NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF OPERATIONS, HISTORY AND PRESENTATION
Nature of Operations
General Cannabis Corp, a Colorado Corporation (the Company, we, us, our, or GCC) (formerly, Advanced Cannabis Solutions, Inc.), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. On June 6, 2018 we began trading on the OTCQX® Best Market after upgrading from the OTCQB® Venture Market. Our operations are segregated into the following four segments:
Security and Cash Transportation Services (Security Segment)
We provide advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators, cannabis processing facilities and retail shops, under the business name Iron Protection Group (IPG) in California and Colorado, and security services to non-cannabis customers in Colorado, such as hotels, apartment buildings and retail, under the business name Mile High Protection Services (MHPS), which we acquired in August 2017.
Operations Consulting and Products (Operations Segment)
Through Next Big Crop (NBC), we deliver comprehensive consulting services to the cannabis industry that include obtaining licenses, compliance, cultivation, retail operations, logistical support, facility design and construction, and expansion of existing operations. During the 6 months ended June 30, 2019, 76% of NBCs revenue was with three customers.
NBC oversees our wholesale equipment and supply business, operated under the name GC Supply, which provides turnkey sourcing and stocking services to cultivation, retail and infused products manufacturing facilities. Our products include building materials, equipment, consumables and compliance packaging. There are generally multiple suppliers for the products we sell; however, there are a limited number of manufacturers of certain high-tech cultivation equipment.
Consumer Goods and Marketing Consulting (Consumer Goods Segment)
Our apparel business, Chiefton, has two primary revenue streams. Chiefton Supply strives to create innovative, unique t-shirts, hats, hoodies and accessories. Our apparel is sold through our on-line shop, cannabis retailers, non-cannabis retailers, and specialty t-shirt and gift shops. Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry, which frequently includes sourcing and selling customer-specific apparel and accessories.
Our CBD retail business, STOA Wellness, opened in July of 2019. STOA Wellness offers a curated collection of high quality CBD products for athletes and general wellness.
Capital Investments and Real Estate (Investments Segment)
As a publicly traded company, we believe that we have access to capital that may not be available to businesses operating in the cannabis industry. Accordingly, we may provide debt or equity capital through (a) loans or revolving lines of credit, (b) leasing real estate we own, or (c) investing in businesses using cash or shares of our common stock.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (SEC), for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America (U.S. GAAP) can be condensed or omitted. The condensed consolidated balance sheet for the year ended December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended December 31, 2018 which were included in the annual report on Form 10-K filed by the Company on March 8, 2019.
In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Companys financial position and operating results. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results for the year ending December 31, 2019, or any other interim or future periods.
8
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.
Going Concern
The condensed consolidated financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for at least the twelve months from the date these condensed consolidated financial statements are issued. Our cash of approximately $800,000 is not sufficient to absorb our operating losses and repay our debt of $1.1 million. The warrants associated with this debt, if exercised, would provide sufficient funds to retire the debt; however, there is no guarantee that these warrants will be exercised. Our ability to continue as a going concern is dependent upon our generating profitable operations in the future and / or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management believes that (a) we will be successful obtaining additional capital and (b) actions presently being taken to further implement our business plan and generate additional revenues provide opportunity for the Company to continue as a going concern. While we believe in the viability of our strategy to generate additional revenues and our ability to raise additional funds, there can be no assurances that we will be successful in such efforts. Accordingly, there is substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Related Parties
Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. We consider the following individuals / companies to be related parties:
·
Michael Feinsod
Chairman of our Board of Directors (Board).
·
Infinity Capital West, LLC (Infinity Capital)
An investment management company that was founded and is controlled by Michael Feinsod.
·
DB Arizona
A company that borrowed $825,000 from GC Finance Arizona. Prior to our purchase in June 2017, we did not possess the ability to influence DB Arizona and DB Arizona did not have the ability to influence us. We include DB Arizona as a related party due to our relationship with Michael Feinsod and Infinity Capital, and their relationship with DB Arizona.
Summary of Significant Accounting Policies
Since the date of the Annual Report, there have been no material changes to the Companys significant accounting policies, except as disclosed below.
Notes Receivable
We classify our notes receivable as held for investment, because we have the intent and ability to hold our notes receivable to maturity or settlement. Direct loan origination costs we incur are netted with loan origination fees we receive and the net amount, loan origination fees or costs, is included in notes receivable on the condensed consolidated balance sheets. The loan origination fees or costs are amortized over the term of the underlying note receivable and included in interest income in the condensed consolidated statements of operations. We record an allowance for credit losses, as needed, using the current expected credit losses impairment model (CECL Model). The CECL Model requires us to consider relevant information about past events, current conditions, and reasonable and supportable forecasts of factors that affect the expected collectability of notes receivable. There is no probability of loss threshold that must be met prior to recording an allowance for credit losses under the CECL Model. We may assess notes receivable for impairment either on an aggregated basis, if they have sufficiently similar characteristics, or on an individual basis. Increases or decreases to the allowance for credit losses, if any, are included in net loss in the condensed consolidated statements of operations.
Right-of-use Asset / Lease Liability
We adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-02 Leases (Topic 842) on January 1, 2019. We first evaluated our leases to determine whether they are classified as a finance lease or as an operating lease. A lease is a finance lease if any of the following criteria are met: (a) ownership transfers, (b) the lease includes an option to purchase
9
the underlying asset, (c) the lease term is for the major part of the remaining economic life of the underlying asset, (d) the present value of the lease payments equals or exceeds the fair value of the underlying asset, or (e) the underlying asset is of a specialized nature that is expected to have no alternative use to the lessor at the end of the lease term. All of our leases are classified as operating leases. We then determined whether the short-term exemption applies; that is, is the lease term 12 months or less and does not include a purchase option whose exercise is reasonably certain. If the short-term exemption applies then lease payments are recognized as expense and no asset or liability is recorded. If the short-term exemption does not apply, then we recorded an operating lease right-of-use asset and a corresponding operating lease liability equal to the present value of the lease payments. All of our leases entered into prior to 2019 met the short-term exemption, so modification to prior period financial position was is not required. The two year commercial real estate lease we entered into in February 2019 did not meet the short-term exemption and, accordingly, we recorded the present value of the lease payments as a right-of-use asset and a lease liability in the condensed consolidated balance sheet. We recognize rent expense on a straight-line basis over the life of the lease.
Fair Value of Financial Instruments
GAAP requires disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the consolidated balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.
In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including accounts receivable and accounts payable, the Company estimated that the carrying amount approximated fair value because of the short maturities of these instruments. All debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value.
GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs consist of items that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Companys assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below:
Level 1 Quoted prices in active markets for identical assets or liabilities. There are no fair valued assets or liabilities classified under Level 1 as of June 30, 2019 and December 31, 2018.
Level 2 Observable prices that are based on inputs not quoted on active markets but corroborated by market data. There are no fair valued assets or liabilities classified under Level 2 as of June 30, 2019 and December 31, 2018.
Level 3 Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs (see Note 9).
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Companys accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Companys accounting and finance department and are approved by the Chief Financial Officer.
Level 3 Valuation Techniques:
Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company deems financial instruments which do not have fixed settlement provisions to be derivative instruments. In accordance with U.S. GAAP the fair value of these warrants is classified as a liability on the Companys consolidated balance sheets because, according to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant holders. Such instruments do not have fixed settlement provisions and have also been recorded as derivative liabilities. Corresponding changes in the fair value of the derivative liabilities are recognized in earnings on the Companys consolidated statements of operations in each subsequent period.
The Companys derivative liabilities are carried at fair value and were classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs. In order to calculate fair value, the Company uses a standard Black-Scholes model.
10
Equity Instruments
Warrants with derivative features
When we raise capital by issuing warrants that do not have complex terms, they are recorded as additional paid in capital in our condensed consolidated balance sheet. When we issue warrants that have complex terms, such as a clause in which the warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash upon a fundamental transaction that is considered outside of the control of management, such as a change of control, the warrants are considered to be a derivative that are recorded as a liability at fair value. The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as expense or gain. Equity issuance costs associated with a capital raise transaction are allocated between expense and additional paid-in capital based on the relative fair value of the instruments being issued. The expense is included in amortization of debt discount and equity issuance costs on the condensed consolidated statements of operations, and the equity allocation as a reduction of additional paid-in capital in our condensed consolidated balance sheet.
NOTE 2. ACCOUNTS RECEIVABLE AND CUSTOMER DEPOSITS
Our accounts receivable consisted of the following:
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2019
|
|
2018
|
Accounts receivable
|
$
|
516,288
|
$
|
476,581
|
Less: Allowance for doubtful accounts
|
|
(166,000)
|
|
(61,000)
|
Total
|
$
|
350,288
|
$
|
415,581
|
We record bad debt expense when we conclude the credit risk of a customer indicates the amount due under the contract is not collectible. We recorded bad debt expense of $71,262 and $43,101, respectively, during the three months ended June 30, 2019 and 2018 and $103,262 and $110,615, respectively, during the six months ended June 30, 2019 and 2018.
As of June 30, 2019 and December 31, 2018, prepaid expenses and other current assets includes $0 and $18,164 of unbilled revenue, respectively, representing amounts for services completed but not billed.
Our deferred revenue and customer deposit liability had the following activity:
|
|
|
|
|
Amount
|
January 1, 2019
|
$
|
391,290
|
Additional deposits received
|
|
942,136
|
Less: Deposits recognized as revenue
|
|
(876,227)
|
June 30, 2019
|
$
|
457,199
|
NOTE 3. NOTES RECEIVABLE
As of June 30, 2019, our notes receivable consisted of the following:
|
|
|
CCR Note
|
$
|
375,000
|
BB Note
|
|
100,000
|
BRB Note
|
|
300,000
|
Total principal
|
|
775,000
|
Unamortized loan origination fee
|
|
(12,256)
|
|
|
762,744
|
Less: Current portion
|
|
(399,438)
|
Long-term portion
|
$
|
363,306
|
In March 2019, we agreed to loan $375,000 to Consolidated C.R., LLC (CCR) pursuant to the terms of a convertible promissory note (CCR Note), bearing interest at 12% per annum, collateralized by virtually all of the assets of CCR and a maturity date of November 2020. We had a 90 day option to convert $250,000 of principal under the CCR Note into a 10% equity ownership of CCR. This option was not exercised and has expired. CCR is a vertically integrated medical cannabis company located in San Juan, Puerto Rico. As of June 30, 2019, we had loaned $375,000, of which $155,000 was loaned in the first quarter, to CCR under the CCR Note. The CCR Note included a loan origination fee of $15,000, which is being recognized as interest income over the term of the agreement.
On January 3, 2019, we loaned $100,000 to Beacher Brewing, LLC (BB) pursuant to the terms of a promissory note (BB Note), bearing interest at 11% per annum and a maturity date of January 3, 2020.
On December 13, 2018, we loaned $50,000 to BRB Realty, LLC (BRB) pursuant to the terms of a promissory note (BRB Note), bearing interest at 13% per annum and a maturity date of June 12, 2019. On January 19, 2019 the BRB Note was amended with an additional loan amount of $250,000 bearing an interest rate of 13% and a new maturity date of July 15, 2019. On July 15, 2019, BRB Realty extended the maturity date, in accordance with the terms of the BRB Note, an additional six months with an increased interest rate to 15%. The BRB Note included a loan origination fee of $5,000, which is being recognized as interest income over the term of the agreement.
11
NOTE 4. OPERATING LEASE RIGHT-OF-USE ASSET / OPERATING LEASE LIABILITY
On February 1, 2019, we entered into a commercial real estate lease for 3,200 square feet of retail space in Greenvale, NY, with an initial term of two years and, at our option, two additional terms of five years each. Rent is $7,000 per month, as well as our portion of real estate taxes and common area maintenance. We determined the present value of the future lease payments using a discount rate of 8.5%, our incremental borrowing rate based on outstanding debt, resulting in an initial right-of-use asset and lease liability of $154,200, which are being applied ratably over the term of the lease. As of June 30, 2019, the balance of the right-of-use asset and lease liability was $122,075. Future remaining minimum lease payments were as follows:
|
|
|
Year ending December 31,
|
|
Amount
|
2019
|
$
|
42,000
|
2020
|
|
84,000
|
2021
|
|
7,000
|
|
|
133,000
|
Less: Present value adjustment
|
|
(10,925)
|
Operating lease liability
|
$
|
122,075
|
NOTE 5. ACCRUED STOCK PAYABLE
The following tables summarize the changes in accrued common stock payable:
|
|
|
|
|
|
|
Amount
|
|
Number of Shares
|
December 31, 2018
|
$
|
|
|
|
Employee stock award accrual
|
|
54,670
|
|
20,248
|
June 30, 2019
|
$
|
54,670
|
|
20,248
|
On January 31, 2019, we granted an employee $100,000 worth of our common stock, with half vesting over six months and half vesting over eighteen months. Based on a stock price of $2.70 on the date of grant, the employee would receive 37,038 shares of our common stock upon vesting. We are recognizing the value of the grant ratably over the vesting periods.
NOTE 6. NOTES PAYABLE
Our notes payable consisted of the following:
|
|
|
|
|
|
|
June 30,
|
|
December 31
|
|
|
2019
|
|
2018
|
8.5% Notes
|
$
|
1,106,000
|
$
|
6,849,000
|
Unamortized debt discount
|
|
|
|
(1,575,094)
|
|
|
1,106,000
|
|
5,273,906
|
Less: Current portion
|
|
(1,106,000)
|
|
(5,273,906)
|
Long-term portion
|
$
|
|
$
|
|
8.5% Notes
In April 2018, we completed a $7,500,000 private placement pursuant to a promissory note (8.5% Notes) and warrant purchase agreement (the 8.5% Agreement) with certain accredited investors, bearing interest at 8.5%, with principal due May 1, 2019, and interest payable quarterly. During the second quarter this note was extended to be due June 1, 2019. On June 6, 2019, we made payments of approximately $5.7 million, leaving approximately $1 million outstanding. The current note is in default, however we are in the process of re-negotiating the note. In the event of default, the interest rate increases to 18%. The 8.5% Notes are collateralized by a security interest in substantially all of our assets. We may prepay the 8.5% Notes at any time, but in any event must pay at least one year of interest.
Subject to the terms and conditions of the 8.5% Agreement, each investor was granted fully-vested warrants equal to their note principal times 80%, or six million warrants, with an exercise price of $2.35 per share and a life of two years (the 8.5% Warrants). Should we issue any equity-based instruments at a price lower than the exercise price(s) of the 8.5% Warrants, other than under our Incentive Plan (as defined below), the exercise price(s) of the 8.5% Warrants will be adjusted to the lower price. If the shares underlying the 8.5% Warrants were not registered for resale on a registration statement within six months, we would have issued an additional warrant to each purchaser at the same exercise price for one-half of the shares covered by the initial 8.5% Warrants. A registration statement related to the 8.5% Warrants was declared effective on June 5, 2018. We may call the 8.5% Warrants at $0.01 per share if our stock trades above $8.00 per share for 15 consecutive days. The 8.5% Warrants may be exercised at the option of the holder by paying cash or by applying the amount due under the 8.5% Notes as consideration.
12
We received $7,500,000 of cash for issuing the 8.5% Notes. The relative fair value of the 8.5% Warrants was recorded as a debt discount and additional paid-in capital of $5,366,000. For the three months ended June 30, 2019 and 2018, respectively, amortization of debt discount includes $403,538 and $1,013,261. For the six months ended June 30, 2019 and 2018, amortization of debt discount expense was $1,575,094 and $1,457,178, respectively, from the 8.5% Notes. The 8.5% Notes are otherwise treated as conventional debt.
For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 8.5% Warrants as of April 2018, were:
|
|
Current stock price
|
$ 4.18
|
Exercise price
|
$ 2.35
|
Risk-free interest rate
|
2.46 %
|
Expected dividend yield
|
|
Expected term (in years)
|
2.0
|
Expected volatility
|
134 %
|
Number of iterations
|
5
|
NOTE 7. WARRANT DERIVATIVE LIABILITY
The 2019 Warrants have been accounted for as a derivative liability. The 2019 Warrant agreements contain a cash settlement provision whereby the holders could settle the warrants for cash based on the Black-Scholes value, upon certain fundamental transactions, as defined in the 2019 Warrant agreement, that are considered outside of the control of management, such as a change of control.
The following are the key assumptions that were used to determine the fair value of the 2019 Warrants:
|
|
|
|
|
|
|
May 31,
2019
|
|
June 30,
2019
|
Number of shares underlying the warrants
|
|
3,000,000
|
|
3,000,000
|
Fair market value of stock
|
$
|
0.95
|
$
|
0.81
|
Exercise price
|
$
|
1.30
|
$
|
1.30
|
Volatility
|
|
133%
|
|
133%
|
Risk-free interest rate
|
|
1.93%
|
|
1.76%
|
Warrant life (years)
|
|
5.00
|
|
4.92
|
The following table sets forth a summary of the changes in the fair value of the warrant derivative liability, our Level 3 financial liabilities that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
Recognition of warrant derivative liability on May 31, 2019
|
|
2,416,422
|
|
|
|
2,416,422
|
|
|
Change in fair value of warrants derivative liability
|
|
(401,862)
|
|
|
|
(401,862)
|
|
|
Ending balance
|
$
|
2,014,560
|
$
|
|
$
|
2,014,560
|
$
|
|
NOTE 8. COMMITMENTS AND CONTINGENCIES
Legal
To the best of our knowledge and belief, no material legal proceedings of merit are currently pending or threatened.
NOTE 9. STOCKHOLDERS EQUITY
2019 Capital Raise
On May 31, 2019 we received gross proceeds of $3 million by issuing three million shares of our common stock and three million warrants (2019 Warrants) to purchase shares of our common stock (together 2019 Units) in a registered direct offering for $1.00 per 2019 Unit. The 2019 Warrants have an exercise price of $1.30 per share and are exercisable for five years from the date of issuance. We received cash of $2,604,355 which is net of $395,645 of issuance costs, of which $318,681 is included as amortization of debt discount and equity issuance costs and $76,964 is included as a reduction of additional paid in capital. We used a portion of the net proceeds from the issuance of the 2019 Units to pay down the 8.5% Notes by $5,743,000, leaving $1,106,000 outstanding.
13
Share-based compensation
We use the fair value method to account for stock-based compensation. We recorded $752,467 and $1,204,921 in compensation expense for the three months ended June 30, 2019 and 2018, respectively and $2,244,963 and $2,963,492 for the six months ended June 30, 2019 and 2018, respectively. This includes expense related to options issued in prior years for which the requisite service period for those options includes the current period as well as options issued in the current period. The fair value of these instruments was calculated using the Black-Scholes option pricing method.
As of June 30, 2019, there was approximately $2,886,358 of total unrecognized compensation expense related to unvested Employee Awards, which is expected to be recognized over a weighted-average period of nine months.
Warrants
On May 31, 2019, we issued the 2019 Units at $1.00, which triggered the down round feature specified in the 8.5% Warrants. As required by ASU 2017-11 Earnings per Share (Topic 206), we calculated the difference between the 8.5% Warrants fair value on the date the down round feature was triggered using the original exercise price and the new exercise price. The difference in fair value of the effect of the down round feature is reflected in our condensed consolidated financial statements as a deemed dividend and as a reduction to income available to common stockholders in the basic earnings per share calculation.
The underlying assumptions used in the binomial lattice model to determine the fair value of the 8.5% Warrants were:
|
|
|
|
|
Pre-Trigger
|
|
Post-Trigger
|
Current stock price
|
$ 0.95
|
|
$ 0.95
|
Exercise price
|
$ 2.35
|
|
$ 1.00
|
Risk-free interest rate
|
2.21 %
|
|
2.21 %
|
Expected dividend yield
|
|
|
|
Expected term (in years)
|
0.89
|
|
0.89
|
Expected volatility
|
123%
|
|
123%
|
Number of iterations
|
5
|
|
5
|
NOTE 10. SUBSEQUENT EVENTS
On July 18, 2019, we entered into a Promissory Note Purchase Agreement with SBI Investments LLC, 2014-1 (the SBI), (the SBI Purchase Agreement), pursuant to which we issued to SBI a Promissory Note (the SBI Note) in the aggregate principal face value amount of $850,000, with an original issuance discount of approximately 12%. The SBI Note bears interest at the rate of 10% per annum. The principal amount, including accrued but unpaid interest thereon, is due and payable on October 18, 2019. The SBI Purchase Agreement and related SBI Note contain certain events of default upon which, if uncured, may accelerate the due date and payment of the principal amount, including all accrued but unpaid interest.
NOTE 11. SEGMENT INFORMATION
Our operations are organized into four segments: Security and Cash Transportation Services; Operations Consulting and Products; Consumer Goods and Marketing Consulting; and Capital Investments and Real Estate. All revenue originates, and all assets are located in the United States. We have revised our disclosure to correspond to the information provided to the chief operating decision maker.
Three months ended June 30
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Security
|
|
Operations
|
|
Consumer
Goods
|
|
Investments
|
|
Total
|
Services
|
$
|
507,556
|
$
|
366,520
|
$
|
|
$
|
|
$
|
874,076
|
Rent and interest
|
|
|
|
|
|
|
|
27,775
|
|
27,775
|
Product
|
|
|
|
426,122
|
|
28,892
|
|
|
|
455,014
|
Total Revenues
|
|
507,556
|
|
792,642
|
|
28,892
|
|
27,775
|
|
1,356,865
|
Costs and expenses
|
|
(594,336)
|
|
(859,236)
|
|
(388,688)
|
|
(1,648)
|
|
(1,843,908)
|
|
$
|
(86,780)
|
$
|
(66,594)
|
$
|
(359,796)
|
$
|
26,127
|
|
(487,043)
|
Corporate
|
|
|
|
|
|
|
|
|
|
(2,407,759)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(2,894,802)
|
14
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Security
|
|
Operations
|
|
Consumer
Goods
|
|
Investments
|
|
Total
|
Service
|
$
|
614,281
|
$
|
391,185
|
$
|
44,819
|
$
|
|
$
|
1,050,285
|
Product
|
|
|
|
11,102
|
|
53,154
|
|
|
|
64,256
|
Total revenue
|
|
614,281
|
|
402,287
|
|
97,973
|
|
|
|
1,114,541
|
Costs and expenses
|
|
(745,457)
|
|
(459,268)
|
|
(182,679)
|
|
|
|
(1,387,404)
|
Investment in Desert Created
|
|
|
|
|
|
|
|
(72,143)
|
|
(72,143)
|
|
$
|
(131,176)
|
$
|
(56,981)
|
$
|
(84,706)
|
$
|
(72,143)
|
|
(345,006)
|
Corporate
|
|
|
|
|
|
|
|
|
|
(3,324,291)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(3,669,297)
|
Six months ended June 30
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
Security
|
|
Operations
|
|
Consumer
Goods
|
|
Investments
|
|
Total
|
Services
|
$
|
1,072,148
|
$
|
614,303
|
$
|
|
$
|
|
$
|
1,686,451
|
Rent and interest
|
|
|
|
|
|
|
|
42,596
|
|
42,596
|
Product
|
|
|
|
958,440
|
|
58,667
|
|
|
|
1,017,107
|
Total Revenues
|
|
1,072,148
|
|
1,572,743
|
|
58,667
|
|
42,596
|
|
2,746,154
|
Costs and expenses
|
|
(1,273,342)
|
|
(1,536,617)
|
|
(649,742)
|
|
(41,723)
|
|
(3,501,424)
|
|
$
|
(201,194)
|
$
|
36,126
|
$
|
(591,075)
|
$
|
873
|
|
(755,270)
|
Corporate
|
|
|
|
|
|
|
|
|
|
(6,653,227)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(7,408,497)
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Security
|
|
Operations
|
|
Consumer
Goods
|
|
Investments
|
|
Total
|
Service
|
$
|
1,166,258
|
$
|
679,318
|
$
|
98,088
|
$
|
|
$
|
1,943,664
|
Product
|
|
|
|
28,983
|
|
84,376
|
|
|
|
113,359
|
Total revenue
|
|
1,166,258
|
|
708,301
|
|
182,464
|
|
|
|
2,057,023
|
Costs and expenses
|
|
(1,503,946)
|
|
(879,743)
|
|
(381,553)
|
|
|
|
(2,765,242)
|
Investment in Desert Created
|
|
|
|
|
|
|
|
(925,472)
|
|
(925,472)
|
|
$
|
(337,688)
|
$
|
(171,442)
|
$
|
(199,089)
|
$
|
(925,472)
|
|
(1,633,691)
|
Corporate
|
|
|
|
|
|
|
|
|
|
(6,501,993)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(8,135,684)
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
Total assets
|
|
2019
|
|
2018
|
Security
|
$
|
493,621
|
$
|
723,878
|
Operations
|
|
192,415
|
|
134,786
|
Consumer Goods
|
|
290,463
|
|
144,365
|
Investments
|
|
374,524
|
|
300,000
|
Corporate
|
|
3,112,911
|
|
9,439,196
|
|
$
|
4,463,934
|
$
|
10,742,225
|
15