| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and nature of business CSA Holdings Inc. (“we,” “us,” “our,” “CSA Holdings,” or the “Company”) was incorporated in Nevada on June 12, 2013 under the name Asta Holdings, Corp. The name was changed to CSA Holdings, Inc. effective July 9, 2015. Following our September 4, 2015 acquisition of a 100% ownership interest in CSA, LLC (“Canna Security”), our wholly owned subsidiary, we became a security solutions provider catering to businesses in the legalized cannabis industry. We provide our customers security system design services, installation, consulting services in physical security solutions and security systems as part of the state licensing process in the legalized cannabis business. Historically, we had been engaged solely in the business of yacht maintenance, repairs, refurbishing, winterizing, custom refinishing and modifications, interior customization and professional boat detailing in the Russian Federation and had been exploring expansion in North America until its acquisition of CSA, LLC (“Canna Security”). Acquisition of Canna Security
Effective March 25, 2015 (the "Effective Date"), we entered into a merger and exchange agreement (the "Agreement") with CSA Acquisition Subsidiary, LLC (the "Acquisition Subsidiary") and Canna Security. The Agreement was subsequently amended on June 30, 2015 (the "First Amendment") and August 17, 2015 (the "Second Amendment"). We completed the merger with Canna Security under the Agreement (the "Merger") on September 4, 2015 and Acquisition Subsidiary merged into and with Canna Security, and Canna Security, as the surviving limited liability company, became our wholly-owned subsidiary. The Merger closed subsequent to our fiscal year ended July 31, 2015. Pursuant to the terms and conditions of the Agreement, the members who collectively own 100% of the issued and outstanding units of Canna Security immediately prior to the closing of the Merger exchanged their units for an aggregate of 69,980,032 shares of our common stock. In addition, pursuant to terms of the Agreement and immediately prior to the closing of the Merger, George Furlan cancelled 103,300,010 shares of our common stock.
Merger Financing Concurrent with the closing of the Merger on September 4, 2015, we issued to 17 accredited investors, 907,564 shares of our 5% Series A Convertible Preferred Stock (the "Series A Preferred") at an original issue price of $1.00 per share (the "Stated Value") for an aggregate purchase price of $907,56 4 4 Recapitalization Our acquisition of Canna Security was accounted for as a recapitalization of Canna Security since the shareholders of Canna Security obtained voting and managing control of our company. Canna Security was the acquirer for financial reporting purposes and CSA Holdings was the acquired company. Consequently, the consolidated financial statements after completion of the acquisition include the assets and liabilities of both CSA Holdings and Canna Security, the historical operations of Canna Security and their consolidated operations from the September 4, 2015 closing date of the acquisition. Canna Security retroactively applied its recapitalization pursuant to the terms of the Agreement for all periods presented in the accompanying consolidated financial statements. Basis of presentation and going concern The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. These unaudited financial statements should be read in conjunction with the unaudited financial statements and notes thereto for the year ended December 31, 2014.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced recurring net losses of $ 1,246,148 318,111 535,423 168,488 808,170 129 stockholders’ 648,726 056 The Company anticipates that it will continue to incur losses into the foreseeable future and plans to fund its losses from operations and capital funding needs through future public or private equity or debt financings, other third-party funding, collaborations or a combination of these. There can be no assurance that the Company will be able to obtain equity or debt financing on acceptable terms, or at all. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations, and future prospects, including its ability to continue as a going concern. The Company’s recurring net losses, working capital deficit and members’ deficit raise substantial doubt about its ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern. Use of estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Revenue recognition Major components of revenue for the Company include installations of alarms, door access systems, video cameras, security system design, monitoring and consulting. Revenue is recognized as those services are rendered, net of sales taxes. Customer billings for services not yet rendered are deferred and recognized as revenue as the services are rendered. Revenue associated with the sale of equipment and related installation is recognized once delivery, installation and customer acceptance is completed. Monitoring revenue is recognized over the life of the respective contract. Cash and cash equivalents All highly liquid investments with original maturities of three months or less from the time of purchase are considered to be cash equivalents. Accounts receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment on the invoice date. Unpaid accounts receivable with invoice dates over 30 days old bear interest at 1% per month. Accounts receivable are stated at the contractual amount billed to the customer plus any accrued and unpaid interest. Customer account balances with invoices dated over 90 days old are considered past due. Interest continues to accrue on past due accounts until the age of any invoices exceeds 180 days at which time the account is placed on nonaccrual status. When a customer balance is placed on nonaccrual status, the Company reverses any accrued but uncollected interest previously recognized through interest income. In addition, the Company discontinues the accrual of interest and does not resume these accruals unless the account first ceases to be classified as past due and then subsequently requalifies for accrual status. The allowance for doubtful accounts receivable reflects the best estimate of probable losses inherent in the Company's receivable portfolio determined on the basis of historical experience and other currently available evidence. Loan receivables and allowance for loan losses Loans receivable are stated at unpaid principal balances, less an allowance for loan losses and net deferred loan origination fees and discounts, if any. Interest on loans is recognized over the term of the loan and is calculated using the compound-interest method on the outstanding balance of the loan.
Property and equipment Property and equipment is recorded at cost less accumulated depreciation. Maintenance and repair expenditures are charged to expense when incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets as follows:
Leasehold improvements
Lesser of remaining term of the lease or economic useful life
Vehicles
Up to 5 years
Equipment, furniture and fixtures
3 to 7 years Inventory Inventory is recorded at the lower of cost (primarily first-in, first-out) or market value. Long-lived assets Management reviews long-lived assets for impairment quarterly or when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of an asset may not be recoverable, a write-down to fair value is recorded. Fair values are determined based on the discounted cash flows, quoted market values, or external appraisals, as applicable. Long-lived assets are reviewed for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified. Income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Fair value of financial instruments The carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings approximate their fair values due to the short-term nature of these instruments. The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority; Level 2 inputs are those that are observable, either directly or indirectly, for the asset or liability other than quoted prices included in Level 1; and Level 3 inputs, which are unobservable and are used when level 1 and 2 inputs are not available. The Company uses appropriate valuation techniques based on the available inputs. When available, the Company measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs, if any, were only used when Level 1 or Level 2 inputs were not available. Share based compensation The Company established an equity based compensation plan for a certain employee and consultant. Under each plan, the individuals vest in the shares of the Company based upon the terms of their respective agreements. The Company values the shares either at the stated value contained in the agreement or using the intrinsic value method. Compensation costs are recognized using the straight-line method. There are no equity units outstanding under the plan and no further units of Canna Security will be awarded under this plan. Advertising Advertising is charged to expense as incurred. Operating expenses for the nine-months ended September 30, 2015 and September 30, 2014 includes advertising and marketing expense of approximately $1,300 and $7,300 respectively. Recent accounting pronouncements Management has reviewed and adopted applicable recent accounting standards updates issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Security and Exchange Commission during the nine-month period ended September 30, 2015. Management believes the adoption of such pronouncements and revisions do not have a material impact on the Company's financial statements other than certain footnote disclosures which have been incorporated into these financial statements. |
