0001553350-16-002194.txt : 20160630 0001553350-16-002194.hdr.sgml : 20160630 20160630142828 ACCESSION NUMBER: 0001553350-16-002194 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20160331 FILED AS OF DATE: 20160630 DATE AS OF CHANGE: 20160630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Aquarius Cannabis Inc. /NV/ CENTRAL INDEX KEY: 0001624203 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 471273086 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-200932 FILM NUMBER: 161742718 BUSINESS ADDRESS: STREET 1: METRO OFFICE PARK STREET 2: 7 CALLE 1, SUITE 204 CITY: GUAYNABO STATE: PR ZIP: 00968 BUSINESS PHONE: 888-317-0460 MAIL ADDRESS: STREET 1: METRO OFFICE PARK STREET 2: 7 CALLE 1, SUITE 204 CITY: GUAYNABO STATE: PR ZIP: 00968 10-Q 1 aqua_10q.htm QUARTERLY REPORT Quarterly Report

 

 

 

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 the quarterly period ended March 31, 2016

 

or

 

 

¨

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: 000-55330

 

AQUARIUS CANNABIS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

47-1273086

(State or other jurisdiction of incorporation or
organization)

 

(I.R.S. Employer Identification No.)

 

 

 

Metro Office Park, 7 Calle 1, Ste. 204,
Guaynabo, Puerto Rico

 

00968

(Address of principal executive offices)

 

(Zip Code)

 

(888) 317-0460 

(Registrant’s telephone number, including area 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 such filing requirements for the past 90 days. Yes ¨    No þ

 

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 ¨  No þ

 

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

 

Large Accelerated Filer   ¨ Accelerated Filer   ¨ Non-Accelerated Filer    ¨ (Do not check if a smaller reporting company) Smaller Reporting Company   þ

 

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

 

Indicate the number of shares outstanding of each of the issuers classes of common stock: As of June 29, 2016, there were 29,596,833 shares, $0.0001 par value per share, of common stock outstanding.  

  

 

 

 




 


 

AQUARIUS CANNABIS, INC.

 

Quarterly Report on Form 10-Q for the

Period Ended March 31, 2016

 

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

1

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Control and Procedures

26

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

27

 

 

 

SIGNATURES

28

 

 

 




 


CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

CERTAIN TERMS USED IN THIS REPORT

 

When this Report uses the words “we,” “us,” “our,” “Aquarius,” and the “Company,” they refer to Aquarius Cannabis, Inc. “SEC” refers to the Securities and Exchange Commission.

 

 

 




 


Item 1.           Financial Statements (Unaudited)

 

Aquarius Cannabis, Inc.


Index to Financial Statements

March 31, 2016 and 2015

 

 

Page

 

Number

 

 

Balance Sheets as of March 31, 2016 and 2015 (Unaudited)

2

 

 

Statements of Operations for the three months ended March 31, 2016 and 2015 (Unaudited)

3

 

 

Statements of Cash Flows for the three months ended March 31, 2016 and 2015 (Unaudited)

4

 

 

Notes to Financial Statements (Unaudited)

5

 

 

 





1



 


AQUARIUS CANNABIS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,963

 

 

$

105,833

 

Accounts receivable, related party

 

 

 

 

 

10,313

 

Inventory

 

 

 

 

 

 

Prepaid expenses and deposits

 

 

13,927

 

 

 

9,589

 

Prepaid expenses, related parties

 

 

 

 

 

 

Total current assets

 

 

55,890

 

 

 

125,735

 

 

 

 

 

 

 

 

 

 

Fixed assets, net of accumulated depreciation of $5,004 and $4,134 respectively

 

 

12,402

 

 

 

13,272

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

68,292

 

 

$

139,007

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS'DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

57,207

 

 

$

82,213

 

Accrued liabilities

 

 

55,462

 

 

 

16,872

 

Accrued interest -  convertible notes payable

 

 

190,066

 

 

 

157,625

 

Deferred revenue

 

 

5,000

 

 

 

5,000.00

 

Due to related parties

 

 

20,703

 

 

 

16,725

 

Line of credit, net of debt discount

 

 

582,695

 

 

 

388,172

 

Notes payable

 

 

50,000

 

 

 

50,000

 

Notes payable, related party

 

 

200,000

 

 

 

200,000

 

Convertible note payable

 

 

28,000

 

 

 

28,000

 

Total current liabilities

 

 

1,189,133

 

 

 

944,607

 

 

 

 

 

 

 

 

 

 

Long term liabilities:

 

 

 

 

 

 

 

 

Convertible notes payable, net of debt discount

 

 

983,861

 

 

 

981,795

 

Convertible notes payable, related party

 

 

50,000

 

 

 

50,000

 

Total liabilities

 

 

2,222,994

 

 

 

1,976,402

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

Preferred Stock, par value $0.0001; authorized shares 20,000,000; issued and outstanding shares 2,000,000 and 2,000,000, respectively

 

 

200

 

 

 

200

 

Preferred Stock - Series B, par value $0.0001; authorized shares 200,000; issued and outstanding shares 200,000 and 0, respectively

 

 

20

 

 

 

20.00

 

Common Stock, par value $0.0001; authorized shares 200,000,000; issued and outstanding shares 27,269,436 and 26,739,002, respectively

 

 

2,728

 

 

 

2,675

 

Additional paid in capital

 

 

3,246,066

 

 

 

2,783,979

 

Less: stock subscriptions receivable

 

 

 

 

 

0

 

Accumulated deficit

 

 

(5,403,716

)

 

 

(4,624,269

)

Total stockholders’ deficit

 

 

(2,154,702

)

 

 

(1,837,395

)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$

68,292

 

 

$

139,007

 


The accompanying footnotes are an integral part of these condensed consolidated unaudited financial statements




2



 


AQUARIUS CANNABIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Revenues - related party

 

$

 

 

$

 

Cost of goods sold

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

61,903

 

 

 

52,414

 

Research and development

 

 

23,405

 

 

 

15,552

 

General and administrative

 

 

606,199

 

 

 

153,866

 

General and administrative, related parties

 

 

23,556

 

 

 

76,810

 

Total operating expenses

 

 

715,063

 

 

 

298,642

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(715,063

)

 

 

(298,642

)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

82

 

Interest expense

 

 

(55,798

)

 

 

(26,650

)

Interest expense, related party

 

 

(1,997

)

 

 

(1,000

)

Amortization of debt discount

 

 

(6,589

)

 

 

(2,043

)

Other income

 

 

 

 

 

5,020

 

Total other income (expense)

 

 

(64,384

)

 

 

(24,591

)

 

 

 

 

 

 

 

 

 

Net loss

 

$

(779,447

)

 

$

(323,233

)

 

 

 

 

 

 

 

 

 

Net Income (loss) per common share: Basic and diluted

 

$

(0.03

)

 

$

(0.02

)

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding: Basic and diluted

 

 

27,001,222

 

 

 

21,044,896

 


The accompanying footnotes are an integral part of these condensed consolidated unaudited financial statements





3



 


AQUARIUS CANNABIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

March 31,

 

 

 

2016

 

 

2015

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(779,447

)

 

$

(323,233

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Amortization of debt discount, convertible notes

 

 

6,589

 

 

 

2,043

 

Equity-based compensation expense

 

 

462,140

 

 

 

72,265

 

Convertible notes payable issued for services

 

 

 

 

 

18,000

 

Depreciation

 

 

870

 

 

 

871

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in Accounts receivable - related party

 

 

10,313

 

 

 

 

Increase in Prepaid expenses and deposits

 

 

(4,338

)

 

 

(7,317

)

Decrease in Prepaid expenses, related parties

 

 

 

 

 

1,500

 

Increase / (Decrease) in Accounts payable and accrued expenses

 

 

(25,006

)

 

 

41,060

 

Increase in Accrued liabilities

 

 

59,293

 

 

 

 

Increase in Accrued interest notes payable

 

 

32,441

 

 

 

 

Due to related parties

 

 

(16,725

)

 

 

24,475

 

Net cash (used in) operating activities

 

 

(253,870

)

 

 

(170,336

)

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Cash acquired in reverse capitalization

 

 

 

 

 

(15,000

)

Net cash used in investing activities

 

 

 

 

 

(15,000

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from line of credit

 

 

190,000

 

 

 

 

Proceeds from issuance of convertible notes payable

 

 

 

 

 

100,000

 

Net cash provided by financing activities

 

 

190,000

 

 

 

100,000

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash

 

 

(63,870

)

 

 

(85,336

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

105,833

 

 

 

100,355

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

41,963

 

 

$

15,019

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

 

 

$

 

Taxes

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Convertible note payable issued for services

 

$

 

 

$

18,000

 

Equity interest issued for services

 

$

0

 

 

$

72,265

 


The accompanying footnotes are an integral part of these condensed consolidated unaudited financial statements


 



4



 


AQUARIUS CANNABIS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015


Note 1 – Nature of Operations


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended March 31, 2016 are not necessarily indicative of results for the full fiscal year. 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.

Aquarius Cannabis Inc. ("we", "our", "us" or "Aquarius") was formed on July 3, 2014, under the laws of the State of Nevada, for the purpose of acquiring Aquarius Holdings LLC ("Aquarius Colorado"), a Colorado limited liability company, through an exchange of shares of our common and preferred stock to acquire 100% of the membership interests of Aquarius Colorado (“the Exchange”). It was our intention that, subsequent to completion of the Exchange, we would continue with the process of filing a Form S-1 Registration Statement with the Securities and Exchange Commission and achieve a listing for our common shares on the OTC Bulletin Board ("OTCBB") interdealer quotation system. Aquarius Colorado is a limited liability company organized on October 20, 2011 under the laws of the State of Colorado. The Exchange of our common and preferred shares for the acquisition of 100% of the membership interests of Aquarius Colorado was completed on December 1, 2014.


Pursuant to the Exchange, we issued 18,000,000 shares of our common stock and 2,000,000 shares of our preferred stock, both with a par value of $0.0001 per share, resulting in former members of Aquarius Colorado owning 90% of our outstanding common shares and 100% of our outstanding preferred shares. This reverse merger was accounted for as a reverse capitalization with Aquarius Colorado, the legally acquired entity, being treated as the acquirer of Aquarius for accounting and financial reporting purposes. Consequently, the accompanying condensed consolidated unaudited financial statements reflect the operations of Aquarius Colorado since Inception (October 20, 2011) and for Aquarius from the effective date of the Exchange (December 1, 2014). The issuance of shares pursuant to the Exchange has been retroactively presented in the footnotes to these condensed consolidated unaudited financial statements to reflect the common stock, preferred stock and additional paid in capital that was issued to members of Aquarius Colorado at the time of the Exchange.


Our principal business is the development, marketing and licensing of cannabis brands and to provide a variety of ancillary services, including production processes, components and consulting services to the cannabis industry. We are currently conducting research and development activities and preliminary marketing activities to develop and license proprietary production processes and new cannabis brands.


We have only recently begun operations and we rely upon borrowings and the issuance of our common shares for cash to fund our operations as we have only generated nominal revenue to date. Our business is subject to significant risks and uncertainties, including failure to secure additional funding necessary to complete the development of our products and services and to bring our products and services to market.


We do not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor do we intend to do so in the future.




5



 


Note 2 – Going Concern


Our consolidated financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course of business. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. Since the inception (October 20, 2011) of the Company through December 31, 2015, we have incurred losses and we expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern.


Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due. We anticipate that additional funding will be in the form of loans and equity financing from the sale of our common stock. We may also seek to obtain loans from our current investors. Currently, there are no arrangements in place for equity funding or new loans. There is no assurance that this series of events will be satisfactorily completed.


Note 3 – Summary of Significant Accounting Policies


Basis of Presentation


Our financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The Company fiscal year end is December 31.


Use of Estimates


The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the period presented.


We make our estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.


Development Stage Company


We are a development stage company as defined under the then current Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, "Development-Stage Entities". Additional disclosures required as a development stage company are that our financial statements be identified as those of a development stage company, and that the statements of operations, changes in stockholder’s deficit and cash flows disclosed activity since the date of our inception (October 11, 2011). Effective June 10, 2014, the FASB changed its regulations with respect to development stage entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2015, with the option for entities to early adopt these new provisions. Consequently, these additional disclosures are not included in our financial statements.


Reclassification

 

Certain reclassifications have been made to the prior year’s data to conform to current year presentation. These reclassifications had no effect on net income (loss).

 



6



 


Principles of Consolidation and Reverse Capitalization

 

As previously disclosed, effective December 1, 2014, we exchanged a total of 18,000,000 shares of our common stock and 2,000,000 shares of our preferred stock in exchange for the acquisition of 100% of the membership interests in Aquarius Colorado. Although we were the legal acquirer, the transaction has been accounted for as a reverse merger with Aquarius Colorado in the form of a reverse capitalization, whereby Aquarius Colorado becomes the accounting acquirer. Accordingly, the accompanying condensed consolidated unaudited financial statements reflect the results of Aquarius Colorado since Inception (October 20, 2011) and of Aquarius from the effective date of the Exchange (December 1, 2014). All costs associated with the reverse merger transaction were expensed as incurred.

 

Fair Value of Financial Instruments


We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash and cash equivalents, note receivable, prepaid expenses and deposits, accounts payable, amounts due from and to related parties, note payable and note payable, related party approximates fair value because of the short-term nature of these financial instruments. The carrying amount of our convertible notes payable at March 31, 2016 and December 31, 2015, approximates their fair value based on our incremental borrowing rates.


Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet date.


Cash and Cash Equivalents


We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less to be cash equivalents.


Notes Receivable and Allowance for Doubtful Accounts


We provide an allowance for doubtful accounts when collection of an account or note receivable is considered doubtful, and receivables are written off against the allowance when deemed uncollectible. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates regarding, among other factors, the customer’s access to capital, the customer’s willingness or ability to pay, general economic and market conditions, the ongoing relationship with the customer and uncertainties related to the resolution of disputed matters. As of March 31, 2016 and December 31, 2015, we had no allowances on current receivables.


Inventories 


The Company’s inventories consist entirely of purchased finished goods. Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis.



7



 


Fixed Assets


Our fixed assets represent equipment stated at cost and are depreciated using the straight-line method over the estimated useful life of the assets, ranging from three to ten years. During the years ended December 31, 2015 and there were no purchases of fixed assets. During the year ended December 31, 2014 we purchased $17,407 of equipment.  We incurred depreciation expense of $870 and $871, for the three months ended March 31, 2016 and 2015, respectively.


Impairment of Long-Lived Assets


When applicable, we continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.


Revenue Recognition


We recognize revenue in accordance with ASC 605, "Revenue Recognition" which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will be provided for in the same period the related sales are recorded. We defer any revenue for which the product or service has not been delivered or is subject to refund until such time that we and the customer jointly determine that the product or service has been delivered or no refund will be required. As of March 31, 2016 and December 31, 2015, the Company has recorded deferred revenue of $5,000, recognition of the revenue is contingent on the grow operation on which we consulted getting to harvest and ultimately to market which is anticipated to be completed by June 30, 2016. During the years ended December 31, 2015 the Company generated revenue from the sale of products to an entity controlled by a shareholder and brother to Mr. Lawyer.


Advertising Expense


Advertising is expensed as incurred. We incurred $24,983 and $0 of advertising expense during the three months ended March 31, 2016 and 2015, respectively.


Research and Development Expense


Research and development ("R&D") costs are charged to expense as incurred. Our R&D costs include, but are not limited to, consulting service fees and materials and supplies used in the development of our proprietary brands and processes. We incurred R&D expense during the three months ended March 31, 2016 and 2015 of $23,405 and $15,552, respectively.


Embedded Conversion Features


The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.




8



 


Income Taxes


From its inception on October 20, 2011, through the effective date of the Exchange on December 1, 2014, Aquarius Holdings LLC was a limited liability company treated as a partnership for federal and state income tax purposes and all its income tax liabilities and, or, benefits were passed through to its members. As such, it did not recognize federal or state income taxes in the accompanying financial statements for the period from its inception on October 20, 2011 to December 1, 2014. Any uncertain tax position taken by its members did not result in an uncertain tax position of Aquarius Holdings LLC.


Aquarius Cannabis Inc. was a taxable entity from its incorporation on July 3, 2014 and Aquarius Holdings LLC became a taxable entity from the effective date of the Exchange on December 1, 2014. Accordingly, Federal and State income taxes are recognized in the accompanying financial statements for Aquarius Cannabis, Inc. from July 3, 2014 and for Aquarius Holdings LLC from December 1, 2014.


Income taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that enactment occurs. To the extent that we do not consider it more likely than not that a future tax asset will be recovered, we will provide a valuation allowance against the excess.


We follow the provisions of ASC 740, "Income Taxes". As a result of ASC 740, we make a comprehensive review of our portfolio of tax positions in accordance with recognition standards established by ASC 740. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.


Net Income (Loss) Per Share


We compute net income (loss) per share in accordance with ASC 260, "Earnings per Share." Under the provisions of ASC 260, basic net income (loss) per share includes no dilution and is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share takes into consideration shares of common stock outstanding (computed under basic net income (loss) per share) and potentially dilutive securities that are not anti-dilutive.


During the three months ended March 31, 2016 and 2015, there were potentially dilutive warrants and convertible debt instruments issued and outstanding. However, these potentially dilutive securities were excluded from the calculation of our loss per share as we incurred losses in all periods presented and their inclusion would have been anti-dilutive.

 



9



 


New Accounting Standards


From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our financial statements upon adoption.


Note 4 – Notes Receivable


Effective February 25, 2015, we issued a $15,000 unsecured promissory note to Kyle Schuck, an outside contractor. The promissory note bore interest at 10.25% per annum and was to be paid in eight monthly payments of $2,000, beginning on June 28, 2015 and continuing until January 28, 2016. On July 29, 2015, the promissory note was repaid in full and the interest was forgiven.


Note 5 – Line of Credit


 

 

March 31,

2016

 

 

December 31, 2015

 

Draws

 

590,000

 

 

 

400,000

 

Less: unamortized debt discount

 

 

(7,305

)

 

 

(11,828

Balance

 

$

582,695

 

 

$

388,172

 


On June 22, 2015, we entered into an unsecured credit facility with an existing investor (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of preferred stock valued at $20 ($.0001 per share) and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of .87%, and expected life of 1 year with a fair value of $18,119. As of March 31, 2016 and December 31, 2015 we have drawn down $590,000 and $400,000 on the credit facility and amortized $10,752 and $6,229, respectively of the debt discount.


Note 6 – Notes Payable


Our notes payable consists of the following:


 

 

March 31,

2016

 

 

December 31, 2015

 

Note payable

 

$

50,000

 

 

$

50,000

 

Note payable, related party

 

$

200,000

 

 

$

200,000

 


Note Payable


Effective June 21, 2012, we issued a $50,000 unsecured demand promissory note to Daniel Hagel, one of our shareholders. The promissory note bears interest at 2% per annum, to be paid annually, beginning on June 21, 2015. As further consideration for making this loan, on June 21, 2012, we issued 2,723,346 common shares and 302,594 preferred shares, as of that date, to Mr. Hagel. The promissory note was recorded in our financial statements at its face value of $50,000. The $50,000 cash proceeds received from Mr. Hagel were allocated between the respective common, preferred shares and the promissory note based on their relative fair values, as determined by us, as of the date of the note (June 21, 2012). The fair value of common shares and promissory note were determined to be $50,000 and $0, respectively. Accordingly, the $50,000 cash proceeds were allocated in their entirety to the common shares and a corresponding $50,000 debt discount was recognized. Since the promissory note is due upon demand, the entire $50,000 debt discount was immediately amortized to interest expense in 2012 as an additional cost of this borrowing.



10



 


On March 1, 2013, new investors were issued 6,808,320 common shares and 756,480 preferred shares which resulted in dilution of Mr. Hagel’s pro-rata interest in us and consequently, as a shareholder holding less than 10% shareholder interest, as of that date, Mr. Hagel was no longer considered to be a related party for financial reporting purposes. Accordingly, the $50,000 note payable was reclassified from note payable, related party to note payable as of that date.


During the three months ended March 31, 2016 and 2015, we incurred interest expense on the above note payable of $250, and $250, respectively.


As at March 31, 2016 and December 31, 2015, accrued interest payable on the above note payable is $3,777 and $3,527, respectively, and is included in accrued liabilities on our balance sheets.


Note Payable, Related Party


Effective March 11, 2013, we issued a $200,000 unsecured demand promissory note to Ernest Rudyak, one of our directors. The promissory note bears interest at 2% per annum, to be paid annually. As further consideration for making this loan, on March 1, 2013, we issued 5,446,656 common shares and 605,184 preferred shares to Mr. Rudyak. The promissory note was recorded in our financial statements at its face value of $200,000. The $200,000 cash proceeds received from Mr. Rudyak were allocated between the commons shares, preferred shares and the promissory note based on relative fair values, as determined by us, as of the date of the note (March 11, 2013). The fair value of the common shares and promissory note were determined to be $200,000 and $0, respectively. Accordingly, the $200,000 cash proceeds were allocated in their entirety to the common shares and a corresponding $200,000 debt discount was recognized. Since the promissory note is due upon demand, the entire $200,000 debt discount was immediately amortized to interest expense in 2013 as an additional cost of this borrowing.


During the three months ended March 31, 2016 and 2015, we incurred interest expense on the above note payable of $1,000 and $1,000, respectively. At March 31, 2016 and December 31, 2015, accrued interest payable on the above note payable was $12,219 and $11,219, respectively, and is included in due to related parties on our balance sheets.


Note 7 – Convertible Notes Payable


Our convertible notes payable consist of the following:

 

 

 

March 31,

 2016

 

 

December 31, 2015

 

 

 

 

 

 

 

 

Convertible notes payable, short term

 

 

 

 

 

 

 

 

Convertible note payable – MSMN18

 

$

18,000

 

 

$

18,000

 

Convertible note payable – MSMN10

 

 

10,000

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

Convertible notes payable, short term, total

 

$

28,000

 

 

$

28,000

 

 

 

 

 

 

 

 

 

 

Convertible notes payable, long term

 

 

 

 

 

 

 

 

Convertible note payable - Blackbridge

 

$

250,000

 

 

$

250,000

 

Convertible notes payable – 12% Notes

 

 

325,000

 

 

 

325,000

 

Convertible notes payable – 8% Notes

 

 

395,000

 

 

 

395,000

 

Convertible note payable – 8% Notes, related party

 

 

50,000

 

 

 

50,000

 

Convertible note payable - KCSA

 

 

15,000

 

 

 

15,000

 

Convertible notes payable, long term, total

 

 

1,035,000

 

 

 

1,035,000

 

Less: convertible note payable, related party

 

 

(50,000

)

 

 

(50,000

)

Less: unamortized debt discount

 

 

(1,139

)

 

 

(3,205

)

Convertible notes payable, long term, net of debt discount, total

 

$

983,861

 

 

$

981,795

 




11



 


On May 1, 2014, we entered into a consulting agreement with Blackbridge Capital, LLC, ("Blackbridge") to provide business advisory services, including introductions to prospective transaction parties in exchange for a $250,000 two-year unsecured convertible promissory note (the "Blackbridge Note") dated May 1, 2014, accruing interest at 12% per annum due upon maturity of the note. The Blackbridge Note is convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for our common stock during the 60 day trading period ending on the last trading day prior to the conversion date. We have not assigned any value to the Blackbridge Note's conversion feature as our common stock is not publicly quoted and therefore the Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


The Company believes that Blackbridge did not provide the services bargained for under the consulting agreement, and we are currently being advised by legal counsel with respect to our rights and remedies.


During the period from May 15, 2014, through June 2, 2014, we sold six convertible two-year convertible promissory notes (the "12% Notes") for total proceeds of $325,000. The 12% Notes are unsecured and accrue interest at 12% and interest is due upon maturity of the note. The 12% Notes are convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for common stock during the 60 day trading period ending on the last trading day prior to the conversion date. We have not assigned any value to the 12% Notes' conversion feature as our common stock is not publicly quoted and therefore the 12% Notes are not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted. In conjunction with the sale of the 12% notes, we issued each note holder 0.918 common shares and 0.102 preferred shares for every dollar of convertible note sold which resulted in a total of 298,350 common shares and 33,150 preferred shares being issued to holders of the 12% notes. The value of the shares issued totaled $16,575 which was recorded as a debt discount.


During the period from July 23, 2014, through December 31, 2014, we sold 22 two-year convertible promissory notes (the "8% Notes") for total proceeds of $445,000. The 8% Notes are unsecured and accrue interest at 8% and interest is due upon maturity of the note. The 8% Notes are convertible by the holder into shares of our common stock, if or when, our shares of common stock become listed on the OTCBB, beginning on the 40th trading day after the shares are listed, at a conversion price equal to the higher of (a) $0.20 per share, or (b) 60% of the average of the five lowest daily closing prices for common stock during the 20 day trading period ending on the last trading day prior to the conversion date. The 8% Notes can be redeemed by us at any time by paying the principal amount owed plus a 35% premium. We have not assigned any value to the 8% Notes' conversion feature as our common stock is not publicly quoted and therefore the 8% Notes are not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


On December 19, 2014, we entered into a consulting agreement with KCSA Strategic Communications, ("KCSA") to provide marketing services, in exchange for a $15,000 two-year unsecured convertible promissory note (the "KCSA Note") dated December 19, 2014, accruing interest at 8% per annum due upon maturity of the note. The KCSA Note is convertible by the holder into shares of our common stock, if or when, our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. We have not assigned any value to the KCSA Note's conversion feature as our common stock is not publicly quoted and therefore the KCSA Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.




12



 


On March 1, 2015, we entered into a services agreement with My Social Marketing Network, LLC, ("MSMN") to provide internet marketing services, in exchange for a $18,000 one-year unsecured convertible promissory note (the "MSMN18 Note"), accruing interest at 8% per annum due upon maturity of the note. The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. We have not assigned any value to the MSMN18 Note's conversion feature as our common stock is not publicly quoted and therefore the MSMN18 Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


On July 23, 2015, we entered into a services agreement with My Social Marketing Network, LLC, ("MSMN") to provide internet marketing services, in exchange for a $10,000 one-year unsecured convertible promissory note (the "MSMN18 Note"), accruing interest at 8% per annum due upon maturity of the note. The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. We have not assigned any value to the MSMN18 Note's conversion feature as our common stock is not publicly quoted and therefore the MSMN18 Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


During the three months ended March 31, 2016 and 2015 we incurred interest expense applicable to our convertible notes payable of $26,936 and $26,650 respectively. As at March 31, 2016 and December 31, 2015, accrued interest payable was $190,066 and $157,624, respectively, and this amount is included in accrued liabilities on our balance sheets.


Amortization of Debt Discount, Convertible Notes


During the three months ended March 31, 2016 and 2015, we incurred amortization of debt discount expense, on the 12% Notes of $6,589 and $2,043, respectively.


Note 8 – Commitments and Contingencies


Contractual Obligations and Commercial Commitments


We have independent contractor agreements which expire at various times through December 2015. Such agreements, which have been revised from time to time, provide for minimum salary levels, share-based compensation and commissions as well as for incentive bonuses that are payable if specified management goals are attained. Commission agreements include a commitment to pay one of our independent contractors a 60% commission, payable in our common shares, on all California portfolio brand revenue generated during the first year of California sales.


Legal Proceedings


We were not subject to any legal proceedings as of March 31, 2016 and December 31, 2015, and, to the best of our knowledge, no legal proceedings are pending or threatened.


Note 9 – Stockholders' Deficit


Preferred Stock


We are authorized to issue 20,000,000 shares of preferred stock with a par value of $0.0001 per share.




13



 


Each share of preferred stock shall have one hundred (100) votes per share for all purposes. Our preferred stock does not provide preemptive, subscription, liquidation or conversion rights and there are no redemption or sinking fund provisions or rights. The preferred stock can be redeemed by us at any time with no consideration provided. Our preferred stockholders are not entitled to cumulative voting for election of our Board. Of the 20,000,000 shares of preferred stock the company is authorized to issue, we have issued 2,000,000 shares designated as Series A Preferred and 200,000 shares designated as Series B Preferred. Both Series A and Series B carry the same shareholder rights as outlined above.


On July 6, 2015, we entered into a new unsecured credit facility with an existing related party (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of series B preferred stock and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. As of March 31, 2016 and December 31, 2015 we received $590,000 and $400,000.


Common Stock


We are authorized to issue 200,000,000 shares of common stock with a par value of $0.0001 per share.


Each share of common stock shall have one (1) vote per share for all purposes. Our common stock does not provide preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our common stockholders are not entitled to cumulative voting for election of our Board.


Common and Preferred Stock Issued and Outstanding


As at March 31, 2016 and December 31, 2015, there were a total of 27,269,436 and 26,737,902 shares of common stock and 2,200,000 preferred shares issued and outstanding.


On January 2, 2015, we issued 464,525 common shares to contractors for services valued at $36,094 which were provided between August and December 2014. These shares had been disclosed as Common Stock earned, but not yet issued as of December 31, 2014.


On February 23, 2015, we sold 1,000,000 shares of common stock to a new investor. The investment includes warrants to purchase up to 1,000,000 shares of common stock at an exercise price of $0.40 per share, those warrants expiring one year from the first day that the common stock is traded on the OTCQB marketplace. The investment also includes warrants to purchase up to 1,000,000 shares of common stock at an exercise price of $0.50 per share, those warrants expiring two years from the first day that the common stock is traded on the OTCQB marketplace. The investment totaled $250,000 of which $100,000 was received on February 24, 2015 and the balance of $150,000 was received on April 2, 2015.


On March 25, 2015, we sold 2,000,000 shares of common stock to an existing investor which included warrants to purchase up to 750,000 shares of common stock at an exercise price of $0.40 per share, those warrants expiring one year from the first day that the common stock is traded on any exchange, warrants to purchase up to 1,250,000 shares of common stock at an exercise price of $0.40 per share, those warrants expiring one year one year from the date of purchase, and warrants to purchase up to 2,000,000 shares of common stock at an exercise price of $0.50 per share, those warrants expiring two years from the first day that the common stock is traded on any exchange. The investment is to be paid in installments of $62,500 per month between April and November 2015 for a total investment of $500,000. As of December 31, 2015, all 2,000,000 of these common shares are recorded as issued and outstanding and all owed had been received.


On April 1, 2015, we issued 621,040 shares of common stock, valued at $0.11 per share, based on the most recent cash sale of common stock, which was earned by contractors during the three months ended March 31, 2015.




14



 


On April 27, 2015, we sold 225,000 shares of common stock at a price of $0.33 per share to a new investor which included warrants to purchase up to 225,000 shares of common stock at an exercise price of $0.75 per share, those warrants expiring 18 months from the first day that the common stock is traded on any exchange. The investment totaled $75,000 which was received in its entirety on May 11, 2015.


On May 1, 2015, we issued 129,732 shares of common stock, valued at $0.208 per share, based on the most recent cash sale of common stock, for services provided by contractors in April 2015.


On June 30, 2015, we issued 234,765 shares of common stock, valued at $0.208 per share, based on the most recent cash sale of common stock, for services provided by contractors in May and June 2015.


On July 14, 2015, we sold 100,000 shares of common stock to a new investor which included 100,000 warrants to purchase up to an additional 100,000 shares of common stock at an exercise price of $0.80 per share, those warrants expiring two years from the first day that the common stock is traded on the OTCQB marketplace. The investment totaled $50,000 which was received by us on July 20, 2015.


On July 15, 2015, we agreed to issue a total of 1,000,000 shares of common stock, valued at $0.302 per share, based on the most recent cash sale of common stock to several Employees of the Company. All 1,000,000 shares were issued on September 3, 2015.


On September 28, 2015, the Company agreed to issue 50,000 shares of common stock valued at $0.302 per share, based on the most recent cash sale of common stock to an individual in consideration for the termination of the joint venture agreement first entered into on April 23, 2015.

 

On September 30, 2015, we agreed to issue a total of 496,240 shares of common stock, valued at $0.302 per share, based on the most recent cash sale of common stock to several Employees and consultants of the Company. All 496,240 shares were issued on October 23, 2015.


As at September 30, 2015, there were a total of 26,378,802 shares of common stock, 2,000,000 shares of preferred stock and 200,000 shares of preferred stock series B issued and outstanding.


As of December 31, 2015 agreed to issue 360,200 common shares to several contractors and employees of the company for services provided to us valued at $0.302 per share, based on the most recent cash sale of common stock.


During the three months ended March 31, 2016 the Company agreed to issue 530,434 common shares to several contractors and employees of the company for services provided to us valued at $0.302 per share, based on the most recent cash sale of common stock.


Warrants Issued


On June 22, 2015, we entered into a new unsecured credit facility with an existing investor (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of preferred stock valued at $20 ($.0001 per share) and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of .87%, and expected life of 1.41 years with a fair value of $18,119. As of March 31, 2016 and December 31, 2015 we have drawn down $590,000 and $400,000, respectively on the credit facility.




15



 


On July 14, 2015, we sold 100,000 shares of common stock to a new investor which included 100,000 warrants to purchase up to 100,000 shares of common stock at an exercise price of $0.80 per share, those warrants expiring two years from the first day that the common stock is traded on the OTCQB marketplace. The investment totaled $50,000 which was received by us on July 20, 2015.


On September 30, 2015, the Company agreed to issue 60,913 warrants to several contractors as compensation for services. The warrants will expire 24 months from the start of trading and have an exercise price of $0.30. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of .87%, and expected life of 2.41 years with a fair value of $14,342.


On December 1, 2015 the Company entered into an agreement with an independent contractor for financial consulting services. The term of the agreement is one year and continues for additional one (1) year periods unless the Company gives Contractor not less than three (3) months’ prior written notice of non-renewal. The Company agreed to pay to the Contractor $7,500 per month in advance for his services (whether solely as an independent contractor or as an independent contractor and Chairman of the Board and/or Acting CFO). Beginning on the first day of the first calendar quarter following the Company’s receipt of at least $500,000 in gross proceeds from the sale of its equity securities to one or more third parties, the Company will pay the Contractor $22,500 per quarter in advance. The Company also agreed to issue to the Contractor 26,000 common shares of the Company per month. The Contractor may elect to receive, at his sole election, in lieu of the Shares, Non-Qualified Stock Options to acquire Shares of the Company with an exercise price equal to the FMV of Shares on the date of issuance and a term of 7 years from the date of issuance. The Company agreed to issue the Contractor, an aggregate of 3,500,000 warrants with a standard “cashless” exercise feature, to vest based upon the schedule below, with the caveat that no additional warrants shall vest to Consultant after a termination (a) by the Company for Cause, as defined herein, or (b) by the Consultant without Cause:


i.

2,000,000 warrants shall vest upon the Effective Date;

ii.

An additional 375,000 warrants shall vest after 3 months of service beginning on the Effective Date;

iii.

An additional 375,000 warrants shall vest after 6 months of service beginning on the Effective Date;

iv.

An additional 375,000 warrants shall vest after 9 months of service beginning on the Effective Date; and

v.

An additional 375,000 warrants shall vest after 12 months of service beginning on the Effective Date.


The Warrants will have an exercise price of $0.077 and will expire seven (7) years from the date of issuance. Should the Contractor terminate this Agreement without Cause or be terminated by the Company with Cause prior to end of the Term of this Agreement, (a) Contractor shall forfeit the Warrants for any period noted above which has not yet commenced; and (b) for any period which has commenced, then the Contractor shall retain the warrants for the days that have elapsed within the period prior to the effective date of the termination, and shall forfeit the warrants not yet vested on the termination date, on a pro rata basis of 4,167 warrants vesting for each day of the period noted above which have elapsed prior to termination.  The Contractor further agreed that he could only exercise warrants that have vested based upon the above. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of 1.19%, and expected life of 7 years with a fair value of $603,540 at December 31, 2015. For the three months ended March 31, 2016 the Company expensed $276,622 for the vested portion of stock options.


On February 18, 2016, Aquarius Cannabis Inc. (“Aquarius”) entered into a binding Memorandum of Understanding (the “Agreement”) with Flying Eagle Advisors, LLC (“Flying Eagle”), a Native American-owned cannabis management consulting and financing company, to be the distribution, branding, and cultivation consulting partner of a series of cannabis cultivation facilities owned by Native American tribes in the United States.


Aquarius will be responsible for coordinating legal distribution, consulting on legal structuring and integrating the facilities into the state systems, developing the branding and marketing for all the products cultivated at the facilities, and ensuring that cultivation processes meet the rigorous brand-standards Aquarius has for its branded marijuana. Aquarius will own all the brands of the marijuana grown and distributed from these facilities.




16



 


Aquarius will earn 9.77% of the gross wholesale sales of products grown in the facility, once sold by an Aquarius-licensed distribution partner.  Aquarius will earn 5% of gross revenue earned by the vertically integrated cultivation and manufacturing operation, and will receive per pound cultivation consulting fees based on the level of success the clients have growing its brands.


In addition to Flying Eagle, the binding agreement was signed by Grower’s Supply, LLC, a greenhouse design/build firm.  Grower’s Supply, LLC will be responsible for the design, build, staffing, and day-to-day operational management of the facilities.


The Agreement is conditioned upon Flying Eagle raising sufficient capital to engage the Native American tribes.


Aquarius has agreed to issue Flying Eagle 100,000 warrants upon execution of this Agreement, and further equity incentives based upon certain milestones.


As of March 31, 2016, the Company expensed the 100,000 warrants owed upon the execution of the memo of understanding. The warrants will expire 24 months from the start of trading and have an exercise price of $0.15. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 155%, risk free interest rate of .71%, and expected life of 2 years with a fair value of $24,573.


The following tables summarize our share warrants outstanding as of March 31, 2016 and December 31, 2015:


 

 

Year Ended December 31, 2015

 

 

 

Number of

Shares

 

 

Weighted

Average

Remaining

Life (years)

 

 

Weighted

Average

Exercise

Price

  

Warrants outstanding, December 31, 2014

 

 

 

 

 

 

 

$

 

Issued

 

 

8,485,913

 

 

 

2.5

 

 

 

0.37

 

Exercised

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

Warrants outstanding, December 31, 2015

 

 

8,485,913

 

 

 

2.5

 

 

$

0.47

 

Issued

 

 

475,000

 

 

 

5.7

 

 

 

0.23

 

Exercised

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

Warrants outstanding, March 31, 2016

 

 

8,960,913

 

 

 

2.48

 

 

$

0.36

 

Warrants exercisable, March 31, 2016

 

 

3,350,000

 

 

 

4.1

 

 

$

0.15

 


The following table summarizes information about warrants outstanding at March 31, 2016:


Exercise Price

 

 

Warrants Outstanding

 

 

Weighted Average Life of

Outstanding Warrants In Years

 

 

 

 

 

 

 

 

 

 

 

$0.08

 

 

 

2,375,000

 

 

 

6.7

 

$0.15

 

 

 

100,000

 

 

 

1.9

 

$0.30

 

 

 

60,913

 

 

 

1.8

 

$0.40

 

 

 

3,100,000

 

 

 

.6

 

$0.50

 

 

 

3,000,000

 

 

 

1.3

 

$0.75

 

 

 

225,000

 

 

 

.6

 

$0.80

 

 

 

100,000

 

 

 

1.8

 

Balance March 31, 2016

 

 

 

8,960,913

 

 

 

2.5

 




17



 


Note 10 - Related Party Transactions


Management Fees – Related Parties


In addition to the related party transactions described in Note 5 Notes Payable and Note 6 Convertible Notes Payable to these condensed consolidated unaudited financial statements; we incurred management fees and equity-based compensation expense included in general and administrative expense, to (a) Mr. Grede, Aquarius’ Executive Vice President, and an entity controlled by Mr. Grede, The Aspen Alliance ("TAA"), and (b) Mr. Lawyer, Aquarius’ Chief Executive Officer and an entity controlled by Mr. Lawyer, TAG, as follows:


 

 

During The

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Management fees – Mr. Grede and TAA

 

$

 

 

$

12,000

 

Management fees – Mr. Lawyer and TAG

 

 

 

 

 

41,500

 

 

 

$

 

 

$

53,500

 


Interest Expense and Interest Payments – Related Party


 

 

During The

Three Months Ended

March  31,

 

 

 

2016

 

 

2015

 

Interest expense – Mr. Rudyak

 

$

1,000

 

 

$

1,000

 


Due to Related Parties


Accounts payable and accrued interest payable owed to related parties are included in due to related parties in our balance sheets as follows:


 

 

March 31,

2016

 

 

December 31, 2015

 

Accrued interest payable - Mr. Rudyak

 

$

12,220

 

 

$

11,220

 

Accrued interest - convertible notes

 

 

8,503

 

 

 

5,505

 

Due to related parties – total

 

$

20,703

 

 

$

16,725

 


Notes Payable – Related Parties


As described in Note 6 Notes Payable to these condensed consolidated unaudited financial statements, on March 11, 2013, we borrowed $200,000 from Mr. Rudyak and our note payable, related party balance was $200,000 on each of March 31, 2016 and December 31, 2015.


There were no borrowings or repayments to related parties as of March 31, 2016 and December 31, 2015.




18



 


Note 11 – Share-based Compensation


Share-based Compensation Expense


Equity-based compensation expense is included in our statements of operations for the three month ended March 31, 2016 and 2015 as follows:


 

 

For the Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Research and development expense

 

$

724

 

 

$

1,665

 

General and administrative expense

 

 

437,860

 

 

 

48,955

 

General and administrative expense, related party

 

 

23,556

 

 

 

21,645

 

 

 

$

462,140

 

 

$

72,265

 


Note 12 – Income Taxes


From its inception on October 20, 2011 through the effective date of the Exchange on December 1, 2014, Aquarius Holdings LLC was a limited liability company treated as a partnership for federal and state income tax purposes and all its income tax liabilities and, or, benefits were passed through to its members. As such, it did not recognize federal or state income taxes in the accompanying financial statements for the period its inception on October 20, 2011 to December 1, 2014. Any uncertain tax position taken by its members did not result in an uncertain tax position of Aquarius Holdings LLC.


In accordance with the Aquarius Holdings LLC’s Membership Agreement, to the extent possible without impairing its ability to continue to conduct its business and activities, and in order to permit its members to pay taxes on the taxable income of Aquarius Holdings LLC, Aquarius Holdings LLC was required to make distributions to its members in amounts equal to the estimated tax liability of the members computed as if the members paid income tax at the highest marginal federal and state rate applicable to an individual resident of Colorado, in the event that taxable income is generated for the members. There was no taxable income and therefore no distributions for the period from October 20, 2011 to December 1, 2014.


Aquarius Cannabis Inc. was a taxable entity from its incorporation on July 3, 2014 and Aquarius Holdings LLC became a taxable entity from the effective date of the Exchange on December 1, 2014. Accordingly, Federal and State income taxes are recognized the accompanying financial statements for Aquarius Cannabis Inc. from July 3, 2014 and for Aquarius Holdings LLC from December 1, 2014.


The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.




19



 


Note 13 - Subsequent Events


On June 22, 2015, we entered into a new unsecured credit facility with an existing investor (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. Subsequent to March 31, 2016 we drew down an additional $160,000.

 

As of May 9, 2016, a holder of a $50,000 convertible note at 12% agreed to amend the original terms of the convertible note. The amendment creates a $0.125 conversion price floor, extends the maturity date from May 19, 2016 to November 17, 2017, limits to a maximum of $25,000 for conversions within a thirty (30) day period, limits the maximum sale on converted shares to 20% of previous thirty (30) day average daily share trade volume for share prices under $0.40, and allows a $0.20 conversion price during first 120 days of trading, subject to the maximum conversion and sale conditions listed above.

 

As of May 15, 2016 holders of $225,000 of convertible notes elected to convert their note balances and accrued interest of $53,424 into common stock at a conversion price of $0.125 per share. The Company has agreed to issue a total of 2,227,397 shares of common stock. As of June 22, 2016, the 2,227,397 shares of common stock were issued to the noteholders.




 



20



 


Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of the results of operations and financial condition for the three months ended March 31, 2016 and 2015 and should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Report.

 

Overview

 

We were incorporated on July 3, 2014, under the laws of the state of Nevada. We acquired Aquarius Holdings LLC, a Colorado limited liability company ("Aquarius Colorado"), on December 1, 2014, via a share exchange agreement with Aquarius Colorado's members (the "Share Exchange"). In exchange for all of the membership interests of the members of Aquarius Colorado, we gave them shares of Common Stock and Aquarius Colorado became our wholly-owned subsidiary. Aquarius Colorado was formed on October 20, 2011.


Business


We are a U.S.-based branding, packaging and consulting company in the medical and recreational marijuana industries. We are focused on building long-term consumer loyalty to exceptional, consistent, and pesticide-free marijuana products that are marketed and sold under our Aquarius Cannabis brands.


We anticipate that we will profit from contracts with growers in California and other states and will increase the number of our contracts resulting in increased revenues. We expect to form long-standing, mutually beneficial relationships with licensees of our brands by providing consistent and reliable products and services resulting in increased profitability for licensees. Once our brands gain traction, we believe our easily scalable model can be employed to license additional facilities and grow our brands.


To accomplish this, we contracted with Michael Leigh, a top-tier grower, and Hollister Keene, a horticulture specialist, to develop the growing methods and environmental designs to systemize the production process as part of the Aquarius Cannabis brands platform. Our proprietary growing methods and environmental designs outline a specific process with approved materials for all steps of the cultivation process that provide the backbone for consistent marijuana. We will license our growing methods and environmental designs and hire top-tier experts in marijuana growing and horticultural production to provide producers, who license our Aquarius Cannabis brands, access to on-site consulting to meet the quality and consistency standards we set in their marijuana flowers. Our consultants will advise growers at every step of the way to ensure their success including: site planning, site set-up, and crop scheduling, as well as guidance and troubleshooting during production, harvest, curing, and packaging. We will help producers by lowering growing costs, increasing wholesale revenue, and decreasing the effort put into sales of their products.


We intend to fill the noticeable void in the medical and recreational marijuana industries of producers and brands able to provide consistent products. Because we own the Aquarius Cannabis brands, we are responsible to the end consumer for ensuring that each and every Aquarius Cannabis branded product is produced, packaged, and labeled consistently. Delivering on the brand promises of quality and consistency is how we add value to the end consumer.


Since Aquarius Cannabis Inc.’s inception, our operations have been limited to raising capital resources and developing our flagship production process that allows for commercially viable, pesticide-free production of marijuana. Aquarius Cannabis Inc. is currently in search of medical and recreational growers with the intention of negotiating flagship production partnerships in California and Colorado and searching for growers interested in micro-branding.


We believe we are an early mover in a developing industry. We believe we have the necessary experience and expertise in our industry, a clear plan to capitalize on current market opportunities, and that we are well positioned to become a market leader in this nascent industry.




21



 


On April 30, 2015, we entered into a binding agreement with a Texas based investment group, Sedo Cresco, LLC, to develop a lawful medical marijuana growing operation in California. Under the agreement, Aquarius will receive 35% of net revenues from the operation. Sedo Cresco has paid Aquarius Cannabis Inc. a non-refundable $5,000 deposit against future revenues due to Aquarius under the agreement. The project harvested its first crop in Q2 2016. The perpetual harvest cultivation model, once at full capacity, will produce 60+ pounds per month and generate $30,000+ per month in consulting revenue Aquarius. We are working with local government authorities to develop county cultivation regulations compliant under California’s new MMRSA regulation, and issue a commercial license for the facility.


On May 20, 2015, Aquarius Cannabis Inc. has launched its first marijuana brand, Golden GatewayTM, in California.  Golden Gateway products are lab tested for quality, consistency, and safety - all products must pass microbial and pesticide tests - to ensure they meet the Aquarius Cannabis standard.


Golden Gateway products are processed and distributed by medical marijuana collectives within the State of California and in strict compliance with the Compassionate Use Act and the Medical Marijuana Program Act, California Health & Safety Code Sections 11362.5, et seq.


In February 2016, Aquarius signed a joint venture agreement with Native American-owned Flying Eagle Advisors to pursue cultivation and branding contracts with Native American tribes. The first client, a California and Nevada based tribe, signed initial agreements in March 2016 for the first 1-acre facility. Aquarius is responsible for coordinating the cultivation, branding, and distribution of a 1-acre greenhouse facility on the tribe’s land in California. The facility is expected to harvest 900+ pounds per month beginning in Q2 2017, and generate over $300,000 per month in consulting fees to Aquarius from around $2,000,000 per month in gross wholesale revenue.


On December 18, 2015, the Company established Aquarius PR LLC, a wholly owned Puerto Rico subsidiary of the Company.


At the date hereof, we have minimal cash at hand. We require additional capital to implement our business and fund our operations.


Business and Plan of Operations


We are a U.S.-based branding, packaging and consulting company in the medical and recreational marijuana industries. We are focused on building long-term consumer loyalty to exceptional, consistent, and pesticide-free marijuana products that are marketed and sold under our Aquarius Cannabis brands.


Because we own the Aquarius Cannabis brands, we are responsible to the end consumer for ensuring that each and every Aquarius Cannabis branded product is produced, packaged, and labeled consistently.


Delivering on the brand promises of quality and consistency is how we add value to the end consumer. Aquarius Cannabis will ensure quality and consistency by providing an equipment list, material list, schedules and environmental requirements for all steps of the cultivation process. Producers will gain access to on-site consulting from top-tier experts that we plan to employ, in marijuana growing and horticultural production to ensure all growers that license our Aquarius Cannabis brands are able to meet the quality and consistency standards we set in their marijuana flowers. Our consultants will advise growers at every step of the way to ensure their success including: site planning, site set-up, and crop scheduling, as well as guidance and troubleshooting during production, harvest, curing, testing, and packaging.


The way that we will deliver on our promises to the end consumer is by working directly with growers, intermediaries, and retailers to ensure consistency throughout the entire supply chain. To accomplish this, we contracted a top-tier grower and horticulture specialist to develop the growing methods and environmental designs to systemize the production process as part of the Aquarius Cannabis brands platform. Our proprietary growing methods and environmental designs outline a specific process with approved materials for all steps of the cultivation process that provide the backbone for consistent marijuana. We will help producers by lowering growing costs, increasing wholesale revenue, and decreasing the effort put into sales of their products.




22



 


We will take responsibility for marketing on behalf of growers at both the wholesale and retail level. We will coordinate all necessary legal contracts between these outlets and our growers. We will monitor inventory so consumers know where they can find our products in real time. We plan to communicate inventory needs to growers so they are able to meet those needs before stores run out of supply. Lastly, we will be responsible for driving retail demand from marijuana consumers through our B2C marketing.


Growers are the primary financial beneficiary of all of these efforts because of lower growing costs, increased wholesale revenue, and decreased effort put into sales of their products. We will earn licensing fees, royalties, consulting fees and packaging revenue from the production and distribution of Aquarius Cannabis branded products in exchange for the use of our brands, processes, other intellectual property and consulting services.


Business Model


We plan to generate revenue through consulting, licensing, royalties, and packaging fees paid by marijuana producers and distributors licensed under the Aquarius Cannabis brands.


We will generate consulting and packaging fees by providing visually appealing and strongly branded materials that medical marijuana and recreational marijuana producers and distributors will use to package medical marijuana and recreational products in our brand portfolio. The medical marijuana and recreational marijuana products will be packaged both at wholesale scale and for the end-consumer.


We plan to generate revenues through our consulting services to medical and recreational cannabis producers. We will provide varying degrees of assistance to different growers, but services will include helping producers increase the quality and efficiency of their growing process, as well as helping them effectively market and build their brands. These services are vital to ensure that all producers partnering with us maintain the consistent high quality we believe that consumers will come to expect from our Aquarius Cannabis brands.


The common denominator in our sales contracts from state to state is that we will always sell business consulting services that include intellectual property licensing. However, the actual form of our fee schedules with a legal marijuana grower depends entirely on the specific laws and regulations governing production in that state. We believe that our model can be adapted to any current state model, based on over 100 of hours of legal advice from multiple business and criminal lawyers across multiple states.


Marketing Plan


We anticipate that marketing will be a significant part of our overall business strategy, since marketing is needed to build awareness of our products and services. Marketing Aquarius Cannabis includes enrolling growers into brand-licensing agreements, and building and strengthening consumer loyalty to our family of marijuana product brands.


Our sales and business development teams will lead campaigns to enroll growers and dispensaries in legal marijuana markets. Currently we are focused on California.


We plan to contract a marketing and advertising services firm to assist with consumer marketing campaigns. Marketing efforts for Aquarius Cannabis branded marijuana products will include: high quality consumer packaging, in-store displays and advertising, promotions, and digital and experiential marketing.


Intellectual Property


Our growing methods and environmental designs are proprietary because we have developed a system of marijuana production that implements a specific combination of genetics, materials, process, and environment. We will protect our proprietary property by requiring the producer to sign a licensing and non-disclosure agreements.


Legal limitations include the fact that intellectual property, specifically federal trademarks, for cannabis are not granted at this time, as cannabis is a Schedule 1 drug. Federal courts are unlikely to hear IP litigation cases, which poses limitations on our ability to protect our IP.




23



 


We have applied for and have been granted 8 provisional, “Intend To Use” trademarks for the brand name Aquarius by the USPTO. We have applied for and have been granted 3 “Intend To Use” trademarks for Golden Gateway with the USPTO.

   

Results of Operations

 

The following compares Aquarius’s operations for the three months ended March 31, 2016 to the same period at March 31, 2015.

 

Revenues

 

We are still in our development stage and did not generate any revenues during the three months ended March 31, 2016 and 2015, respectively.

 

General and Administrative Expenses

 

General and administrative expenses were incurred in the amount of $606,109 and $153,866 for the three months ended March 31, 2016 and 2015, respectively. The increase in expenses as compared to the same period in the prior period was primarily due to expenses associated consisted of professional fees related to fundraising and preparation for the registration of shares for public trade, ongoing fundraising activities, and services provided by outside contractors in assisting the company with ongoing brand development, marketing activities, and development of grower relationship during the 2016 period.

 

Research and Development Expenses

 

Research and development expenses were incurred in the amount of $23,405 and $15,552 during the three months ended March 31, 2016 and 2015, respectively. The increase was primarily due to expense in the development of our brands and proprietary processes during the 2016 period.

 

Interest Expense

 

During the three months ended March 31, 2016, interest expense increased to $55,798 as compared to $26,650 at March 31, 2015. The increase was due to increased borrowings associated with the Companies line of credit.

 

Net Loss

 

Net loss for the three months ended March 31, 2016 was $779,447 as compared to a net loss of $323,233 for the three month period ended March 31, 2015. The increase in net loss was due to expenses associated with stock options, warrants and common stock to consultants and employees of $462,140 for the three months ended March 31, 2016 compared to $125,765 for the three months ended March 31, 2015 an increase of $336,375.  As we did not generate any revenues during the three months ended March 31, 2016, our net loss equaled our operating expenses.


Liquidity and Capital Resources

 

As at March 31, 2016, the Company has a working capital deficit of $1,133,243, a net loss of $779,447 and has not earned any revenues to cover its operating costs. The Company intends to fund future operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2016.

 

The ability of the Company to realize its business plan is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings.

 

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.



24



 


Critical Accounting Policies and Estimates

 

The Company believes that the following critical policies affect the Company’s more significant judgments and estimates used in preparation of the Company’s financial statements.

 

The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principals require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Company’s board of directors; however, actual results could differ from those estimates.

 

The Company issues restricted stock to consultants for various services and employees for compensation. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of: (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.

 

The Company issues options and warrants to consultants, directors, and officers as compensation for services. These options and warrants are valued using the Black-Scholes model, which focuses on the current stock price and the volatility of moves to predict the likelihood of future stock moves. This method of valuation is typically used to accurately price stock options and warrants based on the price of the underlying stock.

  

Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. The Company did not recognize any impairment losses for any periods presented.

 

Fair value estimates used in preparation of the financial statements are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and due to related parties. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.

  

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements. 

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.  

 

Item 3.          Quantitative and Qualitative Disclosures About Market Risk

 

Smaller reporting companies are not required to provide the information required by this item.

 



25



 


Item 4.          Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Company’s principal executive officer and principal financial officer conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Report. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of April 30, 2016, the Company’s disclosure controls and procedures were not effective due to the material weaknesses identified in Item 9A of the Company’s Annual Report on Form 10-K filed with the SEC on October 26, 2015.  

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 



26



 


PART II— OTHER INFORMATION

 

Item 1.            Legal Proceedings.


We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.


Item 1A.        Risk Factors.


We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds.


None.

 

Item 3.            Defaults Upon Senior Securities.

 

None.

 

Item 4.            Mine Safety Disclosures.

 

Not applicable. 

  

Item 5.            Other Information.


None.

 

Item 6.           Exhibits

 

Exhibit
Number

 

Exhibit Title

 

 

 

31.1

 

Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Schema

101.CAL

 

XBRL Taxonomy Calculation Linkbase

101.DEF

 

XBRL Taxonomy Definition Linkbase

101.LAB

 

XBRL Taxonomy Label Linkbase

101.PRE

 

XBRL Taxonomy Presentation Linkbase


* In accordance with SEC Release 33-8238, Exhibit 32.1 are being furnished and not filed.

  



27



 


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.

 

 

AQUARIUS CANNABIS, INC.

 

 

 

 

 

Date: June 30, 2016

By:

/s/ Michael Davis Lawyer

 

 

 

Name:  Michael Davis Lawyer

 

 

 

Title: Chief Executive Officer,
Chief Financial Officer

 

 

 

(Principal Executive Officer and
Principal Financial Officer)

 

 

 










28


EX-31.1 2 aqua_ex31z1.htm CERTIFICATION Certifications

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Michael Davis Lawyer, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Aquarius Cannabis, Inc.;

 

 

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 this 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 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-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 financing reporting that occurred during the registrant’s most recent fiscal quarter 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 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. 

 

 

By:

/s/ Michael Davis Lawyer

 

 

Michael Davis Lawyer

 

 

President, Chief Executive Officer, Chief Financial Officer

 

(Principal Executive Officer and Principal Financial Officer)

 

Dated: June 30, 2016




EX-32.1 3 aqua_ex32z1.htm CERTIFICATION Certifications

Exhibit 32.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT of 2002

 

In connection with the Quarterly Report of Aquarius Cannabis, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), Michael Davis Lawyer, Chief Executive Officer and Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Quarterly Report, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

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

 

 

By:

/s/ Michael Davis Lawyer

 

 

Michael Davis Lawyer

 

 

President, Chief Executive Officer, Chief Financial Officer

 

(Principal Executive Officer and Principal Financial Officer)

 

Dated: June 30, 2016

 

 

 

 

 

 


 

 

 




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Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended March 31, 2016 are not necessarily indicative of results for the full fiscal year. 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.</p> <p style="margin: 0px">Aquarius Cannabis Inc. (&#34;we&#34;, &#34;our&#34;, &#34;us&#34; or &#34;Aquarius&#34;) was formed on July 3, 2014, under the laws of the State of Nevada, for the purpose of acquiring Aquarius Holdings LLC (&#34;Aquarius Colorado&#34;), a Colorado limited liability company, through an exchange of shares of our common and preferred stock to acquire 100% of the membership interests of Aquarius Colorado (&#147;the Exchange&#148;). It was our intention that, subsequent to completion of the Exchange, we would continue with the process of filing a Form S-1 Registration Statement with the Securities and Exchange Commission and achieve a listing for our common shares on the OTC Bulletin Board (&#34;OTCBB&#34;) interdealer quotation system. Aquarius Colorado is a limited liability company organized on October 20, 2011 under the laws of the State of Colorado. The Exchange of our common and preferred shares for the acquisition of 100% of the membership interests of Aquarius Colorado was completed on December 1, 2014.</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px">Pursuant to the Exchange, we issued 18,000,000 shares of our common stock and 2,000,000 shares of our preferred stock, both with a par value of $0.0001 per share, resulting in former members of Aquarius Colorado owning 90% of our outstanding common shares and 100% of our outstanding preferred shares. This reverse merger was accounted for as a reverse capitalization with Aquarius Colorado, the legally acquired entity, being treated as the acquirer of Aquarius for accounting and financial reporting purposes. <font style="background-color: #FFFFFF">Consequently, the accompanying condensed consolidated unaudited financial statements reflect the operations of Aquarius Colorado since Inception (October 20, 2011) and for Aquarius from the effective date of the Exchange (December 1, 2014). </font>The issuance of shares pursuant to the Exchange has been retroactively presented in the footnotes to these condensed consolidated unaudited financial statements to reflect the common stock, preferred stock and additional paid in capital that was issued to members of Aquarius Colorado at the time of the Exchange.</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px">Our principal business is the development, marketing and licensing of cannabis brands and to provide a variety of ancillary services, including production processes, components and consulting services to the cannabis industry. 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The Blackbridge Note is convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for our common stock during the 60 day trading period ending on the last trading day prior to the conversion date. We have not assigned any value to the Blackbridge Note's conversion feature as our common stock is not publicly quoted and therefore the Note is not currently convertible. 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We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.</p> <p style="margin-top: 0px; margin-bottom: 9.8px"><br /></p> <p style="line-height: 11pt; margin: 0px">On March 1, 2015, we entered into a services agreement with My Social Marketing Network, LLC, (&#34;MSMN&#34;) to provide internet marketing services, in exchange for a $18,000 one-year unsecured convertible promissory note (the &#34;MSMN18 Note&#34;), accruing interest at 8% per annum due upon maturity of the note. The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. 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vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 76px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>March 31,</b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>&#160;2016</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 76px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>December 31, 2015</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; vertical-align: bottom; width: 76px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px"><u>Convertible notes payable, short term</u></p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; 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vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 1px solid; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">10,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 1px solid; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">Convertible notes payable, short term, total</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 7px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 69px"><p style="margin: 0px; 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vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px"><u>Convertible notes payable, long term</u></p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">Convertible note payable - Blackbridge</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">250,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">250,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">Convertible notes payable &#150; 12% Notes</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">325,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">325,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">Convertible notes payable &#150; 8% Notes</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">395,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">395,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">Convertible note payable &#150; 8% Notes, related party</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">50,000</p> </td><td style="margin-top: 0px; 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padding-left: 8px; text-indent: -8px">Convertible notes payable, long term, total</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">1,035,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">1,035,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px; padding-left: 8px; text-indent: -8px">Less: convertible note payable, related party</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 69px"><p style="margin: 0px; text-align: right">(50,000</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">)</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 7px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; 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vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 64px"><p style="margin: 0px; text-align: right">12,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #FFFFFF; vertical-align: bottom"><p style="margin: 0px">Management fees &#150; Mr. Lawyer and TAG</p> </td><td style="margin-top: 0px; background-color: #FFFFFF; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #FFFFFF; border-bottom: #000000 1px solid; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #FFFFFF; border-bottom: #000000 1px solid; 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background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 61px"><p style="margin: 0px; text-align: right">&#151;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #FFFFFF 3px double; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; border-bottom: #000000 3px double; vertical-align: bottom; 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background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6.66px"><p style="margin: 0px">$</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 64px"><p style="margin: 0px; text-align: right">1,000</p> </td><td style="margin-top: 0px; background-color: #CCFFCC; vertical-align: bottom; width: 6px"><p style="margin: 0px">&#160;</p> </td></tr> </table> <p style="margin: 0px">Accounts payable and accrued interest payable owed to related parties are included in due to related parties in our balance sheets as follows:</p> <p style="margin: 0px"><br /></p> <table cellpadding="0" cellspacing="0" style="margin-top: 0px; font-size: 10pt; width: 100%"><tr style="height: 0px; font-size: 0"><td></td><td style="width: 5px"></td><td style="width: 9px"></td><td style="width: 69px"></td><td style="width: 5px"></td><td style="width: 5px"></td><td style="width: 9px"></td><td style="width: 71px"></td><td style="width: 10px"></td></tr> <tr><td style="margin-top: 0px; vertical-align: bottom"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 5px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 78px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>March 31,</b></p> <p style="margin: 0px; font-size: 8pt; text-align: center"><b>2016</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 5px"><p style="margin: 0px">&#160;</p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 5px"><p style="margin: 0px">&#160;</p> </td><td colspan="2" style="margin-top: 0px; border-bottom: #000000 1px solid; vertical-align: bottom; width: 80px"><p style="margin: 0px; font-size: 8pt; text-align: center"><b>December 31, 2015</b></p> </td><td style="margin-top: 0px; vertical-align: bottom; width: 10px"><p style="margin: 0px">&#160;</p> </td></tr> <tr><td style="margin-top: 0px; background-color: #CCFFCC; 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Stockholders' Deficit</b></p> <p style="margin: 0px"><br /></p> <p style="margin: 0px"><b><i>Preferred Stock</i></b></p> <p style="margin: 0px"><br /></p> <p style="margin: 0px">We are authorized to issue 20,000,000 shares of preferred stock with a par value of $0.0001 per share.</p> <p style="margin-top: 0px; margin-bottom: 9.8px"><br /></p> <p style="margin: 0px">Each share of preferred stock shall have one hundred (100) votes per share for all purposes. Our preferred stock does not provide preemptive, subscription, liquidation or conversion rights and there are no redemption or sinking fund provisions or rights. The preferred stock can be redeemed by us at any time with no consideration provided. Our preferred stockholders are not entitled to cumulative voting for election of our Board. Of the 20,000,000 shares of preferred stock the company is authorized to issue, we have issued 2,000,000 shares designated as Series A Preferred and 200,000 shares designated as Series B Preferred. Both Series A and Series B carry the same shareholder rights as outlined above.</p> <p style="margin: 0px"><br /></p> <p style="margin: 0px">On July 6, 2015, we entered into a new unsecured credit facility with an existing related party (&#147;Lender&#148;), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of series B preferred stock and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. 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Convertible Notes Payable 12% Notes [Member] Convertible Notes Payable 8% Notes [Member] Convertible Notes Payable 8% Notes Related Party [Member] Convertible Notes Payable Black Bridge [Member] Convertible Notes Payable KCSA [Member] Convertible Notes Payable MSMN 10 [Member] Convertible Notes Payable MSMN 18 [Member] The entire disclosure for convertible notes payable. The accounting policy relating to development stage companies. Draws on line of credit. The accounting policy for embedded conversion features. The amount recognized from a equity interest issued for services during a noncash or partial noncash transaction. General and Administrative Expense Related Party [Member] Increase (decrease) in prepaid expenses from related parties. The accounting policy for interim financial statements. Disclosure for line of credit. Management fees incurred with related party. Maximum monthly borrowing capacity on line of credit. New Investors Notes Payable [Member] Nine Investors [Member] The entire disclosure for notes payable. Amount of asset related to consideration paid in advance for costs that provide economic benefits within a future period of one year or the normal operating cycle, if longer. Related Party Notes Payable [Member] Accounting policy for related party transactions. The entire disclosure relating to the reverse capitalization transactions. Tabular disclosure of amounts due to related parties. Tabular disclosure of interest expense and payments to related parties. Tabular disclosure of management fees owed to related parties. Tabular disclosure of related party prepaid expenses. Schedule Of Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options By Exercise Price Range [Table] Services provided in exchange for convertible notes. Weighted average price at which holders acquired shares when converting equity instruments other than options into shares. Weighted average price at which grantees could have acquired the underlying shares with respect to equity instrument other than options that have expired. Weighted average price at which grantees could have acquired the underlying shares with respect to equity instrument other than options that have forfeited. Weighted average per share amount at which grantees can acquire shares of common stock by exercise of equity instruments other than options. Weighted average price at which grantees can acquire the shares reserved for issuance for equity instruments other than options. The number of shares into which fully or partially vested other then options outstanding as of the balance sheet date can be currently converted under the option plan. Share Based Compensation Arrangement By Share Based Payment Award Non Option Equity Instruments Outstanding Weighted Average Exercise Price Roll Forward [Abstract] The weighted-average price as of the balance sheet date at which grantees can acquire the shares reserved for issuance on vested portions of other then options outstanding and currently exercisable under the plan. Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options By Exercise Price Range [Axis] Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Domain] Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items] Weighted average remaining contractual term for equity-based awards excluding options, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Weighted average remaining contractual term of outstanding equity instruments other than options, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Shareholder Notes Payable [Member] Stock Subscription Receivable [Member] Warrants Exercise Price Range Five [Member] Warrants Exercise Price Range Four [Member] Warrant Exercise Price Range One [Member] Warrants Exercise Price Range Three [Member] Warrants Exercise Price Range Two [Member] Warrant term. Warrant Group One [Member] Warrant Group Three [Member] Warrant Group Two [Member] The amount of the monthly payment on the unsecured promissory note. Unsecured Promissory Note to Outside Contractor [Member] The date the unsecured promissory note was repaid in full. The date the unsecured promissory note was effective. Equity Issuance Per Line of Credit Agreement [Member] Number of warrants issuable under agreement. Fair value of warrants. Accrued interest on convertible notes to related parties. Accrued interest payable to related parties. Warrant Exercise Price Range Six [Member] Warrant Exercise Price Range Seven [Member] Amount of monthly installment to be paid by investor between April and November 2015. Warrants Group One, Two and Three [Member] Agreement With Independant Contractor [Member] Date agreement was entered into. Term of initial agreement. Amount of monthly payment owed in advance to contractor. Quarterly payment owed to contractor beginning on the first day of the first calendar quarter following the Company's receipt of at least $500,000 in gross proceeds from the sale of its equity securities to one or more third parties. Total common shares agreed to be issued to contractor each month Share Based Compensation Award Tranche Four [Member] Number of warrants vesting per terms of agreement. Number of warrants that will forfeit per termination of agreement. Memorandum of Understanding with Flying Eagle Advisors, LLC [Member] Total number of warrants offered under agreement, to vest over the term of the agreement. Converitble debt conversion price floor. The value of accrued interest from the financial instrument(s) that the original debt is being converted into in a noncash (or part noncash) transaction. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period. Tabular disclosure of warrant exercise prices, by grouped ranges, including the upper and lower limits of the price range, the number of shares under warrant, weighted average exercise price and remaining contractual warrant terms. Share Based Compensation Award Vesting Upon Effective Date [Member] Cash acquired in reverse capitalization. Weighted average remaining contractual term for equity-based awards issued excluding options, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Debt Instrument [Axis] [Default Label] Assets, Current Assets Liabilities, Current Liabilities Receivable from Shareholders or Affiliates for Issuance of Capital Stock Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Operating Expenses Operating Income (Loss) Interest Expense, Related Party Nonoperating Income (Expense) Increase (Decrease) in Accounts Receivable, Related Parties Increase (Decrease) in Prepaid Expense and Other Assets IncreaseDecreaseInPrepaidExpensesRelatedParties Increase (Decrease) in Due to Related Parties Net Cash Provided by (Used in) Operating Activities CashAcquiredFromReverseCapitalization Net Cash Provided by (Used in) Investing Activities Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Substantial Doubt about Going Concern [Text Block] ReverseCapitalizationTextBlock Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] Income Tax, Policy [Policy Text Block] RelatedPartyTransactionsPolicyTextBlock Debt Instrument, Unamortized Discount Line of Credit Facility, Interest Rate During Period Debt Instrument, Issuance Date Debt Instrument, Interest Rate, Stated Percentage Debt Instrument, Maturity Date, Description Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Forfeitures Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Expirations ShareBasedCompensationArrangementByShareBasedPaymentAwardInstrumentsOtherThanOptionsOutstandingWeightedAverageExercisePrice ShareBasedCompensationArrangementByShareBasedPaymentAwardOtherThenOptionsExercisableWeightedAverageExercisePrice Allocated Share-based Compensation Expense Debt Instrument, Maturity Date ShareBasedCompensationSharesAuthorizedUnderEquityInstrumentsOtherThanOptionsExercisePriceRangeDomain EX-101.PRE 9 aqca-20160331_pre.xml XBRL PRESENTATION FILE XML 10 R1.htm IDEA: XBRL DOCUMENT v3.5.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2016
Jun. 29, 2016
Document And Entity Information    
Entity Registrant Name Aquarius Cannabis Inc. /NV/  
Entity Central Index Key 0001624203  
Document Type 10-Q  
Document Period End Date Mar. 31, 2016  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   29,596,833
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2016  
XML 11 R2.htm IDEA: XBRL DOCUMENT v3.5.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Current assets:    
Cash and cash equivalents $ 41,963 $ 105,833
Accounts receivable, related party $ 10,313
Inventory
Prepaid expenses and deposits $ 13,927 $ 9,589
Prepaid expenses, related parties
Total current assets $ 55,890 $ 125,735
Fixed assets, net of accumulated depreciation of $5,004 and $4,134 respectively 12,402 13,272
Total assets 68,292 139,007
Current liabilities:    
Accounts payable 57,207 82,213
Accrued liabilities 55,462 16,872
Accrued interest - convertible notes payable 190,066 157,625
Deferred revenue 5,000 5,000
Due to related parties 20,703 16,725
Line of credit, net of debt discount 582,695 388,172
Notes payable 50,000 50,000
Notes payable, related party 200,000 200,000
Convertible note payable 28,000 28,000
Total current liabilities 1,189,133 944,607
Long term liabilities:    
Convertible notes payable, net of debt discount 983,861 981,795
Convertible notes payable, related party 50,000 50,000
Total liabilities 2,222,994 1,976,402
Stockholders' deficit:    
Preferred Stock 200 200
Common Stock, par value $0.0001; authorized shares 200,000,000; issued and outstanding shares 27,269,436 and 26,739,002, respectively 2,728 2,675
Additional paid in capital $ 3,246,066 $ 2,783,979
Less: stock subscriptions receivable
Accumulated deficit $ (5,403,716) $ (4,624,269)
Total stockholders' deficit (2,154,702) (1,837,395)
Total liabilities and stockholders' deficit 68,292 139,007
Preferred Stock - Series B [Member]    
Stockholders' deficit:    
Preferred Stock $ 20 $ 20
XML 12 R3.htm IDEA: XBRL DOCUMENT v3.5.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Fixed assets, accumulated depreciation $ 5,004 $ 4,134
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 2,000,000 2,000,000
Preferred stock, shares outstanding 2,000,000 2,000,000
Common stock, par value $ .0001 $ .0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 27,269,436 27,269,436
Common stock, shares outstanding 26,739,002 26,739,002
Preferred Stock - Series B [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 200,000 200,000
Preferred stock, shares issued 200,000 200,000
Preferred stock, shares outstanding 0 0
XML 13 R4.htm IDEA: XBRL DOCUMENT v3.5.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Income Statement [Abstract]    
Revenues - related party
Cost of goods sold
Gross Profit
Operating expenses:    
Sales and marketing $ 61,903 $ 52,414
Research and development 23,405 15,552
General and administrative 606,199 153,866
General and administrative, related parties 23,556 76,810
Total operating expenses 715,063 298,642
Operating loss $ (715,063) (298,642)
Other income (expense):    
Interest income 82
Interest expense $ (55,798) (26,650)
Interest expense, related party (1,997) (1,000)
Amortization of debt discount $ (6,589) (2,043)
Other income 5,020
Total other income (expense) $ (64,384) (24,591)
Net loss $ (779,447) $ (323,233)
Net Income (loss) per common share: Basic and Diluted $ (0.03) $ (0.02)
Weighted-average common shares outstanding: Basic and Diluted 27,001,222 21,044,896
XML 14 R5.htm IDEA: XBRL DOCUMENT v3.5.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Operating activities:    
Net loss $ (779,447) $ (323,233)
Adjustments to reconcile net loss to net cash used in operating activities:    
Amortization of debt discount, convertible notes 6,589 2,043
Equity-based compensation expense $ 462,140 72,265
Convertible notes payable issued for services 18,000
Depreciation $ 870 $ 871
Changes in operating assets and liabilities:    
Increase in Accounts receivable - related party 10,313
Increase in Prepaid expenses and deposits $ (4,338) $ (7,317)
Decrease in Prepaid expenses, related parties 1,500
Increase / (Decrease) in Accounts payable and accrued expenses $ (25,006) $ 41,060
Increase in Accrued liabilities 59,293
Increase in Accrued interest notes payable 32,441
Due to related parties (16,725) $ 24,475
Net cash (used in) operating activities $ (253,870) (170,336)
Investing activities:    
Cash acquired in reverse capitalization (15,000)
Net cash used in investing activities $ (15,000)
Financing activities:    
Proceeds from line of credit $ 190,000
Proceeds from issuance of convertible notes payable $ 100,000
Net cash provided by financing activities $ 190,000 100,000
Net (decrease) increase in cash (63,870) (85,336)
Cash and cash equivalents, beginning of period 105,833 100,355
Cash and cash equivalents, end of period $ 41,963 $ 15,019
Supplemental disclosure of cash flow information    
Cash paid for interest
Cash paid for taxes
Supplemental disclosure of non-cash financing activities:    
Convertible note payable issued for services $ 18,000
Equity interest issued for services $ 72,265
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.5.0.1
Nature of Operations
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

Note 1 – Nature of Operations


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended March 31, 2016 are not necessarily indicative of results for the full fiscal year. 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.

Aquarius Cannabis Inc. ("we", "our", "us" or "Aquarius") was formed on July 3, 2014, under the laws of the State of Nevada, for the purpose of acquiring Aquarius Holdings LLC ("Aquarius Colorado"), a Colorado limited liability company, through an exchange of shares of our common and preferred stock to acquire 100% of the membership interests of Aquarius Colorado (“the Exchange”). It was our intention that, subsequent to completion of the Exchange, we would continue with the process of filing a Form S-1 Registration Statement with the Securities and Exchange Commission and achieve a listing for our common shares on the OTC Bulletin Board ("OTCBB") interdealer quotation system. Aquarius Colorado is a limited liability company organized on October 20, 2011 under the laws of the State of Colorado. The Exchange of our common and preferred shares for the acquisition of 100% of the membership interests of Aquarius Colorado was completed on December 1, 2014.


Pursuant to the Exchange, we issued 18,000,000 shares of our common stock and 2,000,000 shares of our preferred stock, both with a par value of $0.0001 per share, resulting in former members of Aquarius Colorado owning 90% of our outstanding common shares and 100% of our outstanding preferred shares. This reverse merger was accounted for as a reverse capitalization with Aquarius Colorado, the legally acquired entity, being treated as the acquirer of Aquarius for accounting and financial reporting purposes. Consequently, the accompanying condensed consolidated unaudited financial statements reflect the operations of Aquarius Colorado since Inception (October 20, 2011) and for Aquarius from the effective date of the Exchange (December 1, 2014). The issuance of shares pursuant to the Exchange has been retroactively presented in the footnotes to these condensed consolidated unaudited financial statements to reflect the common stock, preferred stock and additional paid in capital that was issued to members of Aquarius Colorado at the time of the Exchange.


Our principal business is the development, marketing and licensing of cannabis brands and to provide a variety of ancillary services, including production processes, components and consulting services to the cannabis industry. We are currently conducting research and development activities and preliminary marketing activities to develop and license proprietary production processes and new cannabis brands.


We have only recently begun operations and we rely upon borrowings and the issuance of our common shares for cash to fund our operations as we have only generated nominal revenue to date. Our business is subject to significant risks and uncertainties, including failure to secure additional funding necessary to complete the development of our products and services and to bring our products and services to market.


We do not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor do we intend to do so in the future.

XML 16 R7.htm IDEA: XBRL DOCUMENT v3.5.0.1
Going Concern
3 Months Ended
Mar. 31, 2016
Going Concern  
Going Concern

Note 2 – Going Concern


Our consolidated financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course of business. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. Since the inception (October 20, 2011) of the Company through December 31, 2015, we have incurred losses and we expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern.


Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due. We anticipate that additional funding will be in the form of loans and equity financing from the sale of our common stock. We may also seek to obtain loans from our current investors. Currently, there are no arrangements in place for equity funding or new loans. There is no assurance that this series of events will be satisfactorily completed.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.5.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2016
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies


Note 3 – Summary of Significant Accounting Policies


Basis of Presentation


Our financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The Company fiscal year end is December 31.


Use of Estimates


The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the period presented.


We make our estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.


Development Stage Company


We are a development stage company as defined under the then current Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, "Development-Stage Entities". Additional disclosures required as a development stage company are that our financial statements be identified as those of a development stage company, and that the statements of operations, changes in stockholder’s deficit and cash flows disclosed activity since the date of our inception (October 11, 2011). Effective June 10, 2014, the FASB changed its regulations with respect to development stage entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2015, with the option for entities to early adopt these new provisions. Consequently, these additional disclosures are not included in our financial statements.


Reclassification

 

Certain reclassifications have been made to the prior year’s data to conform to current year presentation. These reclassifications had no effect on net income (loss).


Principles of Consolidation and Reverse Capitalization

 

As previously disclosed, effective December 1, 2014, we exchanged a total of 18,000,000 shares of our common stock and 2,000,000 shares of our preferred stock in exchange for the acquisition of 100% of the membership interests in Aquarius Colorado. Although we were the legal acquirer, the transaction has been accounted for as a reverse merger with Aquarius Colorado in the form of a reverse capitalization, whereby Aquarius Colorado becomes the accounting acquirer. Accordingly, the accompanying condensed consolidated unaudited financial statements reflect the results of Aquarius Colorado since Inception (October 20, 2011) and of Aquarius from the effective date of the Exchange (December 1, 2014). All costs associated with the reverse merger transaction were expensed as incurred.

 

Fair Value of Financial Instruments


We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash and cash equivalents, note receivable, prepaid expenses and deposits, accounts payable, amounts due from and to related parties, note payable and note payable, related party approximates fair value because of the short-term nature of these financial instruments. The carrying amount of our convertible notes payable at March 31, 2016 and December 31, 2015, approximates their fair value based on our incremental borrowing rates.


Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet date.


Cash and Cash Equivalents


We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less to be cash equivalents.


Notes Receivable and Allowance for Doubtful Accounts


We provide an allowance for doubtful accounts when collection of an account or note receivable is considered doubtful, and receivables are written off against the allowance when deemed uncollectible. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates regarding, among other factors, the customer’s access to capital, the customer’s willingness or ability to pay, general economic and market conditions, the ongoing relationship with the customer and uncertainties related to the resolution of disputed matters. As of March 31, 2016 and December 31, 2015, we had no allowances on current receivables.


Inventories 


The Company’s inventories consist entirely of purchased finished goods. Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis.


Fixed Assets


Our fixed assets represent equipment stated at cost and are depreciated using the straight-line method over the estimated useful life of the assets, ranging from three to ten years. During the years ended December 31, 2015 and there were no purchases of fixed assets. During the year ended December 31, 2014 we purchased $17,407 of equipment.  We incurred depreciation expense of $870 and $871, for the three months ended March 31, 2016 and 2015, respectively.


Impairment of Long-Lived Assets


When applicable, we continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.


Revenue Recognition


We recognize revenue in accordance with ASC 605, "Revenue Recognition" which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will be provided for in the same period the related sales are recorded. We defer any revenue for which the product or service has not been delivered or is subject to refund until such time that we and the customer jointly determine that the product or service has been delivered or no refund will be required. As of March 31, 2016 and December 31, 2015, the Company has recorded deferred revenue of $5,000, recognition of the revenue is contingent on the grow operation on which we consulted getting to harvest and ultimately to market which is anticipated to be completed by June 30, 2016. During the years ended December 31, 2015 the Company generated revenue from the sale of products to an entity controlled by a shareholder and brother to Mr. Lawyer.


Advertising Expense


Advertising is expensed as incurred. We incurred $24,983 and $0 of advertising expense during the three months ended March 31, 2016 and 2015, respectively.


Research and Development Expense


Research and development ("R&D") costs are charged to expense as incurred. Our R&D costs include, but are not limited to, consulting service fees and materials and supplies used in the development of our proprietary brands and processes. We incurred R&D expense during the three months ended March 31, 2016 and 2015 of $23,405 and $15,552, respectively.


Embedded Conversion Features


The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.


Income Taxes


From its inception on October 20, 2011, through the effective date of the Exchange on December 1, 2014, Aquarius Holdings LLC was a limited liability company treated as a partnership for federal and state income tax purposes and all its income tax liabilities and, or, benefits were passed through to its members. As such, it did not recognize federal or state income taxes in the accompanying financial statements for the period from its inception on October 20, 2011 to December 1, 2014. Any uncertain tax position taken by its members did not result in an uncertain tax position of Aquarius Holdings LLC.


Aquarius Cannabis Inc. was a taxable entity from its incorporation on July 3, 2014 and Aquarius Holdings LLC became a taxable entity from the effective date of the Exchange on December 1, 2014. Accordingly, Federal and State income taxes are recognized in the accompanying financial statements for Aquarius Cannabis, Inc. from July 3, 2014 and for Aquarius Holdings LLC from December 1, 2014.


Income taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that enactment occurs. To the extent that we do not consider it more likely than not that a future tax asset will be recovered, we will provide a valuation allowance against the excess.


We follow the provisions of ASC 740, "Income Taxes". As a result of ASC 740, we make a comprehensive review of our portfolio of tax positions in accordance with recognition standards established by ASC 740. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.


Net Income (Loss) Per Share


We compute net income (loss) per share in accordance with ASC 260, "Earnings per Share." Under the provisions of ASC 260, basic net income (loss) per share includes no dilution and is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share takes into consideration shares of common stock outstanding (computed under basic net income (loss) per share) and potentially dilutive securities that are not anti-dilutive.


During the three months ended March 31, 2016 and 2015, there were potentially dilutive warrants and convertible debt instruments issued and outstanding. However, these potentially dilutive securities were excluded from the calculation of our loss per share as we incurred losses in all periods presented and their inclusion would have been anti-dilutive.


New Accounting Standards


From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our financial statements upon adoption.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Receivable
3 Months Ended
Mar. 31, 2016
Receivables [Abstract]  
Notes Receivable

Note 4 – Notes Receivable


Effective February 25, 2015, we issued a $15,000 unsecured promissory note to Kyle Schuck, an outside contractor. The promissory note bore interest at 10.25% per annum and was to be paid in eight monthly payments of $2,000, beginning on June 28, 2015 and continuing until January 28, 2016. On July 29, 2015, the promissory note was repaid in full and the interest was forgiven.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.5.0.1
Line of Credit
3 Months Ended
Mar. 31, 2016
Line of Credit Facility [Abstract]  
Line of Credit

Note 5 – Line of Credit


 

 

March 31,

2016

 

 

December 31, 2015

 

Draws

 

590,000

 

 

 

400,000

 

Less: unamortized debt discount

 

 

(7,305

)

 

 

(11,828

Balance

 

$

582,695

 

 

$

388,172

 


On June 22, 2015, we entered into an unsecured credit facility with an existing investor (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of preferred stock valued at $20 ($.0001 per share) and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of .87%, and expected life of 1 year with a fair value of $18,119. As of March 31, 2016 and December 31, 2015 we have drawn down $590,000 and $400,000 on the credit facility and amortized $10,752 and $6,229, respectively of the debt discount.

XML 20 R11.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Payable
3 Months Ended
Mar. 31, 2016
Notes Payable [Abstract]  
Notes Payable


Note 6 – Notes Payable


Our notes payable consists of the following:


 

 

March 31,

2016

 

 

December 31, 2015

 

Note payable

 

$

50,000

 

 

$

50,000

 

Note payable, related party

 

$

200,000

 

 

$

200,000

 


Note Payable


Effective June 21, 2012, we issued a $50,000 unsecured demand promissory note to Daniel Hagel, one of our shareholders. The promissory note bears interest at 2% per annum, to be paid annually, beginning on June 21, 2015. As further consideration for making this loan, on June 21, 2012, we issued 2,723,346 common shares and 302,594 preferred shares, as of that date, to Mr. Hagel. The promissory note was recorded in our financial statements at its face value of $50,000. The $50,000 cash proceeds received from Mr. Hagel were allocated between the respective common, preferred shares and the promissory note based on their relative fair values, as determined by us, as of the date of the note (June 21, 2012). The fair value of common shares and promissory note were determined to be $50,000 and $0, respectively. Accordingly, the $50,000 cash proceeds were allocated in their entirety to the common shares and a corresponding $50,000 debt discount was recognized. Since the promissory note is due upon demand, the entire $50,000 debt discount was immediately amortized to interest expense in 2012 as an additional cost of this borrowing.


On March 1, 2013, new investors were issued 6,808,320 common shares and 756,480 preferred shares which resulted in dilution of Mr. Hagel’s pro-rata interest in us and consequently, as a shareholder holding less than 10% shareholder interest, as of that date, Mr. Hagel was no longer considered to be a related party for financial reporting purposes. Accordingly, the $50,000 note payable was reclassified from note payable, related party to note payable as of that date.


During the three months ended March 31, 2016 and 2015, we incurred interest expense on the above note payable of $250, and $250, respectively.


As at March 31, 2016 and December 31, 2015, accrued interest payable on the above note payable is $3,777 and $3,527, respectively, and is included in accrued liabilities on our balance sheets.


Note Payable, Related Party


Effective March 11, 2013, we issued a $200,000 unsecured demand promissory note to Ernest Rudyak, one of our directors. The promissory note bears interest at 2% per annum, to be paid annually. As further consideration for making this loan, on March 1, 2013, we issued 5,446,656 common shares and 605,184 preferred shares to Mr. Rudyak. The promissory note was recorded in our financial statements at its face value of $200,000. The $200,000 cash proceeds received from Mr. Rudyak were allocated between the commons shares, preferred shares and the promissory note based on relative fair values, as determined by us, as of the date of the note (March 11, 2013). The fair value of the common shares and promissory note were determined to be $200,000 and $0, respectively. Accordingly, the $200,000 cash proceeds were allocated in their entirety to the common shares and a corresponding $200,000 debt discount was recognized. Since the promissory note is due upon demand, the entire $200,000 debt discount was immediately amortized to interest expense in 2013 as an additional cost of this borrowing.


During the three months ended March 31, 2016 and 2015, we incurred interest expense on the above note payable of $1,000 and $1,000, respectively. At March 31, 2016 and December 31, 2015, accrued interest payable on the above note payable was $12,219 and $11,219, respectively, and is included in due to related parties on our balance sheets.

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.5.0.1
Convertible Notes Payable
3 Months Ended
Mar. 31, 2016
Convertible Notes Payable [Abstract]  
Convertible Notes Payable

Note 7 – Convertible Notes Payable


Our convertible notes payable consist of the following:

 

 

 

March 31,

 2016

 

 

December 31, 2015

 

 

 

 

 

 

 

 

Convertible notes payable, short term

 

 

 

 

 

 

 

 

Convertible note payable – MSMN18

 

$

18,000

 

 

$

18,000

 

Convertible note payable – MSMN10

 

 

10,000

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

Convertible notes payable, short term, total

 

$

28,000

 

 

$

28,000

 

 

 

 

 

 

 

 

 

 

Convertible notes payable, long term

 

 

 

 

 

 

 

 

Convertible note payable - Blackbridge

 

$

250,000

 

 

$

250,000

 

Convertible notes payable – 12% Notes

 

 

325,000

 

 

 

325,000

 

Convertible notes payable – 8% Notes

 

 

395,000

 

 

 

395,000

 

Convertible note payable – 8% Notes, related party

 

 

50,000

 

 

 

50,000

 

Convertible note payable - KCSA

 

 

15,000

 

 

 

15,000

 

Convertible notes payable, long term, total

 

 

1,035,000

 

 

 

1,035,000

 

Less: convertible note payable, related party

 

 

(50,000

)

 

 

(50,000

)

Less: unamortized debt discount

 

 

(1,139

)

 

 

(3,205

)

Convertible notes payable, long term, net of debt discount, total

 

$

983,861

 

 

$

981,795

 


On May 1, 2014, we entered into a consulting agreement with Blackbridge Capital, LLC, ("Blackbridge") to provide business advisory services, including introductions to prospective transaction parties in exchange for a $250,000 two-year unsecured convertible promissory note (the "Blackbridge Note") dated May 1, 2014, accruing interest at 12% per annum due upon maturity of the note. The Blackbridge Note is convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for our common stock during the 60 day trading period ending on the last trading day prior to the conversion date. We have not assigned any value to the Blackbridge Note's conversion feature as our common stock is not publicly quoted and therefore the Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


The Company believes that Blackbridge did not provide the services bargained for under the consulting agreement, and we are currently being advised by legal counsel with respect to our rights and remedies.


During the period from May 15, 2014, through June 2, 2014, we sold six convertible two-year convertible promissory notes (the "12% Notes") for total proceeds of $325,000. The 12% Notes are unsecured and accrue interest at 12% and interest is due upon maturity of the note. The 12% Notes are convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for common stock during the 60 day trading period ending on the last trading day prior to the conversion date. We have not assigned any value to the 12% Notes' conversion feature as our common stock is not publicly quoted and therefore the 12% Notes are not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted. In conjunction with the sale of the 12% notes, we issued each note holder 0.918 common shares and 0.102 preferred shares for every dollar of convertible note sold which resulted in a total of 298,350 common shares and 33,150 preferred shares being issued to holders of the 12% notes. The value of the shares issued totaled $16,575 which was recorded as a debt discount.


During the period from July 23, 2014, through December 31, 2014, we sold 22 two-year convertible promissory notes (the "8% Notes") for total proceeds of $445,000. The 8% Notes are unsecured and accrue interest at 8% and interest is due upon maturity of the note. The 8% Notes are convertible by the holder into shares of our common stock, if or when, our shares of common stock become listed on the OTCBB, beginning on the 40th trading day after the shares are listed, at a conversion price equal to the higher of (a) $0.20 per share, or (b) 60% of the average of the five lowest daily closing prices for common stock during the 20 day trading period ending on the last trading day prior to the conversion date. The 8% Notes can be redeemed by us at any time by paying the principal amount owed plus a 35% premium. We have not assigned any value to the 8% Notes' conversion feature as our common stock is not publicly quoted and therefore the 8% Notes are not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


On December 19, 2014, we entered into a consulting agreement with KCSA Strategic Communications, ("KCSA") to provide marketing services, in exchange for a $15,000 two-year unsecured convertible promissory note (the "KCSA Note") dated December 19, 2014, accruing interest at 8% per annum due upon maturity of the note. The KCSA Note is convertible by the holder into shares of our common stock, if or when, our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. We have not assigned any value to the KCSA Note's conversion feature as our common stock is not publicly quoted and therefore the KCSA Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


On March 1, 2015, we entered into a services agreement with My Social Marketing Network, LLC, ("MSMN") to provide internet marketing services, in exchange for a $18,000 one-year unsecured convertible promissory note (the "MSMN18 Note"), accruing interest at 8% per annum due upon maturity of the note. The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. We have not assigned any value to the MSMN18 Note's conversion feature as our common stock is not publicly quoted and therefore the MSMN18 Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


On July 23, 2015, we entered into a services agreement with My Social Marketing Network, LLC, ("MSMN") to provide internet marketing services, in exchange for a $10,000 one-year unsecured convertible promissory note (the "MSMN18 Note"), accruing interest at 8% per annum due upon maturity of the note. The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion. We have not assigned any value to the MSMN18 Note's conversion feature as our common stock is not publicly quoted and therefore the MSMN18 Note is not currently convertible. We will record the estimated value of such conversion feature, if or when, our common stock becomes publicly quoted.


During the three months ended March 31, 2016 and 2015 we incurred interest expense applicable to our convertible notes payable of $26,936 and $26,650 respectively. As at March 31, 2016 and December 31, 2015, accrued interest payable was $190,066 and $157,624, respectively, and this amount is included in accrued liabilities on our balance sheets.


Amortization of Debt Discount, Convertible Notes


During the three months ended March 31, 2016 and 2015, we incurred amortization of debt discount expense, on the 12% Notes of $6,589 and $2,043, respectively.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.5.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 8 – Commitments and Contingencies


Contractual Obligations and Commercial Commitments


We have independent contractor agreements which expire at various times through December 2015. Such agreements, which have been revised from time to time, provide for minimum salary levels, share-based compensation and commissions as well as for incentive bonuses that are payable if specified management goals are attained. Commission agreements include a commitment to pay one of our independent contractors a 60% commission, payable in our common shares, on all California portfolio brand revenue generated during the first year of California sales.


Legal Proceedings


We were not subject to any legal proceedings as of March 31, 2016 and December 31, 2015, and, to the best of our knowledge, no legal proceedings are pending or threatened.

XML 23 R14.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit
3 Months Ended
Mar. 31, 2016
Equity [Abstract]  
Stockholders' Deficit


Note 9 – Stockholders' Deficit


Preferred Stock


We are authorized to issue 20,000,000 shares of preferred stock with a par value of $0.0001 per share.


Each share of preferred stock shall have one hundred (100) votes per share for all purposes. Our preferred stock does not provide preemptive, subscription, liquidation or conversion rights and there are no redemption or sinking fund provisions or rights. The preferred stock can be redeemed by us at any time with no consideration provided. Our preferred stockholders are not entitled to cumulative voting for election of our Board. Of the 20,000,000 shares of preferred stock the company is authorized to issue, we have issued 2,000,000 shares designated as Series A Preferred and 200,000 shares designated as Series B Preferred. Both Series A and Series B carry the same shareholder rights as outlined above.


On July 6, 2015, we entered into a new unsecured credit facility with an existing related party (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of series B preferred stock and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. As of March 31, 2016 and December 31, 2015 we received $590,000 and $400,000.


Common Stock


We are authorized to issue 200,000,000 shares of common stock with a par value of $0.0001 per share.


Each share of common stock shall have one (1) vote per share for all purposes. Our common stock does not provide preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our common stockholders are not entitled to cumulative voting for election of our Board.


Common and Preferred Stock Issued and Outstanding


As at March 31, 2016 and December 31, 2015, there were a total of 27,269,436 and 26,737,902 shares of common stock and 2,200,000 preferred shares issued and outstanding.


On January 2, 2015, we issued 464,525 common shares to contractors for services valued at $36,094 which were provided between August and December 2014. These shares had been disclosed as Common Stock earned, but not yet issued as of December 31, 2014.


On February 23, 2015, we sold 1,000,000 shares of common stock to a new investor. The investment includes warrants to purchase up to 1,000,000 shares of common stock at an exercise price of $0.40 per share, those warrants expiring one year from the first day that the common stock is traded on the OTCQB marketplace. The investment also includes warrants to purchase up to 1,000,000 shares of common stock at an exercise price of $0.50 per share, those warrants expiring two years from the first day that the common stock is traded on the OTCQB marketplace. The investment totaled $250,000 of which $100,000 was received on February 24, 2015 and the balance of $150,000 was received on April 2, 2015.


On March 25, 2015, we sold 2,000,000 shares of common stock to an existing investor which included warrants to purchase up to 750,000 shares of common stock at an exercise price of $0.40 per share, those warrants expiring one year from the first day that the common stock is traded on any exchange, warrants to purchase up to 1,250,000 shares of common stock at an exercise price of $0.40 per share, those warrants expiring one year one year from the date of purchase, and warrants to purchase up to 2,000,000 shares of common stock at an exercise price of $0.50 per share, those warrants expiring two years from the first day that the common stock is traded on any exchange. The investment is to be paid in installments of $62,500 per month between April and November 2015 for a total investment of $500,000. As of December 31, 2015, all 2,000,000 of these common shares are recorded as issued and outstanding and all owed had been received.


On April 1, 2015, we issued 621,040 shares of common stock, valued at $0.11 per share, based on the most recent cash sale of common stock, which was earned by contractors during the three months ended March 31, 2015.


On April 27, 2015, we sold 225,000 shares of common stock at a price of $0.33 per share to a new investor which included warrants to purchase up to 225,000 shares of common stock at an exercise price of $0.75 per share, those warrants expiring 18 months from the first day that the common stock is traded on any exchange. The investment totaled $75,000 which was received in its entirety on May 11, 2015.


On May 1, 2015, we issued 129,732 shares of common stock, valued at $0.208 per share, based on the most recent cash sale of common stock, for services provided by contractors in April 2015.


On June 30, 2015, we issued 234,765 shares of common stock, valued at $0.208 per share, based on the most recent cash sale of common stock, for services provided by contractors in May and June 2015.


On July 14, 2015, we sold 100,000 shares of common stock to a new investor which included 100,000 warrants to purchase up to an additional 100,000 shares of common stock at an exercise price of $0.80 per share, those warrants expiring two years from the first day that the common stock is traded on the OTCQB marketplace. The investment totaled $50,000 which was received by us on July 20, 2015.


On July 15, 2015, we agreed to issue a total of 1,000,000 shares of common stock, valued at $0.302 per share, based on the most recent cash sale of common stock to several Employees of the Company. All 1,000,000 shares were issued on September 3, 2015.


On September 28, 2015, the Company agreed to issue 50,000 shares of common stock valued at $0.302 per share, based on the most recent cash sale of common stock to an individual in consideration for the termination of the joint venture agreement first entered into on April 23, 2015.

 

On September 30, 2015, we agreed to issue a total of 496,240 shares of common stock, valued at $0.302 per share, based on the most recent cash sale of common stock to several Employees and consultants of the Company. All 496,240 shares were issued on October 23, 2015.


As at September 30, 2015, there were a total of 26,378,802 shares of common stock, 2,000,000 shares of preferred stock and 200,000 shares of preferred stock series B issued and outstanding.


As of December 31, 2015 agreed to issue 360,200 common shares to several contractors and employees of the company for services provided to us valued at $0.302 per share, based on the most recent cash sale of common stock.


During the three months ended March 31, 2016 the Company agreed to issue 530,434 common shares to several contractors and employees of the company for services provided to us valued at $0.302 per share, based on the most recent cash sale of common stock.


Warrants Issued


On June 22, 2015, we entered into a new unsecured credit facility with an existing investor (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. The agreement states that within 120 days of the execution of the agreement, we will issue 200,000 shares of preferred stock valued at $20 ($.0001 per share) and 100,000 warrants to purchase common stock at $0.40 per share, those warrants expiring one year from the date our shares of common stock begins publicly trading on any public exchange. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of .87%, and expected life of 1.41 years with a fair value of $18,119. As of March 31, 2016 and December 31, 2015 we have drawn down $590,000 and $400,000, respectively on the credit facility.


On July 14, 2015, we sold 100,000 shares of common stock to a new investor which included 100,000 warrants to purchase up to 100,000 shares of common stock at an exercise price of $0.80 per share, those warrants expiring two years from the first day that the common stock is traded on the OTCQB marketplace. The investment totaled $50,000 which was received by us on July 20, 2015.


On September 30, 2015, the Company agreed to issue 60,913 warrants to several contractors as compensation for services. The warrants will expire 24 months from the start of trading and have an exercise price of $0.30. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of .87%, and expected life of 2.41 years with a fair value of $14,342.


On December 1, 2015 the Company entered into an agreement with an independent contractor for financial consulting services. The term of the agreement is one year and continues for additional one (1) year periods unless the Company gives Contractor not less than three (3) months’ prior written notice of non-renewal. The Company agreed to pay to the Contractor $7,500 per month in advance for his services (whether solely as an independent contractor or as an independent contractor and Chairman of the Board and/or Acting CFO). Beginning on the first day of the first calendar quarter following the Company’s receipt of at least $500,000 in gross proceeds from the sale of its equity securities to one or more third parties, the Company will pay the Contractor $22,500 per quarter in advance. The Company also agreed to issue to the Contractor 26,000 common shares of the Company per month. The Contractor may elect to receive, at his sole election, in lieu of the Shares, Non-Qualified Stock Options to acquire Shares of the Company with an exercise price equal to the FMV of Shares on the date of issuance and a term of 7 years from the date of issuance. The Company agreed to issue the Contractor, an aggregate of 3,500,000 warrants with a standard “cashless” exercise feature, to vest based upon the schedule below, with the caveat that no additional warrants shall vest to Consultant after a termination (a) by the Company for Cause, as defined herein, or (b) by the Consultant without Cause:


i.

2,000,000 warrants shall vest upon the Effective Date;

ii.

An additional 375,000 warrants shall vest after 3 months of service beginning on the Effective Date;

iii.

An additional 375,000 warrants shall vest after 6 months of service beginning on the Effective Date;

iv.

An additional 375,000 warrants shall vest after 9 months of service beginning on the Effective Date; and

v.

An additional 375,000 warrants shall vest after 12 months of service beginning on the Effective Date.


The Warrants will have an exercise price of $0.077 and will expire seven (7) years from the date of issuance. Should the Contractor terminate this Agreement without Cause or be terminated by the Company with Cause prior to end of the Term of this Agreement, (a) Contractor shall forfeit the Warrants for any period noted above which has not yet commenced; and (b) for any period which has commenced, then the Contractor shall retain the warrants for the days that have elapsed within the period prior to the effective date of the termination, and shall forfeit the warrants not yet vested on the termination date, on a pro rata basis of 4,167 warrants vesting for each day of the period noted above which have elapsed prior to termination.  The Contractor further agreed that he could only exercise warrants that have vested based upon the above. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 157%, risk free interest rate of 1.19%, and expected life of 7 years with a fair value of $603,540 at December 31, 2015. For the three months ended March 31, 2016 the Company expensed $276,622 for the vested portion of stock options.


On February 18, 2016, Aquarius Cannabis Inc. (“Aquarius”) entered into a binding Memorandum of Understanding (the “Agreement”) with Flying Eagle Advisors, LLC (“Flying Eagle”), a Native American-owned cannabis management consulting and financing company, to be the distribution, branding, and cultivation consulting partner of a series of cannabis cultivation facilities owned by Native American tribes in the United States.


Aquarius will be responsible for coordinating legal distribution, consulting on legal structuring and integrating the facilities into the state systems, developing the branding and marketing for all the products cultivated at the facilities, and ensuring that cultivation processes meet the rigorous brand-standards Aquarius has for its branded marijuana. Aquarius will own all the brands of the marijuana grown and distributed from these facilities.


Aquarius will earn 9.77% of the gross wholesale sales of products grown in the facility, once sold by an Aquarius-licensed distribution partner.  Aquarius will earn 5% of gross revenue earned by the vertically integrated cultivation and manufacturing operation, and will receive per pound cultivation consulting fees based on the level of success the clients have growing its brands.


In addition to Flying Eagle, the binding agreement was signed by Grower’s Supply, LLC, a greenhouse design/build firm.  Grower’s Supply, LLC will be responsible for the design, build, staffing, and day-to-day operational management of the facilities.


The Agreement is conditioned upon Flying Eagle raising sufficient capital to engage the Native American tribes.


Aquarius has agreed to issue Flying Eagle 100,000 warrants upon execution of this Agreement, and further equity incentives based upon certain milestones.


As of March 31, 2016, the Company expensed the 100,000 warrants owed upon the execution of the memo of understanding. The warrants will expire 24 months from the start of trading and have an exercise price of $0.15. The warrants were valued using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 155%, risk free interest rate of .71%, and expected life of 2 years with a fair value of $24,573.


The following tables summarize our share warrants outstanding as of March 31, 2016 and December 31, 2015:


 

 

Year Ended December 31, 2015

 

 

 

Number of

Shares

 

 

Weighted

Average

Remaining

Life (years)

 

 

Weighted

Average

Exercise

Price

  

Warrants outstanding, December 31, 2014

 

 

 

 

 

 

 

$

 

Issued

 

 

8,485,913

 

 

 

2.5

 

 

 

0.37

 

Exercised

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

Warrants outstanding, December 31, 2015

 

 

8,485,913

 

 

 

2.5

 

 

$

0.47

 

Issued

 

 

475,000

 

 

 

5.7

 

 

 

0.23

 

Exercised

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

Warrants outstanding, March 31, 2016

 

 

8,960,913

 

 

 

2.48

 

 

$

0.36

 

Warrants exercisable, March 31, 2016

 

 

3,350,000

 

 

 

4.1

 

 

$

0.15

 


The following table summarizes information about warrants outstanding at March 31, 2016:


Exercise Price

 

 

Warrants Outstanding

 

 

Weighted Average Life of

Outstanding Warrants In Years

 

 

 

 

 

 

 

 

 

 

 

$0.08

 

 

 

2,375,000

 

 

 

6.7

 

$0.15

 

 

 

100,000

 

 

 

1.9

 

$0.30

 

 

 

60,913

 

 

 

1.8

 

$0.40

 

 

 

3,100,000

 

 

 

.6

 

$0.50

 

 

 

3,000,000

 

 

 

1.3

 

$0.75

 

 

 

225,000

 

 

 

.6

 

$0.80

 

 

 

100,000

 

 

 

1.8

 

Balance March 31, 2016

 

 

 

8,960,913

 

 

 

2.5

 

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.5.0.1
Related Party Transactions
3 Months Ended
Mar. 31, 2016
Related Party Transactions [Abstract]  
Related Party Transactions


Note 10 - Related Party Transactions


Management Fees – Related Parties


In addition to the related party transactions described in Note 5 Notes Payable and Note 6 Convertible Notes Payable to these condensed consolidated unaudited financial statements; we incurred management fees and equity-based compensation expense included in general and administrative expense, to (a) Mr. Grede, Aquarius’ Executive Vice President, and an entity controlled by Mr. Grede, The Aspen Alliance ("TAA"), and (b) Mr. Lawyer, Aquarius’ Chief Executive Officer and an entity controlled by Mr. Lawyer, TAG, as follows:


 

 

During The

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Management fees – Mr. Grede and TAA

 

$

 

 

$

12,000

 

Management fees – Mr. Lawyer and TAG

 

 

 

 

 

41,500

 

 

 

$

 

 

$

53,500

 


Interest Expense and Interest Payments – Related Party


 

 

During The

Three Months Ended

March  31,

 

 

 

2016

 

 

2015

 

Interest expense – Mr. Rudyak

 

$

1,000

 

 

$

1,000

 


Due to Related Parties


Accounts payable and accrued interest payable owed to related parties are included in due to related parties in our balance sheets as follows:


 

 

March 31,

2016

 

 

December 31, 2015

 

Accrued interest payable - Mr. Rudyak

 

$

12,220

 

 

$

11,220

 

Accrued interest - convertible notes

 

 

8,503

 

 

 

5,505

 

Due to related parties – total

 

$

20,703

 

 

$

16,725

 


Notes Payable – Related Parties


As described in Note 6 Notes Payable to these condensed consolidated unaudited financial statements, on March 11, 2013, we borrowed $200,000 from Mr. Rudyak and our note payable, related party balance was $200,000 on each of March 31, 2016 and December 31, 2015.


There were no borrowings or repayments to related parties as of March 31, 2016 and December 31, 2015.

XML 25 R16.htm IDEA: XBRL DOCUMENT v3.5.0.1
Share-based Compensation
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-based Compensation

Note 11 – Share-based Compensation


Share-based Compensation Expense


Equity-based compensation expense is included in our statements of operations for the three month ended March 31, 2016 and 2015 as follows:


 

 

For the Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Research and development expense

 

$

724

 

 

$

1,665

 

General and administrative expense

 

 

437,860

 

 

 

48,955

 

General and administrative expense, related party

 

 

23,556

 

 

 

21,645

 

 

 

$

462,140

 

 

$

72,265

 

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.5.0.1
Income Taxes
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 – Income Taxes


From its inception on October 20, 2011 through the effective date of the Exchange on December 1, 2014, Aquarius Holdings LLC was a limited liability company treated as a partnership for federal and state income tax purposes and all its income tax liabilities and, or, benefits were passed through to its members. As such, it did not recognize federal or state income taxes in the accompanying financial statements for the period its inception on October 20, 2011 to December 1, 2014. Any uncertain tax position taken by its members did not result in an uncertain tax position of Aquarius Holdings LLC.


In accordance with the Aquarius Holdings LLC’s Membership Agreement, to the extent possible without impairing its ability to continue to conduct its business and activities, and in order to permit its members to pay taxes on the taxable income of Aquarius Holdings LLC, Aquarius Holdings LLC was required to make distributions to its members in amounts equal to the estimated tax liability of the members computed as if the members paid income tax at the highest marginal federal and state rate applicable to an individual resident of Colorado, in the event that taxable income is generated for the members. There was no taxable income and therefore no distributions for the period from October 20, 2011 to December 1, 2014.


Aquarius Cannabis Inc. was a taxable entity from its incorporation on July 3, 2014 and Aquarius Holdings LLC became a taxable entity from the effective date of the Exchange on December 1, 2014. Accordingly, Federal and State income taxes are recognized the accompanying financial statements for Aquarius Cannabis Inc. from July 3, 2014 and for Aquarius Holdings LLC from December 1, 2014.


The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.

XML 27 R18.htm IDEA: XBRL DOCUMENT v3.5.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events

Note 13 - Subsequent Events


On June 22, 2015, we entered into a new unsecured credit facility with an existing investor (“Lender”), which provided up to $750,000 in debt financing with all outstanding principal and accrued interest due on June 21, 2016 unless extended by mutual consent. The agreement calls for a 24% annual interest rate on the outstanding principal balance with accrued interest payable monthly and is limited to monthly draws of $100,000 unless otherwise approved by the Lender. Subsequent to March 31, 2016 we drew down an additional $160,000.

 

As of May 9, 2016, a holder of a $50,000 convertible note at 12% agreed to amend the original terms of the convertible note. The amendment creates a $0.125 conversion price floor, extends the maturity date from May 19, 2016 to November 17, 2017, limits to a maximum of $25,000 for conversions within a thirty (30) day period, limits the maximum sale on converted shares to 20% of previous thirty (30) day average daily share trade volume for share prices under $0.40, and allows a $0.20 conversion price during first 120 days of trading, subject to the maximum conversion and sale conditions listed above.

 

As of May 15, 2016 holders of $225,000 of convertible notes elected to convert their note balances and accrued interest of $53,424 into common stock at a conversion price of $0.125 per share. The Company has agreed to issue a total of 2,227,397 shares of common stock. As of June 22, 2016, the 2,227,397 shares of common stock were issued to the noteholders.

XML 28 R19.htm IDEA: XBRL DOCUMENT v3.5.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2016
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation


Our financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The Company fiscal year end is December 31.

Use of Estimates

Use of Estimates


The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the period presented.


We make our estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.

Development Stage Company

Development Stage Company


We are a development stage company as defined under the then current Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, "Development-Stage Entities". Additional disclosures required as a development stage company are that our financial statements be identified as those of a development stage company, and that the statements of operations, changes in stockholder’s deficit and cash flows disclosed activity since the date of our inception (October 11, 2011). Effective June 10, 2014, the FASB changed its regulations with respect to development stage entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2015, with the option for entities to early adopt these new provisions. Consequently, these additional disclosures are not included in our financial statements.

Reclassification

Reclassification

 

Certain reclassifications have been made to the prior year’s data to conform to current year presentation. These reclassifications had no effect on net income (loss).

Principles of Consolidation and Reverse Capitalization

Principles of Consolidation and Reverse Capitalization

 

As previously disclosed, effective December 1, 2014, we exchanged a total of 18,000,000 shares of our common stock and 2,000,000 shares of our preferred stock in exchange for the acquisition of 100% of the membership interests in Aquarius Colorado. Although we were the legal acquirer, the transaction has been accounted for as a reverse merger with Aquarius Colorado in the form of a reverse capitalization, whereby Aquarius Colorado becomes the accounting acquirer. Accordingly, the accompanying condensed consolidated unaudited financial statements reflect the results of Aquarius Colorado since Inception (October 20, 2011) and of Aquarius from the effective date of the Exchange (December 1, 2014). All costs associated with the reverse merger transaction were expensed as incurred.

Fair Value of Financial Instruments

Fair Value of Financial Instruments


We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash and cash equivalents, note receivable, prepaid expenses and deposits, accounts payable, amounts due from and to related parties, note payable and note payable, related party approximates fair value because of the short-term nature of these financial instruments. The carrying amount of our convertible notes payable at March 31, 2016 and December 31, 2015, approximates their fair value based on our incremental borrowing rates.


Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

Due to the short-term nature of all financial assets and liabilities, their carrying value approximates their fair value as of the balance sheet date.

Cash and Cash Equivalents

Cash and Cash Equivalents


We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Notes Receivable and Allowance for Doubtful Accounts

Notes Receivable and Allowance for Doubtful Accounts


We provide an allowance for doubtful accounts when collection of an account or note receivable is considered doubtful, and receivables are written off against the allowance when deemed uncollectible. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates regarding, among other factors, the customer’s access to capital, the customer’s willingness or ability to pay, general economic and market conditions, the ongoing relationship with the customer and uncertainties related to the resolution of disputed matters. As of March 31, 2016 and December 31, 2015, we had no allowances on current receivables.

Inventories

Inventories 


The Company’s inventories consist entirely of purchased finished goods. Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out basis.

Fixed Assets

Fixed Assets


Our fixed assets represents equipment stated at cost and are depreciated using the straight-line method over the estimated useful life of the assets, ranging from three to ten years. During the years ended December 31, 2015 and there were no purchases of fixed assets. During the year ended December 31, 2014 we purchased $17,407 of equipment.  We incurred depreciation expense of $870 and $871, for the three months ended March 31, 2016 and 2015, respectively.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets


When applicable, we continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Revenue Recognition

Revenue Recognition


We recognize revenue in accordance with ASC 605, "Revenue Recognition" which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments will be provided for in the same period the related sales are recorded. We defer any revenue for which the product or service has not been delivered or is subject to refund until such time that we and the customer jointly determine that the product or service has been delivered or no refund will be required. As of March 31, 2016 and December 31, 2015, the Company has recorded deferred revenue of $5,000, recognition of the revenue is contingent on the grow operation on which we consulted getting to harvest and ultimately to market which is anticipated to be completed by June 30, 2016. During the years ended December 31, 2015 the Company generated revenue from the sale of products to an entity controlled by a shareholder and brother to Mr. Lawyer.

Advertising Expense

Advertising Expense


Advertising is expensed as incurred. We incurred $24,983 and $0 of advertising expense during the three months ended March 31, 2016 and 2015, respectively.

Research and Development Expense

Research and Development Expense


Research and development ("R&D") costs are charged to expense as incurred. Our R&D costs include, but are not limited to, consulting service fees and materials and supplies used in the development of our proprietary brands and processes. We incurred R&D expense during the three months ended March 31, 2016 and 2015 of $23,405 and $15,552, respectively.

Embedded Conversion Features

Embedded Conversion Features


The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.

Income Taxes

Income Taxes


From its inception on October 20, 2011, through the effective date of the Exchange on December 1, 2014, Aquarius Holdings LLC was a limited liability company treated as a partnership for federal and state income tax purposes and all its income tax liabilities and, or, benefits were passed through to its members. As such, it did not recognize federal or state income taxes in the accompanying financial statements for the period from its inception on October 20, 2011 to December 1, 2014. Any uncertain tax position taken by its members did not result in an uncertain tax position of Aquarius Holdings LLC.


Aquarius Cannabis Inc. was a taxable entity from its incorporation on July 3, 2014 and Aquarius Holdings LLC became a taxable entity from the effective date of the Exchange on December 1, 2014. Accordingly, Federal and State income taxes are recognized in the accompanying financial statements for Aquarius Cannabis, Inc. from July 3, 2014 and for Aquarius Holdings LLC from December 1, 2014.


Income taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that enactment occurs. To the extent that we do not consider it more likely than not that a future tax asset will be recovered, we will provide a valuation allowance against the excess.


We follow the provisions of ASC 740, "Income Taxes". As a result of ASC 740, we make a comprehensive review of our portfolio of tax positions in accordance with recognition standards established by ASC 740. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.

Net Income (Loss) Per Share

Net Income (Loss) Per Share


We compute net income (loss) per share in accordance with ASC 260, "Earnings per Share." Under the provisions of ASC 260, basic net income (loss) per share includes no dilution and is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share takes into consideration shares of common stock outstanding (computed under basic net income (loss) per share) and potentially dilutive securities that are not anti-dilutive.


During the three months ended March 31, 2016 and 2015, there were potentially dilutive warrants and convertible debt instruments issued and outstanding. However, these potentially dilutive securities were excluded from the calculation of our loss per share as we incurred losses in all periods presented and their inclusion would have been anti-dilutive.

New Accounting Standards

New Accounting Standards


From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our financial statements upon adoption.

XML 29 R20.htm IDEA: XBRL DOCUMENT v3.5.0.1
Line of Credit (Tables)
3 Months Ended
Mar. 31, 2016
Line of Credit Facility [Abstract]  
Schedule of Line of Credit Activity


 

 

March 31,

2016

 

 

December 31, 2015

 

Draws

 

590,000

 

 

 

400,000

 

Less: unamortized debt discount

 

 

(7,305

)

 

 

(11,828

Balance

 

$

582,695

 

 

$

388,172

 

XML 30 R21.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Payable (Tables)
3 Months Ended
Mar. 31, 2016
Notes Payable [Abstract]  
Schedule of Notes Payable


Our notes payable consists of the following:


 

 

March 31,

2016

 

 

December 31, 2015

 

Note payable

 

$

50,000

 

 

$

50,000

 

Note payable, related party

 

$

200,000

 

 

$

200,000

 

XML 31 R22.htm IDEA: XBRL DOCUMENT v3.5.0.1
Convertible Notes Payable (Tables)
3 Months Ended
Mar. 31, 2016
Convertible Notes Payable [Abstract]  
Schedule of Convertible Debt

Our convertible notes payable consist of the following:

 

 

 

March 31,

 2016

 

 

December 31, 2015

 

 

 

 

 

 

 

 

Convertible notes payable, short term

 

 

 

 

 

 

 

 

Convertible note payable – MSMN18

 

$

18,000

 

 

$

18,000

 

Convertible note payable – MSMN10

 

 

10,000

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

Convertible notes payable, short term, total

 

$

28,000

 

 

$

28,000

 

 

 

 

 

 

 

 

 

 

Convertible notes payable, long term

 

 

 

 

 

 

 

 

Convertible note payable - Blackbridge

 

$

250,000

 

 

$

250,000

 

Convertible notes payable – 12% Notes

 

 

325,000

 

 

 

325,000

 

Convertible notes payable – 8% Notes

 

 

395,000

 

 

 

395,000

 

Convertible note payable – 8% Notes, related party

 

 

50,000

 

 

 

50,000

 

Convertible note payable - KCSA

 

 

15,000

 

 

 

15,000

 

Convertible notes payable, long term, total

 

 

1,035,000

 

 

 

1,035,000

 

Less: convertible note payable, related party

 

 

(50,000

)

 

 

(50,000

)

Less: unamortized debt discount

 

 

(1,139

)

 

 

(3,205

)

Convertible notes payable, long term, net of debt discount, total

 

$

983,861

 

 

$

981,795

 

XML 32 R23.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit (Tables)
3 Months Ended
Mar. 31, 2016
Equity [Abstract]  
Schedule of Warrant Activity

The following tables summarize our share warrants outstanding as of March 31, 2016 and December 31, 2015:


 

 

Year Ended December 31, 2015

 

 

 

Number of

Shares

 

 

Weighted

Average

Remaining

Life (years)

 

 

Weighted

Average

Exercise

Price

  

Warrants outstanding, December 31, 2014

 

 

 

 

 

 

 

$

 

Issued

 

 

8,485,913

 

 

 

2.5

 

 

 

0.37

 

Exercised

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

Warrants outstanding, December 31, 2015

 

 

8,485,913

 

 

 

2.5

 

 

$

0.47

 

Issued

 

 

475,000

 

 

 

5.7

 

 

 

0.23

 

Exercised

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

Warrants outstanding, March 31, 2016

 

 

8,960,913

 

 

 

2.48

 

 

$

0.36

 

Warrants exercisable, March 31, 2016

 

 

3,350,000

 

 

 

4.1

 

 

$

0.15

 

Schedule of Warrants by Exercise Price

The following table summarizes information about warrants outstanding at March 31, 2016:


Exercise Price

 

 

Warrants Outstanding

 

 

Weighted Average Life of

Outstanding Warrants In Years

 

 

 

 

 

 

 

 

 

 

 

$0.08

 

 

 

2,375,000

 

 

 

6.7

 

$0.15

 

 

 

100,000

 

 

 

1.9

 

$0.30

 

 

 

60,913

 

 

 

1.8

 

$0.40

 

 

 

3,100,000

 

 

 

.6

 

$0.50

 

 

 

3,000,000

 

 

 

1.3

 

$0.75

 

 

 

225,000

 

 

 

.6

 

$0.80

 

 

 

100,000

 

 

 

1.8

 

Balance March 31, 2016

 

 

 

8,960,913

 

 

 

2.5

 

XML 33 R24.htm IDEA: XBRL DOCUMENT v3.5.0.1
Related Party Transactions (Tables)
3 Months Ended
Mar. 31, 2016
Related Party Transactions [Abstract]  
Schedule of Related Party Management Fees


In addition to the related party transactions described in Note 5 Notes Payable and Note 6 Convertible Notes Payable to these condensed consolidated unaudited financial statements; we incurred management fees and equity-based compensation expense included in general and administrative expense, to (a) Mr. Grede, Aquarius’ Executive Vice President, and an entity controlled by Mr. Grede, The Aspen Alliance ("TAA"), and (b) Mr. Lawyer, Aquarius’ Chief Executive Officer and an entity controlled by Mr. Lawyer, TAG, as follows:


 

 

During The

Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Management fees – Mr. Grede and TAA

 

$

 

 

$

12,000

 

Management fees – Mr. Lawyer and TAG

 

 

 

 

 

41,500

 

 

 

$

 

 

$

53,500

 

Schedule of Related Party Interest Expense and Interest Payments

Interest Expense and Interest Payments – Related Party


 

 

During The

Three Months Ended

March  31,

 

 

 

2016

 

 

2015

 

Interest expense – Mr. Rudyak

 

$

1,000

 

 

$

1,000

 

Schedule of Amounts Due to Related Parties

Accounts payable and accrued interest payable owed to related parties are included in due to related parties in our balance sheets as follows:


 

 

March 31,

2016

 

 

December 31, 2015

 

Accrued interest payable - Mr. Rudyak

 

$

12,220

 

 

$

11,220

 

Accrued interest - convertible notes

 

 

8,503

 

 

 

5,505

 

Due to related parties – total

 

$

20,703

 

 

$

16,725

 

XML 34 R25.htm IDEA: XBRL DOCUMENT v3.5.0.1
Share-based Compensation (Tables)
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Allocation of Share-based Compensation Expense


Equity-based compensation expense is included in our statements of operations for the three month ended March 31, 2016 and 2015 as follows:


 

 

For the Three Months Ended

March 31,

 

 

 

2016

 

 

2015

 

Research and development expense

 

$

724

 

 

$

1,665

 

General and administrative expense

 

 

437,860

 

 

 

48,955

 

General and administrative expense, related party

 

 

23,556

 

 

 

21,645

 

 

 

$

462,140

 

 

$

72,265

 

XML 35 R26.htm IDEA: XBRL DOCUMENT v3.5.0.1
Nature of Operations (Details) - $ / shares
1 Months Ended
Dec. 31, 2014
Mar. 31, 2016
Dec. 31, 2015
Class of Stock [Line Items]      
Preferred stock par value   $ 0.0001 $ 0.0001
Common stock par value   $ .0001 $ .0001
Preferred Stock [Member]      
Class of Stock [Line Items]      
Stock issued acquisition 2,000,000    
Preferred stock par value $ .0001    
Common Stock [Member]      
Class of Stock [Line Items]      
Stock issued acquisition 18,000,000    
Preferred stock par value $ .0001    
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.5.0.1
Summary of Significant Accounting Policies (Details) - USD ($)
1 Months Ended 3 Months Ended
Dec. 31, 2014
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Class of Stock [Line Items]        
Allowances on current receivables    
Deferred revenue   $ 5,000   $ 5,000
Advertising expense   24,983  
Research and development expense   $ 23,405 $ 15,552  
Common Stock [Member]        
Class of Stock [Line Items]        
Stock issued acquisition 18,000,000      
Preferred Stock [Member]        
Class of Stock [Line Items]        
Stock issued acquisition 2,000,000      
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.5.0.1
Summary of Significant Accounting Policies (Fixed Assets) (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Dec. 31, 2014
Property, Plant and Equipment [Line Items]        
Depreciation expense $ 870 $ 871    
Purchase of fixed assets $ 17,407
Minimum [Member]        
Property, Plant and Equipment [Line Items]        
Fixed asset estimated useful lives 3 years      
Maximum [Member]        
Property, Plant and Equipment [Line Items]        
Fixed asset estimated useful lives 10 years      
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Receivable (Details) - Unsecured Promissory Note to Outside Contractor [Member]
3 Months Ended
Mar. 31, 2016
USD ($)
Receivables with Imputed Interest [Line Items]  
Effective date Feb. 25, 2015
Note value $ 15,000
Interest rate 10.25%
Monthly payment $ 2,000
Due date Jan. 28, 2016
Repayment date Jul. 29, 2015
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.5.0.1
Line of Credit (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Dec. 31, 2014
Line of Credit Facility [Line Items]        
Line of credit, net of debt discount $ 582,695   $ 388,172  
Amortization of debt discount $ 6,589 $ 2,043    
Preferred stock, par value $ 0.0001   $ 0.0001  
Preferred Stock [Member]        
Line of Credit Facility [Line Items]        
Preferred stock, par value       $ .0001
Equity Issued Per Line of Credit Agreement [Member] | Preferred Stock [Member]        
Line of Credit Facility [Line Items]        
Shares issued 200,000      
Value of shares issued $ 20      
Preferred stock, par value $ .0001      
Equity Issued Per Line of Credit Agreement [Member] | Warrant [Member]        
Line of Credit Facility [Line Items]        
Number of warrants issuable under agreement 200,000      
Warrant term 1 year      
Warrant exercise price $ 0.40      
Valuation method used Black-Scholes Option Pricing Model      
Dividend yield 0.00%      
Annual volatility 157.00%      
Risk free interest rate 0.87%      
Expected term 1 year      
Fair value of warrants $ 18,119      
Unsecured Credit Facility [Member]        
Line of Credit Facility [Line Items]        
Draws 590,000   $ 400,000  
Less: unamortized debt discount (7,305)   (11,828)  
Line of credit, net of debt discount 582,695   388,172  
Amortization of debt discount $ 10,752   $ 6,229  
Issuance date Jun. 22, 2015      
Maximum borrowing capacity $ 750,000      
Maturity date Jun. 21, 2016      
Interest rate 24.00%      
Maximum monthly borrowing capacity $ 100,000      
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Payable (Schedule of Notes Payable) (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Notes Payable [Abstract]    
Note payable $ 50,000 $ 50,000
Note payable, related party $ 200,000 $ 200,000
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Payable (Note Payable) (Details) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Oct. 31, 2015
Sep. 30, 2015
Jul. 31, 2015
Apr. 30, 2015
Mar. 31, 2015
Feb. 28, 2015
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2012
Dec. 31, 2015
Short-term Debt [Line Items]                    
Amortization of debt discount             $ 6,589 $ 2,043    
Interest expense             55,798 26,650    
Accrued interest             $ 190,066     $ 157,625
Common Stock [Member]                    
Short-term Debt [Line Items]                    
Stock issued 50,000 1,000,000 100,000 225,000 2,000,000 1,000,000        
Notes Payable [Member] | Shareholder Notes Payable [Member]                    
Short-term Debt [Line Items]                    
Issuance date             Jun. 21, 2012      
Face amount             $ 50,000      
Interest rate             2.00%      
Maturity date             Due upon demand      
First payment date             Jun. 21, 2015      
Debt discount             $ 50,000      
Amortization of debt discount                 $ 50,000  
Notes Payable [Member] | Shareholder Notes Payable [Member] | Common Stock [Member]                    
Short-term Debt [Line Items]                    
Stock issued             2,723,346      
Notes Payable [Member] | Shareholder Notes Payable [Member] | Preferred Stock [Member]                    
Short-term Debt [Line Items]                    
Stock issued             302,594      
Notes Payable [Member] | New Investors Notes Payable [Member]                    
Short-term Debt [Line Items]                    
Issuance date             Mar. 01, 2013      
Interest expense             $ 250 $ 250    
Accrued interest             $ 3,777     $ 3,527
Notes Payable [Member] | New Investors Notes Payable [Member] | Common Stock [Member]                    
Short-term Debt [Line Items]                    
Stock issued             6,808,320      
Notes Payable [Member] | New Investors Notes Payable [Member] | Preferred Stock [Member]                    
Short-term Debt [Line Items]                    
Stock issued             756,480      
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.5.0.1
Notes Payable (Note Payable, Related Party) (Details) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Oct. 31, 2015
Sep. 30, 2015
Jul. 31, 2015
Apr. 30, 2015
Mar. 31, 2015
Feb. 28, 2015
Mar. 31, 2013
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2013
Dec. 31, 2015
Short-term Debt [Line Items]                      
Amortization of debt discount               $ 6,589 $ 2,043    
Interest expense               1,997 1,000    
Accrued interest               190,066     $ 157,625
Common Stock [Member]                      
Short-term Debt [Line Items]                      
Stock issued 50,000 1,000,000 100,000 225,000 2,000,000 1,000,000          
Mr. Rudyak [Member]                      
Short-term Debt [Line Items]                      
Interest expense               $ 1,000 1,000    
Notes Payable [Member] | Related Party Notes Payable [Member] | Mr. Rudyak [Member]                      
Short-term Debt [Line Items]                      
Issuance date               Mar. 11, 2013      
Face amount               $ 200,000      
Interest rate               2.00%      
Maturity date               Due upon demand      
Amortization of debt discount                   $ 200,000  
Interest expense               $ 1,000 $ 1,000    
Accrued interest               $ 12,219     $ 11,219
Notes Payable [Member] | Related Party Notes Payable [Member] | Mr. Rudyak [Member] | Common Stock [Member]                      
Short-term Debt [Line Items]                      
Stock issued             5,446,656        
Notes Payable [Member] | Related Party Notes Payable [Member] | Mr. Rudyak [Member] | Preferred Stock [Member]                      
Short-term Debt [Line Items]                      
Stock issued             605,184        
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.5.0.1
Convertible Notes Payable (Schedule of Convertible Debt) (Details) - USD ($)
Mar. 31, 2016
Dec. 31, 2015
Debt Instrument [Line Items]    
Convertible notes payable, short term $ 28,000 $ 28,000
Convertible notes payable, related party (50,000) (50,000)
Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, long term 1,035,000 1,035,000
Convertible notes payable, related party (50,000) (50,000)
Less: unamortized debt discount (1,139) (3,205)
Convertible notes payable, long term, net of debt discount, total 983,861 981,795
Convertible note payable - Blackbridge [Member] | Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, long term 250,000 250,000
Convertible notes payable - 12% Notes [Member] | Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, long term 325,000 325,000
Convertible notes payable - 8% Notes [Member] | Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, long term 395,000 395,000
Convertible note payable - 8% Notes, related party [Member] | Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, long term 50,000 50,000
Convertible note payable - KCSA [Member] | Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, long term 15,000 15,000
Convertible Notes Payable [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, short term 28,000 28,000
Convertible Notes Payable [Member] | Convertible note payable - MSMN18 [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, short term 18,000 18,000
Convertible Notes Payable [Member] | Convertible note payable - MSMN10 [Member]    
Debt Instrument [Line Items]    
Convertible notes payable, short term $ 10,000 $ 10,000
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.5.0.1
Convertible Notes Payable (Narrative) (Details) - USD ($)
1 Months Ended 3 Months Ended
Oct. 31, 2015
Sep. 30, 2015
Jul. 31, 2015
Apr. 30, 2015
Mar. 31, 2015
Feb. 28, 2015
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Debt Instrument [Line Items]                  
Amortization of debt discount             $ 6,589 $ 2,043  
Interest expense             55,798 26,650  
Accrued interest             $ 190,066   $ 157,625
Common Stock [Member]                  
Debt Instrument [Line Items]                  
Stock issued 50,000 1,000,000 100,000 225,000 2,000,000 1,000,000      
Convertible note payable - MSMN18 [Member] | Convertible Notes Payable [Member]                  
Debt Instrument [Line Items]                  
Issuance date             Mar. 01, 2015    
Term             1 year    
Face amount             $ 18,000    
Interest rate             8.00%    
Conversion description             The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion.    
Convertible note payable - MSMN10 [Member] | Convertible Notes Payable [Member]                  
Debt Instrument [Line Items]                  
Issuance date             Jul. 23, 2015    
Term             1 year    
Face amount             $ 10,000    
Interest rate             8.00%    
Conversion description             The MSMN18 Note is convertible by the holder into shares of our common stock at any time following forty (40) days from the date our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion.    
Convertible Notes Payable [Member]                  
Debt Instrument [Line Items]                  
Interest expense             $ 26,936 26,650  
Accrued interest             $ 190,066   $ 157,624
Convertible Notes Payable [Member] | Convertible note payable - Blackbridge [Member]                  
Debt Instrument [Line Items]                  
Issuance date             May 01, 2014    
Term             2 years    
Face amount             $ 250,000    
Interest rate             12.00%    
Conversion description             The Blackbridge Note is convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for our common stock during the 60 day trading period ending on the last trading day prior to the conversion date.    
Convertible Notes Payable [Member] | Convertible notes payable - 12% Notes [Member]                  
Debt Instrument [Line Items]                  
Issuance date             Jun. 02, 2014    
Term             2 years    
Face amount             $ 325,000    
Interest rate             12.00%    
Conversion description             The 12% Notes are convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for common stock during the 60 day trading period ending on the last trading day prior to the conversion date.    
Amortization of debt discount             $ 6,589 $ 2,043  
Convertible Notes Payable [Member] | Convertible notes payable - 12% Notes [Member] | Common Stock [Member]                  
Debt Instrument [Line Items]                  
Stock issued             298,350    
Amortization of debt discount             $ 16,575    
Convertible Notes Payable [Member] | Convertible notes payable - 12% Notes [Member] | Preferred Stock [Member]                  
Debt Instrument [Line Items]                  
Stock issued             33,150    
Convertible Notes Payable [Member] | Convertible notes payable - 8% Notes [Member]                  
Debt Instrument [Line Items]                  
Issuance date             Dec. 31, 2014    
Term             2 years    
Face amount             $ 445,000    
Interest rate             8.00%    
Conversion description             The 8% Notes are convertible by the holder into shares of our common stock, if or when, our shares of common stock become listed on the OTCBB, beginning on the 40th trading day after the shares are listed, at a conversion price equal to the higher of (a) $0.20 per share, or (b) 60% of the average of the five lowest daily closing prices for common stock during the 20 day trading period ending on the last trading day prior to the conversion date.    
Convertible Notes Payable [Member] | Convertible note payable - KCSA [Member]                  
Debt Instrument [Line Items]                  
Issuance date             Dec. 19, 2014    
Term             2 years    
Face amount             $ 15,000    
Interest rate             8.00%    
Conversion description             The KCSA Note is convertible by the holder into shares of our common stock, if or when, our shares of common stock become listed on the OTCBB, at the higher of (1) $0.20 or (2) a forty (40%) percent discount to the average of the five (5) lowest closing prices for the twenty days preceding the conversion.    
XML 45 R36.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit (Preferred and Common Stock) (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Sep. 30, 2015
Dec. 31, 2014
Class of Stock [Line Items]        
Preferred stock, par value $ 0.0001 $ 0.0001    
Preferred stock, shares authorized 20,000,000 20,000,000    
Preferred stock, shares issued 2,000,000 2,000,000    
Preferred stock, shares outstanding 2,000,000 2,000,000    
Preferred stock voting rights Each share of preferred stock shall have one hundred (100) votes per share for all purposes.      
Common stock, par value $ .0001 $ .0001    
Common stock, shares authorized 200,000,000 200,000,000    
Common stock, shares issued 27,269,436 27,269,436 26,378,802  
Common stock, shares outstanding 26,739,002 26,739,002 26,378,802  
Common stock voting rights Each share of common stock shall have one (1) vote per share for all purposes.      
Equity Issued Per Line of Credit Agreement [Member] | Warrant [Member]        
Class of Stock [Line Items]        
Number of warrants issuable under agreement 200,000      
Warrant exercise price $ 0.40      
Unsecured Credit Facility [Member]        
Class of Stock [Line Items]        
Maximum borrowing capacity $ 750,000      
Maturity date Jun. 21, 2016      
Interest rate 24.00%      
Maximum monthly borrowing capacity $ 100,000      
Draws $ 590,000 $ 400,000    
Preferred Stock [Member]        
Class of Stock [Line Items]        
Preferred stock, par value       $ .0001
Preferred stock, shares issued     2,000,000  
Preferred stock, shares outstanding     2,000,000  
Preferred Stock [Member] | Equity Issued Per Line of Credit Agreement [Member]        
Class of Stock [Line Items]        
Preferred stock, par value $ .0001      
Shares issued 200,000      
Preferred Stock - Series A [Member]        
Class of Stock [Line Items]        
Preferred stock, shares authorized 2,000,000      
Preferred Stock - Series B [Member]        
Class of Stock [Line Items]        
Preferred stock, par value $ 0.0001 $ 0.0001    
Preferred stock, shares authorized 200,000 200,000    
Preferred stock, shares issued 200,000 200,000 200,000  
Preferred stock, shares outstanding 0 0 200,000  
XML 46 R37.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit (Common and Preferred Stock Issued and Outstanding) (Details) - USD ($)
1 Months Ended 3 Months Ended
Dec. 31, 2015
Oct. 31, 2015
Sep. 30, 2015
Jul. 31, 2015
Jun. 30, 2015
May 31, 2015
Apr. 30, 2015
Apr. 30, 2015
Mar. 31, 2015
Feb. 28, 2015
Jan. 31, 2015
Mar. 31, 2016
Class of Stock [Line Items]                        
Preferred stock, shares issued 2,000,000                     2,000,000
Preferred stock, shares outstanding 2,000,000                     2,000,000
Common stock, shares issued 27,269,436   26,378,802                 27,269,436
Common stock, shares outstanding 26,739,002   26,378,802                 26,739,002
Common Stock [Member]                        
Class of Stock [Line Items]                        
Stock issued shares   50,000 1,000,000 100,000     225,000   2,000,000 1,000,000    
Proceeds from investment       $ 50,000   $ 75,000 $ 150,000     $ 100,000    
Stock issued for services 360,200 496,240     234,765 129,732   621,040     464,525 530,434
Stock issued for services value                     $ 36,094  
Price per share for stock issued $ 0.302 $ 0.302 $ 0.302   $ 0.208 $ 0.208 $ 0.11 $ 0.11       $ 0.302
Common Stock [Member] | Warrants Group One [Member]                        
Class of Stock [Line Items]                        
Stock issuable through warrants                 750,000 1,000,000    
Warrant exercise price                 $ .40 $ 0.40    
Warrant term                 1 year 1 year    
Common Stock [Member] | Warrants Group Two [Member]                        
Class of Stock [Line Items]                        
Stock issuable through warrants                 1,250,000 1,000,000    
Warrant exercise price                 $ 0.40 $ 0.50    
Warrant term                 1 year 2 years    
Common Stock [Member] | Warrants Group Three [Member]                        
Class of Stock [Line Items]                        
Stock issuable through warrants                 2,000,000      
Warrant exercise price                 $ 0.50      
Warrant term                 2 years      
Common Stock [Member] | Warrants Group One, Two and Three [Member]                        
Class of Stock [Line Items]                        
Amount of monthly installment to be paid by investor between April and November 2015                 $ 62,500      
Common Stock [Member] | Warrant [Member]                        
Class of Stock [Line Items]                        
Stock issuable through warrants       100,000     225,000 225,000        
Warrant exercise price       $ 0.80     $ 0.75 $ 0.75        
Warrant term       2 years     18 months          
Preferred Stock - Series B [Member]                        
Class of Stock [Line Items]                        
Preferred stock, shares issued 200,000   200,000                 200,000
Preferred stock, shares outstanding 0   200,000                 0
Preferred Stock [Member]                        
Class of Stock [Line Items]                        
Preferred stock, shares issued     2,000,000                  
Preferred stock, shares outstanding     2,000,000                  
XML 47 R38.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit (Warrants Issued) (Details) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Sep. 30, 2016
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Class of Warrant or Right [Line Items]        
Compensation expense   $ 462,140 $ 72,265  
Warrant [Member]        
Class of Warrant or Right [Line Items]        
Warrants issued 60,913 475,000   8,485,913
Warrant term 24 months      
Warrant exercise price $ 0.30      
Valuation method used Black-Scholes Option Pricing Model      
Dividend yield 0.00%      
Annual volatility 157.00%      
Risk free interest rate 0.87%      
Expected term 2 years 4 months 28 days      
Fair value of warrants $ 14,342      
Memorandum of Understanding with Flying Eagle [Member] | Warrant [Member]        
Class of Warrant or Right [Line Items]        
Warrant exercise price   $ 0.15    
Valuation method used   Black-Scholes Option Pricing Model    
Dividend yield   0.00%    
Annual volatility   155.00%    
Risk free interest rate   0.71%    
Expected term   2 years    
Fair value of warrants   $ 24,573    
Total number of warrants offered in agreement   100,000    
Expiration period   24 months    
Agreement with Independant Contractor [Member]        
Class of Warrant or Right [Line Items]        
Date of agreement   Dec. 01, 2015    
Term of agreement   1 year    
Amount of monthly payment owed in advance to contractor   $ 7,500    
Quarterly payment owed to contractor   $ 22,500    
Total common shares agreed to be issued to contractor each month   26,000    
Agreement with Independant Contractor [Member] | Warrant [Member]        
Class of Warrant or Right [Line Items]        
Warrant exercise price   $ 0.077    
Valuation method used   Black-Scholes Option Pricing Model    
Dividend yield   0.00%    
Annual volatility   157.00%    
Risk free interest rate   1.19%    
Expected term   7 years    
Fair value of warrants   $ 603,540    
Total number of warrants offered in agreement   3,500,000    
Expiration period   7 years    
Number of warrants that will forfeit per termination of agreement   4,167    
Compensation expense   $ 276,622    
Agreement with Independant Contractor [Member] | Warrant [Member] | Vesting on the Effective Date [Member]        
Class of Warrant or Right [Line Items]        
Number of warrants vesting per terms of agreement   2,000,000    
Agreement with Independant Contractor [Member] | Warrant [Member] | Vesting after 3 months of service beginning on the Effective Date [Member]        
Class of Warrant or Right [Line Items]        
Number of warrants vesting per terms of agreement   375,000    
Agreement with Independant Contractor [Member] | Warrant [Member] | Vesting after 6 months of service beginning on the Effective Date [Member]        
Class of Warrant or Right [Line Items]        
Number of warrants vesting per terms of agreement   375,000    
Agreement with Independant Contractor [Member] | Warrant [Member] | Vesting after 9 months of service beginning on the Effective Date [Member]        
Class of Warrant or Right [Line Items]        
Number of warrants vesting per terms of agreement   375,000    
Agreement with Independant Contractor [Member] | Warrant [Member] | Vesting after 12 months of service beginning on the Effective Date [Member]        
Class of Warrant or Right [Line Items]        
Number of warrants vesting per terms of agreement   375,000    
XML 48 R39.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit (Summary of Warrants Activity) (Details) - Warrant [Member] - $ / shares
1 Months Ended 3 Months Ended 12 Months Ended
Sep. 30, 2016
Mar. 31, 2016
Dec. 31, 2015
Warrants outstanding      
Warrants outstanding at beginning of period   8,485,913
Issued 60,913 475,000 8,485,913
Exercised  
Cancelled  
Expired  
Warrants outstanding at end of period   8,960,913 8,485,913
Warrants exercisable   3,350,000  
Warrants outstanding at beginning of period   $ 0.47
Issued   $ 0.23 $ 0.37
Exercised  
Cancelled  
Expired  
Warrants outstanding at end of period   $ 0.36 $ 0.47
Warrants exercisable   $ 0.15  
Warrants outstanding, Weighted Average Remaining Life (years)   2 years 5 months 23 days 2 years 6 months
Warrants issued, Weighted Average Remaining Life (years)   5 years 8 months 12 days 2 years 6 months
Warrants exercisable, Weighted Average Remaining Life (years)   4 years 1 month 6 days  
XML 49 R40.htm IDEA: XBRL DOCUMENT v3.5.0.1
Stockholders' Deficit (Summary of Warrants Outstanding by Price Range) (Details) - Warrant [Member] - $ / shares
3 Months Ended
Mar. 31, 2016
Sep. 30, 2016
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price   $ 0.30
Warrants Outstanding 8,960,913  
Remaining Average Contractual Life 2 years 6 months  
Warrant Exercise Price Range One [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.08  
Warrants Outstanding 2,375,000  
Remaining Average Contractual Life 6 years 8 months 12 days  
Warrant Exercise Price Range Two [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.15  
Warrants Outstanding 100,000  
Remaining Average Contractual Life 1 year 10 months 24 days  
Warrant Exercise Price Range Three [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.30  
Warrants Outstanding 60,913  
Remaining Average Contractual Life 1 year 9 months 18 days  
Warrant Exercise Price Range Four [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.40  
Warrants Outstanding 3,100,000  
Remaining Average Contractual Life 7 months 6 days  
Warrant Exercise Price Range Five [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.50  
Warrants Outstanding 3,000,000  
Remaining Average Contractual Life 1 year 3 months 18 days  
Warrant Exercise Price Range Six [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.75  
Warrants Outstanding 225,000  
Remaining Average Contractual Life 7 months 6 days  
Warrant Exercise Price Range Seven [Member]    
Share Based Compensation Shares Authorized Under Equity Instruments Other Than Options Exercise Price Range [Line Items]    
Exercise Price $ 0.80  
Warrants Outstanding 100,000  
Remaining Average Contractual Life 1 year 9 months 18 days  
XML 50 R41.htm IDEA: XBRL DOCUMENT v3.5.0.1
Related Party Transactions (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Related Party Transaction [Line Items]      
Management fees $ 53,500  
Interest expense $ 1,997 $ 1,000  
Accrued interest - convertible notes 8,503   $ 5,505
Due to related parties - total 20,703   16,725
Note payable, related party $ 200,000   200,000
Borrowings from related parties  
Repayments to related parties  
Mr. Grede and TAA [Member]      
Related Party Transaction [Line Items]      
Management fees $ 12,000  
Mr. Lawyer and TAG [Member]      
Related Party Transaction [Line Items]      
Management fees 41,500  
Mr. Rudyak [Member]      
Related Party Transaction [Line Items]      
Interest expense $ 1,000 1,000  
Accrued interest payable 12,220   11,220
Mr. Rudyak [Member] | Notes Payable [Member] | Related Party Notes Payable [Member]      
Related Party Transaction [Line Items]      
Interest expense 1,000 $ 1,000  
Note payable, related party $ 200,000   $ 200,000
XML 51 R42.htm IDEA: XBRL DOCUMENT v3.5.0.1
Share-based Compensation (Details) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Equity-based compensation expense $ 462,140 $ 72,265
Research and development expense [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Equity-based compensation expense 724 1,665
General and administrative expense [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Equity-based compensation expense 437,860 48,955
General and administrative expense, related party [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Equity-based compensation expense $ 23,556 $ 21,645
XML 52 R43.htm IDEA: XBRL DOCUMENT v3.5.0.1
Subsequent Events (Details) - USD ($)
1 Months Ended 3 Months Ended
May 31, 2016
Jun. 30, 2016
Mar. 31, 2016
Mar. 31, 2015
Subsequent Event [Line Items]        
Draw on line of credit     $ 190,000
Unsecured Credit Facility [Member]        
Subsequent Event [Line Items]        
Issuance date     Jun. 22, 2015  
Maximum borrowing capacity     $ 750,000  
Maturity date     Jun. 21, 2016  
Interest rate     24.00%  
Maximum monthly borrowing capacity     $ 100,000  
Convertible Notes Payable [Member] | Convertible notes payable - 12% Notes [Member]        
Subsequent Event [Line Items]        
Conversion description     The 12% Notes are convertible by the holder into common stock, if or when, our shares of common stock become listed on the OTCBB, at a conversion price equal to 50% of the average of the three lowest daily trading prices for common stock during the 60 day trading period ending on the last trading day prior to the conversion date.  
Subsequent Event [Member] | Unsecured Credit Facility [Member]        
Subsequent Event [Line Items]        
Draw on line of credit   $ 160,000    
Subsequent Event [Member] | Convertible Notes Payable [Member]        
Subsequent Event [Line Items]        
Principal balance converted $ 225,000      
Accrued interest converted $ 53,424      
Conversion price $ 0.125      
Subsequent Event [Member] | Convertible Notes Payable [Member] | Convertible notes payable - 12% Notes [Member]        
Subsequent Event [Line Items]        
Maturity date Nov. 17, 2017      
Conversion description The amendment creates a $0.125 conversion price floor, extends the maturity date from May 19, 2016 to November 17, 2017, limits to a maximum of $25,000 for conversions within a thirty (30) day period, limits the maximum sale on converted shares to 20% of previous thirty (30) day average daily share trade volume for share prices under $0.40, and allows a $0.20 conversion price during first 120 days of trading, subject to the maximum conversion and sale conditions listed above.      
Subsequent Event [Member] | Convertible Notes Payable [Member] | Common Stock [Member]        
Subsequent Event [Line Items]        
Shares issued from conversion of debt 2,227,397      
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