and $22,160 for product liability insurance. The financing of D&O insurance bears 4.25% interest and is payable in monthly payments of $15,511 for nine months with the first payment due on March 5, 2014 and the last payment due on November 5, 2014. The financing of product liability insurance bears 5.99% interest and is payable in monthly payments of $2,524 for nine months with the first payment due on September 5, 2014 and the last payment due on May 5, 2015. |
CONVERTIBLE_NOTES_PAYABLE_AND_
CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY | 9 Months Ended |
Sep. 30, 2014 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY | NOTE 13 – CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY |
On July 21, 2014, as amended on September 19, 2014 and October 20, 2014, the Company entered into a Securities Purchase Agreement whereby the Company agreed to issue convertible debentures (“July 2014 Purchase Agreement Debentures”) in the aggregate principal amount of $3,500,000, in five tranches. The initial closing in the aggregate principal amount of $1,000,000 occurred on July 21, 2014. The second closing in the amount of $1,000,000 occurred on August 26, 2014; the third of $500,000 on September 26, 2014. The fourth and fifth, each in the amount of $500,000, are to occur within 2 and 5 business days, respectively, of the effective date of the registration statement filed by the Company for the resale of the shares of common stock issuable upon conversion of the July 2014 Purchase Agreement Debentures. The July 2014 Purchase Agreement Debentures bear interest at the rate of 10% per year. The debt is due July 21, 2015, with repayment, including accrued principal and accrued interest, beginning on the eleventh day of the fourth month after issuance and will continue on the eleventh day of each following 8 successive months thereafter. | |
Also on September 19, 2014, as amended on October 20, 2014, the Company entered into a securities purchase agreement pursuant to which it agreed to issue convertible debentures (“September 2014 Purchase Agreement Debentures”) in the aggregate principal amount of $2,500,000, in two tranches. The initial closing in the principal amount of $1,000,000 occurred on September 19, 2014. The second closing, of $1,500,000, is to occur within 2 days of the effective date of the registration statement filed by the Company for the resale of the shares of common stock issuable upon conversion of the September 2014 Purchase Agreement Debentures. The September 2014 Purchase Agreement Debentures bear interest at the rate of 5% per year. The debt is due September 19, 2015, with repayment, including accrued principal and accrued interest, due in nine monthly installments, commencing the fourth month after issuance. | |
Both the July 2014 Purchase Agreement Debentures and September 2014 Purchase Agreement Debentures, share the following significant terms: | |
Conversion - All amounts are convertible at any time, in whole or in part, at the option of the holders into shares of the Company’s common stock at a conversion price, or Fixed Conversion Price, which is subject to adjustment as described below. | |
The Notes are initially convertible into shares of the Company’s common stock at the initial Fixed Conversion Price of $11.75 per share. The Fixed Conversion Price is subject to adjustment for stock splits, combinations or similar events. If the Company makes any subsequent equity sales (subject to certain exceptions), under which an effective price per share that is lower than the Fixed Conversion Price, then the conversion price will be reduced to equal such price. The July 2014 Securities Purchase Agreement exempts any sales pursuant to the September 2014 Purchase Agreement Debentures from the July 2014 Purchase Agreement Debentures conversion price adjustments. | |
The Company may make payments on the debt in cash, prompting a 30% premium or, subject to certain conditions, in shares of common stock valued at 70% of the lowest volume weighted average price of the common stock for the 20 prior trading days. However, in the event the registration statement filed by the Company in connection with the respective purchase agreements is not effective within 120 days of the initial closing date under the July 2014 Purchase Agreement and 120 days of the initial closing date under the September 2014 Purchase Agreement, the July 2014 Purchase Agreement Debentures’ and the September 2014 Purchase Agreement Debentures’, respectively, conversion rate will be, during the period commencing 120 days after the initial closing date until the registration statement is effective, equal to 63% of the lowest volume weighted average price of the common stock for the 20 prior trading days. If the aforementioned registration statement is not effective within 160 days of the initial closing date, each of the debentures’ conversion rate will be, during the period commencing 160 days after the initial closing date until the registration statement is effective, equal to 60% of the lowest volume weighted average price of the common stock for the 20 prior trading days. | |
In connection with each of the purchase agreements, the Company entered into a registration rights agreement with the respective investors, pursuant to which the Company agreed to file a registration statement for the resale of the shares of common stock issuable upon conversion of, or payable as principal and interest on, the respective debentures, within 45 days of the initial closing date under each agreement, and to have such registration statements declared effective within 120 days of the initial closing dates of each purchase agreement. | |
The $3.5 million principal amount of the Notes were issued net of $227,500 debt origination costs and $1.776 million initial fair value of the embedded derivative. The conversion feature of the notes meets the definition of a derivative under ASC 815 and requires bifurcation and is accounted for as a separate embedded derivative. Therefore, initially the embedded derivative was recorded on the balance sheet as a derivative liability at its estimated fair value of $1.776 million and created a discount on the Notes that will be amortized over the life of the Notes using the effective interest rate method. The fair value of the embedded derivative will be measured and recorded at fair value each subsequent reporting period and changes in fair value will be recognized in the statement of operations as a gain or loss on derivative. See Note 2 Fair value measure for additional information on the fair value and gains or losses on the embedded derivative. |
PREPAID_EXPENSES_AND_OTHER_CUR
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | NOTE 14 – PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||||||||
Prepaid expenses and other currents assets as of September 30, 2014 and December 31, 2013 consisted of: | |||||||||
Prepaid expenses and other current assets | September 30, | December 31, | |||||||
2014 | 2013 | ||||||||
Prepaid expenses | |||||||||
Deferred loan cost | $ | 196,250 | $ | — | |||||
Rent | 5,262 | 3,962 | |||||||
Directors & officers insurance | 77,645 | — | |||||||
Professional fees | 30,000 | 52,739 | |||||||
Other vendors | 68,750 | 32,540 | |||||||
Other current assets | |||||||||
Earnest money deposits, net | 634,288 | — | |||||||
Prepaid expenses and other current assets | $ | 1,012,195 | $ | 89,241 | |||||
Deferred loan cost represents the cost to secure the convertible note payable financing in the third quarter of 2014. The deferred loan costs will be amortized to expense over the life of the loans. | |||||||||
Earnest money deposits consist of amounts paid to open escrow accounts for the purchase of multiple properties to be used to develop retail dispensary or product cultivation facilities. Also it includes amounts paid to extend the closing dates on some purchase agreements. |
RESTRICTED_STOCK_AND_RESTRICTE
RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||
RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") | NOTE 15 – RESTRICTED STOCK AND RESTRICTED STOCK UNITS (“RSUs”) | ||||||||
On July 23, 2014, in connection with the election of a new Chairman, President and CEO, the Company entered into a two year employment contract with the new CEO. Under the employment contract, the CEO received an award of RSU’s, to be issued within 90 days of the effective date of the Employment Agreement, under the Equity Incentive Plan adopted by the Company, in the amount of the greater (by value) of 50,000 shares of common stock or $500,000 of common stock based on the volume weighted average price for the 30 day period prior to the date of the grant. The Company also agreed to make an equal stock award to the CEO on each anniversary date of the employment agreement. The RSU’s vest immediately during each year of the employment contract. As of September 30, 2014, the fair value of the grant was $711,500 which is being amortized over the CEO’s one year service period. | |||||||||
On August 21, 2014, the Compensation Committee of the Board of Directors granted Restricted Stock and RSU’s to two Board members who were elected to the Board on April 9, 2014. Under the award, the Directors received 346,875 shares of restricted stock and 121,875 RSU’s under which the holders have the right to receive 121,875 shares of common stock. The grant date fair value of the restricted stock was $3,607,500 and the grant date fair value of the RSU’s was $1,267,500. The restricted Stock and RSU’s vest over the remaining first year of the new Board members’ term ending on March 31, 2015. The fair value of the grant is being amortized over the period from the date of grant, August 21, 2014 to the end of the first year of the Board members’ term, March 31, 2015. Under the Board members’ contracts, additional grants will be made for the second year of the contract. | |||||||||
A summary of the activity related to restricted stock and RSUs for the nine months ended September 30, 2014 is presented below: | |||||||||
Restricted stock | Total shares | Grant date fair | |||||||
value | |||||||||
Restricted stock non-vested at January 1, 2014 | — | $ | — | ||||||
Restricted stock granted | 346,875 | 10.4 | |||||||
Restricted stock vested | (178,125 | ) | 10.4 | ||||||
Restricted stock forfeited | — | — | |||||||
Restricted stock non-vested at September 30, 2014 | 168,750 | $ | 10.4 | ||||||
Restricted stock units (RSU’s) | Total shares | Grant date fair | |||||||
value | |||||||||
Restricted stock non-vested at January 1, 2014 | — | $ | — | ||||||
Restricted stock granted | 171,875 | 10.4 | |||||||
Restricted stock vested | (115,625 | ) | 10.4 | ||||||
Restricted stock forfeited | — | ||||||||
Restricted stock non-vested at September 30, 2014 | 56,250 | $ | 10.4 | ||||||
A summary of the expense related to restricted stock and RSUs for the three and nine months ended September 30, 2014 is presented below: | |||||||||
Summary of the expense related to Restricted Stock and RSUs | Three months | Nine | |||||||
ended | months ended | ||||||||
September 30, | September 30, | ||||||||
2014 | 2014 | ||||||||
Restricted Stock | $ | 663,262 | $ | 663,262 | |||||
RSU’s | 368,378 | 368,378 | |||||||
Total stock based compensation expense | $ | 1,031,640 | $ | 1,031,640 | |||||
RELATED_PARTY_TRANSACTIONS_RES
RELATED PARTY TRANSACTIONS (RESTATED) | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS (RESTATED) | NOTE 16 – RELATED PARTY TRANSACTIONS (RESTATED) |
The Company utilizes Vincent Chase Inc., which is a related party and 100% owned by a co-founder of the Company for management advisory and consulting services. During the nine months ended September 30, 2014, the Company incurred $150,000 for these services at the rate of $12,500 per month for the first half of 2014 and $25,000 for the three months ended September 30, 2014. | |
During 2013, the Company issued two promissory notes payable to Vincent Chase Inc., on September 20, 2013 in the amount of $150,000 and on October 28, 2013 in the amount of $100,000. At December 31, 2013 the outstanding amount for the combined notes was $111,794. As of September 30, 2014 these notes were repaid in full. | |
During the first nine months of 2014, the Company issued four notes payable to PVM International Inc. (“PVMI”), a related party which is 100% owned by a co-founder of the Company in the amounts of $250,000, $100,000, $500,000, and $375,000. These notes were subsequently partially repaid leaving $391,674 outstanding as of September 30, 2014. During the first nine months of 2014, the Company issued a notes payable to Vincent Chase, Inc., a related party which is 100% owned by a co-founder of the Company in the amounts of $100,000. The aggregate amount of outstanding notes payable to related parties as of September 30, 2014 was $491,674. The notes bear no interest and are payable on demand. | |
On March 25, 2014, the Company completed a contract for management rights with a related party and shareholder in the amount of $400,000. Also, the same related party paid the Company $150,000 during the first quarter of 2014 on behalf of one of the related party’s partners. These amounts were recorded as deposits in the Company’s balance sheet. In addition, on March 28, 2014, the Company entered into an agreement with the same related party for territory rights in Colorado for $500,000. The agreement has a term of five years and, accordingly, the revenue will be recognized ratably over five year term. | |
On October 9, 2014 the Company made a principal payment to PVMI for $3,197. | |
On July 21, 2014, the Company also paid $75,000 to PVMI as a partial payment for advances made by PVMI for escrow deposits used to secure properties for possible license acquisition in the San Diego market area. | |
The Company utilized Dr. Bruce Consulting which is a related party and 100% owned by one of Company’s major shareholders and former Chief Executive Officer for management consulting and advisory service. During the nine months ended September 30, 2014 the Company incurred expenses in the amount of $18,750 for consulting and advisory services to Dr. Bruce Consulting. The Company will pay an additional $12,500 for consulting services to be provided in November 2014. | |
During the application process for dispensaries and cultivation centers in Illinois, which took place in September, 2014, Dr. Bruce Bedrick, a major shareholder, provided funding to the applicant entity in the amount of $500,000. This amount was returned by the applicant entity to Dr. Bruce Bedrick by September 30, 2014. | |
During the third quarter of 2014 the CEO of the Company and the Chairman of the board, Mr. Guy Marsala received 20,000 shares from the founder and major shareholder of the Company out of his personal holdings to compensate Mr. Marsala for his performance. On October 24, 2014 the Compensation Committee of the Board of Directors recommended that shares be returned to the founder and issued by the Company as part of the yearly RSU grant. In November 2014, Mr. Marsala returned 20,000 shares to founder and major shareholder and 20,000 additional shares were approved to increase Mr. Marsala’s first year RSU grant from 50,000 RSU’s to 70,000 RSU’s. (for details see Note 19 – “Subsequent events”) | |
During the third quarter of 2014, the Company created the following affiliated entities in connection with license applications: A. Hanna Growers, Inc., Herbal Choice of Illinois, Inc., Nature’s Treatment of Illinois, Inc., Green Blossom of Illinois, Inc., Midwestern Compassionate Care of Illinois, Inc., Midwestern Wellness Group of Illinois, Inc., Green Blossom, Inc., Nature’s Treatment, Inc. and Herbal Choice, Inc. |
STOCKHOLDERS_EQUITY
STOCKHOLDER'S EQUITY | 9 Months Ended |
Sep. 30, 2014 | |
Equity [Abstract] | |
STOCKHOLDER'S EQUITY | NOTE 17 – STOCKHOLDER’S EQUITY |
Preferred Stock | |
In November 2011, the Company issued 6,000,000 shares of $0.001 par value Series A convertible preferred stock to the founder and a shareholder of the Company. This preferred stock can be converted to common stock at a ratio of 1 (one) share of Series A Preferred Stock to 5 (five) shares of common stock. In October 2012, 3,000,000 shares of Series A Preferred Stock were returned to the Company by the shareholder and reissued to the founder. In January 2013, the founder returned to the Company the 3,000,000 shares of Series A Preferred Stock and they were immediately cancelled. As of September 30, 2014, there are 3,000,000 shares of Series A Preferred Stock outstanding. | |
Common Stock | |
On June 5, 2014 the Company entered into two separate sale agreements with an affiliate company owned by the co-founder of the Company. One was for the sale of all Bio-Tech rights and claims and a contribution for legal costs of $4,800 in exchange for 30,000 shares of Company common stock with a fair value of $604,800 and another for the sale of all the MedVend rights and claims and a contribution for legal costs of $4,800 in exchange for 30,000 shares of Company common stock with a fair value of $604,800. These 60,000 shares of common stock are treated as treasury stock and can be reissued. | |
During the first quarter of 2014, the Company issued 485,830 shares of common stock at the price of $5.00 per share, resulting in net cash proceeds of $2,427,859. | |
On December 19, 2013 the Company declared a 1:1 common stock dividend on each share of outstanding common stock. This stock dividend aggregating 14,762,875 common shares was issued on February 3, 2014. Accordingly, the Company’s 2013 condensed consolidated financial statements have been retroactively stated to reflect the common stock dividend. | |
On September 8, 2014 the Company issued 93,751 shares of common stock to two board members from a total grant of 346,875 awarded by the Compensation Committee to board members. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | NOTE 18 – COMMITMENTS AND CONTINGENCIES | ||||||||||||||||||||
The Company leases property for its day to day operations and has recently begun leasing facilities for possible retail dispensary locations and cultivation locations as part of the process of applying for retail dispensary and cultivation licenses. | |||||||||||||||||||||
Office Leases | |||||||||||||||||||||
On August 1, 2011, the Company entered into a lease agreement for office space located in West Hollywood, California through June 30, 2017 at a monthly rate of $14,397. Starting July 1, 2014, the monthly rent increased by 3% to $14,828 per month. | |||||||||||||||||||||
In addition, the Company leases office facilities located at West Hills, California and Scottsdale, Arizona from unrelated third parties at a monthly rate of $1,300 and $1,420. The West Hills lease is on a month to month basis. The Arizona lease is a non-auto renewing lease with the most current agreement covering the period from May 1, 2014 to October 31, 2014. The company terminated the West Hills and Scottsdale leases effective November 1, 2014. | |||||||||||||||||||||
On December 17, 2013 the Company’s subsidiary Vaporfection International Inc. entered into a 1 year non-cancelable office lease in Deerfield Beach, Florida. The lease started on January 1, 2014 at a monthly rate of $1,981. After December 31, 2014 the lease converts to a month to month basis. | |||||||||||||||||||||
The Company rents virtual offices/meeting spaces in Tokyo, New York, Toronto and Seattle on a month to month basis for an aggregate of approximately $390 per month. The payment is charged to rent expense as incurred. | |||||||||||||||||||||
Total rent expense under operating leases for the three months ended September 30, 2014 and 2013 was $53,114 and $48,069, and for the nine months ended September 30, 2014 and 2013 was $156,716 and $91,983,. | |||||||||||||||||||||
Retail/Cultivation facility leases | |||||||||||||||||||||
The Company’s business model of acquiring retail dispensary and cultivation licenses has made it important to acquire real estate either through lease arrangements or through purchase agreements in order to secure a possible license. On May 8, 2014, the Company entered into a lease agreement for five years with a monthly payment of $7,400 in order to apply for a license and build-out of a location for a client. Also, on July 22, 2014 one of the Company’s subsidiaries Medbox Property Investments, Inc., entered into a new lease for a facility which will be used in the application process for both a dispensary and cultivation facility. The company paid an initial security deposit of $30,000 and the lease is payable monthly at a rate of $20,000 per month. The lease has a five year term, but is contingent upon license approval which allows for early termination of the lease after January 1, 2015 if the license is not granted. | |||||||||||||||||||||
The following table is a summary of our material contractual lease commitments as of September 30, 2014: | |||||||||||||||||||||
Year Ending | Office Rent | Retail/Cultivation | |||||||||||||||||||
Facility Lease | |||||||||||||||||||||
2014 | $ | 44,484 | $ | 22,200 | |||||||||||||||||
2015 | 177,936 | 88,800 | |||||||||||||||||||
2016 | 177,936 | 88,800 | |||||||||||||||||||
2017 | 88,968 | 88,800 | |||||||||||||||||||
2018 | — | 88,800 | |||||||||||||||||||
2019 | — | 29,600 | |||||||||||||||||||
Total | $ | 489,324 | $ | 407,000 | |||||||||||||||||
Real Estate Commitments | |||||||||||||||||||||
As part of the changes in the Company’s business model, the Company entered in various real estate purchase agreements at various times in order to allow the filing of retail dispensary or cultivation facility licenses in certain states and localities. These purchase agreements generally provide for a period of due diligence and a termination clause in the event that the Company is unable to obtain a license for its client. The agreements generally also provide for some monthly payment from escrow in order to compensate the real estate owner for the passage of time until the sale transaction is complete. Most of these payment releases from escrow are nonrefundable but applicable towards the purchase price if the Company decides to proceed with the purchase. Subject to approval of the license for a dispensary or cultivation center, the Company intends to close on the real estate where purchase agreements have been signed, or to seek partners to replace the Company on each property purchased. | |||||||||||||||||||||
During the nine months period ended September 30, 2014 the Company paid $634,288 either by deposit into twelve escrow accounts or direct payments to sellers, to secure the purchase and/or extend the closing dates on real estate to be used for future retail/cultivation facilities with an aggregate purchase price of $23,030,000. The real estate purchase agreements have closing dates varying between December 1, 2014 and February 10, 2015. | |||||||||||||||||||||
During the second quarter of 2014 one of the Company’s subsidiaries entered into a real estate purchase agreement in Washington state. The purchase transaction was closed during the third quarter for a total purchase price of $399,594 partially financed by a promissory note for $249,000. | |||||||||||||||||||||
During July 2014 one of the real estate properties that MJ Property Investments, Inc. opened escrow on was foreclosed upon and the agreement was canceled and escrow money in the amount of $10,000 was reimbursed to the Company on July 28, 2014. | |||||||||||||||||||||
During July 2014, MJ Property Investments, Inc. allowed the escrows to expire on two agreements with an aggregate purchase price of $2,500,000 and forfeited $100,000 in earnest money due to unfavorable terms demanded by the sellers to extend the escrow and closing date. | |||||||||||||||||||||
A summary of open real estate purchase transactions as of September 30, 2014 is represented in the table below: | |||||||||||||||||||||
Property | Purchase price | Closing | Net escrow balance | Date | Additional | ||||||||||||||||
date | escrow opened | rents/fees paid to | |||||||||||||||||||
extend closing | |||||||||||||||||||||
date | |||||||||||||||||||||
1 | $ | 3,500,000 | 12/11/14 | $ | 60,000 | 7/25/14 | $ | — | |||||||||||||
2 | 3,650,000 | 1/5/15 | 35,000 | 7/21/14 | — | ||||||||||||||||
3 | 2,450,000 | 12/1/14 | 80,000 | 8/13/14 | — | ||||||||||||||||
4 | 790,000 | 1/1/15 | 24,288 | 8/12/14 | — | ||||||||||||||||
5 | 480,000 | 1/31/15 | 16,000 | 8/12/14 | — | ||||||||||||||||
6 | 2,100,000 | 2/10/15 | 90,000 | 8/13/14 | — | ||||||||||||||||
7 | 595,000 | 1/31/15 | 10,000 | 8/13/14 | — | ||||||||||||||||
8 | 3,250,000 | 2/10/15 | 90,000 | 8/19/14 | — | ||||||||||||||||
9 | 2,400,000 | 2/8/15 | 19,000 | 8/19/14 | — | ||||||||||||||||
10 | 2,300,000 | 1/8/15 | 80,000 | 8/19/14 | — | ||||||||||||||||
11 | 695,000 | 10/18/14 | 10,000 | 6/28/14 | — | ||||||||||||||||
12 | 820,000 | 10/18/14 | 45,000 | 6/28/14 | 7,893 | ||||||||||||||||
13 | — | 75,000 | 7/21/14 | — | |||||||||||||||||
Total | $ | 23,030,000 | $ | 634,288 | $ | 7,893 | |||||||||||||||
Property 13 represents the advance on July 21, 2014 of $75,000 to PVMI, a related party, as a partial payment for advances made by PVMI for escrow deposits used to secure properties for possible license acquisition in the San Diego market area. | |||||||||||||||||||||
The closing dates on agreements Property 11 and 12 have been extended to 12/31/2014 and 01/15/2015, respectively subsequent to September 30, 2014. | |||||||||||||||||||||
Other Commitments | |||||||||||||||||||||
The Company has an obligation to a prior manufacturer of VII products to purchase certain unused components after a certain period of time. The amount the Company is now committed to purchase is approximately $56,000. |
RESTATEMENT
RESTATEMENT | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||
RESTATEMENT | NOTE – 19 RESTATEMENT | ||||||||||||||||||||
On December 30, 2014, Medbox, Inc. (the “Registrant”) filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Original 8-K”) disclosing its determination to (i) amend and restate its financial statements for the year ended December 31, 2013, the third and fourth quarters of 2013 and the first three quarters of 2014 and (ii) to examine the Company’s financial statements for the fiscal year 2012 and the first two quarters of 2013 and, if necessary, to restate those also. Thereafter, management, together with its professional advisor, undertook a comprehensive review of revenue recognition for all periods from 2012 to the present. | |||||||||||||||||||||
Management and the outside professional advisor have completed the review of revenue recognition for the years 2012, 2013 and 2014. Conclusions that relate to the periods being restated herein include: | |||||||||||||||||||||
1) | Revenue on some contracts with customers was recognized before all required criteria were met, resulting in an overstatement of revenue; | ||||||||||||||||||||
2) | Certain transactions with related parties in the amount of $810,000 during the year ended December 31, 2013 were improperly recorded as revenue instead of capital contributions; and, | ||||||||||||||||||||
3) | Certain inventory costs in 2013 were improperly capitalized resulting in an understatement of cost of sales. These are costs to seek licenses and locations that should have been recorded as expense prior to executing a contract with a customer, obtaining a license and closing on real estate to operate a dispensary or cultivation center. | ||||||||||||||||||||
The combined impacts of all adjustments to the applicable line items in our consolidated financial statements for the periods covered by this Form 10-Q/A are provided in the tables below. | |||||||||||||||||||||
Financial Statement Presentation. In addition to the restatement of our consolidated financial statements, we have also restated the following items to reflect certain changes noted above. | |||||||||||||||||||||
• | Note 2 - Summary of Significant Accounting Policies | ||||||||||||||||||||
• | Note 5 - Inventories | ||||||||||||||||||||
• | Note 9 - Accounts and Notes Receivable | ||||||||||||||||||||
• | Note 11 - Customer Deposits | ||||||||||||||||||||
• | Note 16. - Related Parties | ||||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED BALANCE SHEET | |||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||
As originally | Impact of 2013 | Early | Presentation | Restated | |||||||||||||||||
presented | restatement | Recognition of | Reclass | (Unaudited) | |||||||||||||||||
(Unaudited) | Revenue | ||||||||||||||||||||
Assets | |||||||||||||||||||||
Cash and cash equivalents | $ | 1,350,442 | $ | 1,350,442 | |||||||||||||||||
Marketable securities | 208,025 | 208,025 | |||||||||||||||||||
Accounts receivable | 337,475 | (1,524,771 | ) | 1,219,607 | 32,312 | ||||||||||||||||
Notes receivable | 75,000 | 75,000 | |||||||||||||||||||
Inventory | 2,466,897 | (636,468 | ) | (1,308,231 | ) | 522,198 | |||||||||||||||
Prepaid expenses and other current assets | 1,012,195 | 1,012,195 | |||||||||||||||||||
Total current assets | 5,450,034 | 3,200,172 | |||||||||||||||||||
Property and equipment | 151,984 | 151,984 | |||||||||||||||||||
Assets held for resale | 399,594 | 399,594 | |||||||||||||||||||
Investments, at cost | — | — | |||||||||||||||||||
Intangible assets | 800,904 | 800,904 | |||||||||||||||||||
Note receivable | 155,000 | 155,000 | |||||||||||||||||||
Goodwill | 1,100,037 | 1,100,037 | |||||||||||||||||||
Deposits and other assets | 72,726 | 72,726 | |||||||||||||||||||
Total assets | $ | 8,130,279 | (2,161,239 | ) | (88,623 | ) | — | $ | 5,880,417 | ||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||
Accounts payable and accrued expenses | $ | 1,505,998 | (150,000 | ) | (34,000 | ) | $ | 1,321,998 | |||||||||||||
Deferred revenue | 683,621 | 390,311 | 1,073,932 | ||||||||||||||||||
Notes payable | 299,605 | 299,605 | |||||||||||||||||||
Related party notes payable | 491,674 | 491,674 | |||||||||||||||||||
Convertible notes payable | 1,939,801 | 1,939,801 | |||||||||||||||||||
Derivative liability | 1,228,108 | 1,228,108 | |||||||||||||||||||
Customer deposits | 587,088 | 582,675 | 415,045 | 1,584,808 | |||||||||||||||||
Total current liabilities | 6,052,274 | 1,116,296 | 771,356 | 7,939,926 | |||||||||||||||||
Stockholders’ Equity | |||||||||||||||||||||
Preferred stock | 3,000 | 3,000 | |||||||||||||||||||
Common stock | 30,105 | 30,105 | |||||||||||||||||||
Additional paid-in capital | 10,244,278 | 1,371,000 | 11,615,278 | ||||||||||||||||||
Common stock subscribed | — | — | |||||||||||||||||||
Treasury stock | (1,209,600 | ) | (1,209,600 | ) | |||||||||||||||||
Accumulated deficit | (6,989,778 | ) | (4,648,535 | ) | (859,979 | ) | 158,507 | (12,339,785 | ) | ||||||||||||
Accumulated other comprehensive loss | (158,507 | ) | (158,507 | ) | |||||||||||||||||
Total stockholders’ equity | 2,078,005 | (3,277,535 | ) | (859,979 | ) | — | (2,059,509 | ) | |||||||||||||
Total liabilities and stockholders’ equity | $ | 8,130,279 | $ | 5,880,417 | |||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | |||||||||||||||||||||
For Nine Months Ended September 30, 2014 | |||||||||||||||||||||
As originally | Early Recognition of | Restated | |||||||||||||||||||
presented | Revenue | ||||||||||||||||||||
Revenue | $ | 836,427 | (302,345 | ) | $ | 534,082 | |||||||||||||||
Revenue from related party | 1,000,000 | (949,890 | ) | 50,110 | |||||||||||||||||
Less: allowances and refunds | (1,229,710 | ) | 1,169,710 | (60,000 | ) | ||||||||||||||||
Net revenue | 606,717 | (82,525 | ) | 524,192 | |||||||||||||||||
Cost of revenues | 2,183,874 | 1,308,231 | 3,492,105 | ||||||||||||||||||
Gross margin | (1,577,157 | ) | (1,390,756 | ) | (2,967,913 | ) | |||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 749,212 | 749,212 | |||||||||||||||||||
Research and development | 136,656 | 136,656 | |||||||||||||||||||
General and administrative | 2,682,519 | (530,777 | ) | 2,151,742 | |||||||||||||||||
Stock based compensation | 1,031,640 | 1,031,640 | |||||||||||||||||||
Total operating expenses | 4,600,027 | 4,069,250 | |||||||||||||||||||
Loss from operations | (6,177,184 | ) | (7,037,163 | ) | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||
Interest income (expense), net | (314,078 | ) | (314,078 | ) | |||||||||||||||||
Change in fair value of derivative liabilities | 548,315 | 548,315 | |||||||||||||||||||
Total other income | 234,237 | 234,237 | |||||||||||||||||||
Loss before provision for income | (5,942,947 | ) | (6,802,926 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | — | — | |||||||||||||||||||
Net loss | $ | (5,942,947 | ) | (859,979 | ) | $ | (6,802,926 | ) | |||||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0.20 | ) | $ | (0.22 | ) | |||||||||||||||
Diluted | $ | (0.20 | ) | $ | (0.22 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 30,472,447 | 30,472,447 | |||||||||||||||||||
Diluted | 30,472,447 | 30,472,447 | |||||||||||||||||||
Other Comprehensive loss | |||||||||||||||||||||
Net loss | $ | (6,802,926 | ) | ||||||||||||||||||
Unrealized loss from marketable securities | (158,507 | ) | |||||||||||||||||||
Comprehensive loss | $ | (6,961,433 | ) | ||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | |||||||||||||||||||||
For Three Months Ended September 30, 2014 | |||||||||||||||||||||
As originally | Early Recognition | Restated | |||||||||||||||||||
presented | of Revenue | ||||||||||||||||||||
Revenue | $ | 107,429 | 65,647 | $ | 173,076 | ||||||||||||||||
Revenue from related party | — | — | |||||||||||||||||||
Less: allowances and refunds | — | — | |||||||||||||||||||
Net revenue | 107,429 | 65,647 | 173,076 | ||||||||||||||||||
Cost of revenues | 743,397 | 1,070,165 | 1,813,562 | ||||||||||||||||||
Gross margin | (635,968 | ) | (1,004,518 | ) | (1,640,486 | ) | |||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 319,204 | 319,204 | |||||||||||||||||||
Research and development | 61,623 | 61,623 | |||||||||||||||||||
General and administrative | 1,363,440 | (410,777 | ) | 952,663 | |||||||||||||||||
Stock based compensation | 1,031,640 | 1,031,640 | |||||||||||||||||||
Total operating expenses | 2,775,907 | 2,365,130 | |||||||||||||||||||
Loss from operations | (3,411,875 | ) | (4,005,616 | ) | |||||||||||||||||
Other expense | |||||||||||||||||||||
Interest income (expense), net | (339,231 | ) | (339,231 | ) | |||||||||||||||||
Change in fair value of derivative liabilities | 548,315 | 548,315 | |||||||||||||||||||
Total other income | 209,084 | 209,084 | |||||||||||||||||||
Loss before provision for income | (3,202,791 | ) | (3,796,532 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | — | — | |||||||||||||||||||
Net loss | $ | (3,202,791 | ) | (593,741 | ) | $ | (3,796,532 | ) | |||||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0.11 | ) | $ | (0.13 | ) | |||||||||||||||
Diluted | $ | (0.07 | ) | $ | (0.13 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 30,371,299 | 30,371,299 | |||||||||||||||||||
Diluted | 45,371,299 | 30,371,299 | |||||||||||||||||||
Other Comprehensive loss | |||||||||||||||||||||
Net loss | $ | (3,796,532 | ) | ||||||||||||||||||
Unrealized loss from marketable securities | (158,507 | ) | |||||||||||||||||||
Comprehensive loss | $ | (3,955,039 | ) | ||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
For Nine Months Ended September 30, 2013 | |||||||||||||||||||||
As originally | Early Recognition | Contributions | Restated | ||||||||||||||||||
presented | of Revenue | to capital | |||||||||||||||||||
Revenue | $ | 4,801,062 | (2,146,686 | ) | (810,000 | ) | $ | 1,844,376 | |||||||||||||
Revenue from related party | — | — | |||||||||||||||||||
Less: allowances and refunds | — | — | |||||||||||||||||||
Net revenue | 4,801,062 | 1,844,376 | |||||||||||||||||||
Cost of revenues | 2,442,592 | (184,465 | ) | 2,258,127 | |||||||||||||||||
Gross margin | 2,358,470 | (1,962,221 | ) | (810,000 | ) | (413,751 | ) | ||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 506,393 | 506,393 | |||||||||||||||||||
Research and development | 46,733 | 46,733 | |||||||||||||||||||
General and administrative | 1,876,505 | 1,876,505 | |||||||||||||||||||
Stock based compensation | — | — | |||||||||||||||||||
Total operating expenses | 2,429,631 | 2,429,631 | |||||||||||||||||||
Loss from operations | (71,161 | ) | (2,843,382 | ) | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||
Interest income (expense), net | (1,884 | ) | (1,884 | ) | |||||||||||||||||
Total other expense | (1,884 | ) | (1,884 | ) | |||||||||||||||||
Loss before provision for income | (73,045 | ) | (2,845,266 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | (29,220 | ) | (29,220 | ) | |||||||||||||||||
Net loss | $ | (43,825 | ) | (1,962,221 | ) | (810,000 | ) | $ | (2,816,046 | ) | |||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0.00 | ) | $ | (0.10 | ) | |||||||||||||||
Diluted | $ | (0.00 | ) | $ | (0.10 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 28,658,556 | 28,658,556 | |||||||||||||||||||
Diluted | 44,372,842 | 28,658,556 | |||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
For Three Months Ended September 30, 2013 | |||||||||||||||||||||
As originally | Early Recognition | Restated | |||||||||||||||||||
presented | of Revenue | ||||||||||||||||||||
Revenue | $ | 1,980,720 | (666,542 | ) | $ | 1,314,178 | |||||||||||||||
Revenue from related party | — | — | |||||||||||||||||||
Less: allowances and refunds | — | — | |||||||||||||||||||
Net revenue | 1,980,720 | 1,314,178 | |||||||||||||||||||
Cost of revenues | 1,641,495 | 165,535 | 1,807,030 | ||||||||||||||||||
Gross margin | 339,225 | (832,077 | ) | (492,852 | ) | ||||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 91,136 | 91,136 | |||||||||||||||||||
Research and development | 28,233 | 28,233 | |||||||||||||||||||
General and administrative | 522,372 | 522,372 | |||||||||||||||||||
Stock based compensation | — | — | |||||||||||||||||||
Total operating expenses | 641,741 | 641,741 | |||||||||||||||||||
Loss from operations | (302,516 | ) | (1,134,593 | ) | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||
Interest income (expense), net | 4,311 | 4,311 | |||||||||||||||||||
Change in fair value of derivative liabilities | — | — | |||||||||||||||||||
Total other income | 4,311 | 4,311 | |||||||||||||||||||
Loss before provision for income | (298,205 | ) | (1,130,282 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | (119,280 | ) | (119,280 | ) | |||||||||||||||||
Net loss | $ | (178,925 | ) | (832,077 | ) | $ | (1,011,002 | ) | |||||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0 | ) | $ | (0 | ) | |||||||||||||||
Diluted | $ | (0 | ) | $ | (0 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 29,298,284 | 29,298,284 | |||||||||||||||||||
Diluted | 44,298,284 | 29,298,284 | |||||||||||||||||||
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 20– SUBSEQUENT EVENTS |
During the third quarter of 2014, the CEO of the Company and the Chairman of the Board, Mr. Guy Marsala received 20,000 shares from the founder and major shareholder of the Company out of his personal holdings to compensate for his superior performance. On October 24, 2014 the Compensation Committee of the Board of Directors recommended that shares be returned to the founder and issued by the Company as part of the yearly RSU grant. In November 2014, Mr. Marsala returned 20,000 shares to founder and major shareholder and 20,000 additional shares were approved to increase Mr. Marsala’s first year RSU grant from 50,000 RSU’s to 70,000 RSU’s. | |
On October 17, 2014 the Company entered into an assignment agreement with its affiliate PVM International (PVMI) through which PVMI assigned all rights and titles for any opened escrow on real estate purchase agreements in San Diego in exchange for a related party notes payable from the Company. As of the signing date the agreement was valued at $190,400 which represented the value of escrow deposits paid by PVMI for eight different real estate agreements. Also on the date of the assignment agreement the Company paid $50,000 into an escrow account for PVMI. The escrow was related to one of the eight real estate purchase agreements that were part of the assignment. | |
As of October 30, 2014 the Company was unsuccessful in obtaining the license associated with one of the locations. As a result the Company canceled one agreement with a purchase price of $3,500,000 and received the earnest money refund in the amount of $60,000 out of initially $100,000 paid; $40,000 represents a non-refundable fee according to the agreement that the escrow would release to seller $10,000 on the first day of each month following the signing and additional $10,000 with signing on July 21, 2014. | |
On October 20, 2014 the Company received a $155,000 payment on the promissory note receivable from its Canadian partner plus accrued interest of $6,423.56. The full payment retired the note receivable. | |
Effective November 1, 2014 the Company terminated two leases from unrelated third parties for offices located in West Hills, California and Scottsdale, Arizona with monthly lease payments of $1,300 and $1,420. The West Hills lease was on a month to month basis. The Arizona lease term expired on October 31, 2014. | |
The Company utilized Dr. Bruce Consulting which is a related party and 100% owned by one of Company’s major shareholder and former Chief Executive Officer for management consulting and advisory service. The Company paid an additional $12,500 for consulting services in November 2014. | |
On October 13, 2014, Mr. Vincent Mehdizadeh resigned as an officer of the Company. Mr. Mehdizadeh will continue to serve as a consultant to the Company. In his new role, Mr. Mehdizadeh will provide consulting services and will have the title of Founder and Senior Advisor. In connection therewith, on October 13, 2014, the Company entered into a consulting agreement with Mr. Mehdizadeh, pursuant to which the Company agreed to pay Mr. Mehdizadeh a monthly fee of $25,000 for consulting services to be performed by Mr. Mehdizadeh. The monthly consulting fee will be reduced to $12,500 per month if Mr. Mehdizadeh is engaged in trading any of the Company’s securities at any time within the preceding 30 day period. The consulting agreement has a two-year term, which term will automatically be extended for successive additional one-year terms, unless either party provides written notice to the other 90 days prior to the expiration of the initial term or any successive term, that Mr. Mehdizadeh’s agreement will not be extended. | |
As of filing date the Company issued 337,186 shares of common stock to two board members from a total grant of 346,875 awarded by the Compensation Committee to board members. | |
On October 16, 2014, Thomas Iwanski resigned as Chief Financial Officer, and C. Douglas (“Doug”) Mitchell was elected as Chief Financial Officer of the Company and Corporate Secretary. | |
Mr. Iwanski agreed to serve as a consultant to the Company for a transition period. The Company agreed to pay Mr. Iwanski $10,000 for services provided during the month of October 2014 and $200 per hour for consulting services rendered after October 31, 2014. The Company also agreed to issue Mr. Iwanski 100,000 Restricted Stock Units (“RSU’s”) for his service to the Company. | |
In connection with Mr. Mitchell’s election as Chief Financial Officer, on October 16, 2014, the Company entered into an employment agreement with Mr. Mitchell (the “Employment Agreement”). Pursuant to the Employment Agreement, the Company agreed to engage Mr. Mitchell, and Mr. Mitchell agreed to serve as the Company’s Chief Financial Officer, for a two-year term, which term will automatically be extended for successive additional one-year terms, unless either party provides written notice to the other 90 days prior to the expiration of the initial term or any successive term, that the Employment Agreement will not be renewed. The Company agreed to pay Mr. Mitchell a salary of $190,000 per year and to pay Mr. Mitchell $2,500 per month for living expenses in the West Hollywood, California area. Mr. Mitchell will also be entitled to an annual bonus of up to 35% of his salary, payable of up to 50% in cash and the balance payable in equity of the Company, subject to performance criteria and objectives to be established by mutual agreement of the CEO of the Company and Mr. Mitchell within 90 days of the effective date of the Employment Agreement, and thereafter from time to time by the CEO in consultation with Mr. Mitchell. Mr. Mitchell will also be entitled to an award of restricted stock units, to be issued within 90 days of the effective date of the Employment Agreement, under the Company’s Equity Incentive Plan, in the amount of 7,500 shares of common stock each calendar quarter Mr. Mitchell serves as Chief Financial Officer of the Company. | |
The Company may terminate the Employment Agreement with or without Cause (as defined in the Employment Agreement) upon written notice to Mr. Mitchell. In the event the Company terminates the Employment Agreement without Cause, Mr. Mitchell terminates the Employment Agreement with Good Reason (as defined in the Employment Agreement), or the Employment Agreement is not renewed as a result of notice to Mr. Mitchell provided 90 days prior to expiration of the initial or a renewal term, Mr. Mitchell will be entitled to payment of one-half his annual salary. Termination by the Company within 365 days of a Change of Control (as defined in the Employment Agreement) in the absence of Cause will conclusively be deemed a termination by the Company without Cause. | |
On October 22, 2014, Jennifer S. Love was elected to the board of directors of the Company. Ms. Love was also elected to serve as Chairperson of the Audit Committee. | |
Ms. Love, 52, has been Senior Vice President and Chief Security Officer of Cablevision Services Corporation since August 2012. Previously, from 1987 to 2012, Ms. Love was with the Federal Bureau of Investigation, including as Assistant Director of the Security Division from July 2011 to June 2012. Ms. Love received a Bachelor of Science in Accounting from Jackson State University. Jennifer Love was granted 19,452 RSU’s for 2014. Her contract calls for grants of 100,000 RSU’s for each succeeding year of service beginning on April 1, 2015. | |
On October 19, 2014, the Company received the sixth (last) warrant for 33,333 shares of common stock as a payment for services provided to MJ Holdings. The warrant was initially valuated at $13,033 using the Black Scholes model. | |
On October 30, 2014, the Company appointed Tim Morrissey as V.P. and Director of Vaporfection International, Inc. Mr. Morrissey is the founder and Chief Executive Officer of Head Choice Inc., which is involved in many facets of the vaporization industry including consultation, manufacturing, sales and distribution. | |
The Company plans to re-file an amendment to the Form S-1 it filed in connection with the July 2014 and September 2014 purchase agreements to include financial information from this Form 10-Q/A on or about November 14, 2014. | |
The registration rights agreement entered into in connection with the July 2014 purchase agreement requires the Company to have a Form S-1 declared effective on or before November 18, 2014. As noted above, it is expected the amended Form S-1 will not be effective until December 4, 2014. As a result of the delay in effectiveness for the Form S-1, the conversion rate for the common stock to be issued as repayment of the debentures issued pursuant to the July 2014 purchase agreement will be, during the period commencing 120 days after the initial closing date until to the registration statement is effective, reduced to 63% of the volume weighted average price for 20 days prior to the issuance from 70% of the volume weighted average price originally stipulated in the loan agreements. This reduction in the conversion rate will increase our interest expense beginning in the fourth quarter of 2014. | |
On November 10, 2014, the Los Angeles Regional Office of the Securities and Exchange Commission (the “SEC”) notified the Company that it is conducting an investigation pertaining to the Company and issued a subpoena to the Company for documents from December 1, 2011 to the present relating to the matters it is reviewing. The Company plans to cooperate fully with the SEC staff to complete the investigation on a timely basis. | |
The SEC said it is trying to determine whether there have been any violations of the Federal Securities Laws. It said further that the fact of the investigation does not mean that it has concluded that the Company or anyone else has broken the law or that it has a negative opinion of any person, entity or security. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) (Policies) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation | ||||||||||||||||||||||||||||||||
The consolidated financial statements include the accounts of Medbox, Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated. | |||||||||||||||||||||||||||||||||
Use of Estimates | Use of Estimates | ||||||||||||||||||||||||||||||||
The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements as well as the reported expenses during the reporting periods. The Company’s significant estimates and assumptions include the valuation of the Company’s common stock used in the valuation of goodwill, accounts receivable and note receivable collectability, inventory, advances on investments, the valuation of restricted stock and warrants received from customers, the amortization and recoverability of capitalized patent costs and useful lives of long-lived assets the derivative liability, and income tax expense. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from these estimates. | |||||||||||||||||||||||||||||||||
Concentrations of Credit Risk | Concentrations of Credit Risk (Restated) | ||||||||||||||||||||||||||||||||
The Company maintains cash balances at several financial institutions in the Los Angeles, California area and Florida. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2014 and December 31, 2013, the Company’s uninsured balances totaled $967,347 and $0, respectively. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. | |||||||||||||||||||||||||||||||||
At September 30, 2014, one customer, represented 77.4% of outstanding receivables | |||||||||||||||||||||||||||||||||
September 30, 2014 | January - | December 31, 2013 | January - | ||||||||||||||||||||||||||||||
September 2014 | September 2013 | ||||||||||||||||||||||||||||||||
Accounts | Revenue | Accounts | Revenue | ||||||||||||||||||||||||||||||
Receivable | Receivable | ||||||||||||||||||||||||||||||||
Amount, | % | Amount, | % | Amount, | % | Amount, | % | ||||||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||||||||||||
A | — | — | 190,131 | 32.5 | % | 150,000 | 44.2 | % | 325,000 | 17.6 | % | ||||||||||||||||||||||
B | — | — | 175,000 | 30 | % | 115,200 | 33.9 | % | |||||||||||||||||||||||||
C | 25,000 | 77.4 | % | — | — | ||||||||||||||||||||||||||||
D | |||||||||||||||||||||||||||||||||
E | |||||||||||||||||||||||||||||||||
25,000 | 77.4 | % | 365,131 | 62.5 | % | 265,200 | 78.1 | % | 325,000 | 17.6 | % | ||||||||||||||||||||||
Total | 32,312 | 100 | % | 584,191 | 100 | % | 339,736 | 100 | % | 1,844,376 | 100 | % | |||||||||||||||||||||
Advertising and Marketing Costs | Advertising and Marketing Costs | ||||||||||||||||||||||||||||||||
Advertising and marketing costs are expensed as incurred. The Company incurred advertising and marketing costs of $319,204 and $91,136 for the three months ended September 30, 2014 and 2013, and $749,212 and $506,393 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||||||||||||||||||||||||||||
Research and Development | Research and Development | ||||||||||||||||||||||||||||||||
Research and development expenses are charged to operations as incurred. The Company incurred research and development costs of $61,623 and $28,233 for the three months ended September 30, 2014 and 2013, and $136,656 and $46,733 for the nine months ended September 30, 2014 and 2013, respectively. | |||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments | ||||||||||||||||||||||||||||||||
Pursuant to ASC No. 825, Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying value of cash, accounts receivable, other receivables, inventory, accounts payable and accrued expenses and notes payable, related party notes payable, customer deposits, provision for customer refunds and short term loans payable approximate their fair value due to the short period to maturity of these instruments. The Company’s marketable securities and related customer deposits require fair value measurement on a recurring basis as the Company has received advance payment of restricted stock in a publicly traded company for contracted services and received warrants for service provided to unrelated third party. The Company has no exposure to gain or loss on the increase or decrease in the value of the marketable securities received as a payment from customer as any shortfall in the ultimate liquidated value of the securities will be supplemented by additional restricted stock from the customer and any liquidation in excess above the Company’s billings will be returned to the customer. The securities received as a payment for services provided will be exposed to gains or losses following their initial evaluation as of the date the revenue was earned. | |||||||||||||||||||||||||||||||||
Warrants and other financial assets received as a payment for the services provided are recorded as “Marketable securities” under the current assets if they are expected to be realized within 12 months. The Company uses the Black-Scholes model to measure the value of the warrants. At each reporting date the Company will reevaluate the value of marketable securities and record any changes in value to other comprehensive income (loss) under “Unrealized gain or losses from marketable securities”. | |||||||||||||||||||||||||||||||||
Embedded derivative - The Company’s convertible notes payable include embedded features that require bifurcation and are accounted for as a separate embedded derivative (see Note 13). The Company has estimated the fair market value of the embedded derivative of the Notes as the difference between the fair market value of the Notes with the conversion feature and the fair market value of the Notes without the conversion feature associated with the embedded derivative, in both cases using relevant market data. In the case of the fair market value of the Notes with the conversion feature, a binomial lattice model was used utilizing a discount rate based on variable conversion probability. In the case of the fair market value of the Notes without the conversion feature associated with the embedded derivative, a discounted cash flow approach was used. The key valuation assumptions used consist of the price of the Company’s stock, a risk free interest rate based on the average yield of a one year Treasury note and expected volatility of the Company’s common stock all as of the measurement dates. The Company considers these inputs Level 3 assumptions. | |||||||||||||||||||||||||||||||||
A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows: | |||||||||||||||||||||||||||||||||
Level 1 | Quoted prices in active markets for identical assets or liabilities. | ||||||||||||||||||||||||||||||||
Level 2 | Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly. | ||||||||||||||||||||||||||||||||
Level 3 | Significant unobservable inputs that cannot be corroborated by market data. | ||||||||||||||||||||||||||||||||
The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the liabilities that are measured at fair value on a recurring basis. | |||||||||||||||||||||||||||||||||
Total | Quoted Prices | Quoted Prices | Significant | ||||||||||||||||||||||||||||||
in Active | for Similar | Unobservable | |||||||||||||||||||||||||||||||
Markets for | Assets or | Inputs | |||||||||||||||||||||||||||||||
Identical | Liabilities in | (Level 3) | |||||||||||||||||||||||||||||||
Assets or | Active | ||||||||||||||||||||||||||||||||
Liabilities | Markets | ||||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | ||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||
Marketable securities | $ | 208,025 | $ | 208,025 | $ | — | $ | — | |||||||||||||||||||||||||
Conversion Feature | 1,228,108 | — | — | 1,228,108 | |||||||||||||||||||||||||||||
Total | $ | 1,436,133 | $ | 208,025 | $ | — | $ | 1,228,108 | |||||||||||||||||||||||||
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis: | |||||||||||||||||||||||||||||||||
For the nine months | |||||||||||||||||||||||||||||||||
ended | |||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||
Beginning balance | $ | — | |||||||||||||||||||||||||||||||
Initial recognition of conversion feature | 1,776,423 | ||||||||||||||||||||||||||||||||
Change in fair value of conversion feature | (548,315 | ) | |||||||||||||||||||||||||||||||
Ending balance | $ | 1,228,108 | |||||||||||||||||||||||||||||||
Revenue Recognition (Restated) | Revenue Recognition (Restated) | ||||||||||||||||||||||||||||||||
The Company applies the revenue recognition provisions pursuant to ASC No. 605, Revenue Recognition, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. The guidance outlines the basic criteria that must be met to recognize the revenue and provides guidance for disclosure related to revenue recognition policies. | |||||||||||||||||||||||||||||||||
Revenue is only recognized when the following four criteria are met: 1) persuasive evidence of an arrangement exists, 2) delivery has occurred or services have been rendered, 3) sales price is fixed and determinable and 4) collectability is reasonably assured. For multi-year contracts with upfront payments made by customers, the upfront payments are recognized over the longer of the contract period or the customer relationship. For contracts that include multiple deliverables such as the build out of customer facilities, the Company recognizes revenue when a milestone is reached in the contract such as securing the location, delivery of dispensing machines or completion of the facility. The contract terms are broken down in specific milestones with specific attributable revenue to be earned upon successful completion of the milestone terms. ( e.g.. if a milestone is completing construction on a client dispensary, the condition for the revenue to be recorded is after issuance of a certificate of occupancy for the newly completed facility. The Company will record a specified amount of revenue attributable to this milestone based on the contract). Equipment sales not associated with a consulting contract are recognized as the product is shipped and title passes. Advance payments from clients in advance of work performed are recorded as customer deposits on the balance sheet. | |||||||||||||||||||||||||||||||||
An allowance for bad debt is established for any customer when their balance is deemed as possibly uncollectible. | |||||||||||||||||||||||||||||||||
Provisions for estimated returns and allowances, and other adjustments are usually provided in the same period the related sales are recorded. The Company will at times allow customers to receive full refunds should regulatory events prevent the customer from being able to operate his contracted location. The provision for returns as well as an allowance for doubtful accounts is included in the Company’s balance sheet as determined by management. | |||||||||||||||||||||||||||||||||
Provisions for estimated returns and allowances, and other adjustments are provided in the same period the related sales are recorded. The Company will at times allow customers to get full refunds should political events prevent the customer from being able to operate his or her contracted location. The provision for returns as well as an allowance for bad debts will be included in the Company’s balance sheet should the Company deem such allowances justified. | |||||||||||||||||||||||||||||||||
Cost of Revenues (Restated) | Cost of Revenues (Restated) | ||||||||||||||||||||||||||||||||
Cost of revenue consists primarily of expenses associated with the delivery and distribution of our products and services. These include expenses related to the manufacture of our dispensary units, construction expense related to the customer dispensary, site selection and establishment of licensing requirements, and consulting expense for the continued management of the dispensary unit build out, server and security equipment, rent expense, energy and bandwidth costs, and support and maintenance costs prior to when the client moves in. We only begin capitalizing costs when we have obtained a license and a site for operation of a customer dispensary or cultivation center. The previously capitalized costs are charged to cost of revenue in the same period that the associated revenue is earned. In the case where it is determined that previously inventoried costs are in excess of the projected net realizable value of the sale of the licenses then the excess cost above net realizable value is written off to cost of revenues. In addition, cost of revenue related to our vaporizer line of products consists of direct procurement cost of the products along with costs associated with order fulfillment, shipping, inventory storage and inventory management costs. | |||||||||||||||||||||||||||||||||
Basic and Fully Diluted Net Income/Loss Per Share | Basic and Fully Diluted Net Income/Loss Per Share | ||||||||||||||||||||||||||||||||
Basic net income/loss per share is computed by dividing net income/loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net incomes per share include the effects of any outstanding options, warrants and other potentially dilutive securities. The Company did not consider any potentially dilutive common shares in the computation of diluted loss per share for the periods ending September 30, 2014 and December 31, 2013, due to the net loss, as they would have an anti-dilutive effect on EPS. | |||||||||||||||||||||||||||||||||
As of September 30, 2014 and December 31, 2013, the Company had 3,000,000 shares of Series A preferred stock outstanding with par value of $0.001 that could be converted into 15,000,000 shares of the Company’s common stock. The Company also had 295,854 warrants to purchase common stock outstanding as of September 30, 2014. | |||||||||||||||||||||||||||||||||
Accounts Receivable and Allowance for Bad Debts (Restated) | Accounts Receivable and Allowance for Bad Debts (Restated) | ||||||||||||||||||||||||||||||||
The Company is subject to credit risk as it extends credit to our customers for work performed as specified in individual contracts. The Company extends credit to its customers, mostly on an unsecured basis after performing certain credit analysis. Our typical terms require the customer to pay a portion of the contract price up front and the rest upon certain agreed milestones. The Company’s management periodically reviews the creditworthiness of its customers and provides for probable uncollectible amounts through a charge to operations and a credit to an allowance for doubtful accounts based on our assessment of the current status of individual accounts. Accounts still outstanding after the Company has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts. As of September 30, 2014 and December 31, 2013, the Company’s management considered all accounts outstanding fully collectible. | |||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment | ||||||||||||||||||||||||||||||||
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses accelerated depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows: | |||||||||||||||||||||||||||||||||
Vehicles | 5 years | ||||||||||||||||||||||||||||||||
Furniture and Fixtures | 5 years | ||||||||||||||||||||||||||||||||
Office equipment | 3 years | ||||||||||||||||||||||||||||||||
Assets Held for Resale | Assets Held for Resale | ||||||||||||||||||||||||||||||||
During 2014, the Company has entered into various real estate purchase agreements to support the filing of retail dispensary or cultivation facility licenses in certain states and localities. The cost of the acquired real estate is included in Assets Held for Resale on the balance sheet. The Company intends to sell the real estate to a long term investor after the license is granted. Accordingly, the company does not depreciate assets held for resale. | |||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes | ||||||||||||||||||||||||||||||||
The Company accounts for income taxes under the asset and liability method in accordance with ASC 740. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred tax assets and liabilities are classified as current and non-current based on their characteristics. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. | |||||||||||||||||||||||||||||||||
In addition, the Company’s management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing the Company’s income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorizes. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes. | |||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies | ||||||||||||||||||||||||||||||||
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |||||||||||||||||||||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. | |||||||||||||||||||||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. | |||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | ||||||||||||||||||||||||||||||||
There were various accounting updates recently issued which are not expected to a have a material impact on the Company’s consolidated financial position, consolidated results of operations or cash flows. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
Schedules of Concentration of Risk, by Risk Factor | At September 30, 2014, one customer, represented 77.4% of outstanding receivables | ||||||||||||||||||||||||||||||||
September 30, 2014 | January - | December 31, 2013 | January - | ||||||||||||||||||||||||||||||
September 2014 | September 2013 | ||||||||||||||||||||||||||||||||
Accounts | Revenue | Accounts | Revenue | ||||||||||||||||||||||||||||||
Receivable | Receivable | ||||||||||||||||||||||||||||||||
Amount, | % | Amount, | % | Amount, | % | Amount, | % | ||||||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||||||||||||
A | — | — | 190,131 | 32.5 | % | 150,000 | 44.2 | % | 325,000 | 17.6 | % | ||||||||||||||||||||||
B | — | — | 175,000 | 30 | % | 115,200 | 33.9 | % | |||||||||||||||||||||||||
C | 25,000 | 77.4 | % | — | — | ||||||||||||||||||||||||||||
D | |||||||||||||||||||||||||||||||||
E | |||||||||||||||||||||||||||||||||
25,000 | 77.4 | % | 365,131 | 62.5 | % | 265,200 | 78.1 | % | 325,000 | 17.6 | % | ||||||||||||||||||||||
Total | 32,312 | 100 | % | 584,191 | 100 | % | 339,736 | 100 | % | 1,844,376 | 100 | % | |||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the liabilities that are measured at fair value on a recurring basis. | ||||||||||||||||||||||||||||||||
Total | Quoted Prices | Quoted Prices | Significant | ||||||||||||||||||||||||||||||
in Active | for Similar | Unobservable | |||||||||||||||||||||||||||||||
Markets for | Assets or | Inputs | |||||||||||||||||||||||||||||||
Identical | Liabilities in | (Level 3) | |||||||||||||||||||||||||||||||
Assets or | Active | ||||||||||||||||||||||||||||||||
Liabilities | Markets | ||||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | ||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||
Marketable securities | $ | 208,025 | $ | 208,025 | $ | — | $ | — | |||||||||||||||||||||||||
Conversion Feature | 1,228,108 | — | — | 1,228,108 | |||||||||||||||||||||||||||||
Total | $ | 1,436,133 | $ | 208,025 | $ | — | $ | 1,228,108 | |||||||||||||||||||||||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis: | ||||||||||||||||||||||||||||||||
For the nine months | |||||||||||||||||||||||||||||||||
ended | |||||||||||||||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||||||||||||||
Total | |||||||||||||||||||||||||||||||||
Beginning balance | $ | — | |||||||||||||||||||||||||||||||
Initial recognition of conversion feature | 1,776,423 | ||||||||||||||||||||||||||||||||
Change in fair value of conversion feature | (548,315 | ) | |||||||||||||||||||||||||||||||
Ending balance | $ | 1,228,108 | |||||||||||||||||||||||||||||||
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Estimated Useful Lives [Member] | |||||||||
Property, Plant and Equipment | The estimated useful lives for significant property and equipment categories are as follows: | ||||||||
Vehicles | 5 years | ||||||||
Furniture and Fixtures | 5 years | ||||||||
Office equipment | 3 years | ||||||||
Property And Equipment [Member] | |||||||||
Property, Plant and Equipment | Property and equipment at September 30, 2014 and December 31, 2013 consists of: | ||||||||
Property and Equipment | September 30, 2014 | December 31, 2013 | |||||||
Office equipment | $ | 22,934 | $ | 17,192 | |||||
Furniture and fixtures | 74,404 | 73,567 | |||||||
Website development | 46,922 | 46,922 | |||||||
Product tooling | 50,503 | 24,100 | |||||||
194,763 | 161,781 | ||||||||
Less accumulated depreciation | (42,779 | ) | (21,123 | ) | |||||
Property and equipment, net | $ | 151,984 | $ | 140,658 | |||||
ACQUISITION_Tables
ACQUISITION (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Business Combinations [Abstract] | |||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The total value of the acquisition was approximately $1,635,000 and has been allocated in accordance with ASC 805 as per the Company’s independent valuation as follows: | ||||
Machinery & Equipment | $ | 70,000 | |||
IP and related technology | 287,000 | ||||
Amortizable intangible assets: | |||||
Customer contracts and related relationships | 314,000 | ||||
Trade name, trademark, and domain name | 46,000 | ||||
Non-compete covenants | 23,000 | ||||
Goodwill | 895,000 | ||||
Total assets acquired | 1,635,000 | ||||
Fair value of liabilities assumed | (469,000 | ) | |||
Net fair value | $ | 1,166,000 | |||
INVENTORIES_Restated_Tables
INVENTORIES (Restated) (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | |||||||||
Schedule of Inventory, Current | The consolidated inventories at September 30, 2014 and December 31, 2013 consist of the following: | ||||||||
September 30, 2014 | December 31, 2013 | ||||||||
(Restated) | |||||||||
Work in process and related capitalized costs | $ | — | $ | 242,488 | |||||
Deposits on dispensing machines | 336,583 | 138,423 | |||||||
Vaporizers and accessories | 164,030 | 193,575 | |||||||
Dispensing machines | 21,585 | 58,500 | |||||||
Total inventory, net | $ | 522,198 | $ | 632,986 | |||||
ASSETS_HELD_FOR_RESALE_Tables
ASSETS HELD FOR RESALE (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Text Block [Abstract] | |||||||||
Disclosure of Long Lived Assets Held-for-sale | In the event of a default, as defined, the interest rate increases to 18% and the note can be accelerated. | ||||||||
Assets held for resale | September 30, 2014 | December 31, 2013 | |||||||
Buildings held for resale | $ | 399,594 | $ | — | |||||
Assets held for resale | $ | 399,594 | $ | — | |||||
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Estimated Useful Lives [Member] | |||||||||
Schedule of Finite-Lived Intangible Assets | The estimated useful lives for significant intangible assets are as follows: | ||||||||
Distributor Relationship | 10 years | ||||||||
Domain Names | 10 years | ||||||||
IP/Technology/Patents | 10 years | ||||||||
Non-Compete covenants | 3 years | ||||||||
Finite-Lived Intangible Assets [Member] | |||||||||
Schedule of Finite-Lived Intangible Assets | |||||||||
Intangible assets | September 30, 2014 | December 31, 2013 | |||||||
Distributor relationship | $ | 314,000 | $ | 314,000 | |||||
IP/technology/patents | 403,363 | 332,179 | |||||||
Domain names | 131,000 | 46,000 | |||||||
Non-compete covenants | 23,000 | 23,000 | |||||||
Subtotal | 871,363 | 715,179 | |||||||
Less accumulated amortization | (70,459 | ) | (32,750 | ) | |||||
Intangible assets, net | $ | 800,904 | $ | 682,429 | |||||
MARKETABLE_SECURITIES_Tables
MARKETABLE SECURITIES (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||
Marketable Securities | Marketable securities of the Company represent the shares received as a payment from clients for services provided. | ||||||||||||||||||||
Marketable securities | Value as of | Value as of | |||||||||||||||||||
September 30, 2014 | December 30, 2013 | ||||||||||||||||||||
Shares received as a payment from client | $ | 176,400 | $ | 184,800 | |||||||||||||||||
Securities from MJ Holdings, Inc. | 31,625 | — | |||||||||||||||||||
Total marketable securities | $ | 208,025 | $ | 184,800 | |||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques | The following data were introduced in the model in order to assess the value of the warrants assuming that the Company expects to keep the warrants for six months: | ||||||||||||||||||||
Black-Scholes Calculator Data | Initial Valuation and Recognition | ||||||||||||||||||||
#1 | #2 | #3 | #4 | #5 | |||||||||||||||||
Warrant | |||||||||||||||||||||
Stock price, $ | 8.69 | 4 | 8 | 6.15 | 2.01 | ||||||||||||||||
Exercise price, $ | 6.41503521 | 8.454933 | 7.874619 | 6.953694 | 3.53412 | ||||||||||||||||
Time to maturity, Years | 0.5 | 0.5 | 0.5 | 0.5 | 1 | ||||||||||||||||
Annual risk-free rate, % | 0.05 | 0.05 | 0.05 | 0.05 | 0.04 | ||||||||||||||||
Annualized volatility, % | 70 | 70 | 70 | 70 | 70 | ||||||||||||||||
Black-Scholes Value per warrant, $ | 2.876 | 0.08 | 1.616 | 0.918 | 0.214 | ||||||||||||||||
Number of warrants/shares | 33,333 | 33,333 | 33,333 | 33,333 | 33,333 | ||||||||||||||||
Total value of warrants/shares, $ | 95,866 | 2,666 | 53,867 | 30,600 | 7,133 | ||||||||||||||||
Fair Value of Warrants | As of September 30, 2014 | ||||||||||||||||||||
#2 | #3 | #4 | #5 | ||||||||||||||||||
Warrant | |||||||||||||||||||||
Stock price, $ | 2.01 | 2.01 | 2.01 | 2.01 | |||||||||||||||||
Exercise price, $ | 8.454933 | 7.874619 | 6.953694 | 3.53412 | |||||||||||||||||
Time to maturity, Years | 1 | 1 | 1 | 1 | |||||||||||||||||
Annual risk-free rate, % | 0.13 | 0.13 | 0.13 | 0.13 | |||||||||||||||||
Annualized volatility, % | 70 | 70 | 70 | 70 | |||||||||||||||||
Black-Scholes Value per warrant, $ | 0.019 | 0.025 | 0.038 | 0.214 | |||||||||||||||||
Number of warrants/shares | 33,333 | 33,333 | 33,333 | 33,333 | |||||||||||||||||
Total value of warrants/shares, $ | 633 | 834 | 1,267 | 7,133 | |||||||||||||||||
Warrant [Member] | |||||||||||||||||||||
Marketable Securities | The following table represents the initial recognition value and subsequent adjustment as of reporting date: | ||||||||||||||||||||
Warrants | Initial Fair | Fair Value at | Gain or (Loss) | Fair Value as of | |||||||||||||||||
Value | Conversion | September 30, | |||||||||||||||||||
2014 | |||||||||||||||||||||
Warrant #1 | $ | 95,866 | $ | (94,719 | ) | $ | (1,147 | ) | $ | — | |||||||||||
Conversion of the Warrant #1 to 10,825 shares | — | 94,719 | (72,961 | ) | 21,758 | ||||||||||||||||
Warrant #2 | 2,666 | (2,033 | ) | 633 | |||||||||||||||||
Warrant #3 | 53,867 | (53,033 | ) | 834 | |||||||||||||||||
Warrant #4 | 30,600 | (29,333 | ) | 1,267 | |||||||||||||||||
Warrant #5 | 7,133 | — | 7,133 | ||||||||||||||||||
Total | $ | 190,132 | $ | — | $ | (158,507 | ) | $ | 31,625 | ||||||||||||
CUSTOMER_DEPOSITS_RESTATED_Tab
CUSTOMER DEPOSITS (RESTATED) (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Banking and Thrift [Abstract] | |||||||||
Customer Advances And Deposits, Current | Advance payments from customers are recorded as customer deposits on the balance sheet. | ||||||||
Customer deposits | September 30, 2014 | December 31, 2013 | |||||||
(Restated) | |||||||||
Advance payments from customers | $ | 1,509,770 | $ | 710,225 | |||||
Advance payments for vaporizers | 75,038 | 75,636 | |||||||
Total customer deposits | $ | 1,584,808 | $ | 785,861 | |||||
SHORTTERM_DEBT_Tables
SHORT-TERM DEBT (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Schedule of Short-term Debt | Short-term debt as of September 30, 2014 and December 31, 2013 consisted of: | ||||||||
Short-term debt | September 30, 2014 | December 31, 2013 | |||||||
Notes payable to unrelated third party | $ | 299,605 | $ | 75,000 | |||||
Notes payable to related party | 491,674 | 111,794 | |||||||
Total short-term debt | $ | 791,279 | $ | 186,794 | |||||
PREPAID_EXPENSES_AND_OTHER_CUR1
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure | Prepaid expenses and other currents assets as of September 30, 2014 and December 31, 2013 consisted of: | ||||||||
Prepaid expenses and other current assets | September 30, | December 31, | |||||||
2014 | 2013 | ||||||||
Prepaid expenses | |||||||||
Deferred loan cost | $ | 196,250 | $ | — | |||||
Rent | 5,262 | 3,962 | |||||||
Directors & officers insurance | 77,645 | — | |||||||
Professional fees | 30,000 | 52,739 | |||||||
Other vendors | 68,750 | 32,540 | |||||||
Other current assets | |||||||||
Earnest money deposits, net | 634,288 | — | |||||||
Prepaid expenses and other current assets | $ | 1,012,195 | $ | 89,241 | |||||
RESTRICTED_STOCK_AND_RESTRICTE1
RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | A summary of the activity related to restricted stock and RSUs for the nine months ended September 30, 2014 is presented below: | ||||||||
Restricted stock | Total shares | Grant date fair | |||||||
value | |||||||||
Restricted stock non-vested at January 1, 2014 | — | $ | — | ||||||
Restricted stock granted | 346,875 | 10.4 | |||||||
Restricted stock vested | (178,125 | ) | 10.4 | ||||||
Restricted stock forfeited | — | — | |||||||
Restricted stock non-vested at September 30, 2014 | 168,750 | $ | 10.4 | ||||||
Restricted stock units (RSU’s) | Total shares | Grant date fair | |||||||
value | |||||||||
Restricted stock non-vested at January 1, 2014 | — | $ | — | ||||||
Restricted stock granted | 171,875 | 10.4 | |||||||
Restricted stock vested | (115,625 | ) | 10.4 | ||||||
Restricted stock forfeited | — | ||||||||
Restricted stock non-vested at September 30, 2014 | 56,250 | $ | 10.4 | ||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | A summary of the expense related to restricted stock and RSUs for the three and nine months ended September 30, 2014 is presented below: | ||||||||
Summary of the expense related to Restricted Stock and RSUs | Three months | Nine | |||||||
ended | months ended | ||||||||
September 30, | September 30, | ||||||||
2014 | 2014 | ||||||||
Restricted Stock | $ | 663,262 | $ | 663,262 | |||||
RSU’s | 368,378 | 368,378 | |||||||
Total stock based compensation expense | $ | 1,031,640 | $ | 1,031,640 | |||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | The following table is a summary of our material contractual lease commitments as of September 30, 2014: | ||||||||||||||||||||
Year Ending | Office Rent | Retail/Cultivation | |||||||||||||||||||
Facility Lease | |||||||||||||||||||||
2014 | $ | 44,484 | $ | 22,200 | |||||||||||||||||
2015 | 177,936 | 88,800 | |||||||||||||||||||
2016 | 177,936 | 88,800 | |||||||||||||||||||
2017 | 88,968 | 88,800 | |||||||||||||||||||
2018 | — | 88,800 | |||||||||||||||||||
2019 | — | 29,600 | |||||||||||||||||||
Total | $ | 489,324 | $ | 407,000 | |||||||||||||||||
Schedule of Real Estate Properties | A summary of open real estate purchase transactions as of September 30, 2014 is represented in the table below: | ||||||||||||||||||||
Property | Purchase price | Closing | Net escrow balance | Date | Additional | ||||||||||||||||
date | escrow opened | rents/fees paid to | |||||||||||||||||||
extend closing | |||||||||||||||||||||
date | |||||||||||||||||||||
1 | $ | 3,500,000 | 12/11/14 | $ | 60,000 | 7/25/14 | $ | — | |||||||||||||
2 | 3,650,000 | 1/5/15 | 35,000 | 7/21/14 | — | ||||||||||||||||
3 | 2,450,000 | 12/1/14 | 80,000 | 8/13/14 | — | ||||||||||||||||
4 | 790,000 | 1/1/15 | 24,288 | 8/12/14 | — | ||||||||||||||||
5 | 480,000 | 1/31/15 | 16,000 | 8/12/14 | — | ||||||||||||||||
6 | 2,100,000 | 2/10/15 | 90,000 | 8/13/14 | — | ||||||||||||||||
7 | 595,000 | 1/31/15 | 10,000 | 8/13/14 | — | ||||||||||||||||
8 | 3,250,000 | 2/10/15 | 90,000 | 8/19/14 | — | ||||||||||||||||
9 | 2,400,000 | 2/8/15 | 19,000 | 8/19/14 | — | ||||||||||||||||
10 | 2,300,000 | 1/8/15 | 80,000 | 8/19/14 | — | ||||||||||||||||
11 | 695,000 | 10/18/14 | 10,000 | 6/28/14 | — | ||||||||||||||||
12 | 820,000 | 10/18/14 | 45,000 | 6/28/14 | 7,893 | ||||||||||||||||
13 | — | 75,000 | 7/21/14 | — | |||||||||||||||||
Total | $ | 23,030,000 | $ | 634,288 | $ | 7,893 | |||||||||||||||
RESTATEMENT_Tables
RESTATEMENT (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||
Schedule of Prior Period Adjustments | The combined impacts of all adjustments to the applicable line items in our consolidated financial statements for the periods covered by this Form 10-Q/A are provided in the tables below. | ||||||||||||||||||||
Financial Statement Presentation. In addition to the restatement of our consolidated financial statements, we have also restated the following items to reflect certain changes noted above. | |||||||||||||||||||||
• | Note 2 - Summary of Significant Accounting Policies | ||||||||||||||||||||
• | Note 5 - Inventories | ||||||||||||||||||||
• | Note 9 - Accounts and Notes Receivable | ||||||||||||||||||||
• | Note 11 - Customer Deposits | ||||||||||||||||||||
• | Note 16. - Related Parties | ||||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED BALANCE SHEET | |||||||||||||||||||||
September 30, 2014 | |||||||||||||||||||||
As originally | Impact of 2013 | Early | Presentation | Restated | |||||||||||||||||
presented | restatement | Recognition of | Reclass | (Unaudited) | |||||||||||||||||
(Unaudited) | Revenue | ||||||||||||||||||||
Assets | |||||||||||||||||||||
Cash and cash equivalents | $ | 1,350,442 | $ | 1,350,442 | |||||||||||||||||
Marketable securities | 208,025 | 208,025 | |||||||||||||||||||
Accounts receivable | 337,475 | (1,524,771 | ) | 1,219,607 | 32,312 | ||||||||||||||||
Notes receivable | 75,000 | 75,000 | |||||||||||||||||||
Inventory | 2,466,897 | (636,468 | ) | (1,308,231 | ) | 522,198 | |||||||||||||||
Prepaid expenses and other current assets | 1,012,195 | 1,012,195 | |||||||||||||||||||
Total current assets | 5,450,034 | 3,200,172 | |||||||||||||||||||
Property and equipment | 151,984 | 151,984 | |||||||||||||||||||
Assets held for resale | 399,594 | 399,594 | |||||||||||||||||||
Investments, at cost | — | — | |||||||||||||||||||
Intangible assets | 800,904 | 800,904 | |||||||||||||||||||
Note receivable | 155,000 | 155,000 | |||||||||||||||||||
Goodwill | 1,100,037 | 1,100,037 | |||||||||||||||||||
Deposits and other assets | 72,726 | 72,726 | |||||||||||||||||||
Total assets | $ | 8,130,279 | (2,161,239 | ) | (88,623 | ) | — | $ | 5,880,417 | ||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||
Accounts payable and accrued expenses | $ | 1,505,998 | (150,000 | ) | (34,000 | ) | $ | 1,321,998 | |||||||||||||
Deferred revenue | 683,621 | 390,311 | 1,073,932 | ||||||||||||||||||
Notes payable | 299,605 | 299,605 | |||||||||||||||||||
Related party notes payable | 491,674 | 491,674 | |||||||||||||||||||
Convertible notes payable | 1,939,801 | 1,939,801 | |||||||||||||||||||
Derivative liability | 1,228,108 | 1,228,108 | |||||||||||||||||||
Customer deposits | 587,088 | 582,675 | 415,045 | 1,584,808 | |||||||||||||||||
Total current liabilities | 6,052,274 | 1,116,296 | 771,356 | 7,939,926 | |||||||||||||||||
Stockholders’ Equity | |||||||||||||||||||||
Preferred stock | 3,000 | 3,000 | |||||||||||||||||||
Common stock | 30,105 | 30,105 | |||||||||||||||||||
Additional paid-in capital | 10,244,278 | 1,371,000 | 11,615,278 | ||||||||||||||||||
Common stock subscribed | — | — | |||||||||||||||||||
Treasury stock | (1,209,600 | ) | (1,209,600 | ) | |||||||||||||||||
Accumulated deficit | (6,989,778 | ) | (4,648,535 | ) | (859,979 | ) | 158,507 | (12,339,785 | ) | ||||||||||||
Accumulated other comprehensive loss | (158,507 | ) | (158,507 | ) | |||||||||||||||||
Total stockholders’ equity | 2,078,005 | (3,277,535 | ) | (859,979 | ) | — | (2,059,509 | ) | |||||||||||||
Total liabilities and stockholders’ equity | $ | 8,130,279 | $ | 5,880,417 | |||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | |||||||||||||||||||||
For Nine Months Ended September 30, 2014 | |||||||||||||||||||||
As originally | Early Recognition of | Restated | |||||||||||||||||||
presented | Revenue | ||||||||||||||||||||
Revenue | $ | 836,427 | (302,345 | ) | $ | 534,082 | |||||||||||||||
Revenue from related party | 1,000,000 | (949,890 | ) | 50,110 | |||||||||||||||||
Less: allowances and refunds | (1,229,710 | ) | 1,169,710 | (60,000 | ) | ||||||||||||||||
Net revenue | 606,717 | (82,525 | ) | 524,192 | |||||||||||||||||
Cost of revenues | 2,183,874 | 1,308,231 | 3,492,105 | ||||||||||||||||||
Gross margin | (1,577,157 | ) | (1,390,756 | ) | (2,967,913 | ) | |||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 749,212 | 749,212 | |||||||||||||||||||
Research and development | 136,656 | 136,656 | |||||||||||||||||||
General and administrative | 2,682,519 | (530,777 | ) | 2,151,742 | |||||||||||||||||
Stock based compensation | 1,031,640 | 1,031,640 | |||||||||||||||||||
Total operating expenses | 4,600,027 | 4,069,250 | |||||||||||||||||||
Loss from operations | (6,177,184 | ) | (7,037,163 | ) | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||
Interest income (expense), net | (314,078 | ) | (314,078 | ) | |||||||||||||||||
Change in fair value of derivative liabilities | 548,315 | 548,315 | |||||||||||||||||||
Total other income | 234,237 | 234,237 | |||||||||||||||||||
Loss before provision for income | (5,942,947 | ) | (6,802,926 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | — | — | |||||||||||||||||||
Net loss | $ | (5,942,947 | ) | (859,979 | ) | $ | (6,802,926 | ) | |||||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0.20 | ) | $ | (0.22 | ) | |||||||||||||||
Diluted | $ | (0.20 | ) | $ | (0.22 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 30,472,447 | 30,472,447 | |||||||||||||||||||
Diluted | 30,472,447 | 30,472,447 | |||||||||||||||||||
Other Comprehensive loss | |||||||||||||||||||||
Net loss | $ | (6,802,926 | ) | ||||||||||||||||||
Unrealized loss from marketable securities | (158,507 | ) | |||||||||||||||||||
Comprehensive loss | $ | (6,961,433 | ) | ||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | |||||||||||||||||||||
For Three Months Ended September 30, 2014 | |||||||||||||||||||||
As originally | Early Recognition | Restated | |||||||||||||||||||
presented | of Revenue | ||||||||||||||||||||
Revenue | $ | 107,429 | 65,647 | $ | 173,076 | ||||||||||||||||
Revenue from related party | — | — | |||||||||||||||||||
Less: allowances and refunds | — | — | |||||||||||||||||||
Net revenue | 107,429 | 65,647 | 173,076 | ||||||||||||||||||
Cost of revenues | 743,397 | 1,070,165 | 1,813,562 | ||||||||||||||||||
Gross margin | (635,968 | ) | (1,004,518 | ) | (1,640,486 | ) | |||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 319,204 | 319,204 | |||||||||||||||||||
Research and development | 61,623 | 61,623 | |||||||||||||||||||
General and administrative | 1,363,440 | (410,777 | ) | 952,663 | |||||||||||||||||
Stock based compensation | 1,031,640 | 1,031,640 | |||||||||||||||||||
Total operating expenses | 2,775,907 | 2,365,130 | |||||||||||||||||||
Loss from operations | (3,411,875 | ) | (4,005,616 | ) | |||||||||||||||||
Other expense | |||||||||||||||||||||
Interest income (expense), net | (339,231 | ) | (339,231 | ) | |||||||||||||||||
Change in fair value of derivative liabilities | 548,315 | 548,315 | |||||||||||||||||||
Total other income | 209,084 | 209,084 | |||||||||||||||||||
Loss before provision for income | (3,202,791 | ) | (3,796,532 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | — | — | |||||||||||||||||||
Net loss | $ | (3,202,791 | ) | (593,741 | ) | $ | (3,796,532 | ) | |||||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0.11 | ) | $ | (0.13 | ) | |||||||||||||||
Diluted | $ | (0.07 | ) | $ | (0.13 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 30,371,299 | 30,371,299 | |||||||||||||||||||
Diluted | 45,371,299 | 30,371,299 | |||||||||||||||||||
Other Comprehensive loss | |||||||||||||||||||||
Net loss | $ | (3,796,532 | ) | ||||||||||||||||||
Unrealized loss from marketable securities | (158,507 | ) | |||||||||||||||||||
Comprehensive loss | $ | (3,955,039 | ) | ||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
For Nine Months Ended September 30, 2013 | |||||||||||||||||||||
As originally | Early Recognition | Contributions | Restated | ||||||||||||||||||
presented | of Revenue | to capital | |||||||||||||||||||
Revenue | $ | 4,801,062 | (2,146,686 | ) | (810,000 | ) | $ | 1,844,376 | |||||||||||||
Revenue from related party | — | — | |||||||||||||||||||
Less: allowances and refunds | — | — | |||||||||||||||||||
Net revenue | 4,801,062 | 1,844,376 | |||||||||||||||||||
Cost of revenues | 2,442,592 | (184,465 | ) | 2,258,127 | |||||||||||||||||
Gross margin | 2,358,470 | (1,962,221 | ) | (810,000 | ) | (413,751 | ) | ||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 506,393 | 506,393 | |||||||||||||||||||
Research and development | 46,733 | 46,733 | |||||||||||||||||||
General and administrative | 1,876,505 | 1,876,505 | |||||||||||||||||||
Stock based compensation | — | — | |||||||||||||||||||
Total operating expenses | 2,429,631 | 2,429,631 | |||||||||||||||||||
Loss from operations | (71,161 | ) | (2,843,382 | ) | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||
Interest income (expense), net | (1,884 | ) | (1,884 | ) | |||||||||||||||||
Total other expense | (1,884 | ) | (1,884 | ) | |||||||||||||||||
Loss before provision for income | (73,045 | ) | (2,845,266 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | (29,220 | ) | (29,220 | ) | |||||||||||||||||
Net loss | $ | (43,825 | ) | (1,962,221 | ) | (810,000 | ) | $ | (2,816,046 | ) | |||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0.00 | ) | $ | (0.10 | ) | |||||||||||||||
Diluted | $ | (0.00 | ) | $ | (0.10 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 28,658,556 | 28,658,556 | |||||||||||||||||||
Diluted | 44,372,842 | 28,658,556 | |||||||||||||||||||
MEDBOX, INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
For Three Months Ended September 30, 2013 | |||||||||||||||||||||
As originally | Early Recognition | Restated | |||||||||||||||||||
presented | of Revenue | ||||||||||||||||||||
Revenue | $ | 1,980,720 | (666,542 | ) | $ | 1,314,178 | |||||||||||||||
Revenue from related party | — | — | |||||||||||||||||||
Less: allowances and refunds | — | — | |||||||||||||||||||
Net revenue | 1,980,720 | 1,314,178 | |||||||||||||||||||
Cost of revenues | 1,641,495 | 165,535 | 1,807,030 | ||||||||||||||||||
Gross margin | 339,225 | (832,077 | ) | (492,852 | ) | ||||||||||||||||
Operating expenses | |||||||||||||||||||||
Selling and marketing | 91,136 | 91,136 | |||||||||||||||||||
Research and development | 28,233 | 28,233 | |||||||||||||||||||
General and administrative | 522,372 | 522,372 | |||||||||||||||||||
Stock based compensation | — | — | |||||||||||||||||||
Total operating expenses | 641,741 | 641,741 | |||||||||||||||||||
Loss from operations | (302,516 | ) | (1,134,593 | ) | |||||||||||||||||
Other income (expense) | |||||||||||||||||||||
Interest income (expense), net | 4,311 | 4,311 | |||||||||||||||||||
Change in fair value of derivative liabilities | — | — | |||||||||||||||||||
Total other income | 4,311 | 4,311 | |||||||||||||||||||
Loss before provision for income | (298,205 | ) | (1,130,282 | ) | |||||||||||||||||
taxes | |||||||||||||||||||||
Provision for income taxes | (119,280 | ) | (119,280 | ) | |||||||||||||||||
Net loss | $ | (178,925 | ) | (832,077 | ) | $ | (1,011,002 | ) | |||||||||||||
Earnings per share attributable to common stockholders | |||||||||||||||||||||
Basic | $ | (0 | ) | $ | (0 | ) | |||||||||||||||
Diluted | $ | (0 | ) | $ | (0 | ) | |||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 29,298,284 | 29,298,284 | |||||||||||||||||||
Diluted | 44,298,284 | 29,298,284 | |||||||||||||||||||
NOTE_1_BUSINESS_ORGANIZATION_N
NOTE 1 - BUSINESS ORGANIZATION, NATURE OF OPERATIONS (Detail) (Vaporfection International Inc. [Member]) | 9 Months Ended |
Sep. 30, 2014 | |
Vaporfection International Inc. [Member] | |
NOTE 1 - BUSINESS ORGANIZATION, NATURE OF OPERATIONS (Details) [Line Items] | |
Number of Subsidiaries | 8 |
NOTE_2_SUMMARY_OF_SIGNIFICANT_
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items] | |||||
Cash, FDIC Insured Amount | $250,000 | $250,000 | |||
Cash, Uninsured Amount | 967,347 | 967,347 | 0 | ||
Advertising Expense | 319,204 | 91,136 | 749,212 | 506,393 | |
Research and Development Expense | $61,623 | $28,233 | $136,656 | $46,733 | |
Warrants to purchase common stock outstanding | 295,854 | 295,854 | |||
Series A Preferred Stock [Member] | |||||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items] | |||||
Preferred Stock, Shares Outstanding (in Shares) | 3,000,000 | 3,000,000 | 3,000,000 | ||
Preferred Stock, No Par Value (in Dollars per share) | $0.00 | $0.00 | $0.00 | ||
Convertible Preferred Stock, Shares Issued upon Conversion (in Shares) | 15,000,000 | 15,000,000 | 15,000,000 |
NOTE_2_SUMMARY_OF_SIGNIFICANT_1
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedules of Concentration of Risk, by Risk Factor (Detail) (USD $) | 9 Months Ended | 12 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | |
Accounts Receivable [Member] | Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Accounts Receivable Amount | $32,312 | $339,736 | |
Concentration Risk, Percentage | 100.00% | 100.00% | |
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Gross Revenue Generated | 584,191 | 1,844,376 | |
Concentration Risk, Percentage | 100.00% | 100.00% | |
Customer A [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Accounts Receivable Amount | 0 | 150,000 | |
Concentration Risk, Percentage | 0.00% | 44.20% | |
Customer A [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Gross Revenue Generated | 190,131 | 325,000 | |
Concentration Risk, Percentage | 32.50% | 17.60% | |
Customer B [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Accounts Receivable Amount | 0 | 115,200 | |
Concentration Risk, Percentage | 0.00% | 33.90% | |
Customer B [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Gross Revenue Generated | 175,000 | ||
Concentration Risk, Percentage | 30.00% | ||
Customer C [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Accounts Receivable Amount | 25,000 | ||
Concentration Risk, Percentage | 77.40% | ||
Customer C [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Gross Revenue Generated | 0 | ||
Concentration Risk, Percentage | 0.00% | ||
Customer A & B [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Accounts Receivable Amount | 265,200 | ||
Concentration Risk, Percentage | 78.10% | ||
Customer A & B [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Gross Revenue Generated | 365,131 | 325,000 | |
Concentration Risk, Percentage | 62.50% | 17.60% | |
Subtotal [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Accounts Receivable Amount | $25,000 | ||
Concentration Risk, Percentage | 77.40% |
NOTE_2_SUMMARY_OF_SIGNIFICANT_2
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 30, 2013 |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | |||
Marketable securities | $208,025 | $184,800 | $184,800 |
Conversion Feature | 1,228,108 | 0 | |
Total | 1,436,133 | ||
Fair Value, Inputs, Level 1 [Member] | |||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | |||
Marketable securities | 208,025 | ||
Conversion Feature | 0 | ||
Total | 208,025 | ||
Fair Value, Inputs, Level 2 [Member] | |||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | |||
Marketable securities | 0 | ||
Conversion Feature | 0 | ||
Total | 0 | ||
Fair Value, Inputs, Level 3 [Member] | |||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | |||
Marketable securities | 0 | ||
Conversion Feature | 1,228,108 | ||
Total | $1,228,108 |
NOTE_2_SUMMARY_OF_SIGNIFICANT_3
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Detail) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Abstract] | |
Beginning balance | $0 |
Initial recognition of conversion feature | 1,776,423 |
Change in fair value of conversion feature | -548,315 |
Ending balance | $1,228,108 |
NOTE_2_SUMMARY_OF_SIGNIFICANT_4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Property, Plant and Equipment, Estimated Useful Lives (Detail) | 9 Months Ended |
Sep. 30, 2014 | |
Vehicles [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 5 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 5 years |
Office Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 3 years |
NOTE_3_ACQUISITION_Detail
NOTE 3 - ACQUISITION (Detail) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | ||
Mar. 22, 2013 | Sep. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 22, 2013 | |
NOTE 3 - ACQUISITION (Details) [Line Items] | |||||
Goodwill | $1,100,037 | $1,090,037 | |||
Vaporfection International Inc. [Member] | |||||
NOTE 3 - ACQUISITION (Details) [Line Items] | |||||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | 100.00% | |||
Business Acquisition, Equity Interest Issued or Issuable, Description | The Company issued 260,854 warrants to shareholders of VII allowing them to purchase one (1) share of Medbox common stock at $.001 per share beginning April 1, 2014. | ||||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares) | 260,854 | ||||
Fair Value Assumptions, Exercise Price (in Dollars per share) | $4.47 | $4.47 | |||
Business Combination, Consideration Transferred, Liabilities Incurred | 470,000 | ||||
Business Combination, Consideration Transferred | 1,635,000 | ||||
Finite-Lived Intangible Asset, Useful Life | 10 years | ||||
Goodwill | 895,000 | 895,000 | |||
Increase (Decrease) in Other Accounts Payable and Accrued Liabilities | 10,000 | 195,000 | |||
Goodwill, Period Increase (Decrease) | $205,000 | ||||
Business Combination, Contingent Consideration Arrangements, Description | In addition to the above warrants, the purchase agreement and associated consulting contract with the prior management company of the business unit calls for additional shares of common stock to be issued in the event that the performance of the business unit exceeds $11,818,140 of accumulated EBITBA over the subsequent 4 year operating period. | ||||
Settlement With Former Shareholders [Member] | Vaporfection International Inc. [Member] | |||||
NOTE 3 - ACQUISITION (Details) [Line Items] | |||||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares) | 130,427 |
NOTE_3_ACQUISITION_Schedule_of
NOTE 3 - ACQUISITION - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Mar. 22, 2013 |
NOTE 3 - ACQUISITION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Line Items] | |||
Goodwill | $1,100,037 | $1,090,037 | |
Vaporfection International Inc. [Member] | |||
NOTE 3 - ACQUISITION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Line Items] | |||
Machinery & Equipment | 70,000 | ||
Goodwill | 895,000 | ||
Total assets acquired | 1,635,000 | ||
Fair value of liabilities assumed | -469,000 | ||
Net fair value | 1,166,000 | ||
Customer Relationships [Member] | Vaporfection International Inc. [Member] | |||
NOTE 3 - ACQUISITION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Line Items] | |||
Intangible assets | 314,000 | ||
Trademarks and Trade Names [Member] | Vaporfection International Inc. [Member] | |||
NOTE 3 - ACQUISITION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Line Items] | |||
Intangible assets | 46,000 | ||
Noncompete Agreements [Member] | Vaporfection International Inc. [Member] | |||
NOTE 3 - ACQUISITION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Line Items] | |||
Intangible assets | 23,000 | ||
IP and Related Technology [Member] | Vaporfection International Inc. [Member] | |||
NOTE 3 - ACQUISITION (Details) - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Line Items] | |||
Intangible assets | $287,000 |
NOTE_4_INVESTMENTS_Detail
NOTE 4 - INVESTMENTS (Detail) (USD $) | 0 Months Ended | |||||
Feb. 27, 2014 | Feb. 08, 2013 | Mar. 12, 2013 | Jun. 05, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Investment Owned, at Cost | $0 | $1,200,000 | ||||
Treasury Stock, Value | 1,209,600 | 0 | ||||
Treasury Stock, Shares (in Shares) | 60,000 | |||||
Bio-Tech Medical Software [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Equity Method Investment, Additional Information | The Company advanced $600,000 upon execution of this agreement for the right to purchase with the remaining balance of $900,000 due and payable in installments at various dates by August 25, 2013. On June 26, 2013, the Company notified Bio-Tech that it was canceling the agreement. | |||||
Payments to Acquire Trading Securities Held-for-investment | 600,000 | |||||
Licensing Agreement, Term | 5 years | |||||
Bio-Tech Medical Software [Member] | Maximum [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Investment, Authorized Shares Available for Purchase (in Shares) | 833,333 | |||||
Equity Method Investment, Ownership Percentage | 25.00% | |||||
Investment, Purchase Price | 1,500,000 | |||||
MedVend Holdings LLC [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Equity Method Investment, Ownership Percentage | 50.00% | |||||
Equity Method Investment, Additional Information | In May 2013, the three members of MedVend were named in a lawsuit by that entity's minority shareholders alleging improper conveyance of the three members' ownership interest in MedVend to the Company. Accordingly, also in May 2013, Medbox filed suit against MedVend and the three members of that entity that were involved in the transaction. | |||||
Investment Owned, at Cost | 4,100,000 | |||||
MedVend Holdings LLC [Member] | Amount Paid Upon Execution of the Contract [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Payments to Acquire Trading Securities Held-for-investment | 300,000 | |||||
MedVend Holdings LLC [Member] | Amount Disbursed as an Additional Investment [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Payments to Acquire Trading Securities Held-for-investment | 300,000 | |||||
Affiliated Entity [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Treasury Stock, Shares (in Shares) | 60,000 | |||||
Affiliated Entity [Member] | Bio-Tech Medical Software [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Legal Fees | 4,800 | |||||
Stock Repurchased During Period, Shares (in Shares) | 30,000 | |||||
Stock Repurchased During Period, Value | 604,800 | |||||
Affiliated Entity [Member] | MedVend Holdings LLC [Member] | ||||||
NOTE 4 - INVESTMENTS (Details) [Line Items] | ||||||
Legal Fees | 4,800 | |||||
Stock Repurchased During Period, Shares (in Shares) | 30,000 | |||||
Stock Repurchased During Period, Value | $604,800 |
NOTE_5_INVENTORIES_Schedule_of
NOTE 5 - INVENTORIES - Schedule of Inventory, Current (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Inventory [Line Items] | ||
Work in process and related capitalized costs | $0 | $242,488 |
Inventory | 522,198 | 632,986 |
Deposits on Dispensing Machines [Member] | ||
Inventory [Line Items] | ||
Inventory | 336,583 | 138,423 |
Vaporizers and Accessories [Member] | ||
Inventory [Line Items] | ||
Inventory | 164,030 | 193,575 |
Dispensing Machines [Member] | ||
Inventory [Line Items] | ||
Inventory | $21,585 | $58,500 |
NOTE_5_INVENTORIES_Detail
NOTE 5 - INVENTORIES (Detail) (USD $) | 3 Months Ended |
Sep. 30, 2014 | |
Inventory Disclosure [Abstract] | |
Inventory Write-down | $329,154 |
NOTE_6_PROPERTY_AND_EQUIPMENT_
NOTE 6 - PROPERTY AND EQUIPMENT - Schedule of Property, Plant and Equipment (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $194,763 | $161,781 |
Less accumulated depreciation | -42,779 | -21,123 |
Property and equipment, net | 151,984 | 140,658 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 22,934 | 17,192 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 74,404 | 73,567 |
Website Development [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 46,922 | 46,922 |
Product Development [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $50,503 | $24,100 |
NOTE_7_ASSETS_HELD_FOR_RESALE_
NOTE 7 - ASSETS HELD FOR RESALE (Detail) (Land [Member], USD $) | 0 Months Ended | 3 Months Ended | ||
Jul. 28, 2014 | Sep. 30, 2014 | Jul. 28, 2014 | Mar. 22, 2013 | |
Land [Member] | ||||
NOTE 7 - ASSETS HELD FOR RESALE (Details) [Line Items] | ||||
Proceeds from Sale of Property, Plant, and Equipment | $399,594 | |||
Debt Instrument, Face Amount | 249,000 | 249,000 | 249,000 | |
Debt Instrument, Maturity Date | 30-Jan-15 | 30-Jan-15 | ||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | 12.00% | ||
Debt Instrument, Date of First Required Payment | 1-Aug-14 | 28-Jul-14 | ||
Debt Instrument, Periodic Payment, Interest | $2,490 | |||
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Maximum | 18.00% | 18.00% |
NOTE_7_ASSETS_HELD_FOR_RESALE_1
NOTE 7 - ASSETS HELD FOR RESALE - Schedule of Assets Held for Resale (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Long Lived Assets Held-for-sale [Line Items] | ||
Assets held for resale | $399,594 | $0 |
Building [Member] | ||
Long Lived Assets Held-for-sale [Line Items] | ||
Assets held for resale | $399,594 | $0 |
NOTE_8_INTANGIBLE_ASSETS_Detai
NOTE 8 - INTANGIBLE ASSETS (Detail) (Vaporfection International Inc. [Member]) | Mar. 22, 2013 |
Vaporfection International Inc. [Member] | |
NOTE 8 - INTANGIBLE ASSETS (Details) [Line Items] | |
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% |
NOTE_8_INTANGIBLE_ASSETS_Sched
NOTE 8 - INTANGIBLE ASSETS - Schedule of Finite-Lived Intangible Assets (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $871,363 | $715,179 |
Less accumulated amortization | -70,459 | -32,750 |
Intangible assets, net | 800,904 | 682,429 |
Distribution Rights [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 314,000 | 314,000 |
Patented Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 403,363 | 332,179 |
Internet Domain Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 131,000 | 46,000 |
Noncompete Agreements [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $23,000 | $23,000 |
NOTE_8_INTANGIBLE_ASSETS_Sched1
NOTE 8 - INTANGIBLE ASSETS - Schedule of Finite-Lived Intangible Assets, Estimated Useful Life (Detail) | 9 Months Ended |
Sep. 30, 2014 | |
Distribution Rights [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, estimated useful lives | 10 years |
Internet Domain Names [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, estimated useful lives | 10 years |
IP and Related Technology [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, estimated useful lives | 10 years |
Noncompete Agreements [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, estimated useful lives | 3 years |
NOTE_9_ACCOUNTS_AND_NOTES_RECE
NOTE 9 - ACCOUNTS AND NOTES RECEIVABLE (RESTATED) (Detail) (USD $) | 1 Months Ended | 3 Months Ended |
Dec. 31, 2013 | Sep. 30, 2014 | |
Receivables [Abstract] | ||
Financing Receivable, Net | $75,000 | |
Note Receivable, Maturity Date | 10-Dec-18 | 31-Dec-14 |
Note Receivable, Stated Interest Rate, Percentage | 5.00% | 7.50% |
Note Receivable, Face Amount | 1,000,000 | |
Notes, Loans and Financing Receivable, Net, Noncurrent | 0 | 155,000 |
Notes, Loans and Financing Receivable, Net, Current | $115,000 | $75,000 |
NOTE_10_MARKETABLE_SECURITIES_
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS - Marketable Securities (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 30, 2013 |
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) [Line Items] | |||
Shares received as a payment from client | $176,400 | $184,800 | $184,800 |
Marketable Securities, Current | 208,025 | 184,800 | 184,800 |
MJ Holdings [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) [Line Items] | |||
Marketable Securities, Current | $31,625 | $0 |
NOTE_10_MARKETABLE_SECURITIES_1
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Detail) (USD $) | 9 Months Ended | 0 Months Ended | ||
Sep. 30, 2014 | 19-May-14 | Dec. 31, 2013 | Dec. 30, 2013 | |
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Marketable Securities [Line Items] | ||||
Marketable Securities, Current | $208,025 | $184,800 | $184,800 | |
Marketable Securities, Number of Shares Held as Deposit (in Shares) | 7,000,000 | |||
Marketable Securities, Value of Shares Held as Customer Deposit | 300,000 | |||
Fair Value Inputs, Discount Rate | 12.00% | |||
Marketable Securities, Restricted, Current | 176,400 | 184,800 | 184,800 | |
Class of Warrant or Right, Outstanding (in Shares) | 295,854 | |||
MJ Holdings [Member] | ||||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Marketable Securities [Line Items] | ||||
Marketable Securities, Current | 31,625 | 0 | ||
Investment, Percentage of Profits Realized from Investment | 50.00% | |||
Investment, Term of Investment | 6 months | |||
Class of Warrant or Right, Outstanding (in Shares) | 33,333 | |||
Class of Warrant or Rights, Granted (in Shares) | 5 | |||
Class of Warrant or Rights, Exercised (in Shares) | 10,825 | |||
Class of Warrant or Rights, Fair Value Granted | $21,758 |
NOTE_10_MARKETABLE_SECURITIES_2
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS - Schedule of Marketable Securities (Detail) (USD $) | 9 Months Ended | ||
Sep. 30, 2014 | Jun. 19, 2014 | 19-May-14 | |
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | $31,625 | $190,132 | $0 |
Fair Value at Conversion | -158,507 | ||
Warrant #3 [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | 834 | 53,867 | |
Fair Value at Conversion | -53,033 | ||
Warrant #4 [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | 1,267 | 30,600 | |
Fair Value at Conversion | -29,333 | ||
Warrant # 5 [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | 7,133 | 7,133 | |
Fair Value at Conversion | 0 | ||
Warrant [Member] | Warrant #1 [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | 0 | 95,866 | -94,719 |
Fair Value at Conversion | -1,147 | ||
Warrant [Member] | Warrant #2 [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | 633 | 2,666 | |
Fair Value at Conversion | -2,033 | ||
Convertible Debt Securities [Member] | |||
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |||
Warrant Fair Value | 21,758 | 0 | 94,719 |
Fair Value at Conversion | ($72,961) |
NOTE_10_MARKETABLE_SECURITIES_3
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS - Schedule of Marketable Securities (Parenthetical) (Detail) (Convertible Debt Securities [Member]) | 9 Months Ended |
Sep. 30, 2014 | |
Convertible Debt Securities [Member] | |
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS (Details) - Schedule of Marketable Securities [Line Items] | |
Conversion of the Warrant, shares | 10,825 |
NOTE_10_MARKETABLE_SECURITIES_4
NOTE 10 - MARKETABLE SECURITIES AND CUSTOMER DEPOSITS - Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques (Detail) (USD $) | 0 Months Ended | 9 Months Ended | |
19-May-14 | Sep. 30, 2014 | 19-May-14 | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Number of warrants/shares (in Shares) | 295,854 | ||
Warrant #1 [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Stock price, $ | $8.69 | $8.69 | |
Exercise price, $ | $6.42 | $6.42 | |
Time to maturity, Years | 6 months | ||
Annual risk-free rate, % | 0.05% | ||
Annualized volatility, % | 70.00% | ||
Black-Scholes Value per warrant, $ | $2.88 | $2.88 | |
Number of warrants/shares (in Shares) | 33,333 | 33,333 | |
Total value of warrants/shares, $ (in Dollars) | $95,866 | $95,866 | |
Warrant #2 [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Stock price, $ | $4 | $2.01 | $4 |
Exercise price, $ | $8.45 | $8.45 | $8.45 |
Time to maturity, Years | 6 months | 1 year | |
Annual risk-free rate, % | 0.05% | 0.13% | |
Annualized volatility, % | 70.00% | 70.00% | |
Black-Scholes Value per warrant, $ | $0.08 | $0.02 | $0.08 |
Number of warrants/shares (in Shares) | 33,333 | 33,333 | 33,333 |
Total value of warrants/shares, $ (in Dollars) | 2,666 | 633 | 2,666 |
Warrant #3 [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Stock price, $ | $8 | $2.01 | $8 |
Exercise price, $ | $7.87 | $7.87 | $7.87 |
Time to maturity, Years | 6 months | 1 year | |
Annual risk-free rate, % | 0.05% | 0.13% | |
Annualized volatility, % | 70.00% | 70.00% | |
Black-Scholes Value per warrant, $ | $1.62 | $0.03 | $1.62 |
Number of warrants/shares (in Shares) | 33,333 | 33,333 | 33,333 |
Total value of warrants/shares, $ (in Dollars) | 53,867 | 834 | 53,867 |
Warrant #4 [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Stock price, $ | $6.15 | $2.01 | $6.15 |
Exercise price, $ | $6.95 | $6.95 | $6.95 |
Time to maturity, Years | 6 months | 1 year | |
Annual risk-free rate, % | 0.05% | 0.13% | |
Annualized volatility, % | 70.00% | 70.00% | |
Black-Scholes Value per warrant, $ | $0.92 | $0.04 | $0.92 |
Number of warrants/shares (in Shares) | 33,333 | 33,333 | 33,333 |
Total value of warrants/shares, $ (in Dollars) | 30,600 | 1,267 | 30,600 |
Warrant # 5 [Member] | |||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |||
Stock price, $ | $2.01 | $2.01 | $2.01 |
Exercise price, $ | $3.53 | $3.53 | $3.53 |
Time to maturity, Years | 1 year | 1 year | |
Annual risk-free rate, % | 0.04% | 0.13% | |
Annualized volatility, % | 70.00% | 70.00% | |
Black-Scholes Value per warrant, $ | $0.21 | $0.21 | $0.21 |
Number of warrants/shares (in Shares) | 33,333 | 33,333 | 33,333 |
Total value of warrants/shares, $ (in Dollars) | $7,133 | $7,133 | $7,133 |
NOTE_11_CUSTOMER_DEPOSITS_Cust
NOTE 11 - CUSTOMER DEPOSITS - Customer Advances and Deposits, Current (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Customer Advances and Deposits, Current [Abstract] | ||
Advance payments from customers | $1,509,770 | $710,225 |
Advance payments for vaporizers | 75,038 | 75,636 |
Total customer deposits | $1,584,808 | $785,861 |
NOTE_12_SHORTTERM_DEBT_Schedul
NOTE 12 - SHORT-TERM DEBT - Schedule of Short-term Debt (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Schedule of Short-term Debt [Abstract] | ||
Notes payable to unrelated third party | $299,605 | $75,000 |
Notes payable to related party | 491,674 | 111,794 |
Total short-term debt | $791,279 | $186,794 |
NOTE_12_SHORTTERM_DEBT_Detail
NOTE 12 - SHORT-TERM DEBT (Detail) (USD $) | 9 Months Ended | 0 Months Ended | 3 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Jul. 28, 2014 | Sep. 30, 2014 | Mar. 22, 2013 | |
NOTE 12 - SHORT-TERM DEBT (Details) [Line Items] | |||||
Repayments of Notes Payable | $75,000 | $0 | |||
Land [Member] | |||||
NOTE 12 - SHORT-TERM DEBT (Details) [Line Items] | |||||
Debt Instrument, Face Amount | 249,000 | 249,000 | 249,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | 12.00% | 12.00% | ||
Debt Instrument, Date of First Required Payment | 1-Aug-14 | 28-Jul-14 | |||
Debt Instrument, Maturity Date | 30-Jan-15 | 30-Jan-15 | |||
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Maximum | 18.00% | 18.00% | |||
Debt Instrument, Periodic Payment, Interest | 2,490 | ||||
Notes Payable, Other Payables [Member] | |||||
NOTE 12 - SHORT-TERM DEBT (Details) [Line Items] | |||||
Debt Instrument, Face Amount | 22,160 | 22,160 | |||
Debt Instrument, Interest Rate, Stated Percentage | 5.99% | 5.99% | |||
Debt Instrument, Date of First Required Payment | 5-Sep-14 | ||||
Debt Instrument, Maturity Date | 5-May-15 | ||||
Debt Instrument, Periodic Payment, Interest | 2,524 | ||||
Notes Payable [Member] | |||||
NOTE 12 - SHORT-TERM DEBT (Details) [Line Items] | |||||
Debt Instrument, Face Amount | 50,605 | 50,605 | |||
D&O Insurance Financing [Member] | |||||
NOTE 12 - SHORT-TERM DEBT (Details) [Line Items] | |||||
Debt Instrument, Face Amount | 137,160 | 137,160 | |||
Debt Instrument, Interest Rate, Stated Percentage | 4.25% | 4.25% | |||
Debt Instrument, Date of First Required Payment | 5-Mar-14 | ||||
Debt Instrument, Maturity Date | 5-Nov-14 | ||||
Debt Instrument, Frequency of Periodic Payment | Monthly | ||||
Debt Instrument, Periodic Payment | $15,511 | ||||
Debt Instrument, Term | 9 months |
NOTE_13_CONVERTIBLE_NOTES_PAYA
NOTE 13 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY (Detail) (USD $) | 9 Months Ended | 0 Months Ended | ||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 19, 2014 | Jul. 21, 2014 | Aug. 26, 2014 | Sep. 26, 2014 | |
NOTE 13 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY (Details) [Line Items] | ||||||
Proceeds from Convertible Debt | $3,500,000 | $0 | ||||
Convertible Debt [Member] | ||||||
NOTE 13 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY (Details) [Line Items] | ||||||
Debt Instrument, Maturity Date | 19-Sep-15 | 21-Jul-15 | ||||
Debt Instrument, Description | In connection with each of the purchase agreements, the Company entered into a registration rights agreement with the respective investors, pursuant to which the Company agreed to file a registration statement for the resale of the shares of common stock issuable upon conversion of, or payable as principal and interest on, the respective debentures, within 45 days of the initial closing date under each agreement, and to have such registration statements declared effective within 120 days of the initial closing dates of each purchase agreement. | The second closing, of $1,500,000, is to occur within 2 days of the effective date of the registration statement filed by the Company for the resale of the shares of common stock issuable upon conversion of the September 2014 Purchase Agreement Debentures. | The fourth and fifth, each in the amount of $500,000, are to occur within 2 and 5 business days, respectively, of the effective date of the registration statement filed by the Company for the resale of the shares of common stock issuable upon conversion of the July 2014 Purchase Agreement Debentures. | |||
Debt Instrument, Face Amount | 2,500,000 | 3,500,000 | ||||
Proceeds from Convertible Debt | 1,000,000 | |||||
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 10.00% | ||||
Debt Instrument, Payment Terms | Repayment, including accrued principal and accrued interest, due in nine monthly installments, commencing the fourth month after issuance. | Repayment, including accrued principal and accrued interest, beginning on the eleventh day of the fourth month after issuance and will continue on the eleventh day of each following 8 successive months thereafter. | ||||
Debt Instrument, Convertible, Conversion Price | $11.75 | |||||
Debt Instrument, Convertible, Terms of Conversion Feature | The Company may make payments on the debt in cash, prompting a 30% premium or, subject to certain conditions, in shares of common stock valued at 70% of the lowest volume weighted average price of the common stock for the 20 prior trading days. However, in the event the registration statement filed by the Company in connection with the respective purchase agreements is not effective within 120 days of the initial closing date under the July 2014 Purchase Agreement and 120 days of the initial closing date under the September 2014 Purchase Agreement, the July 2014 Purchase Agreement Debenturesb and the September 2014 Purchase Agreement Debenturesb, respectively, conversion rate will be, during the period commencing 120 days after the initial closing date until the registration statement is effective, equal to 63% of the lowest volume weighted average price of the common stock for the 20 prior trading days. If the aforementioned registration statement is not effective within 160 days of the initial closing date, each of the debenturesb conversion rate will be, during the period commencing 160 days after the initial closing date until the registration statement is effective, equal to 60% of the lowest volume weighted average price of the common stock for the 20 prior trading days. | |||||
Debt Issuance Cost | 227,500 | |||||
Derivative Liability | 1,776,000 | |||||
Debt Instrument, Tranche One [Member] | Convertible Debt [Member] | ||||||
NOTE 13 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY (Details) [Line Items] | ||||||
Proceeds from Convertible Debt | 1,000,000 | |||||
Debt Instrument, Tranche Two [Member] | Convertible Debt [Member] | ||||||
NOTE 13 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY (Details) [Line Items] | ||||||
Proceeds from Convertible Debt | 1,000,000 | |||||
Debt Instrument, Tranche Three [Member] | Convertible Debt [Member] | ||||||
NOTE 13 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITY (Details) [Line Items] | ||||||
Proceeds from Convertible Debt | $500,000 |
NOTE_14_PREPAID_EXPENSES_AND_O
NOTE 14 - PREPAID EXPENSES AND OTHER CURRENT ASSETS - Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Prepaid expenses | ||
Deferred loan cost | $196,250 | $0 |
Rent | 5,262 | 3,962 |
Directors & officers insurance | 77,645 | 0 |
Professional fees | 30,000 | 52,739 |
Other vendors | 68,750 | 32,540 |
Other current assets | ||
Earnest money deposits, net | 634,288 | 0 |
Prepaid expenses and other current assets | $1,012,195 | $89,241 |
NOTE_15_RESTRICTED_STOCK_AND_R
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Detail) (USD $) | 0 Months Ended | 9 Months Ended | ||
Sep. 08, 2014 | Aug. 21, 2014 | Jul. 23, 2014 | Sep. 30, 2014 | |
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Details) [Line Items] | ||||
Employment Agreement, Term | 2 years | |||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | Under the Equity Incentive Plan adopted by the Company, in the amount of the greater (by value) of 50,000 shares of common stock or $500,000 of common stock based on the volume weighted average price for the 30 day period prior to the date of the grant. | |||
Stock Issued During Period, Value, Restricted Stock Award, Gross | $711,500 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period | 1 year | |||
Number of Board Members | 2 | 2 | ||
Restricted Stock [Member] | ||||
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Details) [Line Items] | ||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | 3,607,500 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 346,875 | 346,875 | ||
Restricted Stock Units (RSUs) [Member] | ||||
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Details) [Line Items] | ||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | 1,267,500 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 121,875 | 171,875 | ||
Number of shares underlying restricted stock | 121,875 |
NOTE_15_RESTRICTED_STOCK_AND_R1
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") - Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity (Detail) (USD $) | 0 Months Ended | 9 Months Ended |
Aug. 21, 2014 | Sep. 30, 2014 | |
Restricted Stock [Member] | ||
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Details) - Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Line Items] | ||
Restricted stock non-vested at January 1, 2014 | 0 | |
Restricted stock granted | 346,875 | 346,875 |
Restricted stock vested | -178,125 | |
Restricted stock forfeited | 0 | |
Restricted stock non-vested at September 30, 2014 | 168,750 | |
Restricted stock non-vested at January 1, 2014 | $0 | |
Restricted stock granted | $10.40 | |
Restricted stock vested | $10.40 | |
Restricted stock forfeited | $0 | |
Restricted stock non-vested at September 30, 2014 | $10.40 | |
Restricted Stock Units (RSUs) [Member] | ||
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") (Details) - Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Line Items] | ||
Restricted stock non-vested at January 1, 2014 | 0 | |
Restricted stock granted | 121,875 | 171,875 |
Restricted stock vested | -115,625 | |
Restricted stock forfeited | 0 | |
Restricted stock non-vested at September 30, 2014 | 56,250 | |
Restricted stock non-vested at January 1, 2014 | $0 | |
Restricted stock granted | $10.40 | |
Restricted stock vested | $10.40 | |
Restricted stock forfeited | $0 | |
Restricted stock non-vested at September 30, 2014 | $10.40 |
NOTE_15_RESTRICTED_STOCK_AND_R2
NOTE 15 - RESTRICTED STOCK AND RESTRICTED STOCK UNITS ("RSUs") - Allocation of Recognized Period Costs (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share based compensation | $1,031,640 | $0 | $1,031,640 | $0 |
Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share based compensation | 663,262 | 663,262 | ||
Restricted Stock Units (RSUs) [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Share based compensation | $368,378 | $368,378 |
NOTE_16_RELATED_PARTY_TRANSACT
NOTE 16 - RELATED PARTY TRANSACTIONS (Detail) (USD $) | 0 Months Ended | 12 Months Ended | 9 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | ||||||
Sep. 08, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Jul. 21, 2014 | Sep. 30, 2014 | Oct. 09, 2014 | Nov. 11, 2014 | Mar. 31, 2014 | Nov. 01, 2014 | Oct. 28, 2013 | Sep. 30, 2013 | Sep. 20, 2013 | Mar. 28, 2014 | Mar. 25, 2014 | |
NotesPayable | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Deposits and other assets | $98,726 | $72,726 | $72,726 | $72,726 | ||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | 346,875 | |||||||||||||||
Affiliated Entity [Member] | Vincent Chase Inc. [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | 100.00% | 100.00% | 100.00% | ||||||||||||
Number of Promissory Notes | 2 | |||||||||||||||
Debt Instrument, Face Amount | 100,000 | 100,000 | 100,000 | 100,000 | 150,000 | |||||||||||
Due to Related Parties, Current | 111,794 | 491,674 | 491,674 | 491,674 | ||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 0.00% | 0.00% | 0.00% | |||||||||||||
Affiliated Entity [Member] | Vincent Chase Inc. [Member] | Annual Advisory And Consulting Service Fee [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Related Party Transaction, Amounts of Transaction | 150,000 | |||||||||||||||
Affiliated Entity [Member] | Vincent Chase Inc. [Member] | Monthly Advisory and Consulting Service Fee [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Related Party Transaction, Amounts of Transaction | 25,000 | 12,500 | ||||||||||||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | 100.00% | 100.00% | |||||||||||||
Number of Promissory Notes | 4 | |||||||||||||||
Due to Related Parties, Current | 391,674 | 391,674 | 391,674 | |||||||||||||
Repayments of Related Party Debt | 75,000 | |||||||||||||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #1 [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Debt Instrument, Face Amount | 250,000 | 250,000 | 250,000 | |||||||||||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #2 [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Debt Instrument, Face Amount | 100,000 | 100,000 | 100,000 | |||||||||||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable 3 [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Debt Instrument, Face Amount | 500,000 | 500,000 | 500,000 | |||||||||||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #4 [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Debt Instrument, Face Amount | 375,000 | 375,000 | 375,000 | |||||||||||||
Affiliated Entity [Member] | Dr. Bruce Consulting [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Related Party Transaction, Amounts of Transaction | 18,750 | 500,000 | ||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | 100.00% | 100.00% | |||||||||||||
Affiliated Entity [Member] | Subsequent Event [Member] | PVM International Inc. (PVMI) [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Repayments of Related Party Debt | 3,197 | |||||||||||||||
Affiliated Entity [Member] | Subsequent Event [Member] | Dr. Bruce Consulting [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Related Party Transaction, Amounts of Transaction | 12,500 | |||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | |||||||||||||||
Related Party And Shareholder [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Related Party Transaction, Amounts of Transaction | 150,000 | |||||||||||||||
Deposits and other assets | 500,000 | 400,000 | ||||||||||||||
Chief Executive Officer [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | 20,000 | |||||||||||||||
Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted (in Shares) | 50,000 | |||||||||||||||
Chief Executive Officer [Member] | Subsequent Event [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Stock Issued During Period, Value, Share-based Compensation, Forfeited | $20,000 | |||||||||||||||
Chief Executive Officer [Member] | Subsequent Event [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted (in Shares) | 70,000 | |||||||||||||||
Chief Executive Officer [Member] | Subsequent Event [Member] | Additional Award [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
NOTE 16 - RELATED PARTY TRANSACTIONS (Details) [Line Items] | ||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted (in Shares) | 20,000 |
NOTE_17_STOCKHOLDERS_EQUITY_De
NOTE 17 - STOCKHOLDER'S EQUITY (Detail) (USD $) | 0 Months Ended | 9 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 0 Months Ended | |||||
Sep. 08, 2014 | Aug. 21, 2014 | Feb. 03, 2014 | Dec. 19, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Mar. 31, 2014 | Nov. 30, 2011 | Dec. 31, 2012 | Jan. 31, 2013 | Jun. 05, 2014 | Dec. 31, 2013 | |
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Treasury Stock, Shares | 60,000 | |||||||||||
Proceeds from Issuance of Common Stock (in Dollars) | $2,442,859 | $3,541,090 | ||||||||||
Dividends Payable, Nature | declared a 1:1 common stock dividend on each share of outstanding common stock | |||||||||||
Common Stock Dividends, Shares | 14,762,875 | |||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross | 346,875 | |||||||||||
Number of Board Members | 2 | 2 | ||||||||||
Common Stock Issuance [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Issued During Period, Shares, New Issues | 485,830 | |||||||||||
Sale of Stock, Price Per Share (in Dollars per share) | $5 | |||||||||||
Proceeds from Issuance of Common Stock (in Dollars) | 2,427,859 | |||||||||||
Series A Preferred Stock [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Preferred Stock, Par or Stated Value Per Share (in Dollars per share) | $0.00 | $0.00 | ||||||||||
Preferred Stock, Shares Outstanding | 3,000,000 | 3,000,000 | ||||||||||
Series A Preferred Stock [Member] | Stock Issued to Founder and Shareholder [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Issued During Period, Shares, New Issues | 6,000,000 | |||||||||||
Preferred Stock, Par or Stated Value Per Share (in Dollars per share) | $0.00 | |||||||||||
Convertible Preferred Stock, Terms of Conversion | converted to common stock at a ratio of 1 (one) share of Series A Preferred Stock to 5 (five) shares of common stock | |||||||||||
Series A Preferred Stock [Member] | Stock Issued To Shareholder [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Repurchased During Period, Shares | 3,000,000 | |||||||||||
Series A Preferred Stock [Member] | Stock Issued to Founder [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Repurchased and Retired During Period, Shares | 3,000,000 | |||||||||||
Affiliated Entity [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Treasury Stock, Shares | 60,000 | |||||||||||
Board Member [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross | 93,751 | |||||||||||
Bio-Tech Medical Software [Member] | Affiliated Entity [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Repurchased During Period, Shares | 30,000 | |||||||||||
Legal Fees (in Dollars) | 4,800 | |||||||||||
Stock Repurchased During Period, Value (in Dollars) | 604,800 | |||||||||||
MedVend Holdings LLC [Member] | Affiliated Entity [Member] | ||||||||||||
NOTE 17 - STOCKHOLDER'S EQUITY (Details) [Line Items] | ||||||||||||
Stock Repurchased During Period, Shares | 30,000 | |||||||||||
Legal Fees (in Dollars) | 4,800 | |||||||||||
Stock Repurchased During Period, Value (in Dollars) | $604,800 |
NOTE_18_COMMITMENTS_AND_CONTIN
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | 1 Months Ended | |||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 17, 2013 | Oct. 17, 2014 | Aug. 01, 2011 | Jul. 01, 2014 | Jul. 22, 2014 | 8-May-14 | Jul. 31, 2014 | |
Agreement | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Leases, Rent Expense | $53,114 | $48,069 | $156,716 | $91,983 | |||||||
Payments to Acquire Real Estate | 399,594 | 0 | |||||||||
Real Estate, Purchase Price | 23,030,000 | 23,030,000 | |||||||||
Vaporfection International Inc. [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,981 | ||||||||||
Lessee Leasing Arrangements, Operating Leases, Term of Contract | 1 year | ||||||||||
Amount committed to purchase unused components | 56,000 | ||||||||||
Subsequent Event [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Payments to Acquire Real Estate | 50,000 | ||||||||||
Office Lease, West Hollywood, California [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Lease Expiration Date | 30-Jun-17 | ||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 14,397 | ||||||||||
Office Lease, West Hollywood, California [Member] | Subsequent Event [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Lease, Rent Increase, Percent | 3.00% | ||||||||||
Operating Leases, Rent Expense | 14,828 | ||||||||||
Office Facilities Lease, West Hills, California [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,300 | ||||||||||
Office Facilities Lease, Scottsdale, Arizona [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,420 | ||||||||||
Virtial Office Lease, Tokyo, New York, Seattle and Toronto [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 390 | ||||||||||
Description of Lessee Leasing Arrangements, Operating Leases | month to month basis | ||||||||||
Land and Building [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 20,000 | 7,400 | |||||||||
Lessee Leasing Arrangements, Operating Leases, Term of Contract | 5 years | 5 years | |||||||||
Security Deposit | 30,000 | ||||||||||
Escrow Deposits Related to Property Sales | 634,288 | ||||||||||
Payments to Acquire Real Estate | 23,030,000 | ||||||||||
Real Estate, Purchase Price | 399,594 | 399,594 | |||||||||
Notes Issued | 249,000 | ||||||||||
Potential Real Estate Purcahse Foreclosed Upon [Member] | Land and Building [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Number of Real Estate Purchase Agreements | 1 | ||||||||||
Proceeds from Other Deposits | 10,000 | ||||||||||
Forfeiture Of Earnest Money On Potential Purchase Of Real Estate [Member] | Land and Building [Member] | |||||||||||
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items] | |||||||||||
Real Estate, Purchase Price | 2,500,000 | ||||||||||
Number of Real Estate Purchase Agreements | 2 | ||||||||||
Earnest Money Forfeited | $100,000 |
NOTE_18_COMMITMENTS_AND_CONTIN1
NOTE 18 - COMMITMENTS AND CONTINGENCIES - Schedule of Future Minimum Rental Payments for Operating Leases (Detail) (USD $) | Sep. 30, 2014 |
Building [Member] | |
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) - Schedule of Future Minimum Rental Payments for Operating Leases [Line Items] | |
2014 | $44,484 |
2015 | 177,936 |
2016 | 177,936 |
2017 | 88,968 |
2018 | 0 |
2019 | 0 |
Total | 489,324 |
Land and Building [Member] | |
NOTE 18 - COMMITMENTS AND CONTINGENCIES (Details) - Schedule of Future Minimum Rental Payments for Operating Leases [Line Items] | |
2014 | 22,200 |
2015 | 88,800 |
2016 | 88,800 |
2017 | 88,800 |
2018 | 88,800 |
2019 | 29,600 |
Total | $407,000 |
NOTE_18_COMMITMENTS_AND_CONTIN2
NOTE 18 - COMMITMENTS AND CONTINGENCIES - Schedule of Real Estate Properties (Detail) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Real Estate Properties [Line Items] | |
Purchase price | $23,030,000 |
Net escrow balance | 634,288 |
Additional rents/fees paid to extend closing date | 7,893 |
Property 1 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 3,500,000 |
Closing date | 12/11/14 |
Net escrow balance | 60,000 |
Date escrow opened | 7/25/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 2 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 3,650,000 |
Closing date | 1/5/15 |
Net escrow balance | 35,000 |
Date escrow opened | 7/21/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 3 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 2,450,000 |
Closing date | 12/1/14 |
Net escrow balance | 80,000 |
Date escrow opened | 8/13/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 4 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 790,000 |
Closing date | 1/1/15 |
Net escrow balance | 24,288 |
Date escrow opened | 8/12/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 5 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 480,000 |
Closing date | 1/31/15 |
Net escrow balance | 16,000 |
Date escrow opened | 8/12/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 6 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 2,100,000 |
Closing date | 2/10/15 |
Net escrow balance | 90,000 |
Date escrow opened | 8/13/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 7 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 595,000 |
Closing date | 1/31/15 |
Net escrow balance | 10,000 |
Date escrow opened | 8/13/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 8 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 3,250,000 |
Closing date | 2/10/15 |
Net escrow balance | 90,000 |
Date escrow opened | 8/19/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 9 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 2,400,000 |
Closing date | 2/8/15 |
Net escrow balance | 19,000 |
Date escrow opened | 8/19/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 10 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 2,300,000 |
Closing date | 1/8/15 |
Net escrow balance | 80,000 |
Date escrow opened | 8/19/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 11 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 695,000 |
Closing date | 10/18/14 |
Net escrow balance | 10,000 |
Date escrow opened | 6/28/14 |
Additional rents/fees paid to extend closing date | 0 |
Property 12 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 820,000 |
Closing date | 10/18/14 |
Net escrow balance | 45,000 |
Date escrow opened | 6/28/14 |
Additional rents/fees paid to extend closing date | 7,893 |
Property 13 [Member] | |
Real Estate Properties [Line Items] | |
Purchase price | 0 |
Net escrow balance | 75,000 |
Date escrow opened | 7/21/14 |
Additional rents/fees paid to extend closing date | $0 |
NOTE_19_RESTATEMENT_Detail
NOTE 19 - RESTATEMENT (Detail) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Accounting Changes and Error Corrections [Abstract] | |
Transactions with related parties improperly recorded as revenue instead of capital contributions | $810,000 |
NOTE_19_RESTATEMENT_Restated_C
NOTE 19 - RESTATEMENT - Restated Consolidated Balance Sheet (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Assets | |||||
Cash and cash equivalents | $1,350,442 | $168,003 | $100,301 | $1,026,902 | |
Marketable securities | 208,025 | 184,800 | 184,800 | ||
Accounts receivable | 32,312 | 339,735 | |||
Notes receivable | 75,000 | 115,000 | |||
Inventory | 522,198 | 632,986 | |||
Prepaid expenses and other current assets | 1,012,195 | 89,241 | |||
Total current assets | 3,200,172 | 1,529,765 | |||
Property and equipment | 151,984 | 140,658 | |||
Assets held for resale | 399,594 | 0 | |||
Investments, at cost | 0 | 1,200,000 | |||
Intangible assets | 800,904 | 682,429 | |||
Note receivable | 155,000 | 0 | |||
Goodwill | 1,100,037 | 1,090,037 | |||
Deposits and other assets | 72,726 | 98,726 | |||
Total assets | 5,880,417 | 4,741,615 | |||
Liabilities and stockholders' equity | |||||
Accounts payable and accrued expenses | 1,321,998 | 448,314 | |||
Deferred revenue | 1,073,932 | 683,621 | |||
Notes payable | 299,605 | 75,000 | |||
Related party notes payable | 491,674 | 111,794 | |||
Convertible notes payable | 1,939,801 | 0 | |||
Derivative liability | 1,228,108 | 0 | |||
Customer deposits | 1,584,808 | 785,861 | |||
Total current liabilities | 7,939,926 | 2,104,590 | |||
Stockholders' Equity | |||||
Preferred stock | 3,000 | 3,000 | |||
Common stock | 30,105 | 29,526 | |||
Additional paid-in capital | 11,615,278 | 8,156,358 | |||
Common stock subscribed | 0 | -15,000 | |||
Treasury stock | -1,209,600 | 0 | |||
Accumulated deficit | -12,339,785 | -5,536,859 | |||
Accumulated other comprehensive loss | -158,507 | 0 | |||
Total stockholders' equity | -2,059,509 | 2,637,025 | -153,629 | ||
Total liabilities and stockholders' equity | 5,880,417 | 4,741,615 | |||
As Originally Presented [Member] | |||||
Assets | |||||
Cash and cash equivalents | 1,350,442 | ||||
Marketable securities | 208,025 | ||||
Accounts receivable | 337,475 | ||||
Notes receivable | 75,000 | ||||
Inventory | 2,466,897 | ||||
Prepaid expenses and other current assets | 1,012,195 | ||||
Total current assets | 5,450,034 | ||||
Property and equipment | 151,984 | ||||
Assets held for resale | 399,594 | ||||
Investments, at cost | 0 | ||||
Intangible assets | 800,904 | ||||
Note receivable | 155,000 | ||||
Goodwill | 1,100,037 | ||||
Deposits and other assets | 72,726 | ||||
Total assets | 8,130,279 | ||||
Liabilities and stockholders' equity | |||||
Accounts payable and accrued expenses | 1,505,998 | ||||
Notes payable | 299,605 | ||||
Related party notes payable | 491,674 | ||||
Convertible notes payable | 1,939,801 | ||||
Derivative liability | 1,228,108 | ||||
Customer deposits | 587,088 | ||||
Total current liabilities | 6,052,274 | ||||
Stockholders' Equity | |||||
Preferred stock | 3,000 | ||||
Common stock | 30,105 | ||||
Additional paid-in capital | 10,244,278 | ||||
Common stock subscribed | 0 | ||||
Treasury stock | -1,209,600 | ||||
Accumulated deficit | -6,989,778 | ||||
Total stockholders' equity | 2,078,005 | ||||
Total liabilities and stockholders' equity | 8,130,279 | ||||
Impact of Restatement [Member] | |||||
Assets | |||||
Accounts receivable | -1,524,771 | ||||
Inventory | -636,468 | ||||
Total assets | -2,161,239 | ||||
Liabilities and stockholders' equity | |||||
Accounts payable and accrued expenses | -150,000 | ||||
Deferred revenue | 683,621 | ||||
Customer deposits | 582,675 | ||||
Total current liabilities | 1,116,296 | ||||
Stockholders' Equity | |||||
Additional paid-in capital | 1,371,000 | ||||
Accumulated deficit | -4,648,535 | ||||
Total stockholders' equity | -3,277,535 | ||||
Early Recognition of Revenue [Member] | |||||
Assets | |||||
Accounts receivable | 1,219,607 | ||||
Inventory | -1,308,231 | ||||
Total assets | -88,623 | ||||
Liabilities and stockholders' equity | |||||
Accounts payable and accrued expenses | -34,000 | ||||
Deferred revenue | 390,311 | ||||
Customer deposits | 415,045 | ||||
Total current liabilities | 771,356 | ||||
Stockholders' Equity | |||||
Accumulated deficit | -859,979 | ||||
Total stockholders' equity | -859,979 | ||||
Scenario Reclassification [Member] | |||||
Assets | |||||
Total assets | 0 | ||||
Stockholders' Equity | |||||
Accumulated deficit | 158,507 | ||||
Accumulated other comprehensive loss | -158,507 | ||||
Total stockholders' equity | $0 |
NOTE_19_RESTATEMENT_Restated_C1
NOTE 19 - RESTATEMENT - Restated Consolidated Statements of Operations And Comprehensive Loss (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Revenue | $173,076 | $1,314,178 | $534,082 | $1,844,376 | |
Revenue from related party | 0 | 0 | 50,110 | 0 | |
Less: allowances and refunds | 0 | 0 | -60,000 | 0 | |
Net revenue | 173,076 | 1,314,178 | 524,192 | 1,844,376 | |
Cost of revenues | 1,813,562 | 1,807,030 | 3,492,105 | 2,258,127 | |
Gross margin | -1,640,486 | -492,852 | -2,967,913 | -413,751 | |
Operating expenses | |||||
Selling and marketing | 319,204 | 91,136 | 749,212 | 506,393 | |
Research and development | 61,623 | 28,233 | 136,656 | 46,733 | |
General and administrative | 952,663 | 522,372 | 2,151,742 | 1,876,505 | |
Stock based compensation | 1,031,640 | 0 | 1,031,640 | 0 | |
Total operating expenses | 2,365,130 | 641,741 | 4,069,250 | 2,429,631 | |
Loss from operations | -4,005,616 | -1,134,593 | -7,037,163 | -2,843,382 | |
Other expense | |||||
Interest income (expense), net | -339,231 | 4,311 | -314,078 | -1,884 | |
Change in fair value of derivative liabilities | 548,315 | 0 | 548,315 | 0 | |
Total other income (expense) | 209,084 | 4,311 | 234,237 | -1,884 | |
Loss before provision for income taxes | -3,796,532 | -1,130,282 | -6,802,926 | -2,845,266 | |
Provision for income taxes | 0 | -119,280 | 0 | -29,220 | |
Net loss | -3,796,532 | -1,011,002 | -6,802,926 | -2,816,046 | -3,791,440 |
Earnings per share attributable to common stockholders | |||||
Basic | ($0.13) | ($0.03) | ($0.22) | ($0.10) | |
Diluted | ($0.13) | ($0.03) | ($0.22) | ($0.10) | |
Weighted average shares outstanding | |||||
Basic | 30,371,299 | 29,298,284 | 30,472,447 | 28,658,556 | |
Diluted | 30,371,299 | 29,298,284 | 30,472,447 | 28,658,556 | |
Other Comprehensive loss | |||||
Net loss | -3,796,532 | -1,011,002 | -6,802,926 | -2,816,046 | -3,791,440 |
Unrealized loss from marketable securities | -158,507 | 0 | -158,507 | 0 | |
Comprehensive loss | -3,955,039 | -1,011,002 | -6,961,433 | -2,816,046 | |
Adjustment [Member] | |||||
Earnings per share attributable to common stockholders | |||||
Basic | $0 | ||||
Diluted | $0 | ||||
As Originally Presented [Member] | |||||
Revenue | 107,429 | 1,980,720 | 836,427 | 4,801,062 | |
Revenue from related party | 0 | 0 | 1,000,000 | 0 | |
Less: allowances and refunds | 0 | 0 | -1,229,710 | 0 | |
Net revenue | 107,429 | 1,980,720 | 606,717 | 4,801,062 | |
Cost of revenues | 743,397 | 1,641,495 | 2,183,874 | 2,442,592 | |
Gross margin | -635,968 | 339,225 | -1,577,157 | 2,358,470 | |
Operating expenses | |||||
Selling and marketing | 319,204 | 91,136 | 749,212 | 506,393 | |
Research and development | 61,623 | 28,233 | 136,656 | 46,733 | |
General and administrative | 1,363,440 | 522,372 | 2,682,519 | 1,876,505 | |
Stock based compensation | 1,031,640 | 0 | 1,031,640 | 0 | |
Total operating expenses | 2,775,907 | 641,741 | 4,600,027 | 2,429,631 | |
Loss from operations | -3,411,875 | -302,516 | -6,177,184 | -71,161 | |
Other expense | |||||
Interest income (expense), net | -339,231 | 4,311 | -314,078 | -1,884 | |
Change in fair value of derivative liabilities | 548,315 | 0 | 548,315 | ||
Total other income (expense) | 209,084 | 4,311 | 234,237 | -1,884 | |
Loss before provision for income taxes | -3,202,791 | -298,205 | -5,942,947 | -73,045 | |
Provision for income taxes | 0 | -119,280 | 0 | -29,220 | |
Net loss | -3,202,791 | -178,925 | -5,942,947 | -43,825 | |
Earnings per share attributable to common stockholders | |||||
Basic | ($0.11) | ($0.20) | $0 | ||
Diluted | ($0.07) | ($0.20) | $0 | ||
Weighted average shares outstanding | |||||
Basic | 30,371,299 | 29,298,284 | 30,472,447 | 28,658,556 | |
Diluted | 45,371,299 | 44,298,284 | 30,472,447 | 44,372,842 | |
Other Comprehensive loss | |||||
Net loss | -3,202,791 | -178,925 | -5,942,947 | -43,825 | |
As Originally Presented [Member] | Adjustment [Member] | |||||
Earnings per share attributable to common stockholders | |||||
Basic | $0 | ||||
Diluted | $0 | ||||
Early Recognition of Revenue [Member] | |||||
Revenue | 65,647 | -666,542 | -302,345 | -2,146,686 | |
Revenue from related party | -949,890 | ||||
Less: allowances and refunds | 1,169,710 | ||||
Net revenue | 65,647 | -82,525 | |||
Cost of revenues | 1,070,165 | 165,535 | 1,308,231 | -184,465 | |
Gross margin | -1,004,518 | -832,077 | -1,390,756 | -1,962,221 | |
Operating expenses | |||||
General and administrative | -410,777 | -530,777 | |||
Other expense | |||||
Net loss | -593,741 | -832,077 | -859,979 | -1,962,221 | |
Other Comprehensive loss | |||||
Net loss | -593,741 | -832,077 | -859,979 | -1,962,221 | |
Contributions to Capital [Member] | |||||
Revenue | -810,000 | ||||
Gross margin | -810,000 | ||||
Other expense | |||||
Net loss | -810,000 | ||||
Other Comprehensive loss | |||||
Net loss | ($810,000) |
NOTE_20_SUBSEQUENT_EVENTS_Deta
NOTE 20 - SUBSEQUENT EVENTS (Detail) (USD $) | 0 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | ||||||||
Sep. 08, 2014 | Jul. 23, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Jul. 21, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Oct. 17, 2014 | Oct. 13, 2014 | Nov. 01, 2014 | Oct. 31, 2014 | Nov. 11, 2014 | Oct. 30, 2014 | Oct. 20, 2014 | Oct. 16, 2014 | Oct. 19, 2014 | |
Subsequent Event [Line Items] | ||||||||||||||||
Payments to Acquire Real Estate | $399,594 | $0 | ||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | 346,875 | |||||||||||||||
Employment Agreement, Term | 2 years | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | Under the Equity Incentive Plan adopted by the Company, in the amount of the greater (by value) of 50,000 shares of common stock or $500,000 of common stock based on the volume weighted average price for the 30 day period prior to the date of the grant. | |||||||||||||||
Convertible Debt [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Debt Instrument, Payment Terms | the delay in effectiveness for the Form S-1, the conversion rate for the common stock to be issued as repayment of the debentures issued pursuant to the July 2014 purchase agreement will be, during the period commencing 120 days after the initial closing date until to the registration statement is effective, reduced to 63% of the volume weighted average price for 20 days prior to the issuance from 70% of the volume weighted average price originally stipulated in the loan agreements. | |||||||||||||||
MJ Holdings [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Class of Warrant or Rights, Fair Value Granted | 21,758 | 21,758 | 21,758 | |||||||||||||
Office Facilities Lease, West Hills, California [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,300 | |||||||||||||||
Office Facilities Lease, Scottsdale, Arizona [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,420 | |||||||||||||||
Chief Executive Officer [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures (in Shares) | 20,000 | |||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | 20,000 | |||||||||||||||
Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures (in Shares) | 50,000 | |||||||||||||||
Affiliated Entity [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Other Commitments, Description | non-refundable fee according to the agreement that the escrow would release to seller $10,000 on the first day of each month following the signing and additional $10,000 with signing on July 21, 2014. | |||||||||||||||
Affiliated Entity [Member] | Dr. Bruce Consulting [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | 100.00% | 100.00% | |||||||||||||
Related Party Transaction, Amounts of Transaction | 18,750 | 500,000 | ||||||||||||||
Vice President [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures (in Shares) | 19,452 | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in Shares) | 100,000 | |||||||||||||||
Subsequent Event [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Payments to Acquire Real Estate | 50,000 | |||||||||||||||
Subsequent Event [Member] | MJ Holdings [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Marketable Securities, Restricted | 33,333 | |||||||||||||||
Class of Warrant or Rights, Fair Value Granted | 13,033 | |||||||||||||||
Subsequent Event [Member] | Monthly Advisory and Consulting Service Fee [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Other Commitment | 25,000 | 10,000 | ||||||||||||||
Other Commitments, Description | The monthly consulting fee will be reduced to $12,500 per month if Mr. Mehdizadeh is engaged in trading any of the Company's securities at any time within the preceding 30 day period. | |||||||||||||||
Subsequent Event [Member] | Office Facilities Lease, West Hills, California [Member] | Lease Termination [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,300 | |||||||||||||||
Subsequent Event [Member] | Office Facilities Lease, Scottsdale, Arizona [Member] | Lease Termination [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Operating Leases, Rent Expense, Minimum Rentals | 1,420 | |||||||||||||||
Subsequent Event [Member] | Hourly Advisory And Consulting Service Fee [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Other Commitment | 200 | |||||||||||||||
Subsequent Event [Member] | Advisory And Consulting Services [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures (in Shares) | 100,000 | |||||||||||||||
Subsequent Event [Member] | Chief Executive Officer [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Repurchased During Period, Shares (in Shares) | 20,000 | |||||||||||||||
Subsequent Event [Member] | Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures (in Shares) | 70,000 | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in Shares) | 20,000 | |||||||||||||||
Subsequent Event [Member] | Affiliated Entity [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Escrow Deposit | 190,400 | |||||||||||||||
Increase (Decrease) in Earnest Money Deposits Outstanding | -60,000 | |||||||||||||||
Non-Refundable Fee | 40,000 | |||||||||||||||
Proceeds from Collection of Notes Receivable | 155,000 | |||||||||||||||
Proceeds from Interest Received | 6,423.56 | |||||||||||||||
Subsequent Event [Member] | Affiliated Entity [Member] | Dr. Bruce Consulting [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Equity Method Investment, Ownership Percentage | 100.00% | |||||||||||||||
Related Party Transaction, Amounts of Transaction | 12,500 | |||||||||||||||
Subsequent Event [Member] | Director [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Gross (in Shares) | 346,875 | |||||||||||||||
Subsequent Event [Member] | Director [Member] | Two Board Members [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Stock Issued During Period, Shares, Share-based Compensation, Net of Forfeitures (in Shares) | 337,186 | |||||||||||||||
Subsequent Event [Member] | Chief Financial Officer [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Other Commitments, Description | Pursuant to the Employment Agreement, the Company agreed to engage Mr. Mitchell, and Mr. Mitchell agreed to serve as the Company's Chief Financial Officer, for a two-year term, which term will automatically be extended for successive additional one-year terms, unless either party provides written notice to the other 90 days prior to the expiration of the initial term or any successive term, that the Employment Agreement will not be renewed. | |||||||||||||||
Employment Agreement, Term | 2 years | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | Mitchell will also be entitled to an award of restricted stock units, to be issued within 90 days of the effective date of the Employment Agreement, under the Company's Equity Incentive Plan, in the amount of 7,500 shares of common stock each calendar quarter Mr. Mitchell serves as Chief Financial Officer of the Company. | |||||||||||||||
Employee Agreement, Description | Termination by the Company within 365 days of a Change of Control (as defined in the Employment Agreement) in the absence of Cause will conclusively be deemed a termination by the Company without Cause. | |||||||||||||||
Subsequent Event [Member] | Chief Financial Officer [Member] | Annual Salary [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Other Commitment | 190,000 | |||||||||||||||
Subsequent Event [Member] | Chief Financial Officer [Member] | Living Expenses [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Other Commitment | 2,500 | |||||||||||||||
Subsequent Event [Member] | Chief Financial Officer [Member] | Annual Bonus [Member] | Maximum [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Percentage of bonus on base salary | 35.00% | |||||||||||||||
Subsequent Event [Member] | Chief Financial Officer [Member] | Annual Cash Bonus [Member] | ||||||||||||||||
Subsequent Event [Line Items] | ||||||||||||||||
Percentage of bonus in cash | 50.00% |