Property And Equipment

12 Months Ended

Dec. 31, 2014

Property and Equipment [Abstract]

PROPERTY AND EQUIPMENT

7.   PROPERTY AND EQUIPMENT

Property Leased to Licensed Cannabis Cultivators

On December 31, 2013 the Company purchased a property in Pueblo County, Colorado (the “Pueblo West Property”) for approximately $450,000. The property, which is located in a suburb of Pueblo, consists of approximately three acres of undeveloped land, a 5,000 square-foot steel building, and a parking lot. The purchase price was allocated $12,340 for land and $437,660 for buildings and related equipment.

The purchase price consisted of a cash payment of $280,000 and a promissory note in the principal of $170,000. The note bears interest at 8.5% interest per annum and is payable in monthly installments, including principal and interest, in the amount of $1,674. All unpaid principal and interest is due December 31, 2018. The promissory note is convertible at any time on or before the maturity date at $5.00 per common share (See Note 13).

The property is zoned for growing cannabis and is leased to a licensed medical cannabis cultivator through December 31, 2022 on a triple net lease basis. Depreciation on the Pueblo West Property building facility began effective January 1, 2014.

Shared Workspace and Events

On October 21, 2014, the Company purchased a retail bank property in Denver County, Colorado (“The Greenhouse”) for approximately $1,100,000. The property, which is located near the northeast corner of East Evans Avenue and Monaco Parkway, in Denver, consists of land, a parking lot and a 15,000 square-foot building that was a former retail bank. The purchase price was allocated $800,000 for land and $283,871 for buildings.

The purchase price consisted of cash payments of approximately $500,000 and a promissory note in the principal of $600,000. The note bears interest at 14% interest per annum.  The terms of the note provide for interest-only payments for the first two years, and allow the Company an optional payment abatement until July 1, 2015. In connection with the promissory note issued in connection with the building, the Company issued 600,000 warrants to the note holder, Evans Street Lendco, LLC (“Evans Lendco”). Each warrant allows Evans Lendco to purchase one share of the Company’s common stock at an exercise price of $4.40 per share at any time on or before October 21, 2016.

The property is zoned for office space. The Company is in the process of re-purposing the former retail bank into a multi-tenant office building that will, among other things, provide a workspace environment purely dedicated to participants serving the cannabis industry. The facility is being re-branded as The Greenhouse and offers non-regulated ancillary services to the cannabis industry, as well as providing educational, conference and networking opportunities for tenants. Depreciation on The Greenhouse building facility began effective November 1, 2014.

The following table summarizes property and equipment and related accumulated depreciation:

	December 31,
	2014			2013
Land	$	812,340		$	12,340
Buildings		724,284			388,523
Leasehold improvements		45,000			45,000
Furniture, fixtures and equipment		15,792			6,890
Construction in progress		138,056			-
Property and Equipment, gross		1,735,472			452,753
Less: Accumulated Depreciation		(28,062	)		-
Property and Equipment, net	$	1,707,410		$	452,753

Depreciation expense was $28,062 and $0 for the year ended December 31, 2014 and the 2013 Fiscal Period, respectively.

Construction in progress (“CIP”) includes land development costs, pre-construction costs, construction costs, interest incurred on financing, property taxes, insurance and overhead costs related to development. Included in pre-construction costs are architectural fees and site, soil, and engineering costs. Included in land development costs are on-site construction costs and other direct and indirect expenditures. Interest and property taxes are capitalized to CIP when development activities commence, and end when the qualifying assets are ready for their intended use. Sales and marketing costs are expensed as incurred. No interest or property taxes were capitalized to CIP in 2014. Capitalized project costs are allocated to specific venues within the property using specific identification where feasible. Costs that are not specifically attributable to a particular venue will be allocated using methodologies deemed appropriate to the cost and areas benefited at the completion of the project. CIP of approximately $138,000 at December 31, 2014 was capitalized in conjunction with the Company’s renovation of The Greenhouse. CIP includes approximately $110,000 relating to the value of common stock and warrants issued to Spector Group II, LLP, a New York limited liability partnership (“Spector Group”), to act as the design architect for The Greenhouse. Management of the Company anticipates that costs to complete The Greenhouse will approximate $420,000 (See Note 15).