NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 2018, 60% of NBCs revenue was with one customer.
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.
Capital Investments and Real Estate (Investments Segment)
As a publicly traded company, 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
The accompanying consolidated financial statements include the results of GCC and its four wholly-owned subsidiary companies: (a) 6565 E. Evans Owner LLC, a Colorado limited liability company formed in 2014; (b) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (c) GC Security LLC (GCS), a Colorado limited liability company formed in 2015; and (d) GC Corp., a Colorado corporation, originally formed in 2013 under ACS Corp. In 2015, the name was changed to GC Corp. Intercompany accounts and transactions have been eliminated.
The preparation of our consolidated financial statements requires us 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.
36
Going Concern
The 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 the foreseeable future. Our cash of approximately $8.0 million is not sufficient to absorb our operating losses and retire our debt of $6,849,000. 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 to that effect. Accordingly, there is substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase. We maintain our cash balances in financial institutions that, from time to time, may exceed amounts insured by the Federal Deposit Insurance Corporation ($250,000 as of December 31, 2018).
Inventory
Our inventory consists of finished goods, including apparel and supplies for the cannabis market. Inventory is stated at the lower of cost or market (net realizable value), using average cost to determine cost. We monitor inventory cost compared to selling price in order to determine if a lower of cost or market reserve is necessary.
Property and Equipment
Property and equipment are recorded at historical cost. The cost of maintenance and repairs, which are not significant improvements, are expensed when incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets: thirty years for buildings, the lesser of five years or the life of the lease for leasehold improvements, and three to five years for furniture, fixtures and equipment. Land is not depreciated.
Business Combinations
Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.
Intangible Assets
Intangible assets consist primarily of customer relationships and marketing-related intangibles. Our intangible assets are being amortized on a straight-line basis over a period of two years.
Impairment of Long-lived Assets
We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the assets carrying value over its fair value.
37
Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.
Investments
We use the equity method for investments when we are able to exercise significant influence over, but do not control, the investee, and are not the primary beneficiary of the investees activities. We include our portion of an equity-method investees net income or loss within other expense on the consolidated statements of operations. In the event that the cost basis in an investment exceeds the fair value of the underlying business, we record an impairment charge to reduce our carrying value to the estimated fair value.
We record investments that do not qualify for treatment under the equity method at fair value, unless there is no readily determinable fair value. We record at cost equity investments that do not have readily determinable fair value and assess for impairment at each reporting period. We are able to switch to fair value at our option.
Debt
We issue debt that may have separate warrants, conversion features, or no equity-linked attributes.
Debt with warrants
When we issue debt with warrants, we treat the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations. The offset to the contra-liability is recorded as additional paid in capital in our consolidated balance sheets. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statement of operations. The debt is treated as conventional debt.
We determine the value of the non-complex warrants using the Black-Scholes Option Pricing Model (Black-Scholes) using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the volatility of our stock. For warrants with complex terms, we use the binomial lattice model to estimate their fair value.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.
Our financial instruments include cash, accounts receivable, notes receivable, investments, accounts payables and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us.
38
Revenue Recognition
During the first quarter of 2018, we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12
Revenue from Contracts with Customers (Topic 606)
; (b) FASB ASU 2016-11
Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)
; and (c) FASB ASU 2016-10
Revenue from Contracts with Customers (Topic 606)
. Due to the nature of our contracts with customers, adopting the new accounting principles did not have a significant impact on our prior period results of operations, cash flows or financial position.
Our service and product revenues arise from contracts with customers. Service revenue includes (a) Security Segment, (b) Operations Segment consulting revenue, and (c) Consumer Goods Segment revenues from design consulting, including customer-branded apparel designed and fulfilled by Chiefton. Product revenue includes (a) Operations Segment product sales and (b) Consumer Goods Segment Chiefton-branded apparel. The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a service or the delivery of a specific product.
We may also enter into contracts with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance obligations. These contracts are typically fulfilled within one to three months. Only an insignificant portion of our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations prior to invoicing the customer.
We recognize revenue when the following criteria are met:
The parties to the contract have approved the contract and are committed to perform their respective obligations
our customary practice is to obtain written evidence, typically in the form of a contract or purchase order.
Each partys rights regarding the goods or services have been identified
we have rights to payment when services are completed in accordance with the underlying contract, or for the sale of goods when custody is transferred to our customers either upon shipment to or receipt at our customers locations, with no right of return or further obligations.
The payment terms for the goods or services have been identified
prices are typically fixed, and no price protections or variables are offered.
The contract has commercial substance
our practice is to only enter into contracts that will positively affect our future cash flows.
Collectability is probable
we typically require a retainer for all or a portion of the goods or services to be delivered, as well as continually monitoring and evaluating customers ability to pay. Payment terms are typically zero to fifteen days within delivery of the good or service.
Customer deposits are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund the amount received. Where possible, we obtain retainers to lessen our risk of non-payment by our customers. Customer deposits are recognized as revenue as we perform under the contract.
Share-based Payments
Nonemployees
We may enter into agreements with nonemployees to make share-based payments in return for services. These payments may be made in the form of common stock or common stock warrants. We recognize expense for fully-vested warrants at the time they are granted. For awards with service or performance conditions, we generally recognize expense over the service period or when the performance condition is met; however, there may be circumstances in which we determine that the performance condition is probable before the actual performance condition is achieved. In such circumstances, the amount recognized as expense is the pro rata amount, depending on the estimated progress towards completion of the performance condition. Nonemployee share-based payments are measured at fair value, based on either the fair value of the equity instrument issued or on the fair value of the services received. Typically, it is not practical to value the services received, so we determine the fair value of common stock grants based on the price of the common stock on the measurement date (which is the earlier of the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, if there are sufficient disincentives to ensure performance, or the date at which the counterpartys performance is complete), and the fair value of common stock warrants using Black-Scholes. We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the
39
stock option. For awards that are recognized when a performance condition is probable, the fair value is estimated at each reporting date. The cost ultimately recognized is the fair value of the equity award on the date the performance condition is achieved. Accordingly, the expense recognized may change between interim reporting dates and the date the performance condition is achieved.
Awards of common stock with a service or performance condition, where the ultimate number of shares to be issued is uncertain, are classified as liabilities. All other nonemployee awards are classified as equity.
Employees
We issue options to purchase our common stock to our employees, which are measured at fair value using Black-Scholes. We use historical data and other relevant factors to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. We recognize expense on a straight-line basis over the service period, net of an estimated forfeiture rate, resulting in a compensation cost for only those shares expected to vest. Awards to employees are classified as equity.
Market price-based awards
We may issue share-based payments that vest when certain market conditions are met, such as our common stock trading above a certain value for a specific number of days. We recognize expense for market price-based options at the estimated fair value of the options using the binomial lattice model over the estimated life of the options used in the model, or immediately upon the market conditions being met. We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option.
Shipping and Handling
Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of goods sold. Shipping and handling for inventory is included as a component of inventory on the consolidated balance sheets, and in cost of goods sold in the consolidated statements of operations when the product is sold.
Income Taxes
We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. Our assessment of tax positions as of December 31, 2018 and 2017, determined that there were no material uncertain tax positions.
Reportable Segments
Our reporting segments consist of: a) Security and Cash Transportation Services; b) Operations Consulting and Products; c) Consumer Goods and Marketing Consulting; and d) Capital Investments and Real Estate. Our Chief Executive Officer has been identified as the chief decision maker. Our operations are conducted primarily within the United States of America.
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.
40
Recently Issued Accounting Standards
FASB ASU 2018-07 Compensation Stock Compensation (Topic 718) -
In June 2018, the FASB issued ASU 2018-07. This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, CompensationStock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. We do not currently expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.
FASB ASU 2017-04 Simplifying the Test for Goodwill Impairment (Topic 350)
In January 2017, the FASB issued 2017-04. The guidance removes Step Two of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting units carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. We do not currently expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.
FASB ASU 2016-02 Leases (Topic 842)
In February 2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. As of December 31, 2018, we do not have any material leases, so adoption of this ASU will not have a significant impact on our consolidated results of operations, cash flows and financial position.
NOTE 2.
INVESTMENTS AND
ACQUISITIONS
Flowhub SAFE
On November 7, 2018, we invested $250,000 in Flowhub Holdings, LLC (Flowhub) through a simple agreement for future equity (the Flowhub SAFE). The Flowhub SAFE provides us with the right to either (a) future equity in Flowhub when it completes an equity financing, or (b) future equity in Flowhub or cash proceeds if there is a liquidity event. If there is an equity financing, Flowhub would issue to us (a) a number of standard preferred units equal to our investment divided by the price per share of the standard preferred units if the pre-money valuation is less than or equal to the valuation cap ($35 million); or (b) a number of safe preferred units equal to the purchase amount divided by the valuation cap ($35 million), if the pre-money valuation is greater than the valuation cap. If there is a liquidity event, we will receive either (a) a cash payment equal to the purchase amount or (b) automatically receive a number of common units equal to the purchase amount divided by the liquidity price. Our investment in the Flowhub SAFE is included under investment on the consolidated balance sheet and is shown as long-term because it is not readily convertible into cash.
Desert Created Company LLC / DB Products Arizona, LLC
In January 2018, we entered into a limited liability company operating agreement with DNFC LLC (DNFC), pursuant to the formation of Desert Created Company LLC (Desert Created). Each party owned a 50% interest in Desert Created, which took over the assets and operations of DB Products Arizona, LLC (DB Arizona). Desert Created produces and distributes cannabis-infused edible products in Arizona. In connection with the formation of Desert Created, we contributed 75,000 shares of our common stock and warrants to purchase 75,000 shares of our common stock, at an exercise price of $2.00 per share, to members of DNFC (collectively, the DNFC Sellers). This pricing was agreed to in November 2017, however, the transaction did not close until January 2018. In the interim, our stock price increased substantially, which was the reason for the initial impairment noted below. In October 2018, we sold our 50% interest to DNFC for cash consideration of $23,045 and, accordingly, impaired the remaining balance.
The 75,000 shares of our common stock were valued at $461,000, based on the closing price per share of our common stock on January 24, 2018, or $7.23 per share, reduced by a discount of 15% due to the restrictions on the DNFC Sellers ability to immediately sell such shares. The warrants were valued at $518,000, using the Black-Scholes model, assuming a life of 5.0 years, a risk-free interest rate of 1.2% and a volatility of 150%. The fair value of Desert Created was estimated based on the relative fair value of the underlying assets and liabilities, consisting primarily of cash, accounts receivable, equipment and accounts payable.
41
The purchase price allocation was as follows:
|
|
|
Common Stock
|
$
|
461,000
|
Warrants
|
|
518,000
|
Initial investment in Desert Created
|
$
|
979,000
|
|
|
|
Fair value of Desert Created
|
$
|
347,000
|
Percentage ownership
|
|
50%
|
Fair value of 50% of Desert Created
|
|
173,500
|
Initial investment in Desert Created
|
|
979,000
|
Initial impairment
|
$
|
805,500
|
The income and losses related to Desert Created were recognized using the equity method of accounting. The value of the investment as of December 31, 2018, consists of the following and is included in prepaid expenses and other current assets on the balance sheet:
|
|
|
Initial investment in Desert Created
|
$
|
979,000
|
Initial impairment
|
|
(805,500)
|
Additional investment
|
|
50,000
|
Net loss
|
|
(182,136)
|
Additional impairment
|
|
(18,319)
|
Proceeds from sale of investment
|
|
(23,045)
|
December 31, 2018
|
$
|
|
We loaned $26,500 to DB Arizona during the year ended December 31, 2017. In June 2017, we purchased 100% of the ownership interests in GC Finance Arizona LLC (GC Finance Arizona) from Infinity Capital for $106,000 in cash. GC Finance Arizona holds a 50% ownership interest in DB Arizona, an $825,000 loan to DB Arizona, and no liabilities. We expected future positive cash flows, if any, would first go towards paying the holders of DB Arizonas notes payable. Accordingly, we allocated the entire consideration of $106,000 to the note receivable from DB Arizona. During the quarter ended December 31, 2017, DB Arizonas operations were taken over by Desert Created and, as a result, we impaired the full amount of our notes receivable from DB Arizona.
Mile High Protection Services
On August 18, 2017, we entered into an Asset Purchase Agreement (the Mile High APA) with Mile High Protection Services LLC, a Colorado limited liability company, and its sole member (together Seller) whereby we acquired the tradename, workforce, customer contracts, and other intangible assets of the business. Pursuant to the Mile High APA, we agreed to deliver to Seller 224,359 restricted shares of our common stock. The shares vested over a six-month period. The Mile High APA contained certain provisions that required Seller to forfeit a portion of such shares in the event that Seller does not meet the obligations under the Mile High APA. In accordance with the terms of the Mile High APA, the number of shares to be delivered was reduced by 120,000, thus 104,359 shares of our common stock were due upon vesting. Seller also agreed to a three year non-compete agreement.
The 104,359 shares of restricted common stock were valued based on the closing price per share of our common stock on August 18, 2017, or $1.75 per share, reduced by a discount of 15% due to the vesting period and the restrictions on the Sellers ability to immediately sell such shares. The $155,000 value of stock consideration was recorded as accrued stock payable on the December 31, 2017, consolidated balance sheet, which was reduced when the vesting requirements for the shares was met and we issued the common stock in February 2018.
The purchase price allocation was as follows:
Intangible assets:
|
|
|
Customer relationships
|
$
|
100,000
|
Tradename
|
|
55,000
|
|
$
|
155,000
|
We finalized the purchase price allocation in the quarter ended December 31, 2017.
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The accompanying consolidated financial statements include the results of MHPS from the date of acquisition, August 18, 2017. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2017, are as follows:
|
|
|
|
|
Year ended December 31,
|
|
|
2017
|
|
|
(Unaudited)
|
Total revenues
|
$
|
4,103,416
|
Net loss
|
|
(8,305,855)
|
Net loss per common share:
|
|
|
Basic and diluted
|
$
|
(0.41)
|
NOTE 3. ACCOUNTS RECEIVABLE AND CUSTOMER DEPOSITS
Our accounts receivable consisted of the following:
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
Accounts receivable
|
$
|
476,581
|
$
|
586,219
|
Less: Allowance for doubtful accounts
|
|
(61,000)
|
|
(140,000)
|
Total
|
$
|
415,581
|
$
|
446,219
|
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 $87,592 and $82,615, respectively, during the years ended December 31, 2018 and 2017.
As of December 31, 2018, prepaid expenses and other current assets includes $18,164 of unbilled revenue, representing amounts for services completed but not billed.
Our customer deposit liability had the following activity:
|
|
|
|
|
Amount
|
December 31, 2017
|
$
|
107,370
|
Additional deposits received
|
|
1,249,274
|
Less: Deposits recognized as revenue
|
|
(965,354)
|
December 31, 2018
|
$
|
391,290
|
NOTE 4. NOTE RECEIVABLE
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 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 June 6, 2018, we loaned $600,000 to Dope Media, Inc. (Dope Media) pursuant to the terms of a senior secured note (Dope Media Note), bearing interest at 10% per annum and a maturity date of May 31, 2019. The Dope Media Note was paid in full in September 2018. Dope Medias obligations under the Dope Media Note were secured by all of Dope Medias assets. In connection with the loan transaction, Dope Media also issued a warrant (Dope Media Warrant) to the Company to purchase an aggregate of 1,846,187 shares of Dope Medias common stock at an exercise price of $0.3278 per share, which represents approximately 5% of fully diluted outstanding common and preferred shares of Dope Media. Subsequent to the repayment of the Dope Media Note, the warrant expired unexercised.
43
NOTE 5. PREPAIDS AND OTHER CURRENT ASSETS
Our Prepaids and other current assets consist of the following:
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
Prepaid insurance
|
$
|
97,828
|
$
|
53,498
|
Employee receivable payroll tax withholding for stock option exercise
|
|
|
|
499,587
|
Prepaid product for resale
|
|
173,852
|
|
|
Other
|
|
169,210
|
|
119,551
|
|
$
|
440,890
|
$
|
672,636
|
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
Land
|
$
|
800,000
|
$
|
800,000
|
Buildings
|
|
508,104
|
|
423,104
|
Furniture, fixtures and equipment
|
|
317,741
|
|
161,430
|
|
|
1,625,845
|
|
1,384,534
|
Less: Accumulated depreciation
|
|
(162,770)
|
|
(90,773)
|
|
$
|
1,463,075
|
$
|
1,293,761
|
Depreciation expense was $71,997 and $65,282, respectively, for the years ended December 31, 2018 and 2017.
In December 2017, we sold our Pueblo property, consisting of land, building and leasehold improvements with a net carrying value of approximately $410,000 for cash consideration of $579,823, net of certain expenses, and recognized a gain on sale of approximately $196,000.
NOTE 7. INTANGIBLE ASSETS
Intangible Assets
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Estimated Life
(in years)
|
MHPS Customer relationships
|
$
|
100,000
|
$
|
72,744
|
$
|
27,256
|
|
2
|
MHPS Tradename
|
|
55,000
|
|
40,009
|
|
14,991
|
|
2
|
Intangible assets, net
|
$
|
155,000
|
$
|
112,753
|
$
|
42,247
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Estimated Life
(in years)
|
MHPS Customer relationships
|
$
|
100,000
|
$
|
22,739
|
$
|
77,261
|
|
2
|
MHPS Tradename
|
|
55,000
|
|
12,507
|
|
42,493
|
|
2
|
Intangible assets, net
|
$
|
155,000
|
$
|
35,246
|
$
|
119,754
|
|
|
Amortization expense was $77,507 and $60,629 for the years ended December 31, 2018 and 2017. Future amortization expense will be $42,247 during the year ending December 31, 2019.
44
NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Our accounts payable and accrued expenses consist of the following:
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
Accounts payable
|
$
|
130,970
|
$
|
192,204
|
Accrued payroll, taxes and vacation
|
|
308,536
|
|
243,659
|
Payroll tax liability for stock option exercises
|
|
|
|
519,278
|
Property taxes and other
|
|
86,186
|
|
42,653
|
|
$
|
525,692
|
$
|
997,794
|
NOTE 8. ACCRUED STOCK PAYABLE
The following tables summarize the changes in accrued common stock payable:
|
|
|
|
|
|
|
Amount
|
|
Number of Shares
|
December 31, 2016
|
$
|
|
|
|
Acquisition of MHPS accrual
|
|
155,000
|
|
104,359
|
Warrant exercises accrual
|
|
166,860
|
|
154,500
|
December 31, 2017
|
|
321,860
|
|
258,859
|
Acquisition of MHPS accrual
|
|
(155,000)
|
|
(104,359)
|
Warrant exercises accrual
|
|
(166,860)
|
|
(154,500)
|
December 31, 2018
|
$
|
|
|
|
NOTE 9. DEBT
Notes Payable
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
8.5% Notes
|
$
|
6,849,000
|
$
|
|
12% Notes
|
|
|
|
1,621,250
|
Unamortized debt discount
|
|
(1,575,094)
|
|
(443,917)
|
|
|
5,273,906
|
|
1,177,333
|
Less: Current portion
|
|
(5,273,906)
|
|
(1,177,333)
|
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. 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.
45
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. During the year ended December 31, 2018, amortization of debt discount expense includes $3,790,906 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
|
12% Notes
The 12% Notes (as defined below) were paid off in January 2018. We recognized the remaining debt discount amortization expense of $443,917 in January as a result of the pay off.
In September 2016, we completed a $3,000,000 private placement pursuant to a promissory note and warrant purchase agreement (the 12% Agreement) with certain accredited investors, bearing interest at 12%, with principal due September 21, 2018, and interest payable quarterly (each such note, a 12% Note, and collectively, the 12% Notes). In the event of default, the interest rate would increase to 18%. The 12% Notes were collateralized by a security interest in substantially all of our assets. We could prepay the 12% Notes at any time, but in any event must pay at least one year of interest.
Subject to the terms and conditions of the 12% Agreement, each investor was granted fully-vested warrants equal to their note principal times three (the 12% Warrants), or nine million warrants, with a life of three years. 4.5 million warrants had an exercise price of $0.35 per share and the other 4.5 million warrants had an exercise price of $0.70 per share. Had we issued any equity-based instruments at a price lower than the exercise price(s) of the 12% Warrants, other than under our Incentive Plan, the exercise price(s) of the 12% Warrants would have been adjusted to the lower price. The participants in the Fall 2018 Capital Raise (Note 12) waived this provision for that offering. The 12% Warrants were exercisable at the option of the holder (a) by paying cash, (b) by applying the amount due under the 12% Notes as consideration, or (c) if there was no effective registration statement for the 12% Warrants within six months of being granted, the holder could exercise on a cashless basis. The registration statement related to the 12% Warrants was declared effective on December 23, 2016. If our common stock closed above $5.00 for ten consecutive days, we could call the warrants, giving the warrant holders 30 days to exercise. We called the warrants during the three months ended March 31, 2018, and all holders elected to exercise.
We received $2,450,000 of cash for issuing the 12% Notes. $300,000 of 10% Notes and $250,000 of the 14% Greenhouse Mortgage were converted into 12% Notes. We concluded that these conversions met the criteria for a debt extinguishment and, accordingly, recorded a loss on extinguishment of $1,728,280 during the year ended December 31, 2016. The loss on extinguishment represents the fair value of the 12% Warrants issued to the previous 10% Note holders and the 14% Greenhouse Mortgage lender. The initial fair value of the 12% Warrants not associated with the conversions was recorded as a debt discount of $1,855,000. The 12% Notes are otherwise treated as conventional debt.
Infinity Note Related Party
This note was paid in full in February 2018. In February 2015, we issued a senior secured note to Infinity Capital, as amended in April 2015, bearing interest at 5% payable monthly in arrears commencing September 30, 2015, until the maturity date of August 31, 2015 (the Infinity Note). On December 31, 2016, the Infinity Note was amended to aggregate principal and interest and extend the due date of principal and interest to September 21, 2018. The Infinity Note was collateralized by a security interest in substantially all of our assets. Interest expense for the Infinity Note for the years ended December 31, 2018 and 2017, was $9,272 and $51,239, respectively.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Legal
To the best of our knowledge and belief, no material legal proceedings of merit are currently pending or threatened.
46
NOTE 11. DEFERRED TAXES
The components of net deferred tax assets are as follows:
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
Net operating loss carryforwards
|
$
|
5,383,012
|
$
|
3,446,733
|
Equity-based instruments
|
|
5,004,624
|
|
3,648,787
|
Long-lived assets and other
|
|
555,138
|
|
427,779
|
Deferred tax asset valuation allowance
|
|
(10,942,774)
|
|
(7,523,299)
|
|
$
|
|
$
|
|
A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2018
|
|
2017
|
Income tax benefit at statutory rate
|
$
|
(3,564,489)
|
$
|
(2,795,089)
|
State income tax benefit, net of Federal benefit
|
|
(620,849)
|
|
(251,213)
|
Equity-based instruments
|
|
(326,242)
|
|
(312,589)
|
Amortization of debt discount
|
|
1,044,210
|
|
391,513
|
Tax Cuts and Jobs Act rate change
|
|
|
|
991,223
|
Other
|
|
47,895
|
|
(242,781)
|
Valuation allowance
|
|
3,419,475
|
|
2,218,936
|
|
$
|
|
$
|
|
NOTE 12. STOCKHOLDERS EQUITY
Share-based compensation
Share-based compensation expense consisted of the following:
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2018
|
|
2017
|
Employee Awards
|
$
|
3,626,271
|
$
|
3,742,294
|
Consulting Awards
|
|
306,466
|
|
34,399
|
Feinsod Agreement
|
|
2,062,270
|
|
104,134
|
|
$
|
5,995,007
|
$
|
3,880,827
|
Employee Stock Options
On October 29, 2014, the Board authorized the adoption of and, on June 26, 2015, our stockholders ratified, our 2014 Equity Incentive Plan for the issuance of 10 million shares of our common stock and, in April 2018, stockholders approved an increase of 5 million shares of common stock that may be granted (the Incentive Plan). The Incentive Plan provides for the issuance of up to 15 million shares of our common stock and is designed to provide an additional incentive to executives, employees, directors and key consultants, aligning our long term interests with participants. A Registration Statement on Form S-8 for the initial 10 million shares automatically became effective in May 2016, and a Registration Statement on Form S-8 for the additional 5 million shares and 900,000 shares under the Feinsod Agreement automatically became effective in June 2018 (collectively, the Registration Statements). The Registration Statements relate to 15,000,000 shares of our common stock, which are issuable pursuant to or, upon exercise of, options that have been granted or may be granted under our Incentive Plan. As of December 31, 2018, there were 13,147,214 shares available to issue under the Incentive Plan.
47
Share-based compensation costs for award grants to employees and directors (Employee Awards) are recognized on a straight-line basis over the service period for the entire award, with the amount of compensation cost recognized at any date equaling at least the portion of the award that is vested. The following summarizes the Black-Scholes assumptions used for Employee Awards granted:
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2018
|
|
2017
|
Exercise price
|
|
$1.71 7.17
|
|
$1.34 4.23
|
Stock price on date of grant
|
|
$1.71 7.17
|
|
$1.34 4.23
|
Volatility
|
|
131 140%
|
|
140 153%
|
Risk-free interest rate
|
|
2.1 2.9%
|
|
1.4 2.3%
|
Expected life (years)
|
|
3.0
|
|
3.0 5.0
|
Dividend yield
|
|
|
|
|
The following summarizes Employee Awards activity:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-average Exercise Price per Share
|
|
Weighted-average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
|
Outstanding at December 31, 2016
|
|
8,818,400
|
$
|
1.04
|
|
|
|
|
Granted
|
|
1,496,100
|
|
2.29
|
|
|
|
|
Exercised
|
|
(1,012,522)
|
|
0.78
|
|
|
|
|
Forfeited or expired
|
|
(596,700)
|
|
1.19
|
|
|
|
|
Outstanding at December 31, 2017
|
|
8,705,278
|
|
1.28
|
|
|
|
|
Granted
|
|
2,160,525
|
|
3.41
|
|
|
|
|
Exercised
|
|
(731,264)
|
|
0.99
|
|
|
|
|
Forfeited or expired
|
|
(961,159)
|
|
2.47
|
|
|
|
|
Outstanding at December 31, 2018
|
|
9,173,380
|
|
1.68
|
|
6.0
|
$
|
3,934,000
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2018
|
|
7,133,905
|
$
|
1.18
|
|
6.7
|
$
|
3,934,000
|
Based on our estimated forfeiture rates, we expect 2,023,563 Employee Awards will vest. As of December 31, 2018, there was approximately $3,281,291 of total unrecognized compensation expense related to unvested Employee Awards, which is expected to be recognized over a weighted-average period of ten months.
Consulting Services
As needed, we may issue warrants to third parties in exchange for consulting services. Stock-based compensation costs for award grants to third parties for consulting services (Consulting Awards) are recognized on a straight-line basis over the service period for the entire award, with the amount of compensation cost recognized at any date equaling at least the portion of the award that is vested. Service Awards are revalued at each reporting date until fully vested, which may generate an expense or benefit.
The fair value of each warrant grant is estimated using Black-Scholes. We use historical data to estimate the expected price volatility. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of valuation for the estimated life of the option. The following summarizes the Black-Scholes assumptions used for Consulting Awards granted:
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2018
|
|
2017
|
Exercise price
|
$
|
3.08
|
$
|
1.40
|
Stock price, date of valuation
|
$
|
3.08
|
$
|
1.40
|
Volatility
|
|
134%
|
|
128%
|
Risk-free interest rate
|
|
2.3%
|
|
1.7%
|
Expected life (years)
|
|
2.0
|
|
2.0
|
Dividend yield
|
|
|
|
|
48
The following summarizes Consulting Awards activity:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-average Exercise Price per Share
|
|
Weighted-average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
|
Outstanding at December 31, 2016
|
|
157,500
|
$
|
1.96
|
|
|
|
|
Granted
|
|
10,000
|
|
1.40
|
|
|
|
|
Forfeited or expired
|
|
(40,000)
|
|
3.62
|
|
|
|
|
Outstanding at December 31, 2017
|
|
127,500
|
|
2.40
|
|
|
|
|
Granted
|
|
35,000
|
|
3.08
|
|
|
|
|
Exercised
|
|
(75,000)
|
|
1.31
|
|
|
|
|
Forfeited or expired
|
|
(37,500)
|
|
1.66
|
|
|
|
|
Outstanding and exercisable at
December 31, 2018
|
|
50,000
|
|
2.53
|
|
1.3
|
$
|
4,000
|
We granted 25,000 shares of common stock with a fair value of $92,500 to a non-employee for consulting services, which were issued in July 2018. Additionally, we granted 47,933 shares of common stock with a fair value of $142,500 to non-employees for consulting services, which were issued in October 2018.
Feinsod Employment Agreement
On December 8, 2017, we entered into an agreement (the Feinsod Agreement) with Michael Feinsod for his continued service as our Executive Chairman of our Board of Directors. Pursuant to the agreement, Mr. Feinsod received (a) 600,000 stock options that vest on the anniversary date of the agreement for the next three years, or 200,000 per year (Time-based Options); and (b) three tranches of 100,000 stock options that vest when our stock price has an average trading price for 20 days of $3.50, $5.00 and $6.50 (Market-based Options). The options have an exercise price of $3.45 per share and a ten-year life. These options were not issued under the Incentive Plan; however, the underlying shares were included in the Registration Statement on Form S-8 that automatically became effective in June 2018. During the quarter ended March 31, 2018, the $3.50 and $5.00 Market-based Options vested and, accordingly, the expense associated with those options was recognized immediately.
DB Option Agreement warrants
In order to extend the DB Option Agreement with Infinity Capital, in March 2016 we granted Infinity Capital warrants to purchase 100,000 shares of our common stock at an exercise price of $0.67 per share with a five year life. All 100,000 warrants were still outstanding as of December 31, 2018.
IPG Acquisition Warrants
In connection with the IPG acquisition in 2015, we issued to IPG 500,000 fully-vested warrants to purchase a) 250,000 shares of our common stock at $4.50 per share, (the IPG $4.50 Warrants), and b) 250,000 shares of our common stock at $5.00 per share (the IPG $5.00 Warrants) (collectively, the IPG Warrants). All of these warrants expired unexercised during the quarter ended March 31, 2018.
49
Warrants with Debt
The following summarizes warrants issued with debt activity:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-average Exercise Price per Share
|
|
Weighted-average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
|
Outstanding at December 31, 2016
|
|
9,025,843
|
$
|
0.63
|
|
|
|
|
Granted
|
|
(5,633,517)
|
|
0.61
|
|
|
|
|
Cancelled
|
|
(40,626)
|
|
1.16
|
|
|
|
|
Outstanding at December 31, 2017
|
|
3,351,700
|
|
0.65
|
|
|
|
|
Granted
|
|
6,000,000
|
|
2.35
|
|
|
|
|
Exercised
|
|
(3,316,786)
|
|
0.77
|
|
|
|
|
Expired
|
|
(42,700)
|
|
5.00
|
|
|
|
|
Outstanding and exercisable at
December 31, 2018
|
|
5,992,214
|
|
2.26
|
|
1.3
|
$
|
186,620
|
Fall 2017 Capital Raise
During the year ended December 31, 2017, in a private placement we raised $4 million of equity by issuing four million shares of our common stock and four million warrants (Fall 2017 Warrants) to purchase shares of our common stock (together Units) for $1.00 per Unit. The Fall 2017 Warrants had an exercise price of $0.50 per share and were exercisable for two years. If our common stock closed above $5.00 for ten consecutive days, we could call the warrants, giving the warrant holders 10 days to exercise. During the quarter ended March 31, 2018, we called the warrants and all were exercised. In consideration for the sale of the Units, we received $3,750,000 in cash and extinguished $250,000 of 12% Notes.
NOTE 13. NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised.
Outstanding stock options and common stock warrants are considered anti-dilutive because we are in a net loss position. Accordingly, the number of weighted average shares outstanding for basic and fully diluted net loss per share are the same.
The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share:
|
|
|
|
|
|
|
December 31,
|
|
|
2018
|
|
2017
|
Stock options
|
|
10,073,380
|
|
9,605,278
|
Warrants
|
|
6,217,214
|
|
8,119,200
|
Accrued stock payable
|
|
|
|
258,859
|
|
|
16,290,594
|
|
17,983,337
|
NOTE 14. SUBSEQUENT EVENTS
On January 7, 2019, Robert Frichtel retired as Chief Executive Officer of General Cannabis Corp. and provided his resignation to the Companys Board of Directors on such date. Mr. Frichtel will continue to serve on the Companys Board of Directors. On January 7, 2019, the Board appointed Michael Feinsod, the Chairman of the Board, as interim Chief Executive Officer of the Company.
In January 2019, we loaned an additional $250,000 to BRB Realty, LLC pursuant to the terms of a senior secured note (BRB Note), bearing interest at 13% per annum and a maturity date of July 15, 2019.
50
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 (the Greenvale Lease). Rent will be $7,000 per month, as well as our portion of real estate taxes and common area maintenance.
In March 2019, we agreed to loan $375,000 to Consolidated C.R., LLC (CCR) in the form of a convertible promissory note, bearing interest at 12%, collateralized by virtually all of the assets of CCR, with a term of 18 months (the CCR Note). We have a 90 day option to convert $250,000 of principal under the CCR Note into a 10% equity ownership in CCR. CCR is a vertically integrated medical cannabis company located in San Juan, Puerto Rico.
NOTE 15. 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.
Year ended December 31
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
Security
|
|
Operations
|
|
Consumer
Goods
|
|
Investments
|
|
Total
|
Services
|
$
|
2,602,365
|
$
|
1,186,624
|
$
|
145,079
|
$
|
|
$
|
3,934,068
|
Rent and interest
|
|
|
|
|
|
|
|
18,749
|
|
18,749
|
Product
|
|
|
|
531,883
|
|
134,012
|
|
|
|
665,895
|
Total Revenues
|
|
2,602,365
|
|
1,718,507
|
|
279,091
|
|
18,749
|
|
4,618,712
|
Costs and expenses
|
|
(3,027,510)
|
|
(1,932,598)
|
|
(692,394)
|
|
|
|
(5,652,502)
|
Investment in Desert Created
|
|
|
|
|
|
|
|
(1,005,955)
|
|
(1,005,955)
|
|
$
|
(425,145)
|
$
|
(214,091)
|
$
|
(413,303)
|
$
|
(987,206)
|
|
(2,039,745)
|
Corporate
|
|
|
|
|
|
|
|
|
|
(14,934,013)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(16,973,758)
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
Security
|
|
Operations
|
|
Consumer
Goods
|
|
Investments
|
|
Total
|
Services
|
$
|
1,884,618
|
$
|
790,000
|
$
|
151,977
|
$
|
|
$
|
2,826,595
|
Rent and interest
|
|
|
|
|
|
|
|
132,780
|
|
132,780
|
Product
|
|
|
|
475,072
|
|
87,628
|
|
|
|
562,700
|
Total Revenues
|
|
1,884,618
|
|
1,265,072
|
|
239,605
|
|
132,780
|
|
3,522,075
|
Costs and expenses
|
|
(2,320,042)
|
|
(1,453,436)
|
|
(527,590)
|
|
(277,114)
|
|
(4,578,182)
|
Gain on sale
|
|
|
|
|
|
|
|
196,003
|
|
196,003
|
|
$
|
(435,424)
|
$
|
(188,364)
|
$
|
(287,985)
|
$
|
51,669
|
|
(860,104)
|
Corporate
|
|
|
|
|
|
|
|
|
|
(7,360,747)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(8,220,851)
|
|
|
|
|
|
|
|
December 31,
|
Total assets
|
|
2018
|
|
2017
|
Security
|
$
|
723,878
|
$
|
488,299
|
Operations
|
|
134,786
|
|
231,670
|
Consumer Goods
|
|
144,365
|
|
57,833
|
Investments
|
|
300,000
|
|
|
Corporate
|
|
9,439,196
|
|
6,826,124
|
|
$
|
10,742,225
|
$
|
7,603,926
|
51