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EX-31.1 - EXHIBIT 31.1 - Cabinet Grow, Inc.cbnt0806form10qexh31_1.htm
EX-32.1 - EXHIBIT 32.1 - Cabinet Grow, Inc.cbnt0806form10qexh32_1.htm
EX-31.2 - EXHIBIT 31.2 - Cabinet Grow, Inc.cbnt0806form10qexh31_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015.

 

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: 000-55340

 

 
CABINET GROW, INC.
(Exact name of registrant as specified in its charter)

 

     
Nevada   46-5546647
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
319 Clematis Street, Suite 1008    
West Palm Beach, FL   33401
(Address of principal executive offices)   (Zip Code)

 

 
561-249-6511
(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 ☐

 

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 ☐

 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

 

Large accelerated filer ☐     Accelerated filer ☐
   
Non-accelerated filer ☐ (Do not check if a smaller reporting company)     Smaller reporting company ☑

 

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

 

The number of shares outstanding of registrant’s $0.001 par value Common Stock, as of August 7, 2015, was 36,605,338 shares.

 

 
 

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this quarterly report on Form 10-Q. Additionally, statements concerning future matters are forward-looking statements.

 

Although forward-looking statements in this quarterly report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the fiscal year ended December 31, 2014, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report on Form 10-Q and in other reports that we file with the Securities and Exchange Commission (the “SEC”). You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q.

 

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

 

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this quarterly report on Form 10-Q, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

CABINET GROW, INC,
CONDENSED BALANCE SHEETS
           
           
   June 30,   December 31, 
   2015   2014 
   (Unaudited)      
ASSETS          
           
Current Assets:          
Cash and cash equivalents  $27,423   $61,472 
Accounts receivable, net   4,293    9,280 
Inventory   47,233    48,761 
Prepaid assets and other   4,991    8,938 
Total current assets   83,940    128,451 
           
Security deposit  $20,120   $20,120 
Property and equipment, net of accumulated depreciation of $27,505 (2015) and $13,026 (2014)   60,184    70,640 
Total assets  $164,244   $219,211 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current Liabilities:          
Accounts payable and accrued expenses  $157,594   $112,203 
Accounts payable and accrued expenses, stockholder   32,611    14,152 
Customer deposits   11,176     
Note payable, stockholder   11,615    6,168 
Total current liabilities   212,996    132,523 
           
Convertible notes payable, net of discount of $173,061 (2015) and $210,165 (2014)   739,739    523,335 
           
Total liabilities   952,735    655,858 
           
           
Stockholders' Deficit:          
Common stock, $0.001 par value; 300,000,000 shares authorized; 33,966,742 (2015) and 33,100,000 (2014) shares issued and outstanding   33,967    33,100 
Common stock to be issued, $0.001 par value, 105,000 (2015) and 352,242 (2014) shares to be issued   105    352 
Preferred stock, $0.001 par value; 10,000,000 shares authorized Series A preferred stock, $0.001 par value; 100 shares issued and authorized        
Additional paid-in capital   1,495,970    1,085,518 
Accumulated deficit   (2,318,533)   (1,555,617)
           
Total stockholders' deficit   (788,491)   (436,647)
           
Total liabilities and stockholders' deficit  $164,244   $219,211 
           
See notes to unaudited condensed financial statements.

2
 

CABINET GROW, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
             
   Three Months Ended June 30,  Six Months Ended June 30,
   2015  2014  2015  2014
         (Restated)          (Restated)  
                     
Sales  $228,585   $128,398   $381,381   $312,736 
Cost of sales   161,012    101,760    266,904    217,866 
Gross profit   67,572    26,638    114,478    94,870 
                     
Operating Expenses:                    
Salaries and management fees (including 2014 stock compensation of $521,750)   123,196    573,356    218,654    591,356 
Advertising and marketing   34,321    27,982    164,238    60,631 
Merchant processing fees   4,782    2,542    8,207    7,356 
Professional fees (including stock compensation for the six months ended June 30 of $47,000 (2015) and $150,000 (2014)   56,651    168,286    106,176    168,286 
Rent   8,465    4,027    16,929    7,876 
Research and development   10,885    4,186    17,138    16,072 
Depreciation and amortization   7,239    800    14,479    1,019 
Other general and administrative   30,276    21,107    73,245    29,796 
                     
Total operating expenses   275,816    802,286    619,065    882,392 
                     
Loss from operations   (208,243)   (775,649)   (504,588)   (787,522)
                     
Other income (expenses):                    
Other income and interest income   741    30    744    30 
Interest expense, other   (182,574)   (20,463)   (258,613)   (20,845)
Interest expense, related party   (229)   0    (458)   (441)
Total other expense, net   (182,061)   (20,433)   (258,328)   (21,256)
                     
Net loss  $(390,304)  $(796,082)   (762,916)   (808,778)
                     
Basic and diluted loss per share  $(0.01)  $(0.03)   (0.02)   (0.03)
                     
Weighted average number of common shares outstanding Basic and diluted   33,964,798    31,566,667    33,892,078    30,783,333 
                     
See notes to unaudited condensed financial statements.

3
 

CABINET GROW, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
           
    For the six months ended June 30, 
    2015    2014 
         (Restated) 
Cash flows from operating activities          
Net loss  $(762,916)  $(808,778)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   14,479    1,019 
Amortization of discounts on convertible notes   216,404    15,109 
Amortization of deferred financing fees   2,909    1,458 
Stock compensation expense   47,000    671,750 
Changes in operating assets and liabilities:          
(Increase) decrease in:          
Accounts receivable   4,987    (35)
Inventory   1,528    (9,977)
Prepaid assets and other   1,038    (19,116)
Increase in:          
Accounts payable and accrued expenses   45,664    24,497 
Accounts payable and accrued expenses, stockholder   18,458    8,267 
Customer deposits   11,176    5,338 
Net cash used in operating activities   (399,273)   (110,469)
           
Cash flows from investing activities:          
Purchase of computers and software and furniture and fixtures   (2,677)   (9,570)
Leasehold improvements   (1,346)    
Net cash used in investing activities   (4,023)   (9,570)
           
Cash flows from financing activities:          
Proceeds from issuance of convertible debt   163,000    560,000 
Proceeds from sale of Series A preferred stock       100 
Amounts from advances and credit card charges from stockholder   5,447    43,664 
Repayments of advances and credit card charges to stockholder       (89,687)
Proceeds from sale of common stock   200,800    500 
Payment of deferred financing costs       (2,500)
Net cash provided by financing activities   369,247    512,078 
           
Net increase (decrease) in cash and cash equivalents   (34,049)   392,039 
           
Cash and cash equivalents, Beginning   61,472    10,485 
           
Cash and cash equivalents, Ending  $27,423   $402,524 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $3,071   $4,258 
Cash paid for income taxes  $   $ 
           
Schedule of non-cash financing activities:          
Included in issuances of convertible promissory notes for fees  $16,300   $63,500 
           
See notes to unaudited condensed financial statements.

4
 

CABINET GROW, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2015

(UNAUDITED)

 

NOTE 1 - ORGANIZATION

 

BUSINESS

 

Cabinet Grow, Inc. (the “Company” or “CG-NV”) began operations in California in 2008, doing business as Universal Hydro (“Hydro”). Prior to April 2014, the Company was a sole proprietorship owned by its’ current chief operating officer and stockholder. On April 28, 2014, the Company registered with the Secretary of State of California as Cabinet Grow, Inc. (“CG-CA”), and all of the business, assets and liabilities of Hydro were assigned to CG-CA. On May 14, 2014, the Company filed Articles of Incorporation with the Nevada Secretary of State. On May 15, 2014, CG-CA merged with CG-NV, with CG-NV being the surviving entity.

 

The Company’s common stock is quoted on the OTC Market Group, Inc.’s OTC Pink marketplace under the symbol “CBNT.” On July 31, 2015, the Company engaged DTCEligibility.com to assist the Company with the preparation of the necessary documents associated with applying for DTC eligibility.

 

The Company is a manufacturer and distributor of cabinet-based horticultural systems. The Company’s design and production of hydroponic and soil grow cabinets makes the process of growing in a self-contained cabinet automated and simplified. The Company’s mission is to make hydroponic and soil growing simpler, more efficient and a better value than other products found on the market. Substantially all of the Company’s sales are to individuals in the United States via the Company’s website.

The Company commenced its initial public offering in December 2014. The Company sold 602,000 (502,000 in 2015) shares of its common stock at $0.40 per share pursuant to its initial public offering and received net proceeds of $240,800 ($200,800 in 2015).

RESTATEMENT

The unaudited financial statements for the six months ended June 30, 2014 have been restated to correct notes receivable and the associated liability for the unfunded portion of the Company’s convertible notes. In conjunction with such adjustment, the Company determined that the related embedded conversion options and common stock warrants do not require derivative liability treatment as reflected in the previously issued unaudited financial statements since there was no active market for the Company’s common stock and the underlying shares are not readily convertible into cash.

5
 

The following tables present the effects of the restatement adjustments on the affected line items in the previously reported statement of operations for the six months ended June 30, 2014.

 

   Six months ended June 30, 2014
          
   As reported   Adjustments   Restated 
Other income (expenses)               
  Interest income  $4,253   $(4,223)  $0 
                
  Interest expense   (65,657)          
    Amortizations of note discount        38,698      
    Amortization of deferred financing costs        (133)   (21,286)
    Accrued interest convertible note        5,806      
  Derivative liability expense   (264,725)          
    Initial derivative liability expense        270,368      
    Fair value change in derivative liabilities        (5,643)    
                
Total other expense, net  $(326,129)  $304,874   $(21,256)
                
Net Loss  $(1,113,652)  $304,874   $(808,778)
                
Basic and diluted loss per share  $(0.04)  $   $(0.03)
                
Weighted average number of shares outstanding               
     Basic and diluted   30,783,333        30,783,333 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

The accompanying unaudited condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These condensed financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s annual report for the year ended December 31, 2014 on Form 10-K. Interim results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of future results for the full year. Certain amounts from the 2014 period have been reclassified to conform to the presentation used in the current period.

 

EMERGING GROWTH COMPANY

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.

6
 

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

CASH AND CASH EQUIVALENTS

 

The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents.

 

INVENTORY

 

Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts. Inventory of $47,223 and $48,761 as of June 30, 2015 and December 31, 2014, respectively, was comprised of raw materials.

 

PROPERTY AND EQUIPMENT

 

Property and equipment are stated at cost, and depreciation is provided by use of straight-line methods over the estimated useful lives of the assets. The estimated useful lives of property and equipment are as follows:

 

Manufacturing equipment 10 years
Office equipment and furniture 7 years
Computer hardware and software 3 years

 

The Company's property and equipment consisted of the following at June 30, 2015 and December 31, 2014:

 

   June 30,
2015
  December 31,
2014
Furniture and Equipment  $29,614   $26,937 
Manufacturing equipment   7,396    7,396 
Software   15,830    15,830 
Leasehold improvements   34,849    33,503 
Accumulated depreciation   (27,505)   (13,026)
Balance  $60,184   $70,640 

 

Depreciation expense of $14,479 and $1,019 was recorded for the six months ended June 30, 2015 and 2014, respectively.

 

REVENUE RECOGNITION

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, “Revenue Recognition.” ASC 605 requires that the following four basic criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the period in which the product is shipped.

 

7
 

SHIPPING AND HANDLING

 

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the Company are recorded in cost of sales. For the three and six months ended June 30, 2015 and 2014, the billing costs were as follows:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
Freight costs billed to customers  $19,897   $14,078   $34,793   $37,166 
Company’s shipping costs  $15,307   $14,333   $28,806   $35,505 

 

RESEARCH AND DEVELOPMENT

 

Expenditures for research and development are charged to expense as incurred. For the three and six months ended June 30, 2015 and 2014, the costs were as follows:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
Research and development costs  $10,885   $4,186   $17,138   $16,072 

 

ADVERTISING

 

The Company records advertising costs as incurred. For the three and six months ended June 30, 2015 and 2014, advertising expense was as follows:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
Advertising costs  $34,321   $27,982   $164,238   $60,631 

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable and accrued expenses, note payable and convertible debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.

 

INCOME TAXES

 

Prior to May 2014, the Company was organized as a sole proprietorship and was not subject to income taxes. Rather, the Company’s sole stockholder was subject to income taxes on the Company’s taxable activity. In May 2014, the Company became subject to income taxes and will be subject to Federal and State income taxes as a corporation.

 

The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes.” Deferred tax assets and liabilities are recognized to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

 

ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed, nor paid, any interest or penalties.

 

8
 

Uncertain tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.

 

EARNINGS (LOSS) PER SHARE

 

The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. For the six months ended June 30, 2014 and 2015, 14,617,500 and 14,287,500 shares of common stock, respectively, underlying convertible debt and warrants have been excluded from the computation of diluted earnings per share.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements.

 

NOTE 3 – SALES CONCENTRATION AND CONCENTRATION OF CREDIT RISK

 

CASH

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts.

 

PURCHASES

 

During the six months ended June 30, 2015 and 2014, the Company made significant purchases from three suppliers as follows:

 

Supplier  Purchase %
Six Months Ended
June 30, 2014
  Purchase %
Six Months Ended
June 30, 2015
  Accounts Payable Balance as of
June 30, 2015
 A    26%   32%  $4,777 
 B    19%   18%  $11,088 
 C        16%  $-0- 

 

NOTE 4 – CONVERTIBLE NOTES PAYABLE

 

In May and June 2014 (the “May and June 2014 Notes”), the Company issued 3 convertible promissory notes, each in the amount of $22,000. The Company received proceeds of $60,000 in the aggregate. Each of the May and June 2014 Notes matured on the six month anniversary of its issuance date, carried interest at 10% and contained a 9.1% original issue discount (“OID”). The OID was amortized over the earlier of the conversion of the note or the maturity date. The holders of the note can convert the notes into shares of common stock at any time from the date of issuance to maturity at $0.20 per share. In December 2014, the Company received conversion notices from the holders of the May and June 2014 Notes and accordingly, recorded the conversion of $66,000 of principal and $4,177 of accrued and unpaid interest of the three convertible promissory notes and 352,242 shares of common stock to be issued at a conversion price of $0.20 per share. The shares were issued in January 2015.

 

9
 

On June 3, 2014, the Board authorized the Company to enter into a Securities Purchase Agreement (“SPA”) with Chicago Venture Partners, L.P. (“CVP”). Pursuant to the SPA, the Company agreed to issue to CVP a Secured Convertible Promissory Note in the principal amount of $1,657,500 (the “Company Note”).

 

On June 6, 2014, the Company executed the SPA with CVP, for the sale of the Company Note in the principal amount of up to $1,657,500 (which includes CVP’s legal expenses in the amount of $7,500 and a $150,000 OID) for $1,500,000, consisting of $500,000 paid in cash on June 11, 2014 (the “Closing Date”), two $250,000 secured promissory notes and two $250,000 promissory notes (the “Investor Notes”), aggregating $1,000,000, bearing interest at the rate of 10% per annum. The Investor Notes are due 30 months from the Closing Date and may be prepaid, without penalty. Advances received, OID charged and deferred financing costs incurred to CVP are as follows:

 

Date  Funded Amount  OID  Other  Convertible Note Issued
 6 /11/14  $500,000   $50,000   $7,500   $557,500 
 10 /15/14   62,500    6,250        68,750 
 11 /17/14   62,500    6,250        68,750 
 12 /19/14   35,000    3,500        38,500 
 Balances 12/31/14     660,000    60,000    7,500    733,500 
 3 /18/15   65,000    6,500        71,500 
 4 /14/15   22,500    2,250        24,750 
 4 /23/15   25,500    2,550        28,050 
 5 /20/15   30,000    3,000        33,000 
 6 /22/15   20,000    2,000        22,000 
 Balances 6/30/15   $823,000   $82,300   $7,500   $912,800 

 

The Company has also not recorded the $677,000 remaining balance of the Investor Notes issued by CVP to the Company. The above OID’s were recorded as a discount to the Company Note and are being amortized to interest expense, over the life of the loan. Accordingly, $16,755 and $23,447 is included in interest expense for the three and six months ended June 30, 2015, respectively.

 

The Company Note bears interest at the rate of 10% per annum. All interest and principal must be repaid on the date that is 30 months after the Closing Date. The Company Note may be converted at the option of the holder, on the date that is six months from the Trading Date (defined in the Purchase Agreement as the date on which the Common Stock is first trading on an Eligible Market, but in any event the Company shall cause its Common Stock to be trading on an Eligible Market within nine months of the Closing Date of June 11, 2014) or at any time thereafter at a conversion price of $0.1976. The conversion price is equal to $6,500,000 divided by 33,000,000 (the amount of fully diluted shares of Common Stock of the Company on the date the Company filed its’ Registration Statement). If the holder funds $1,500,000 and elects to convert the Company Note into Common Stock, the number of shares issuable upon conversion will be 8,287,500. In the event the Company elects to prepay all or any portion of the Company Note, the Company is required to pay to CVP an amount in cash equal to 125% multiplied by the sum of all principal, interest and any other amounts owing.

 

The Company determined that the conversion feature of the convertible note did not meet the criteria of an embedded derivative and therefore the conversion feature was not bi-furcated and accounted for as a derivative because the Company was a private company, there was no quoted price and no active market for the Company’s common stock.

 

Since the convertible note included an embedded conversion feature that did not qualify to be bi-furcated as a derivative, management evaluated this feature to determine whether it meets the definition of a beneficial conversion feature (“BCF”) within the scope of ASC 470-20, “Debt with Conversion and Other Options”, and determined that a BCF existed. The Company recorded an initial discount against the debt of $25,874 to be amortized into interest expense over the term of the loan. Amortization of the discount was $2,969 and $7,526 for the three and six months ended June 30, 2015, respectively. Additionally, during the six months ended June 30, 2015, the Company received $163,000 in new funding and increased the Company Note by $179,300 including $16,300 of OID. The Company recorded an initial discount against the new debt for the BCF in the amount of $163,000, to be amortized into interest expense over the term of the loan. Amortization of the discount for the three and six months ended June 30, 2015 was $111,458.

 

10
 

The Company also issued a five year warrant to CVP to purchase the number of shares equal to $420,000 divided by 70% of the average of the three lowest closing bid prices in the 20 trading days immediately preceding the applicable conversion. Based on the current discounted cash flow valuation, the Company estimated that CVP can purchase 6,000,000 shares of common stock, with an exercise price of $0.20 per share. The Company allocated $254,319 of the proceeds from the note to the warrants based on their relative fair value, and recorded a discount against the debt to be amortized into interest expense over the term of the loan. Amortization of the discount was $29,180 and $73,973 and is included in interest expense for the three and six months ended June 30, 2015, respectively.

 

The carrying amount of the Company Note as of June 30, 2015, was $739,739, net of unamortized discounts of $173,061.

 

As security for the Company Note, the Company’s CEO and COO each pledged to CVP their 50 shares of Class A Preferred Stock (see Note 8). The pledge immediately expires upon the shares of common stock of the Company being publicly traded and listed or designated for quotation on any of The New York Stock Exchange, NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTCQX, or the OTCQB.

 

NOTE 5 – NOTE PAYABLE, STOCKHOLDER

 

For the six months ended June 30, 2015 and the year ended December 31, 2014, a stockholder and officer loaned the Company various amounts for Company expenses. Included in the advances and repayments that follow is the activity from several credit cards that are in the name of the stockholder but were used for Company purposes. The terms of the note include an interest rate of 15% per annum and monthly payments beginning May 15, 2014 of $1,500 through March 15, 2015 and the balance due in a balloon payment on or before April 15, 2015. Interest expense of $229 and $458 was recorded for the three and six months ended June 30, 2015, respectively. The activity for the six months ended June 30, 2015 is as follows:

 

   Six Months Ended
June 30, 2015
Beginning balance  $6,168 
Advances   5,447 
Ending balance  $11,615 

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

On May 14, 2014, effective as of May 1, 2014, the Board authorized the Company to engage the services of Venture Equity, LLC (“Venture Equity”). Mr. Barry Hollander, the sole member of Venture Equity, was also named the Company’s Chief Financial Officer. Mr. Hollander will be responsible for the preparation of the financial statements, a registration statement, overseeing the “going public” process, the continuing reporting responsibilities upon becoming a public company and other corporate matters. The Company has agreed to compensate Venture Equity $5,000 per month and issued 1,500,000 shares of the Company’s common stock, 750,000 shares of common stock immediately vested and 750,000 shares of common stock vested on November 15, 2014. The Company recorded an expense of $75,000, included in salaries and management fees for the three and six months ended June 30, 2014, for the vested shares ($0.10 per share), based upon the Company’s internal valuation on a discounted cash flow basis.

 

The 750,000 shares that vested on November 15, 2014 have been recorded as deferred equity compensation on the balance sheet, at an initial value of $75,000 ($0.10 per share) and were amortized monthly from the date of issuance to their vesting date. Accordingly, the Company has expensed $18,750 included in salaries and management fees for the three and six months ended June 30, 2014. The balance was amortized monthly through November 15, 2014.

 

On May 11, 2015, the Board approved increases to the salaries of each of the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Operating Officer (“COO”) from $5,000 per month to $8,000 per month. The increases will only be paid when and if the cash flow of the Company is sufficient.

 

11
 

For the three and six months ended June 30, 2015 and 2014, the Company recorded expenses to its officers the following amounts:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
 CEO   $21,000   $15,000   $36,000   $24,000 
 COO    21,000    15,000    36,000    24,000 
 CFO    21,000    10,000    36,000    10,000 
 Total   $63,000   $40,000   $108,000   $58,000 

 

As of June 30, 2015, the Company owed $10,500 to each the CEO and COO and $8,500 to the CFO, for accrued and unpaid fees. As of December 31, 2014, the Company owed $4,500 to each the CEO and COO and $2,500 to the CFO. Accordingly $29,500 and $11,500 is included in accounts payable and accrued liabilities, stockholders, on the June 30, 2015 and December 31, 2014 balance sheets presented herein, respectively.

 

The Company’s COO loaned the Company various amounts for Company expenses. Included in the advances and repayments is the activity from several credit cards that are in the name of the stockholder but were used for Company purposes (see Note 5). The Company recorded interest expense of $229 and $221 for the three months ended June 30, 2015 and 2014 respectively and $458 and $441 for the six months ended June 30, 2015 and 2014 respectively. As of June 30, 2015 and December 31, 2014, the COO was owed accrued interest of $3,111 and $2,653, respectively, which is included in accounts payable and accrued liabilities, stockholders, on the balance sheets presented herein.

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

LEASE AGREEMENTS

 

Beginning January 1, 2011, the Company (through its COO) leased approximately 1,850 square feet of office and manufacturing space in an industrial complex in Irvine California. The initial lease term expired July 31, 2012. Since that date through July 2014, the Company leased the property on a month to month basis at a cost of $2,138 per month. Effective August 1, 2014, the Company moved into a 4,427 square foot facility under a new lease agreement, in the same industrial complex. The Company entered into a 26 month lease, pursuant to which (i) there is no base rent for the first two months, (ii) beginning October 1, 2014, the monthly lease is $4,870 plus common area maintenance charges of $354, and (iii) beginning October 1, 2015, the monthly rent increases to $5,091. The Company is straight lining the 24 month costs over the 26 month term of the lease.

 

   Three months ended June 30,  Six months ended June 30,
  Rent Expense:  2015  2014  2015  2014
Rent allocated to cost of goods sold  $5,644   $2,685   $11,286   $5,251 
Rent allocated to SG&A   8,465    4,027    16,929    7,876 
Total rent expense  $14,109   $6,712   $28,215   $13,127 

 

Effective April 15, 2015, the Company entered into a two month Investor Relations Consulting Agreement (the “Agreement”) with Hayden IR (“Hayden”). Pursuant to the Agreement, on April 15, 2015, the Company issued 12,500 shares of common stock and 12,500 additional shares of common stock were to be issued in May 2015. Accordingly, as of June 30, 2015, 12,500 shares of restricted common stock were recorded as common stock to be issued. The Company valued the shares at $0.40 per share and has included $10,000 in stock compensation expense for the three and six months ended June 30, 2015. The additional 12,500 shares were issued in July 2015.

 

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NOTE 8 – STOCKHOLDERS’ EQUITY

 

COMMON STOCK

On May 14, 2014, the Board of Directors (the “Board”) authorized the Company to enter into a consulting agreement with Makena Investment Advisors, LLC (“Makena”). Pursuant to the agreement, Makena will assist the Company in advisory services and registration statement preparation related to being a public company. Pursuant to the filing of the S-1, the Company issued Makena 1,500,000 shares of the Company’s common stock for the services. The share are fully vested and non-assessable. For the three and six months ended June 30, 2014, the Company recorded an expense of $150,000 ($0.10 per share) for the issuance, based upon the Company’s internal valuation on a discounted cash flow basis.

 

Also on May 14, 2014, effective as of May 1, 2014, the Board authorized the Company to engage the services of Venture Equity. The Company has agreed to compensate Venture Equity $5,000 per month and issued 1,500,000 shares of the Company’s common stock, 750,000 shares of common stock immediately vested and 750,000 shares of common stock vested November 15, 2014. See Note 6.

 

The Company’s Registration Statement on Form S-1 with the SEC became effective on December 22, 2014. During the six months ended June 30, 2015, the Company sold 502,000 shares of common stock and received $200,800.

 

On April 15, 2015, the Company issued 12,500 shares of stock to Hayden (See Note 7).

 

COMMON STOCK TO BE ISSUED

 

As of June 30, 2015, the Company had recorded 105,000 shares of common to be issued as follows:

 

17,500 shares of common stock to be issued equal in value to an aggregate of $7,000 per month to two employees as part of their compensation. Accordingly, $7,000 is included in stock compensation expense for the three and six months ended June 30, 2015, and the shares were issued in July 2015.

 

Pursuant to the Agreement with Hayden, 12,500 additional shares of common stock were to be issued in May 2015. Accordingly, as of June 30, 2015, 12,500 shares of restricted common stock were recorded as common stock to be issued and the shares were issued in July 2015.

 

During the six months ended June 30, 2015, the Company agreed to issue 75,000 shares of common stock for consulting services provided to the Company. The shares were valued at $30,000 and are included in stock compensation expense for the three and six months ended June 30, 2015. As of June 30, 2015 the 75,000 shares were recorded as common stock to be issued. The shares were issued in July 2015.

 

DEFERRED EQUITY COMPENSATION

 

The 750,000 shares issued to Venture Equity which vested November 15, 2014, have been recorded as deferred equity compensation on the balance sheet, at an initial value of $75,000 ($0.10 per share) and was amortized from the date of issuance to their vesting date. Accordingly, the Company has expensed $18,750 included in salaries and management fees for the three and six months ended June 30, 2014.

 

13
 

CLASS A PREFERRED STOCK

 

On June 3, 2014, the Company’s Board of Directors adopted and approved the Class A Preferred Stock Certificate of Designation, establishing the terms, conditions and relative rights of the Class A Preferred Stock, including that the holders of the Class A Preferred Stock (the “Class A Holders”) shall have limited voting rights and powers compared to the voting rights and powers of holders of Common Stock and other series of Preferred Stock. The Class A Holders shall be entitled to notice of any shareholders meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote, but only with respect to the following matters (collectively, the “Class A Voting Matters”): (i) the appointment and/or removal of any member of the Company’s board of directors, (ii) any matter related to or transaction (or series of transactions) pursuant to which the Company would sell or license all or substantially all of its assets or the stockholders of the Company would sell all or substantially all of their shares of the Company’s stock or where the Company would merge with or into any other entity, (iii) causing the Company to register its Common Stock for trading pursuant to the Securities Exchange Act of 1934, as amended, including by filing a Registration Statement on Form S-1 with the Securities Exchange Commission and filing and obtaining FINRA approval of a Form 15c2-11, and (iv) with respect to any matter involving a transaction whereby the Company will become part of or merge into an existing public company. For so long as Class A Preferred Stock is issued and outstanding, the holders of Class A Preferred Stock shall vote together as a single class with the holders of the Corporation’s Common Stock and the holders of any other class or series of shares entitled to vote with the Common Stock, with the holders of Class A Preferred Stock being entitled to fifty-one percent (51%) of the total votes on only Class A Preferred Voting Matters regardless of the actual number of shares of Class A Preferred Stock then outstanding, and the holders of Common Stock and any other shares entitled to vote being entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power for any Class A Preferred Voting Matter. The Board also approved the issuance of 50 shares each of the Class A Preferred Stock to the Company’s Chief Executive Officer and Chief Operating Officer. The issued shares of the Class A Preferred Stock were valued at $428,000 based primarily on management’s estimate of the fair value of the control features embedded in the Class A preferred stock, and are included in salaries and management fees for the three and six months ended June 30, 2014.

 

EQUITY COMPENSATION PLAN

 

On May 11, 2015, the Company’s Board of Directors adopted the 2015 Equity Compensation Plan (the “Plan”). Persons eligible to participate in the Plan include Employees (as defined in the Plan), officers and directors of the Company.

 

Term

 

The Plan became effective upon its adoption by the Board. Options and stock awards may be granted immediately thereafter; provided, that no option may be exercised and no stock award may be granted under the Plan until it is approved by the stockholders of the Company, within 12 months after the date of adoption by the Board. The Plan shall continue in effect for a term of 10 years from the date of the Plan’s adoption by the Board unless terminated earlier as provided in the Plan.

 

Administration

 

The Plan will be administered by the Board or a committee designated by the Board (the “Committee”). The Committee may grant options and stock awards under the Plan.

 

Maximum Shares Available

 

The maximum aggregate number of shares that may be issued under the Plan through awards is 5,000,000 shares.

 

Adjustments

 

The maximum aggregate number of shares that may be issued under the Plan, the number and kind of shares covered by each outstanding award, and the price per share (but not the total price) subject to each outstanding award shall be proportionally adjusted to prevent dilution or enlargement of rights under the Plan for any change in the outstanding common stock subject to the Plan, or subject to any award, resulting from any stock splits, combination or exchange of shares, consolidation, spin-off or recapitalization of shares or any capital adjustment or transaction similar to the foregoing or any distribution to holders of common stock other than regular cash dividends.

 

14
 

Awards

 

Options

 

The Committee may grant options to purchase shares of common stock under the Plan from time to time in the discretion of the Administrator or automatically upon the occurrence of specified events, including the achievement of performance goals, and for the satisfaction of an event or condition within the control of the grantee or within the control of others.

 

The per share exercise price of an option shall be determined by the Committee, provided, however that (i) the exercise price of an incentive stock option granted to a non-10% stockholder shall be no less than 100% of the fair market value of the Company’s common stock on the grant date, (ii) the exercise price of an incentive stock option granted to a 10% stockholder shall be no less than 110% of the fair market value of the Company’s common stock on the grant date, and (iii) the exercise price of a nonstatutory stock option shall be no less than 100% of the fair market value of the Company’s common stock on the grant date.

 

Only employees may be granted incentive stock options. Notwithstanding the designation “incentive stock option” in an option agreement, if the aggregate fair market value of the shares with respect to which incentive stock options are exercisable for the first time by the grantee during any calendar year (under all plans of the Company) exceeds $100,000, then the portion of such options that exceeds $100,000 shall be treated as nonstatutory stock options.

 

Restricted Stock

 

The Committee may grant stock awards pursuant to a stock award agreement that shall contain provisions regarding (i) the number of shares subject to such stock award or a formula for determining such number; (ii) the purchase price, if any, of the shares, and the means of payment for the shares; (iii) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of shares granted, issued, retained, or vested, as applicable; (iv) such terms and conditions on the grant, issuance, vesting, or forfeiture of the shares, as applicable, as may be determined from time to time by the Committee; (v) restrictions on the transferability of the stock award; and (vi) such further terms and conditions in each case not inconsistent with the Plan as may be determined from time to time by the Committee.

 

Unless otherwise provided by the Committee, the grantee shall have the rights equivalent to those of a stockholder and shall be a stockholder only after shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) to the grantee. Unless otherwise provided by the Committee, a grantee holding stock units shall be entitled to receive dividend payments as if he or she were an actual stockholder.

 

As of June 30, 2015, the Company has not granted any stock options or stock awards pursuant to the Plan.

 

WARRANTS

 

The Company issued a five year warrant (which expires on June 30, 2019) to CVP to purchase the number of shares equal to $420,000 divided by 70% of the average of the three lowest closing bid prices in the 20 trading days immediately preceding the applicable conversion. Based on the current discounted cash flow valuation, the Company estimated that CVP can purchase 6,000,000 shares of common stock, with an exercise price of $0.20 per share. See Note 5.

 

NOTE 9 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2015 the Company had an accumulated deficit of $2,318,533 and working capital deficit of $129,056. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

15
 

Management’s Plans

 

The Company maintains daily operations and capital needs through the receipts of sales of product and from the proceeds received from the issuance of convertible promissory notes. As of June 30, 2015, the Company has $677,000 of Investor Notes that may be available to be advances to the Company.

 

Management is developing a plan of action to eliminate the Company’s convertible notes payable that include conversion rights that may convert at a discount to the market price of our common stock. Management plans to become cash flow positive from operations by the end of the third quarter of this fiscal year, therefore eliminating any future cash burn.

 

Part of management’s plans include increases in unit sales of our cabinets. As part of that initiative, in July 2015 the Company introduced our newest version of our Medicab. The unit is more efficient and lower priced than its predecessor. On June 1, 2015, the Company hired a sales manager to head our wholesale division for sales of the new Medicab into the hydroponic retail store sector.

 

Retailers in our wholesale program are able to purchase our products for resale. While the Company’s entire product line is available the program and product was designed to allow for the retailer to carry a basic cabinet and work with their customer to custom design a cabinet that fits their needs.

 

We are also working on introducing additional product extensions, new products, and subscription based service offerings. We plan to introduce a higher level of automation options as well as expand the offering of scalable packages and accessories. We have developed several innovative product enhancements that we are considering incorporating to our line of products and we may seek to apply for intellectual property protection. An increasing emphasis will be placed on supplies such as nutrients and grow medium which are consumed by system users with each grow cycle and represent a captive recurring revenue opportunity. We are introducing an automated contact and reorder system for our customer base to help grow this revenue stream. We are planning to expand our current line of LEDs for uses in cabinets and also as a standalone offering for larger scale growers. We also plan to offer and expand our premium support services and education. Support and education can be packaged as a monthly subscription service offering live support, advanced training, and even an auto resupply of nutrients and grow media.

 

Additionally, management’s plans include the establishment and development of wholly-owned separate stand-alone subsidiaries. There will be a separate subsidiary for technology companies, media companies, manufacturing companies and intellectual property companies. The Company also plans to acquire cannabis brands that are compatible with our risk guidelines, that have an operating history and that are cash-flow positive.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On July 16, 2015, CVP converted $50,000 of accrued and unpaid interest under the Company Note into 253,846 shares of common stock.

 

On July 17, 2015, CVP funded $45,000 and the Company increased the convertible promissory note by $49,500, including $4,500 of OID.

 

On July 21, 2015, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with BMA Securities, LLC (the “Consultant”). Pursuant to the Consulting Agreement, the Consultant, on a non-exclusive basis, will provide consulting services to the Company as a financial advisor for a six month period. The Consulting Agreement automatically renews for successive six month periods unless terminated by either party 60 days prior to the end of the initial successive term. The Company will compensate the Consultant 350,000 shares of restricted common stock for the initial six month term.

 

On July 24, 2015, the board of directors of the Company approved the granting of 1,473,500 shares of restricted common stock, including 750,000 shares awarded to the Company’s CFO. The board of directors also approved the issuance of common stock equal in value to an aggregate of $7,000 per month to two employees as part of their compensation. As of June 30, 2015, the Company recorded 17,500 shares of common stock to be issued to the two employees and the shares were issued in July 2015.

 

16
 

On August 3, 2015, (the “August 2015 Note”) the Company issued a convertible promissory note, in the amount of $86,250. The Company received proceeds of $75,000. The August 2015 Note matures on the six month anniversary of its issuance date, carries interest at 10% and contained a 10% original issue discount (“OID”). The holder of the August 2015 Note can convert the note into shares of common stock at any time from the date of issuance to maturity at $0.20 per share. On August 4, 2015, the Company received a conversion notice from the holder of the August 2015 Note to convert the note amount into 431,250 shares of restricted common stock.

 

On August 3, 2015, the Board of Directors of the Company authorized the engagement of Hayden effective August 1, 2015 (the”Effective Date”), for a twelve month period. Pursuant to the Agreement, the Company has agreed to, include among other matters, the issuance of 100,000 restricted shares of common stock to vest over the term of the Agreement as follows, 25,000 upon execution of the Agreement, 50,000 shares on the 90th day from the Effective Date and 25,000 shares on the 180th day from the Effective Date of the Agreement, subject to the Agreement being in effect as of each applicable vesting date. Hayden shall not have registration rights, and the shares may be sold subject to Rule 144. Additionally Hayden will be compensated $6,000 per month, which can be paid at the Company’s discretion in cash, or by the issuance of 10,000 shares of restricted common stock and $2,000 cash.

 

 

17
 

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

 

The Company makes cabinet based horticultural systems. The design and production of our hydroponic and soil grow cabinets makes the process of growing in a self-contained cabinet automated and simplified. Our mission is to make hydroponic and soil growing simpler, more efficient and a better value than other products found on the market. Our product offerings are split into two categories: (1) self-contained horticultural grow cabinets and (2) specifically constructed kits and packages offered to satisfy the DIY home horticulturist, which involve a modular growing solution.

 

The Company’s line of grow cabinets consists of three models, with variations of each model allowing consumers to select a cabinet that will suit their specific needs. In October 2010, we launched an initial prototype of our flagship product, the Earth Cab Pro hydroponic grow cabinet (the “ECP”). Two other models, the Yielder Max and the MediCab Micro, round out our cabinet product line.

 

The Company purchases cabinets, as well as lights, filters and fans, from third party suppliers. Upon receipt of an order from a customer, the Company assembles the parts into a “finished horticulture” cabinet for sale. We currently have no plans to manufacture cabinets but depending on the costs of the components we purchase, labor, transportation and other costs associated with purchasing components, we may from time to time investigate the possibility of manufacturing some of the purchased components. The design and production of our hydroponic and soil grow cabinets make the process of growing in a self-contained cabinet automated and simplified. Our mission is to make hydroponic and soil growing simpler, more efficient and a better value than other products found on the market.

 

The Company views itself as a “pick and shovel” assembler and distributor, providing the tools needed for successful growing operations, but never touching the actual end product. The design and production of our innovative line of grow cabinets makes the process of growing a superior crop self-contained, automated and simplified. Throughout the entire process, from seed to harvest, we are dedicated to giving growers the products, services and knowledge to make each grow their best.

 

Results of Operations

 

For the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014

 

Revenues

 

Revenues for the three and six months ended June 30, 2015 were $228,585 and $381,381, respectively, compared to $128,398 and $312,736 for the three and six months ended June 30, 2014, respectively. The increase for the six months ended June 30, 2015 was primarily a result of a unit increase of the Company’s Yielder Max Series from 60 to 84 and a corresponding increase in revenues of $62,439 from $107,818 to $170,257, and an increase in revenues of $16,215 from $98,288 to $114,503 in the Company’s Earth Cab models. A summary of the net increase in sales is as follows:

 

   Three months ended June 30,
   2015  2014
   Units  Dollars  Average  Units  Dollars  Average
Cabinets   93   $192,488   $2,070    57   $105,000   $1,842 
Tents   4    6,607    1,652    1    1,229    1,229 
Accessories   2,336    41,385    18    404    24,130    55 
Discounts        (31,863)             (16,040)     
Net product sales        208,627              114,320      
Freight income        19,958              14,078      
Total       $228,585             $128,398      

 

18
 

   Six months ended June 30,
   2015  2014
   Units  Dollars  Average  Units  Dollars  Average
Cabinets   167   $330,312   $1,978    139   $250,558   $1,803 
Tents   7    8,894    1,270    10    8,290    829 
Accessories   2,533    63,440    25    1,010    45,155    45 
Discounts        (56,059)             (28,433)     
Net product sales        346,588              275,570      
Freight income        34,793              37,166      
Total       $381,381             $312,736      

 

Cost of Sales

 

Cost of sales increased to $161,012 and $266,904, respectively, for the three and six months ended June 30, 2015 from $101,760 and $217,866, respectively, for the three and six months ended June 30, 2014. We realize a similar gross margin percentage on all of our cabinets. The increase in costs of sales was as a result of increase revenues and was comprised of:

 

   Three  months ended June 30,  Six months ended June 30,
  Description  2015  2014  2015  2014
Components  $103,027   $46,966   $160,305   $115,746 
Packaging and inland freight   12,833    10,653    17,928    19,347 
Labor and benefits   23,173    26,735    46,559    41,394 
Overhead   6,622    3,073    13,305    5,875 
Sub total   145,705    87,427    238,098    182,361 
Freight to customer costs   15,307    14,333    28,806    35,505 
Total  $161,012   $101,760   $266,904   $217,866 

 

Operating Expenses

 

Operating expenses for the three and six months ended June 30, 2015 were $275,816 and $619,065, respectively, compared to $802,286 and $882,392 for the three and six months ended June 30, 2014, respectively. The expenses were comprised of the following:

 

   Three  months ended June 30,  Six months ended June 30,
  Description  2015  2014  2015  2014
Salaries and management fees  $123,196   $51,606   $218,654   $69,606 
Stock compensation expense, management       521,750        521,750 
Professional fees   9,651    18,286    59,176    18,286 
Stock compensation expense, other   47,000    150,000    47,000    150,000 
Advertising and marketing   34,321    27,982    164,238    60,631 
Rent   8,465    4,027    16,929    7,876 
Merchant processing fees   4,782    2,542    8,207    7,356 
Research and development   10,885    4,186    17,137    16,072 
Depreciation and amortization   7,240    800    14,479    1,019 
Other general and administrative   30,276    21,107    73,245    29,796 
Total  $275,816   $802,286   $619,065   $882,392 

 

Salaries and management fees increased to $123,196 and $218,654 for the three and six months ended June 30, 2015, respectively, compared to $51,606 and $69,606 for the three and six months ended June 30, 2014, respectively. The increase in the current period is a result of the CEO and COO, effective April 1, 2014, and the hiring of a CFO, effective May 1, 2015, earning $5,000 per month compared to previously the CEO and COO earning $3,000 per month. Additional staff hiring’s have been in sales, marketing and product development.

 

19
 

Stock compensation expense, management for the three and six months ended June 30, 2014, was comprised of:

 

·100 shares issued of the Class A Preferred Stock were valued at $428,000 based primarily on management’s estimate of the fair value of the control features embedded in the Class A preferred stock,
·750,000 shares of the 1,500,000 shares of common stock issued to Venture Equity immediately vested and were valued at $75,000 ($0.10 per share) based upon the Company’s internal valuation on a discounted cash flow basis.

 

The 750,000 shares issued to Venture Equity that vested on November 15, 2014, have been recorded as deferred equity compensation on the balance sheet, at an initial value of $75,000 ($0.10 per share) and was amortized monthly from the date of issuance to their vesting date. Accordingly, the Company has expensed $18,750 for the three and six months ended June 30, 2014.

 

Stock compensation expense, other (included in professional fees) was $47,000 for the three and six months ended June 30, 2015, compared to $150,000 for the three and six months ended June 30, 2014. The 2015 expense is comprised of $10,000 for the two month engagement of Hayden (see Note 7) and $30,000 for consulting services provided to the Company, whereby the Company has agreed to issue 75,000 shares of common stock. The shares are recorded as common stock to be issued on the June 30, 2015 balance sheet presented in these financial statements. The shares were issued in July 2015. Additionally, effective June 1, 2015, the Company has agreed to issue $4,500 and $2,500 of common stock, respectively, to two employees as part of their monthly compensation. Accordingly, for the three and six months ended June 30, 2015, the Company recorded stock based compensation expense of $7,000 and recorded 17,5000 shares of common stock to be issued. The shares were issued in July 2015. The Company valued all of the above shares at $0.40 per share based on the Company’s most recent sale of shares of common stock.

 

The 2014 period is comprised of 1,500,000 shares of the Company’s common stock issued to a consultant for services. The shares are fully vested and non-assessable. The Company recorded an expense of $150,000 ($0.10 per share) for the issuance, based upon the Company’s internal valuation on a discounted cash flow basis.

 

Professional fees of $9,651 and $59,176, respectively, were incurred for the three and six months ended June 30, 2015 compared to $18,286 for the three and six months ended June 30, 2014, and is comprised of the following:

 

   Three  months ended June 30,  Six months ended June 30,
  Description  2015  2014  2015  2014
Legal fees  $6,824   $8,000   $14,838   $8,000 
Accounting fees   2,827    5,465    12,638    5,465 
Consulting fees       4,821    31,700    4,821 
Total  $9,651   $18,286   $59,176   $18,286 

 

Advertising and marketing expensed increased to $34,321 and $164,238, respectively, for the three and six months ended June 30, 2015, compared to $27,982 and $60,631 for the three and six months ended June 30, 2014, respectively. The increase in the 2015 period is due to an increase in costs predominately in the first quarter of 2015 of a print advertising campaign, online and digital advertising, trade show participation and costs incurred for our website update and enhancements. Also included in the current three and six month expense is $10,000 and $31,814, respectively, paid to marketing consultants, which the Company is no longer engaging.

 

Merchant processing fees increased for the three and six months ended June 30, 2015 as a result of increased sales and the fees the Company pays for the processing and collection of credit card sales.

 

Research and development costs are incurred related to the Company conducting additional studies regarding analyzing the various stages of growth in order to improve the final product as well as the testing developing new components. During the quarter ended June 30, 2015, after conducting significant research, the Company introduced its new MediCab model which features improved efficiencies at a reduced cost.

 

20
 

General and administrative costs for the three and six months ended June 30, 2015 were $30,276 and $73,245, respectively, compared to $21,107 and $29,796 for the three and six months ended June 30, 2014. The significant increases in the 2015 period is comprised of the following:

 

   Three  months ended June 30,  Six months ended June 30,
  Description  2015  2014  2015  2014
Commissions  $4,284   $   $4,284   $ 
Insurance expense   1,606    903    3,834    1,798 
Employee benefits           1,365     
Travel & Entertainment   3,702    7,791    16,051    8,386 
Transfer agent and filing fees   4,167    3,238    5,710    3,238 
Investor relations   1,497        15,633     
Computer and internet expense   2,690    1,791    5,281    2,502 
Utilities   3,186    1,325    5,604    2,793 
Office supplies   2,444    1,973    4,987    2,824 
Other general and administrative   6,700    4,086    10,496    8,255 
Total  $30,276   $21,107   $73,245   $29,796 

 

Other Expenses

 

Other expense for the three and six months ended June 30, 2015 were $182,061 and $258,328, respectively, compared to $20,433 and $21,257 for the three and six months ended June 30, 2014, respectively. Interest expense, other for the three and six months ended June 30, 2015 and 2014 were as follows:

 

   Three  months ended June 30,  Six months ended June 30,
  Description  2015  2014  2015  2014
Amortization of discount on convertible notes  $160,362   $15,109   $216,404   $15,109 
Face value of issued interest, convertible notes   19,911    2,942    37,691    2,942 
Amortization of deferred financing costs   1,147    1,458    2,909    1,458 
Other   1,154    954    1,609    1,336 
Total  $182,574   $20,463   $258,613   $20,845 

 

Net Loss

 

Net loss for the three and six months ended June 30, 2015, decreased to $390,304 and $762,916, respectively, from $796,082 and $808,778 for the three and six months ended June 30, 2014, respectively, as a result of the increase in revenues and gross profit and the decreases in operating expenses offset by increases in other expenses as described above.

 

Capital Resources and Liquidity

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of June 30, 2015, we had cash and cash equivalents of $27,423 compared to $61,472 and $402,524 as of December 31, 2014 and June 30, 2014. At June 30, 2015 we had current liabilities of $212,996 compared to current assets of $83,940 which resulted in a negative working capital position of $129,056. The current liabilities are comprised principally of accounts payable, accrued expenses, note payable to a stockholder and customer deposits.

 

21
 

Operating Activities

 

We used $399,273 of cash from operating activities for the six months ending June 30, 2015 compared to $110,469 for the six months ended June 30, 2014. For the six months ended June 30, 2015, non-cash expenses of $230,459 of amortization of discounts and fees on convertible notes, $47,000 of stock based compensation expense and $14,479 of depreciation were major factors to adjust net loss to net cash used in operating activities. Changes in non-cash operating assets and liabilities resulted in generating $82,851 for the six months ended June 30, 2015. The changes were comprised of increases of $45,664 in accounts payable, $18,458 in accounts payable and accrued expenses stockholders, $11,176 in customer deposits and decreases of $4,987 in accounts receivable, $1,528 in inventory and $1,038 in prepaid assets and other.

 

Non-cash expenses for the six months ended June 30, 2014, of $671,750 of stock compensation expense and $15,109 of amortization of discounts on convertible notes were major adjusting factors to reconcile the Company’s net loss to net cash used in operating activities. Changes in non-cash operating assets and liabilities resulted in generating $8,974 for the six months ending June 30, 2014. The major changes in non-cash operating items for the six months ending June 30, 2014 resulted from increases of $5,338 in customer deposits, $24,497 in accounts payable, $8,267 in amounts due a shareholder, $9,977 increase in inventory and $19,116 increases in prepaid assets.

 

Investing Activities

 

Cash used in investing activities was $4,023 for the six months ended June 30, 2015 and was comprised of $1,346 of leasehold improvements and $2,677 of purchased office and warehouse equipment. Cash used in investing activities for the six months ending June 30, 2014 and was $9,570 and was the result of the purchase of computers and software.

 

Financing Activities

 

Cash provided by financing activities was $369,247 for the six months ended June 30, 2015, compared to $512,078 for the six months ended June 30, 2014. During the six months ended June 30, 2015 the Company received proceeds of $163,000 from the issuance of convertible promissory notes, $200,800 from the sale of shares of common stock and $5,447 for the amounts received from a stockholder. During the six month period ending June 30, 2014, the primary source of cash were the proceeds of $560,000 from the issuance of convertible promissory notes and $43,664 for amounts advanced and credit card charges from a stockholder. Payments of $89,687 were made on the credit card advances.

 

OFF BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

 

GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the accompanying unaudited consolidated financial statements, the Company had an accumulated deficit at June 30, 2015, a net loss and net cash used in operating activities for the reporting period then ended. These conditions raise substantial doubt about its ability to continue as a going concern.

 

The Company is attempting to produce sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to produce sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds.

 

22
 

The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

CRITICAL ACCOUNTING POLICIES

 

We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

 

Basis of Presentation

 

The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These condensed financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto. Interim results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of future results for the full year. Certain amounts from the 2014 period have been reclassified to conform to the presentation used in the current period.

 

Emerging Growth Company

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents.

 

Inventory

 

Inventory is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts. Inventory of $47,233 and $48,761 as of June 30, 2015 and December 31, 2014, respectively, was comprised of raw materials.

 

23
 

Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASC 605 requires that the following four basic criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the period in which the product is shipped.

 

Shipping and Handling

 

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the Company are recorded in cost of sales. For the three and six ended June 30, 2015 and 2014 the costs were as follows:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
Freight costs billed to customers  $19,897   $14,078   $34,793   $37,166 
Company’s shipping costs  $15,307   $14,333   $28,806   $35,505 

 

Research and Development

 

Expenditures for research and development are charged to expense as incurred. For the three and six months ended June 30 2015 and 2014, the costs were as follows:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
Research and development costs  $10,885   $4,186   $17,138   $16,072 

 

Advertising

 

The Company records advertising costs as incurred. For the three and six months ended June 30, 2015 and 2014, advertising expense was as follows:

 

   Three months ended June 30,  Six months ended June 30,
   2015  2014  2015  2014
Advertising costs  $34,321   $27,982   $164,238   $60,631 

 

Fair Value of Financial Instruments

 

The Company's financial instruments consist primarily of cash, accounts receivable, accounts payable and accrued expenses, note payable and convertible debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.

 

24
 

Earnings Per Share

 

The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. For the six months ended June 30, 2015 and 2014, 14,287,500 and 14,617,500, respectively shares of common stock underlying convertible debt and warrants have been excluded from the computation of diluted earnings per share.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures


We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required disclosure. Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and they determined that our disclosure controls and procedures were not effective as of June 30, 2015 due to a control deficiency. During the period we did not have additional personnel to allow segregation of duties to ensure the completeness or accuracy of our information. Due to the size and operations of the Company, we are unable to remediate this deficiency until we acquire or merge with another company.

 

Changes in Internal Control over Financial Reporting


There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS

 

We are not a party to any material litigation, nor, to the knowledge of management, is any litigation threatened against us that may materially affect us.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.

 

25
 

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

  Description of Exhibit
3.1   Articles of Incorporation filed with the California Secretary of State on April 28, 2014. (Incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on July 31, 2014).
3.2   Articles of Incorporation filed with the California Secretary of State on April 28, 2014. (Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 as filed with the SEC on July 31, 2014).
3.3   Bylaws of Cabinet Grow, Inc. (California Corporation). (Incorporated herein by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1 as filed with the SEC on July 31, 2014).
3.4   Articles of Merger and Agreement and Plan of Merger filed with the Nevada Secretary of State on May 16, 2014. (Incorporated herein by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-1 as filed with the SEC on July 31, 2014).
3.5   Bylaws of Cabinet Grow, Inc. (Nevada corporation). (Incorporated herein by reference to Exhibit 3.5 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.1   Certificate of Designation Class A Preferred Stock. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on July 31, 2014).
4.2   Class A Preferred Stock Purchase Agreement between Cabinet Grow, Inc. and Sam May dated June 6, 2014. (Incorporated herein by reference to Exhibit 4.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.3   Class A Preferred Stock Purchase Agreement between Cabinet Grow, Inc. and Matt Lee dated June 6, 2014. (Incorporated herein by reference to Exhibit 4.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.4   $22,000 Convertible Promissory Note with Gary Gilman. (Incorporated herein by reference to Exhibit 4.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.41   $22,000 Convertible Promissory Note with Sean Cook. (Incorporated herein by reference to Exhibit 4.41 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.42   $22,000 Convertible Promissory Note with Maureen Lee. (Incorporated herein by reference to Exhibit 4.42 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.5   Security Purchase Agreement between Cabinet Grow, Inc. and Chicago Venture Partners, L.P. dated June 6, 2014. (Includes Exhibit N). (Incorporated herein by reference to Exhibit 4.5 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.6   Secured Convertible Promissory Note between Cabinet Grow, Inc. and Chicago Venture Partners, L.P. dated June 6, 2014. (Incorporated herein by reference to Exhibit 4.6 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.7   Pledge Agreement between Sam May and Chicago Venture Partners, L.P. dated June 6, 2014. (Incorporated herein by reference to Exhibit 4.7 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.8   Pledge Agreement between Matt Lee and Chicago Venture Partners, L.P. dated June 6, 2014. (Incorporated herein by reference to Exhibit 4.8 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.9   Warrant to Purchase Common Stock between Cabinet Grow, Inc. and Chicago Venture Partners, L.P. dated June 6, 2014. (Incorporated herein by reference to Exhibit 4.9 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.10   Amended form of Subscription Agreement. (Incorporated herein by reference to Exhibit 4.10 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.11   Membership Interest Pledge Agreement (Buyer Pledge Agreement). (Incorporated herein by reference to Exhibit 4.11   to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.12   Allocation of Purchase Price. (Incorporated herein by reference to Exhibit 4.12 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.13   Secured Buyer Note #2. (Incorporated herein by reference to Exhibit 4.13 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.14   Secured Buyer Note #4. (Incorporated herein by reference to Exhibit 4.14 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.15   Security Agreement. (Incorporated herein by reference to Exhibit 4.15 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.16   Irrevocable Transfer Agent Instructions. (Incorporated herein by reference to Exhibit 4.16 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.17   Secretary’s Certificate. (Incorporated herein by reference to Exhibit 4.17 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
4.18   Share Issuance Resolution. (Incorporated herein by reference to Exhibit 4.18 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
10.1   Agreement to Assign Assets between Cabinet Grow, Inc. and Matt Lee dated April 30, 2014. (Incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
10.2   Merger Agreement. (Incorporated herein by reference to Exhibit 10.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
10.3   Promissory Note between Cabinet Grow, Inc. and Matt Lee dated April 29, 2014. (Incorporated herein by reference to Exhibit 10.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
10.4   Secured Buyer Note #1. (Incorporated herein by reference to Exhibit 10.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
10.5   Secured Buyer Note #3. (Incorporated herein by reference to Exhibit 10.5 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 as filed with the SEC on September 26, 2014).
10.6+   Cabinet Grow, Inc. 2015 Equity Compensation Plan. (Incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q as filed with the SEC on May 15, 2015).
10.7+   Form of Stock Option Agreement under the Cabinet Grow, Inc. 2015 Equity Compensation Plan. (Incorporated herein by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q as filed with the SEC on May 15, 2015).
10.8+   Form of Stock Award Agreement for Restricted Stock under the Cabinet Grow, Inc. 2015 Equity Compensation Plan. (Incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q as filed with the SEC on May 15, 2015).
31.1*   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2*   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1*   Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS*   XBRL Instance
101.SCH*   XBRL Taxonomy Extension Schema
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase
101.DEF*   XBRL Taxonomy Extension Definition Linkbase
101.LAB*   XBRL Taxonomy Extension Labels Linkbase
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase

 

* Filed herewith.

+ Management contract or compensatory plan or arrangement.

 

 
 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

Dated: August 10, 2015 CABINET GROW, INC.
   
  By: /s/ Sam May                               
    Sam May
    Chief Executive Officer (principal executive officer)

 

 

  By: /s/ Barry Hollander                   
    Barry Hollander
    Chief Financial Officer (principal financial and accounting officer)