Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 06, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | MDBX | |
Entity Registrant Name | Medbox, Inc. | |
Entity Central Index Key | 1,547,996 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 114,410,410 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 346,761 | $ 101,182 |
Marketable securities | 94,817 | 94,776 |
Accounts receivable | 8,774 | |
Inventory | 187,844 | 961,236 |
Deposits in escrow | 15,000 | 400,476 |
Prepaid insurance | 240,428 | 31,491 |
Prepaid expenses and other current assets | 172,039 | 34,729 |
Total current assets | 1,056,889 | 1,632,664 |
Property and equipment, net of accumulated depreciation of $59,210 and $50,192, respectively | 573,470 | 158,318 |
Land | 4,945,000 | |
Assets held for resale | 399,594 | |
Construction in progress | 68,959 | |
Intangible assets, net of accumulated amortization of $123,567 and $83,500 respectively | 669,086 | 709,153 |
Note receivable, net of allowance of $350,000 | 0 | 0 |
Goodwill | 1,260,037 | 1,260,037 |
Deferred Costs | 299,018 | |
Deposits and other assets | 140,212 | 104,726 |
Total assets | 9,012,671 | 4,264,492 |
Current liabilities | ||
Accounts payables | 3,609,486 | 1,713,627 |
Accrued interest payable | 324,330 | 372,937 |
Accrued expenses | 122,663 | 610,497 |
Accrued settlement and severance expenses | 912,065 | |
Deferred revenue, current | 219,487 | 204,091 |
Notes payable | 431,415 | 261,434 |
Related party notes payable | 678,877 | |
Convertible notes payable, net of discount of $266,497 and $1,225,573, respectively | 4,993,891 | 2,524,427 |
Derivative Liability | 4,885,286 | 3,691,853 |
Customer deposits | 1,057,340 | 1,525,808 |
Total current liabilities | 16,741,461 | 11,583,551 |
Notes Payable, less current portion | 4,326,484 | |
Deferred revenue, less current portion | 378,041 | 568,515 |
Deferred tax liability | 160,000 | 160,000 |
Total liabilities | $ 21,605,986 | $ 12,312,066 |
Commitments and contingencies (Note 9) | ||
Stockholders' Deficit | ||
Preferred stock, $0.001 par value: 10,000,000 authorized; 1,000,000 and 3,000,000 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | $ 1,000 | $ 3,000 |
Common stock, $0.001 par value: 100,000,000 authorized, 99,250,518 and 30,496,909 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | 99,250 | 30,497 |
Additional paid-in capital | 35,823,112 | 15,315,110 |
Treasury stock | (1,209,600) | (1,209,600) |
Accumulated deficit | (47,198,689) | (22,078,193) |
Accumulated other comprehensive loss | (108,388) | (108,388) |
Total stockholders' deficit | (12,593,315) | (8,047,574) |
Total liabilities and stockholders' deficit | 9,012,671 | $ 4,264,492 |
Directors [Member] | ||
Current liabilities | ||
Accrued expenses | $ 185,498 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Property and equipment, accumulated depreciation (in Dollars) | $ 59,210 | $ 50,192 |
Intangible assets, accumulated amortization (in Dollars) | 123,567 | 83,500 |
Note receivable, allowance | 350,000 | |
Convertible notes payable, discount | $ 266,497 | $ 1,225,573 |
Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 1,000,000 | 3,000,000 |
Preferred stock, outstanding | 1,000,000 | 3,000,000 |
Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 99,250,518 | 30,496,909 |
Common stock, outstanding | 99,250,518 | 30,496,909 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $ 288,961 | $ 147,884 | $ 390,156 | $ 534,082 |
Revenue, related party | 25,192 | 25,192 | 74,754 | 50,110 |
Less: allowances and refunds | (60,000) | |||
Net revenue | 314,153 | 173,076 | 464,910 | 524,192 |
Cost of revenues | 656,383 | 1,813,562 | 1,837,711 | 3,492,105 |
Gross loss | (342,230) | (1,640,486) | (1,372,801) | (2,967,913) |
Operating expenses | ||||
Selling and marketing | 103,765 | 319,204 | 442,261 | 749,212 |
Research and development | 61,623 | 136,656 | ||
General and administrative | 3,506,029 | 1,984,303 | 12,627,644 | 3,183,382 |
Total operating expenses | 3,609,794 | 2,365,130 | 13,069,905 | 4,069,250 |
Loss from operations | (3,952,024) | (4,005,616) | (14,442,706) | (7,037,163) |
Other income (expense) | ||||
Interest income (expense), net | (195,426) | (123,007) | (289,226) | (71,343) |
Financing Costs | (522,379) | (2,822,011) | ||
Change in fair value of derivative liabilities | (2,544,014) | 548,315 | 509,057 | 548,315 |
Amortization of debt discount | (2,071,898) | (216,224) | (8,121,537) | (216,224) |
Other income (expense) | (6,208) | 45,927 | (26,511) | |
Total other income (expense) | (5,339,925) | 209,084 | (10,677,790) | 234,237 |
Loss before provision for income taxes | (9,291,949) | (3,796,532) | (25,120,496) | (6,802,926) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (9,291,949) | $ (3,796,532) | $ (25,120,496) | $ (6,802,926) |
Loss per share attributable to common stockholders | ||||
Basic (in Dollars per share) | $ (0.13) | $ (0.13) | $ (0.54) | $ (0.22) |
Diluted (in Dollars per share) | $ (0.13) | $ (0.13) | $ (0.54) | $ (0.22) |
Weighted average shares outstanding | ||||
Basic (in Shares) | 73,524,951 | 30,371,299 | 46,945,806 | 30,472,447 |
Diluted (in Shares) | 73,524,951 | 30,371,299 | 46,945,806 | 30,472,447 |
Other Comprehensive loss | ||||
Net loss | $ (9,291,949) | $ (3,796,532) | $ (25,120,496) | $ (6,802,926) |
Unrealized loss from marketable securities | (158,507) | 0 | (158,507) | |
Comprehensive loss | $ (9,291,949) | $ (3,955,039) | $ (25,120,496) | $ (6,961,433) |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Stockholders' Deficit - 9 months ended Sep. 30, 2015 - USD ($) | Total | Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-In Capital [Member] | Common Stock Subscribed [Member] | Retained Earnings (Accumulated) (Deficit) [Member] | Accumulated Other Comprehensive Loss [Member] |
Balances at Dec. 31, 2014 | $ (8,047,574) | $ 3,000 | $ 30,497 | $ (1,209,600) | $ 15,315,110 | $ (22,078,193) | $ (108,388) | |
Balances (in Shares) at Dec. 31, 2014 | 3,000,000 | 30,496,909 | (60,000) | |||||
Stock-based compensation | 5,331,382 | $ 147 | 5,331,235 | |||||
Stock-based compensation (in shares) | 147,145 | |||||||
Exercise of warrants | 278,951 | $ 206 | 278,745 | |||||
Exercise of warrants (in shares) | 206,480 | |||||||
Issuance of shares to settle accounts payable | $ 364,728 | $ 1,633 | 363,095 | |||||
Issuance of shares to settle accounts payable (in shares) | 1,633,047 | 1,633,047 | ||||||
Conversions of convertible notes payable | $ 10,157,662 | $ 67,475 | 10,090,187 | |||||
Conversions of convertible notes payable (in shares) | 67,475,105 | |||||||
Issuance of warrants in connection with convertible notes payable | 4,304,522 | 4,304,522 | ||||||
Exercise of warrants in connection with convertible notes payable | 137,510 | $ 2,292 | 135,218 | |||||
Exercise of warrants in connection with convertible notes payable (in shares) | 2,291,832 | |||||||
Share cancelation | $ (2,000) | $ (3,000) | 5,000 | |||||
Share cancelation (in shares) | (2,000,000) | (3,000,000) | ||||||
Unrealized loss from marketable securities | 0 | $ 0 | $ 0 | $ 0 | 0 | $ 0 | 0 | 0 |
Net loss | (25,120,496) | (25,120,496) | ||||||
Balances at Sep. 30, 2015 | $ (12,593,315) | $ 1,000 | $ 99,250 | $ (1,209,600) | $ 35,823,112 | $ (47,198,689) | $ (108,388) | |
Balances (in Shares) at Sep. 30, 2015 | 1,000,000 | 99,250,518 | (60,000) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities | ||
Net loss | $ (25,120,496) | $ (6,802,926) |
Adjustments to reconcile net loss to net cash: | ||
Depreciation and amortization | 90,315 | 59,364 |
Provisions and allowances | 60,000 | |
Gain on sale of investments and property and equipment | (9,600) | |
Charges from escrow deposits | 280,400 | |
Inventory valuation reserve | 497,439 | |
Market value of securities received for services | (190,132) | |
Change in fair value of derivative liability | (509,057) | (548,315) |
Amortization of debt discount | 8,121,537 | 216,224 |
Financing costs | 2,822,011 | |
Stock based compensation | 5,331,382 | 1,031,640 |
Changes in operating assets and liabilities | ||
Accounts receivable | 8,774 | 213,424 |
Inventories | 275,953 | 110,788 |
Deposits in escrow | 55,076 | |
Prepaid insurance | (208,937) | |
Prepaid expenses and other assets | (172,796) | (896,954) |
Deferred costs | (299,018) | |
Accounts payables | 2,521,976 | 907,684 |
Accrued interest payable | 214,886 | |
Accrued expenses | (487,834) | |
Accrued settlement and severance expenses | 912,065 | |
Customer deposits | (468,468) | 807,347 |
Deferred revenue | (175,078) | 390,311 |
Net cash used in operating activities | (6,124,372) | (4,651,145) |
Cash flows from investing activities | ||
Issuance of note receivable | (115,000) | |
Purchase of property and equipment | (14,795) | (32,982) |
Purchase of real estate | (500,000) | (399,594) |
Purchase of intangible assets | (166,183) | |
Construction in Progress | (68,959) | |
Net cash used in investing activities | (583,754) | (713,759) |
Cash flows from financing activities | ||
Payments on notes payable | (3,535) | (75,000) |
Related party notes payable | (624,888) | 379,880 |
Proceeds from issuance of notes payable | 299,605 | |
Proceeds from issuance of common stock | 2,442,859 | |
Proceeds from issuance of convertible notes payable, net fees of approximately $352,000 | 7,432,128 | 3,500,000 |
Proceeds from issuance of convertible notes payable from related parties | 150,000 | |
Net cash provided by financing activities | 6,953,705 | 6,547,344 |
Net decrease in cash | 245,579 | 1,182,440 |
Cash and cash equivalents, beginning of period | 101,182 | 168,003 |
Cash and cash equivalents, end of period | 346,761 | 1,350,443 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 1,151 | 37,078 |
Cash paid for income tax | 0 | $ 0 |
Non- cash investing and financing activities: | ||
Common stock issued upon debt conversion | 6,261,474 | |
Purchase of land with notes payable | 5,000,000 | |
Directors [Member] | ||
Changes in operating assets and liabilities | ||
Accrued expenses | 185,498 | |
Stock Issued For Accounts Payable [Member] | ||
Non- cash investing and financing activities: | ||
Common stock issued for accounts payable | $ 364,728 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Statement of Cash Flows [Abstract] | |
Proceeds from issuance of convertible notes payable, net fees | $ 352,000 |
Business Organization, Nature o
Business Organization, Nature of Operations | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Organization, Nature of Operations | NOTE 1 – BUSINESS ORGANIZATION, NATURE OF OPERATIONS Medbox, Inc, which is incorporated in the state of Nevada (the “Company”), provides specialized consulting services to the marijuana industry and sells associated patented products, and medical vaporization devices. The Company works with clients who seek to enter the medical and cultivation marijuana markets in those states where approved. Medbox offers turnkey solutions that assist with licensing and compliance, site selection, design and permitting, safety and security, along with full build-out and operational oversight. The Company’s consulting solutions and technology create structure and process for clients and their respective businesses in this rapidly emerging sector. In addition, through its wholly owned subsidiary, Vaporfection International, Inc. (“VII”), the Company sells a line of vaporizer and accessory products online and through distribution partners. The Company is headquartered in Los Angeles, California. The Company holds the license to operate a dispensary in Portland, Oregon, and a master lease on the property in which the dispensary is located. The Company entered into an Operating Agreement with an unrelated party (the “Operator”) in which the Operator will manage and operate the Dispensary. Per the terms of the Agreement, the Dispensary is “under the exclusive supervision and control of Operator, which shall be responsible for the proper and efficient operation of the Dispensary”. The term of the Agreement includes an initial term, which is five years, and a renewal term for an additional five years. The renewal term is at the discretion of the Operator. The procurement fee for the dispensary was $400,000 (initially classified in Deferred Revenue), of which $50,000 was paid upon execution and delivery of the Agreement, and the remaining $350,000 is to be paid monthly in the amount of gross receipts less payroll and costs of inventories. If the procurement fees are not paid within six months, the payment terms become a minimum monthly payment of $5,000. As of the date of this report, there have been no amounts available under the above calculation to make payments towards the procurement fees. The remaining $350,000 is evidenced by a Note Receivable to the Company. As of June 30, 2015 the Company determined it was not assured of the timing of the collectability of the Note Receivable and therefore has set up an allowance in the amount of $350,000 for the Note Receivable, and has reduced the Deferred Revenue to $50,000. After the Procurement Fee is paid in full, it is the parties’ plan that ownership of the Dispensary (through a new merged corporation) will be apportioned 51% to Operator and 49% to Medbox. The Agreement also includes an annual Licensor Fee of 5% of the annual Gross Revenues, which will begin after the Procurement Fees have been paid in full. The Company has determined that they do not hold the controlling financial interest in the Dispensary and are not the primary beneficiary, and therefore will not consolidate the Dispensary in their financial statements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Medbox, Inc. and its wholly owned subsidiaries: • Prescription Vending Machines, Inc., a California corporation, d/b/a Medicine Dispensing Systems in the State of California (“MDS”), which distributes our Medbox™ product and provides related consulting services described further below. • Vaporfection International, Inc., a Florida corporation through which we distribute our medical vaporizing products and accessories. • Medbox Property Investments, Inc., a California corporation specializing in real property acquisitions and leases for dispensaries and cultivation centers. • MJ Property Investments, Inc., a Washington corporation specializing in real property acquisitions and leases for dispensaries and cultivation centers in the state of Washington. • Medbox Management Services, Inc., a California corporation specializing in providing management oversight and compliance services to state-licensed dispensaries for cultivation, dispensing, and marijuana infused products (MIPS). • EWSD I, LLC, an Arizona corporation that owns property in Colorado. All intercompany transactions, amounts and balances 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 (“U.S. GAAP”) 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. Basis of Presentation The accompanying unaudited interim financial statements and related notes have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission for Interim Reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. The results for the three and nine months ended September 30, 2015 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period. The accompanying unaudited interim financial statements and the information included under the heading “Management’s Discussion and Analysis or Plan of Operation” should be read in conjunction with our company’s audited financial statements and related notes included in our company’s Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 26, 2015. The condensed consolidated balance sheet data as of December 31, 2014 was derived from audited consolidated financial statements. The Company has performed a review of all subsequent events through the date the unaudited interim financial statements were issued, and has determined that no additional disclosures are necessary. Concentrations of Credit Risk The Company maintains cash balances at several financial institutions in California, Illinois, and Florida. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015 and December 31, 2014, the Company’s uninsured balances totaled $22,504 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. Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred. The Company incurred advertising and marketing costs of approximately $0 and $319,000 for the three months ended September 30, 2015 and 2014, respectively and approximately $0 and $749,000 for the nine months ended September 30, 2015 and 2014, respectively. Fair Value of Financial Instruments Pursuant to ASC No. 825, Financial Instruments 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 5). The Company has estimated the fair market value of the embedded derivative of the Notes based on a weighted probability model. 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, and various estimated reset exercise prices allocated by probability. 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 in Active Markets for Identical Assets or Liabilities (Level 1) Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2015 Marketable securities $ 94,817 $ 21,650 $ — $ 73,167 Derivative liability 4,885,286 — — 4,885,286 Total $ 4,980,103 $ 21,650 $ — $ 4,958,453 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, 2015 Total Balance at January 1, 2015 $ 3,691,853 Additions 5,531,201 Reclassified to equity upon conversion (3,828,711 ) Change in fair value of conversion feature (509,057 ) Ending balance $ 4,885,286 Revenue Recognition We enter into transactions with clients who require our expertise and are interested in being granted the right to have us engage exclusively with them in certain territories (which we describe as territory rights) to obtain the necessary licenses to operate a dispensary or cultivation center for the location, and to consult in daily operations of the dispensary or cultivation center. Terms for each deal are varied and the sales arrangements typically include the delivery of our dispensing technology and dispensary location build-out and/or consultation on the location, licensing, build out and operation of a cultivation center. Medbox machines retail for approximately $50,000 for each machine set (including the POS system), and normally our contracts include the sale of the dispensary units within the scope of options to be provided that might also include location build out costs. Currently, our standard contracts have a five year term, call for an upfront, non-refundable consulting fee, and contain options including acquiring a Medbox dispensary machine and having the Company perform the buildouts for the location, at set prices. The Company has determined these optional purchases each constitute a separate purchasing decision, and therefore are considered a separate arrangement for revenue recognition purposes. Revenue on each of these options are evaluated for recognition when and if the customer decides to enter into the arrangement. Based on these contracts, and other auxiliary agreements, our current revenue model consists of the following income streams: Consulting fee revenues and build-outs Consulting fee revenues is a consistent component of our current and anticipated future revenues and is negotiated at the time we enter into a contract. Consulting revenue consists of providing ongoing consulting services over the life of the contract, to the established business in the areas of regulatory compliance, security, operations and other matters to operate the dispensary. The majority of the consulting fees arise from the upfront, non-refundable consulting fee in our standard contract, and is recognized using the straight line method over the life of the contract. Consulting fee 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. Revenue for the build-outs of the dispensary or cultivation center, if the customer chooses to have it performed by the Company, is recognized after issuance of a certificate of occupancy for the newly completed facility. This consists of a complete interior build-out of the retail store front including necessary construction (not to include installation of plumbing, electrical, HVAC systems and masonry), furniture fixtures and security system. Due to the uncertainties inherent in the emerging industry, the Company deferred recognition of revenue for sale of completed dispensaries with licenses until the issuance of a certificate of occupancy by the municipality. The certificate of occupancy is the final approval to open a dispensary in the customer’s community, at which time all criteria for revenue recognition, including delivery and acceptance, has been met. Additionally, at the time of the issuance of the certificate of occupancy, under the contract terms, all payments owed by the customer have been received by the Company. Similarly, recognition of revenue for sale of completed cultivation center is deferred until all licensing and permitting is completed and approved. Unbilled costs and associated fees related to the build-outs are recorded in inventory and are subject to valuation testing at each quarter end for net realizable value (lower of cost or market) and collectability. Other revenue includes sales of territory, location, and management rights The Company at times enters into specific contracts to assign exclusive location and management rights, for a dispensary, that the Company has been granted through a license approved by local authorities. These rights are transferred under a management rights agreement to an operator for retail, dispensary, or cultivation centers. The Company also has one agreement with a related party in which they granted the related party the exclusive rights to a certain territory. Other 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. In the sale of the territory rights to the related party, the revenue is being recognized over the term of the agreement. Revenues on VII product sales. Revenue from referral fees. Cost of Revenue 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 fulfilment, shipping, inventory storage and inventory management costs. Inventory Inventory is stated at the lower of cost or market value. Cost is determined on a cost basis that approximates the first-in, first-out (FIFO) method. Work in process and related capitalized costs includes costs to build out a dispensary in Portland Oregon that opened in the second quarter of 2015. Costs include tenant improvements to the facility, furniture, fixtures and Medbox dispensary units to be used by the licensed operator. The costs related to the Portland dispensary have been classified in deferred costs until the related revenue is recognized. Basic and Fully Diluted Net Income/Loss Per Share Basic net income/loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the effects of any outstanding options, warrants and other potentially dilutive securities. The Company did not consider any potential common shares in the computation of diluted loss per share for the three and nine months ending September 30, 2015 and 2014, due to the net loss, as they would have an anti-dilutive effect on EPS. As of September 30, 2014, the Company had 3,000,000 shares of Series A preferred stock outstanding with par value of $0.001 that could have been converted into 15,000,000 shares of the Company’s common stock. On August 24, 2015, 2 million shares of Series A preferred stock was cancelled, leaving 1 million shares outstanding at September 30, 2015 . Additionally the Company has approximately 14,084,000 warrants to purchase common stock outstanding as of September 30, 2015. The Company also has approximately $4,994,000 in convertible debentures outstanding at September 30, 2015, whose underlying shares were not included that are convertible at the holders’ option at a conversion price of the lower of $0.75 or 51% of the VWAP over the last 40 days prior to conversion (subject to reset upon a future dilutive financing). Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC No. 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. An IRS audit is still open on the year ended December 31, 2011, in which the Company received a notice of deficiency for the amount of approximately $60,000. The Company is in discussions with the IRS to set up a payment plan for the amount owed. 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. Going Concern The accompanying unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has an accumulated deficit of approximately $47,199,000 as of September 30, 2015. During the nine months ended September 30, 2015, the Company had a net loss of approximately $25,120,000, negative cash flow from operations of approximately $6,124,000 and negative working capital of approximately $15,685,000. The Company will need to raise capital in order to fund its operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement a business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. On August 14, 2015 and August 20, 2015, the Company entered into two Securities Purchase Agreements with two separate investors, in the aggregate principal amount of up to approximately $5,480,000 (collectively the “August 2015 Debentures”), of which approximately $2,729,000 was funded during the third quarter of 2015, with up to a remaining $2,751,000 still to be funded. Management is actively seeking additional financing and expects to complete additional financing arrangements in the next few months. The Company expects that these plans will provide it the necessary liquidity to continue operations for the next 12 months. To address its financing requirements, the Company will continue to execute on its business model by attempting to raise additional capital through the sales of debt or equity securities or other means. It is uncertain the Company can obtain financing to fund operating deficits until profitability is achieved. This need may be adversely impacted by: uncertain market conditions, approval of sites and licenses by regulatory bodies and adverse operating results. The outcome of these matters cannot be predicted at this time. Recent Accounting Pronouncements In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods for public business entities beginning after December 15, 2017, including interim periods within that reporting period. The new standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor determined the effect of the standard on its ongoing financial reporting. |
Asset Acquisition
Asset Acquisition | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Asset Acquisition | NOTE 3 – ASSET ACQUISITION On July 24, 2015, the Company entered into an Agreement of Purchase and Sale of Membership Interest (the “Acquisition Agreement”) with East West Secured Development, LLC (the “Seller”) to purchase 100% of the membership interest of EWSD I, LLC (“EWSD”) which has entered into an agreement with Southwest Farms, Inc. (“Southwest”) to purchase certain real property comprised of 320-acres of agricultural land in Pueblo, Colorado (the “Acquired Property” or “the Farm”). The purchase price to acquire EWSD consisted of (i) $500,000 paid by the Company as a deposit into the escrow for the Acquired Property, and (ii) the Company’s future payments to Seller of a royalty of 3% of the adjusted gross revenue, if any, from operation of the Acquired Property (including sale of any portion of or interest in the Acquired Property less any applicable expenses) for the three-year period beginning on January 1, 2016. Such royalty payments shall be payable 50% in cash and 50% in Company common stock (the “Royalty Payment”). The Company determined that the royalty payments could not be estimated at the time of acquisition, and therefore the contingent payments have not been recognized as part of the acquisition price. The contingent consideration will be remeasured to fair value each subsequent period until the contingency is resolved, in this case, for the three year period beginning on January 1, 2016, with any changes in fair value recognized in earnings. Per the terms of the agreement, the closing is deemed to have occurred when the Special Warranty Deed is recorded (which occurred on August 7, 2015), all terms of the purchase agreement for the Farm have been complied with, including the Farm closing, which also took place on August 7, 2015. Therefore the acquisition date has been determined to be August 7, 2015. There were no assets or liabilities of EWSD on the acquisition date. In connection with EWSD’s purchase of the Acquired Property, EWSD entered into a secured promissory note (the “Note”) with Southwest in the principal amount of $3,670,000. Interest on the outstanding principal balance of the Note shall accrue at the rate of five percent per annum. The Note shall be payable by EWSD in thirty-five payments of principal and interest, which shall be calculated based upon an amortization period of thirty years, commencing on September 1, 2015 and continuing thereafter on the first day of each calendar month through and including July 1, 2018; and one final balloon payment of all unpaid principal and accrued but unpaid interest on August 1, 2018. The Note is secured by a deed of trust, security agreement, assignment of rents and financing statement encumbering the Acquired Property. In connection with the closing (the “Closing”) on the Farm, EWSD also entered into an unsecured promissory note (the “Unsecured Note”) with the Seller, in respect of earnest money payments previously made by Seller to Southwest, in the principal amount of $830,000. Interest on the outstanding principal balance of the Unsecured Note shall accrue at the rate of six percent per annum. The Unsecured Note shall be payable by EWSD in thirty-five payments of principal and interest, which shall be calculated based upon a hypothetical amortization period of thirty years, commencing on September 1, 2015 and continuing thereafter on the first day of each calendar month through and including July 1, 2018; and one final balloon payment of all unpaid principal and accrued but unpaid interest on August 1, 2018. The balance owing on the two notes is $4,485,763 as of September 30, 2015. Principal payments due on the notes are as follows: Secured Unsecured Total 2015 $ 8,851 301,658 310,509 2016 54,691 27,299 81,990 2017 58,007 30,635 88,642 2018 3,536,670 467,952 4,004,622 Current maturities related to these notes as presented on the accompanying Balance Sheet, amount to $378,278. The Closing occurred on August 7, 2015, as a result of which the Company, through its new, wholly-owned subsidiary, EWSD, became the owner of the Acquired Property. The Company has determined that the Acquired Property is an acquisition of assets and does not constitute a business. Prior to its acquisition by the Company, the Acquired Property was leased to a farmer who cultivated corn on 150 of its 320 acres. The Company intends to engage an independent contractor to manage the operations and hire its own new staff to initially cultivate hemp on the Acquired Property. No employees of the former farm will work in the new operation. The new operation will have an entirely new customer base, sales force and marketing plan as well as new production techniques and a new trade name. Management has determined that the purchase of the Acquired Property and planned operations do not constitute continuation of the prior business and therefore it does not meet the criteria for a business acquisition. The Acquired Property was determined to have a fair value of $5,000,000, based on the $500,000 cash payment and the amounts due under the Secured and Unsecured notes for its purchase from third parties. The purchase price is comprised of: Cash deposit $ 500,000 Note Payable to Southwest 3,670,000 Note Payable to EWSD (Seller) 830,000 $ 5,000,000 The assets acquired included various buildings that were on the land. The Company did not acquire the Farm to obtain or use these buildings, and are replacing two of the buildings with new buildings that will better suit the Company’s planned operations, and renovating the greenhouses to also better serve the Company’s planned operations. The buildings which remain are a mechanics shop and a processing building, which the Company will utilize as is. The fair value of these two buildings has been determined to be $55,000. Therefore the purchase price has been allocated $4,945,000 to Land and $55,000 to Buildings and structures (included in Property and equipment on the accompanying Balance Sheet). |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 4 – INVENTORIES 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, 2015 and December 31, 2014 consist of the following: September 30, 2015 December 31, 2014 Work in process and related capitalized costs $ — $ 308,867 Deposits on dispensing machines — 325,973 Vaporizers and accessories 187,844 154,930 Dispensing machines — 171,466 Total inventory, net $ 187,844 $ 961,236 On May 4, 2015, AVT, Inc., the manufacturing partner of the Company, announced that they had commenced a voluntary filing for restructuring and court protection under Chapter 11 of the United States Bankruptcy Code. Dispensing machines and Deposits on dispensing machines noted in schedule above are with AVT. Additionally, during the second quarter of 2015, the Company completed a strategic review of the Medbox machines and concluded that they would take a reduced role in future marketing efforts. As a result of the strategic review, the Company evaluated the inventory and the related deposits in connection with reduced demand and concluded a write down of both assets was required. The bankruptcy of the manufacturing partner further complicates the process to convert the inventory and advances to cash and therefore is an additional factor in the decision to write down the inventory and record a valuation reserve against the deposits. During the three months ended September 30, 2015, the Company ended negotiations with the supplier and bankruptcy counsel advised that collection of deposits and availability of inventory from the supplier was unlikely. Accordingly, the remaining deposit and inventory valued at $142,500 were written off. Work in process and related capitalized costs includes costs to build out a dispensary in Portland, Oregon that opened in the second quarter of 2015 (Note 1). The costs related to the Portland dispensary have been classified in deferred costs until the related revenue is recognized. |
Convertible Notes Payable and D
Convertible Notes Payable and Derivative Liability | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable and Derivative Liability | NOTE 5 – 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 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, were 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 Debentures. The Registration statement was withdrawn and terminated in December 2014, and a new registration statement was filed on April 9, 2015. The July 2014 Debentures bear interest at the rate of 10% per year. The debt is due July 21, 2015, with the original agreement calling for amortization payments, 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 eight 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 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 Debentures. The September 2014 Debentures bear interest at the rate of 5% per year. The debt is due September 19, 2015, and the original agreement called for amortization payments, including accrued principal and accrued interest, due in nine monthly installments, commencing the fourth month after issuance. Both the original July 2014 Purchase Agreement Debentures and September 2014 Debentures prior to subsequent amendment, share the following significant terms: 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. The Notes were 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 is lower than the Fixed Conversion Price, then the conversion price will be reduced to equal such price. The Company may make the amortization 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. 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. Through subsequent modifications of the July 2014 Debentures and September 2014 Debentures, the required date to file the registration statement and the effective date of the registration statement have been changed to April 15, 2015 and July 15, 2015, respectively. The registration statement was filed on April 9, 2015, and became effective on June 11, 2015. The conversion feature of the July 2014 Debenture and the September 2014 debenture meets the definition of a derivative and due to the reset provision to occur upon subsequent sales of securities at a price lower than the fixed conversion price, requires bifurcation and is accounted for as a derivative liability. The derivative was initially recognized at its estimated fair value of approximately $1,885,000 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 is measured and recognized at fair value each subsequent reporting period and the changes in fair value are recognized in the Statement of Operations as Change in fair value of derivative liability. For the nine months ended September 30, 2015 the Company recognized a gain on the change in fair value of derivative liabilities of approximately $509,000 (including the change in fair value related to the new convertible debentures issued in the first, second and third quarters of 2015 discussed below). See Note 2 Fair value measure for additional information on the fair value and gains or losses on the embedded derivative. On January 30, 2015, the Company and the Investors entered into an Amendment, Modification and Supplement to the Purchase Agreement (the “Purchase Agreement Amendment” or the “Modification”) pursuant to which the Investors agreed to purchase an additional $1,800,000 in seven Modified Closings: (1) $200,000 was funded at the Closing of the Purchase Agreement Amendment; (2) $100,000 to be funded within thirty (30) days of the Closing; (3) $100,000 to be funded within two days following the filing of a registration statement with the SEC to register the shares underlying the Debentures (the “Registration Statement”) and of the Company having filed with the SEC a restatement of the Company’s consolidated financial statements as described in the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2014; (4) $100,000 to be funded within two days of receipt of the first comment letter from the SEC with regard to the Registration Statement; (5) $500,000 to be funded within two days of the date that the Registration Statement is declared effective by the SEC; (6) $500,000 to be funded within five days of the date that the Registration Statement is declared effective by the SEC; and (7) $100,000 to be funded within each of 90, 120, 150, and 180 days from the Closing of the Purchase Agreement Amendment. The Modification also eliminated the amortization payments discussed above, and provided for accrued and unpaid interest to be payable upon conversion or maturity rather than on specified payment dates. The Company is also required to open a new dispensary in Portland, Oregon during the first calendar quarter of 2015(which was later modified to April 30, 2015). The Company must also file the Registration Statement by March 8, 2015 (later amended), and it must be declared effective by June 15, 2015 in order to avoid default and acceleration under the Amended and Restated Debenture. As noted above, the Registration Statement was filed on April 9, 2015, and became effective June 11, 2015. On March 13, 2015 the Company and the Investors entered into a further amendment (“March 2015 Amendment”) to the July 21, 2014, 10% Convertible debentures, as amended January 30, 2015, whereby the reset of the fixed conversion rate to $1.83 caused by recent dilutive issuances was reiterated for all previously issued notes. In addition, the March 2015 Amendment modified the opening date of the Portland, Oregon dispensary to be April 30, 2015. Neither of these modified terms had an impact on the accounting treatment of the Debentures. The July 2014 financing was further modified on March 23, 2015. The closing dates of the financing were again modified, investments by two members of the Board of Director’s (“Board”) was required, and the deadline for filing of the registration statement was changed to no later than April 15, 2015, and its effective date to no later than July 15, 2015. Neither of these modified terms had an impact on the accounting treatment of the Debentures. On April 9, 2015, the Company and their investors entered into an Amendment, Modification and Supplement to the July 2014 convertible debenture, which amends the closings as set forth in the March 23, 2015 Modification, to increase the amounts due in the third tranche, due two days after the filing of the Registration Statement, to $450,000. On January 28, 2015, the Company and the Investors entered into an Amendment, Modification and Supplement to the September 2014 Debenture, pursuant to which the remaining $1,500,000 will be funded in four Modified Closings as set forth in the agreement, and contains other modifications with the same terms as was contained in the January 30, 2015 Modification. The Company considered if the above modifications should be accounted for as an extinguishment or modification of the existing debt. The Company first evaluated if the modification of terms could be considered a troubled debt restructuring, but the modification did not meet the criteria as the Investors did not grant a concession to the Company for economic or legal reasons related to any financial difficulties of the Company. The majority of the modifications related to deadlines being extended for certain required events. The only financial modification was to revise the payment schedule on the Debentures to eliminate the amortization payments and instead require all to be due at maturity. The Company concluded this is not regarded as a concession as it is not the forgiveness of any interest payments, nor reduction of principal, nor change to the maturity date. Therefore, the modification of the terms was evaluated to determine if the changes in the Debentures’ future cash flows were in excess of 10% and considered substantial, which would require the Debentures to be accounted for as extinguished and replaced with new debt. As the modification resulted in a less than 10% estimated change in future cash flows, the Company concluded that the modification of the terms of the July 2014 and September 2014 Debentures was to be accounted for as a modification of the existing Debentures. As part of the January 30, 2015 Modification, the Parties entered into a Modified Debenture Agreement for the $200,000 that was funded at the Closing and agreed to use the same form of Modified Debenture for each of the other foregoing Modified Closings (collectively, the “Modified Debentures”). The fixed conversion price of the Modified Debenture was the lower of $5.00 or 51% of the lowest volume weighted average price for the 20 consecutive trading days prior to the applicable conversion date. This new fixed conversion price was a dilutive issuance to the outstanding July 2014 and September 2014 Debentures, thereby triggering a reset of the older fixed conversion price. As a result of the reset to the conversion price, at January 30, 2015, the derivative liability was remeasured to a fair value of approximately $2,690,000, using a weighted probability model as estimated by management. A decrease in fair value of the derivative liability of approximately $1,072,000 was recognized as a gain on the Statement of Consolidated Comprehensive Loss in the nine months ended September 30, 2015. The additional Modified Debentures under the July 2014 Debentures closed on February 27, 2015 in the amount of $100,000, March 13, 2015 in the amount of $50,000, March 16, 2015 in the amount of $25,000, March 20, 2015 in the amount of $75,000 and on March 26, 2015 in the amount of $150,000. All these Modified Debentures have a fixed conversion price of the lower of $1.83 or 51% of the VWAP for the last 20 days prior to the conversion. This new fixed conversion price was a dilutive issuance to the outstanding July 2014 and September 2014 Debentures, thereby triggering a reset of the previous $5 fixed conversion price. This reset resulted in the derivative liability being revalued at February 27, 2015, using a weighted probability model for a fair value of $2,720,000, for a decrease in fair value of approximately $334,000, recognized as a gain on the Statement of Consolidated Comprehensive Loss. The additional Modified Debentures under the September 2014 Debentures closed on January 29, 2015 in the amount of $100,000 and February 24, 2015 in the amount of $100,000. These Modified Debentures have a fixed conversion price of the lower of $5.00 or 51% of the VWAP for the last 20 days prior to the conversion. This new fixed conversion price was a dilutive issuance to the outstanding July 2014 and September 2014 Debentures, thereby triggering a reset of the previous $5.00 fixed conversion price. The resulting reset and remeasurement of the fair value of the derivative liability is included in the amounts of the change to fair value discussed above. The additional fundings of the July 2014 Modified Debentures under the closing schedule detailed above resulted in $2,811,500 being received during the second quarter. The first $300,000 had a fixed conversion price of the lower of $1.83 or 51% of the VWAP for the last 40 days prior to the conversion. The April 17, 2015 closing contained a fixed conversion price of the lower of $0.88 or 51% of the VWAP for the last 40 days prior to the conversion. This new fixed conversion price was a dilutive issuance to the outstanding July 2014 and September 2014 Debentures, thereby triggering a reset of the previous $1.83 fixed conversion price. This reset resulted in the derivative liability being revalued at April 17, 2015, using a weighted probability model for a fair value of $3,287,000, for a increase in fair value of approximately $1,764,000, recognized as a loss on the Statement of Consolidated Comprehensive Loss during the second quarter of 2015. There was additional funding of $1,300,000 of the September 2014 Modified Debentures under the closing schedule detailed above. These Modified Debentures all have a fixed conversion price of the lower of $0.88 or 51% of the VWAP for the last 40 days prior to the conversion. The Directors’ convertible debentures required under the March 23, 2015 Modification, issued in the first quarter of 2015, total $150,000, and have a three year term and an interest rate of 8% per annum. They were originally convertible at a fixed conversion price of the lower of $1.83 or 51% of the VWAP for the last 20 days prior to conversion. As with the Modified Debentures, the debentures included a reset provision, which resulted in the conversion feature being bifurcated and accounted for as a derivative liability, with an initial fair value of $132,175. The director’s convertible debentures also reset on February 27, 2015 and April 17, 2015, with the changes to fair value included in the amounts disclosed above. The Modified Debentures also included a warrant instrument granting the Investor the right to purchase shares of common stock of the Company equal to the principal amount of the applicable Modified Debenture divided by a price equal to 120% of the last reported closing price of the Common stock on the applicable closing date of the Modified Debenture, with a three year term. The warrants issued in the nine months ended September 30, 2015 in connection with all the Modified Debentures detailed above, and the August 2015 Securities Purchase Agreement (“August 2015 Debentures”) discussed below, are summarized below: Date issued Number of warrants Exercise price Fair Value July 2014 Modified Debentures January 30, 2015 40,552 $ 4.93 $ 159,601 February 26, 2015 45,537 2.20 79,904 March 13, 2015 21,151 2.36 39,965 March 16, 2015 10,575 2.36 19,981 March 20, 2015 41,946 1.79 59,942 March 27, 2015 75,758 1.98 119,888 April 2, 2015 60,386 1.66 74,025 April 2, 2015 30,193 1.66 37,012 April 10,2015 107,914 1.39 112,460 April 17,2015 41,667 1.20 37,680 April 24,2015 127,119 1.18 112,635 April 24, 2015 21,186 1.18 18,772 May 1, 2015 156,250 .96 113,133 May 7, 2015 134,615 .78 79,234 May 8, 2015 42,000 .75 23,768 May 15, 2015 200,000 .75 113,365 May 22, 2015 250,000 .60 113,366 May 29, 2015 258,621 .58 112,537 June 5, 2015 288,462 .52 120,738 June 12, 2015 930,233 .43 303,246 June 19, 2015 3,448,276 .29 751,159 September 2014 Modified Debentures January 28, 2015 18,038 5.54 80,156 February 13, 2015 57,870 1.73 96,689 April 2, 2015 181,159 1.66 222,109 April 24, 2015 90,579 1.10 80,548 May 15, 2015 200,000 .75 113,365 June 12, 2015 1,744,186 .43 570,248 August 2015 Debentures August 24, 2015 6,666,667 .06 321,757 September 18, 2015 588,235 .17 82,804 Directors January 5, 2015 129,305 .40 39,901 January 30, 2015 129,250 .40 39,916 February 2, 2015 237,778 .22 16,619 Total $ 16,375,508 $ 4,266,522 The Company determined that the warrants were properly classified in equity as there is no cash settlement provision and the warrants have a fixed exercise price and therefore result in an obligation to deliver a known number of shares. Effective September 18, 2015, the holder of the September 2014 Debentures and the Company agreed to amend its September 2014 Warrants, to reduce the exercise price of the warrants to purchase an aggregate of 2,291,832 shares of the Company’s common stock to six cents per share. The holder agreed to exercise in full those warrants in cash within three trading days of the filing with the SEC of a Form 8-K, which occurred on September 18, 2015. During the three months ended September 30, 2015, approximately 2,292,000 warrants were exercised. Effective September 18, 2015, the holder of the July 2014 Debentures and the Company agreed to amend its July 2014 Warrants, to reduce the exercise price of the warrants to purchase an aggregate of 6,332,441 shares of Common Stock to six cents per share. The holder agreed to exercise in full those warrants in cash within three trading days of the filing with the SEC of a Form 8-K, which occurred on September 18, 2015. As of September 30, 2015 the warrants have not yet been exercised, and will be upon the finalization of the increase in authorized shares (Note 8). As a result of the conversion feature being bifurcated and recognized as a derivative liability, the Company evaluated the warrants and determined that they have a sufficient number of authorized and unissued shares as of September 30, 2015, after consideration of the subsequent increased authorized shares, (See Note 10), to settle all existing commitments. The Company adopted a sequencing policy that reclassifies contracts, with the exception of stock options, from equity to assets or liabilities for those with the earliest inception date first. Future issuance of securities will be evaluated as to reclassification as a liability under our sequencing policy of earliest inception date first until either all of the convertible debentures are converted or settled. During the nine months ended September 30, 2015, $4,420,000 principal of the July 2014 Debentures and $1,710,000 principal and approximately $49,000 accrued interest of the September 2014 Debentures, and $150,000 principal of the Directors debentures, in addition to approximately $49,000 accrued interest were converted into approximately 67,475,000 of the Company’s common shares at an average price of $0.09, based on 51% of the calculated VWAP. Upon conversion, the derivative fair value for the amounts converted were remeasured through the date of conversion, with the conversion date fair value reclassified to equity, amounting to $4,519,000 in the nine months ended September 30,2015. As a result of the conversions, the resulting decrease of fair value of approximately $1,730,000 of the related debt discount was recognized on the Statement of Consolidated Comprehensive Loss. August 2015 Debentures On August 14, 2015, the Company entered into a Securities Purchase Agreement whereby the Company agreed to issue convertible debentures in the aggregate principal amount of up $3,979,877. The initial closing in the aggregate principal amount of $650,000 occurred on August 14, 2015. An additional 5 payments were made in the total amount of $1,078,880 through September 30, 2015. The seventh tranche in the amount of $250,000 will occur 8 days after the filing of a registration statement filed by the Company for the resale of the shares of common stock issuable upon conversion of the August 2015 Debentures, the eighth tranche in the amount of $1,250,000 will occur within 3 business days of the effective date of the registration statement and the ninth tranche, in the amount of $750,000 will occur within 7 business days of the effective date of the registration statement. The August 2015 Debentures bear interest at the rate of 10% per year. On August 20, 2015, the Company also entered into a Securities Purchase Agreement with another investor, in the aggregate principal amount of up to $1,500,000 (collectively the “August 2015 Debentures”), which was amended on September 19, 2015, to increase the principal by an additional $200,000. Through September 30, 2015, two tranches totaling $500,000 have been funded. A third tranche in the amount of $500,000 (after amendment) is to occur within two days after the filing of a registration statement, with the fourth tranche in the amount of $700,000 to occur within 2 days of the effective date of the registration statement. The August 2015 Debentures contain the following significant terms: The debentures all mature in one year from the date of each individual closing. 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 fixed conversion price. The conversion price is the lower of (a) $0.75, or (b) a 49% discount to the lowest daily VWAP (as reported by Bloomberg) of the Common Stock during the 30 trading days prior to the conversion date. 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 is lower than the Fixed Conversion Price, then the conversion price will be reset to equal such price. The Company may prepay the Debentures in cash, prompting a 30% premium or, subject to certain conditions, in shares of common stock valued at 51% of the lowest volume weighted average price of the common stock for the 30 prior trading days. The premium will be recognized at such time as the Company may choose to prepay the Debentures. 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 pre-effective registration statement was filed with the SEC on October 16, 2015. The conversion feature of the August 2015 Debenture meets the definition of a derivative and due to the reset provision to occur upon subsequent sales of securities at a price lower than the fixed conversion price, requires bifurcation and is accounted for as a derivative liability. The derivative was initially recognized at its estimated fair value of approximately $2,345,000 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 is measured and recognized at fair value each subsequent reporting period and the changes in fair value are recognized in the Statement of Operations as Change in fair value of derivative liability (discussed above). See Note 2 Fair value measure for additional information on the fair value and gains or losses on the embedded derivative. The debenture entered into with the second investor on August 20, 2015 included a warrant instrument granting the Investor the right to purchase shares of common stock of the Company equal to the principal amount of the applicable Debenture divided by a price equal to 120% of the last reported closing price of the Common stock on the applicable closing date of the Debenture, with a three year term. During the three months ending September 30, 2015, there were 7,254,902 warrants issued, with a fair value of $404,561, calculated with the Black Sholes Merton model. There were no conversions of the August 2015 Debentures during the three months ended September 30, 2015. Entry into Security Agreement In connection with entry into the August 20 Purchase Agreement and August 14 Purchase Agreement, the investors party to such agreements and the Company entered into a Security Agreement, dated August 21, 2015, securing the amounts underlying the August 14 Debentures and the August 20 Debentures. The Security Agreement grants a security interest in all assets and personal property of the Company, subject to certain excluded real property assets. The security interests under the Security Agreement shall terminate following the date the registration statement is declared effective. July 2015 Debenture On July 10, 2015, another accredited investor (the “July 2015 Investor”) purchased a separate Convertible Debenture (the “July 2015 Debenture”) in the aggregate principal amount of $500,000, that closed in five weekly tranches between July 10 and August 15, 2015. The July 2015 Debenture is in substantially the same form as the August 14 Debentures, and does not include issuance of warrants . As such, the conversion feature was also determined to require bifurcation, and derivative accounting. All amounts related to the July 2015 derivative liability are included in amounts disclosed above for the August 2015 debentures. On October 14, 2015, the August 14 Investor assigned the right to purchase August 14 Debentures in the principal amount of $100,000 to the July 2015 Investor and the July 2015 Investor purchased such August 15 Debentures on the same day. |
Share Based Awards, Restricted
Share Based Awards, Restricted Stock and Restricted Stock Units ("RSUs") | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share Based Awards, Restricted Stock and Restricted Stock Units ("RSUs") | NOTE 6 – SHARE BASED AWARDS, 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 fair value of the awards, as determined on grant date, was $711,500 which wss being amortized over the CEO’s one year service period. On June 30, 2015, Guy Marsala, President, Chief Executive Officer, and director of the Company, tendered his resignation as President and Chief Executive Officer of the Company and as a director on the Company’s board, effective immediately (Note 9). The remaining value of Mr. Marsala’s grants was recorded as expense in the second quarter of 2015. In connection with Mr. Marsala’s separation agreement approximately 2,580,000 options with a 10 year term were granted at an exercise price of $0.13. The fair value of $335,117 was calculated using the Black Sholes Merton model, and was immediately expensed. On August 21, 2014, the Compensation Committee of the Board 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 vested over the remaining first year of the new Board members’ term ending on March 31, 2015. The fair value of the grant was 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. During October 2014, the Compensation Committee of the Board granted 19,452 RSU’s to a new Board member who was elected to the Board on October 22, 2014. The Board member’s contract calls for grants of 100,000 RSU’s for each succeeding year of service beginning on April 1, 2015, which vest quarterly. On September 24, 2015, the same Board member resigned from her positions as a member of the board of directors of the Company, chairperson of the Company’s audit committee and a member of its special committee, effective immediately. Stock compensation expense for this director in the second and third quarter was $353,000 and $197,000, respectively, which completes recognition of stock compensation expense for her service. The remaining 50,000 unvested RSU’s were forfeited upon her resignation. On February 10, 2015, the Compensation Committee of the Board granted 100,174 RSU’s to certain officers and employees of the Company as for retention and bonuses. The grant date fair value of the RSU’s was approximately $114,000. The RSU’s vest every six months through December 31, 2016. The fair value of the grant is being amortized over the period from the date of grant, February 10, 2015 through the vesting dates in six month increments. On January 15, 2015, the Board granted 75,000 RSUs to a consultant, which vest in 25,000 installments quarterly through July 15, 2015, beginning with 25,000 which vested immediately on the grant date. The grant date fair value of the RSU’s was approximately $450,000. On May 11, 2015, the Board granted 38,600 RSUs to various officers and employees, which vested immediately on the grant date. The grant date fair value of the RSU’s was approximately $20,000, which was immediately expensed. On May 11, 2015, the new CEO (Note 9) was awarded 196,078 RSUs in connection with his retention agreement. The grant date fair value of the RSU’s was approximately $100,000. The RSUs vest quarterly through May 11, 2016. On August 26, 2015, the Board granted 79,917 RSUs to various officers and employees, which vested immediately on the grant date. The grant date fair value of the RSU’s was approximately $12,000, which was immediately expensed. On August 31, 2015, the Board granted 156,250 RSUs to the CFO of the Company, which vested immediately on the grant date. The grant date fair value of the RSU’s was approximately $25,000, which was immediately expensed. A summary of the activity related to restricted stock and RSUs for the nine months ended September 30, 2015 is presented below: Restricted stock Total shares Grant date fair value Restricted stock non-vested at January 1, 2015 168,750 $ 10.40 Restricted stock granted 150,000 — Restricted stock vested (206,250 ) 10.40 Restricted stock forfeited — — Restricted stock non-vested at September 30, 2015 112,500 $ 10.40 Restricted stock units (RSU’s) Total shares Grant date fair value RSU’s non-vested at January 1, 2015 199,584 $ 10.70 RSU’s granted 698,522 $ 0.51 - $6.07 RSU’s vested (590,502 ) $ 0.51 - $6.07 RSU’s forfeited (50,000 ) RSU’s non-vested September 30, 2015 257,604 $ 0.51 - $10.70 A summary of the expense related to restricted stock, RSUs and stock option awards for the three and nine months ended September 30, 2015 is presented below: Summary of the expense related to Restricted Stock and RSUs For the three months ended September 30, For the nine months ended September 30, Restricted Stock $ 390,000 $ 2,420,782 RSU’s 574,840 2,501,150 Stock options — 335,117 Common stock 74,333 74,333 Total $ 1,039,173 $ 5,331,382 On August 11, 2015, the Compensation Committee, with the Board’s approval, granted the Chairman of the Board a bonus of $371,666. The bonus is to be paid 20% in common stock of Medbox at $.0621 per share (the share price of the Company’s common stock on the date of grant) for a total grant of 1,196,988 shares, issued under the Medbox, Inc. 2014 Equity Incentive Plan. The remainder is to be paid in cash, including $50,000 which was paid in June and July, with the balance in monthly payments of $30,918 from August 2015 to March 2016. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 7 – RELATED PARTY TRANSACTIONS During the year ended December 31, 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 $284,488 outstanding as of June 30, 2014. On October 17, 2014 the Company entered into an assignment agreement with 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. All of the notes and amounts owed under the assignment agreement were repaid in full during the third quarter of 2015. On March 28, 2014, the Company entered into an agreement with a related party for territory rights in Colorado for $500,000. The agreement has a term of five years and in accordance with the Company’s revenue recognition policy, the revenue will be recognized over the five year term. Approximately $350,000 remains in deferred revenue as of September 30, 2015. 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. |
Stockholder's Equity
Stockholder's Equity | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Stockholder's Equity | NOTE 8 – STOCKHOLDER’S EQUITY Common Stock Authorized share increase On June 30, 2015, the Board of Directors of the Company and the holders of a majority of the Company’s voting securities approved by written consent an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of the Company’s common stock from 100,000,000 shares to 400,000,000 shares, par value of $0.001 per share. The Company’s Board of Directors approved the increase of authorized capital so that it will have sufficient shares of common stock available for issuance upon the conversion or exercise of currently outstanding convertible debt securities and warrants and for future capital raises. The Company filed a Schedule 14C Information Statement regarding the matter submitted to a vote of their security holders with the Securities and Exchange Commission. The increase of authorized capital approved by the stockholders became effective on October 27, 2015. Change of Control Effective August 24, 2015, Vincent Chase, Incorporated, which is owned by the former CEO of the Company, cancelled without consideration all of its 2 million shares of Preferred Stock and 3 million shares of Common Stock. As a result of this action, neither VM nor any of its affiliates holds a majority of the voting power of the Company, which to the Company’s knowledge is no longer held by a single person or entity or group thereof. For common shares which were issued upon conversion of the convertible debentures during the nine months ended September 30, 2015 see Note 5. During the nine months ended September 30, 2015 the Company issued 1,633,047 shares of its common stock, valued at approximately $365,000 as based on the market price of the common stock on the date of settlement, as a payment of certain accounts payables. In addition, in January, 2015, the Company issued 206,480 of their common stock upon exercise of the warrants held by various previous owners of VII. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 9 – COMMITMENTS AND CONTINGENCIES The Company leases property for its day to day operations and 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. The Company moved to new offices in Los Angeles, CA in April 2015. The sublease on the new office has a term of 18 months and with monthly rent of $7,486. The Company plans to sublease the office in West Hollywood, CA. Total rent expense under operating leases for the three months ended September 30, 2015 and 2014 was approximately $90,000 and $53,000, respectively. Rent expense for the nine months ended September 30, 2015 and 2014 was approximately $211,000 and $157,000, respectively. Retail/Cultivation facility leases The Company’s business model of acquiring retail dispensary and cultivation licenses often requires us 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 the Portland dispensary 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. On July 22, 2014 one of the Company’s subsidiaries Medbox Property Investments, Inc., entered into a new lease for a facility which was to 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 was payable monthly at a rate of $20,000 per month. The lease had a five year term, but was contingent upon license approval which allowed for early termination of the lease after January 1, 2015 if the license was not granted. Due to the fact that the Company was unsuccessful in obtaining the license related to the mentioned facility the lease agreement was terminated in November 2014 and the Company forfeited the security deposit. The following table is a summary of our material contractual lease commitments as of September 30, 2015: Year Ending Office Rent Retail/Cultivation Facility Lease 2015 $ 66,942 $ 22,200 2016 245,310 88,800 2017 88,968 88,800 2018 — 88,800 2019 — 29,600 Total $ 401,220 $ 318,200 Real Estate Commitments Through December 31, 2014 the Company paid $930,000 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 $26,830,000. The real estate purchase agreements had closing dates varying between December 1, 2014 and February 10, 2015. During 2014, the Company entered into numerous real estate contracts to secure locations during the licensing process. The contracts allow the Company to demonstrate to licensing authorities that the locations are available for use as a dispensary or cultivation location. The contracts are generally structured with an escrow deposit, a deferred closing until a license is granted and periodic withdrawals from the deposit to compensate the seller for holding the property off the market in escrow during the pendency of the license application. The periodic transfers out of escrow to the seller are in some cases creditable towards the purchase price but in most cases represent charges in lieu of rent. The charges in lieu of rent and other non-refundable charges paid to property sellers have been recorded as expense of $195,712 for the nine months ended September 30, 2014 in the statement of operations. During the third quarter of 2014, one of the Company’s subsidiaries, MJ Property Investments, Inc., allowed the escrows to expire on two real estate purchase agreements with an aggregate purchase price of $2,500,000. As a result the Company forfeited $100,000 in earnest money due to unfavorable terms demanded by the sellers to extend the escrow and closing date. 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 of 2014 for a total purchase price of $399,594 partially financed by a promissory note for $249,000. The note was due January 30, 2015 and bore interest at twelve percent (12%). The Company did not repay the note on its maturity date, and is therefore is incurring the default interest rate of eighteen percent (18%). The property was classified as Assets held for resale as of December 31, 2014 because the Company’s plan was to sell the property to a third party to hold as a lessor to the operator of the dispensary. (See Note 10, Subsequent Events) On September 30, 2015, the Company, through its subsidiary, entered into an amendment to the Note Payable, whereby the maturity date was extended to April 1, 2017, with the interest at twelve percent (12%). During the nine months ended September 30, 2015 the Company recovered approximately $105,000 and forfeited approximately $280,000 out of escrow deposits outstanding as of December 31, 2014. As of September 30, 2015 the Company has only one open real estate agreement for a property in San Diego with a purchase price of $875,000 and related outstanding deposit of $15,000 Officers On June 30, 2015, Guy Marsala, President, Chief Executive Officer, and director of the Company since July 23, 2014, tendered his resignation as President and Chief Executive Officer of the Company and as a director on the Company’s board, effective immediately. Mr. Marsala confirmed that such resignation is not because of a disagreement with the Company on any matter relating to its operations, policies or practices. In connection with his resignation, the Company and Mr. Marsala entered into a Separation Agreement dated June 30, 2015. Pursuant to the terms of the Separation Agreement, Mr. Marsala is entitled to receive $500,000 in severance pay, payable in equal monthly installments of $30,000, and a grant of options to purchase up to $335,275 of shares of common stock at an exercise price based on the closing price of the Company’s common stock on June 30, 2015, in lieu of any rights under his employment agreement, which was terminated. Chief Operating Officer/Chief Executive Officer On April 22, 2015, the Board of Company appointed Jeffrey Goh as Chief Operating Officer, effective immediately. In connection with his appointment as Chief Operating Officer, Mr. Goh and the Company have agreed that Mr. Goh’s annual base salary will be $300,000, subject to annual increases of between 5% and 7% based upon performance goals and the Company’s financial results. Mr. Goh will be eligible to receive a cash bonus of up to a maximum of $150,000 per year (“Cash Bonus”), plus a bonus grant of restricted stock units convertible into Company common stock up to a maximum of $150,000 per year (“Equity Bonus”). Each of the Cash Bonus and Equity Bonus shall be determined based upon the achievement of performance goals to be mutually agreed upon amongst Mr. Goh and the Board of Directors for the given year. Mr. Goh shall also be entitled to receive an award of 100,000 restricted stock units convertible into Company common stock on each anniversary of the original date of his employment with the Company. In the event that Mr. Goh terminates his employment with or without cause or the Company terminates Mr. Goh’s employment without cause, Mr. Goh shall be entitled to receive a severance payment equivalent to 6, 12, or 18 months of base salary, based upon whether the length of Mr. Goh’s employment with the Company at the time of termination is less than 12 months, greater than 12 months but less than 24 months, or greater than 24 months, respectively. Effective June 30, 2015, Jeffrey Goh, was promoted to President and interim Chief Executive Officer of the Company. Voting Agreement On August 21, 2015, Medbox, P. Vincent Mehdizadeh (“VM”), PVM International, Inc., (“PVM”), and Vincent Chase, Incorporated, (“VC”) (VM, PVM and VC, collectively, the “VM Group”) and each member of the Board of Directors of the Company, namely, Ned Siegel, Mitch Lowe and Jennifer Love, entered into a certain Second Amendment to Voting Agreement, dated August 21, 2015 (the “Second Amendment”) amending in certain respects that certain Voting Agreement dated January 21, 2015 among such parties as previously amended by that certain First Amendment to Voting Agreement (the “First Amendment”) dated August 11, 2015 (collectively, the “Voting Agreement”). Pursuant to the First Amendment, the VM Group previously agreed (i) to extend the Expiration Date of the Voting Agreement from January 20, 2016 to July 20, 2016, provided the Company made certain pre-payments on the remaining $478,877 balance due to PVM on an outstanding promissory note (Note 7), and (ii) to forebear from exercising its rights to appoint a director to the Board of Directors of the Company (under Section 4 of that certain Settlement Agreement dated January 21, 2015 among the Company and the VM Group, the “Settlement Agreement”), until the Expiration Date of the Voting Agreement as extended by the First Amendment. Pursuant to the Second Amendment, the VM Group and the Company: (a) further extended the Expiration Date of the Voting Agreement to July 20, 2018, (b) provided that the Company would make certain accelerated pre-payments on the $328,877 balance under the Note consisting of: (i) three equal payments of principal in the amount of $82,220, together with accrued and unpaid interest, payable on each of August 24, 2015, August 31, 2015 and September 8, 2015, and (ii) one final payment on September 14, 2015 equal to the remaining principal and accrued and unpaid interest due under the Note (the payments have all been paid as of September 30, 2014); (c) provided that the VM Group would forebear from exercising its right to appoint a director to the Board of Directors of the Company (under Section 4 of that certain Settlement Agreement), until the Expiration Date of the Voting Agreement as extended by the Second Amendment; and (d) the VM Group executed, that certain Consent of Stockholders of Medbox, Inc. (the “Consent”) approving the following amendments of the Articles of Incorporation (the “Articles”) of the Company: (i) elimination of the provisions of Section IV of the Articles giving the holders of the Series A Convertible Preferred Stock of the Company (the “Preferred”) disproportionately greater voting rights than the holders of Common Stock and instead providing for the Preferred to have one vote per common share on an as- converted basis voting as a single class with the common shares upon any matter submitted to the stockholders for a vote, and (ii) to eliminate the provisions of Section V of the Articles providing the holders of a majority of the outstanding shares of Preferred the right to approve any corporate action except for: (1) actions which would adversely alter or change the rights, preferences, privileges or restrictions of the Preferred or increase the authorized number thereof, (2) any changes to the terms of the Preferred; (3) creation of any new class of shares having preferences over or being on a parity with the Preferred as to dividends or assets, unless the purpose of creation of such class is, and the proceeds to be derived from the sale and issuance thereof are to be used for, the retirement of all Preferred then outstanding; or, (4) any payment of dividends or other distributions or any redemption or repurchase of options or warrants to purchase stock of the Company, except for repurchases of options or stock issued under an equity incentive plan approved by the Board. Litigation On May 22, 2013, Medbox initiated litigation in the United States District Court in the District of Arizona against three shareholders of MedVend Holdings LLC (“Medvend”) in connection with a contemplated transaction that Medbox entered into for the purchase of an approximate 50% ownership stake in Medvend for $4.1 million. The lawsuit alleges fraud and related claims arising out of the contemplated transaction during the quarter ended June 30, 2013. The litigation is pending and Medbox has sought cancellation due to a fraudulent sale of the stock because the selling shareholders lacked the power or authority to sell their ownership stake in MedVend, and their actions were a breach of representations made by them in the agreement. On November 19, 2013 the litigation was transferred to United States District Court for the Eastern District of Michigan. MedVend recently joined the suit pursuant to a consolidation order executed by a new judge assigned to the matter. In the litigation, the selling shareholder defendants seek alternatively to have the transaction performed, or to have it unwound and be awarded damages and allege breach of the agreement by Medbox and that $600,000 was wrongfully retained by the Company. Medbox has denied liability with respect to any and all such counterclaims. A new litigation schedule was recently issued setting trial for September 2015. On June 5, 2014, the Company entered into a purchase and sale agreement (the “Medvend PSA”) with PVM International, Inc. (“PVMI”) concerning this matter. Pursuant to the Medvend PSA, the Company sold to PVMI the Company’s rights and claims attributable to or controlled by the Company against those three certain stockholders of Medvend, known as Kaplan, Tartaglia and Kovan (the “Medvend Rights and Claims”), in exchange for the return by PVMI to the Company of 30,000 shares of the Company’s common stock. PVMI is owned by Vincent Mehdizadeh, the Company’s largest stockholder. The Company will have the right, under the Medvend PSA, to purchase from PVMI, at any time, the Medvend Rights and Claims, for the consideration provided by PVMI, plus the sum of any of PVMI’s reasonable expenditures incurred in pursuit of the Medvend Rights and Claims. The court has not yet ruled on the substitution of PVMI as plaintiff in this matter. If necessary, the Company plans to vigorously defend against this matter. The case is in the discovery stage, and, at this time, the Company cannot determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can they reasonably estimate a range of potential loss, should the outcome be unfavorable. On February 20, 2015, Michael A. Glinter, derivatively and on behalf of nominal defendants Medbox, Inc. the Board and certain executive officers (Pejman Medizadeh, Matthew Feinstein, Bruce Bedrick, Thomas Iwanskai, Guy Marsala, J. Mitchell Lowe, Ned Siegel, Jennifer Love, and C. Douglas Mitchell) filed a suit in the Superior Court of the State of California for the County of Los Angeles. The suit alleges breach of fiduciary duties and abuse of control by the defendants. Relief is sought awarding damages resulting from breach of fiduciary duty and to direct the Company and the defendants to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law. This action has been stayed pending the outcome of the actions filed in the United States District Court for the District of Nevada (Calabrese and Gray). Due to the early stages of this suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On January 21, 2015, Josh Crystal on behalf of himself and of all others similarly situated filed a class action lawsuit in the U.S. District Court for Central District of California against Medbox, Inc., and certain past and present members of the Board (Pejman Medizadeh, Bruce Bedrick, Thomas Iwanskai, Guy Marsala, and C. Douglas Mitchell). The suit alleges that the Company issued materially false and misleading statements regarding its financial results for the fiscal year ended December 31, 2013 and each of the interim financial periods that year. The plaintiff seeks relief of compensatory damages and reasonable costs and expenses or all damages sustained as a result of the wrongdoing. On April 23, 2015, the Court issued an Order consolidating the three related cases in this matter: Crystal v. Medbox, Inc., Gutierrez v. Medbox, Inc., and Donnino v. Medbox, Inc., and appointing a lead plaintiff. On July 27, 2015 Plaintiffs filed a Consolidated Amended Complaint. The Company must file a responsive pleading on or before December 4, 2015. The Company intends to vigorously defend against these suits. Due to the early stages of the suits the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On January 18, 2015, Ervin Gutierrez filed a class action lawsuit in the U.S. District Court for the Central District of California. The suit alleges violations of federal securities laws through public announcements and filings that were materially false and misleading when made because they misrepresented and failed to disclose that the Company was recognizing revenue in a manner that violated US GAAP. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses or all damages sustained as a result of the wrongdoing. On April 23, 2015, the Court issued an Order consolidating the three related cases in this matter: Crystal v. Medbox, Inc., Gutierrez v. Medbox, Inc., and Donnino v. Medbox, Inc., and appointing a lead plaintiff. On July 27, 2015 Plaintiffs filed a Consolidated Amended Complaint. The Company must file a responsive pleading on or before December 4, 2015. The Company intends to vigorously defend against this suit. Due to the early stages of the suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On January 29, 2015, Matthew Donnino filed a class action lawsuit in the U.S. District Court for Central District of California. The suit alleges that the Company issued materially false and misleading statements regarding its financial results for the fiscal year ended December 31, 2013 and each of the interim financial periods that year. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses or all damages sustained as a result of the wrongdoing. On April 23, 2015, the Court issued an Order consolidating the three related cases in this matter: Crystal v. Medbox, Inc., Gutierrez v. Medbox, Inc., and Donnino v. Medbox, Inc., and appointing a lead plaintiff. On July 27, 2015 Plaintiffs filed a Consolidated Amended Complaint. The Company must file a responsive pleading on or before December 4, 2015. The Company intends to vigorously defend against this suit. Due to the early stages of the suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On February 12, 2015, Jennifer Scheffer, derivatively on behalf of Medbox, Guy Marsala, Ned Siegel, Mitchell Lowe and C. Douglas Mitchell filed a lawsuit in the Eighth Judicial District Court of Nevada seeking damages for breaches of fiduciary duty regarding the issuance and dissemination of false and misleading statements and regarding allegedly improper and unfair related party transactions, unjust enrichment and waste of corporate assets. On April 17, 2015, Ned Siegel and Mitchell Lowe filed a Motion to Dismiss. On April 20, 2015, the Company filed a Joinder in the Motion to Dismiss. On July 27, 2015, the Court held a hearing on and granted the Motion to Dismiss without prejudice. Due to the early stages of the suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On March 10, 2015 Robert J. Calabrese, derivatively and on behalf of nominal defendant Medbox, Inc., filed a suit in the United States District Court for the District of Nevada against certain Company officers and/or directors (Ned L. Siegel, Guy Marsala, J. Mitchell Lowe, Pejman Vincent Mehdizadeh, Bruce Bedrick, and Jennifer S. Love). The suit alleges breach of fiduciary duties and gross mismanagement by issuing materially false and misleading statements regarding the Company’s financial results for the fiscal year ended December 31, 2013 and each of the interim financial periods. Specifically the suit alleges that defendants caused the Company to overstate the Company’s revenues by recognizing revenue on customer contracts before it had been earned. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses for all damages sustained as a result of the alleged wrongdoing. Due to the early stages of the suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On March 27, 2015 Tyler Gray, derivatively and on behalf of nominal defendant Medbox, Inc., filed a suit in the United States District Court for the District of Nevada against the Company’s Board of Directors and certain executive officers (Pejman Vincent Mehdizadeh, Matthew Feinstein, Bruce Bedrick, Thomas Iwanski, Guy Marsala, J. Mitchell Lowe, Ned Siegel, Jennifer S. Love, and C. Douglas Mitchell). The suit alleges breach of fiduciary duties and abuse of control. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses for all damages sustained as a result of the alleged wrongdoing. Additionally the plaintiff seeks declaratory judgments that plaintiff may maintain the action on behalf of the Company, that the plaintiff is an adequate representative of the Company, and that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company. Lastly the plaintiff seeks that the Company be directed to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law. Due to the early stages of this suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On May 20, 2015 Patricia des Groseilliers, derivatively and on behalf of nominal defendant Medbox, Inc., filed a suit in the United States District Court for the District of Nevada against the Company’s Board of Directors and certain executive officers (Pejman Vincent Mehdizadeh, Ned Siegel, Guy Marsala, J. Mitchell Lowe, Bruce Bedrick, Jennifer S. Love, Matthew Feinstein, C. Douglas Mitchell, and Thomas Iwanski). The suit alleges breach of fiduciary duties and unjust enrichment. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses for all damages sustained as a result of the alleged wrongdoing. Additionally the plaintiff seeks declaratory judgments that plaintiff may maintain the action on behalf of the Company, that the plaintiff is an adequate representative of the Company, and that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company. Lastly the plaintiff seeks that the Company be directed to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law. Due to the early stages of this suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On June 3, 2015 Mike Jones, derivatively and on behalf of nominal defendant Medbox, Inc., filed a suit in the U.S. District Court for Central District of California against the Company’s Board of Directors and certain executive officers (Guy Marsala, J. Mitchell Lowe, Ned Siegel, Jennifer S. Love, C. Douglas Mitchell, Pejman Vincent Mehdizadeh, Matthew Feinstein, Bruce Bedrick, and Thomas Iwanski). The suit alleges breach of fiduciary duties, abuse of control, and breach of duty of honest services. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses for all damages sustained as a result of the alleged wrongdoing. Additionally the plaintiff seeks declaratory judgments that plaintiff may maintain the action on behalf of the Company, that the plaintiff is an adequate representative of the Company, and that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company. Lastly the plaintiff seeks that the Company be directed to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law. On July 20, 2015, the Court issued an Order consolidating this litigation with those previously consolidated in the Central District (Crystal, Gutierrez, and Donnino). Due to the early stages of this suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On July 20, 2015 Kimberly Freeman, derivatively and on behalf of nominal defendant Medbox, Inc., filed a suit in the Eighth Judicial District Court of Nevada against the Company’s Board of Directors and certain executive officers (Pejman Vincent Mehdizadeh, Guy Marsala, Ned Siegel, J. Mitchell Lowe, Jennifer S. Love, C. Douglas Mitchell, and Bruce Bedrick). The suit alleges breach of fiduciary duties and unjust enrichment. The plaintiff seeks relief for compensatory damages and reasonable costs and expenses for all damages sustained as a result of the alleged wrongdoing. Additionally the plaintiff seeks declaratory judgments that plaintiff may maintain the action on behalf of the Company, that the plaintiff is an adequate representative of the Company, and that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company. Lastly the plaintiff seeks that the Company be directed to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law. Due to the early stages of this suit the Company is unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. On December 26, 2014, Medicine Dispensing Systems, a wholly-owned subsidiary of Medbox, filed a suit against Kind Meds, Inc. to collect fees of approximately $550,000 arising under a contract to establish a dispensary. Kind Meds, Inc. filed a cross complaint against Medicine Dispensing Systems for breach of contract and breach of implied covenant of good faith and fair dealing, claiming damages of not less than $500,000. We believe that the cross complaint is without merit. We will continue to pursue this Kind Meds for the amounts owed under the contract and will vigorously defend ourselves against the cross complaint. At this time the Company in unable to determine whether the likelihood of an unfavorable outcome of the dispute is probable or remote, nor can it reasonably estimate a range of potential loss, should the outcome be unfavorable. The Company commenced arbitration proceedings against a former employee on June 13, 2013 related to employment claims asserted by the employee. Thereafter, the employee filed a suit in Los Angeles County Superior Court. The suit was stayed pending the outcome of the arbitration and thereafter dismissed without prejudice. The Company obtained a favorable arbitration award. The Company then filed an Application to Confirm the Arbitration Award in Arizona Superior Court, Maricopa County. After being unable to serve the employee, the Company performed service by publication and filed proofs of publication for service on the employee on February 27, 2015 and March 2, 2015. If the arbitration award is not enforced, the employee’s claim can be re-filed in California. In October 2014, the Board of Directors of the Company appointed a special board committee (the “Special Committee”) to investigate a federal grand jury subpoena pertaining to the Company’s financial reporting which was served upon the Company’s accountants as well as certain alleged wrongdoing raised by a former employee of the Company. The Company was subsequently served with two SEC subpoenas in early November 2014. The Company is fully cooperating with the grand jury and the SEC. In connection with its investigation of these matters, the Special Committee in conjunction with the Audit Committee initiated an internal review by management and by an outside professional advisor of certain prior period financial reporting of the Company. The outside professional advisor reviewed the Company’s revenue recognition methodology for certain contracts for the third and fourth quarters of 2013. As a result of certain errors discovered in connection with the review by management and its professional advisor, the Audit Committee, upon management’s recommendation, concluded on December 24, 2014 that the consolidated financial statements for the year ended December 31, 2013 and for the third and fourth quarters therein, as well as for the quarters ended June 30, 2014, June 30, 2014 and September 30, 2014, should no longer be relied upon and would be restated to correct the errors. On March 6, 2015 the audit committee determined that the consolidated financial statements for the year ended December 31, 2012, together with all three, six and nine month financial information contained therein, and the quarterly information for the first two quarters of the 2013 fiscal year should also be restated. On March 11, 2015, the Company filed its restated Form 10 Registration Statement with the SEC with restated financial information for the years ended December 31, 2012 and December 31, 2013, and on March 16, 2015, the Company filed amended and restated quarterly reports on Form 10-Q, with restated financial information for the periods ended March 31, June 30 and September 30, 2014, respectively. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 10 – SUBSEQUENT EVENTS Share purchase and transfer On March 5, 2015, Mr. Mehdizadeh announced that an agreement has been executed with Lizada Capital LLC, an investor in the field of legal cannabis products, that would result in the transfer of the majority of Mr. Mehdizadeh’s shares of the Company to that firm. As of September 30, 2015, the prospective buyer has cancelled this agreement. October 2015 Debentures On October 14, 2015, the Company issued seven debentures in the aggregate of $2,000,000 to a service provider (the “October 2015 Investor”) as consideration for services previously rendered to the Company on the same terms as the August 14 Debentures and August 14 Purchase Agreement (the “October 2015 Debentures” and “October 2015 Purchase Agreement”, respectively) except that the October 2015 Purchase Agreement does not provide for registration rights to the October 2015 Investor with regard to the shares underlying the October 2015 Debentures. The service provider has agreed with the Company not to convert the October 2015 Debentures for any amount in excess of fees payable for services previously rendered to the Company at the time of conversion. To the extent that the sale of shares underlying the October 2015 Debentures do not satisfy outstanding amounts payable to the service provider, such amounts will remain payable to the service provider by the Company. Lease On October 14, 2015, one of the Company’s subsidiaries entered into a lease regarding a property in Washington state (Note 9). The lease has a five year term, with monthly lease payments of $2,500. The property had been classified as Asset held for resale during previous periods, but as management’s plans regarding the property have changed, as evidenced by the subsequent period lease, it was reclassified as Property and equipment as of September 30, 2015. Settlements As disclosed in Note 9, class actions and derivative lawsuits were filed against and purportedly on behalf of the Company captioned (1) Josh Crystal v. Medbox, Inc., et al. Matthew Donnino v. Medbox, Inc., et al. Ervin Gutierrez v. Medbox, Inc., et al., Mike Jones v. Guy Marsala, et al. Jennifer Scheffer v. P. Vincent Mehdizadeh, et al. Kimberly Y. Freeman v. Pejman Vincent Mehdizadeh, et al., Tyler Gray v. Pejman Vincent Mehdizadeh, et al. Robert J. Calabrese v. Ned L. Siegel, et al. Patricia des Groseilliers v. Pejman Vincent Mehdizadeh, et al. Michael A. Glinter v. Pejman Vincent Mehdizadeh, et al. On October 16, 2015, solely to avoid the costs, risks, and uncertainties inherent in litigation, the parties to the class actions and derivative lawsuits entered into settlements, that collectively effect a global settlement of all claims asserted in the class actions and the derivative actions. The global settlement provides, among other things, for the release and dismissal of all asserted claims. The global settlement is contingent on final court approval, respectively, of the settlements of the class actions and derivative actions. As a result of amounts already reflected in the Company’s financial statements, and the coverage by the Company’s insurance carrier, the final terms of the settlements are not expected to have a material adverse effect on the Company’s financial position or results of operations. Board of Directors appointment On October 15, 2015, Jeff Goh, 51, President and Interim Chief Executive Officer of the Company was elected to the board of directors of the Company. The Farm Operating Agreement On November 4, 2015, the Company signed an operating agreement with an independent contractor to perform cultivating services at the Farm. The independent operator will receive 10% of the profits of the Farm, after deduction of direct expenses. The term of the agreement is five years from the date of the agreement, with the parties permitted to extend the term through mutual agreement by successive two year terms. New Litigation On October 27, 2015, Richard Merritts, derivatively and on behalf of nominal defendant Medbox, Inc., filed a suit in the Superior Court of the State of California for the County of Los Angeles against the Board and certain executive officers (Guy Marsala, J. Mitchell Lowe, Ned Siegel, Jennifer S. Love, C. Douglas Mitchell, Pejman Vincent Mehdizadeh, Matthew Feinstein, Bruce Bedrick, Jeff Goh, and Thomas Iwanski). The suit alleges breach of fiduciary duties by the defendants. Relief is sought awarding damages resulting from breach of fiduciary duty and to direct the Company and the defendants to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law. Merritts’ lawsuit has not been served. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Medbox, Inc. and its wholly owned subsidiaries: • Prescription Vending Machines, Inc., a California corporation, d/b/a Medicine Dispensing Systems in the State of California (“MDS”), which distributes our Medbox™ product and provides related consulting services described further below. • Vaporfection International, Inc., a Florida corporation through which we distribute our medical vaporizing products and accessories. • Medbox Property Investments, Inc., a California corporation specializing in real property acquisitions and leases for dispensaries and cultivation centers. • MJ Property Investments, Inc., a Washington corporation specializing in real property acquisitions and leases for dispensaries and cultivation centers in the state of Washington. • Medbox Management Services, Inc., a California corporation specializing in providing management oversight and compliance services to state-licensed dispensaries for cultivation, dispensing, and marijuana infused products (MIPS). • EWSD I, LLC, an Arizona corporation that owns property in Colorado. All intercompany transactions, amounts and balances 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 (“U.S. GAAP”) 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. |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim financial statements and related notes have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission for Interim Reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. The results for the three and nine months ended September 30, 2015 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period. The accompanying unaudited interim financial statements and the information included under the heading “Management’s Discussion and Analysis or Plan of Operation” should be read in conjunction with our company’s audited financial statements and related notes included in our company’s Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 26, 2015. The condensed consolidated balance sheet data as of December 31, 2014 was derived from audited consolidated financial statements. The Company has performed a review of all subsequent events through the date the unaudited interim financial statements were issued, and has determined that no additional disclosures are necessary. |
Concentrations of Credit Risk | Concentrations of Credit Risk The Company maintains cash balances at several financial institutions in California, Illinois, and Florida. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015 and December 31, 2014, the Company’s uninsured balances totaled $22,504 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. |
Advertising and Marketing Costs | Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred. The Company incurred advertising and marketing costs of approximately $0 and $319,000 for the three months ended September 30, 2015 and 2014, respectively and approximately $0 and $749,000 for the nine months ended September 30, 2015 and 2014, respectively. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Pursuant to ASC No. 825, Financial Instruments 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 5). The Company has estimated the fair market value of the embedded derivative of the Notes based on a weighted probability model. 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, and various estimated reset exercise prices allocated by probability. 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 in Active Markets for Identical Assets or Liabilities (Level 1) Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2015 Marketable securities $ 94,817 $ 21,650 $ — $ 73,167 Derivative liability 4,885,286 — — 4,885,286 Total $ 4,980,103 $ 21,650 $ — $ 4,958,453 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, 2015 Total Balance at January 1, 2015 $ 3,691,853 Additions 5,531,201 Reclassified to equity upon conversion (3,828,711 ) Change in fair value of conversion feature (509,057 ) Ending balance $ 4,885,286 |
Revenue Recognition | Revenue Recognition We enter into transactions with clients who require our expertise and are interested in being granted the right to have us engage exclusively with them in certain territories (which we describe as territory rights) to obtain the necessary licenses to operate a dispensary or cultivation center for the location, and to consult in daily operations of the dispensary or cultivation center. Terms for each deal are varied and the sales arrangements typically include the delivery of our dispensing technology and dispensary location build-out and/or consultation on the location, licensing, build out and operation of a cultivation center. Medbox machines retail for approximately $50,000 for each machine set (including the POS system), and normally our contracts include the sale of the dispensary units within the scope of options to be provided that might also include location build out costs. Currently, our standard contracts have a five year term, call for an upfront, non-refundable consulting fee, and contain options including acquiring a Medbox dispensary machine and having the Company perform the buildouts for the location, at set prices. The Company has determined these optional purchases each constitute a separate purchasing decision, and therefore are considered a separate arrangement for revenue recognition purposes. Revenue on each of these options are evaluated for recognition when and if the customer decides to enter into the arrangement. Based on these contracts, and other auxiliary agreements, our current revenue model consists of the following income streams: Consulting fee revenues and build-outs Consulting fee revenues is a consistent component of our current and anticipated future revenues and is negotiated at the time we enter into a contract. Consulting revenue consists of providing ongoing consulting services over the life of the contract, to the established business in the areas of regulatory compliance, security, operations and other matters to operate the dispensary. The majority of the consulting fees arise from the upfront, non-refundable consulting fee in our standard contract, and is recognized using the straight line method over the life of the contract. Consulting fee 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. Revenue for the build-outs of the dispensary or cultivation center, if the customer chooses to have it performed by the Company, is recognized after issuance of a certificate of occupancy for the newly completed facility. This consists of a complete interior build-out of the retail store front including necessary construction (not to include installation of plumbing, electrical, HVAC systems and masonry), furniture fixtures and security system. Due to the uncertainties inherent in the emerging industry, the Company deferred recognition of revenue for sale of completed dispensaries with licenses until the issuance of a certificate of occupancy by the municipality. The certificate of occupancy is the final approval to open a dispensary in the customer’s community, at which time all criteria for revenue recognition, including delivery and acceptance, has been met. Additionally, at the time of the issuance of the certificate of occupancy, under the contract terms, all payments owed by the customer have been received by the Company. Similarly, recognition of revenue for sale of completed cultivation center is deferred until all licensing and permitting is completed and approved. Unbilled costs and associated fees related to the build-outs are recorded in inventory and are subject to valuation testing at each quarter end for net realizable value (lower of cost or market) and collectability. Other revenue includes sales of territory, location, and management rights The Company at times enters into specific contracts to assign exclusive location and management rights, for a dispensary, that the Company has been granted through a license approved by local authorities. These rights are transferred under a management rights agreement to an operator for retail, dispensary, or cultivation centers. The Company also has one agreement with a related party in which they granted the related party the exclusive rights to a certain territory. Other 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. In the sale of the territory rights to the related party, the revenue is being recognized over the term of the agreement. Revenues on VII product sales. Revenue from referral fees. |
Cost of Revenue | Cost of Revenue 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 fulfilment, shipping, inventory storage and inventory management costs. |
Inventory | Inventory Inventory is stated at the lower of cost or market value. Cost is determined on a cost basis that approximates the first-in, first-out (FIFO) method. Work in process and related capitalized costs includes costs to build out a dispensary in Portland Oregon that opened in the second quarter of 2015. Costs include tenant improvements to the facility, furniture, fixtures and Medbox dispensary units to be used by the licensed operator. The costs related to the Portland dispensary have been classified in deferred costs until the related revenue is recognized. |
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 loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share includes the effects of any outstanding options, warrants and other potentially dilutive securities. The Company did not consider any potential common shares in the computation of diluted loss per share for the three and nine months ending September 30, 2015 and 2014, due to the net loss, as they would have an anti-dilutive effect on EPS. As of September 30, 2014, the Company had 3,000,000 shares of Series A preferred stock outstanding with par value of $0.001 that could have been converted into 15,000,000 shares of the Company’s common stock. On August 24, 2015, 2 million shares of Series A preferred stock was cancelled, leaving 1 million shares outstanding at September 30, 2015 . Additionally the Company has approximately 14,084,000 warrants to purchase common stock outstanding as of September 30, 2015. The Company also has approximately $4,994,000 in convertible debentures outstanding at September 30, 2015, whose underlying shares were not included that are convertible at the holders’ option at a conversion price of the lower of $0.75 or 51% of the VWAP over the last 40 days prior to conversion (subject to reset upon a future dilutive financing). |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC No. 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. An IRS audit is still open on the year ended December 31, 2011, in which the Company received a notice of deficiency for the amount of approximately $60,000. The Company is in discussions with the IRS to set up a payment plan for the amount owed. |
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. |
Going Concern | Going Concern The accompanying unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has an accumulated deficit of approximately $47,199,000 as of September 30, 2015. During the nine months ended September 30, 2015, the Company had a net loss of approximately $25,120,000, negative cash flow from operations of approximately $6,124,000 and negative working capital of approximately $15,685,000. The Company will need to raise capital in order to fund its operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement a business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. On August 14, 2015 and August 20, 2015, the Company entered into two Securities Purchase Agreements with two separate investors, in the aggregate principal amount of up to approximately $5,480,000 (collectively the “August 2015 Debentures”), of which approximately $2,729,000 was funded during the third quarter of 2015, with up to a remaining $2,751,000 still to be funded. Management is actively seeking additional financing and expects to complete additional financing arrangements in the next few months. The Company expects that these plans will provide it the necessary liquidity to continue operations for the next 12 months. To address its financing requirements, the Company will continue to execute on its business model by attempting to raise additional capital through the sales of debt or equity securities or other means. It is uncertain the Company can obtain financing to fund operating deficits until profitability is achieved. This need may be adversely impacted by: uncertain market conditions, approval of sites and licenses by regulatory bodies and adverse operating results. The outcome of these matters cannot be predicted at this time. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods for public business entities beginning after December 15, 2017, including interim periods within that reporting period. The new standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor determined the effect of the standard on its ongoing financial reporting. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
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 in Active Markets for Identical Assets or Liabilities (Level 1) Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2015 Marketable securities $ 94,817 $ 21,650 $ — $ 73,167 Derivative liability 4,885,286 — — 4,885,286 Total $ 4,980,103 $ 21,650 $ — $ 4,958,453 |
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, 2015 Total Balance at January 1, 2015 $ 3,691,853 Additions 5,531,201 Reclassified to equity upon conversion (3,828,711 ) Change in fair value of conversion feature (509,057 ) Ending balance $ 4,885,286 |
Asset Acquisition (Tables)
Asset Acquisition (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Schedule of Principal Payments Due | Principal payments due on the notes are as follows: Secured Unsecured Total 2015 $ 8,851 301,658 310,509 2016 54,691 27,299 81,990 2017 58,007 30,635 88,642 2018 3,536,670 467,952 4,004,622 |
Schedule of Purchase Price Allocation | The purchase price is comprised of: Cash deposit $ 500,000 Note Payable to Southwest 3,670,000 Note Payable to EWSD (Seller) 830,000 $ 5,000,000 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory, Current | The consolidated inventories at September 30, 2015 and December 31, 2014 consist of the following: September 30, 2015 December 31, 2014 Work in process and related capitalized costs $ — $ 308,867 Deposits on dispensing machines — 325,973 Vaporizers and accessories 187,844 154,930 Dispensing machines — 171,466 Total inventory, net $ 187,844 $ 961,236 |
Convertible Notes Payable and22
Convertible Notes Payable and Derivative Liability (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Summary of Warrants Issued in Connection with Modified Debentures | The warrants issued in the nine months ended September 30, 2015 in connection with all the Modified Debentures detailed above, and the August 2015 Securities Purchase Agreement (“August 2015 Debentures”) discussed below, are summarized below: Date issued Number of warrants Exercise price Fair Value July 2014 Modified Debentures January 30, 2015 40,552 $ 4.93 $ 159,601 February 26, 2015 45,537 2.20 79,904 March 13, 2015 21,151 2.36 39,965 March 16, 2015 10,575 2.36 19,981 March 20, 2015 41,946 1.79 59,942 March 27, 2015 75,758 1.98 119,888 April 2, 2015 60,386 1.66 74,025 April 2, 2015 30,193 1.66 37,012 April 10,2015 107,914 1.39 112,460 April 17,2015 41,667 1.20 37,680 April 24,2015 127,119 1.18 112,635 April 24, 2015 21,186 1.18 18,772 May 1, 2015 156,250 .96 113,133 May 7, 2015 134,615 .78 79,234 May 8, 2015 42,000 .75 23,768 May 15, 2015 200,000 .75 113,365 May 22, 2015 250,000 .60 113,366 May 29, 2015 258,621 .58 112,537 June 5, 2015 288,462 .52 120,738 June 12, 2015 930,233 .43 303,246 June 19, 2015 3,448,276 .29 751,159 September 2014 Modified Debentures January 28, 2015 18,038 5.54 80,156 February 13, 2015 57,870 1.73 96,689 April 2, 2015 181,159 1.66 222,109 April 24, 2015 90,579 1.10 80,548 May 15, 2015 200,000 .75 113,365 June 12, 2015 1,744,186 .43 570,248 August 2015 Debentures August 24, 2015 6,666,667 .06 321,757 September 18, 2015 588,235 .17 82,804 Directors January 5, 2015 129,305 .40 39,901 January 30, 2015 129,250 .40 39,916 February 2, 2015 237,778 .22 16,619 Total $ 16,375,508 $ 4,266,522 |
Share Based Awards, Restricte23
Share Based Awards, Restricted Stock and Restricted Stock Units ("RSUs") (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
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, 2015 is presented below: Restricted stock Total shares Grant date fair value Restricted stock non-vested at January 1, 2015 168,750 $ 10.40 Restricted stock granted 150,000 — Restricted stock vested (206,250 ) 10.40 Restricted stock forfeited — — Restricted stock non-vested at September 30, 2015 112,500 $ 10.40 Restricted stock units (RSU’s) Total shares Grant date fair value RSU’s non-vested at January 1, 2015 199,584 $ 10.70 RSU’s granted 698,522 $ 0.51 - $6.07 RSU’s vested (590,502 ) $ 0.51 - $6.07 RSU’s forfeited (50,000 ) RSU’s non-vested September 30, 2015 257,604 $ 0.51 - $10.70 |
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | A summary of the expense related to restricted stock, RSUs and stock option awards for the three and nine months ended September 30, 2015 is presented below: Summary of the expense related to Restricted Stock and RSUs For the three months ended September 30, For the nine months ended September 30, Restricted Stock $ 390,000 $ 2,420,782 RSU’s 574,840 2,501,150 Stock options — 335,117 Common stock 74,333 74,333 Total $ 1,039,173 $ 5,331,382 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of Material Contractual Lease Commitments | The following table is a summary of our material contractual lease commitments as of September 30, 2015: Year Ending Office Rent Retail/Cultivation Facility Lease 2015 $ 66,942 $ 22,200 2016 245,310 88,800 2017 88,968 88,800 2018 — 88,800 2019 — 29,600 Total $ 401,220 $ 318,200 |
Business Organization, Nature25
Business Organization, Nature of Operations - Additional Information (Detail) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Jun. 30, 2015 | |
Business Organization, Nature Of Operations [Line Items] | ||
Note receivable, allowance | $ 350,000 | |
Operating Agreement [Member] | ||
Business Organization, Nature Of Operations [Line Items] | ||
Agreement term | 5 years | |
Agreement renewal term | 5 years | |
Procurement fee paid upon execution and delivery of agreement | $ 50,000 | |
Procurement fee due amount | 350,000 | |
Minimum monthly payment | $ 5,000 | |
Note receivable, allowance | $ 350,000 | |
Procurement fee payment terms | If the procurement fees are not paid within six months, the payment terms become a minimum monthly payment of $5,000. | |
Ownership percentage, by parent | 51.00% | |
Ownership percentage | 49.00% | |
Annual licensor fee | 5.00% | |
Operating Agreement [Member] | Maximum [Member] | ||
Business Organization, Nature Of Operations [Line Items] | ||
Deferred revenue | $ 400,000 | |
Operating Agreement [Member] | Minimum [Member] | ||
Business Organization, Nature Of Operations [Line Items] | ||
Deferred revenue | $ 50,000 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Additional Information (Detail) | Aug. 24, 2015USD ($) | Jan. 30, 2015$ / shares | Sep. 30, 2015USD ($)$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 30, 2015USD ($)d$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | Aug. 20, 2015USD ($) | Aug. 14, 2015USD ($) | Mar. 13, 2015$ / shares | Jan. 28, 2015USD ($) | Dec. 31, 2014USD ($)$ / sharesshares | Sep. 19, 2014USD ($) | Jul. 21, 2014USD ($) |
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Cash, FDIC Insured Amount | $ 250,000 | $ 250,000 | |||||||||||
Cash, Uninsured Amount | 22,504 | $ 22,504 | $ 0 | ||||||||||
Cash, Uninsured Amount Description | 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. | ||||||||||||
Advertising Expense | 0 | $ 319,000 | $ 0 | $ 749,000 | |||||||||
Revenues | $ 314,153 | $ 173,076 | $ 464,910 | $ 524,192 | |||||||||
Preferred Stock, Shares Outstanding (in Shares) | shares | 1,000,000 | 1,000,000 | 3,000,000 | ||||||||||
Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||
Warrants to purchase common stock outstanding | shares | 14,084,000 | 14,084,000 | |||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.75 | $ 11.75 | $ 0.75 | $ 11.75 | |||||||||
Conversion, percentage of weighted average price | 51.00% | ||||||||||||
Accumulated deficit | $ (47,198,689) | $ (47,198,689) | $ (22,078,193) | ||||||||||
Net loss | (9,291,949) | $ (3,796,532) | (25,120,496) | $ (6,802,926) | |||||||||
Net cash used in operating activities | (6,124,372) | $ (4,651,145) | |||||||||||
Working capital | (15,685,000) | (15,685,000) | |||||||||||
Internal Revenue Service (IRS) [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Tax deficiency amount | $ 60,000 | ||||||||||||
Open tax year | 2,011 | ||||||||||||
Convertible Debt [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Debt Instrument, Face Amount | $ 4,994,000 | $ 4,994,000 | $ 1,500,000 | $ 2,500,000 | $ 3,500,000 | ||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 5 | $ 1.83 | $ 1.83 | $ 1.83 | |||||||||
Conversion, percentage of weighted average price | 51.00% | 51.00% | |||||||||||
Series A Preferred Stock [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Preferred Stock, Shares Outstanding (in Shares) | shares | 1,000,000 | 3,000,000 | 1,000,000 | 3,000,000 | |||||||||
Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |||||||||||
Convertible Preferred Stock, Shares Issued upon Conversion (in Shares) | shares | 15,000,000 | 15,000,000 | |||||||||||
Preferred stock, shares repurchased | $ 2,000,000 | ||||||||||||
July 2014, September 2014, August 2015 Modified Debentures [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Period of volume weighted average price calculation | d | 40 | ||||||||||||
August 2015 Debentures [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Debt Instrument, Face Amount | $ 5,480,000 | $ 5,480,000 | |||||||||||
Principal amount of debt funded amount | $ 2,729,000 | $ 2,729,000 | |||||||||||
Principal amount of debt yet to be funded amount | $ 2,751,000 | $ 2,751,000 | |||||||||||
August 2015 Debentures [Member] | Convertible Debt [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Warrants to purchase common stock outstanding | shares | 7,254,902 | 7,254,902 | |||||||||||
Debt Instrument, Face Amount | $ 200,000 | $ 200,000 | $ 1,500,000 | ||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.75 | $ 0.75 | |||||||||||
Conversion, percentage of weighted average price | 51.00% | ||||||||||||
Dispensing machines [Member] | |||||||||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||||||||
Revenues | $ 50,000 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | $ 94,817 | $ 94,776 |
Derivative Liability | 4,885,286 | $ 3,691,853 |
Total | 4,980,103 | |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 21,650 | |
Derivative Liability | 0 | |
Total | 21,650 | |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | |
Derivative Liability | 0 | |
Total | 0 | |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 73,167 | |
Derivative Liability | 4,885,286 | |
Total | $ 4,958,453 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies - Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Detail) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Abstract] | |
Beginning balance | $ 3,691,853 |
Additions | 5,531,201 |
Reclassified to equity upon conversion | (3,828,711) |
Change in fair value of conversion feature | (509,057) |
Ending balance | $ 4,885,286 |
Asset Acquisition - Additional
Asset Acquisition - Additional Information (Detail) | Jul. 24, 2015USD ($)aBuildingsInstallments | Sep. 30, 2015USD ($)a | Aug. 07, 2015a | Dec. 31, 2014USD ($) |
Business Acquisition [Line Items] | ||||
Escrow deposit | $ 15,000 | $ 400,476 | ||
Fair value of acquired property | $ 5,000,000 | 500,000 | ||
Cash payment | 500,000 | $ 5,000,000 | ||
Purchase price allocation, land | 4,945,000 | |||
Purchase price allocation, building and structures | $ 55,000 | |||
Number of buildings to be replaced | Buildings | 2 | |||
EWSD [Member] | ||||
Business Acquisition [Line Items] | ||||
Business acquisition, percentage of equity interest | 100.00% | |||
Area of real estate property | a | 320 | |||
Escrow deposit | $ 500,000 | |||
Royalty percentage on adjusted gross revenues | 3.00% | |||
Royalty payment period | 3 years | |||
Percentage of royalty payable in cash | 50.00% | |||
Percentage of royalty payable in common stock | 50.00% | |||
EWSD [Member] | Leased Property [Member] | ||||
Business Acquisition [Line Items] | ||||
Area of real estate property | a | 150 | |||
EWSD [Member] | Secured Promissory Note [Member] | ||||
Business Acquisition [Line Items] | ||||
Royalty payment terms | Company's future payments to Seller of a royalty of 3% of the adjusted gross revenue, if any, from operation of the Acquired Property (including sale of any portion of or interest in the Acquired Property less any applicable expenses) for the three-year period beginning on January 1, 2016. Such royalty payments shall be payable 50% in cash and 50% in Company common stock (the "Royalty Payment"). | |||
Debt Instrument, Face Amount | $ 3,670,000 | |||
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | |||
Debt instrument frequency description | Commencing on September 1, 2015 and continuing thereafter on the first day of each calendar month through and including July 1, 2018; and one final balloon payment of all unpaid principal and accrued but unpaid interest on August 1, 2018. | |||
Debt Instrument, Payment Terms | The Note shall be payable by EWSD in thirty-five payments of principal and interest, which shall be calculated based upon an amortization period of thirty years | |||
Amortization period of Debt instrument | 30 years | |||
Debt instrument frequency payments of principal and interest | Installments | 35 | |||
EWSD [Member] | Unsecured Promissory Note [Member] | ||||
Business Acquisition [Line Items] | ||||
Acquisition date | Aug. 7, 2015 | |||
Debt Instrument, Face Amount | $ 830,000 | |||
Debt Instrument, Interest Rate, Stated Percentage | 6.00% | |||
Debt instrument frequency description | Unsecured Note shall be payable by EWSD in thirty-five payments of principal and interest, which shall be calculated based upon a hypothetical amortization period of thirty years | |||
Debt Instrument, Payment Terms | Commencing on September 1, 2015 and continuing thereafter on the first day of each calendar month through and including July 1, 2018; and one final balloon payment of all unpaid principal and accrued but unpaid interest on August 1, 2018. | |||
Amortization period of Debt instrument | 30 years | |||
Debt instrument frequency payments of principal and interest | Installments | 35 | |||
Balance amount owing to be paid | $ 4,485,763 | |||
Current maturities of long-term debt | $ 378,278 | |||
Southwest [Member] | ||||
Business Acquisition [Line Items] | ||||
Area of real estate property | a | 320 |
Asset Acquisition - Schedule of
Asset Acquisition - Schedule of Principal Payments Due (Detail) | Sep. 30, 2015USD ($) |
Debt Instrument [Line Items] | |
2,015 | $ 310,509 |
2,016 | 81,990 |
2,017 | 88,642 |
2,018 | 4,004,622 |
Secured Promissory Note [Member] | |
Debt Instrument [Line Items] | |
2,015 | 8,851 |
2,016 | 54,691 |
2,017 | 58,007 |
2,018 | 3,536,670 |
Unsecured Promissory Note [Member] | |
Debt Instrument [Line Items] | |
2,015 | 301,658 |
2,016 | 27,299 |
2,017 | 30,635 |
2,018 | $ 467,952 |
Asset Acquisition - Schedule 31
Asset Acquisition - Schedule of Purchase Price Allocation (Detail) - USD ($) | Sep. 30, 2015 | Jul. 24, 2015 |
Business Acquisition [Line Items] | ||
Cash deposit | $ 500,000 | $ 5,000,000 |
Total purchase price | 5,000,000 | $ 500,000 |
Southwest [Member] | ||
Business Acquisition [Line Items] | ||
Note Payable | 3,670,000 | |
EWSD [Member] | ||
Business Acquisition [Line Items] | ||
Note Payable | $ 830,000 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventory, Current (Detail) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory [Line Items] | ||
Work in process and related capitalized costs | $ 308,867 | |
Inventory | $ 187,844 | 961,236 |
Deposits on dispensing machines [Member] | ||
Inventory [Line Items] | ||
Inventory | 325,973 | |
Vaporizers and Accessories [Member] | ||
Inventory [Line Items] | ||
Inventory | $ 187,844 | 154,930 |
Dispensing machines [Member] | ||
Inventory [Line Items] | ||
Inventory | $ 171,466 |
Inventories - Additional Inform
Inventories - Additional Information (Detail) | 3 Months Ended |
Sep. 30, 2015USD ($) | |
Inventory Disclosure [Abstract] | |
Inventory written down | $ 142,500 |
Convertible Notes Payable and34
Convertible Notes Payable and Derivative Liability - Additional Information (Detail) | Sep. 18, 2015shares | Jul. 10, 2015USD ($)Tranches | Apr. 17, 2015USD ($)$ / shares | Apr. 14, 2015USD ($) | Apr. 11, 2015USD ($) | Apr. 09, 2015USD ($) | Feb. 27, 2015USD ($) | Jan. 30, 2015USD ($)$ / shares | Sep. 26, 2014USD ($) | Sep. 19, 2014USD ($) | Aug. 26, 2014USD ($) | Jul. 21, 2014USD ($) | Sep. 30, 2015USD ($)$ / sharesshares | Jun. 30, 2015USD ($) | Sep. 30, 2014USD ($)$ / shares | Sep. 30, 2015USD ($)$ / sharesshares | Sep. 30, 2014USD ($)$ / shares | Oct. 14, 2015USD ($) | Aug. 20, 2015USD ($) | Aug. 14, 2015USD ($) | Mar. 26, 2015USD ($) | Mar. 20, 2015USD ($) | Mar. 16, 2015USD ($) | Mar. 13, 2015USD ($)$ / shares | Feb. 24, 2015USD ($) | Jan. 29, 2015USD ($) | Jan. 28, 2015USD ($) |
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 7,432,128 | $ 3,500,000 | |||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.75 | $ 11.75 | $ 0.75 | $ 11.75 | |||||||||||||||||||||||
Debt instrument, convertible, terms of conversion feature | The Company may make the amortization 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. | ||||||||||||||||||||||||||
Change in fair value of derivative liabilities | $ (2,544,014) | $ 548,315 | $ 509,057 | $ 548,315 | |||||||||||||||||||||||
Minimum percentage of change in present value of future cash flows | 10.00% | ||||||||||||||||||||||||||
Maximum estimated percentage of resulted change in present value of future cash flows | 10.00% | ||||||||||||||||||||||||||
Conversion, percentage of weighted average price | 51.00% | ||||||||||||||||||||||||||
Consecutive trading days | 20 days | ||||||||||||||||||||||||||
Weighted probability model for the fair value | $ 3,287,000 | $ 2,720,000 | |||||||||||||||||||||||||
Derivative gain recognized | 334,000 | ||||||||||||||||||||||||||
Derivative loss recognized | $ 1,764,000 | ||||||||||||||||||||||||||
Cash settlement provision for warrants classified in equity | 0 | $ 0 | |||||||||||||||||||||||||
Debt converted to common shares | shares | 67,475,000 | ||||||||||||||||||||||||||
Reclassified to equity upon conversion | $ 3,828,711 | ||||||||||||||||||||||||||
Amortization of debt discount | $ 2,071,898 | $ 216,224 | $ 8,121,537 | $ 216,224 | |||||||||||||||||||||||
Warrants to purchase common stock outstanding | shares | 14,084,000 | 14,084,000 | |||||||||||||||||||||||||
Class of warrant or rights, outstanding | $ 4,266,522 | $ 4,266,522 | |||||||||||||||||||||||||
Common Stock [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.09 | $ 0.09 | |||||||||||||||||||||||||
Conversions of convertible debentures | shares | 67,475,105 | ||||||||||||||||||||||||||
Conversion of Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Reclassified to equity upon conversion | $ 4,519,000 | ||||||||||||||||||||||||||
Amortization of debt discount | 1,730,000 | ||||||||||||||||||||||||||
September 2014 Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,710,000 | $ 1,710,000 | |||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 5 | $ 5 | |||||||||||||||||||||||||
Debt instrument, convertible, terms of conversion feature | Modified Debentures have a fixed conversion price of the lower of $5.00 or 51% of the VWAP for the last 20 days prior to the conversion. | ||||||||||||||||||||||||||
Conversion, percentage of weighted average price | 51.00% | ||||||||||||||||||||||||||
Consecutive trading days | 20 days | ||||||||||||||||||||||||||
Debt redemption amount | $ 100,000 | $ 100,000 | |||||||||||||||||||||||||
Accrued interest of debt | $ 49,000 | ||||||||||||||||||||||||||
Debt Instrument, Tranche Three [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 450,000 | ||||||||||||||||||||||||||
Debt Instrument, Due after filing | 2 days | ||||||||||||||||||||||||||
July 2014 Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 4,420,000 | $ 4,420,000 | |||||||||||||||||||||||||
Debt redemption amount | $ 100,000 | $ 150,000 | $ 75,000 | $ 25,000 | $ 50,000 | ||||||||||||||||||||||
July 2014 and September 2014 Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 5 | $ 5 | |||||||||||||||||||||||||
August 2015 Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 5,480,000 | $ 5,480,000 | |||||||||||||||||||||||||
Convertible Debt [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Maturity Date | Sep. 19, 2015 | Jul. 21, 2015 | |||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 2,500,000 | $ 3,500,000 | $ 4,994,000 | $ 4,994,000 | $ 1,500,000 | ||||||||||||||||||||||
Proceeds from convertible debt | $ 1,000,000 | $ 150,000 | |||||||||||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | 10.00% | |||||||||||||||||||||||||
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. Through subsequent modifications of the July 2014 Debentures and September 2014 Debentures, the required date to file the registration statement and the effective date of the registration statement have been changed to April 15, 2015 and July 15, 2015, respectively. The registration statement was filed on April 9, 2015, and became effective on June 11, 2015. | ||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 5 | $ 1.83 | $ 1.83 | $ 1.83 | |||||||||||||||||||||||
Debt instrument, convertible, terms of conversion feature | They were originally convertible at a fixed conversion price of the lower of $1.83 or 51% of the VWAP for the last 20 days prior to conversion. | ||||||||||||||||||||||||||
Derivative liability fair value | $ 2,690,000 | $ 1,885,000 | $ 132,175 | $ 132,175 | |||||||||||||||||||||||
Change in fair value of derivative liabilities | $ 1,072,000 | ||||||||||||||||||||||||||
Conversion, percentage of weighted average price | 51.00% | 51.00% | |||||||||||||||||||||||||
Consecutive trading days | 20 days | 20 days | |||||||||||||||||||||||||
Convertible debt instrument term | 3 years | ||||||||||||||||||||||||||
Debt instrument effective percentage | 8.00% | 8.00% | |||||||||||||||||||||||||
Warrant instrument grant agreement, description | The Modified Debentures also included a warrant instrument granting the Investor the right to purchase shares of common stock of the Company equal to the principal amount of the applicable Modified Debenture divided by a price equal to 120% of the last reported closing price of the Common stock on the applicable closing date of the Modified Debenture, with a three year term. | ||||||||||||||||||||||||||
Convertible Debt [Member] | Directors Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 150,000 | $ 150,000 | |||||||||||||||||||||||||
Convertible Debt [Member] | Funded at the Closing of the Purchase Agreement Amendment [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,800,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded within thirty (30) days of the closing [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | 200,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded within two days following the filing of a registration statement with the SEC to register the shares underlying the debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | 100,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded within two days of receipt of the first comment letter from the SEC with regard to the Registration Statement [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | 100,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded within two days of the date that the Registration Statement is declared effective by the SEC [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | 100,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded within five days of the date that the Registration Statement is declared effective by the SEC [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | 500,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded within each of 90, 120, 150, and 180 days from the Closing of the Purchase Agreement Amendment Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | 500,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Funded at the Closing [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 100,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | September 2014 Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 1,300,000 | $ 1,300,000 | |||||||||||||||||||||||||
Debt Instrument, Payment Terms | The original agreement called for amortization payments, including accrued principal and accrued interest, due in nine monthly installments, commencing the fourth month after issuance. | ||||||||||||||||||||||||||
Debt Instrument, Description | 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 Debentures. | ||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.88 | $ 0.88 | |||||||||||||||||||||||||
Debt instrument, convertible, terms of conversion feature | Modified Debentures all have a fixed conversion price of the lower of $0.88 or 51% of the VWAP for the last 40 days prior to the conversion. | ||||||||||||||||||||||||||
Conversion, percentage of weighted average price | 51.00% | ||||||||||||||||||||||||||
Consecutive trading days | 40 days | ||||||||||||||||||||||||||
Warrants to purchase shares common stock | shares | 2,291,832 | ||||||||||||||||||||||||||
Percentage reduction of exercise price of warrants to purchase share of common stock | 6.00% | ||||||||||||||||||||||||||
Class of warrant or right, exercised | shares | 2,292,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument, Tranche One [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 1,000,000 | $ 650,000 | |||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument, Tranche Two [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 1,000,000 | 500,000 | |||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument, Tranche Three [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 500,000 | 500,000 | |||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument, Tranche Four [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 500,000 | 700,000 | |||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument, Tranche Five [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 500,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | July 2014 Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 300,000 | $ 300,000 | |||||||||||||||||||||||||
Proceeds from convertible debt | $ 2,811,500 | ||||||||||||||||||||||||||
Debt Instrument, Payment Terms | The original agreement calling for amortization payments, 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 eight successive months thereafter. | ||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.88 | $ 1.83 | $ 1.83 | ||||||||||||||||||||||||
Debt instrument, convertible, terms of conversion feature | The first $300,000 had a fixed conversion price of the lower of $1.83 or 51% of the VWAP for the last 40 days prior to the conversion. The April 17, 2015 closing contained a fixed conversion price of the lower of $0.88 or 51% of the VWAP for the last 40 days prior to the conversion. | ||||||||||||||||||||||||||
Conversion, percentage of weighted average price | 51.00% | 51.00% | |||||||||||||||||||||||||
Consecutive trading days | 40 days | 40 days | |||||||||||||||||||||||||
Warrants to purchase shares common stock | shares | 6,332,441 | ||||||||||||||||||||||||||
Percentage reduction of exercise price of warrants to purchase share of common stock | 6.00% | ||||||||||||||||||||||||||
Class of warrant or right, exercised | shares | 0 | ||||||||||||||||||||||||||
Convertible Debt [Member] | July 2014 and September 2014 Convertible Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 1.83 | $ 1.83 | |||||||||||||||||||||||||
Convertible Debt [Member] | August 2015 Debentures [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 200,000 | $ 200,000 | $ 1,500,000 | ||||||||||||||||||||||||
Proceeds from convertible debt | $ 1,078,880 | ||||||||||||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 10.00% | 10.00% | |||||||||||||||||||||||||
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 pre-effective registration statement was filed with the SEC on October 16, 2015. | ||||||||||||||||||||||||||
Debt Instrument, Convertible, Conversion Price | $ / shares | $ 0.75 | $ 0.75 | |||||||||||||||||||||||||
Debt instrument, convertible, terms of conversion feature | 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 fixed conversion price. The conversion price is the lower of (a) $0.75, or (b) a 49% discount to the lowest daily VWAP (as reported by Bloomberg) of the Common Stock during the 30 trading days prior to the conversion date. 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 is lower than the Fixed Conversion Price, then the conversion price will be reset to equal such price. The Company may prepay the Debentures in cash, prompting a 30% premium or, subject to certain conditions, in shares of common stock valued at 51% of the lowest volume weighted average price of the common stock for the 30 prior trading days. The premium will be recognized at such time as the Company may choose to prepay the Debentures. | ||||||||||||||||||||||||||
Derivative liability fair value | $ 2,345,000 | $ 2,345,000 | |||||||||||||||||||||||||
Conversion, percentage of weighted average price | 51.00% | ||||||||||||||||||||||||||
Consecutive trading days | 30 days | ||||||||||||||||||||||||||
Warrant instrument grant agreement, description | The debenture entered into with the second investor on August 20, 2015 included a warrant instrument granting the Investor the right to purchase shares of common stock of the Company equal to the principal amount of the applicable Debenture divided by a price equal to 120% of the last reported closing price of the Common stock on the applicable closing date of the Debenture, with a three year term. | ||||||||||||||||||||||||||
Percentage of discount to common stock valuation | 49.00% | ||||||||||||||||||||||||||
Percentage of premium | 30.00% | ||||||||||||||||||||||||||
Percentage of debenture conversion price on common stock price | 120.00% | ||||||||||||||||||||||||||
Debenture conversion term | 3 years | ||||||||||||||||||||||||||
Warrants to purchase common stock outstanding | shares | 7,254,902 | 7,254,902 | |||||||||||||||||||||||||
Class of warrant or rights, outstanding | $ 404,561 | $ 404,561 | |||||||||||||||||||||||||
Conversions of convertible debentures | shares | 0 | ||||||||||||||||||||||||||
Convertible Debt [Member] | August 2015 Debentures [Member] | Maximum [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 3,979,877 | 3,979,877 | |||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument Tranche Seven [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | 250,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument Tranche Eight [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | 1,250,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | Debt Instrument Tranche Nine [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Proceeds from convertible debt | $ 750,000 | ||||||||||||||||||||||||||
Convertible Debt [Member] | July 2015 Debenture [Member]. | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 500,000 | ||||||||||||||||||||||||||
Number of tranches | Tranches | 5 | ||||||||||||||||||||||||||
Convertible Debt [Member] | July 2015 Debenture [Member]. | Subsequent Event [Member] | |||||||||||||||||||||||||||
Debt Conversion [Line Items] | |||||||||||||||||||||||||||
Debt Instrument, Face Amount | $ 100,000 |
Convertible Notes Payable and35
Convertible Notes Payable and Derivative Liability - Summary of Warrants Issued in Connection with Modified Debentures (Detail) | Sep. 30, 2015USD ($)$ / sharesshares |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 16,375,508 |
Fair Value | $ 4,266,522 |
Directors [Member] | January 30, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 129,250 |
Exercise price | $ / shares | $ 0.40 |
Fair Value | $ 39,916 |
Directors [Member] | January 5, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 129,305 |
Exercise price | $ / shares | $ 0.40 |
Fair Value | $ 39,901 |
Directors [Member] | February 2, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 237,778 |
Exercise price | $ / shares | $ 0.22 |
Fair Value | $ 16,619 |
July 2015 Modified Debentures [Member] | January 30, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 40,552 |
Exercise price | $ / shares | $ 4.93 |
Fair Value | $ 159,601 |
July 2015 Modified Debentures [Member] | February 26, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 45,537 |
Exercise price | $ / shares | $ 2.20 |
Fair Value | $ 79,904 |
July 2015 Modified Debentures [Member] | March 13, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 21,151 |
Exercise price | $ / shares | $ 2.36 |
Fair Value | $ 39,965 |
July 2015 Modified Debentures [Member] | March 16, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 10,575 |
Exercise price | $ / shares | $ 2.36 |
Fair Value | $ 19,981 |
July 2015 Modified Debentures [Member] | March 20, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 41,946 |
Exercise price | $ / shares | $ 1.79 |
Fair Value | $ 59,942 |
July 2015 Modified Debentures [Member] | March 27, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 75,758 |
Exercise price | $ / shares | $ 1.98 |
Fair Value | $ 119,888 |
July 2015 Modified Debentures [Member] | April 2, 2015 First Issued [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 60,386 |
Exercise price | $ / shares | $ 1.66 |
Fair Value | $ 74,025 |
July 2015 Modified Debentures [Member] | April 2, 2015 Second Issued [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 30,193 |
Exercise price | $ / shares | $ 1.66 |
Fair Value | $ 37,012 |
July 2015 Modified Debentures [Member] | April 10, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 107,914 |
Exercise price | $ / shares | $ 1.39 |
Fair Value | $ 112,460 |
July 2015 Modified Debentures [Member] | April 17, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 41,667 |
Exercise price | $ / shares | $ 1.20 |
Fair Value | $ 37,680 |
July 2015 Modified Debentures [Member] | April 24, 2015 First Issued [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 127,119 |
Exercise price | $ / shares | $ 1.18 |
Fair Value | $ 112,635 |
July 2015 Modified Debentures [Member] | April 24, 2015 Second Issued [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 21,186 |
Exercise price | $ / shares | $ 1.18 |
Fair Value | $ 18,772 |
July 2015 Modified Debentures [Member] | May 1, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 156,250 |
Exercise price | $ / shares | $ 0.96 |
Fair Value | $ 113,133 |
July 2015 Modified Debentures [Member] | May 7, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 134,615 |
Exercise price | $ / shares | $ 0.78 |
Fair Value | $ 79,234 |
July 2015 Modified Debentures [Member] | May 8, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 42,000 |
Exercise price | $ / shares | $ 0.75 |
Fair Value | $ 23,768 |
July 2015 Modified Debentures [Member] | May 15, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 200,000 |
Exercise price | $ / shares | $ 0.75 |
Fair Value | $ 113,365 |
July 2015 Modified Debentures [Member] | May 22, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 250,000 |
Exercise price | $ / shares | $ 0.60 |
Fair Value | $ 113,366 |
July 2015 Modified Debentures [Member] | May 29, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 258,621 |
Exercise price | $ / shares | $ 0.58 |
Fair Value | $ 112,537 |
July 2015 Modified Debentures [Member] | June 5, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 288,462 |
Exercise price | $ / shares | $ 0.52 |
Fair Value | $ 120,738 |
July 2015 Modified Debentures [Member] | June 12, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 930,233 |
Exercise price | $ / shares | $ 0.43 |
Fair Value | $ 303,246 |
July 2015 Modified Debentures [Member] | June 19, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 3,448,276 |
Exercise price | $ / shares | $ 0.29 |
Fair Value | $ 751,159 |
September 2014 Modified Debentures [Member] | April 2, 2015 First Issued [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 181,159 |
Exercise price | $ / shares | $ 1.66 |
Fair Value | $ 222,109 |
September 2014 Modified Debentures [Member] | April 24, 2015 First Issued [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 90,579 |
Exercise price | $ / shares | $ 1.10 |
Fair Value | $ 80,548 |
September 2014 Modified Debentures [Member] | May 15, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 200,000 |
Exercise price | $ / shares | $ 0.75 |
Fair Value | $ 113,365 |
September 2014 Modified Debentures [Member] | June 12, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 1,744,186 |
Exercise price | $ / shares | $ 0.43 |
Fair Value | $ 570,248 |
September 2014 Modified Debentures [Member] | January 28, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 18,038 |
Exercise price | $ / shares | $ 5.54 |
Fair Value | $ 80,156 |
September 2014 Modified Debentures [Member] | February 13, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 57,870 |
Exercise price | $ / shares | $ 1.73 |
Fair Value | $ 96,689 |
August 2015 Debentures [Member] | August 24, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 6,666,667 |
Exercise price | $ / shares | $ 0.06 |
Fair Value | $ 321,757 |
August 2015 Debentures [Member] | September 18, 2015 [Member] | |
Class of Warrant or Right [Line Items] | |
Number of warrants | shares | 588,235 |
Exercise price | $ / shares | $ 0.17 |
Fair Value | $ 82,804 |
Share Based Awards, Restricte36
Share Based Awards, Restricted Stock and Restricted Stock Units ("RSUs") - Additional Information (Detail) | Sep. 24, 2015shares | Aug. 31, 2015$ / sharesshares | Aug. 26, 2015$ / sharesshares | Aug. 11, 2015USD ($)$ / sharesshares | Jun. 30, 2015USD ($)$ / sharesshares | May. 11, 2015USD ($)shares | Apr. 01, 2015shares | Feb. 10, 2015USD ($)shares | Jan. 15, 2015USD ($)shares | Aug. 21, 2014USD ($)Personshares | Jul. 23, 2014USD ($) | Oct. 31, 2014shares | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Sep. 30, 2015$ / sharesshares |
Share-based Compensation Arrangement by Share-based Payment Award [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 | Person | 2 | ||||||||||||||
Stock compensation expense | $ | $ 197,000 | $ 353,000 | |||||||||||||
2014 Equity Incentive Plan [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Value of bonus share issued | $ | $ 371,666 | ||||||||||||||
Number of bonus share issued | 1,196,988 | ||||||||||||||
Percentage of bonus to be paid in common stock | 20.00% | ||||||||||||||
Per share price | $ / shares | $ 0.0621 | ||||||||||||||
Remainder bonus amount | $ | $ 50,000 | ||||||||||||||
Monthly payments of bonus | $ | $ 30,918 | ||||||||||||||
Officers and Employees [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Grant date fair value of RSU's | $ / shares | $ 12,000 | ||||||||||||||
CFO [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Number of shares granted | 156,250 | ||||||||||||||
Grant date fair value of RSU's | $ / shares | $ 25,000 | ||||||||||||||
Restricted Stock Units (RSUs) [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | $ | $ 1,267,500 | ||||||||||||||
Number of shares granted | 121,875 | 698,522 | |||||||||||||
Number of shares underlying restricted stock | 121,875 | ||||||||||||||
Unvested RSU's forfeited | 50,000 | 50,000 | |||||||||||||
Number of shares vested on grant date | 590,502 | ||||||||||||||
Restricted Stock Units (RSUs) [Member] | Officers and Employees [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | $ | $ 20,000 | $ 114,000 | |||||||||||||
Number of shares granted | 79,917 | 38,600 | 100,174 | ||||||||||||
Vesting period description | The RSU's vest every six months through December 31, 2016. | ||||||||||||||
Number of shares vested on grant date | 38,600 | ||||||||||||||
Restricted Stock Units (RSUs) [Member] | Consultant [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | $ | $ 450,000 | ||||||||||||||
Number of shares granted | 75,000 | ||||||||||||||
Vesting period description | Vest in 25,000 installments quarterly through July 15, 2015, beginning with 25,000 which vested immediately on the grant date. | ||||||||||||||
Number of shares vested on grant date | 25,000 | ||||||||||||||
Restricted Stock Units (RSUs) [Member] | New Chief Executive Officer [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | $ | $ 100,000 | ||||||||||||||
Number of shares granted | 196,078 | ||||||||||||||
Vesting period description | The RSUs vest quarterly through May 11, 2016 | ||||||||||||||
Restricted Stock Units (RSUs) [Member] | Board of Directors [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Number of shares granted | 100,000 | 19,452 | |||||||||||||
Restricted Stock Units (RSUs) [Member] | Former Chief Executive Officer [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Number of shares granted | 2,580,000 | ||||||||||||||
Shares granted in period, term | 10 years | ||||||||||||||
Shares granted in period, exercise price | $ / shares | $ 0.13 | ||||||||||||||
Fair value of shares granted | $ | $ 335,117 | $ 335,117 | |||||||||||||
Restricted Stock [Member] | |||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||
Stock Issued During Period, Value, Restricted Stock Award, Gross | $ | $ 3,607,500 | ||||||||||||||
Number of shares granted | 346,875 | 150,000 | |||||||||||||
Unvested RSU's forfeited | 0 | ||||||||||||||
Number of shares vested on grant date | 206,250 | ||||||||||||||
Grant date fair value of RSU's | $ / shares | $ 0 |
Share Based Awards, Restricte37
Share Based Awards, Restricted Stock and Restricted Stock Units ("RSUs") - Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity (Detail) - $ / shares | Sep. 24, 2015 | Aug. 21, 2014 | Sep. 30, 2015 |
Restricted Stock [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Restricted stock and RSUs non-vested at beginning of period | 168,750 | ||
Restricted stock and RSUs granted | 346,875 | 150,000 | |
Restricted stock and RSUs vested | (206,250) | ||
Restricted stock and RSUs forfeited | 0 | ||
Restricted stock and RSUs non-vested at end of period | 112,500 | ||
Restricted stock and RSUs non-vested at beginning of period | $ 10.40 | ||
Restricted stock and RSUs granted | 0 | ||
Restricted stock and RSUs vested | 10.40 | ||
Restricted stock and RSUs forfeited | 0 | ||
Restricted stock and RSUs non-vested at end of period | $ 10.40 | ||
Restricted Stock Units (RSUs) [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Restricted stock and RSUs non-vested at beginning of period | 199,584 | ||
Restricted stock and RSUs granted | 121,875 | 698,522 | |
Restricted stock and RSUs vested | (590,502) | ||
Restricted stock and RSUs forfeited | (50,000) | (50,000) | |
Restricted stock and RSUs non-vested at end of period | 257,604 | ||
Restricted stock and RSUs non-vested at beginning of period | $ 10.7 | ||
Restricted Stock Units (RSUs) [Member] | Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Restricted stock and RSUs granted | 0.51 | ||
Restricted stock and RSUs vested | 0.51 | ||
Restricted stock and RSUs non-vested at end of period | 0.51 | ||
Restricted Stock Units (RSUs) [Member] | Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Restricted stock and RSUs granted | 6.07 | ||
Restricted stock and RSUs vested | 6.07 | ||
Restricted stock and RSUs non-vested at end of period | $ 10.70 |
Share Based Awards, Restricte38
Share Based Awards, Restricted Stock and Restricted Stock Units ("RSUs") - Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Share based compensation | $ 1,039,173 | $ 5,331,382 | $ 1,031,640 |
Common Stock [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Share based compensation | 74,333 | 74,333 | |
Restricted Stock [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Share based compensation | 390,000 | 2,420,782 | |
Restricted Stock Units (RSUs) [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Share based compensation | $ 574,840 | 2,501,150 | |
Stock Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Share based compensation | $ 335,117 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Detail) | Sep. 30, 2015USD ($)Agreement | Oct. 17, 2014USD ($)Agreement | Sep. 30, 2015USD ($) | Dec. 31, 2014USD ($)NotesPayable | Jun. 30, 2014USD ($) | Mar. 28, 2014USD ($) |
Related Party Transactions [Line Items] | ||||||
Escrow deposit | $ 15,000 | $ 15,000 | $ 400,476 | |||
Number of real estate purchase agreements on which escrow deposits paid | Agreement | 1 | |||||
Deposits and other assets | $ 140,212 | 140,212 | $ 104,726 | |||
Territory Rights Agreement [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Deposits and other assets | $ 500,000 | |||||
Deferred revenue | $ 350,000 | $ 350,000 | ||||
Agreement term | 5 years | |||||
Revenue recognition period | 5 years | |||||
Affiliated Entity [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Escrow deposit | $ 190,400 | |||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Due to Related Parties, Current | $ 284,488 | |||||
Number of Promissory Notes | NotesPayable | 4 | |||||
Percentage of ownership by co-founder | 100.00% | |||||
Number of real estate purchase agreements on which escrow deposits paid | Agreement | 8 | |||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #1 [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Debt Instrument, Face Amount | $ 250,000 | |||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #2 [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Debt Instrument, Face Amount | 100,000 | |||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #3 [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Debt Instrument, Face Amount | 500,000 | |||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | Note Payable #4 [Member] | ||||||
Related Party Transactions [Line Items] | ||||||
Debt Instrument, Face Amount | $ 375,000 |
Stockholder's Equity - Addition
Stockholder's Equity - Additional Information (Detail) - USD ($) | Aug. 24, 2015 | Jan. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 |
Stockholders Equity [Line Items] | |||||
Common stock, authorized | 100,000,000 | 100,000,000 | 100,000,000 | ||
Common stock, authorized after amendment | 400,000,000 | ||||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||
Increase of authorized capital approved by the stockholders, effective date | Oct. 27, 2015 | ||||
Stock Issued During Period, shares, as a payment of certain accounts payables | 1,633,047 | ||||
Stock Issued During Period, value, as a payment of certain accounts payables | $ 364,728 | ||||
Preferred Stock [Member] | |||||
Stockholders Equity [Line Items] | |||||
Cancelled shares | 2,000,000 | ||||
Common Stock [Member] | |||||
Stockholders Equity [Line Items] | |||||
Cancelled shares | 3,000,000 | ||||
Stock Issued During Period, shares, as a payment of certain accounts payables | 1,633,047 | ||||
Stock Issued During Period, value, as a payment of certain accounts payables | $ 1,633 | ||||
Issuance common stock upon exercise of the warrants held by various previous owners of VII | 206,480 | ||||
Vincent Chase [Member] | Preferred Stock [Member] | |||||
Stockholders Equity [Line Items] | |||||
Cancelled shares | 2,000,000 | ||||
Vincent Chase [Member] | Common Stock [Member] | |||||
Stockholders Equity [Line Items] | |||||
Cancelled shares | 3,000,000 | ||||
Vaporfection International Inc. [Member] | |||||
Stockholders Equity [Line Items] | |||||
Issuance common stock upon exercise of the warrants held by various previous owners of VII | 206,480 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) | Sep. 30, 2015USD ($)Agreement | Sep. 08, 2015USD ($) | Aug. 31, 2015USD ($) | Aug. 24, 2015USD ($) | Apr. 22, 2015USD ($)shares | Dec. 31, 2014USD ($) | Dec. 26, 2014USD ($) | Oct. 17, 2014Agreement | Jul. 22, 2014USD ($) | Jul. 01, 2014USD ($) | Jun. 05, 2014shares | May. 08, 2014USD ($) | Aug. 01, 2011USD ($) | Apr. 30, 2015USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($)Agreement | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($) | Jun. 30, 2014USD ($) | Nov. 19, 2013USD ($) | Jun. 30, 2013 | May. 22, 2013USD ($) |
Other Commitments [Line Items] | |||||||||||||||||||||||
Operating Leases, Rent Expense | $ 90,000 | $ 53,000 | $ 211,000 | $ 157,000 | |||||||||||||||||||
Escrow Deposits Related to Property Sales | $ 15,000 | ||||||||||||||||||||||
Payments to Acquire Real Estate | 500,000 | 399,594 | |||||||||||||||||||||
Charges in lieu of rent and other non refundable charges to property sellers | 195,712 | ||||||||||||||||||||||
Number of Real Estate Purchase Agreements | Agreement | 1 | ||||||||||||||||||||||
Real Estate, Purchase Price | $ 875,000 | 875,000 | 875,000 | ||||||||||||||||||||
Earnest Money Forfeited | $ 280,000 | ||||||||||||||||||||||
Notes Issued | 5,000,000 | ||||||||||||||||||||||
Assets held for resale | 399,594 | $ 399,594 | |||||||||||||||||||||
Amount recovered out of escrow deposit | 105,000 | ||||||||||||||||||||||
Amount retained by company | $ 600,000 | ||||||||||||||||||||||
President [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Severance payable | $ 500,000 | $ 500,000 | 500,000 | ||||||||||||||||||||
Monthly severance payments | $ 30,000 | ||||||||||||||||||||||
Chief Operating Officer [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Annual base salary | $ 300,000 | ||||||||||||||||||||||
Restricted stock units convertible into company common stock | shares | 100,000 | ||||||||||||||||||||||
Severance payment term | Mr. Goh shall be entitled to receive a severance payment equivalent to 6, 12, or 18 months of base salary, based upon whether the length of Mr. Goh's employment with the Company at the time of termination is less than 12 months, greater than 12 months but less than 24 months, or greater than 24 months, respectively. | ||||||||||||||||||||||
Maximum [Member] | President [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Option to purchase common stock, value | $ 335,275 | ||||||||||||||||||||||
Maximum [Member] | Chief Operating Officer [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Annual base salary increase, Percentage | 7.00% | ||||||||||||||||||||||
Cash bonus per year | $ 150,000 | ||||||||||||||||||||||
Annual equity bonus | $ 150,000 | ||||||||||||||||||||||
Minimum [Member] | Chief Operating Officer [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Annual base salary increase, Percentage | 5.00% | ||||||||||||||||||||||
Employment Termination Less Than Twelve Months [Member] | Chief Operating Officer [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Severance payment | 6 months | ||||||||||||||||||||||
Employment Termination Greater Than Twelve Months But Less Than Twenty Four Months [Member] | Chief Operating Officer [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Severance payment | 12 months | ||||||||||||||||||||||
Employment Termination Greater Than Twenty Four Months [Member] | Chief Operating Officer [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Severance payment | 18 months | ||||||||||||||||||||||
Land and Building [Member] | |||||||||||||||||||||||
Other Commitments [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 | ||||||||||||||||||||||
Affiliated Entity [Member] | MedVend Holdings LLC [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Ownership stake percentage | 50.00% | ||||||||||||||||||||||
Stock Repurchased During Period, Shares (in Shares) | shares | 30,000 | ||||||||||||||||||||||
Investment Owned, at Cost | $ 4,100,000 | ||||||||||||||||||||||
Affiliated Entity [Member] | PVM International Inc. (PVMI) [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Number of Real Estate Purchase Agreements | Agreement | 8 | ||||||||||||||||||||||
Remaining balance due to related party | $ 284,488 | ||||||||||||||||||||||
Kind Meds Inc [Member] | Medicine Dispensing Systems [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Plaintiff past due balance | $ 550,000 | ||||||||||||||||||||||
Claims damages | $ 500,000 | ||||||||||||||||||||||
Real Estate Purchase Agreement [Member] | Land and Building [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Real Estate, Purchase Price | 399,594 | 399,594 | |||||||||||||||||||||
Notes Issued | $ 249,000 | ||||||||||||||||||||||
Debt Instrument, Maturity Date before default | Jan. 30, 2015 | ||||||||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | ||||||||||||||||||||||
Debt Instrument, default interest rate | 18.00% | ||||||||||||||||||||||
Assets held for resale | $ 399,594 | 399,594 | |||||||||||||||||||||
Debt instrument, extended maturity date | Apr. 1, 2017 | ||||||||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | 12.00% | 12.00% | 12.00% | ||||||||||||||||||||
Agreement One [Member] | Land and Building [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Escrow Deposits Related to Property Sales | 930,000 | ||||||||||||||||||||||
Payments to Acquire Real Estate | $ 26,830,000 | ||||||||||||||||||||||
Number of Real Estate Purchase Agreements | Agreement | 2 | ||||||||||||||||||||||
Real Estate, Purchase Price | $ 2,500,000 | $ 2,500,000 | |||||||||||||||||||||
Earnest Money Forfeited | $ 100,000 | ||||||||||||||||||||||
First Amendment [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Date of voting agreement | Jan. 21, 2015 | ||||||||||||||||||||||
Expiration date of agreement | Jan. 20, 2016 | ||||||||||||||||||||||
Extended expiration date of agreement | Jul. 20, 2016 | ||||||||||||||||||||||
First Amendment [Member] | PVM International Inc. (PVMI) [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Remaining balance due to related party | $ 478,877 | $ 478,877 | $ 478,877 | ||||||||||||||||||||
Second Amendment [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Date of voting agreement | Aug. 21, 2015 | ||||||||||||||||||||||
Extended expiration date of agreement | Jul. 20, 2018 | ||||||||||||||||||||||
Second Amendment [Member] | PVM International Inc. (PVMI) [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Remaining balance due to related party | $ 328,877 | $ 328,877 | $ 328,877 | ||||||||||||||||||||
Repayment of principal and accrued interest of promissory notes | $ 82,220 | $ 82,220 | $ 82,220 | ||||||||||||||||||||
Pre-payment of promissory notes description | Company would make certain accelerated pre-payments on the $328,877 balance under the Note consisting of (i) three equal payments of principal in the amount of $82,220, together with accrued and unpaid interest, payable on each of August 24, 2015, August 31, 2015 and September 8, 2015, and (ii) one final payment on September 14, 2015 equal to the remaining principal and accrued and unpaid interest due under the Note | ||||||||||||||||||||||
Office Lease, West Hollywood, California [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Operating Lease, Rent Increase, Percent | 3.00% | ||||||||||||||||||||||
Operating Leases, Rent Expense | $ 14,828 | ||||||||||||||||||||||
Lease Expiration Date | Jun. 30, 2017 | ||||||||||||||||||||||
Operating Leases, Rent Expense, Minimum Rentals | $ 14,397 | ||||||||||||||||||||||
Office Lease Los Angeles California [Member] | |||||||||||||||||||||||
Other Commitments [Line Items] | |||||||||||||||||||||||
Operating Leases, Rent Expense | $ 7,486 | ||||||||||||||||||||||
Sublease term | 18 months |
Commitments and Contingencies42
Commitments and Contingencies - Summary of Material Contractual Lease Commitments (Detail) | Sep. 30, 2015USD ($) |
Building [Member] | |
Property Subject to or Available for Operating Lease [Line Items] | |
2,015 | $ 66,942 |
2,016 | 245,310 |
2,017 | 88,968 |
Total | 401,220 |
Land and Building [Member] | |
Property Subject to or Available for Operating Lease [Line Items] | |
2,015 | 22,200 |
2,016 | 88,800 |
2,017 | 88,800 |
2,018 | 88,800 |
2,019 | 29,600 |
Total | $ 318,200 |
Subsequent Events - Additional
Subsequent Events - Additional Information (Detail) | Nov. 04, 2015 | Oct. 14, 2015USD ($)Debenture | Jul. 22, 2014USD ($) | May. 08, 2014USD ($) | Sep. 30, 2015USD ($) | Jan. 28, 2015USD ($) | Sep. 19, 2014USD ($) | Jul. 21, 2014USD ($) |
Convertible Debt [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Debt Instrument, Face Amount | $ 4,994,000 | $ 1,500,000 | $ 2,500,000 | $ 3,500,000 | ||||
Land and Building [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Lessee Leasing Arrangements, Operating Leases, Term of Contract | 5 years | 5 years | ||||||
Operating Leases, Rent Expense, Minimum Rentals | $ 20,000 | $ 7,400 | ||||||
Subsequent Event [Member] | Southwest [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Profits after deduction of direct expenses | 10.00% | |||||||
Term of Agreement | 5 years | |||||||
Agreement extension terms | through mutual agreement by successive two year terms | |||||||
Subsequent Event [Member] | Land and Building [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Lessee Leasing Arrangements, Operating Leases, Term of Contract | 5 years | |||||||
Operating Leases, Rent Expense, Minimum Rentals | $ 2,500 | |||||||
Subsequent Event [Member] | October 2015 Debentures [Member] | Convertible Debt [Member] | ||||||||
Subsequent Event [Line Items] | ||||||||
Debt Instrument, Face Amount | $ 2,000,000 | |||||||
Number of debentures issued | Debenture | 7 |