0001398432-17-000157.txt : 20171107 0001398432-17-000157.hdr.sgml : 20171107 20171107141031 ACCESSION NUMBER: 0001398432-17-000157 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171107 DATE AS OF CHANGE: 20171107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL CANNABIS CORP CENTRAL INDEX KEY: 0001477009 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 208096131 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54457 FILM NUMBER: 171182839 BUSINESS ADDRESS: STREET 1: 6565 EAST EVANS AVENUE CITY: DENVER STATE: CO ZIP: 80224 BUSINESS PHONE: (719) 748-5603 MAIL ADDRESS: STREET 1: 6565 EAST EVANS AVENUE CITY: DENVER STATE: CO ZIP: 80224 FORMER COMPANY: FORMER CONFORMED NAME: Advanced Cannabis Solutions, Inc. DATE OF NAME CHANGE: 20131023 FORMER COMPANY: FORMER CONFORMED NAME: Promap Corp DATE OF NAME CHANGE: 20091117 10-Q 1 a14081.htm FORM 10-Q 10-Q



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549


FORM 10-Q


(Mark One)

þ

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for quarterly period ended September 30, 2017.

 

 

o

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


for the transition period from __________ to __________.


Commission file number:   000-54457


GENERAL CANNABIS CORP

(Exact name of registrant as specified in its charter)


Colorado

 

90-1072649

(State of incorporation)

 

(IRS Employer Identification No.)

 

6565 East Evans Avenue

Denver, CO 80224

(Address of principal executive offices) (Zip Code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes   þ     No  o


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ       No  o


Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in rule 12b-2 of the Exchange Act.


Large accelerated filer  o

 

Accelerated filer     o

Non-accelerated filer    o

 

Smaller reporting company     þ

 

 

Emerging Growth Company     o


If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.  o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o       No  þ


As of November 1, 2017, there were 22,481,605 issued and outstanding shares of the Companys common stock.






GENERAL CANNABIS CORP

FORM 10-Q


TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

22

Item 4.

Controls and Procedures

22

 

 

 

PART II. OTHER INFORMATION

25

 

 

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

25

 

 

 

 

Signatures

26


2




PART I.  FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


GENERAL CANNABIS CORP

CONDENSED CONSOLIDATED BALANCE SHEETS


 

 

September 30,

2017

(Unaudited)

 

December 31,

2016

ASSETS

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

$

252,538

$

773,795

Accounts receivable, net

 

283,406

 

182,214

Note receivable – DB Arizona

 

 

77,202

Prepaid expenses and other current assets

 

173,908

 

76,493

Inventory

 

30,443

 

7,981

Total current assets

 

740,295

 

1,117,685

 

 

 

 

 

Notes receivable – DB Arizona

 

221,671

 

Property and equipment, net

 

1,706,035

 

1,714,803

Intangible assets, net

 

139,288

 

25,383

Total Assets

$

2,807,289

$

2,857,871

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable and accrued expenses

$

474,200

$

363,618

Interest payable

 

115,237

 

9,806

Deferred rental revenue and customer deposits

 

75,499

 

46,155

Accrued stock payable

 

330,000

 

Derivative warrant liability

 

5,239,000

 

23,120,000

Notes payable (net of discount)

 

1,280,932

 

Infinity Note – related party

 

1,370,126

 

Total current liabilities

 

8,884,994

 

23,539,579

 

 

 

 

 

Notes payable (net of discount)

 

 

815,250

Infinity Note – related party

 

 

1,370,126

Tenant deposits

 

8,854

 

8,854

Total Liabilities

 

8,893,848

 

25,733,809

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

Stockholders’ Equity (Deficit)

 

 

 

 

Preferred stock, no par value; 5,000,000 share authorized; no shares issued and outstanding at September 30, 2017 and December 31, 2016

 

 

Common Stock, $0.001 par value; 100,000,000 shares authorized; 20,881,605 and 17,128,778 shares issued and outstanding on September 30, 2017 and December 31, 2016, respectively

 

20,883

 

17,129

Additional paid-in capital

 

38,894,416

 

26,333,988

Accumulated deficit

 

(45,001,858)

 

(49,227,055)

Total Stockholders’ Equity (Deficit)

 

(6,086,559)

 

(22,875,938)

 

 

 

 

 

Total Liabilities & Stockholders’ Equity (Deficit)

$

2,807,289

$

2,857,871


See Notes to condensed consolidated financial statements.


3




GENERAL CANNABIS CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

REVENUES

 

 

 

 

 

 

 

 

Service

$

932,140

$

704,489

$

2,197,683

$

1,988,584

Rent and interest

 

32,902

 

25,565

 

99,251

 

93,398

Product Sales

 

14,949

 

80,326

 

235,767

 

122,452

Total revenues

 

979,991

 

810,380

 

2,532,701

 

2,204,434

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

Cost of service revenues

 

752,154

 

564,687

 

1,757,241

 

1,547,474

Cost of goods sold

 

32,459

 

68,992

 

240,577

 

112,649

Selling, general and administrative

 

657,532

 

409,403

 

1,976,244

 

1,146,022

Share-based expense

 

839,322

 

872,217

 

2,995,251

 

1,974,191

Professional fees

 

126,303

 

95,520

 

454,591

 

276,706

Depreciation and amortization

 

39,885

 

97,988

 

88,788

 

292,329

Total costs and expenses

 

2,447,655

 

2,108,807

 

7,512,692

 

5,349,371

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

(1,467,664)

 

(1,298,427)

 

(4,979,991)

 

(3,144,937)

 

 

 

 

 

 

 

 

 

OTHER (INCOME) EXPENSE

 

 

 

 

 

 

 

 

Amortization of debt discount

 

284,900

 

111,837

 

1,134,432

 

327,455

Interest expense

 

81,563

 

5,276,550

 

240,380

 

5,381,125

Loss on extinguishment of debt

 

 

1,728,280

 

 

2,086,280

(Gain) loss on derivative warrant liability

 

(2,421,000)

 

6,032,000

 

(10,580,000)

 

6,032,000

Total other (income) expense, net

 

(2,054,537)

 

13,148,667

 

(9,205,188)

 

13,826,860

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

586,873

$

(14,447,094)

$

4,225,197

$

(16,971,797)

 

 

 

 

 

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

$

0.03

$

(0.93)

$

0.21

$

(1.11)

Diluted

 

(0.06)

 

(0.93)

 

(0.21)

 

(1.11)

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

20,654,502

 

15,495,421

 

19,883,329

 

15,270,968

Diluted

 

29,186,775

 

15,495,421

 

29,624,188

 

15,270,968


See Notes to condensed consolidated financial statements.


4




GENERAL CANNABIS CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


 

 

Nine months ended

September 30,

 

 

2017

 

2016

OPERATING ACTIVITIES

 

 

 

 

Net income (loss)

$

4,225,197

$

(16,971,797)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

 

 

 

 

Amortization of debt discount

 

1,134,432

 

327,455

Loss on extinguishment of debt

 

 

2,086,280

Initial fair value of derivative warrant liability included as interest expense

 

 

5,189,000

(Gain) loss on derivative warrant liability

 

(10,580,000)

 

6,032,000

Depreciation and amortization expense

 

88,788

 

292,329

Share-based payments

 

2,995,251

 

1,974,191

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(101,192)

 

(143,141)

Prepaid expenses and other assets

 

(109,384)

 

(12,321)

Inventory

 

(22,462)

 

(11,627)

Accounts payable and accrued liabilities

 

245,357

 

174,948

Net cash used in operating activities:

 

(2,124,013)

 

(1,062,683)

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Purchase of property and equipment

 

(38,925)

 

(11,615)

Lending on Note receivable – related party

 

(26,500)

 

Purchase of GC Finance Arizona LLC

 

(106,000)

 

Net cash used in investing activities

 

(171,425)

 

(11,615)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from exercise of warrants and stock options

 

1,599,181

 

Proceeds from the sale of common stock – accrued stock payable

 

175,000

 

 Borrowings under notes payable

 

 

2,500,000

 Increase in Infinity Note – related party

 

 

497,500

Payments on notes payable

 

 

(917,307)

Net cash provided by financing activities

 

1,774,181

 

2,080,193

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH

 

(521,257)

 

1,005,895

CASH, BEGINNING OF PERIOD

 

773,795

 

58,711

CASH, END OF PERIOD

$

252,538

$

1,064,606

 

 

 

 

 

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION

 

 

 

 

Cash paid for interest

$

131,763

$

213,813

 

 

 

 

 

NON-CASH TRANSACTIONS

 

 

 

 

Portion of warrant derivative liability recorded as additional paid-in capital upon exercise of warrants

$

7,301,000

$

12% Note principal used to exercise 12% Warrants

 

668,750

 

Acquisition of MHPS – accrued stock payable

 

155,000

 

Issuance of common stock and warrants from accrued stock payable

 

 

1,069,775

Derivative warrant liability recorded as debt discount

 

 

2,450,000

Warrants issued in connection with debt recorded as debt discount

 

 

31,100

10% Notes and 14% Mortgage Note Payable converted to 12% Notes

 

 

550,000


See Notes to condensed consolidated financial statements.


5



GENERAL CANNABIS CORP

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 April 28, 2015, our common stock was uplisted and on May 6, 2015, resumed quotation on the OTC Market’s OTCQB.  Our operations are segregated into the following four segments:


Security and Cash Transportation Services (“Security Segment”)

 

Iron Protection Group, or IPG, provides advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops.  In August 2017, we acquired the operating assets of Mile High Protection Group, LLC, a Colorado limited liability company, which will continue to do business as “Mile High Protection Services,” or Mile High.  Mile High has a diversified client roster, providing security services to hospitality companies, such as hotels, and to licensed cannabis retailers and cultivators in Colorado.  We have also opened an IPG office in California.


Marketing Consulting and Apparel (“Marketing Segment”)


Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry.  We assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products.  We now have the capacity of a full service marketing agency as well as the resources to expand our clothing lines.  Chiefton Design also supports our other segments with marketing designs and apparel.


Chiefton’s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories.  Our apparel is sold through our on-line shop, cannabis retailers, and specialty t-shirt and gift shops.  The apparel sold by Chiefton is purchased and screen printed by third parties, for which there are numerous suppliers.


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. Our business plan for NBC correlates to the future growth of the regulated cannabis market in the United States.


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 infrastructure, equipment, consumables, and compliance packaging.


Finance and Real Estate (“Finance Segment”)


Real Estate Leasing


We own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.


Our real estate leasing business plan includes the potential future acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities would range in size from 5,000 to 50,000 square feet. These facilities would only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants would include certain requirements that permit us to continually evaluate our tenants’ compliance with applicable laws and regulations.


Shared Office Space, Networking and Event Services   

 

In October 2014, we purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as “The Greenhouse”. The building is a 16,056 square foot facility, which we use as our corporate headquarters.


6



The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. We continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations.  We expect to continue the renovation of The Greenhouse in 2017.


We plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.


Industry Finance


Our industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.  These loans would generally be secured to the maximum extent permitted by law.  We believe there is a significant demand for this type of financing.  We are assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.


DB Products Arizona, LLC


DB Products Arizona, LLC (“DB Arizona”) produces and distributes cannabis-infused elixirs and edible products in Arizona.


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 expect future positive cash flows, if any, will first go towards paying the holders of DB Arizona’s notes payable.  Accordingly, we allocated the entire consideration of $106,000 to the note receivable from DB Arizona.


We have determined that DB Arizona is a variable interest entity.  The other 50% owner owns the building in which DB Arizona operates, and holds the Arizona cannabis license required for DB Arizona to extract cannabis oil and sell cannabis oil-infused products.  Accordingly, the other owner is the primary beneficiary, as they have the power to direct activities that most significantly impact the economic performance of DB Arizona.  We will treat our 50% ownership in DB Arizona as an equity investment.


As of September 30, 2017, DB Arizona had total assets of $1,200,000, operating liabilities of $73,639, debt and accrued interest liabilities of $2,463,373, and for the nine months ended September 30, 2017, total revenues of $632,000 and a net loss of $611,000.


Basis of Presentation


The accompanying (a) condensed consolidated balance sheet at December 31, 2016, has been derived from audited financial statements and (b) condensed consolidated unaudited financial statements as of September 30, 2017 and 2016, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017.  It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results of operations expected for the year ending December 31, 2017.


The condensed consolidated financial statements include the results of GCC and its six wholly-owned subsidiary companies: (a) ACS Colorado Corp., a Colorado corporation formed in 2013; (b) Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013; (c) 6565 E. Evans Avenue LLC, a Colorado limited liability company formed in 2014; (d) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (e) GC Security LLC (“GCS”), a Colorado limited liability company formed in 2015; and (f) GC Finance Arizona LLC (“GC Finance Arizona”), an Arizona limited liability company .  Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in Colorado on June 6, 2013.  Intercompany accounts and transactions have been eliminated.


7



Reclassifications


Certain reclassifications have been made to the prior period segment reporting to conform to the current period presentation related to now including GC Supply in our Operations Segment.  The reclassifications had no effect on net loss, total assets, or total stockholders’ equity (deficit).


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 had related party transactions with the following individuals / companies:


·

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.

·

GC Finance Arizona – A company owned 100% by Infinity Capital prior to our purchase in June 2017.

·

DB Arizona– A company that borrowed $825,000 from GC Finance Arizona, which also holds a 50% ownership interest in DB 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.


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 the foreseeable future.  The 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 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.


We had an accumulated deficit of $45,001,858 and $49,227,055, respectively, at September 30, 2017 and December 31, 2016, and further losses are anticipated in the development of our business. 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.


Recently Issued Accounting Standards


Financial Accounting Standards Board, or FASB, Accounting Standards Update, or FASB ASU 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Heding (Topic 815)” – In July 2017, the FASB issued 2017-11.  The guidance eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock.  Our 12% Warrants are treated as derivative instruments, because they include a “down round” feature, whereby if we issue equity-based instruments at a price below the exercise price of the 12% Warrants, the exercise price of the 12% Warrants would be adjusted.  The ASU is effective for annual periods beginning after December 15, 2018, and for interim periods within those years, with early adoption permitted.  Early adoption of this guidance could have a significant impact on our financial statements, as it would effectively eliminate the derivative liability and the gain or loss from changes in the fair value of the derivative.  We are currently assessing whether to early adopt this standard.


FASB ASU 2017-09 “Scope of Modification Accounting (Topic 718)” – In May 2017, the FASB issued 2017-09.  The guidance clarifies the accounting for when the terms of a share-based award are modified.  The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years, with early adoption permitted.  This new guidance would only impact our financial statements if, in the future, we modified the terms of any of our share-based awards.


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 unit’s 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 expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.


8



FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” – In January 2017, the FASB issued 2017-01.  The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business.  The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business.  The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606.  The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years.  Adoption of this ASU is not expected to have a significant impact on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15.  Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.  This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted.  Adoption of this ASU will not have a significant impact on our statement of cash flows.


FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” – In May 2016, the FASB issued 2016-12.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” – In May 2016, the FASB issued 2016-11, which clarifies guidance on assessing whether an entity is a principal or an agent in a revenue transaction.  This conclusion impacts whether an entity reports revenue on a gross or net basis.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606)” – In April 2016, the FASB issued ASU 2016-10, to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-09 “Compensation – Stock Compensation (Topic 718)” – In March 2016, the FASB issued ASU 2016-09, which includes multiple provisions intended to simplify various aspects of accounting for share-based payments.  The new guidance will require entities to recognize all income tax effects of awards in the income statement when the awards vest or are settled.  It also will allow entities to make a policy election to account for forfeitures as they occur.  This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Adopting this ASU did not 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 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 18, 2018, including interim periods within those fiscal years.  We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.


FASB ASU 2015-17”Income Taxes (Topic 740)” – In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet.  Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet.  The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet.  This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.


FASB ASU 2015-16 “Business Combinations (Topic 805),” or ASU 2015-16 - In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. We will apply this guidance to any business combinations that may occur.


9



FASB ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory,” or ASU 2015-11 - In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. Adopting this ASU did not have a significant impact on our financial position, results of operations and cash flows.


NOTE 2.  BUSINESS ACQUISITION


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 vest over a six month period.  The Mile High APA contains certain provisions that require 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 are 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 Seller’s ability to immediately sell such shares.  The $155,000 value of stock consideration was recorded as accrued stock payable on the September 30, 2017, condensed consolidated balance sheet, which will be reduced when the vesting requirements for the shares are met and we issue the common stock.  We have not completed the allocation of the purchase price.  In the September 30, 2017, condensed consolidated balance sheet we have preliminarily recorded an intangible asset for Mile High of $155,000.  Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date.


NOTE 3.   NOTES RECEIVABLE – DB ARIZONA


Our notes receivable – DB Arizona include accrued interest of $14,171 and $2,202, respectively, as of September 30, 2017 and December 31, 2016.  The loans bear interest at 14%, with principal and interest due on May 30, 2017.  The face value of the notes includes $101,500 that we loaned directly to DB Arizona and $825,000 that we acquired when we purchased GC Finance Arizona in June 2017 for $106,000.  At the time of the purchase, we estimated the fair value of the $825,000 note, which is subordinate to the $101,500 note, to be $106,000.


DB Arizona is financed with significant debt and has yet to generate positive cash flows from operations.  We have classified the notes as long-term, because DB Arizona does not currently have sufficient resources to satisfy their obligation to us and the notes are in default.  These conditions do not meet the level of probable loss required to reduce the carrying value.  In the future, however, they may be unable to generate sufficient cash flows from operations or to restructure their capital.  Accordingly, there is a reasonable possibility that we may be unable to recover all or a portion of our notes receivable from DB Arizona.


NOTE 4.   LONG-LIVED ASSETS


Property and Equipment


Depreciation expense was $15,997 and $11,944, respectively, for the three months ended September 30, 2017 and 2016, and $47,693 and $36,070, respectively, for the nine months ended September 30, 2017 and 2016.  We have not recognized any impairment as of September 30, 2017.


Intangible Assets


Intangible assets of $139,288 as of September 30, 2017, consisted of the preliminary purchase price allocation for Mile High of $155,000, net of accumulated amortization of $15,712, based on a preliminary estimated useful life of two years.  The intangible asset for Chiefton brand and graphic designs, with a gross value of $69,400, was fully amortized as of September 30, 2017.


Amortization expense was $23,888 and $86,044, respectively, for the three months ended September 30, 2017 and 2016, and $41,095 and $256,259, respectively, for the nine months ended September 30, 2017 and 2016.


10



NOTE 5.    DEBT


Infinity Note – Related Party


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 June 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.  No additional advances may be made after December 31, 2016.  The Infinity Note is collateralized by a security interest in substantially all of our assets.  Interest expense for the Infinity Note for the nine months ended September 30, 2017 and 2016, was $51,239 and $26,540, respectively, and $51,239 was accrued as of September 30, 2017.  The Infinity Note is subordinate to the 12% Notes.


Notes Payable


 

 

September 30,

2017

 

December 31,

2016

12% Notes

$

2,081,250

$

2,750,000

Unamortized debt discount

 

(800,318)

 

(1,934,750)

Long-term portion

$

1,280,932

$

815,250


12% Notes


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 increases to 18%.  The 12% Notes are collateralized by a security interest in substantially all of our assets.  We may 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 have an exercise price of $0.35 per share and the other 4.5 million warrants have an exercise price of $0.70 per share.  Should we issue 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 will be adjusted to the lower price.  The 12% Warrants may be exercised 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 is no effective registration statement for the 12% Warrants within six months of being granted, the holder may exercise on a cashless basis.  The registration statement related to the 12% Warrants was declared effective on December 23, 2016.  If our common stock closes above $5.00 for ten consecutive days, we may call the warrants, giving the warrant holders 30 days to exercise.  Since the 12% Warrants include a clause requiring repricing, the warrants are considered to be a derivative that is recorded as a liability at fair value.


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 $2,450,000 and interest expense of $5,189,000.  The 12% Notes are otherwise treated as conventional debt.


The Infinity Note and the 12% Notes, totaling $3,451,376, are due and payable on September 21, 2018.


NOTE 6.  ACCRUED STOCK PAYABLE


The following tables summarize the changes in accrued common stock payable during the nine months ended September 30, 2017:


 

 

Amount

 

Number of Shares

December 31, 2016

$

$

Acquisition of Mile High

 

155,000

 

104,359

Sale of common stock and warrants

 

175,000

 

175,000

September 30, 2017

$

330,000

$

279,359


The Mile High shares are issuable on February 27, 2018, if the terms of the Mile High APA are met.


11



The 175,000 shares were issued in October 2017.  See Note 11 – Subsequent Events.


NOTE 7.  DERIVATIVE WARRANT LIABILITY


On September 21, 2016, in connection with the 12% Notes, we issued the 12% Warrants, which are treated as a derivative liability and adjusted to fair value at the end of each period.  The underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability were:


 

Three months ended

 

September 30, 2017

June 30,

2017

March 31,

2017

Stock price on valuation date

$1.43

$1.37 – 2.20

$2.21 – 3.25

Risk-free interest rate

1.5%

1.3 – 1.4%

1.3 – 1.5%

Expected dividend yield

Expected term (in years)

2.0

2.2 – 2.5

2.5 – 2.7

Expected volatility

128%

131 – 134%

146 – 153%

Number of iterations

5

5

5


Changes in the derivative warrant liability were as follows:


December 31, 2016

$

23,120,000

Decrease in fair value

 

(10,580,000)

Reclassification to additional paid-in capital upon exercise of warrants

 

(7,301,000)

September 30, 2017

$

5,239,000


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


Share-based expense consisted of the following:


 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Employee Awards

$

839,322

$

740,844

$

2,969,811

$

1,574,906

Consulting Awards

 

 

103,869

 

25,440

 

151,385

Feinsod Agreement

 

 

27,504

 

 

192,800

DB Option Agreement

 

 

 

 

55,100

 

$

839,322

$

872,217

$

2,995,251

$

1,974,191


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 (the “Incentive Plan”).  The Incentive Plan provides for the issuance of up to 10 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.  In April 2016, we filed a Registration Statement on Form S-8 (the “Registration Statement”), which automatically became effective in May 2016.  The Registration Statement relates to 10,000,000 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.


12



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:


 

Three months ended

 

September 30, 2017

June 30,

2017

March 31,

2017

Exercise price

$1.34 – 2.07

$1.92

$2.41 – 3.00

Stock price on date of grant

$1.34 – 2.07

$1.92

$2.41 – 3.00

Volatility

140 – 142%

145%

148 – 153%

Risk-free interest rate

1.4 – 1.9%

1.8%

1.7 – 1.9%

Expected life (years)

3.0 – 5.0

5.0

4.0 – 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

 

1,116,400

 

1.78

 

 

 

 

Exercised

 

(367,240)

 

1.09

 

 

 

 

Forfeited

 

(554,050)

 

0.75

 

 

 

 

Outstanding at September 30, 2017

 

9,013,510

 

1.14

 

2.2

$

6,211,944

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2017

 

7,984,960

$

1.00

 

1.9

$

5,726,885


Based on our estimated forfeiture rates, we expect 1,007,181 Employee Awards will vest.  As of September 30, 2017, there was approximately $1,255,708 of total unrecognized compensation expense related to unvested Employee Awards, which is expected to be recognized over a weighted-average period of eight months.


Warrants for 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.  Consulting Awards are revalued at each reporting date until fully vested, which may generate an expense or benefit.


No Consulting Award warrants were issued during the nine months ended September 30, 2017.


Stock for Consulting Services


During the nine months ended September 30, 2017, we issued 8,000 shares to a third party for marketing services.


Warrants with Debt


The following summarizes warrants issued with debt:


 

 

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

 

 

 

 

Exercised

 

(3,377,587)

$

0.59

 

 

 

 

Forfeited

 

(28,126)

 

1.20

 

 

 

 

Outstanding and exercisable at September 30, 2017

 

5,620,130

$

0.69

 

2.1

$

4,573,359


13



NOTE 10.   NET INCOME (LOSS) PER SHARE


Basic net income (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 as of the first day of the reporting period, along with the impact of those dilutive securities on net income (loss).


 

 

Three months ended September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Net income (loss)

$

586,873

$

(14,447,094)

$

4,225,197

$

(16,971,797)

Gain on derivative warrant liability

 

(2,421,000)

 

 

(10,580,000)

 

 

$

(1,834,127)

$

(14,447,094)

$

(6,354,803)

$

(16,971,797)

 

 

 

 

 

 

 

 

 

Weighted average outstanding shares of common stock

 

20,654,502

 

15,495,421

 

19,883,329

 

15,270,968

Warrants – Debt

 

4,778,627

 

 

4,960,848

 

Stock options

 

3,662,422

 

 

4,667,825

 

Other warrants

 

91,224

 

 

112,186

 

Common stock and equivalents

 

29,186,775

 

15,495,421

 

29,624,188

 

15,270,968

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

Basic

$

0.03

$

(0.93)

$

0.21

$

(1.11)

Diluted

 

(0.06)

 

(0.93)

 

(0.21)

 

(1.11)


In 2016, outstanding stock options and common stock warrants are considered anti-dilutive because we were in a net loss position.


NOTE 11.   SUBSEQUENT EVENTS


On October 9, 2017, we entered into a securities purchase agreement with several non-affiliated accredited investors in a private placement, pursuant to which for $1.00 we sold one share of our common stock and one warrant to purchase one share of our common stock, at an exercise price of $0.50 per share with a two year life (together, the “2017 Units”).  We issued 1,000,000 2017 Units.  In consideration for issuing the 2017 Units, we received $975,000 in cash and extinguished $25,000 of 12% Notes. We received $175,000 in cash consideration in September 2017, see Note 6 – Accrued Stock Payable.


Subsequent to September 30, 2017, and up to the date of this filing, 600,000 shares of our common stock were issued upon the exercise of 12% Warrants for consideration of $210,000 in cash and $210,000 for the extinguishment of 12% Notes.


NOTE 12.   SEGMENT INFORMATION


Our operations are organized into four segments: Security and Cash Management Services; Marketing Consulting and Apparel; Operations Consulting and Products; and Finance 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 September 30


2017

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

533,065

$

49,394

$

364,629

$

32,903

$

979,991

Costs and expenses

 

(647,915)

 

(100,464)

 

(402,856)

 

(9,339)

 

(1,160,574)

 

$

(114,850)

$

(51,070)

$

(38,227)

$

23,564

 

(180,583)

Corporate

 

 

 

 

 

 

 

 

 

767,456

 

 

 

 

 

 

 

 

Net income

$

586,873


2016

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

560,713

$

106,402

$

117,700

$

25,565

$

810,380

Costs and expenses

 

(528,916)

 

(91,342)

 

(235,605)

 

(13,352)

 

(869,215)

Other expense

 

 

 

 

(6,414)

 

(6,414)

 

$

31,797

$

15,060

$

(117,905)

$

5,799

 

(65,249)

Corporate

 

 

 

 

 

 

 

 

 

(14,381,845)

 

 

 

 

 

 

 

 

Net loss

$

(14,447,094)


14



Nine months ended September 30


2017

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

1,322,509

$

163,216

$

947,725

$

99,251

$

2,532,701

Costs and expenses

 

(1,615,694)

 

(381,439)

 

(1,018,655)

 

(37,113)

 

(3,052,901)

 

$

(293,185)

$

(218,223)

$

(70,930)

$

62,138

 

(520,200)

Corporate

 

 

 

 

 

 

 

 

 

4,745,397

 

 

 

 

 

 

 

 

Net income

$

4,225,197


2016

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

1,599,907

$

221,563

$

289,566

$

93,398

$

2,204,434

Costs and expenses

 

(1,604,932)

 

(216,443)

 

(439,389)

 

(36,731)

 

(2,297,495)

Other expense

 

 

 

 

(10,876)

 

(10,876)

 

$

(5,025)

$

5,120

$

(149,823)

$

45,791

 

(103,937)

Corporate

 

 

 

 

 

 

 

 

 

(16,867,860)

 

 

 

 

 

 

 

 

Net loss

$

(16,971,797)


Total assets

 

September 30,

2017

 

December 31,

2016

Security

$

363,757

$

141,140

Marketing

 

51,789

 

50,919

Operations

 

92,882

 

55,750

Finance

 

644,384

 

515,205

Corporate

 

1,654,477

 

2,094,857

 

$

2,807,289

$

2,857,871


15



ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


This Management’s Discussion and Analysis (“MD&A”) is intended to provide an understanding of our financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year.  This discussion should be read in conjunction with the Condensed Consolidated Unaudited Financial Statements contained in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related notes and MD&A of Financial Condition and Results of operations appearing in our Annual Report on Form 10-K as of and for the years ended December 31, 2016 and 2015. The results of operations for an interim period may not give a true indication of results for future interim periods or for the year.


Cautionary Statement Regarding Forward Looking Statements


This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended.  We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date this Quarterly Report on Form 10-Q is filed.


When this report uses the words “we,” “us,” “our,” or “GCC” and the “Company,” they refer to General Cannabis Corp (formerly, “Advanced Cannabis Solutions, Inc.”).


Our Products, Services and Customers


We operate in a rapidly evolving and highly regulated industry that, as has been estimated by some, will exceed $30 billion in revenue by the year 2020.  We have been and will continue to be aggressive in executing acquisitions and pursuing other opportunities that we believe will benefit us in the long-term.


Through our reporting segments, we provide products and services to the regulated cannabis industry, which include the following:


Security and Cash Transportation Services (“Security Segment”)

 

We provide advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops, under the business name Iron Protection Group (“IPG”), and security services to non-cannabis customers in the hospitality business, such as hotels, under the business name Mile High Protection Services (“Mile High”).  The drop in wholesale prices in Colorado has negatively impacted security services in Colorado, as grow facilities and retailers seek cheaper alternatives or curtail services.  We acquired Mile High in order to expand our Colorado security business into the non-cannabis space, as we believe that market provides an opportunity for growth.  We have opened an IPG office in California, which recently legalized recreational cannabis in addition to previously legal medical marijuana.


In states that have recently legalized cannabis, whether medical, recreational or both, license applications require a security plan and, if approved, implementation of that security plan.  Accordingly, we are assessing the opportunity to expand our security consulting business to assist companies with their application process and the subsequent implementation of compliant security services.


Marketing Consulting and Apparel (“Marketing Segment”)


Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry.  We assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products.  We now have the capacity of a full service marketing agency.  Chiefton Design also supports our other segments with marketing designs and apparel.


Chiefton’s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories.  Our apparel is sold through our on-line shop, cannabis retailers, and specialty t-shirt and gift shops.  In August 2017, we added a separate managing director to focus solely on Chiefton Supply.  We are planning a winter line for the 2017 holiday season and a spring / summer line for 2018.


16



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. Our business plan for NBC correlates to future growth of the regulated cannabis market in the United States.


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 infrastructure, equipment, consumables and compliance packaging.


Finance and Real Estate (“Finance Segment”)


Real Estate Leasing


We own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.


Our real estate leasing business plan includes the potential future acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities would range in size from 5,000 to 50,000 square feet. These facilities would only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants would include certain requirements that permit us to continually evaluate our tenants’ compliance with applicable laws and regulations.


Shared Office Space, Networking and Event Services   

 

In October 2014, we purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as “The Greenhouse”. The building is a 16,056 square foot facility, which we use as our corporate headquarters.


The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. We continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations.  We expect to continue the renovation of The Greenhouse in 2017.


We plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.


Industry Finance


Our industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.  These loans would generally be secured to the maximum extent permitted by law.  We believe there is a significant demand for this type of financing.  We are assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.


DB Arizona


DB Arizona produces and distributes cannabis-infused elixirs and edible products in Arizona.  They previously were a licensee with a single national cannabis-infused product company, which also had significant control of operations.  The relationship was terminated in September 2017.   DB Arizona is currently negotiating with several new cannabis-infused product companies to become their producer and distributor of products for the medical cannabis market in Arizona.  If successful, we believe working with additional brands would allow DB Arizona to better control costs and potentially lead to increased revenues and operating cash flows.  We believe the physical plant can be best utilized by contract manufacturing and distributing for multiple brands rather than a single partner.  During this transition phase we anticipate investing additional funds for working capital.


Results of Operations


The following tables set forth, for the periods indicated, condensed statements of operations data.  The table and the discussion below should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.


17



Consolidated Results


 

 

Three months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

979,991

$

810,380

$

169,611

 

21%

Costs and expenses

 

(2,447,655)

 

(2,108,807)

 

(338,848)

 

16%

Other income (expense)

 

2,054,537

 

(13,148,667)

 

15,203,204

 

(116)%

Net income (loss)

$

586,873

$

(14,447,094)

$

15,033,967

 

(104)%


 

 

Nine months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

2,532,701

$

2,204,434

$

328,267

 

15%

Costs and expenses

 

(7,512,692)

 

(5,349,371)

 

(2,163,321)

 

40%

Other income (expense)

 

9,205,188

 

(13,826,860)

 

23,032,048

 

(167)%

Net income (loss)

$

4,225,197

$

(16,971,797)

$

21,196,994

 

(125)%


Revenues


Revenues increased primarily due to an increase in revenue in our Operations Segment and Chiefton Design, offset by a decrease in revenue for our Security Segment and Chiefton Supply.


Costs and expenses


 

 

Three months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Cost of service revenues

$

752,154

$

564,687

$

187,467

 

33%

Cost of goods sold

 

32,459

 

68,992

 

(36,533)

 

(53)%

Selling, general and administrative

 

657,532

 

409,403

 

248,129

 

61%

Share-based expense

 

839,322

 

872,217

 

(32,895)

 

(4)%

Professional fees

 

126,303

 

95,520

 

30,783

 

32%

Depreciation and amortization

 

39,885

 

97,888

 

(58,103)

 

(59)%

 

$

2,447,655

$

2,108,807

$

338,848

 

16%


 

 

Nine months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Cost of service revenues

$

1,757,241

$

1,547,474

$

209,767

 

14%

Cost of goods sold

 

240,577

 

112,649

 

127,928

 

114%

Selling, general and administrative

 

1,976,244

 

1,146,022

 

830,222

 

72%

Share-based expense

 

2,995,251

 

1,974,191

 

1,021,060

 

52%

Professional fees

 

454,591

 

276,706

 

177,885

 

64%

Depreciation and amortization

 

88,788

 

292,329

 

(203,541)

 

(70)%

 

$

7,512,692

$

5,349,371

$

2,163,321

 

40%


Cost of service revenues typically fluctuates with the changes in revenue for our Operations and Security Segments, while these costs are relatively fixed for our Marketing Segment.  Cost of goods sold varies with changes in product sales, including an increase in products sold by our Operations Segment, which have smaller margins than apparel sold by our Marketing Segment.


Selling, general and administrative expense increased in 2017 primarily due to increases for (a) marketing and promotion; (b) premiums for liability, and directors and officers insurance; and (c) additional personnel added to our corporate and segment teams.


Share-based expense included the following:


 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Employee Awards

$

839,322

$

740,844

$

2,969,811

$

1,574,906

Consulting Awards

 

 

103,869

 

25,440

 

151,385

Feinsod Agreement

 

 

27,504

 

 

192,800

DB Option Agreement warrants

 

 

 

 

55,100

 

$

839,322

$

872,217

$

2,995,251

$

1,974,191


18



Employee awards are issued under our 2014 Equity Incentive Plan, which was approved by shareholders on June 26, 2015, and expense varies primarily due to the number of stock options granted.  Consulting Awards are granted to third parties in lieu of cash for services provided.  On August 4, 2014, pursuant to an agreement with Michael Feinsod (“Feinsod”), our Board of Directors (the “Board”) appointed Feinsod Chairman of the Board and approved a compensatory agreement with Infinity Capital, LLC (“Infinity Capital”), an investment management company founded and controlled by him.  Under the agreement, we issued 200,000 shares of our common stock in 2014 and committed to issuing an additional 150,000 shares in 2015 and 150,000 shares in 2016.  The 200,000 shares were expensed immediately, while the additional shares were expensed ratably through their issue date.  In March 2016, we extended the DB Option Agreement and issued 100,000 warrants for our common stock.


Professional fees consist primarily of accounting and legal expenses, and increased in 2017 due to our registration statements and general corporate matters.


Depreciation and amortization expense decreased because the intangibles from the IPG acquisition were fully impaired as of December 31, 2016, and are no longer being amortized.


Other (Income) Expense


 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Amortization of debt discount

$

284,900

$

111,837

$

1,134,432

$

327,455

Interest expense

 

81,563

 

5,276,550

 

240,380

 

5,381,125

Loss on extinguishment of debt

 

 

1,728,280

 

 

2,086,280

(Gain) loss on derivative warrant liability

 

(2,421,000)

 

6,032,000

 

(10,580,000)

 

6,032,000

 

$

(2,054,537)

$

13,148,667

$

(9,205,188)

$

13,826,860


Amortization of debt discount is higher in 2017 compared to 2016, because 2017 also includes amounts immediately expensed upon the exercise of 12% Warrants through the reduction of principal for the related 12% Notes.  Interest expense is higher in 2016 compared to 2017 due to immediately expensing $5,189,000 of the fair value of the derivative warrant liability in September 2016.  Loss on extinguishment of debt includes (a) $1,715,000 of the fair value of the derivative warrant liability associated with converting a portion of the 10% Notes and 14% Mortgage Note Payable into 12% Notes in September 2016, and (b) in June 2016 expensing warrants issued to extend the maturity date of the 10% Notes from April 2016 to January 2017.  The (gain) loss on derivative warrant liability varies, primarily, due to changes in the fair value of our common stock.  A (decrease) increase in the fair value of the derivative warrant liability, associated with the warrants issued with the 12% Notes in September 2016, results in a (gain) loss.


Security and Cash Transportation Services


 

 

Three months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

533,065

$

560,713

$

(27,648)

 

(5)%

Costs and expenses

 

(647,915)

 

(528,916)

 

(118,999)

 

22%

 

$

(114,850)

$

31,797

$

(146,647)

 

(461)%


 

 

Nine months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

1,322,509

$

1,599,907

$

(277,398)

 

(17)%

Costs and expenses

 

(1,615,694)

 

(1,604,932)

 

(10,762)

 

1%

 

$

(293,185)

$

(5,025)

$

(288,160)

 

5,735%


Revenues decreased in 2017 primarily from the loss of a significant customer due to the drop in wholesale cannabis prices in Colorado, partially offset in the third quarter of 2017 by organic growth and the acquisition of Mile High.  Costs and expenses typically vary with changes in revenue, however, the increase in costs and expenses in the third quarter of 2017 compared to 2016, relates primarily to overtime and training time for guards as our customer base recovered from the decline experienced during the first six months of 2017.  We are also incurring additional expenses in 2017 for our office in California and overhead from the Mile High acquisition.


19



Marketing Consulting and Apparel


 

 

Three months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

49,394

$

106,402

$

(57,008)

 

(54)%

Costs and expenses

 

(100,464)

 

(91,342)

 

(9,122)

 

10%

 

$

(51,070)

$

15,060

$

(66,130)

 

(439)%


 

 

Nine months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

163,216

$

221,563

$

(58,347)

 

(26)%

Costs and expenses

 

(381,439)

 

(216,443)

 

(164,996)

 

76%

 

$

(218,223)

$

5,120

$

(223,343)

 

(4,362)%


In 2017, we have been focusing on launching our design agency.  This led to a drop in apparel sales and an increase in consulting revenue.  Expenses for the design business during the first six months of 2017 were high, as we tried different approaches to establishing its operations, which negatively impacted costs and expenses.  We believe we now have an efficient model for Chiefton Design, with manageable, moderate recurring expenses.  In the third quarter of 2017, we added a new managing director to drive Chiefton Supply’s apparel business.  We do not expect to see a corresponding increase in revenue until we launch our holiday and spring clothing lines.


Operations Consulting and Products


 

 

Three months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

364,629

$

117,700

$

246,929

 

210%

Costs and expenses

 

(402,856)

 

(235,605)

 

(167,251)

 

71%

 

$

(38,227)

$

(117,905)

$

79,678

 

(68)%


 

 

Nine months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

947,725

$

289,566

$

658,159

 

227%

Costs and expenses

 

(1,018,655)

 

(439,389)

 

(579,266)

 

132%

 

$

(70,930)

$

(149,823)

$

78,893

 

(53)%


Revenues in 2017 increased primarily from (a) assisting companies submitting applications to acquire licenses in states that recently legalized cannabis; (b) adding a significant two year contract in July 2017 to manage the cannabis grow facility for a customer; and (c) 2017 product sales of approximately $210,000; offset by (d) the completion in the second quarter of 2017 of two small contracts to manage customer grow facilities.  Costs and expenses increased in 2017 primarily due to hiring new consultants to meet current and expected future demand for services, as well as the cost of the products sold.


Finance and Real Estate


 

 

Three months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

32,903

$

25,565

$

7,338

 

29%

Costs and expenses

 

(9,339)

 

(13,352)

 

4,013

 

(30)%

Interest expense

 

 

(6,414)

 

6,414

 

(100)%

 

$

23,564

$

5,799

$

17,765

 

306%


 

 

Nine months ended September 30,

 

Percent

 

 

2017

 

2016

 

Change

 

Change

Revenues

$

99,251

$

93,398

$

5,853

 

6%

Costs and expenses

 

(37,113)

 

(36,731)

 

(382)

 

1%

Interest expense

 

 

(10,876)

 

10,876

 

(100)%

 

$

62,138

$

45,791

$

16,347

 

36%


Revenue from leasing our Pueblo facility remained steady between 2017 and 2016.  Revenue fluctuates in 2017 compared to 2016, due to lease revenue for The Greenhouse.  Revenues in 2017 also include interest income from our note receivable with DB Arizona.  Interest expense represents the interest for the mortgage on our Pueblo facility, which was paid off in September 2016.


20



Liquidity and Capital Resources


We had cash of $252,538 and $773,795, respectively, as of September 30, 2017 and December 31, 2016.  Our cash flows from operating, investing and financing activities were as follows:


 

 

Nine months ended

September 30,

 

 

2017

 

2016

Net cash used in operating activities

$

(2,124,013)

$

(1,062,683)

Net cash used in investing activities

 

(171,425)

 

(11,615)

Net cash provided by financing activities

$

1,774,181

$

2,080,193


Net cash used in operating activities increased in 2017 by $1,061,330 compared to 2016, primarily due to a larger operating loss.  We have added personnel to our Security, Operations and Marketing Segments in advance of growth opportunities.  We also continue to add personnel to our corporate infrastructure and expanded our corporate marketing efforts.  Where possible, we continue to use non-cash equity-based instruments to obtain consulting services and compensate employees.


Net cash used in investing activities in 2017 relates primarily to our loan to DB Arizona and our purchase of GC Finance Arizona.


Net cash provided by financing activities in 2017 was from the exercise of warrants and stock options, and the sale of common stock.  In 2016, we borrowed $437,500 from Infinity Capital and $2,500,000 from non-affiliates.


On October 9, 2017, we entered into a securities purchase agreement with several non-affiliated accredited investors in a private placement, pursuant to which for $1.00 we sold one share of our common stock and one warrant to purchase one share of our common stock, at an exercise price of $0.50 per share with a two year life (together, the “2017 Units”).  We issued and sold 1,000,000 2017 Units. In consideration for issuing the 2017 Units, we received $975,000 in cash and extinguished $25,000 of 12% Notes.


Non-GAAP Financial Measures


For the non-GAAP Adjusted EBITDA (Earnings (loss) Before Interest, Taxes, Depreciation and Amortization) per share-basic and diluted measures presented above, we have provided (1) the most directly comparable GAAP measure; (2) a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure; (3) an explanation of why our management believes this non-GAAP measure provides useful information to investors; and (4) additional purposes for which we use this non-GAAP measure.


We believe that the disclosure of Adjusted EBITDA per share-basic and diluted provides investors with a better comparison of our period-to-period operating results. We exclude the effects of certain items from net loss per share-basic and diluted when we evaluate key measures of our performance internally, and in assessing the impact of known trends and uncertainties on our business. We also believe that excluding the effects of these items provides a more balanced view of the underlying dynamics of our business. Adjusted EBITDA per share-diluted excludes the impacts of interest expense, tax expense, depreciation and amortization, gain (loss) on its derivative liability, and share-based compensation. Weighted average number of common shares outstanding - basic and diluted (adjusted) excludes the impact of shares issued in connection with share-based compensation.


Tabular reconciliations of this supplemental non-GAAP financial information to our most comparable GAAP information are contained in this Quarterly Report on Form 10-Q. We present such non-GAAP supplemental financial information, as we believe such information provides additional meaningful methods of evaluating certain aspects of our operating performance from period-to-period on a basis that may not be otherwise apparent on a non-GAAP basis. This supplemental financial information should be considered in addition to, not in lieu of, our Condensed Consolidated Financial Statements.


21




 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Net income (loss)

$

586,873

$

(14,447,094)

$

4,225,197

$

(16,971,797)

Adjustments:

 

 

 

 

 

 

 

 

Share-based expense

 

839,322

 

872,217

 

2,995,251

 

1,974,191

Depreciation and amortization

 

39,885

 

97,988

 

88,788

 

292,329

Amortization of debt discount

 

284,900

 

111,837

 

1,134,432

 

327,455

Interest expense

 

81,563

 

5,276,550

 

240,380

 

5,381,125

Loss on extinguishment of debt

 

 

1,728,280

 

 

2,086,280

(Gain) loss on derivative liability

 

(2,421,000)

 

6,032,000

 

(10,580,000)

 

6,032,000

Total adjustments

 

(1,175,330)

 

14,118,872

 

(6,121,149)

 

16,093,380

Adjusted EBITDA

$

(588,457)

$

(328,222)

$

(1,895,952)

$

(878,417)

 

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

 

 

Net income (loss) – Basic

$

0.03

$

(0.93)

$

0.21

$

(1.11)

Net income (loss) – Diluted

 

(0.06)

 

(0.93)

 

(0.21)

 

(1.11)

Adjusted EBITDA – Basic and Diluted

 

(0.03)

 

(0.02)

 

(0.11)

 

(0.06)

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

Net income (loss) – Basic

 

20,654,502

 

15,495,421

 

19,883,329

 

15,270,968

Net income (loss) – Diluted

 

29,186,775

 

15,495,421

 

29,624,188

 

15,270,968

Adjusted EBITDA – Basic and Diluted

 

17,128,778

 

15,584,981

 

17,175,653

 

15,323,166


Critical Accounting Policies


Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2016, and Note 1 to the Condensed Consolidated Financial Statements in this Form 10-Q.


Off-Balance Sheet Arrangements


We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.


ITEM 4.  CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.


We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses discussed below.


22



Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by the Board, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:


·

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

·

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures of are being made only in accordance with authorizations of our management and directors; and

·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.


Because of our inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Management identified the following material weaknesses:


·

We have not performed a risk assessment and mapped our processes to control objectives;

·

We have not implemented comprehensive entity-level internal controls;

·

We have not implemented adequate system and manual controls; and

·

We do not have sufficient segregation of duties.


Assessment of Internal Control over Financial Reporting


Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Based on management’s assessment, management concluded that the above material weaknesses have not been remediated and, accordingly, our internal control over financial reporting was not effective as of September 30, 2017.


Remediation of Material Weaknesses


We have designed and plan to implement, or in some cases have already implemented, the specific remediation initiatives described below:


·

We intend to allocate resources to perform a risk assessment and map processes to control objectives and, where necessary, implement and document internal controls in accordance with COSO.

·

Our entity-level controls are, generally, informal and we intend to evaluate current processes, supplement where necessary, and document requirements.

·

While we have implemented procedures to identify, evaluate and record significant transactions, we need to formally document these procedures and evidence the performance of the related controls.

·

We plan to evaluate system and manual controls, identify specific weaknesses, and implement a comprehensive system of internal controls.

·

We are assessing our current staffing and evaluating our personnel requirements to improve our segregation of duties.


Management understands that in order to remediate the material weaknesses, additional segregation of duties, changes in personnel, and technologies are necessary. We do not expect to have fully remediated these material weaknesses until management has tested those internal controls and found them to have been remediated.


Our Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to such attestation pursuant to rules of the SEC that permits us to provide only management’s report in our Annual Report on Form 10-K.


23



Changes in Internal Control over Financial Reporting


In September 2017, we appointed our Vice President of Finance, a certified public accountant, as Chief Financial Officer, and hired a certified public accountant to serve as our corporate controller, a new position.  We have implemented an informal process of preparation and review of balance sheet reconciliations, as well as informal procedures to identify, evaluate and record significant transactions; however, these changes do not meet the strict requirements to overcome the material weaknesses identified above.


24




PART II.  OTHER INFORMATION


ITEM 1.    LEGAL PROCEEDINGS


None.


ITEM 1A.  RISK FACTORS


As of the date of this report, there have been no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


On July 27, 2017, we issued 196,874 shares of our common stock upon the exercise of warrants issued with debt in 2013 for consideration of $236,250 in cash.  Such shares were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4.    MINE SAFETY DISCLOSURES


Not applicable.


ITEM 5.   OTHER INFORMATION


None.


ITEM 6.  EXHIBITS


Exhibits

 

Description

2.1

 

Asset Purchase Agreement dated August 18, 2017, between General Cannabis Corp and Mile High Protection Services LLC (incorporated by reference to Exhibit 2.1 of the Form 8-K filed by General Cannabis Corp. on August 24, 2017).

10.1

 

Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Form 8-K filed by General Cannabis Corp. on October 13, 2017).

10.2

 

Form of Warrant (incorporated by reference to Exhibit 10.2 of the Form 8-K filed by General Cannabis Corp. on October 13, 2017).

31.1

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

 

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

 

The following financial information from the Quarterly Report on Form 10-Q of General Cannabis Corp for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Cash Flows, and (iv) Notes to the Condensed Consolidated Financial Statements.


25




SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

GENERAL CANNABIS CORP

 

 

 

Date: November 7, 2017

By:

/s/Robert Frichtel

 

 

Robert Frichtel, Principal Executive Officer

 

 

 

 

By:

/s/ Brian Andrews

 

 

Brian Andrews, Principal Financial and Accounting Officer


26


EX-31.1 2 exh31_1.htm EXHIBIT 31.1 Exhibit

Exhibit 31.1


CERTIFICATIONS


I, Robert Frichtel, certify that;


1.      I have reviewed this quarterly report on Form 10-Q of General Cannabis Corporatiion;


2.      Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;


3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.      The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: November 7, 2017

By:

/s/ Robert Frichtel

 

 

Robert Frichtel, Principal Executive Officer


EX-31.2 3 exh31_2.htm EXHIBIT 31.2 Exhibit

Exhibit 31.2


CERTIFICATIONS


I, Brian Andrews, certify that;


1.      I have reviewed this quarterly report on Form 10-Q of General Cannabis Corporatiion;


2.      Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;


3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.      The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: November 7, 2017

By:

/s/ Brian Andrews

 

 

Brian Andrews, Principal Financial and Accounting Officer


EX-32.2 4 exh32_1.htm EXHIBIT 32.1 Exhibit

EXHIBIT 32.1


In connection with the Quarterly Report of General Cannabis Corporation, (the “Company”) on Form 10-Q for the quarter ended September 30, 2017, as filed with the Securities Exchange Commission on the date hereof (the “Report”), Robert Frichtel, the Company’s Principal Executive Officer, and Shelly Whitson, the Company’s Principal Financial and Accounting Officer, certify pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:


 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934; and

 

 

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: November 7, 2017

By:

/s/ Robert Frichtel

 

 

Robert Frichtel, Principal Executive Officer


Date: November 7, 2017

By:

/s/ Brian Andrews

 

 

Brian Andrews, Principal Financial and Accounting Officer


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10-Q --12-31 22481605 false 0001477009 Yes No Smaller Reporting Company No 2017 Q3 2017-09-30 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 1.&#160;&#160;&#160;NATURE OF OPERATIONS, HISTORY AND PRESENTATION</b></p><br/><p style="margin:0px"><b>Nature of Operations</b></p><br/><p style="margin:0px">General Cannabis Corp, a Colorado Corporation (the &#8220;Company,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our,&#8221; or &#8220;GCC&#8221;) (formerly, Advanced Cannabis Solutions, Inc.), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. &#160;On April 28, 2015, our common stock was uplisted and on May 6, 2015, resumed quotation on the OTC Market&#8217;s OTCQB. &#160;Our operations are segregated into the following four segments:</p><br/><p style="margin:0px"><font style="text-decoration:underline">Security and Cash Transportation Services (&#8220;Security Segment&#8221;)</font></p><br/><p style="margin:0px">Iron Protection Group, or IPG, provides advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops. &#160;In August 2017, we acquired the operating assets of Mile High Protection Group, LLC, a Colorado limited liability company, which will continue to do business as &#8220;Mile High Protection Services,&#8221; or Mile High. &#160;Mile High has a diversified client roster, providing security services to hospitality companies, such as hotels, and to licensed cannabis retailers and cultivators in Colorado. &#160;We have also opened an IPG office in California.</p><br/><p style="margin:0px"><font style="text-decoration:underline">Marketing Consulting and Apparel (&#8220;Marketing Segment&#8221;)</font></p><br/><p style="margin:0px">Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry. &#160;We assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products. &#160;We now have the capacity of a full service marketing agency as well as the resources to expand our clothing lines. &#160;Chiefton Design also supports our other segments with marketing designs and apparel.</p><br/><p style="margin:0px">Chiefton&#8217;s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories. &#160;Our apparel is sold through our on-line shop, cannabis retailers, and specialty t-shirt and gift shops. &#160;The apparel sold by Chiefton is purchased and screen printed by third parties, for which there are numerous suppliers. </p><br/><p style="margin:0px"><font style="text-decoration:underline">Operations Consulting and Products (&#8220;Operations Segment&#8221;)</font></p><br/><p style="margin:0px">Through Next Big Crop (&#8220;NBC&#8221;), 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. Our business plan for NBC correlates to the future growth of the regulated cannabis market in the United States.</p><br/><p style="margin:0px">NBC oversees our wholesale equipment and supply business, operated under the name &#8220;GC Supply,&#8221; which provides turnkey sourcing and stocking services to cultivation, retail and infused products manufacturing facilities. Our products include infrastructure, equipment, consumables, and compliance packaging.</p><br/><p style="margin:0px"><font style="text-decoration:underline">Finance and Real Estate (&#8220;Finance Segment&#8221;)</font></p><br/><p style="margin:0px"><i>Real Estate Leasing</i></p><br/><p style="margin:0px">We own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.</p><br/><p style="margin:0px">Our real estate leasing business plan includes the potential future acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities would range in size from 5,000 to 50,000 square feet. These facilities would only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants would include certain requirements that permit us to continually evaluate our tenants&#8217; compliance with applicable laws and regulations.</p><br/><p style="margin:0px"><i>Shared Office Space, Networking and Event Services&#160;&#160;&#160;</i></p><br/><p style="margin:0px">In October 2014, we purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as &#8220;The Greenhouse&#8221;. The building is a 16,056 square foot facility, which we use as our corporate headquarters.</p><br/><p style="margin:0px; page-break-before:always">The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. We continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations. &#160;We expect to continue the renovation of The Greenhouse in 2017.</p><br/><p style="margin:0px">We plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.</p><br/><p style="margin:0px"><i>Industry Finance</i></p><br/><p style="margin:0px">Our industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products. &#160;These loans would generally be secured to the maximum extent permitted by law. &#160;We believe there is a significant demand for this type of financing. &#160;We are assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.</p><br/><p style="margin:0px"><i>DB Products Arizona, LLC</i></p><br/><p style="margin:0px">DB Products Arizona, LLC (&#8220;DB Arizona&#8221;) produces and distributes cannabis-infused elixirs and edible products in Arizona.</p><br/><p style="margin:0px">In June 2017, we purchased 100% of the ownership interests in GC Finance Arizona LLC (&#8220;GC Finance Arizona&#8221;) from Infinity Capital for $106,000 in cash. &#160;GC Finance Arizona holds a 50% ownership interest in DB Arizona, an $825,000 loan to DB Arizona, and no liabilities. &#160;We expect future positive cash flows, if any, will first go towards paying the holders of DB Arizona&#8217;s notes payable. &#160;Accordingly, we allocated the entire consideration of $106,000 to the note receivable from DB Arizona.</p><br/><p style="margin:0px">We have determined that DB Arizona is a variable interest entity. &#160;The other 50% owner owns the building in which DB Arizona operates, and holds the Arizona cannabis license required for DB Arizona to extract cannabis oil and sell cannabis oil-infused products. &#160;Accordingly, the other owner is the primary beneficiary, as they have the power to direct activities that most significantly impact the economic performance of DB Arizona. &#160;We will treat our 50% ownership in DB Arizona as an equity investment.</p><br/><p style="margin:0px">As of September 30, 2017, DB Arizona had total assets of $1,200,000, operating liabilities of $73,639, debt and accrued interest liabilities of $2,463,373, and for the nine months ended September 30, 2017, total revenues of $632,000 and a net loss of $611,000.</p><br/><p style="margin:0px"><b>Basis of Presentation</b></p><br/><p style="margin:0px">The accompanying (a) condensed consolidated balance sheet at December&#160;31, 2016, has been derived from audited financial statements and (b) condensed consolidated unaudited financial statements as of September 30, 2017 and 2016, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. &#160;Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December&#160;31, 2016 (the &#8220;2016 Annual Report&#8221;), filed with the Securities and Exchange Commission (the &#8220;SEC&#8221;) on March 31, 2017. &#160;It is management&#8217;s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results of operations expected for the year ending December&#160;31, 2017.</p><br/><p style="margin:0px">The condensed consolidated financial statements include the results of GCC and its six wholly-owned subsidiary companies: (a) ACS Colorado Corp., a Colorado corporation formed in 2013; (b) Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013; (c) 6565 E. Evans Avenue LLC, a Colorado limited liability company formed in 2014; (d) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (e) GC Security LLC (&#8220;GCS&#8221;), a Colorado limited liability company formed in 2015; and (f) GC Finance Arizona LLC (&#8220;GC Finance Arizona&#8221;), an Arizona limited liability company . &#160;Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in Colorado on June 6, 2013. &#160;Intercompany accounts and transactions have been eliminated.</p><br/><p style="margin:0px; page-break-before:always"><font style="text-decoration:underline">Reclassifications</font></p><br/><p style="margin:0px">Certain reclassifications have been made to the prior period segment reporting to conform to the current period presentation related to now including GC Supply in our Operations Segment. &#160;The reclassifications had no effect on net loss, total assets, or total stockholders&#8217; equity (deficit).</p><br/><p style="margin:0px"><font style="text-decoration:underline">Related Parties</font></p><br/><p style="margin:0px">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. &#160;We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. &#160;We had related party transactions with the following individuals / companies:</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px"><i>Michael Feinsod</i> &#8211; Chairman of our Board of Directors (&#8220;Board&#8221;).</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px"><i>Infinity Capital West, LLC (&#8220;Infinity Capital&#8221;)</i> &#8211; An investment management company that was founded and is controlled by Michael Feinsod.</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px"><i>GC Finance Arizona </i>&#8211; A company owned 100% by Infinity Capital prior to our purchase in June 2017.</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px">DB Arizona&#8211; A company that borrowed $825,000 from GC Finance Arizona, which also holds a 50% ownership interest in DB Arizona. &#160;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. &#160;We include DB Arizona as a related party due to our relationship with Michael Feinsod and Infinity capital, and their relationship with DB Arizona.</p><br/><p style="margin:0px"><b>Going Concern</b></p><br/><p style="margin:0px">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 the foreseeable future.&#160;&#160;The 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 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.&#160;&#160;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.</p><br/><p style="margin:0px">We had an accumulated deficit of $45,001,858 and $49,227,055, respectively, at September 30, 2017 and December&#160;31, 2016, and further losses are anticipated in the development of our business. 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.</p><br/><p style="margin:0px"><b>Recently Issued Accounting Standards</b></p><br/><p style="margin:0px"><i>Financial Accounting Standards Board, or FASB, Accounting Standards Update, or FASB ASU 2017-11 &#8220;Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Heding (Topic 815)&#8221;</i> &#8211; In July 2017, the FASB issued 2017-11. &#160;The guidance eliminates the requirement to consider &#8220;down round&#8221; features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity&#8217;s own stock. &#160;Our 12% Warrants are treated as derivative instruments, because they include a &#8220;down round&#8221; feature, whereby if we issue equity-based instruments at a price below the exercise price of the 12% Warrants, the exercise price of the 12% Warrants would be adjusted. &#160;The ASU is effective for annual periods beginning after December 15, 2018, and for interim periods within those years, with early adoption permitted. &#160;Early adoption of this guidance could have a significant impact on our financial statements, as it would effectively eliminate the derivative liability and the gain or loss from changes in the fair value of the derivative. &#160;We are currently assessing whether to early adopt this standard.</p><br/><p style="margin:0px"><i>FASB ASU 2017-09 &#8220;Scope of Modification Accounting (Topic 718)&#8221;</i> &#8211; In May 2017, the FASB issued 2017-09. &#160;The guidance clarifies the accounting for when the terms of a share-based award are modified. &#160;The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years, with early adoption permitted. &#160;This new guidance would only impact our financial statements if, in the future, we modified the terms of any of our share-based awards.</p><br/><p style="margin:0px"><i>FASB ASU 2017-04 &#8220;Simplifying the Test for Goodwill Impairment (Topic 350)&#8221;</i> &#8211; In January 2017, the FASB issued 2017-04. &#160;The guidance removes &#8220;Step Two&#8221; of the goodwill impairment test, which required a hypothetical purchase price allocation. &#160;A goodwill impairment will now be the amount by which a reporting unit&#8217;s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. &#160;The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. &#160;We do not expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px; page-break-before:always"><i>FASB ASU 2017-01 &#8220;Clarifying the Definition of a Business (Topic 805)&#8221;</i> &#8211; In January 2017, the FASB issued 2017-01. &#160;The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. &#160;The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. &#160;The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. &#160;The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years. &#160;Adoption of this ASU is not expected to have a significant impact on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-15 &#8220;Statement of Cash Flows (Topic 230)&#8221; &#8211; </i>In August 2016, the FASB issued 2016-15. &#160;Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. &#160;ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. &#160;Early adoption is permitted. &#160;Adoption of this ASU will not have a significant impact on our statement of cash flows.</p><br/><p style="margin:0px"><i>FASB ASU 2016-12 &#8220;Revenue from Contracts with Customers (Topic 606)&#8221;</i> &#8211; In May 2016, the FASB issued 2016-12. &#160;The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. &#160;ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-11 &#8220;Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)&#8221;</i> &#8211; In May 2016, the FASB issued 2016-11, which clarifies guidance on assessing whether an entity is a principal or an agent in a revenue transaction. &#160;This conclusion impacts whether an entity reports revenue on a gross or net basis. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-10 &#8220;Revenue from Contracts with Customers (Topic 606)&#8221;</i> &#8211; In April 2016, the FASB issued ASU 2016-10, to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-09 &#8220;Compensation &#8211; Stock Compensation (Topic 718)&#8221;</i> &#8211; In March 2016, the FASB issued ASU 2016-09, which includes multiple provisions intended to simplify various aspects of accounting for share-based payments. &#160;The new guidance will require entities to recognize all income tax effects of awards in the income statement when the awards vest or are settled. &#160;It also will allow entities to make a policy election to account for forfeitures as they occur. &#160;This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. &#160;Adopting this ASU did not have a significant impact on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px"><i>FASB ASU 2016-02 &#8220;Leases (Topic 842)&#8221; &#8211; </i>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. &#160;For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. &#160;Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. &#160;Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. &#160;This ASU is effective for fiscal years beginning after December 18, 2018, including interim periods within those fiscal years. &#160;We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px"><i>FASB ASU 2015-17&#8221;Income Taxes (Topic 740)&#8221; &#8211; </i>In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet. &#160;Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet. &#160;The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. &#160;This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. &#160;We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px"><i>FASB ASU 2015-16 &#8220;Business Combinations (Topic 805),&#8221; or ASU 2015-16</i> - In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. We will apply this guidance to any business combinations that may occur.</p><br/><p style="margin:0px; page-break-before:always"><i>FASB ASU 2015-11 &#8220;Inventory (Topic 330): Simplifying the Measurement of Inventory,&#8221; or ASU 2015-11</i> - In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. Adopting this ASU did not have a significant impact on our financial position, results of operations and cash flows.</p><br/></div> <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>Nature of Operations</b></p><br/><p style="margin:0px">General Cannabis Corp, a Colorado Corporation (the &#8220;Company,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our,&#8221; or &#8220;GCC&#8221;) (formerly, Advanced Cannabis Solutions, Inc.), was incorporated on June 3, 2013, and provides services and products to the regulated cannabis industry. &#160;On April 28, 2015, our common stock was uplisted and on May 6, 2015, resumed quotation on the OTC Market&#8217;s OTCQB. &#160;Our operations are segregated into the following four segments:</p><br/><p style="margin:0px"><font style="text-decoration:underline">Security and Cash Transportation Services (&#8220;Security Segment&#8221;)</font></p><br/><p style="margin:0px">Iron Protection Group, or IPG, provides advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops. &#160;In August 2017, we acquired the operating assets of Mile High Protection Group, LLC, a Colorado limited liability company, which will continue to do business as &#8220;Mile High Protection Services,&#8221; or Mile High. &#160;Mile High has a diversified client roster, providing security services to hospitality companies, such as hotels, and to licensed cannabis retailers and cultivators in Colorado. &#160;We have also opened an IPG office in California.</p><br/><p style="margin:0px"><font style="text-decoration:underline">Marketing Consulting and Apparel (&#8220;Marketing Segment&#8221;)</font></p><br/><p style="margin:0px">Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry. &#160;We assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products. &#160;We now have the capacity of a full service marketing agency as well as the resources to expand our clothing lines. &#160;Chiefton Design also supports our other segments with marketing designs and apparel.</p><br/><p style="margin:0px">Chiefton&#8217;s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories. &#160;Our apparel is sold through our on-line shop, cannabis retailers, and specialty t-shirt and gift shops. &#160;The apparel sold by Chiefton is purchased and screen printed by third parties, for which there are numerous suppliers. </p><br/><p style="margin:0px"><font style="text-decoration:underline">Operations Consulting and Products (&#8220;Operations Segment&#8221;)</font></p><br/><p style="margin:0px">Through Next Big Crop (&#8220;NBC&#8221;), 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. Our business plan for NBC correlates to the future growth of the regulated cannabis market in the United States.</p><br/><p style="margin:0px">NBC oversees our wholesale equipment and supply business, operated under the name &#8220;GC Supply,&#8221; which provides turnkey sourcing and stocking services to cultivation, retail and infused products manufacturing facilities. Our products include infrastructure, equipment, consumables, and compliance packaging.</p><br/><p style="margin:0px"><font style="text-decoration:underline">Finance and Real Estate (&#8220;Finance Segment&#8221;)</font></p><br/><p style="margin:0px"><i>Real Estate Leasing</i></p><br/><p style="margin:0px">We own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.</p><br/><p style="margin:0px">Our real estate leasing business plan includes the potential future acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities would range in size from 5,000 to 50,000 square feet. These facilities would only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants would include certain requirements that permit us to continually evaluate our tenants&#8217; compliance with applicable laws and regulations.</p><br/><p style="margin:0px"><i>Shared Office Space, Networking and Event Services&#160;&#160;&#160;</i></p><br/><p style="margin:0px">In October 2014, we purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as &#8220;The Greenhouse&#8221;. The building is a 16,056 square foot facility, which we use as our corporate headquarters.</p><br/><p style="margin:0px; page-break-before:always">The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. We continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations. &#160;We expect to continue the renovation of The Greenhouse in 2017.</p><br/><p style="margin:0px">We plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.</p><br/><p style="margin:0px"><i>Industry Finance</i></p><br/><p style="margin:0px">Our industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products. &#160;These loans would generally be secured to the maximum extent permitted by law. &#160;We believe there is a significant demand for this type of financing. &#160;We are assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.</p><br/><p style="margin:0px"><i>DB Products Arizona, LLC</i></p><br/><p style="margin:0px">DB Products Arizona, LLC (&#8220;DB Arizona&#8221;) produces and distributes cannabis-infused elixirs and edible products in Arizona.</p><br/><p style="margin:0px">In June 2017, we purchased 100% of the ownership interests in GC Finance Arizona LLC (&#8220;GC Finance Arizona&#8221;) from Infinity Capital for $106,000 in cash. &#160;GC Finance Arizona holds a 50% ownership interest in DB Arizona, an $825,000 loan to DB Arizona, and no liabilities. &#160;We expect future positive cash flows, if any, will first go towards paying the holders of DB Arizona&#8217;s notes payable. &#160;Accordingly, we allocated the entire consideration of $106,000 to the note receivable from DB Arizona.</p><br/><p style="margin:0px">We have determined that DB Arizona is a variable interest entity. &#160;The other 50% owner owns the building in which DB Arizona operates, and holds the Arizona cannabis license required for DB Arizona to extract cannabis oil and sell cannabis oil-infused products. &#160;Accordingly, the other owner is the primary beneficiary, as they have the power to direct activities that most significantly impact the economic performance of DB Arizona. &#160;We will treat our 50% ownership in DB Arizona as an equity investment.</p><br/><p style="margin:0px">As of September 30, 2017, DB Arizona had total assets of $1,200,000, operating liabilities of $73,639, debt and accrued interest liabilities of $2,463,373, and for the nine months ended September 30, 2017, total revenues of $632,000 and a net loss of $611,000.</p></div> 4 3 5000 2022-12-31 5000 50000 16056 10000 5000 1.00 106000 0.50 825000 106000 0.50 1200000 73639 2463373 632000 611000 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>Basis of Presentation</b></p><br/><p style="margin:0px">The accompanying (a) condensed consolidated balance sheet at December&#160;31, 2016, has been derived from audited financial statements and (b) condensed consolidated unaudited financial statements as of September 30, 2017 and 2016, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. &#160;Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December&#160;31, 2016 (the &#8220;2016 Annual Report&#8221;), filed with the Securities and Exchange Commission (the &#8220;SEC&#8221;) on March 31, 2017. &#160;It is management&#8217;s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results of operations expected for the year ending December&#160;31, 2017.</p><br/><p style="margin:0px">The condensed consolidated financial statements include the results of GCC and its six wholly-owned subsidiary companies: (a) ACS Colorado Corp., a Colorado corporation formed in 2013; (b) Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013; (c) 6565 E. Evans Avenue LLC, a Colorado limited liability company formed in 2014; (d) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (e) GC Security LLC (&#8220;GCS&#8221;), a Colorado limited liability company formed in 2015; and (f) GC Finance Arizona LLC (&#8220;GC Finance Arizona&#8221;), an Arizona limited liability company . &#160;Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in Colorado on June 6, 2013. &#160;Intercompany accounts and transactions have been eliminated.</p></div> 6 1 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px; page-break-before:always"><font style="text-decoration:underline">Reclassifications</font></p><br/><p style="margin:0px">Certain reclassifications have been made to the prior period segment reporting to conform to the current period presentation related to now including GC Supply in our Operations Segment. &#160;The reclassifications had no effect on net loss, total assets, or total stockholders&#8217; equity (deficit).</p></div> <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><font style="text-decoration:underline">Related Parties</font></p><br/><p style="margin:0px">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. &#160;We disclose related party transactions that are outside of normal compensatory agreements, such as salaries or board of director fees. &#160;We had related party transactions with the following individuals / companies:</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px"><i>Michael Feinsod</i> &#8211; Chairman of our Board of Directors (&#8220;Board&#8221;).</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px"><i>Infinity Capital West, LLC (&#8220;Infinity Capital&#8221;)</i> &#8211; An investment management company that was founded and is controlled by Michael Feinsod.</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px"><i>GC Finance Arizona </i>&#8211; A company owned 100% by Infinity Capital prior to our purchase in June 2017.</p><br/><p style="margin:0px; padding-left:48px; text-indent:-2px">DB Arizona&#8211; A company that borrowed $825,000 from GC Finance Arizona, which also holds a 50% ownership interest in DB Arizona. &#160;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. &#160;We include DB Arizona as a related party due to our relationship with Michael Feinsod and Infinity capital, and their relationship with DB Arizona.</p></div> <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>Going Concern</b></p><br/><p style="margin:0px">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 the foreseeable future.&#160;&#160;The 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 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.&#160;&#160;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.</p><br/><p style="margin:0px">We had an accumulated deficit of $45,001,858 and $49,227,055, respectively, at September 30, 2017 and December&#160;31, 2016, and further losses are anticipated in the development of our business. 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.</p></div> <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>Recently Issued Accounting Standards</b></p><br/><p style="margin:0px"><i>Financial Accounting Standards Board, or FASB, Accounting Standards Update, or FASB ASU 2017-11 &#8220;Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Heding (Topic 815)&#8221;</i> &#8211; In July 2017, the FASB issued 2017-11. &#160;The guidance eliminates the requirement to consider &#8220;down round&#8221; features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity&#8217;s own stock. &#160;Our 12% Warrants are treated as derivative instruments, because they include a &#8220;down round&#8221; feature, whereby if we issue equity-based instruments at a price below the exercise price of the 12% Warrants, the exercise price of the 12% Warrants would be adjusted. &#160;The ASU is effective for annual periods beginning after December 15, 2018, and for interim periods within those years, with early adoption permitted. &#160;Early adoption of this guidance could have a significant impact on our financial statements, as it would effectively eliminate the derivative liability and the gain or loss from changes in the fair value of the derivative. &#160;We are currently assessing whether to early adopt this standard.</p><br/><p style="margin:0px"><i>FASB ASU 2017-09 &#8220;Scope of Modification Accounting (Topic 718)&#8221;</i> &#8211; In May 2017, the FASB issued 2017-09. &#160;The guidance clarifies the accounting for when the terms of a share-based award are modified. &#160;The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years, with early adoption permitted. &#160;This new guidance would only impact our financial statements if, in the future, we modified the terms of any of our share-based awards.</p><br/><p style="margin:0px"><i>FASB ASU 2017-04 &#8220;Simplifying the Test for Goodwill Impairment (Topic 350)&#8221;</i> &#8211; In January 2017, the FASB issued 2017-04. &#160;The guidance removes &#8220;Step Two&#8221; of the goodwill impairment test, which required a hypothetical purchase price allocation. &#160;A goodwill impairment will now be the amount by which a reporting unit&#8217;s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. &#160;The ASU is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those years, with early adoption permitted. &#160;We do not expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px; page-break-before:always"><i>FASB ASU 2017-01 &#8220;Clarifying the Definition of a Business (Topic 805)&#8221;</i> &#8211; In January 2017, the FASB issued 2017-01. &#160;The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. &#160;The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. &#160;The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. &#160;The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years. &#160;Adoption of this ASU is not expected to have a significant impact on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-15 &#8220;Statement of Cash Flows (Topic 230)&#8221; &#8211; </i>In August 2016, the FASB issued 2016-15. &#160;Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. &#160;ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. &#160;Early adoption is permitted. &#160;Adoption of this ASU will not have a significant impact on our statement of cash flows.</p><br/><p style="margin:0px"><i>FASB ASU 2016-12 &#8220;Revenue from Contracts with Customers (Topic 606)&#8221;</i> &#8211; In May 2016, the FASB issued 2016-12. &#160;The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. &#160;ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-11 &#8220;Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)&#8221;</i> &#8211; In May 2016, the FASB issued 2016-11, which clarifies guidance on assessing whether an entity is a principal or an agent in a revenue transaction. &#160;This conclusion impacts whether an entity reports revenue on a gross or net basis. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-10 &#8220;Revenue from Contracts with Customers (Topic 606)&#8221;</i> &#8211; In April 2016, the FASB issued ASU 2016-10, to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. &#160;This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.</p><br/><p style="margin:0px"><i>FASB ASU 2016-09 &#8220;Compensation &#8211; Stock Compensation (Topic 718)&#8221;</i> &#8211; In March 2016, the FASB issued ASU 2016-09, which includes multiple provisions intended to simplify various aspects of accounting for share-based payments. &#160;The new guidance will require entities to recognize all income tax effects of awards in the income statement when the awards vest or are settled. &#160;It also will allow entities to make a policy election to account for forfeitures as they occur. &#160;This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. &#160;Adopting this ASU did not have a significant impact on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px"><i>FASB ASU 2016-02 &#8220;Leases (Topic 842)&#8221; &#8211; </i>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. &#160;For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. &#160;Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. &#160;Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. &#160;This ASU is effective for fiscal years beginning after December 18, 2018, including interim periods within those fiscal years. &#160;We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px"><i>FASB ASU 2015-17&#8221;Income Taxes (Topic 740)&#8221; &#8211; </i>In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet. &#160;Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet. &#160;The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. &#160;This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. &#160;We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.</p><br/><p style="margin:0px"><i>FASB ASU 2015-16 &#8220;Business Combinations (Topic 805),&#8221; or ASU 2015-16</i> - In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. We will apply this guidance to any business combinations that may occur.</p><br/><p style="margin:0px; page-break-before:always"><i>FASB ASU 2015-11 &#8220;Inventory (Topic 330): Simplifying the Measurement of Inventory,&#8221; or ASU 2015-11</i> - In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. Adopting this ASU did not have a significant impact on our financial position, results of operations and cash flows.</p></div> <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 2. &#160;BUSINESS ACQUISITION</b></p><br/><p style="margin:0px">On August 18, 2017, we entered into an Asset Purchase Agreement (the &#8220;Mile High APA&#8221;) with Mile High Protection Services LLC, a Colorado limited liability company, and its sole member (together &#8220;Seller&#8221;) whereby we acquired the tradename, workforce, customer contracts, and other intangible assets of the business. &#160;Pursuant to the Mile High APA, we agreed to deliver to Seller 224,359 restricted shares of our common stock. &#160;The shares vest over a six month period. &#160;The Mile High APA contains certain provisions that require Seller to forfeit a portion of such shares in the event that Seller does not meet the obligations under the Mile High APA. &#160;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 are due upon vesting. &#160;Seller also agreed to a three year non-compete agreement.</p><br/><p style="margin:0px">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 Seller&#8217;s ability to immediately sell such shares. &#160;The $155,000 value of stock consideration was recorded as accrued stock payable on the September 30, 2017, condensed consolidated balance sheet, which will be reduced when the vesting requirements for the shares are met and we issue the common stock. &#160;We have not completed the allocation of the purchase price. &#160;In the September 30, 2017, condensed consolidated balance sheet we have preliminarily recorded an intangible asset for Mile High of $155,000. &#160;Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date.</p><br/></div> 224359 P6M -120000 104359 P3Y 1.75 0.15 155000 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 3.</b>&#160;&#160;&#160;<b>NOTES RECEIVABLE &#8211; DB ARIZONA</b></p><br/><p style="margin:0px">Our notes receivable &#8211; DB Arizona include accrued interest of $14,171 and $2,202, respectively, as of September 30, 2017 and December 31, 2016. &#160;The loans bear interest at 14%, with principal and interest due on May 30, 2017. &#160;The face value of the notes includes $101,500 that we loaned directly to DB Arizona and $825,000 that we acquired when we purchased GC Finance Arizona in June 2017 for $106,000. &#160;At the time of the purchase, we estimated the fair value of the $825,000 note, which is subordinate to the $101,500 note, to be $106,000.</p><br/><p style="margin:0px">DB Arizona is financed with significant debt and has yet to generate positive cash flows from operations. &#160;We have classified the notes as long-term, because DB Arizona does not currently have sufficient resources to satisfy their obligation to us and the notes are in default. &#160;These conditions do not meet the level of probable loss required to reduce the carrying value. &#160;In the future, however, they may be unable to generate sufficient cash flows from operations or to restructure their capital. &#160;Accordingly, there is a reasonable possibility that we may be unable to recover all or a portion of our notes receivable from DB Arizona.</p><br/></div> 14171 2202 0.14 2017-05-30 101500 825000 106000 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 4.&#160;&#160;&#160;LONG-LIVED ASSETS</b></p><br/><p style="margin:0px"><b>Property and Equipment</b></p><br/><p style="margin:0px">Depreciation expense was $15,997 and $11,944, respectively, for the three months ended September 30, 2017 and 2016, and $47,693 and $36,070, respectively, for the nine months ended September 30, 2017 and 2016. &#160;We have not recognized any impairment as of September 30, 2017.</p><br/><p style="margin:0px"><b>Intangible Assets</b></p><br/><p style="margin:0px">Intangible assets of $139,288 as of September 30, 2017, consisted of the preliminary purchase price allocation for Mile High of $155,000, net of accumulated amortization of $15,712, based on a preliminary estimated useful life of two years. &#160;The intangible asset for Chiefton brand and graphic designs, with a gross value of $69,400, was fully amortized as of September 30, 2017.</p><br/><p style="margin:0px">Amortization expense was $23,888 and $86,044, respectively, for the three months ended September 30, 2017 and 2016, and $41,095 and $256,259, respectively, for the nine months ended September 30, 2017 and 2016.</p><br/></div> 15997 11944 47693 36070 139288 155000 15712 P2Y 69400 23888 86044 41095 256259 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px; page-break-before:always"><b>NOTE 5.&#160;&#160;&#160; DEBT</b></p><br/><p style="margin:0px"><b>Infinity Note &#8211; Related Party</b></p><br/><p style="margin:0px">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 June 30, 2015, until the maturity date of August 31, 2015 (the &#8220;Infinity Note&#8221;). &#160;&#160;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. &#160;No additional advances may be made after December 31, 2016. &#160;The Infinity Note is collateralized by a security interest in substantially all of our assets. &#160;Interest expense for the Infinity Note for the nine months ended September 30, 2017 and 2016, was $51,239 and $26,540, respectively, and $51,239 was accrued as of September 30, 2017. &#160;The Infinity Note is subordinate to the 12% Notes.</p><br/><p style="margin:0px"><b>Notes Payable</b></p><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 102;"></td><td style="width: 18;"></td><td style="width: 96;"></td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; text-align: center;"><b>September 30,</b></p> <p style="margin:0px; padding-left:-7.067px; padding-right:-5.867px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: center;"><b>December 31,</b></p> <p style="margin:0px; text-align: center;"><b>2016</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">12% Notes</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 102;" valign="top"><p style="margin:0px; text-align: right;">2,081,250</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96;" valign="top"><p style="margin:0px; text-align: right;">2,750,000</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Unamortized debt discount</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">(800,318)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">(1,934,750)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Long-term portion</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">1,280,932</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">815,250</p> </td></tr> </table><br/><p style="margin:0px"><i><font style="text-decoration:underline">12% Notes</font></i></p><br/><p style="margin:0px">In September 2016, we completed a $3,000,000 private placement pursuant to a promissory note and warrant purchase agreement (the &#8220;12% Agreement&#8221;) with certain accredited investors, bearing interest at 12%, with principal due September 21, 2018, and interest payable quarterly (each such note, a &#8220;12% Note,&#8221; and collectively, the &#8220;12% Notes&#8221;). &#160;In the event of default, the interest rate increases to 18%. &#160;The 12% Notes are collateralized by a security interest in substantially all of our assets. &#160;We may prepay the 12% Notes at any time, but in any event must pay at least one year of interest.</p><br/><p style="margin:0px">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 &#8220;12% Warrants&#8221;), or nine million warrants, with a life of three years. &#160;4.5 million warrants have an exercise price of $0.35 per share and the other 4.5 million warrants have an exercise price of $0.70 per share. &#160;Should we issue 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 will be adjusted to the lower price. &#160;The 12% Warrants may be exercised 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 is no effective registration statement for the 12% Warrants within six months of being granted, the holder may exercise on a cashless basis. &#160;The registration statement related to the 12% Warrants was declared effective on December 23, 2016. &#160;If our common stock closes above $5.00 for ten consecutive days, we may call the warrants, giving the warrant holders 30 days to exercise. &#160;Since the 12% Warrants include a clause requiring repricing, the warrants are considered to be a derivative that is recorded as a liability at fair value.</p><br/><p style="margin:0px">We received $2,450,000 of cash for issuing the 12% Notes. &#160;$300,000 of 10% Notes and $250,000 of the 14% Greenhouse Mortgage were converted into 12% Notes. &#160;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. &#160;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. &#160;The initial fair value of the 12% Warrants not associated with the conversions was recorded as a debt discount of $2,450,000 and interest expense of $5,189,000. &#160;The 12% Notes are otherwise treated as conventional debt.</p><br/><p style="margin:0px">The Infinity Note and the 12% Notes, totaling $3,451,376, are due and payable on September 21, 2018.</p><br/></div> 0.05 2015-08-31 51239 26540 51239 3000000 0.12 2018-09-21 0.18 P1Y 9000000 P3Y 4500000 0.35 4500000 0.70 5.00 P10D 2450000 300000 250000 1728280 2450000 5189000 3451376 <div style="font-family: Times New Roman; font-size: 10pt; "> <table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 102;"></td><td style="width: 18;"></td><td style="width: 96;"></td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; text-align: center;"><b>September 30,</b></p> <p style="margin:0px; padding-left:-7.067px; padding-right:-5.867px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: center;"><b>December 31,</b></p> <p style="margin:0px; text-align: center;"><b>2016</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">12% Notes</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 102;" valign="top"><p style="margin:0px; text-align: right;">2,081,250</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96;" valign="top"><p style="margin:0px; text-align: right;">2,750,000</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Unamortized debt discount</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">(800,318)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">(1,934,750)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Long-term portion</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">1,280,932</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">815,250</p> </td></tr> </table></div> 2081250 2750000 800318 1934750 1280932 815250 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 6. &#160;ACCRUED STOCK PAYABLE</b></p><br/><p style="margin:0px">The following tables summarize the changes in accrued common stock payable during the nine months ended September 30, 2017:</p><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 102;"></td><td style="width: 18;"></td><td style="width: 96;"></td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; padding-left:-7.067px; padding-right:-5.867px; text-align: center;"><b>Amount</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Number of Shares</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">December 31, 2016</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 102;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Acquisition of Mile High</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 102;" valign="top"><p style="margin:0px; text-align: right;">155,000</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96;" valign="top"><p style="margin:0px; text-align: right;">104,359</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Sale of common stock and warrants</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">175,000</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">175,000</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">September 30, 2017</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">330,000</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">279,359</p> </td></tr> </table><br/><p style="margin:0px">The Mile High shares are issuable on February 27, 2018, if the terms of the Mile High APA are met.</p><br/><p style="margin:0px; page-break-before:always">The 175,000 shares were issued in October 2017. &#160;See Note 11 &#8211; Subsequent Events.</p><br/></div> 175000 <div style="font-family: Times New Roman; font-size: 10pt; "> The following tables summarize the changes in accrued common stock payable during the nine months ended September 30, 2017:<br /><br /><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 102;"></td><td style="width: 18;"></td><td style="width: 96;"></td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; padding-left:-7.067px; padding-right:-5.867px; text-align: center;"><b>Amount</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Number of Shares</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">December 31, 2016</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 102;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Acquisition of Mile High</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 102;" valign="top"><p style="margin:0px; text-align: right;">155,000</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96;" valign="top"><p style="margin:0px; text-align: right;">104,359</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Sale of common stock and warrants</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">175,000</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">175,000</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">September 30, 2017</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 102;" valign="top"><p style="margin:0px; text-align: right;">330,000</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.333px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 96;" valign="top"><p style="margin:0px; text-align: right;">279,359</p> </td></tr> </table></div> 104359 175000 175000 330000 279359 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 7. &#160;DERIVATIVE WARRANT LIABILITY</b></p><br/><p style="margin:0px">On September 21, 2016, in connection with the 12% Notes, we issued the 12% Warrants, which are treated as a derivative liability and adjusted to fair value at the end of each period. &#160;The underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability were:</p><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 288;"></td><td style="width: 114;"></td><td style="width: 114;"></td><td style="width: 114;"></td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 342;" valign="top" colspan="3"><p style="margin:0px; text-align: center;"><b>Three months ended</b></p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 114;" valign="bottom"><p style="margin:0px; text-align: center;"><b>September 30, 2017</b></p> </td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 114;" valign="bottom"><p style="margin:0px; text-align: center;"><b>June 30,</b></p> <p style="margin:0px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 114;" valign="bottom"><p style="margin:0px; text-align: center;"><b>March 31,</b></p> <p style="margin:0px; text-align: center;"><b>2017</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Stock price on valuation date</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">$1.43</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">$1.37 &#8211; 2.20</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">$2.21 &#8211; 3.25</p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Risk-free interest rate</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">1.5%</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">1.3 &#8211; 1.4%</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">1.3 &#8211; 1.5%</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Expected dividend yield</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">&#8211;</p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Expected term (in years)</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">2.0</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">2.2 &#8211; 2.5</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">2.5 &#8211; 2.7</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Expected volatility</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">128%</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">131 &#8211; 134%</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">146 &#8211; 153%</p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Number of iterations</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">5</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">5</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">5</p> </td></tr> </table><br/><p style="margin:0px">Changes in the derivative warrant liability were as follows:</p><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 96;"></td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">December 31, 2016</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-5.133px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">23,120,000</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:18px">Decrease in fair value</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">(10,580,000)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:36px; text-indent:-18px">Reclassification to additional paid-in capital upon exercise of warrants</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">(7,301,000)</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">September 30, 2017</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-5.133px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">5,239,000</p> </td></tr> </table><br/></div> <div style="font-family: Times New Roman; font-size: 10pt; "> The underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability were:<br /><br /><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 288;"></td><td style="width: 114;"></td><td style="width: 114;"></td><td style="width: 114;"></td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 342;" valign="top" colspan="3"><p style="margin:0px; text-align: center;"><b>Three months ended</b></p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 114;" valign="bottom"><p style="margin:0px; text-align: center;"><b>September 30, 2017</b></p> </td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 114;" valign="bottom"><p style="margin:0px; text-align: center;"><b>June 30,</b></p> <p style="margin:0px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 114;" valign="bottom"><p style="margin:0px; text-align: center;"><b>March 31,</b></p> <p style="margin:0px; text-align: center;"><b>2017</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Stock price on valuation date</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">$1.43</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">$1.37 &#8211; 2.20</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">$2.21 &#8211; 3.25</p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Risk-free interest rate</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">1.5%</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">1.3 &#8211; 1.4%</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">1.3 &#8211; 1.5%</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Expected dividend yield</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">&#8211;</p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Expected term (in years)</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">2.0</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">2.2 &#8211; 2.5</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">2.5 &#8211; 2.7</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Expected volatility</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">128%</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">131 &#8211; 134%</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 114;" valign="top"><p style="margin:0px; text-align: center;">146 &#8211; 153%</p> </td></tr> <tr><td style="margin-top:0px; width: 288;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Number of iterations</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">5</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">5</p> </td><td style="margin-top:0px; width: 114;" valign="top"><p style="margin:0px; text-align: center;">5</p> </td></tr> </table></div> 1.43 1.37 2.20 2.21 3.25 0.015 0.013 0.014 0.013 0.015 P2Y P2Y73D P2Y6M P2Y6M P2Y255D 1.28 1.31 1.34 1.46 1.53 5 5 5 <div style="font-family: Times New Roman; font-size: 10pt; "> Changes in the derivative warrant liability were as follows:<br /><br /><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 96;"></td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">December 31, 2016</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-5.133px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">23,120,000</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:18px">Decrease in fair value</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">(10,580,000)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:36px; text-indent:-18px">Reclassification to additional paid-in capital upon exercise of warrants</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">(7,301,000)</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">September 30, 2017</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-5.133px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 96;" valign="bottom"><p style="margin:0px; text-align: right;">5,239,000</p> </td></tr> </table></div> 23120000 -10580000 7301000 5239000 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 8.&#160;&#160;&#160;COMMITMENTS AND CONTINGENCIES</b></p><br/><p style="margin:0px"><b>Legal</b></p><br/><p style="margin:0px">To the best of our knowledge and belief, no material legal proceedings of merit are currently pending or threatened.</p><br/></div> <div style="font-family: Times New Roman; font-size: 10pt; 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text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">740,844</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="bottom"><p style="margin:0px; text-align: right;">2,969,811</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">1,574,906</p> </td></tr> <tr><td style="margin-top:0px; width: 181.667;" valign="bottom"><p style="margin:0px; padding-left:-1.667px">Consulting Awards</p> </td><td style="margin-top:0px; width: 19;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; 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padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 71;" valign="bottom"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">27,504</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="bottom"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">192,800</p> </td></tr> <tr><td style="margin-top:0px; 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border-bottom:1px solid #000000; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">55,100</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 181.667;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 19;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 71;" valign="bottom"><p style="margin:0px; text-align: right;">839,322</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">872,217</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; 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page-break-before:always">Share-based compensation costs for award grants to employees and directors (&#8220;Employee Awards&#8221;) 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. &#160;The following summarizes the Black-Scholes assumptions used for Employee Awards granted:</p><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 240;"></td><td style="width: 102;"></td><td style="width: 102;"></td><td style="width: 102;"></td></tr> <tr><td style="margin-top:0px; width: 240;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 306;" valign="bottom" colspan="3"><p style="margin:0px; text-align: center;"><b>Three months ended</b></p> </td></tr> <tr><td style="margin-top:0px; width: 240;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; text-align: center;"><b>September 30, 2017</b></p> </td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; text-align: center;"><b>June 30,</b></p> <p style="margin:0px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 102;" valign="bottom"><p style="margin:0px; text-align: center;"><b>March 31,</b></p> <p style="margin:0px; text-align: center;"><b>2017</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 240;" valign="top"><p style="margin:0px">Exercise price</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 102;" valign="bottom"><p style="margin:0px; text-align: center;">$1.34 &#8211; 2.07</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 102;" valign="bottom"><p style="margin:0px; 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padding-right:-5.867px; text-align: right;">$</p> </td><td style="margin-top:0px; width: 79.667;" valign="bottom"><p style="margin:0px; text-align: right;">4,573,359</p> </td></tr> </table><br/></div> On October 29, 2014, the Board authorized the adoption of, and on June 26, 2015, our stockholders ratified, our 2014 Equity Incentive Plan (the &#8220;Incentive Plan&#8221;). The Incentive Plan provides for the issuance of up to 10 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. In April 2016, we filed a Registration Statement on Form S-8 (the &#8220;Registration Statement&#8221;), which automatically became effective in May 2016. 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background-color:#DEEAF6; width: 19;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 71;" valign="bottom"><p style="margin:0px; text-align: right;">839,322</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 72;" valign="bottom"><p style="margin:0px; text-align: right;">740,844</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="bottom"><p style="margin:0px; text-align: right;">2,969,811</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-6.067px; text-align: right;">$</p> </td><td style="margin-top:0px; 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width: 84;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 90.467;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td></tr> <tr><td style="margin-top:0px; width: 217.667;" valign="bottom"><p style="margin:0px">Exercisable at September 30, 2017</p> </td><td style="margin-top:0px; width: 18;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; 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width: 78;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 88.333;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td></tr> <tr><td style="margin-top:0px; width: 252;" valign="top"><p style="margin:0px">Net income (loss) per share</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 88.333;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 252;" valign="top"><p style="margin:0px; padding-left:18px">Basic</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="bottom"><p style="margin:0px; text-align: right;">0.03</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6px; text-align: right;">(0.93)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6px; text-align: right;">0.21</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 88.333;" valign="bottom"><p style="margin:0px; text-align: right;">(1.11)</p> </td></tr> <tr><td style="margin-top:0px; 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font-size: 10pt; "> Basic net income (loss) per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. 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padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 88.333;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td></tr> <tr><td style="margin-top:0px; width: 252;" valign="top"><p style="margin:0px">Net income (loss) per share</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 88.333;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 252;" valign="top"><p style="margin:0px; padding-left:18px">Basic</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="bottom"><p style="margin:0px; text-align: right;">0.03</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6px; text-align: right;">(0.93)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6px; text-align: right;">0.21</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding-right:-7.667px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 88.333;" valign="bottom"><p style="margin:0px; text-align: right;">(1.11)</p> </td></tr> <tr><td style="margin-top:0px; width: 252;" valign="top"><p style="margin:0px; padding-left:18px">Diluted</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="bottom"><p style="margin:0px; text-align: right;">(0.06)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6px; text-align: right;">(0.93)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6px; text-align: right;">(0.21)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 88.333;" valign="bottom"><p style="margin:0px; text-align: right;">(1.11)</p> </td></tr> </table></div> -2421000 -10580000 -1834127 -14447094 -6354803 -16971797 4778627 4960848 3662422 4667825 91224 112186 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 11.&#160;&#160;&#160;SUBSEQUENT EVENTS</b></p><br/><p style="margin:0px">On October 9, 2017, we entered into a securities purchase agreement with several non-affiliated accredited investors in a private placement, pursuant to which for $1.00 we sold one share of our common stock and one warrant to purchase one share of our common stock, at an exercise price of $0.50 per share with a two year life (together, the &#8220;2017 Units&#8221;). &#160;We issued 1,000,000 2017 Units. &#160;In consideration for issuing the 2017 Units, we received $975,000 in cash and extinguished $25,000 of 12% Notes. We received $175,000 in cash consideration in September 2017, see Note 6 &#8211; Accrued Stock Payable.</p><br/><p style="margin:0px">Subsequent to September 30, 2017, and up to the date of this filing, 600,000 shares of our common stock were issued upon the exercise of 12% Warrants for consideration of $210,000 in cash and $210,000 for the extinguishment of 12% Notes.</p><br/></div> 1.00 1 0.50 P2Y 1000000 975000 25000 175000 600000 210000 210000 <div style="font-family: Times New Roman; font-size: 10pt; "> <p style="margin:0px"><b>NOTE 12.&#160;&#160;&#160;SEGMENT INFORMATION</b></p><br/><p style="margin:0px">Our operations are organized into four segments: Security and Cash Management Services; Marketing Consulting and Apparel; Operations Consulting and Products; and Finance and Real Estate. &#160;All revenue originates and all assets are located in the United States. &#160;We have revised our disclosure to correspond to the information provided to the chief operating decision 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style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Total</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Revenues</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">533,065</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">49,394</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">364,629</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">32,903</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; text-align: right;">979,991</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Costs and expenses</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(647,915)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(100,464)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(402,856)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(9,339)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(1,160,574)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(114,850)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(51,070)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(38,227)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">23,564</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(180,583)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">767,456</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net income</p> </td><td style="margin-top:0px; 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style="margin-top:0px; border-bottom:1px solid #000000; width: 96.467;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Security</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p 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valign="top"><p style="margin:0px; text-align: right;">(528,916)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(91,342)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(235,605)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(13,352)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(869,215)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Other expense</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(6,414)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(6,414)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">31,797</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">15,060</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(117,905)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">5,799</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(65,249)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(14,381,845)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net loss</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(14,447,094)</p> </td></tr> </table><br/><p style="margin:0px; page-break-before:always"><b>Nine months ended September 30</b></p><br/><table style="margin-top:0px; 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84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Total</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Revenues</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">1,322,509</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">163,216</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">947,725</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">99,251</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; text-align: right;">2,532,701</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Costs and expenses</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(1,615,694)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(381,439)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(1,018,655)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(37,113)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(3,052,901)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(293,185)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(218,223)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(70,930)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">62,138</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(520,200)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">4,745,397</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net income</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">4,225,197</p> </td></tr> </table><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 175.667;"></td><td style="width: 17.533;"></td><td style="width: 96.467;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 78;"></td></tr> <tr><td style="margin-top:0px; border-bottom:1px solid #000000; width: 175.667;" valign="bottom"><p style="margin:0px; text-align: center;"><b>2016</b></p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96.467;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Security</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Total</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Revenues</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">1,599,907</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">221,563</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">289,566</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">93,398</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">2,204,434</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Costs and expenses</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(1,604,932)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(216,443)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(439,389)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(36,731)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(2,297,495)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Other expense</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(10,876)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(10,876)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(5,025)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">5,120</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(149,823)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">45,791</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(103,937)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(16,867,860)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net loss</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(16,971,797)</p> </td></tr> </table><br/><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 289.667;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td></tr> <tr><td style="margin-top:0px; border-bottom:1px solid #000000; width: 289.667;" valign="bottom"><p style="margin:0px"><b>Total assets</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-7.667px; padding-right:-5.867px; text-align: center;"><b>September 30,</b></p> <p style="margin:0px; padding-left:-7.667px; padding-right:-5.867px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6.467px; padding-right:-6.467px; text-align: center;"><b>December 31,</b></p> <p style="margin:0px; text-align: center;"><b>2016</b></p> </td></tr> <tr><td style="margin-top:0px; 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right;">51,789</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">50,919</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Operations</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">92,882</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">55,750</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Finance</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">644,384</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">515,205</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Corporate</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">1,654,477</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">2,094,857</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">2,807,289</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">2,857,871</p> </td></tr> </table><br/></div> <div style="font-family: Times New Roman; font-size: 10pt; "> <table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 175.667;"></td><td style="width: 17.533;"></td><td style="width: 96.467;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 78;"></td></tr> <tr><td style="margin-top:0px; border-bottom:1px solid #000000; width: 175.667;" valign="bottom"><p style="margin:0px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96.467;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Security</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Total</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Revenues</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">533,065</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">49,394</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">364,629</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">32,903</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; text-align: right;">979,991</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Costs and expenses</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(647,915)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(100,464)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(402,856)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(9,339)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(1,160,574)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(114,850)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(51,070)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(38,227)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">23,564</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(180,583)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">767,456</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net income</p> </td><td style="margin-top:0px; 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style="margin-top:0px; border-bottom:1px solid #000000; width: 96.467;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Security</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Total</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Revenues</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">560,713</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">106,402</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">117,700</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">25,565</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">810,380</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Costs and expenses</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(528,916)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(91,342)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(235,605)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(13,352)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(869,215)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Other expense</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">&#8211;</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(6,414)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(6,414)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">31,797</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">15,060</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(117,905)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">5,799</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(65,249)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(14,381,845)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net loss</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; border-bottom:3px double #000000; width: 78;" valign="top"><p style="margin:0px; padding-left:-7.667px; text-align: right;">(14,447,094)</p> </td></tr> </table><table style="margin-top:0px; font-size:10pt" cellpadding="0" cellspacing="0"><tr style="font-size:0"><td style="width: 175.667;"></td><td style="width: 17.533;"></td><td style="width: 96.467;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 84;"></td><td style="width: 18;"></td><td style="width: 78;"></td></tr> <tr><td style="margin-top:0px; border-bottom:1px solid #000000; width: 175.667;" valign="bottom"><p style="margin:0px; text-align: center;"><b>2017</b></p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 96.467;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Security</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Marketing</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Operations</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Finance</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="bottom"><p style="margin:0px; text-align: center;"><b>Total</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px">Revenues</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">1,322,509</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">163,216</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">947,725</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">99,251</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 78;" valign="top"><p style="margin:0px; text-align: right;">2,532,701</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Costs and expenses</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(1,615,694)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(381,439)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(1,018,655)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(37,113)</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(3,052,901)</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 96.467;" valign="top"><p style="margin:0px; text-align: right;">(293,185)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(218,223)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">(70,930)</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; border-bottom:3px double #000000; width: 84;" valign="top"><p style="margin:0px; text-align: right;">62,138</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; border-top:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">(520,200)</p> </td></tr> <tr><td style="margin-top:0px; width: 175.667;" valign="top"><p style="margin:0px">Corporate</p> </td><td style="margin-top:0px; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 78;" valign="top"><p style="margin:0px; text-align: right;">4,745,397</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 175.667;" valign="top"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 17.533;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 96.467;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="bottom"><p style="margin:0px; text-align: right;">Net income</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; border-bottom:3px double #000000; width: 78;" valign="top"><p 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center;"><b>2017</b></p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; border-bottom:1px solid #000000; width: 84;" valign="bottom"><p style="margin:0px; padding-left:-6.467px; padding-right:-6.467px; text-align: center;"><b>December 31,</b></p> <p style="margin:0px; text-align: center;"><b>2016</b></p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Security</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">363,757</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; text-align: right;">$</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">141,140</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px">Marketing</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">51,789</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">50,919</p> </td></tr> <tr><td style="margin-top:0px; background-color:#DEEAF6; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Operations</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">92,882</p> </td><td style="margin-top:0px; background-color:#DEEAF6; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; background-color:#DEEAF6; width: 84;" valign="top"><p style="margin:0px; text-align: right;">55,750</p> </td></tr> <tr><td style="margin-top:0px; width: 289.667;" valign="bottom"><p style="margin:0px; padding-left:4.333px; text-indent:-4.333px">Finance</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">644,384</p> </td><td style="margin-top:0px; width: 18;" valign="bottom"><p style="margin:0px; padding:0px">&#160;</p></td><td style="margin-top:0px; width: 84;" valign="top"><p style="margin:0px; text-align: right;">515,205</p> </td></tr> <tr><td 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Document And Entity Information - shares
9 Months Ended
Sep. 30, 2017
Nov. 01, 2017
Document and Entity Information [Abstract]    
Entity Registrant Name GENERAL CANNABIS CORP  
Document Type 10-Q  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   22,481,605
Amendment Flag false  
Entity Central Index Key 0001477009  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Filer Category Smaller Reporting Company  
Entity Well-known Seasoned Issuer No  
Document Period End Date Sep. 30, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q3  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Current Assets    
Cash and cash equivalents $ 252,538 $ 773,795
Accounts receivable, net 283,406 182,214
Note receivable – DB Arizona   77,202
Prepaid expenses and other current assets 173,908 76,493
Inventory 30,443 7,981
Total current assets 740,295 1,117,685
Notes receivable – DB Arizona 221,671  
Property and equipment, net 1,706,035 1,714,803
Intangible assets, net 139,288 25,383
Total Assets 2,807,289 2,857,871
Current Liabilities    
Accounts payable and accrued expenses 474,200 363,618
Interest payable 115,237 9,806
Deferred rental revenue and customer deposits 75,499 46,155
Accrued stock payable 330,000  
Derivative warrant liability 5,239,000 23,120,000
Notes payable (net of discount) 1,280,932  
Infinity Note – related party 1,370,126  
Total current liabilities 8,884,994 23,539,579
Notes payable (net of discount)   815,250
Infinity Note – related party   1,370,126
Tenant deposits 8,854 8,854
Total Liabilities 8,893,848 25,733,809
Commitments and Contingencies
Stockholders’ Equity (Deficit)    
Preferred stock, no par value; 5,000,000 share authorized; no shares issued and outstanding at September 30, 2017 and December 31, 2016
Common Stock, $0.001 par value; 100,000,000 shares authorized; 20,881,605 and 17,128,778 shares issued and outstanding on September 30, 2017 and December 31, 2016, respectively 20,883 17,129
Additional paid-in capital 38,894,416 26,333,988
Accumulated deficit (45,001,858) (49,227,055)
Total Stockholders’ Equity (Deficit) (6,086,559) (22,875,938)
Total Liabilities & Stockholders’ Equity (Deficit) $ 2,807,289 $ 2,857,871
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares
Sep. 30, 2017
Dec. 31, 2016
Preferred stock, par value (in Dollars per share) $ 0 $ 0
Preferred stock, share authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common Stock, par value (in Dollars per share) $ 0.001 $ 0.001
Common Stock, shares authorized 100,000,000 100,000,000
Common Stock, shares issued 20,881,605 17,128,778
Common Stock, shares outstanding 20,881,605 17,128,778
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
REVENUES        
Service $ 932,140 $ 704,489 $ 2,197,683 $ 1,988,584
Rent and interest 32,902 25,565 99,251 93,398
Product Sales 14,949 80,326 235,767 122,452
Total revenues 979,991 810,380 2,532,701 2,204,434
COSTS AND EXPENSES        
Cost of service revenues 752,154 564,687 1,757,241 1,547,474
Cost of goods sold 32,459 68,992 240,577 112,649
Selling, general and administrative 657,532 409,403 1,976,244 1,146,022
Share-based expense 839,322 872,217 2,995,251 1,974,191
Professional fees 126,303 95,520 454,591 276,706
Depreciation and amortization 39,885 97,988 88,788 292,329
Total costs and expenses 2,447,655 2,108,807 7,512,692 5,349,371
OPERATING LOSS (1,467,664) (1,298,427) (4,979,991) (3,144,937)
OTHER (INCOME) EXPENSE        
Amortization of debt discount 284,900 111,837 1,134,432 327,455
Interest expense 81,563 5,276,550 240,380 5,381,125
Loss on extinguishment of debt   1,728,280   2,086,280
(Gain) loss on derivative warrant liability (2,421,000) 6,032,000 (10,580,000) 6,032,000
Total other (income) expense, net (2,054,537) 13,148,667 (9,205,188) 13,826,860
NET INCOME (LOSS) $ 586,873 $ (14,447,094) $ 4,225,197 $ (16,971,797)
Net income (loss) per share:        
Basic (in Dollars per share) $ 0.03 $ (0.93) $ 0.21 $ (1.11)
Diluted (in Dollars per share) $ (0.06) $ (0.93) $ (0.21) $ (1.11)
Weighted average number of common shares outstanding:        
Basic (in Shares) 20,654,502 15,495,421 19,883,329 15,270,968
Diluted (in Shares) 29,186,775 15,495,421 29,624,188 15,270,968
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Net income (loss) $ 4,225,197 $ (16,971,797)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:    
Amortization of debt discount 1,134,432 327,455
Loss on extinguishment of debt   2,086,280
Initial fair value of derivative warrant liability included as interest expense   5,189,000
(Gain) loss on derivative warrant liability (10,580,000) 6,032,000
Depreciation and amortization expense 88,788 292,329
Share-based payments 2,995,251 1,974,191
Changes in operating assets and liabilities:    
Accounts receivable (101,192) (143,141)
Prepaid expenses and other assets (109,384) (12,321)
Inventory (22,462) (11,627)
Accounts payable and accrued liabilities 245,357 174,948
Net cash used in operating activities: (2,124,013) (1,062,683)
INVESTING ACTIVITIES    
Purchase of property and equipment (38,925) (11,615)
Lending on Note receivable – related party (26,500)  
Purchase of GC Finance Arizona LLC (106,000)  
Net cash used in investing activities (171,425) (11,615)
FINANCING ACTIVITIES    
Proceeds from exercise of warrants and stock options 1,599,181  
Proceeds from the sale of common stock – accrued stock payable 175,000  
Borrowings under notes payable   2,500,000
Increase in Infinity Note – related party   497,500
Payments on notes payable   (917,307)
Net cash provided by financing activities 1,774,181 2,080,193
NET (DECREASE) INCREASE IN CASH (521,257) 1,005,895
CASH, BEGINNING OF PERIOD 773,795 58,711
CASH, END OF PERIOD 252,538 1,064,606
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION    
Cash paid for interest 131,763 213,813
NON-CASH TRANSACTIONS    
Portion of warrant derivative liability recorded as additional paid-in capital upon exercise of warrants 7,301,000  
12% Note principal used to exercise 12% Warrants 668,750  
Acquisition of MHPS – accrued stock payable $ 155,000  
Issuance of common stock and warrants from accrued stock payable   1,069,775
Derivative warrant liability recorded as debt discount   2,450,000
Warrants issued in connection with debt recorded as debt discount   31,100
10% Notes and 14% Mortgage Note Payable converted to 12% Notes   $ 550,000
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.8.0.1
NATURE OF OPERATIONS, HISTORY AND PRESENTATION
9 Months Ended
Sep. 30, 2017
Disclosure Text Block [Abstract]  
Nature of Operations [Text Block]

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 April 28, 2015, our common stock was uplisted and on May 6, 2015, resumed quotation on the OTC Market’s OTCQB.  Our operations are segregated into the following four segments:


Security and Cash Transportation Services (“Security Segment”)


Iron Protection Group, or IPG, provides advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops.  In August 2017, we acquired the operating assets of Mile High Protection Group, LLC, a Colorado limited liability company, which will continue to do business as “Mile High Protection Services,” or Mile High.  Mile High has a diversified client roster, providing security services to hospitality companies, such as hotels, and to licensed cannabis retailers and cultivators in Colorado.  We have also opened an IPG office in California.


Marketing Consulting and Apparel (“Marketing Segment”)


Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry.  We assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products.  We now have the capacity of a full service marketing agency as well as the resources to expand our clothing lines.  Chiefton Design also supports our other segments with marketing designs and apparel.


Chiefton’s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories.  Our apparel is sold through our on-line shop, cannabis retailers, and specialty t-shirt and gift shops.  The apparel sold by Chiefton is purchased and screen printed by third parties, for which there are numerous suppliers.


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. Our business plan for NBC correlates to the future growth of the regulated cannabis market in the United States.


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 infrastructure, equipment, consumables, and compliance packaging.


Finance and Real Estate (“Finance Segment”)


Real Estate Leasing


We own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.


Our real estate leasing business plan includes the potential future acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities would range in size from 5,000 to 50,000 square feet. These facilities would only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants would include certain requirements that permit us to continually evaluate our tenants’ compliance with applicable laws and regulations.


Shared Office Space, Networking and Event Services   


In October 2014, we purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as “The Greenhouse”. The building is a 16,056 square foot facility, which we use as our corporate headquarters.


The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. We continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations.  We expect to continue the renovation of The Greenhouse in 2017.


We plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.


Industry Finance


Our industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.  These loans would generally be secured to the maximum extent permitted by law.  We believe there is a significant demand for this type of financing.  We are assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.


DB Products Arizona, LLC


DB Products Arizona, LLC (“DB Arizona”) produces and distributes cannabis-infused elixirs and edible products in Arizona.


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 expect future positive cash flows, if any, will first go towards paying the holders of DB Arizona’s notes payable.  Accordingly, we allocated the entire consideration of $106,000 to the note receivable from DB Arizona.


We have determined that DB Arizona is a variable interest entity.  The other 50% owner owns the building in which DB Arizona operates, and holds the Arizona cannabis license required for DB Arizona to extract cannabis oil and sell cannabis oil-infused products.  Accordingly, the other owner is the primary beneficiary, as they have the power to direct activities that most significantly impact the economic performance of DB Arizona.  We will treat our 50% ownership in DB Arizona as an equity investment.


As of September 30, 2017, DB Arizona had total assets of $1,200,000, operating liabilities of $73,639, debt and accrued interest liabilities of $2,463,373, and for the nine months ended September 30, 2017, total revenues of $632,000 and a net loss of $611,000.


Basis of Presentation


The accompanying (a) condensed consolidated balance sheet at December 31, 2016, has been derived from audited financial statements and (b) condensed consolidated unaudited financial statements as of September 30, 2017 and 2016, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017.  It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results of operations expected for the year ending December 31, 2017.


The condensed consolidated financial statements include the results of GCC and its six wholly-owned subsidiary companies: (a) ACS Colorado Corp., a Colorado corporation formed in 2013; (b) Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013; (c) 6565 E. Evans Avenue LLC, a Colorado limited liability company formed in 2014; (d) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (e) GC Security LLC (“GCS”), a Colorado limited liability company formed in 2015; and (f) GC Finance Arizona LLC (“GC Finance Arizona”), an Arizona limited liability company .  Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in Colorado on June 6, 2013.  Intercompany accounts and transactions have been eliminated.


Reclassifications


Certain reclassifications have been made to the prior period segment reporting to conform to the current period presentation related to now including GC Supply in our Operations Segment.  The reclassifications had no effect on net loss, total assets, or total stockholders’ equity (deficit).


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 had related party transactions with the following individuals / companies:


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.


GC Finance Arizona – A company owned 100% by Infinity Capital prior to our purchase in June 2017.


DB Arizona– A company that borrowed $825,000 from GC Finance Arizona, which also holds a 50% ownership interest in DB 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.


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 the foreseeable future.  The 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 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.


We had an accumulated deficit of $45,001,858 and $49,227,055, respectively, at September 30, 2017 and December 31, 2016, and further losses are anticipated in the development of our business. 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.


Recently Issued Accounting Standards


Financial Accounting Standards Board, or FASB, Accounting Standards Update, or FASB ASU 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Heding (Topic 815)” – In July 2017, the FASB issued 2017-11.  The guidance eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock.  Our 12% Warrants are treated as derivative instruments, because they include a “down round” feature, whereby if we issue equity-based instruments at a price below the exercise price of the 12% Warrants, the exercise price of the 12% Warrants would be adjusted.  The ASU is effective for annual periods beginning after December 15, 2018, and for interim periods within those years, with early adoption permitted.  Early adoption of this guidance could have a significant impact on our financial statements, as it would effectively eliminate the derivative liability and the gain or loss from changes in the fair value of the derivative.  We are currently assessing whether to early adopt this standard.


FASB ASU 2017-09 “Scope of Modification Accounting (Topic 718)” – In May 2017, the FASB issued 2017-09.  The guidance clarifies the accounting for when the terms of a share-based award are modified.  The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years, with early adoption permitted.  This new guidance would only impact our financial statements if, in the future, we modified the terms of any of our share-based awards.


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 unit’s 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 expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.


FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” – In January 2017, the FASB issued 2017-01.  The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business.  The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business.  The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606.  The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years.  Adoption of this ASU is not expected to have a significant impact on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15.  Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.  This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted.  Adoption of this ASU will not have a significant impact on our statement of cash flows.


FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” – In May 2016, the FASB issued 2016-12.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” – In May 2016, the FASB issued 2016-11, which clarifies guidance on assessing whether an entity is a principal or an agent in a revenue transaction.  This conclusion impacts whether an entity reports revenue on a gross or net basis.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606)” – In April 2016, the FASB issued ASU 2016-10, to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-09 “Compensation – Stock Compensation (Topic 718)” – In March 2016, the FASB issued ASU 2016-09, which includes multiple provisions intended to simplify various aspects of accounting for share-based payments.  The new guidance will require entities to recognize all income tax effects of awards in the income statement when the awards vest or are settled.  It also will allow entities to make a policy election to account for forfeitures as they occur.  This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Adopting this ASU did not 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 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 18, 2018, including interim periods within those fiscal years.  We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.


FASB ASU 2015-17”Income Taxes (Topic 740)” – In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet.  Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet.  The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet.  This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.


FASB ASU 2015-16 “Business Combinations (Topic 805),” or ASU 2015-16 - In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. We will apply this guidance to any business combinations that may occur.


FASB ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory,” or ASU 2015-11 - In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. Adopting this ASU did not have a significant impact on our financial position, results of operations and cash flows.


XML 17 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
BUSINESS ACQUISITION
9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

NOTE 2.  BUSINESS ACQUISITION


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 vest over a six month period.  The Mile High APA contains certain provisions that require 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 are 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 Seller’s ability to immediately sell such shares.  The $155,000 value of stock consideration was recorded as accrued stock payable on the September 30, 2017, condensed consolidated balance sheet, which will be reduced when the vesting requirements for the shares are met and we issue the common stock.  We have not completed the allocation of the purchase price.  In the September 30, 2017, condensed consolidated balance sheet we have preliminarily recorded an intangible asset for Mile High of $155,000.  Management anticipates completing the purchase price allocation as soon as possible, but no later than one year from the acquisition date.


XML 18 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
NOTE RECEIVABLE - DB ARIZONA
9 Months Ended
Sep. 30, 2017
Receivables [Abstract]  
Financing Receivables [Text Block]

NOTE 3.   NOTES RECEIVABLE – DB ARIZONA


Our notes receivable – DB Arizona include accrued interest of $14,171 and $2,202, respectively, as of September 30, 2017 and December 31, 2016.  The loans bear interest at 14%, with principal and interest due on May 30, 2017.  The face value of the notes includes $101,500 that we loaned directly to DB Arizona and $825,000 that we acquired when we purchased GC Finance Arizona in June 2017 for $106,000.  At the time of the purchase, we estimated the fair value of the $825,000 note, which is subordinate to the $101,500 note, to be $106,000.


DB Arizona is financed with significant debt and has yet to generate positive cash flows from operations.  We have classified the notes as long-term, because DB Arizona does not currently have sufficient resources to satisfy their obligation to us and the notes are in default.  These conditions do not meet the level of probable loss required to reduce the carrying value.  In the future, however, they may be unable to generate sufficient cash flows from operations or to restructure their capital.  Accordingly, there is a reasonable possibility that we may be unable to recover all or a portion of our notes receivable from DB Arizona.


XML 19 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
LONG-LIVED ASSETS
9 Months Ended
Sep. 30, 2017
Property, Plant and Equipment [Abstract]  
Property, Plant, and Equipment and Intangible Assets [Text Block]

NOTE 4.   LONG-LIVED ASSETS


Property and Equipment


Depreciation expense was $15,997 and $11,944, respectively, for the three months ended September 30, 2017 and 2016, and $47,693 and $36,070, respectively, for the nine months ended September 30, 2017 and 2016.  We have not recognized any impairment as of September 30, 2017.


Intangible Assets


Intangible assets of $139,288 as of September 30, 2017, consisted of the preliminary purchase price allocation for Mile High of $155,000, net of accumulated amortization of $15,712, based on a preliminary estimated useful life of two years.  The intangible asset for Chiefton brand and graphic designs, with a gross value of $69,400, was fully amortized as of September 30, 2017.


Amortization expense was $23,888 and $86,044, respectively, for the three months ended September 30, 2017 and 2016, and $41,095 and $256,259, respectively, for the nine months ended September 30, 2017 and 2016.


XML 20 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
DEBT
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block]

NOTE 5.    DEBT


Infinity Note – Related Party


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 June 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.  No additional advances may be made after December 31, 2016.  The Infinity Note is collateralized by a security interest in substantially all of our assets.  Interest expense for the Infinity Note for the nine months ended September 30, 2017 and 2016, was $51,239 and $26,540, respectively, and $51,239 was accrued as of September 30, 2017.  The Infinity Note is subordinate to the 12% Notes.


Notes Payable


 

 

September 30,

2017

 

December 31,

2016

12% Notes

$

2,081,250

$

2,750,000

Unamortized debt discount

 

(800,318)

 

(1,934,750)

Long-term portion

$

1,280,932

$

815,250


12% Notes


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 increases to 18%.  The 12% Notes are collateralized by a security interest in substantially all of our assets.  We may 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 have an exercise price of $0.35 per share and the other 4.5 million warrants have an exercise price of $0.70 per share.  Should we issue 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 will be adjusted to the lower price.  The 12% Warrants may be exercised 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 is no effective registration statement for the 12% Warrants within six months of being granted, the holder may exercise on a cashless basis.  The registration statement related to the 12% Warrants was declared effective on December 23, 2016.  If our common stock closes above $5.00 for ten consecutive days, we may call the warrants, giving the warrant holders 30 days to exercise.  Since the 12% Warrants include a clause requiring repricing, the warrants are considered to be a derivative that is recorded as a liability at fair value.


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 $2,450,000 and interest expense of $5,189,000.  The 12% Notes are otherwise treated as conventional debt.


The Infinity Note and the 12% Notes, totaling $3,451,376, are due and payable on September 21, 2018.


XML 21 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED STOCK PAYABLE
9 Months Ended
Sep. 30, 2017
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Liabilities Disclosure [Text Block]

NOTE 6.  ACCRUED STOCK PAYABLE


The following tables summarize the changes in accrued common stock payable during the nine months ended September 30, 2017:


 

 

Amount

 

Number of Shares

December 31, 2016

$

$

Acquisition of Mile High

 

155,000

 

104,359

Sale of common stock and warrants

 

175,000

 

175,000

September 30, 2017

$

330,000

$

279,359


The Mile High shares are issuable on February 27, 2018, if the terms of the Mile High APA are met.


The 175,000 shares were issued in October 2017.  See Note 11 – Subsequent Events.


XML 22 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
DERIVATIVE WARRANT LIABILITY
9 Months Ended
Sep. 30, 2017
Disclosure Text Block [Abstract]  
Derivatives and Fair Value [Text Block]

NOTE 7.  DERIVATIVE WARRANT LIABILITY


On September 21, 2016, in connection with the 12% Notes, we issued the 12% Warrants, which are treated as a derivative liability and adjusted to fair value at the end of each period.  The underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability were:


 

Three months ended

 

September 30, 2017

June 30,

2017

March 31,

2017

Stock price on valuation date

$1.43

$1.37 – 2.20

$2.21 – 3.25

Risk-free interest rate

1.5%

1.3 – 1.4%

1.3 – 1.5%

Expected dividend yield

Expected term (in years)

2.0

2.2 – 2.5

2.5 – 2.7

Expected volatility

128%

131 – 134%

146 – 153%

Number of iterations

5

5

5


Changes in the derivative warrant liability were as follows:


December 31, 2016

$

23,120,000

Decrease in fair value

 

(10,580,000)

Reclassification to additional paid-in capital upon exercise of warrants

 

(7,301,000)

September 30, 2017

$

5,239,000


XML 23 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]

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.


XML 24 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
STOCKHOLDERS' EQUITY
9 Months Ended
Sep. 30, 2017
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]

NOTE 9.   STOCKHOLDERS’ EQUITY


Share-based expense consisted of the following:


 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Employee Awards

$

839,322

$

740,844

$

2,969,811

$

1,574,906

Consulting Awards

 

 

103,869

 

25,440

 

151,385

Feinsod Agreement

 

 

27,504

 

 

192,800

DB Option Agreement

 

 

 

 

55,100

 

$

839,322

$

872,217

$

2,995,251

$

1,974,191


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 (the “Incentive Plan”).  The Incentive Plan provides for the issuance of up to 10 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.  In April 2016, we filed a Registration Statement on Form S-8 (the “Registration Statement”), which automatically became effective in May 2016.  The Registration Statement relates to 10,000,000 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.


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:


 

Three months ended

 

September 30, 2017

June 30,

2017

March 31,

2017

Exercise price

$1.34 – 2.07

$1.92

$2.41 – 3.00

Stock price on date of grant

$1.34 – 2.07

$1.92

$2.41 – 3.00

Volatility

140 – 142%

145%

148 – 153%

Risk-free interest rate

1.4 – 1.9%

1.8%

1.7 – 1.9%

Expected life (years)

3.0 – 5.0

5.0

4.0 – 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

 

1,116,400

 

1.78

 

 

 

 

Exercised

 

(367,240)

 

1.09

 

 

 

 

Forfeited

 

(554,050)

 

0.75

 

 

 

 

Outstanding at September 30, 2017

 

9,013,510

 

1.14

 

2.2

$

6,211,944

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2017

 

7,984,960

$

1.00

 

1.9

$

5,726,885


Based on our estimated forfeiture rates, we expect 1,007,181 Employee Awards will vest.  As of September 30, 2017, there was approximately $1,255,708 of total unrecognized compensation expense related to unvested Employee Awards, which is expected to be recognized over a weighted-average period of eight months.


Warrants for 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.  Consulting Awards are revalued at each reporting date until fully vested, which may generate an expense or benefit.


No Consulting Award warrants were issued during the nine months ended September 30, 2017.


Stock for Consulting Services


During the nine months ended September 30, 2017, we issued 8,000 shares to a third party for marketing services.


Warrants with Debt


The following summarizes warrants issued with debt:


 

 

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

 

 

 

 

Exercised

 

(3,377,587)

$

0.59

 

 

 

 

Forfeited

 

(28,126)

 

1.20

 

 

 

 

Outstanding and exercisable at September 30, 2017

 

5,620,130

$

0.69

 

2.1

$

4,573,359


XML 25 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
NET INCOME (LOSS) PER SHARE
9 Months Ended
Sep. 30, 2017
Earnings Per Share [Abstract]  
Earnings Per Share [Text Block]

NOTE 10.   NET INCOME (LOSS) PER SHARE


Basic net income (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 as of the first day of the reporting period, along with the impact of those dilutive securities on net income (loss).


 

 

Three months ended September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Net income (loss)

$

586,873

$

(14,447,094)

$

4,225,197

$

(16,971,797)

Gain on derivative warrant liability

 

(2,421,000)

 

 

(10,580,000)

 

 

$

(1,834,127)

$

(14,447,094)

$

(6,354,803)

$

(16,971,797)

 

 

 

 

 

 

 

 

 

Weighted average outstanding shares of common stock

 

20,654,502

 

15,495,421

 

19,883,329

 

15,270,968

Warrants – Debt

 

4,778,627

 

 

4,960,848

 

Stock options

 

3,662,422

 

 

4,667,825

 

Other warrants

 

91,224

 

 

112,186

 

Common stock and equivalents

 

29,186,775

 

15,495,421

 

29,624,188

 

15,270,968

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

Basic

$

0.03

$

(0.93)

$

0.21

$

(1.11)

Diluted

 

(0.06)

 

(0.93)

 

(0.21)

 

(1.11)


In 2016, outstanding stock options and common stock warrants are considered anti-dilutive because we were in a net loss position.


XML 26 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
SUBSEQUENT EVENTS
9 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
Subsequent Events [Text Block]

NOTE 11.   SUBSEQUENT EVENTS


On October 9, 2017, we entered into a securities purchase agreement with several non-affiliated accredited investors in a private placement, pursuant to which for $1.00 we sold one share of our common stock and one warrant to purchase one share of our common stock, at an exercise price of $0.50 per share with a two year life (together, the “2017 Units”).  We issued 1,000,000 2017 Units.  In consideration for issuing the 2017 Units, we received $975,000 in cash and extinguished $25,000 of 12% Notes. We received $175,000 in cash consideration in September 2017, see Note 6 – Accrued Stock Payable.


Subsequent to September 30, 2017, and up to the date of this filing, 600,000 shares of our common stock were issued upon the exercise of 12% Warrants for consideration of $210,000 in cash and $210,000 for the extinguishment of 12% Notes.


XML 27 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
SEGMENT INFORMATION
9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block]

NOTE 12.   SEGMENT INFORMATION


Our operations are organized into four segments: Security and Cash Management Services; Marketing Consulting and Apparel; Operations Consulting and Products; and Finance 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 September 30


2017

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

533,065

$

49,394

$

364,629

$

32,903

$

979,991

Costs and expenses

 

(647,915)

 

(100,464)

 

(402,856)

 

(9,339)

 

(1,160,574)

 

$

(114,850)

$

(51,070)

$

(38,227)

$

23,564

 

(180,583)

Corporate

 

 

 

 

 

 

 

 

 

767,456

 

 

 

 

 

 

 

 

Net income

$

586,873


2016

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

560,713

$

106,402

$

117,700

$

25,565

$

810,380

Costs and expenses

 

(528,916)

 

(91,342)

 

(235,605)

 

(13,352)

 

(869,215)

Other expense

 

 

 

 

(6,414)

 

(6,414)

 

$

31,797

$

15,060

$

(117,905)

$

5,799

 

(65,249)

Corporate

 

 

 

 

 

 

 

 

 

(14,381,845)

 

 

 

 

 

 

 

 

Net loss

$

(14,447,094)


Nine months ended September 30


2017

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

1,322,509

$

163,216

$

947,725

$

99,251

$

2,532,701

Costs and expenses

 

(1,615,694)

 

(381,439)

 

(1,018,655)

 

(37,113)

 

(3,052,901)

 

$

(293,185)

$

(218,223)

$

(70,930)

$

62,138

 

(520,200)

Corporate

 

 

 

 

 

 

 

 

 

4,745,397

 

 

 

 

 

 

 

 

Net income

$

4,225,197


2016

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

1,599,907

$

221,563

$

289,566

$

93,398

$

2,204,434

Costs and expenses

 

(1,604,932)

 

(216,443)

 

(439,389)

 

(36,731)

 

(2,297,495)

Other expense

 

 

 

 

(10,876)

 

(10,876)

 

$

(5,025)

$

5,120

$

(149,823)

$

45,791

 

(103,937)

Corporate

 

 

 

 

 

 

 

 

 

(16,867,860)

 

 

 

 

 

 

 

 

Net loss

$

(16,971,797)


Total assets

 

September 30,

2017

 

December 31,

2016

Security

$

363,757

$

141,140

Marketing

 

51,789

 

50,919

Operations

 

92,882

 

55,750

Finance

 

644,384

 

515,205

Corporate

 

1,654,477

 

2,094,857

 

$

2,807,289

$

2,857,871


XML 28 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Accounting Policies, by Policy (Policies)
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Nature of Operations

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 April 28, 2015, our common stock was uplisted and on May 6, 2015, resumed quotation on the OTC Market’s OTCQB.  Our operations are segregated into the following four segments:


Security and Cash Transportation Services (“Security Segment”)


Iron Protection Group, or IPG, provides advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops.  In August 2017, we acquired the operating assets of Mile High Protection Group, LLC, a Colorado limited liability company, which will continue to do business as “Mile High Protection Services,” or Mile High.  Mile High has a diversified client roster, providing security services to hospitality companies, such as hotels, and to licensed cannabis retailers and cultivators in Colorado.  We have also opened an IPG office in California.


Marketing Consulting and Apparel (“Marketing Segment”)


Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry.  We assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products.  We now have the capacity of a full service marketing agency as well as the resources to expand our clothing lines.  Chiefton Design also supports our other segments with marketing designs and apparel.


Chiefton’s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories.  Our apparel is sold through our on-line shop, cannabis retailers, and specialty t-shirt and gift shops.  The apparel sold by Chiefton is purchased and screen printed by third parties, for which there are numerous suppliers.


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. Our business plan for NBC correlates to the future growth of the regulated cannabis market in the United States.


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 infrastructure, equipment, consumables, and compliance packaging.


Finance and Real Estate (“Finance Segment”)


Real Estate Leasing


We own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.


Our real estate leasing business plan includes the potential future acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities would range in size from 5,000 to 50,000 square feet. These facilities would only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants would include certain requirements that permit us to continually evaluate our tenants’ compliance with applicable laws and regulations.


Shared Office Space, Networking and Event Services   


In October 2014, we purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as “The Greenhouse”. The building is a 16,056 square foot facility, which we use as our corporate headquarters.


The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. We continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations.  We expect to continue the renovation of The Greenhouse in 2017.


We plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. In exchange for certain services that may be provided to these tenants, we expect to receive rental income in the form of cash. In certain cases, we may acquire equity interests or provide debt capital to these businesses.


Industry Finance


Our industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.  These loans would generally be secured to the maximum extent permitted by law.  We believe there is a significant demand for this type of financing.  We are assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.


DB Products Arizona, LLC


DB Products Arizona, LLC (“DB Arizona”) produces and distributes cannabis-infused elixirs and edible products in Arizona.


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 expect future positive cash flows, if any, will first go towards paying the holders of DB Arizona’s notes payable.  Accordingly, we allocated the entire consideration of $106,000 to the note receivable from DB Arizona.


We have determined that DB Arizona is a variable interest entity.  The other 50% owner owns the building in which DB Arizona operates, and holds the Arizona cannabis license required for DB Arizona to extract cannabis oil and sell cannabis oil-infused products.  Accordingly, the other owner is the primary beneficiary, as they have the power to direct activities that most significantly impact the economic performance of DB Arizona.  We will treat our 50% ownership in DB Arizona as an equity investment.


As of September 30, 2017, DB Arizona had total assets of $1,200,000, operating liabilities of $73,639, debt and accrued interest liabilities of $2,463,373, and for the nine months ended September 30, 2017, total revenues of $632,000 and a net loss of $611,000.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation


The accompanying (a) condensed consolidated balance sheet at December 31, 2016, has been derived from audited financial statements and (b) condensed consolidated unaudited financial statements as of September 30, 2017 and 2016, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017.  It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The condensed consolidated financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the condensed consolidated financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three and nine months ended September 30, 2017, are not necessarily indicative of the results of operations expected for the year ending December 31, 2017.


The condensed consolidated financial statements include the results of GCC and its six wholly-owned subsidiary companies: (a) ACS Colorado Corp., a Colorado corporation formed in 2013; (b) Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013; (c) 6565 E. Evans Avenue LLC, a Colorado limited liability company formed in 2014; (d) General Cannabis Capital Corporation, a Colorado corporation formed in 2015; (e) GC Security LLC (“GCS”), a Colorado limited liability company formed in 2015; and (f) GC Finance Arizona LLC (“GC Finance Arizona”), an Arizona limited liability company .  Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in Colorado on June 6, 2013.  Intercompany accounts and transactions have been eliminated.

Reclassification, Policy [Policy Text Block]

Reclassifications


Certain reclassifications have been made to the prior period segment reporting to conform to the current period presentation related to now including GC Supply in our Operations Segment.  The reclassifications had no effect on net loss, total assets, or total stockholders’ equity (deficit).

Related Parties [Policy Text Block]

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 had related party transactions with the following individuals / companies:


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.


GC Finance Arizona – A company owned 100% by Infinity Capital prior to our purchase in June 2017.


DB Arizona– A company that borrowed $825,000 from GC Finance Arizona, which also holds a 50% ownership interest in DB 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.

Going Concern

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 the foreseeable future.  The 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 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.


We had an accumulated deficit of $45,001,858 and $49,227,055, respectively, at September 30, 2017 and December 31, 2016, and further losses are anticipated in the development of our business. 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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Standards


Financial Accounting Standards Board, or FASB, Accounting Standards Update, or FASB ASU 2017-11 “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Heding (Topic 815)” – In July 2017, the FASB issued 2017-11.  The guidance eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock.  Our 12% Warrants are treated as derivative instruments, because they include a “down round” feature, whereby if we issue equity-based instruments at a price below the exercise price of the 12% Warrants, the exercise price of the 12% Warrants would be adjusted.  The ASU is effective for annual periods beginning after December 15, 2018, and for interim periods within those years, with early adoption permitted.  Early adoption of this guidance could have a significant impact on our financial statements, as it would effectively eliminate the derivative liability and the gain or loss from changes in the fair value of the derivative.  We are currently assessing whether to early adopt this standard.


FASB ASU 2017-09 “Scope of Modification Accounting (Topic 718)” – In May 2017, the FASB issued 2017-09.  The guidance clarifies the accounting for when the terms of a share-based award are modified.  The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years, with early adoption permitted.  This new guidance would only impact our financial statements if, in the future, we modified the terms of any of our share-based awards.


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 unit’s 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 expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.


FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” – In January 2017, the FASB issued 2017-01.  The new guidance that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business.  The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business.  The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606.  The ASU is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those years.  Adoption of this ASU is not expected to have a significant impact on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15.  Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.  ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.  This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years.  Early adoption is permitted.  Adoption of this ASU will not have a significant impact on our statement of cash flows.


FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” – In May 2016, the FASB issued 2016-12.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2016-12 provides clarification on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” – In May 2016, the FASB issued 2016-11, which clarifies guidance on assessing whether an entity is a principal or an agent in a revenue transaction.  This conclusion impacts whether an entity reports revenue on a gross or net basis.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606)” – In April 2016, the FASB issued ASU 2016-10, to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.  This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.


FASB ASU 2016-09 “Compensation – Stock Compensation (Topic 718)” – In March 2016, the FASB issued ASU 2016-09, which includes multiple provisions intended to simplify various aspects of accounting for share-based payments.  The new guidance will require entities to recognize all income tax effects of awards in the income statement when the awards vest or are settled.  It also will allow entities to make a policy election to account for forfeitures as they occur.  This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Adopting this ASU did not 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 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 18, 2018, including interim periods within those fiscal years.  We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.


FASB ASU 2015-17”Income Taxes (Topic 740)” – In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet.  Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet.  The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet.  This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.


FASB ASU 2015-16 “Business Combinations (Topic 805),” or ASU 2015-16 - In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. We will apply this guidance to any business combinations that may occur.


FASB ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory,” or ASU 2015-11 - In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. Adopting this ASU did not have a significant impact on our financial position, results of operations and cash flows.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
DEBT (Tables)
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Schedule of Long-term Debt Instruments [Table Text Block]

 

 

September 30,

2017

 

December 31,

2016

12% Notes

$

2,081,250

$

2,750,000

Unamortized debt discount

 

(800,318)

 

(1,934,750)

Long-term portion

$

1,280,932

$

815,250

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED STOCK PAYABLE (Tables)
9 Months Ended
Sep. 30, 2017
Payables and Accruals [Abstract]  
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]
The following tables summarize the changes in accrued common stock payable during the nine months ended September 30, 2017:

 

 

Amount

 

Number of Shares

December 31, 2016

$

$

Acquisition of Mile High

 

155,000

 

104,359

Sale of common stock and warrants

 

175,000

 

175,000

September 30, 2017

$

330,000

$

279,359

XML 31 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
DERIVATIVE WARRANT LIABILITY (Tables)
9 Months Ended
Sep. 30, 2017
Disclosure Text Block [Abstract]  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
The underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability were:

 

Three months ended

 

September 30, 2017

June 30,

2017

March 31,

2017

Stock price on valuation date

$1.43

$1.37 – 2.20

$2.21 – 3.25

Risk-free interest rate

1.5%

1.3 – 1.4%

1.3 – 1.5%

Expected dividend yield

Expected term (in years)

2.0

2.2 – 2.5

2.5 – 2.7

Expected volatility

128%

131 – 134%

146 – 153%

Number of iterations

5

5

5

Derivative Instruments, Gain (Loss) [Table Text Block]
Changes in the derivative warrant liability were as follows:

December 31, 2016

$

23,120,000

Decrease in fair value

 

(10,580,000)

Reclassification to additional paid-in capital upon exercise of warrants

 

(7,301,000)

September 30, 2017

$

5,239,000

XML 32 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
STOCKHOLDERS' EQUITY (Tables)
9 Months Ended
Sep. 30, 2017
STOCKHOLDERS' EQUITY (Tables) [Line Items]  
Share-based expense [Table Text Block]
Share-based expense consisted of the following:

 

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Employee Awards

$

839,322

$

740,844

$

2,969,811

$

1,574,906

Consulting Awards

 

 

103,869

 

25,440

 

151,385

Feinsod Agreement

 

 

27,504

 

 

192,800

DB Option Agreement

 

 

 

 

55,100

 

$

839,322

$

872,217

$

2,995,251

$

1,974,191

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]
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

 

1,116,400

 

1.78

 

 

 

 

Exercised

 

(367,240)

 

1.09

 

 

 

 

Forfeited

 

(554,050)

 

0.75

 

 

 

 

Outstanding at September 30, 2017

 

9,013,510

 

1.14

 

2.2

$

6,211,944

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2017

 

7,984,960

$

1.00

 

1.9

$

5,726,885

 

 

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

 

 

 

 

Exercised

 

(3,377,587)

$

0.59

 

 

 

 

Forfeited

 

(28,126)

 

1.20

 

 

 

 

Outstanding and exercisable at September 30, 2017

 

5,620,130

$

0.69

 

2.1

$

4,573,359

Employee Awards  
STOCKHOLDERS' EQUITY (Tables) [Line Items]  
Schedule of Assumptions Used [Table Text Block]
The following summarizes the Black-Scholes assumptions used for Employee Awards granted:

 

Three months ended

 

September 30, 2017

June 30,

2017

March 31,

2017

Exercise price

$1.34 – 2.07

$1.92

$2.41 – 3.00

Stock price on date of grant

$1.34 – 2.07

$1.92

$2.41 – 3.00

Volatility

140 – 142%

145%

148 – 153%

Risk-free interest rate

1.4 – 1.9%

1.8%

1.7 – 1.9%

Expected life (years)

3.0 – 5.0

5.0

4.0 – 5.0

Dividend yield

XML 33 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
NET INCOME (LOSS) PER SHARE (Tables)
9 Months Ended
Sep. 30, 2017
Earnings Per Share [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
Basic net income (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 as of the first day of the reporting period, along with the impact of those dilutive securities on net income (loss).

 

 

Three months ended September 30,

 

Nine months ended

September 30,

 

 

2017

 

2016

 

2017

 

2016

Net income (loss)

$

586,873

$

(14,447,094)

$

4,225,197

$

(16,971,797)

Gain on derivative warrant liability

 

(2,421,000)

 

 

(10,580,000)

 

 

$

(1,834,127)

$

(14,447,094)

$

(6,354,803)

$

(16,971,797)

 

 

 

 

 

 

 

 

 

Weighted average outstanding shares of common stock

 

20,654,502

 

15,495,421

 

19,883,329

 

15,270,968

Warrants – Debt

 

4,778,627

 

 

4,960,848

 

Stock options

 

3,662,422

 

 

4,667,825

 

Other warrants

 

91,224

 

 

112,186

 

Common stock and equivalents

 

29,186,775

 

15,495,421

 

29,624,188

 

15,270,968

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

Basic

$

0.03

$

(0.93)

$

0.21

$

(1.11)

Diluted

 

(0.06)

 

(0.93)

 

(0.21)

 

(1.11)

XML 34 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
SEGMENT INFORMATION (Tables)
9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Schedule of Segment Reporting Information, by Segment [Table Text Block]

2017

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

533,065

$

49,394

$

364,629

$

32,903

$

979,991

Costs and expenses

 

(647,915)

 

(100,464)

 

(402,856)

 

(9,339)

 

(1,160,574)

 

$

(114,850)

$

(51,070)

$

(38,227)

$

23,564

 

(180,583)

Corporate

 

 

 

 

 

 

 

 

 

767,456

 

 

 

 

 

 

 

 

Net income

$

586,873

2016

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

560,713

$

106,402

$

117,700

$

25,565

$

810,380

Costs and expenses

 

(528,916)

 

(91,342)

 

(235,605)

 

(13,352)

 

(869,215)

Other expense

 

 

 

 

(6,414)

 

(6,414)

 

$

31,797

$

15,060

$

(117,905)

$

5,799

 

(65,249)

Corporate

 

 

 

 

 

 

 

 

 

(14,381,845)

 

 

 

 

 

 

 

 

Net loss

$

(14,447,094)

2017

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

1,322,509

$

163,216

$

947,725

$

99,251

$

2,532,701

Costs and expenses

 

(1,615,694)

 

(381,439)

 

(1,018,655)

 

(37,113)

 

(3,052,901)

 

$

(293,185)

$

(218,223)

$

(70,930)

$

62,138

 

(520,200)

Corporate

 

 

 

 

 

 

 

 

 

4,745,397

 

 

 

 

 

 

 

 

Net income

$

4,225,197

2016

 

Security

 

Marketing

 

Operations

 

Finance

 

Total

Revenues

$

1,599,907

$

221,563

$

289,566

$

93,398

$

2,204,434

Costs and expenses

 

(1,604,932)

 

(216,443)

 

(439,389)

 

(36,731)

 

(2,297,495)

Other expense

 

 

 

 

(10,876)

 

(10,876)

 

$

(5,025)

$

5,120

$

(149,823)

$

45,791

 

(103,937)

Corporate

 

 

 

 

 

 

 

 

 

(16,867,860)

 

 

 

 

 

 

 

 

Net loss

$

(16,971,797)

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

Total assets

 

September 30,

2017

 

December 31,

2016

Security

$

363,757

$

141,140

Marketing

 

51,789

 

50,919

Operations

 

92,882

 

55,750

Finance

 

644,384

 

515,205

Corporate

 

1,654,477

 

2,094,857

 

$

2,807,289

$

2,857,871

XML 35 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2017
USD ($)
Sep. 30, 2016
USD ($)
Sep. 30, 2017
USD ($)
Sep. 30, 2016
USD ($)
Sep. 30, 2017
Sep. 30, 2017
a
Sep. 30, 2017
ft²
Dec. 31, 2016
USD ($)
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Number of Reporting Units     4          
Payments to Acquire Businesses and Interest in Affiliates     $ 106,000          
Assets $ 2,807,289   2,807,289         $ 2,857,871
Accounts Payable and Accrued Liabilities, Current 474,200   474,200         363,618
Revenues 979,991 $ 810,380 2,532,701 $ 2,204,434        
Net Income (Loss) Attributable to Parent 586,873 $ (14,447,094) $ 4,225,197 $ (16,971,797)        
Number Of Wholly Owned Subsidiary     6          
Retained Earnings (Accumulated Deficit) (45,001,858)   $ (45,001,858)         $ (49,227,055)
Pueblo West Property [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Area of Real Estate Property           3 5,000  
Lease Expiration Date     Dec. 31, 2022          
Potential Acquisitions [Member] | Minimum [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Area of Real Estate Property | ft²             5,000  
Potential Acquisitions [Member] | Maximum [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Area of Real Estate Property | ft²             50,000  
The Greenhouse [Member] | Leasing Arrangement [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Area of Real Estate Property | ft²             16,056  
ACS Corp [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Number Of Wholly Owned Subsidiary     1          
DB Arizona Owner [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners         50.00%      
GC Finance Arizona [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Equity Method Investment, Ownership Percentage         100.00%      
Payments to Acquire Businesses and Interest in Affiliates     $ 106,000          
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners         50.00%      
Debt Instrument, Face Amount 825,000   825,000          
Debt Instrument, Fair Value Disclosure 106,000   106,000          
DB Arizona [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Assets 1,200,000   1,200,000          
Accounts Payable and Accrued Liabilities, Current 73,639   73,639          
Debt, Current $ 2,463,373   2,463,373          
Revenues     632,000          
Net Income (Loss) Attributable to Parent     $ 611,000          
Office Building [Member] | The Greenhouse [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Area of Real Estate Property | ft²             10,000  
Consumer Banking [Member] | The Greenhouse [Member]                
NATURE OF OPERATIONS, HISTORY AND PRESENTATION (Details) [Line Items]                
Area of Real Estate Property | ft²             5,000  
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
BUSINESS ACQUISITION (Details) - USD ($)
9 Months Ended
Aug. 18, 2017
Sep. 30, 2017
Dec. 31, 2016
BUSINESS ACQUISITION (Details) [Line Items]      
Common Stock, Shares, Issued   20,881,605 17,128,778
Stock Issued During Period, Shares, Acquisitions   104,359  
Mile High [Member]      
BUSINESS ACQUISITION (Details) [Line Items]      
Common Stock, Shares, Issued 224,359    
Restricted Stock, Vesting Period 6 months    
Stock Issued During Period, Shares, Period Increase (Decrease) (120,000)    
Stock Issued During Period, Shares, Acquisitions 104,359    
Non-compete Agreement, Duration 3 years    
Shares Issued, Price Per Share (in Dollars per share) $ 1.75    
Fair Value Inputs, Discount Rate 15.00%    
Business Acquisitions, Purchase Price Allocation, Year of Acquisition, Net Effect on Income (in Dollars) $ 155,000    
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
NOTE RECEIVABLE - DB ARIZONA (Details) - DB Arizona [Member] - USD ($)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
NOTE RECEIVABLE - DB ARIZONA (Details) [Line Items]    
Interest Payable $ 14,171 $ 2,202
Debt Instrument, Interest Rate, Effective Percentage 14.00%  
Debt Instrument, Maturity Date May 30, 2017  
Directly Loaned [Member]    
NOTE RECEIVABLE - DB ARIZONA (Details) [Line Items]    
Debt Instrument, Face Amount $ 101,500  
Acquisition of GC Finance Arizona [Member]    
NOTE RECEIVABLE - DB ARIZONA (Details) [Line Items]    
Debt Instrument, Face Amount 825,000  
Long-term Debt, Fair Value $ 106,000  
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
LONG-LIVED ASSETS (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
LONG-LIVED ASSETS (Details) [Line Items]        
Depreciation $ 15,997 $ 11,944 $ 47,693 $ 36,070
Finite-Lived Intangible Assets, Net 139,288   139,288  
Amortization 23,888 $ 86,044 41,095 $ 256,259
Mile High [Member]        
LONG-LIVED ASSETS (Details) [Line Items]        
Finite-Lived Intangible Assets, Gross 155,000   155,000  
Finite-Lived Intangible Assets, Accumulated Amortization 15,712   $ 15,712  
Finite-Lived Intangible Assets, Remaining Amortization Period     2 years  
Chiefton [Member]        
LONG-LIVED ASSETS (Details) [Line Items]        
Finite-Lived Intangible Assets, Gross $ 69,400   $ 69,400  
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
DEBT (Details) - USD ($)
$ / shares in Units, shares in Millions
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Jun. 30, 2017
Feb. 28, 2015
DEBT (Details) [Line Items]              
Interest Expense $ 81,563 $ 5,276,550 $ 240,380 $ 5,381,125      
Convertible Debt           $ 3,451,376  
Debt Instrument, Unamortized Discount $ 800,318   $ 800,318   $ 1,934,750    
12% September 2016 [Member]              
DEBT (Details) [Line Items]              
Debt Instrument, Interest Rate, Effective Percentage   12.00%   12.00%      
Interest Expense         5,189,000    
Convertible Debt   $ 3,000,000   $ 3,000,000      
Debt Instrument, Minimum Interest Payment Period     1 year        
Debt Conversion, Converted Instrument, Warrants or Options Issued (in Shares)     9.0        
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period     3 years        
Warrant Call Threshold, Stock Price (in Dollars per share)     $ 5.00        
Warrant Call Threshold, Consecutive Days     10 days        
Proceeds from Secured Notes Payable     $ 2,450,000        
Extinguishment of Debt, Amount     $ 1,728,280        
Debt Instrument, Unamortized Discount         $ 2,450,000    
12% September 2016 [Member] | Group A [Member]              
DEBT (Details) [Line Items]              
Debt Conversion, Converted Instrument, Warrants or Options Issued (in Shares)     4.5        
Investment Warrants, Exercise Price (in Dollars per share)     $ 0.35        
12% September 2016 [Member] | Group B [Member]              
DEBT (Details) [Line Items]              
Debt Conversion, Converted Instrument, Warrants or Options Issued (in Shares)     4.5        
Investment Warrants, Exercise Price (in Dollars per share)     $ 0.70        
12% September 2016 [Member] | Default [Member]              
DEBT (Details) [Line Items]              
Debt Instrument, Interest Rate, Effective Percentage 18.00%   18.00%        
12% Convertible Notes [Member]              
DEBT (Details) [Line Items]              
Debt Instrument, Maturity Date     Sep. 21, 2018        
10% Convertible Note [Member]              
DEBT (Details) [Line Items]              
Debt Conversion, Converted Instrument, Amount     $ 300,000        
Infinity Capital [Member]              
DEBT (Details) [Line Items]              
Debt Instrument, Interest Rate, Effective Percentage             5.00%
Debt Instrument, Maturity Date     Aug. 31, 2015        
Interest Expense     $ 51,239 $ 26,540      
Accrued Liabilities, Current $ 51,239   51,239        
The Greenhouse [Member] | 14% Convertible Note [Member]              
DEBT (Details) [Line Items]              
Debt Conversion, Converted Instrument, Amount     $ 250,000        
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
DEBT (Details) - Notes Payable - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Unamortized debt discount $ (800,318) $ (1,934,750)
Long-term portion 1,280,932 815,250
12% Convertible Notes [Member]    
Debt Instrument [Line Items]    
12% Notes $ 2,081,250 $ 2,750,000
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED STOCK PAYABLE (Details) - shares
1 Months Ended 9 Months Ended
Oct. 31, 2017
Sep. 30, 2017
ACCRUED STOCK PAYABLE (Details) [Line Items]    
Stock Issued During Period, Shares, Other   175,000
Subsequent Event [Member]    
ACCRUED STOCK PAYABLE (Details) [Line Items]    
Stock Issued During Period, Shares, Other 175,000  
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED STOCK PAYABLE (Details) - Schedule of Accrued Common Stock Payable
9 Months Ended
Sep. 30, 2017
USD ($)
shares
Schedule of Accrued Common Stock Payable [Abstract]  
Balance as of | $
Shares as of | shares
Acquisition of Mile High, Value | $ $ 155,000
Acquisition of Mile High, Shares | shares 104,359
Sale of common stock and warrants, Value | $ $ 175,000
Sale of common stock and warrants, Shares | shares 175,000
Balance as of | $ $ 330,000
Shares as of | shares 279,359
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
DERIVATIVE WARRANT LIABILITY (Details) - Schedule of Assumptions for Determining Derivative Warrant Liability Fair Value - Derivative Warrant Liability [Member] - $ / shares
3 Months Ended
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
DERIVATIVE WARRANT LIABILITY (Details) - Schedule of Assumptions for Determining Derivative Warrant Liability Fair Value [Line Items]      
Stock price on valuation date (in Dollars per share) $ 1.43    
Risk-free interest rate 1.50%    
Expected term (in years) 2 years    
Expected volatility 128.00%    
Number of iterations 5 5 5
Minimum [Member]      
DERIVATIVE WARRANT LIABILITY (Details) - Schedule of Assumptions for Determining Derivative Warrant Liability Fair Value [Line Items]      
Stock price on valuation date (in Dollars per share)   $ 1.37 $ 2.21
Risk-free interest rate   1.30% 1.30%
Expected term (in years)   2 years 73 days 2 years 6 months
Expected volatility   131.00% 146.00%
Maximum [Member]      
DERIVATIVE WARRANT LIABILITY (Details) - Schedule of Assumptions for Determining Derivative Warrant Liability Fair Value [Line Items]      
Stock price on valuation date (in Dollars per share)   $ 2.20 $ 3.25
Risk-free interest rate   1.40% 1.50%
Expected term (in years)   2 years 6 months 2 years 255 days
Expected volatility   134.00% 153.00%
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
DERIVATIVE WARRANT LIABILITY (Details) - Schedule of Derivative Warrant Liability Gain (Loss)
9 Months Ended
Sep. 30, 2017
USD ($)
Schedule of Derivative Warrant Liability Gain (Loss) [Abstract]  
Balance $ 23,120,000
Decrease in fair value (10,580,000)
Reclassification to additional paid-in capital upon exercise of warrants (7,301,000)
Balance $ 5,239,000
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
STOCKHOLDERS' EQUITY (Details)
9 Months Ended
Sep. 30, 2017
USD ($)
shares
STOCKHOLDERS' EQUITY (Details) [Line Items]  
Stock Issued During Period, Shares, Other 175,000
Consulting Awards [Member]  
STOCKHOLDERS' EQUITY (Details) [Line Items]  
Stock Issued During Period, Shares, Other 0
Marketing Services [Member]  
STOCKHOLDERS' EQUITY (Details) [Line Items]  
Stock Issued During Period, Shares, Other 8,000
Incentive Plan [Member]  
STOCKHOLDERS' EQUITY (Details) [Line Items]  
Share-based Compensation Arrangement by Share-based Payment Award, Description On October 29, 2014, the Board authorized the adoption of, and on June 26, 2015, our stockholders ratified, our 2014 Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for the issuance of up to 10 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. In April 2016, we filed a Registration Statement on Form S-8 (the “Registration Statement”), which automatically became effective in May 2016. The Registration Statement relates to 10,000,000 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.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.
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized 10,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number 1,007,181
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options (in Dollars) | $ $ 1,255,708
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period 8 months
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
STOCKHOLDERS' EQUITY (Details) - Share-based expense - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
STOCKHOLDERS' EQUITY (Details) - Share-based expense [Line Items]        
Share-based expense $ 839,322 $ 872,217 $ 2,995,251 $ 1,974,191
Employee Awards        
STOCKHOLDERS' EQUITY (Details) - Share-based expense [Line Items]        
Share-based expense $ 839,322 740,844 2,969,811 1,574,906
Consulting Awards [Member]        
STOCKHOLDERS' EQUITY (Details) - Share-based expense [Line Items]        
Share-based expense   103,869 $ 25,440 151,385
Feinsod Agreement [Member]        
STOCKHOLDERS' EQUITY (Details) - Share-based expense [Line Items]        
Share-based expense   $ 27,504   192,800
DB Option Agreement [Member]        
STOCKHOLDERS' EQUITY (Details) - Share-based expense [Line Items]        
Share-based expense       $ 55,100
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
STOCKHOLDERS' EQUITY (Details) - Share-based compensation costs, Fair Value Assumptions - Employee Awards - $ / shares
3 Months Ended
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
STOCKHOLDERS' EQUITY (Details) - Share-based compensation costs, Fair Value Assumptions [Line Items]      
Exercise price   $ 1.92  
Stock price on date of grant   $ 1.92  
Volatility   145.00%  
Risk-free interest rate   1.80%  
Expected life (years)   5 years  
Minimum [Member]      
STOCKHOLDERS' EQUITY (Details) - Share-based compensation costs, Fair Value Assumptions [Line Items]      
Exercise price $ 1.34   $ 2.41
Stock price on date of grant $ 1.34   $ 2.41
Volatility 140.00%   148.00%
Risk-free interest rate 1.40%   1.70%
Expected life (years) 3 years   4 years
Maximum [Member]      
STOCKHOLDERS' EQUITY (Details) - Share-based compensation costs, Fair Value Assumptions [Line Items]      
Exercise price $ 2.07   $ 3.00
Stock price on date of grant $ 2.07   $ 3.00
Volatility 142.00%   153.00%
Risk-free interest rate 1.90%   1.90%
Expected life (years) 5 years   5 years
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
STOCKHOLDERS' EQUITY (Details) - Schedule of Stockholders' Equity, Warrants or Rights
9 Months Ended
Sep. 30, 2017
USD ($)
$ / shares
shares
Employee Awards  
Class of Warrant or Right [Line Items]  
Outstanding, Number of Shares | shares 8,818,400
Outstanding, Weighted-average Exercise Price per Share | $ / shares $ 1.04
Granted, Number of Shares | shares 1,116,400
Granted, Weighted-average Exercise Price per Share | $ / shares $ 1.78
Exercised, Number of Shares | shares (367,240)
Exercised, Weighted-average Exercise Price per Share | $ / shares $ 1.09
Forfeited, Number of Shares | shares (554,050)
Forfeited, Weighted-average Exercise Price per Share | $ / shares $ 0.75
Outstanding, Number of Shares | shares 9,013,510
Outstanding, Weighted-average Exercise Price per Share | $ / shares $ 1.14
Outstanding, Weighted-average Remaining Contractual Term 2 years 73 days
Outstanding, Aggregate Intrinsic Value | $ $ 6,211,944
Exercisable, Number of Shares | shares 7,984,960
Exercisable, Weighted-average Exercise Price per Share | $ / shares $ 1.00
Exercisable, Weighted-average Remaining Contractual Term 1 year 328 days
Exercisable, Aggregate Intrinsic Value | $ $ 5,726,885
Warrants with Debt  
Class of Warrant or Right [Line Items]  
Outstanding, Number of Shares | shares 9,025,843
Outstanding, Weighted-average Exercise Price per Share | $ / shares $ 0.63
Exercised, Number of Shares | shares (3,377,587)
Exercised, Weighted-average Exercise Price per Share | $ / shares $ 0.59
Forfeited, Number of Shares | shares (28,126)
Forfeited, Weighted-average Exercise Price per Share | $ / shares $ 1.20
Outstanding and Exercisable, Number of Shares | shares 5,620,130
Outstanding and Exercisable, Weighted-average Exercise Price per Share | $ / shares $ 0.69
Outstanding and Exercisable, Weighted-average Remaining Contractual Term 2 years 36 days
Outstanding and Exercisable, Aggregate Intrinsic Value | $ $ 4,573,359
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
NET INCOME (LOSS) PER SHARE (Details) - Schedule of Net Income (Loss) Per Share, Basic and Diluted - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Schedule of Net Income (Loss) Per Share, Basic and Diluted [Abstract]        
Net income (loss) (in Dollars) $ 586,873 $ (14,447,094) $ 4,225,197 $ (16,971,797)
Gain on derivative warrant liability (in Dollars) (2,421,000)   (10,580,000)  
(in Dollars) $ (1,834,127) $ (14,447,094) $ (6,354,803) $ (16,971,797)
Weighted average outstanding shares of common stock 20,654,502 15,495,421 19,883,329 15,270,968
Warrants – Debt 4,778,627   4,960,848  
Stock options 3,662,422   4,667,825  
Other warrants 91,224   112,186  
Common stock and equivalents 29,186,775 15,495,421 29,624,188 15,270,968
Net income (loss) per share        
Basic (in Dollars per share) $ 0.03 $ (0.93) $ 0.21 $ (1.11)
Diluted (in Dollars per share) $ (0.06) $ (0.93) $ (0.21) $ (1.11)
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
SUBSEQUENT EVENTS (Details)
1 Months Ended 9 Months Ended
Oct. 09, 2017
USD ($)
$ / shares
shares
Oct. 31, 2017
USD ($)
shares
Sep. 30, 2017
USD ($)
Sep. 30, 2017
USD ($)
SUBSEQUENT EVENTS (Details) [Line Items]        
Proceeds from Issuance of Common Stock       $ 175,000
Proceeds from Warrant Exercises       $ 668,750
Subsequent Event [Member]        
SUBSEQUENT EVENTS (Details) [Line Items]        
Stock Issued During Period, Shares, Conversion of Units (in Shares) | shares   600,000    
Proceeds from Warrant Exercises   $ 210,000    
Subsequent Event [Member] | 12% Convertible Notes [Member]        
SUBSEQUENT EVENTS (Details) [Line Items]        
Repayments of Debt   $ 210,000    
Subsequent Event [Member] | 2017 Units [Member]        
SUBSEQUENT EVENTS (Details) [Line Items]        
Sale of Stock, Price Per Share (in Dollars per share) | $ / shares $ 1.00      
Debt Instrument, Convertible, Conversion Ratio 1      
Investment Warrants, Exercise Price (in Dollars per share) | $ / shares $ 0.50      
Investment Warrants, Duration 2 years      
Stock Issued During Period, Shares, New Issues (in Shares) | shares 1,000,000      
Proceeds from Issuance of Common Stock $ 975,000   $ 175,000  
Subsequent Event [Member] | 2017 Units [Member] | 12% Convertible Notes [Member]        
SUBSEQUENT EVENTS (Details) [Line Items]        
Repayments of Debt $ 25,000      
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
SEGMENT INFORMATION (Details) - Schedule of Segment Reporting Information, by Segment - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Segment Reporting Information [Line Items]        
Revenues, net $ 979,991 $ 810,380 $ 2,532,701 $ 2,204,434
Costs and expenses (1,160,574) (869,215) (3,052,901) (2,297,495)
Other expense   (6,414)   (10,876)
Segment Income (Loss) (180,583) (65,249) (520,200) (103,937)
Corporate Income (Loss) 767,456 (14,381,845) 4,745,397 (16,867,860)
Net Income (Loss) 586,873 (14,447,094) 4,225,197 (16,971,797)
Security and Cash Management [Member]        
Segment Reporting Information [Line Items]        
Revenues, net 533,065 560,713 1,322,509 1,599,907
Costs and expenses (647,915) (528,916) (1,615,694) (1,604,932)
Segment Income (Loss) (114,850) 31,797 (293,185) (5,025)
Marketing and Products [Member]        
Segment Reporting Information [Line Items]        
Revenues, net 49,394 106,402 163,216 221,563
Costs and expenses (100,464) (91,342) (381,439) (216,443)
Segment Income (Loss) (51,070) 15,060 (218,223) 5,120
Consulting and Advisory[Member]        
Segment Reporting Information [Line Items]        
Revenues, net 364,629 117,700 947,725 289,566
Costs and expenses (402,856) (235,605) (1,018,655) (439,389)
Segment Income (Loss) (38,227) (117,905) (70,930) (149,823)
Finance And Real Estate [Member]        
Segment Reporting Information [Line Items]        
Revenues, net 32,903 25,565 99,251 93,398
Costs and expenses (9,339) (13,352) (37,113) (36,731)
Other expense   (6,414)   (10,876)
Segment Income (Loss) $ 23,564 $ 5,799 $ 62,138 $ 45,791
XML 52 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
SEGMENT INFORMATION (Details) - Schedule of Total Assets by Segment - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Segment Reporting, Asset Reconciling Item [Line Items]    
Assets $ 2,807,289 $ 2,857,871
Security and Cash Management [Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Assets 363,757 141,140
Marketing and Products [Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Assets 51,789 50,919
Consulting and Advisory[Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Assets 92,882 55,750
Finance And Real Estate [Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Assets 644,384 515,205
Corporate Segment [Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Assets $ 1,654,477 $ 2,094,857
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