Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Mar. 20, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | American Cannabis Company, Inc. | |
Entity Central Index Key | 945617 | |
Document Type | 10-K | |
Document Period End Date | 31-Dec-14 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $6,702,699 | |
Entity Common Stock, Shares Outstanding | 44,393,699 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2014 |
Balance_Sheets
Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets | ||
Cash and cash equivalents | $165,213 | $17,597 |
Accounts receivable, net | 57,642 | 1,250 |
Deposits | 181,941 | |
Inventory | 4,555 | |
Prepaid expenses and other current assets | 12,325 | 4,368 |
Total current assets | 421,676 | 23,215 |
Property and equipment, net | 48,416 | 1,765 |
Total assets | 470,092 | 24,980 |
Current liabilities | ||
Accounts payable | 62,136 | 152 |
Deferred revenue | 173,528 | 11,109 |
Convertible note, net of discount | 24,551 | |
Accrued and other current liabilities | 125,518 | 5,340 |
Total current liabilities | 385,733 | 16,601 |
Total liabilities | 385,733 | 16,601 |
Stockholders equity | ||
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued or outstanding | ||
Common stock, $0.00001 par value; 100,000,000 shares authorized; 44,518,750 and 25,368,502 issued and outstanding at December 31, 2014 and December 31, 2013, respectively | 446 | 254 |
Additional paid-in capital | 3,699,526 | 546 |
Retained earnings (accumulated deficit) | -3,615,613 | 7,579 |
Total stockholders equity | 84,359 | 8,379 |
Total liabilities and stockholders' equity | $470,092 | $24,980 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ||
Preferred Stock Par Value | $0.01 | $0.01 |
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | 0 | 0 |
Common stock Par Value | $0.00 | $0.00 |
Common Stock Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock Shares Issued | 44,518,750 | 25,368,502 |
Common Stock Shares Outstanding | 44,518,750 | 25,368,502 |
Statements_of_Operations
Statements of Operations (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||
Consulting services | $70,273 | $692,265 |
Products and equipment | 5,063 | 566,747 |
Total revenues | 75,336 | 1,259,012 |
Cost of consulting services | 19,197 | 322,134 |
Cost of products and equipment | 4,060 | 449,342 |
Total cost of revenues | 23,257 | 771,476 |
General and administrative | 13,530 | 3,675,313 |
Selling and marketing | 19,608 | 190,164 |
Research and development | 12,863 | |
Total operating expenses | 33,138 | 3,878,340 |
Income (loss) from operations | 18,941 | -3,390,804 |
Other income (expense) | ||
Gain on extinguishment of debt | 35,000 | |
Interest expense, net | -263,388 | |
Total other income (expense) | -228,388 | |
Net income (loss) before income taxes | 18,941 | -3,619,192 |
Income tax expense (benefit) | ||
Net income (loss) | $18,941 | ($3,619,192) |
Basic and diluted net income (loss) per common share | $0 | ($0.11) |
Basic and diluted weighted average common shares outstanding | 25,368,502 | 32,545,546 |
Shareholders_Equity
Shareholders Equity (USD $) | Preferred Stock | Common Stock Shares Issuable | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Total |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | ||
Beginning Balance, Value at Mar. 04, 2013 | $0 | $0 | $0 | $0 | $0 | |
Beginning Balance, Shares at Mar. 04, 2013 | 0 | 0 | ||||
Distribution to stockholders | -11,362 | -11,362 | ||||
Shares issued for services, Value | ||||||
Founders Shares issued on Incorporation, Shares | 0 | 25,368,502 | ||||
Founders Shares issued on Incorporation, Value | 0 | 254 | 546 | 0 | 800 | |
Net income (loss) | 18,941 | 18,941 | ||||
Ending Balance, Value at Dec. 31, 2013 | 0 | 254 | 546 | 7,579 | 8,379 | |
Ending Balance, Shares at Dec. 31, 2013 | 0 | 25,368,502 | ||||
Distribution to stockholders | 0 | -4,000 | -4,000 | |||
Stock-based compensation, Shares | 0 | 6,342,126 | ||||
Stock-based compensation, Amount | 0 | 64 | 3,133,009 | 0 | 3,133,073 | |
Reorganization due to recapitalization upon Reverse Merger, Shares | 0 | 8,714,372 | ||||
Reorganization due to recapitalization upon Reverse Merger, Value | 0 | 87 | 5,258 | 0 | 5,345 | |
Stock-based compensation - restricted shares | 40,903 | 0 | 40,903 | |||
Stock-based compensation - warrants | 146,551 | 0 | 146,551 | |||
Shares issued for services, Shares | 0 | 50,000 | ||||
Shares issued for services, Value | 0 | 1 | 31,499 | 0 | 31,500 | |
Conversion of convertible notes payable to common shares, Shares | 0 | 4,043,750 | ||||
Conversion of convertible notes payable to common shares, Value | 0 | 40 | 323,460 | 0 | 323,500 | |
Net income (loss) | 0 | -3,619,192 | -3,619,192 | |||
Ending Balance, Value at Dec. 31, 2014 | $0 | $446 | $3,699,526 | ($3,615,613) | $84,359 | |
Common shares issuable for services to related party at Dec. 31, 2014 | 30,000 | 18,300 | 18,300 | |||
Ending Balance, Shares at Dec. 31, 2014 | 0 | 30,000 | 44,518,750 |
Statements_of_Cash_Flows
Statements of Cash Flows (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Cash flows from operating activities: | ||
Net income (loss) | $18,941 | ($3,619,192) |
Depreciation | 486 | 1,077 |
Amortization of discount on convertible notes payable | 263,215 | |
Stock-based compensation to employees | 3,320,328 | |
Stock-based compensation to service providers | 31,500 | |
Gain on extinguishment of debt | 35,000 | |
Accounts receivable | -1,250 | -56,392 |
Deposits | -181,941 | |
Inventory | -4,555 | |
Prepaid expenses and other current assets | -4,368 | -7,807 |
Deferred revenue | 11,109 | 162,419 |
Accrued and other current liabilities | 2,333 | 120,381 |
Accounts payable | 152 | 61,780 |
Net cash provided by operating activities | 27,403 | 74,113 |
Cash assumed from Brazil Interactive Media, Inc., net of expenses | 90,181 | |
Purchases of property and equipment | -2,250 | -47,728 |
Net cash provided by (used in) investing activities | -2,250 | 42,453 |
Cash flows from financing activities: | ||
Proceeds from issuance of common shares to founders | 800 | |
Distributions to stockholders | -11,362 | -4,000 |
Proceeds from stock-based compensation | 50 | |
Proceeds from short-term notes payable | 35,000 | |
Due to directors | 3,006 | |
Net cash provided by used in financing activities | -7,556 | 31,050 |
Net increase in cash and cash equivalents | 17,597 | 147,616 |
Cash and cash equivalents at beginning of period | 17,597 | |
Cash and cash equivalents at end of period | 17,597 | 165,213 |
Cash paid during the period for interest | 261 | |
Cash paid (received) during the period for income taxes, net | ||
Convertible notes payable assumed from Brazil Interactive Media, Inc., net of accumulated discount amortization | ($84,836) |
1_Description_of_the_Business
1. Description of the Business | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
1. Description of the Business | Note 1. Description of the Business |
American Cannabis Company, Inc. and its subsidiary company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting (“American Cannabis Consulting”), (collectively “the “Company”) are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses operating in the regulated cannabis industry in states and countries where cannabis is regulated and/or has been de-criminalized for medical use and/or legalized for recreational use. The Company provides advisory and consulting services specific to this industry, designs industry-specific products and facilities, and manages a strategic group partnership that offers both exclusive and non-exclusive customer products commonly used in the industry. American Cannabis Company, Inc. is a publicly listed company quoted on the OTCQB under the symbol “AMMJ”. | |
American Cannabis Company, Inc. was incorporated in the State of Delaware on September 24, 2001 under the name Naturewell, Inc. to develop and market clinical diagnostic products using immunology and molecular biologic technologies. | |
On March 13, 2013, Naturewell, Inc. completed a merger transaction whereby it acquired 100% of the issued and outstanding share capital of Brazil Interactive Media, Inc. (“BIMI”), which operated as a Brazilian interactive television company and television production company through its wholly owned Brazilian subsidiary company EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda. (“EsoTV”). Naturewell’s Articles of Incorporation were amended to reflect a new name: Brazil Interactive Media, Inc. | |
On May 15, 2014, BIMI entered into a merger agreement (“the Merger Agreement”) to acquire 100% of the issued and outstanding American Cannabis Consulting while simultaneously disposing of 100% of the issued share capital EsoTV (“the Separation Agreement”). Both the merger with American Cannabis Consulting and disposal of EsoTV were completed on September 29, 2014. BIMI subsequently amended its Articles of Incorporation to change its name to American Cannabis Company, Inc. On October 10, 2014, American Cannabis Company, Inc changed its stock symbol from BIMI to AMMJ. | |
The foregoing descriptions of the Merger Agreement and Separation Agreement do not purport to be complete and are qualified in their entirety by the terms of such agreements, which are filed as exhibits to the Current Report on Form 8-K filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on October 3, 2014. | |
Immediately following the completion of the Merger Agreement, former shareholders of American Cannabis Consulting owned 31,710,628 shares of American Cannabis Company, Inc.’s common stock representing 78.44% of American Cannabis Company, Inc.’s issued and outstanding share capital. Accordingly, American Cannabis Consulting was deemed to have been the accounting acquirer in a Reverse Merger which resulted in a recapitalization of the Company. Consequently, the Company’s consolidated financial statements reflect the results of American Cannabis Consulting since Inception (March 5, 2013) and of American Cannabis Company, Inc. (formerly BIMI) from September 29, 2014 to December 31, 2014. | |
See Note 14. “Stockholders’ Equity” for further information regarding the accounting related to the Reverse Merger. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
2. Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies |
Basis of Accounting | |
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company has elected a fiscal year ending on December 31. | |
Consolidation | |
The Company’s consolidated financial statements include the results of American Cannabis Consulting since Inception (March 5, 2013) and of American Cannabis Company, Inc. (formerly BIMI) from September 29, 2014 to December 31, 2014. All intercompany accounts and transactions have been eliminated in consolidation | |
Use of Estimates in Financial Reporting | |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the financial statements. | |
Cash and Cash Equivalents | |
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. | |
Restricted Cash | |
Restricted cash is recorded at cost, which approximates fair value. There was no restricted cash included in current assets on our consolidated balance sheets as of December 31, 2014 and December 31, 2013. Restricted cash previously related to remaining proceeds from a short-term note entered into on March 21, 2014 and fully satisfied on May 15, 2014 (see Note 7. Convertible Notes Payable). | |
Inventory | |
Inventory is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of December 31, 2014, market values of all of the Company’s inventory were greater than cost, and accordingly, no such valuation allowances was recognized. The Company did not hold any inventory as of December 31, 2013. | |
Deposits | |
Deposits is comprised of advance payments made to third parties, primarily for inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale (see “Costs of Revenues” below). | |
Prepaid Expenses and Other Current Assets | |
Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. | |
Accounts Receivable | |
Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases,an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. | |
The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2014 the Company’s allowance for doubtful accounts was $9,338 and there was no allowance for doubtful accounts as of December 31, 2013. The Company recorded bad debt expense of $9,338 during the year ended December 31, 2014, which is reflected as a component of general and administrative expenses on the consolidated statement of operations, and did not record any bad debt expense during the period from Inception (March 5, 2013) through December 31, 2013. | |
Significant Clients and Customers | |
For the year ended December 31, 2014, two customers individually accounted for 10% or more of the Company’s revenues: Organigram, Inc. and Minnesota Medical Solutions, LLC accounted for approximately 30% and 22% of revenues for the year, respectively. For the period from Inception (March 5, 2013) through December 31, 2013, three customers individually accounted for 10% or more of the Company’s revenues: Connecticut Pharmaceutical Connections, LLC, Andrew Levine and Medicinal Evolution, Inc. accounted for approximately 33%, 19% and 11% of revenues for the period, respectively. | |
As of December 31, 2014, three customers accounted for 10% or more of the Company’s accounts receivable balance: Clare Court, LLC, HW Wellness and The Grove Wellness Center accounted for approximately 58%, 19% and 11% of the accounts receivable balance, respectively. As of December 31, 2013, one client, Organigram, Inc., represented 100% of its gross accounts receivable balance of $1,250. | |
Property and Equipment, net | |
Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins once the underlying asset is placed into service. As of December 31, 2014, the Company had capitalized $40,051 of costs associated with the construction of a demonstration inventory unit; this asset had yet to be placed into service as of December 31, 2014, and accordingly, no depreciation expense was recorded related to this asset during the year ended December 31, 2014. Property and equipment is reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company had not capitalized any interest as of December 31, 2014 and 2013. | |
Accounting for the Impairment of Long-Lived Assets | |
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company did not record any impairment charges related to long-lived assets during the year ended December 31, 2014 or from the period from Inception (March 5, 2013) through December 31, 2013. | |
Beneficial Conversion Feature | |
If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | |
Revenue Recognition | |
Revenue is recognized in accordance with FASB ASC Topic 605, Revenue Recognition. The Company recognizes revenue when persuasive evidence of an arrangement exists, the related services are rendered or delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. | |
The Company primarily generates revenues from professional services consulting agreements. These arrangements are generally entered into on a time basis, for a fixed-fee or on a contingent fee basis. Generally, a prepayment or retainer is required prior to performing services. | |
Revenues from time-based engagements are recognized as the hours are incurred by the Company. | |
Revenues from fixed-fee engagements are recognized under the completed or proportional performance methods. Management reviews arrangement to determine whether or not the fixed-fee is for a final deliverable or act which is significant to the arrangement as a whole. If it is, revenue is recognized under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered. Revenue recognized under the proportional performance method is recognized as services are performed. Under this method, the Company estimates the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable in order to determine the amount of revenue to be recognized. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. During the year ended December 31, 2014 and the period from Inception (March 5, 2013) through December 31, 2013, no such losses have occurred. The Company believes if an engagement terminates prior to completion it can recover the costs incurred related to the services provided. | |
The Company occasionally enters into arrangements for which revenues are contingent upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. | |
The Company’s arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”), or estimates of stand-alone selling prices. Revenues are recognized in accordance with the Company’s accounting policies for the elements as described above. The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. | |
While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as the Company also sells those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice and do not include provisions for refunds relating to services provided. | |
Differences between the timing of billings and the recognition of revenue are recognized as either unbilled revenue (a component of accounts receivable) or deferred revenue on the consolidated balance sheet. Revenues recognized for services performed but not yet billed to clients are recorded as unbilled revenue. | |
Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses are included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are presented in the statement of operations on a net basis. | |
Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with origin terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer. During the year ended December 31, 2014 and the period from Inception (March 5, 2013) through December 31, 2013, sales returns were not significant and as such, no sales return allowance had been recorded as of December 31, 2014 and 2013. | |
Costs of Revenues | |
The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. | |
Advertising and Promotion Costs | |
Advertising and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year ended December 31, 2014, these costs were $29,858. There were no such costs during fiscal 2013. | |
Shipping and Handling Costs | |
For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. | |
Stock-Based Compensation | |
Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. The Company recognizes related compensation costs on a straight-line basis over the requisite vesting period of the award. During the year ended December 31, 2014, stock-based compensation expense for restricted shares was $40,903. Compensation expense for warrants and options is based on the fair value of the instruments on the grant date, which is determined using the Black-Scholes valuation model. During the year ended December 31, 2014, compensation expense for warrants was $146,551 and no stock options had been granted at that date. Compensation expense for common shares of stock is based on an assessment of fair value as of the grant date and is recognized over the vesting period, or if the common shares immediately vest, is recognized in full upon the grant. There were no grants of any kind during or outstanding for the period from Inception (March 5, 2013) through December 31, 2013, and accordingly, no stock-based compensation costs for the period. | |
Income Taxes | |
The Company’s corporate status changed from an S-Corporation, which it had been since inception, to a C-Corporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S-Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S-Corporation’s taxable income. Accordingly, we were only subject to income taxes for a portion of 2014. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended December 31, 2014, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of December 31, 2014, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. | |
Net Income (Loss) Per Common Share | |
The Company reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. | |
Related Party Transactions | |
The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. | |
Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | |
Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | |
See Note 10. Related Party Transactions for associated disclosures. | |
Reclassifications | |
Certain balance sheet reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets. | |
Recent Accounting Pronouncements | |
In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). By incorporating and expanding upon certain principles that are currently in U.S. auditing standards, ASU 2014-15 requires management to assess whether there is substantial doubt about the entity’s ability to continue as a going concern . Specifically, ASU 2014-15 (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has not elected to early adopt the provisions of ASU 2014-15, and accordingly, the requirements of ASU 2014-15 will apply beginning with the year ended December 31, 2017. The Company is currently evaluating the effects, if any, that the application of ASU 2014-15 will have on disclosures associated with its consolidated financial statements. | |
In May 2014, the FASB issued ASU 2014-9 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-9”), which provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. This guidance is effective for annual reporting and interim periods beginning after December 15, 2016 and allows for either full retrospective or modified retrospective application, with early adoption not permitted. Accordingly, the standard becomes effective for the Company on January 1, 2017. The Company is currently evaluating the adoption method it will apply and the impact that this guidance will have on its consolidated financial statements and related disclosures. |
3_Accounts_Receivable_net
3. Accounts Receivable, net | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Receivables [Abstract] | |||||||||
3. Accounts Receivable, net | Note 3. Accounts Receivable, net | ||||||||
Accounts receivable, net, was comprised of the following: | |||||||||
December 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Gross accounts receivable | $ | 66,980 | $ | 1,250 | |||||
Less: allowance for doubtful accounts | (9,338 | ) | — | ||||||
Accounts receivable, net | $ | 57,642 | $ | 1,250 | |||||
The Company had $9,338 and no bad debt expense, respectively, during the years ended December 31, 2014 and the period from Inception (March 5, 2013) through December 31, 2013. |
4_Deposits
4. Deposits | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Banking and Thrift [Abstract] | |||||||||
4. Deposits | Note 4. Deposits | ||||||||
Deposits was comprised of the following as of December 31, 2014 and 2013: | |||||||||
December 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Inventory deposits | $ | 179,941 | $ | — | |||||
Operating lease deposits | 2,000 | — | |||||||
Deposits | $ | 181,941 | $ | — | |||||
Inventory deposits reflect down payments made to suppliers or manufacturers under inventory purchase agreements. |
5_Inventory
5. Inventory | 12 Months Ended |
Dec. 31, 2014 | |
Inventory Disclosure [Abstract] | |
5. Inventory | Note 5. Inventory |
Inventory as of December 31, 2014 of $4,555 was fully comprised of finished goods in-transit to customers. There was no inventory as of December 31, 2013. |
6_Property_and_Equipment_net
6. Property and Equipment, net | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
6. Property and Equipment, net | Note 6. Property and Equipment, net | ||||||||
Property and equipment, net, was comprised of the following: | |||||||||
December 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Office equipment | $ | 5,742 | $ | 2,250 | |||||
Furniture and fixtures | 2,935 | — | |||||||
Machinery and equipment | 1,250 | — | |||||||
Construction in progress | 40,051 | ||||||||
Property and equipment, gross | 49,978 | 2,250 | |||||||
Less: accumulated depreciation | (1,562 | ) | (485 | ) | |||||
Property and equipment, net | $ | 48,416 | $ | 1,765 | |||||
The Company recorded depreciation expense of $1,077 during the year ended December 31, 2014 and $485 during the period from Inception (March 5, 2013) through December 31, 2013. As of December 31, 2014, construction in progress of $40,051 reflects costs incurred during the construction of a demonstration inventory unit. The underlying asset had not been placed into service as of December 31, 2014, and accordingly, no depreciation expense has been recognized related to this asset during the year ended December 31, 2014. |
7_Convertible_Notes_Payable
7. Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2014 | |
Debt Disclosure [Abstract] | |
7. Convertible Notes Payable | Note 7. Convertible Notes Payable |
On April 24, 2014, Brazil Interactive Media, Inc. issued convertible notes payable in the total amount of $395,000. The convertible notes payable have a maturity date of April 24, 2016, pay zero interest, and are convertible until maturity at the holders’ discretion into shares of Brazil Interactive Media, Inc., now American Cannabis Company, Inc.’s common stock at $0.08 per share. Brazil Interactive Media, Inc.’s share price on April 24, 2014 was $0.24 and accordingly, the intrinsic value of the beneficial conversion feature attached to these convertible notes payable was $590,000. However as the amount of debt discount to be recognized cannot exceed the face value of the convertible notes payable, the convertible notes payable were discounted by the maximum permissible amount of $395,000 due to the intrinsic value of the beneficial conversion option. | |
During the period from April 24, 2014 through the effective date of the Reverse Merger, September 29, 2014, no convertible notes payable were converted into shares of Brazil Interactive Media, Inc. common stock and $84,836 debt discount was amortized during the period. Accordingly, as the effective date of the Reverse Merger, September 29, 2014, a total of $395,000 of convertible notes payable and unamortized debt discount of $310,164 was recognized in the Company’s consolidated financial statements. | |
During the period from September 29, 2014 to December 31, 2014, $323,500 of the convertible notes payable were converted into 4,043,750 shares of common stock and $263,215 of debt discounted was amortized in the period. The balance of unamortized debt discount outstanding in respect of convertible notes payable that converted into shares of American Cannabis Company, Inc. common stock was amortized in full at the date of conversion. | |
As of December 31, 2014, the remaining convertible notes payable had a $71,500 face value and a discount of $46,949, for a net carrying value of $24,551 that is reflected on the Company’s consolidated balance sheet as Convertible notes payable, net. The convertible notes payable are convertible into 893,750 shares of American Cannabis Company, Inc. common stock. | |
On May 15, 2014, as a result of the issuance of the convertible notes payable, a secured promissory note that American Cannabis Consulting had originally entered into on March 21, 2014 was deemed to be fully satisfied. This secured promissory note had a principal amount of $35,000 and an interest rate of 5% per annum. The Company recorded interest expense related to this note of $261 during the year ended December 31, 2014. The Company recorded a gain on debt extinguishment of $35,000 during the year ended December 31, 2014. |
8_Accrued_and_Other_Current_Li
8. Accrued and Other Current Liabilities | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Payables and Accruals [Abstract] | |||||||||
8. Accrued and Other Current Liabilities | Note 8. Accrued and Other Current Liabilities | ||||||||
Accrued and other current liabilities consisted of the following: | |||||||||
December 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
Accrued legal fees | $ | 101,509 | $ | 1,654 | |||||
Accrued payroll liabilities | 11,522 | — | |||||||
Accrued accounting fees | 5,000 | 636 | |||||||
Due to directors | 1,999 | 3,006 | |||||||
Other | 5,488 | 44 | |||||||
Accrued and other current liabilities | $ | 125,518 | $ | 5,340 | |||||
9_Net_Income_Loss_per_Common_S
9. Net Income (Loss) per Common Share | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | |||||||||
9. Net Income (Loss) per Common Share | Note 9. Net Income (Loss) per Common Share | ||||||||
The following is a reconciliation of weighted common shares outstanding used in the calculation of basic and diluted net income (loss) per common share: | |||||||||
5-Mar-13 | |||||||||
Year Ended | (Inception) Through | ||||||||
31-Dec-14 | 31-Dec-13 | ||||||||
Net income (loss) | $ | (3,619,192 | ) | $ | 18,941 | ||||
Weighted average shares used for basic net income (loss) per common share | 32,545,546 | 25,368,502 | |||||||
Incremental diluted shares | — | — | |||||||
Weighted average shares used for diluted net income (loss) per common share | 32,545,546 | 25,368,502 | |||||||
Net income (loss) per common share: | |||||||||
Basic | $ | (0.11 | ) | $ | 0 | * | |||
Diluted | $ | (0.11 | ) | $ | 0 | * | |||
*denotes net income of less than $0.01 per common share. | |||||||||
As a result of the net loss for the year, the Company excluded a weighted average of 681,569 shares from its calculation of diluted net loss per common share for the year ended December 31, 2014 because their effect would have been antidilutive. These shares were comprised on 38,225 shares of restricted stock, 26,289 of warrants and 617,055 of share equivalents associated with convertible notes payable. No potentially dilutive shares were issued or outstanding during 2013. |
10_Related_Party_Transactions
10. Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
10. Related Party Transactions | Note 10. Related Party Transactions |
From time to time, the Company purchases inventory and equipment from Baroud Development Group, in which Anthony Baroud, the Company’s Chief Technology Officer and a Director of the Company, is an owner. During the year ended December 31, 2014, total such purchases were $40,715. No such transactions occurred during 2013. | |
During the year ended December 31, 2014, prior to the Reverse Merger, the Company distributed a total of $4,000 to its co-founders and owners, Corey Hollister and Ellis Smith. During the period from March 5, 2013 through December 31, 2013, the Company distributed a total of $11,362 to the same stockholders. | |
During the year ended December 31, 2014, the Company incurred $48,527 of expense payable to New Era CPAs, an accounting firm in which Antonio Migliarese, the Company’s Chief Financial Officer, is a partner. Of this balance, $30,227 was payable in cash and 30,000 shares of the Company’s common stock, valued at $18,300, was issuable as of December 31, 2014. |
11_Commitments_and_Contingenci
11. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |
11. Commitments and Contingencies | Note 11. Commitments and Contingencies |
Under the terms of the Company’s agreement with the manufacturer of its exit packing product, the Satchel™, the Company is committed to the purchase of a total of 500,000 units at a price per unit of $1.00. As of December 31, 2014, a total of 444,000 units had yet to be received, for a remaining purchase commitment of $444,000. As of the date of this report, the manufacturer has not met the delivery schedule established under the agreement, which represents a mutual breach of the agreement under its terms. | |
Under the terms of the Company’s various consulting agreements with clients, the Company is obligated to perform certain future services. The Company is not currently a party to any pending legal proceedings. |
12_Stockbased_Compensation
12. Stock-based Compensation | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Equity [Abstract] | |||||||||||
12. Stock-based Compensation | Note 12. Stock-based Compensation | ||||||||||
During the year ended December 31, 2014, the Company recorded a total of $3,320,328 of stock-based compensation expense, which was the result of the following activity: | |||||||||||
Restricted Shares | |||||||||||
From time to time, the Company grants certain employees restricted shares of its common stock to provide further compensation in-lieu of wages and to align the employee’s interests with the interests of its stockholders. Because vesting is based on continued employment, these equity-based incentives are also intended to attract, retain and motivate personnel upon whose judgment, initiative and effort the Company’s success is largely dependent. There were 150,000 restricted shares granted as of December 31, 2014. The fair value of restricted stock units is determined based on the quoted closing price of the Company’s common stock on the date of grant. | |||||||||||
The following table summarizes the Company’s restricted share award activity during the year ended December 31, 2014: | |||||||||||
Weighted Average | |||||||||||
Restricted Shares | Grant Date | ||||||||||
Common Stock | Fair Value | ||||||||||
Outstanding unvested at December 31, 2013 | — | $ | — | ||||||||
Granted | 150,000 | 0.94 | |||||||||
Vested restricted shares | — | — | |||||||||
Forfeited | — | — | |||||||||
Outstanding unvested at December 31, 2014 | 150,000 | $ | 0.94 | ||||||||
During the year ended December 31, 2014, the Company granted 150,000 restricted shares that best one year from issuance and recognized $40,903 in associated stock-based compensation expense, which is reflected on the consolidated statement of operations for the period as a component of cost of consulting services. The Company had no restricted share activity during 2013 and no restricted share outstanding as of December 31, 2013. | |||||||||||
Unrecognized stock-based compensation expense related to outstanding unvested restricted shares as of December 31, 2014 is expected to be recognized over a weighted average period of 0.8 years, as follows: | |||||||||||
Future Stock-Based | |||||||||||
Compensation Expense | |||||||||||
(Restricted Shares) | |||||||||||
2015 | $ | 100,597 | |||||||||
Thereafter | — | ||||||||||
Total | $ | 100,597 | |||||||||
Warrants | |||||||||||
In connection with his appointment to the Company’s board of directors, the Company granted its independent board member, Vincent “Tripp” Keber, warrants to purchase up to two hundred and fifty thousand (250,000) shares of common stock at an exercise price of sixty-three cents ($0.63) per share, exercisable within five (5) years of the date of issuance on November 19, 2014. | |||||||||||
The Company uses the Black-Scholes valuation model to determine the fair value of warrants as of the grant date. Assumptions used in this calculation for the warrant award to purchase 250,000 shares of common stock include expected volatility of 160.7%, based on an average of historical data of the Company’s stock price and the stock prices of three comparable companies that are also included in the marijuana index, a risk-free rate of 1.62%, based on U.S. Treasury yields as published by the Federal Reserve, a dividend yield of 0.0%, as the Company has not historically paid dividends nor does it have any plans to do so in the foreseeable future, and an expected term of five years. The grant date fair value of the warrants, as calculated based on these assumptions, was $0.59 per share. | |||||||||||
The following table summarizes the Company’s warrant award activity during the year ended December 31, 2014: | |||||||||||
Weighted Average | |||||||||||
Common Stock | Grant Date | ||||||||||
Warrants | Fair Value | ||||||||||
Outstanding at December 31, 2013 | — | $ | — | ||||||||
Granted | 250,000 | 0.59 | |||||||||
Exercised | — | — | |||||||||
Expired or forfeited | — | — | |||||||||
Outstanding at December 31, 2014 | 250,000 | $ | 0.59 | ||||||||
Vested at December 31, 2014 | 250,000 | $ | 0.59 | ||||||||
Unvested at December 31, 2014 | — | — | |||||||||
Compensation expense associated with the 250,000 warrants issued during the year ended December 31, 2014 was $146,551 for the year ended December 31, 2014 and is reflected on the consolidated statement of operations as a component of general and administrative expenses. No warrants were issued or outstanding during 2013, and accordingly, there was no compensation expense associated with warrants for the period from Inception (March 5, 2013) through December 31, 2013. | |||||||||||
As of December 31, 2014, as the exercise price per share exceeded the price per share of our common shares, there was no aggregate intrinsic value of outstanding warrants. As of December 31, 2014, the warrants had a remaining 4.9 years until expiration. | |||||||||||
Stock Options | |||||||||||
In addition to the warrants issued as described above, Mr. Keber shall be eligible to receive options for 400,000 shares of common stock under the Company’s incentive plan, as and when duly approved by the Board of Directors. As these stock options were not granted as of December 31, 2014, no expense in relation to these options was recognized in the year ended December 31, 2014. | |||||||||||
Employee Shares Issued Prior to Reverse Merger | |||||||||||
On May 2, 2014, prior to the Reverse Merger, the Company granted 2,000 total shares of its then Hollister & Blacksmith, Inc. common shares to three employees for $200. The Company collected the purchase price for 500 of these shares from two employees; full value and consideration has not been received for the remaining 1,500 shares. Because this transaction occurred after the signature of a letter of intent and shortly prior to the announcement of the Reverse Merger on May 15, 2014, the Company based its determination of the fair value of this grant on the 3,171.0628 to 1 share exchange that the Reverse Merger would effect. Accordingly, the Company recorded stock-based compensation for the three grants of $3,132,874 in the fourth quarter of 2014, which is reflected within general and administrative expenses on the consolidated statement of operations. The Company changed its assessment of fair value associated with this grant during the fourth quarter of 2014; during the second quarter of 2014, the grant was recorded based on the price charged to the employee, which in turn was based on an estimate of the fair value of common shares of Hollister & Blacksmith, Inc. without considering the impact of the Reverse Merger. |
13_Income_Taxes
13. Income Taxes | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Income Tax Disclosure [Abstract] | |||||
13. Income Taxes | Note 13. Income Taxes | ||||
As part of the Reverse Merger, the Company’s corporate status changed from an S-Corporation, which it had been since inception, to a C-Corporation. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S-Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S-Corporation’s taxable income. Accordingly, the Company was only subject to income taxes for a portion of the year ended December 31, 2014 and was not subject to income taxes during the period from Inception (March 5, 2013) through December 31, 2013. | |||||
The following table displays a reconciliation from the U.S. statutory rate of 39% to the effective tax rate and the provision for (benefit from) income taxes for the year ended December 31, 2014: | |||||
December 31, | |||||
2014 | |||||
Income tax benefit at U.S. statutory rate | $ | (1,387,881 | ) | ||
State and local income tax benefit | (164,766 | ) | |||
Stock-based compensation expense | 1,448,659 | ||||
Bad debt expense | 4,074 | ||||
Non-deductible expenses | 1,461 | ||||
Benefit from income taxes at effective rate, pre-valuation allowance | $ | (98,453 | ) | ||
Valuation allowance | 98,453 | ||||
Benefit from income taxes | $ | — | |||
Due to cumulative net losses since the change in our corporate status to a C-Corporation, the Company determined that it is not more likely than not that its deferred tax asset would be realizable. Accordingly, the Company recorded a valuation allowance for the full amount of its deferred tax asset, resulting in a zero carrying value of the Company’s deferred tax asset and no benefit from or provision for income taxes for the year ended December 31, 2014. As of December 31, 2014, the carrying value of the Company’s deferred tax assets was zero due to the valuation allowance. Federal and state net operating loss carryforwards of $98,453 as of December 31, 2014 expire in 2034. |
14_Stockholders_Equity
14. Stockholders Equity | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
14. Stockholders Equity | Note 14. Stockholders’ Equity |
Preferred Stock | |
American Cannabis Company, Inc. is authorized to issue 5,000,000 shares of preferred stock at $0.01 par value. | |
No shares of preferred stock were issued and outstanding during the year ended December 31, 2014 or the period from Inception (March 5, 2013) to December 31, 2013. | |
Common Stock | |
In connection with the September 29, 2014 Reverse Merger as described in Note 1. “Description of the Business”, American Cannabis Consulting was deemed to have been the accounting acquirer in accordance with U.S. GAAP. Consequently, the Company’s consolidated financial statements reflect the results of American Cannabis Consulting since Inception (March 5, 2013) and of American Cannabis Company, Inc. (formerly BIMI) from September 29, 2014 to December 31, 2014. | |
As a reverse triangular merger, the Reverse Merger resulted in a recapitalization of American Cannabis Company, Inc. (formerly BIMI). This recapitalization included retrospective restatement of all stock issuance by American Cannabis Consulting from Inception (March 5, 2013), whereby the issued and outstanding shares of American Cannabis Consulting common stock were retrospectively restated for a 1:3,171.0628 forward share split to recognize the exchange ratio associated with the Reverse Merger, and, for the change in the par value of shares issued in connection with the Reverse Merger. | |
American Cannabis Company, Inc. is authorized to issue 100,000,000 common shares at $0.00001 par value per share. | |
On March 5, 2013, American Cannabis Consulting sold 23,368,502 shares of its common stock to its Founders for cash consideration of $800. | |
On May 2, 2014, prior to the Reverse Merger, the Company granted 2,000 total shares of its Hollister & Blacksmith, Inc. common stock to employees in exchange for $200. As a result of the 3,171.0628 to 1 exchange ratio associated with the Reverse Merger, these shares converted into 6,342,126 shares of Brazil Interactive Media, Inc. The Company recognized the net grant date fair value of the shares of $3,133,073 in equity as increases to common stock and additional paid-in capital of $64 and $3,133,009, respectively. | |
On the date of the Reverse Merger, an additional 8,714,372 shares are recorded as being issued to the existing shareholders of BIMI, and accordingly, $87 of common stock was recorded (8,714,372 shares issued multiplied by the $0.00001 par value) and additional paid-in capital of $5,258 was recorded, reflecting the net assets assumed from BIMI in connection with the Reverse Merger. | |
During the year ended December 31, 2014: | |
• Stock-based compensation associated with 150,000 restricted share grants to employees resulted in an increase to additional paid-in capital of $40,903 | |
• Stock-based compensation associated with 250,000 warrants issued to a director resulted in an increase to additional paid-in capital of $146,551 | |
• 50,000 shares of common stock, valued at $31,500, were issued as compensation for professional services settled in stock in lieu of cash | |
• 30,000 shares of common stock, valued at $18,300, were issuable to an accounting firm in which the Company’s Chief Financial Officer is a partner as compensation for professional services to be settled in stock in lieu of cash, and | |
• 4,043,750 shares of common stock were issued in settlement of convertible notes payable totaling $323,500, which resulted in an increase to common stock of $40 (4,043,750 shares issued multiplied by the par value of $0.00001) and an increase to additional paid-in capital of $323,460. | |
As a result of the transactions described above, as of December 31, 2014, there were 44,518,750 shares of our common stock issued and outstanding and the balances of common stock and additional paid-in capital were $446 and $3,699,526, respectively. | |
As of December 31, 2013, the Company had 25,368,502 common shares issued and outstanding. |
15_Reportable_Segments
15. Reportable Segments | 12 Months Ended |
Dec. 31, 2014 | |
Segment Reporting [Abstract] | |
15. Reportable Segments | Note 15. Reportable Segments |
The Company operates in one segment, in the regulated cannabis industry, as a provider of professional consulting services, products and equipment. |
16_Subsequent_Events
16. Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
17. Subsequent Events | Note 16. Subsequent Events |
During the first quarter of 2015, the Company agreed to issue 833,333 shares to a private investor at $0.30 per share, for total proceeds of $250,000. Also during the first quarter of 2015, 125,000 shares of previously issued common stock were rescinded and canceled. | |
SUPPLEMENTARY DATA | |
The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting |
The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company has elected a fiscal year ending on December 31. | |
Consolidation | The Company’s consolidated financial statements include the results of American Cannabis Consulting since Inception (March 5, 2013) and of American Cannabis Company, Inc. (formerly BIMI) from September 29, 2014 to December 31, 2014. All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates in Financial Reporting | Use of Estimates in Financial Reporting |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the financial statements. | |
Cash and Cash Equivalents | Cash and Cash Equivalents |
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating accounts at a major financial institution. | |
Restricted Cash | Restricted Cash |
Restricted cash is recorded at cost, which approximates fair value. There was no restricted cash included in current assets on our consolidated balance sheets as of December 31, 2014 and December 31, 2013. Restricted cash previously related to remaining proceeds from a short-term note entered into on March 21, 2014 and fully satisfied on May 15, 2014 (see Note 7. Convertible Notes Payable). | |
Inventory | Inventory |
Inventory is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost, based on the specific identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of December 31, 2014, market values of all of the Company’s inventory were greater than cost, and accordingly, no such valuation allowances was recognized. The Company did not hold any inventory as of December 31, 2013. | |
Deposits | Deposits |
Deposits is comprised of advance payments made to third parties, primarily for inventory for which the Company has not yet taken title. When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon sale (see “Costs of Revenues” below). | |
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets |
Prepaid expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract or service period. | |
Accounts Receivable | Accounts Receivable |
Accounts receivable are recorded at the net value of face amount less an allowance for doubtful accounts. The Company evaluates its accounts receivable periodically based on specific identification of any accounts receivable for which the Company deems the net realizable value to be less than the gross amount of accounts receivable recorded; in these cases,an allowance for doubtful accounts is established for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant services. | |
The allowance for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2014 the Company’s allowance for doubtful accounts was $9,338 and there was no allowance for doubtful accounts as of December 31, 2013. The Company recorded bad debt expense of $9,338 during the year ended December 31, 2014, which is reflected as a component of general and administrative expenses on the consolidated statement of operations, and did not record any bad debt expense during the period from Inception (March 5, 2013) through December 31, 2013. | |
Significant Clients and Customers | Significant Clients and Customers |
For the year ended December 31, 2014, two customers individually accounted for 10% or more of the Company’s revenues: Organigram, Inc. and Minnesota Medical Solutions, LLC accounted for approximately 30% and 22% of revenues for the year, respectively. For the period from Inception (March 5, 2013) through December 31, 2013, three customers individually accounted for 10% or more of the Company’s revenues: Connecticut Pharmaceutical Connections, LLC, Andrew Levine and Medicinal Evolution, Inc. accounted for approximately 33%, 19% and 11% of revenues for the period, respectively. | |
As of December 31, 2014, three customers accounted for 10% or more of the Company’s accounts receivable balance: Clare Court, LLC, HW Wellness and The Grove Wellness Center accounted for approximately 58%, 19% and 11% of the accounts receivable balance, respectively. As of December 31, 2013, one client, Organigram, Inc., represented 100% of its gross accounts receivable balance of $1,250. | |
Property and Equipment, net | Property and Equipment, net |
Property and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins once the underlying asset is placed into service. As of December 31, 2014, the Company had capitalized $40,051 of costs associated with the construction of a demonstration inventory unit; this asset had yet to be placed into service as of December 31, 2014, and accordingly, no depreciation expense was recorded related to this asset during the year ended December 31, 2014. Property and equipment is reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company had not capitalized any interest as of December 31, 2014 and 2013. | |
Accounting for the Impairment of Long-Lived Assets | Accounting for the Impairment of Long-Lived Assets |
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company did not record any impairment charges related to long-lived assets during the year ended December 31, 2014 or from the period from Inception (March 5, 2013) through December 31, 2013. | |
Beneficial Conversion Feature | Beneficial Conversion Feature |
If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. | |
Revenue Recognition | Revenue Recognition |
Revenue is recognized in accordance with FASB ASC Topic 605, Revenue Recognition. The Company recognizes revenue when persuasive evidence of an arrangement exists, the related services are rendered or delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. | |
The Company primarily generates revenues from professional services consulting agreements. These arrangements are generally entered into on a time basis, for a fixed-fee or on a contingent fee basis. Generally, a prepayment or retainer is required prior to performing services. | |
Revenues from time-based engagements are recognized as the hours are incurred by the Company. | |
Revenues from fixed-fee engagements are recognized under the completed or proportional performance methods. Management reviews arrangement to determine whether or not the fixed-fee is for a final deliverable or act which is significant to the arrangement as a whole. If it is, revenue is recognized under the completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered. Revenue recognized under the proportional performance method is recognized as services are performed. Under this method, the Company estimates the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable in order to determine the amount of revenue to be recognized. Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. During the year ended December 31, 2014 and the period from Inception (March 5, 2013) through December 31, 2013, no such losses have occurred. The Company believes if an engagement terminates prior to completion it can recover the costs incurred related to the services provided. | |
The Company occasionally enters into arrangements for which revenues are contingent upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability is reasonably assured. | |
The Company’s arrangements with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when each element is sold separately or by other vendor-specific objective evidence (“VSOE”), or estimates of stand-alone selling prices. Revenues are recognized in accordance with the Company’s accounting policies for the elements as described above. The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price. | |
While assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily identifiable as the Company also sells those elements individually outside of a multiple services engagement. Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable by either party upon sufficient notice and do not include provisions for refunds relating to services provided. | |
Differences between the timing of billings and the recognition of revenue are recognized as either unbilled revenue (a component of accounts receivable) or deferred revenue on the consolidated balance sheet. Revenues recognized for services performed but not yet billed to clients are recorded as unbilled revenue. | |
Reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically, an equivalent amount of reimbursable expenses are included in total direct client service costs. Reimbursable expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities are presented in the statement of operations on a net basis. | |
Revenue from product and equipment sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with origin terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer. During the year ended December 31, 2014 and the period from Inception (March 5, 2013) through December 31, 2013, sales returns were not significant and as such, no sales return allowance had been recorded as of December 31, 2014 and 2013. | |
Costs of Revenues | Costs of Revenues |
The Company’s policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred. | |
Advertising and Promotion Costs | Advertising and Promotion Costs |
Advertising and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year ended December 31, 2014, these costs were $29,858. There were no such costs during fiscal 2013. | |
Shipping and Handling Costs | Shipping and Handling Costs |
For product and equipment sales, shipping and handling costs are included as a component of cost of revenues. | |
Stock-Based Compensation | Stock-Based Compensation |
Restricted shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting period. The fair value of the grant is based on the stock price on the date of grant. The Company recognizes related compensation costs on a straight-line basis over the requisite vesting period of the award. During the year ended December 31, 2014, stock-based compensation expense for restricted shares was $40,903. Compensation expense for warrants and options is based on the fair value of the instruments on the grant date, which is determined using the Black-Scholes valuation model. During the year ended December 31, 2014, compensation expense for warrants was $146,551 and no stock options had been granted at that date. Compensation expense for common shares of stock is based on an assessment of fair value as of the grant date and is recognized over the vesting period, or if the common shares immediately vest, is recognized in full upon the grant. There were no grants of any kind during or outstanding for the period from Inception (March 5, 2013) through December 31, 2013, and accordingly, no stock-based compensation costs for the period. | |
Income Taxes | Income Taxes |
The Company’s corporate status changed from an S-Corporation, which it had been since inception, to a C-Corporation during the year ended December 31, 2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S-Corporations are not subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S-Corporation’s taxable income. Accordingly, we were only subject to income taxes for a portion of 2014. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. For the year ended December 31, 2014, due to cumulative losses since our corporate status changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of December 31, 2014, we had no liabilities related to federal or state income taxes and the carrying value of our deferred tax asset was zero. | |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share |
The Company reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings. | |
Related Party Transactions | Related Party Transactions |
The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. | |
Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | |
Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | |
See Note 10. Related Party Transactions for associated disclosures. | |
Reclassifications | Reclassifications |
Certain balance sheet reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets. | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). By incorporating and expanding upon certain principles that are currently in U.S. auditing standards, ASU 2014-15 requires management to assess whether there is substantial doubt about the entity’s ability to continue as a going concern . Specifically, ASU 2014-15 (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has not elected to early adopt the provisions of ASU 2014-15, and accordingly, the requirements of ASU 2014-15 will apply beginning with the year ended December 31, 2017. The Company is currently evaluating the effects, if any, that the application of ASU 2014-15 will have on disclosures associated with its consolidated financial statements. | |
In May 2014, the FASB issued ASU 2014-9 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-9”), which provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. This guidance is effective for annual reporting and interim periods beginning after December 15, 2016 and allows for either full retrospective or modified retrospective application, with early adoption not permitted. Accordingly, the standard becomes effective for the Company on January 1, 2017. The Company is currently evaluating the adoption method it will apply and the impact that this guidance will have on its consolidated financial statements and related disclosures. |
3_Accounts_Receivable_net_Tabl
3. Accounts Receivable, net (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Receivables [Abstract] | |||||||||
Accounts Receivable | December 31, | December 31, | |||||||
2014 | 2013 | ||||||||
Gross accounts receivable | $ | 66,980 | $ | 1,250 | |||||
Less: allowance for doubtful accounts | (9,338 | ) | — | ||||||
Accounts receivable, net | $ | 57,642 | $ | 1,250 |
4_Deposits_Tables
4. Deposits (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Banking and Thrift [Abstract] | |||||||||
Deposits | December 31, | December 31, | |||||||
2014 | 2013 | ||||||||
Inventory deposits | $ | 179,941 | $ | — | |||||
Operating lease deposits | 2,000 | — | |||||||
Deposits | $ | 181,941 | $ | — |
6_Property_and_Equipment_net_T
6. Property and Equipment, net (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Property and Equipment, Net | December 31, | December 31, | |||||||
2014 | 2013 | ||||||||
Office equipment | $ | 5,742 | $ | 2,250 | |||||
Furniture and fixtures | 2,935 | — | |||||||
Machinery and equipment | 1,250 | — | |||||||
Construction in Progress | 40,051 | — | |||||||
Property and equipment, gross | 49,978 | 2,250 | |||||||
Less: accumulated depreciation | (1,562 | ) | (485 | ) | |||||
Property and equipment, net | $ | 48,416 | $ | 1,765 |
8_Accrued_and_Other_Current_Li1
8. Accrued and Other Current Liabilities (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Payables and Accruals [Abstract] | |||||||||
Accrued and Other Current Liabilities | December 31, | December 31, | |||||||
2014 | 2013 | ||||||||
Accrued legal fees | $ | 101,509 | $ | 1,654 | |||||
Accrued payroll liabilities | 11,522 | — | |||||||
Accrued accounting fees | 5,000 | 636 | |||||||
Due to directors | 1,999 | 3,006 | |||||||
Other | 5,488 | 44 | |||||||
Accrued and other current liabilities | $ | 125,518 | $ | 5,340 |
9_Net_Income_Loss_per_Common_S1
9. Net Income (Loss) per Common Share (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Net Income (Loss) Per Common Share | 5-Mar-13 | ||||||||
Year Ended | (Inception) Through | ||||||||
31-Dec-14 | 31-Dec-13 | ||||||||
Net income (loss) | $ | (3,619,192 | ) | $ | 18,941 | ||||
Weighted average shares used for basic net income (loss) per common share | 32,545,546 | 25,368,502 | |||||||
Incremental diluted shares | — | — | |||||||
Weighted average shares used for diluted net income (loss) per common share | 32,545,546 | 25,368,502 | |||||||
Net income (loss) per common share: | |||||||||
Basic | $ | (0.11 | ) | $ | 0 | * | |||
Diluted | $ | (0.11 | ) | $ | 0 | * | |||
*denotes income of less than $(0.01) per common share. |
12_Stockbased_Compensation_Tab
12. Stock-based Compensation (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2014 | |||||||||||
Equity [Abstract] | |||||||||||
Restricted Share Award Activity | Weighted Average | ||||||||||
Restricted Shares | Grant Date | ||||||||||
Common Stock | Fair Value | ||||||||||
Outstanding unvested at December 31, 2013 | — | $ | — | ||||||||
Granted | 150,000 | 0.94 | |||||||||
Vested restricted shares | — | — | |||||||||
Forfeited | — | — | |||||||||
Outstanding unvested at December 31, 2014 | 150,000 | $ | 0.94 | ||||||||
Unrecognized Stock-Based Compensation Expense | Future Stock-Based | ||||||||||
Compensation Expense | |||||||||||
(Restricted Shares) | |||||||||||
2015 | $ | 100,597 | |||||||||
Thereafter | — | ||||||||||
Total | $ | 100,597 | |||||||||
Warrant Award Activity | Weighted Average | ||||||||||
Common Stock | Grant Date | ||||||||||
Warrants | Fair Value | ||||||||||
Outstanding at December 31, 2013 | — | $ | — | ||||||||
Granted | 650,000 | 0.28 | |||||||||
Exercised | — | — | |||||||||
Expired or forfeited | — | — | |||||||||
Outstanding at December 31, 2014 | 650,000 | $ | 0.28 | ||||||||
Vested at December 31, 2014 | 300,000 | $ | 0.35 | ||||||||
Unvested at December 31, 2014 | 350,000 | $ | 0.23 | ||||||||
Compensation expense associated with warrants was $7,371 for the year ended December 31, 2014 and is reflected on the consolidated statement of operations as a component of general and administrative expenses. No warrants were issued or outstanding during 2013, and accordingly, there was no compensation expense associated with warrants for the period from inception (March 5, 2013) through December 31, 2013. | |||||||||||
As of December 31, 2014, as the exercise price per share exceeded the price per share of our common shares, there was no aggregate intrinsic value of outstanding warrants. |
13_Income_Taxes_Tables
13. Income Taxes (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Income Tax Disclosure [Abstract] | |||||
Income Taxes | Year Ended | ||||
December 31, | |||||
2014 | |||||
Income tax benefit at U.S. statutory rate | $ | (1,387,881 | ) | ||
State and local income tax benefit | (164,766 | ) | |||
Stock-based compensation expense | 1,448,659 | ||||
Bad debt expense | 4,074 | ||||
Non-deductible expenses | 1,461 | ||||
Benefit from income taxes at effective rate, pre-valuation allowance | $ | (98,453 | ) | ||
Valuation allowance | 98,453 | ||||
Benefit from income taxes | $ | — |
1_Description_of_Business_Deta
1. Description of Business (Details Narrative) | Dec. 31, 2014 |
Description Of Business Details Narrative | |
Subsidiary Ownership, Shares | 31,710,628 |
Subsidiary Ownership, Percentage | 78.44% |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Allowance for Doubtful Accounts | $9,338 | |
Bad Debt Expense | 0 | 9,338 |
Advertising and Promotion Costs | 29,858 | |
Stock Based Compensation Expense | 40,903 | |
Compensation Expense for Warrants and Options | 146,551 | |
Capitalized Construction Costs | 40,051 | |
Organigram, Inc. | ||
Concentration Risk Percentage | 30.00% | |
Concentration of Risk Accounts Receivable | $1,250 | |
Minnesota Medical Solutions | ||
Concentration Risk Percentage | 22.00% | |
Connecticut Pharmaceutical Connections | ||
Concentration Risk Percentage | 33.00% | |
Andrew Levine | ||
Concentration Risk Percentage | 19.00% | |
Medicinal Evolution | ||
Concentration Risk Percentage | 11.00% | |
Clare Court | ||
Concentration Risk Percentage | 58.00% | |
HW Wellness | ||
Concentration Risk Percentage | 19.00% | |
Grove Wellness Center | ||
Concentration Risk Percentage | 11.00% |
3_Accounts_Receivable_net_Acco
3. Accounts Receivable, net - Accounts Receivable (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Receivables [Abstract] | ||
Gross accounts receivable | $66,980 | $1,250 |
Less: allowance for doubtful accounts | -9,338 | |
Accounts receivable, net | $57,642 | $1,250 |
3_Accounts_Receivable_net_Deta
3. Accounts Receivable, net (Details Narrative) (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Receivables [Abstract] | ||
Bad Debt Expense | $0 | $9,338 |
4_Deposits_Deposits_Details
4. Deposits - Deposits (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Banking and Thrift [Abstract] | ||
Inventory deposits | $179,941 | |
Operating lease deposits | 2,000 | |
Deposits | $181,941 |
5_Inventory_Details_Narrative
5. Inventory (Details Narrative) (USD $) | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | |
Finished Goods | $4,555 |
6_Property_and_Equipment_net_P
6. Property and Equipment, net - Property and Equipment, Net (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Property and equipment, gross | $49,978 | $2,250 |
Less: accumulated depreciation | -1,562 | -485 |
Property and equipment, net | 48,416 | 1,765 |
Office Equipment | ||
Property and equipment, gross | 5,742 | 2,250 |
Furniture and Fixtures | ||
Property and equipment, gross | 2,935 | |
Machinery and Equipment | ||
Property and equipment, gross | 1,250 | |
Construction in Progress [Member] | ||
Property and equipment, gross | $40,051 |
6_Property_and_Equipment_net_D
6. Property and Equipment, net (Details Narrative) (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation Expense | $486 | $1,077 |
Construction in Progress | $40,051 |
7_Convertible_Notes_Payable_De
7. Convertible Notes Payable (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2014 | Sep. 29, 2014 | Dec. 31, 2014 | Apr. 24, 2014 | |
Debt Disclosure [Abstract] | ||||
Convertible Debentures Issued | $71,500 | $71,500 | $395,000 | |
Conversion Rate | $0.08 | |||
Debt Discount | 46,949 | 46,949 | 395,000 | |
Beneifical Conversion Feature | 590,000 | |||
Convertible Debt, Net Value | 24,551 | 24,551 | ||
Amortization of Debt Discount | 263,215 | 348,051 | ||
Conversion of convertible notes payable to common shares, Shares | 893,750 | 4,043,750 | ||
Conversion of convertible notes payable to common shares, Value | 323,500 | 323,500 | ||
Interest Expense | $261 |
9_Accrued_and_Other_Current_Li
9. Accrued and Other Current Liabilities - Accrued and Other Current Liabilities (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Payables and Accruals [Abstract] | ||
Accrued legal fees | $101,509 | $1,654 |
Accrued payroll liabilities | 11,522 | |
Accrued accounting fees | 5,000 | 636 |
Due to directors | 1,999 | 3,006 |
Other | 5,488 | 44 |
Accrued and other current liabilities | $125,518 | $5,340 |
9_Net_Income_Loss_per_Common_S2
9. Net Income (Loss) per Common Share - Net Income (Loss) Per Common Share (Details) (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Earnings Per Share [Abstract] | ||
Net income (loss) | $18,941 | ($3,619,192) |
Weighted average shares used for basic net income (loss) per common share | 25,368,502 | 32,545,546 |
Incremental diluted shares | ||
Weighted average shares used for diluted net income (loss) per common share | 25,368,502 | 32,545,546 |
Net income (loss) per common share: | ||
Basic | $0 | ($0.11) |
Diluted | $0 | ($0.11) |
9_Net_Income_Loss_per_Common_S3
9. Net Income (Loss) per Common Share (Details Narrative) | 12 Months Ended |
Dec. 31, 2014 | |
Shares Excluded from Calculation of Diluted Net Income Per Share | 681,569 |
Restricted Stock [Member] | |
Shares Excluded from Calculation of Diluted Net Income Per Share | 38,225 |
Warrant [Member] | |
Shares Excluded from Calculation of Diluted Net Income Per Share | 26,289 |
Convertible Debt Securities [Member] | |
Shares Excluded from Calculation of Diluted Net Income Per Share | 617,055 |
10_Related_Party_Transactions_
10. Related Party Transactions (Details Narrative) (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Inventory and Equipment Purchases | $40,715 | |
Distribution to Owners | 11,362 | 4,000 |
Expense Payable, New Era CPAs | 48,527 | |
Cash Distribution [Member] | ||
Expense Payable, New Era CPAs | 30,227 | |
Common Stock Shares Issuable | ||
Expense Payable, New Era CPAs | $18,300 |
11_Commitments_and_Contingenci1
11. Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Units | |
Commitments And Contingencies Details Narrative | |
Purchase Commitment | 500,000 |
Price per Unit | $1 |
Remaining Purchase Commitment | $444,000 |
12_Stockbased_Compensation_Res
12. Stock-based Compensation - Restricted Share Award Activity (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
Outstanding Shares, Beginning | |
Outstanding Weighted Average Grant Date Fair Value, Beginning | |
Granted Shares | 150,000 |
Granted, Weighted Average Grant Date Fair Value | $0.94 |
Vested restricted shares, shares | |
Vested restricted shares, Weighted Average Grant Date Fair Value | |
Forfeited, Shares | |
Forfeited, Weighted Average Grant Date Fair Value | |
Outstanding Shares, End | 150,000 |
Outstanding Weighted Average Grant Date Fair Value, End | $0.94 |
12_Stockbased_Compensation_Unr
12. Stock-based Compensation - Unrecognized Stock-Based Compensation Expense (Details) (Restricted Stock [Member], USD $) | Dec. 31, 2014 |
Restricted Stock [Member] | |
2015 | $100,597 |
2019 |
12_Stockbased_Compensation_War
12. Stock-based Compensation - Warrant Award Activity (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
Warrants Outstanding, Shares, Beginning | |
Warrants Outstanding, Fair Value, Beginning | |
Granted, Shares | 250,000 |
Granted, Fair Value | $0.59 |
Exercised, Shares | |
Expired or Forfeited, Shares | |
Expired or Forfeited, Fair Value | |
Warrants Outstanding, Shares, Ending | 250,000 |
Warrants Outstanding, Fair Value, Ending | $0 |
Vested, Shares | 250,000 |
Vested, Fair value | $0.59 |
Unvested, Shares | |
Unvested, Fair Value |
12_Stockbased_Compensation_Det
12. Stock-based Compensation (Details Narrative) (USD $) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2014 | |
Stock based compensation expense | $3,320,328 | |
Warrants Vested | 250,000 | |
Compensation Expense | 146,551 | |
General and Administrative Expense | 13,530 | 3,675,313 |
Tripp Keber 1 | ||
Warrants Issued | 250,000 | |
Warrants Outstanding, Fair Value, Beginning | $0.63 | |
Warrants Vested | 250,000 | |
Expected Volatility | 160.70% | |
Risk-Free Rate | 1.62% | |
Dividend Yield | 0.00% | |
Grant Date Fair Value | $0.59 | |
Tripp Keber 2 | ||
Warrants Issued | 400,000 | |
Warrants Outstanding, Fair Value, Beginning | $0.63 | |
Restricted Stock [Member] | ||
Stock based compensation expense | 40,903 | |
General and Administrative Expense | $3,132,874 |
13_Income_Taxes_Income_Taxes_D
13. Income Taxes - Income Taxes (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |
Income tax benefit at U.S. statutory rate | ($1,387,881) |
State and local income tax benefit | -164,766 |
Stock-based compensation expense | 1,448,659 |
Bad debt expense | 4,074 |
Non-deductible expenses | 146100.00% |
Benefit from income taxes at effective rate, pre-valuation allowance | -9845300.00% |
Valuation allowance | 98,453 |
Benefit from income taxes |
13_Income_Taxes_Details_Narrat
13. Income Taxes (Details Narrative) (USD $) | Dec. 31, 2014 |
Income Tax Disclosure [Abstract] | |
Net Operating Loss Carryforwards | $98,453 |
14_Stockholders_Equity_Details
14. Stockholders Equity (Details Narrative) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | 2-May-14 | Dec. 31, 2013 | Mar. 06, 2013 | |
Equity [Abstract] | ||||
Preferred Stock Par Value | $0.01 | $0.01 | ||
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 | ||
Preferred Stock Shares Issued | 0 | 0 | ||
Preferred Stock Shares Outstanding | 0 | 0 | ||
Common stock Par Value | $0.00 | $0.00 | ||
Common Stock Shares Authorized | 100,000,000 | 100,000,000 | ||
Common Stock Shares Issued | 44,518,750 | 25,368,502 | ||
Common Stock Shares Outstanding | 44,518,750 | 25,368,502 | ||
Reverse Merger Disclosure | As a reverse triangular merger, the Reverse Merger resulted in a recapitalization of American Cannabis Company, Inc. (formerly BIMI). This recapitalization included retrospective restatement of all stock issuance by American Cannabis Consulting from Inception (March 5, 2013), whereby the issued and outstanding shares of American Cannabis Consulting common stock were retrospectively restated for a 1:3,171.0628 forward share split to recognize the exchange ratio associated with the Reverse Merger, and for the change in the par value of shares issued in connection with the Reverse Merger. | |||
Increase to Additional Paid-In Capital, Share Based Compensation | $48,273 | |||
Increase to Additional Paid-In Capital, Professional Services | 49,799 | |||
Conversion of Convertible Notes, Shares Issued | 4,043,750 | |||
Increase to Additional Paid-In Capital, Conversion of Convertible Debt | 323,460 | |||
Common Stock | 64 | |||
Additional Paid in Capital | 3,699,526 | 546 | 3,133,009 | |
Shares Sold | 23,368,502 | |||
Consideration Received in Sale of Stock | $800 | |||
Reduction to Common Stock Outstanding | 951,319 |
16_Subsequent_Events_Details_N
16. Subsequent Events (Details Narrative) (Subsequent Event [Member], USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Event [Member] | |
Shares Issued | 833,333 |
Price per Share | $0.30 |
Proceeds from Sale of Stock | $250,000 |