NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017
(Unaudited)
1.
ORGANIZATION AND BASIS OF PRESENTATION
Organization and nature of business
CSA Holdings Inc. (“we,” “us,” “our,” “CSA Holdings,” or the “Company”) was incorporated in Nevada on June 12, 2013 under the name Asta Holdings, Corp. The name was changed to CSA Holdings, Inc. effective July 9, 2015. Following our September 4, 2015 acquisition of a 100% ownership interest in CSA, LLC (“Canna Security”), our wholly owned subsidiary, we became a security solutions provider catering to businesses in the legalized cannabis industry. We provide our customers security system design services, installation, consulting services in physical security solutions and security systems as part of the state licensing process in the legalized cannabis business. Historically, we had been engaged solely in the business of yacht maintenance, repairs, refurbishing, winterizing, custom refinishing and modifications, interior customization and professional boat detailing in the Russian Federation and had been exploring expansion in North America until its acquisition of CSA, LLC (“Canna Security”).
Basis of presentation and going concern
The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These unaudited financial statements should be read in conjunction with the unaudited financial statements and notes thereto for the year ended December 31, 2016.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced recurring losses and negative cash flows from operating activities since inception. As of September 30, 2017, we had a significant working capital deficit and an accumulated deficit.
The Company anticipates that it will continue to incur losses into the foreseeable future and plans to fund its losses from operations and capital funding needs through future public or private equity or debt financings, other third-party funding, collaborations or a combination of these. There can be no assurance that the Company will be able to obtain equity or debt financing on acceptable terms, or at all. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations, and future prospects, including its ability to continue as a going concern.
’’ The accompanying financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
2.
Summary of Significant Accounting Policies
The following are significant accounting policies followed by the Company in the preparation and presentation of its financial statements
Use of estimates
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.
Loss per Common Share
Basic net loss per common share is computed by dividing net loss, less the preferred stock dividends, by the weighted average number of common shares outstanding. Dilutive loss per share includes any additional dilution from common stock equivalents, such as stock options and warrants, and convertible instruments, if the impact is not antidilutive. Since the Company incurred net losses for the periods presented, all equity-linked instruments are considered anti-dilutive.
Recently Issued 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. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
3.
PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of September 30, 2017 and December 31, 2016:
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September 30,
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December 31,
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2017
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2016
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|
Vehicles
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$
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158,372
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$
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158,372
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Furniture and equipment
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49,078
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63,520
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Software
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9,779
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9,779
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Total property and equipment at cost
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217,229
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231,671
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Less accumulated depreciation
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(105,779
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)
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(68,568
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)
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Property and equipment, net
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$
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111,450
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$
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152,793
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4.
COMMITMENTS AND CONTINGENCIES
Operating Lease
In September 2016, the Company entered into a three-year lease with base monthly lease payments averaging $2,561.
Litigation
From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. Any adverse outcome of any claim, in management’s opinion, individually or in the aggregate, would not have a material effect on the Company’s financial condition, results of operations or cash flows.
5.
NOTES PAYABLE
In December 2015, the Company issued a convertible note in the aggregate principal amount of $84,000. The note is secured by the Company’s vehicles, and provides for the conversion of all principal and interest outstanding under the notes into shares of the Company’s common stock beginning six months after the issuance date (“conversion date”) at a conversion rate of 65% of the lowest listed closing market price of the Company’s common stock for the previous ten trading days immediately prior to the conversion date, but not lower than $0.10 per share. This note was converted to common stock in August 2017. – See note 10.
On June 30, 2016 Adriatic Advisors, LLC purchased this note. Adriatic is controlled by Jelena Doukas (“Doukas”) who is a beneficial owner of the Corporation’s 5% Series A Convertible Preferred Stock (the “Series A Preferred”).
In August 2016, the Company issued a convertible note in the aggregate principal amount of $55,125. The note is secured by the Company’s vehicles, and provides for the conversion of all principal and interest outstanding under the notes into shares of the Company’s common stock beginning six months after the issuance date (“conversion date”) at a conversion rate of 65% of the lowest listed closing market price of the Company’s common stock for the previous ten trading days immediately prior to the conversion date, with a floor of $0.0035 per share. This note was converted to common stock in August 2017. – See note 10
6.
RELATED PARTY TRANSACTIONS
As of September 30, 2017, and December 31, 2016, the Company had outstanding related party notes payable totaling $98,905 and $342,905, respectively. As of September 30, 2017, $48,905 of the outstanding notes payable was in default, however, no demand for damages has been received.
7.
STOCK BASED COMPENSATION
During the year ended December 31, 2016, the Company granted 5,000,000 stock options The total grant date fair value of the options granted during the year ended December 31, 2016 was $159,979. The grant date fair value for the award was calculated with a Black-Scholes Option pricing model with the following assumptions: expected volatility of 300%; an average expected term of 6.5 years; risk free rates based on U.S. Treasury instruments for the expected term; and no dividend payment expectations. There were no additional options granted during the nine months ended September 30, 2017.
The following table summarizes the Company’s option activity the September 30, 2017:
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Weighted
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Average
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Weighted
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Remaining
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Average
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Contractual
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Aggregate
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Options
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Shares
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Exercise Price
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Term (years)
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Intrinsic Value
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Outstanding at December 31, 2013
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-
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$
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-
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Options granted
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775,000
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0.0001
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Exercised
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-
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Forfeited, cancelled or expired
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—
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—
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Outstanding at December 31, 2014
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775,000
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$
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0.0001
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Options granted
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1,000,000
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|
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0.18
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|
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Exercised
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—
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—
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Forfeited, cancelled or expired
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—
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—
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Outstanding at December 31, 2015
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1,775,000
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$
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0.18
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9.75
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$
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0.23
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|
Options granted in 2016
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5,000,000
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0.18
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|
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0.41
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|
Outstanding at September 30, 2017
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6,775,000
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$
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0.18
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9.75
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$
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0.23
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|
The options granted and vested, as a private company during the year ended December 31, 2014, were accounted for under the intrinsic value method. In accordance with this method, the Company is required to re-measures the intrinsic value of the outstanding options at each reporting date through the date of settlement. The change related to the intrinsic value of the applicable awards is included in payroll and related costs in the accompanying consolidated statements of operations. As of December 31, 2016, the outstanding options subject to re-measurement had an intrinsic value of $0.41. As a result of the re-measurements, the Company recognized stock option expense of $146,301 for the year ended December 31, 2016 and for the nine months ended September 30, 2017 stock option expense was $108,595.
The Board of Directors of CSA LLC., adopted at a meeting of the Directors of the Corporation that Tom Siciliano who has served as COO for 10 months and President for the last 14 months of CSA LLC will be granted 2,000,000 new stock options at a price of .03. We are also approving, when the company has money available - the payment of $30k in expenses and interest for his relocation back in November 2015 that was never paid, plus $45k in back wages and small bonus for his efforts to keep the company going strong and growing. The effective date is October 10, 2017.
8.
STOCKHOLDER’S EQUITY
Common Stock
For the period from January 1, 2017 through September 30, 2017, we issued a total of 10,285,714 shares of restricted and unregistered common stock in private placements for cash proceeds totaling approximately $348,000.
On April 3, 2017, CSA Holdings, Inc. (the “Company”) issued 200,000 shares to James Willett for $10,000 cash.
On April 4, 2017, the Company issued 500,000 shares to Frank Gallo for $25,000 cash.
On April 6, 2017, the Company issued 300,000 shares to Emil Assentato for $15,000 cash.
On April 6, 2017, the Company issued 100,000 shares to Chuck Smith for $5,000 cash.
On April 7, 2017, the Company issued 200,000 shares to Christopher Parks for $10,000 cash.
On April 7, 2017, the Company issued 200,000 shares to Bradley Nattrass for $10,000 cash.
On April 4, 2017, the Company issued 400,000 shares to Kathryn Trickey for $20,000 cash.
On April 7, 2017, the Company issued 200,000 shares to James Lowe for $10,000 cash.
On April 10, 2017, the Company issued 3,800,000 shares to Jose Antoni Silva for $190,000 cash.
On April 21, 2017, the Company issued 300,000 shares to Bagel Hole for $15,000 cash.
On August 1, 2017, the Company issued 1,900,000 shares to MOD Worldwide, LLC for $38,000 cash.
For the period from January 1, 2017 through September 30, 2017, the Company entered into several debt conversions and issued 40,923,192 shares for the amount totaling approximately $801,625.
On August 22, 2017, CSA Holdings, Inc. (the “Company”) entered into a Debt Conversion, Accord and Satisfaction Agreement with Adriatic Advisors, LLC (“Adriatic”) and Jelena Doukas (“Doukas”). The Agreement provided for issuance of 8,000,000 shares of common stock of the Company in exchange for the cancellation of certain debt obligations of the Company and a mutual release of potential claims between the parties to the agreement.
On August 22, 2017, the Company entered into a Debt Conversion, Accord and Satisfaction Agreement with Pure Energy 714, LLC (“Pure Energy”). The Agreement provided for issuance of 7,000,000 shares of common stock of the Company in exchange for the cancellation of certain debt obligations of the Company and a mutual release of potential claims between the parties to the agreement.
On August 24, 2017, the Company entered into a Stock Purchase Agreement with Emil Assentato (“Assentato”). The Agreement provided for the purchase and issuance of 10,756,528 shares of restricted common stock of the Company to Assentato for a purchase price of $300,000
On August 24, 2017, the Company entered into a Termination Agreement with Dixie Holdings, LLC (“Dixie”) and James Willett (“Willett”). The Agreement provided for issuance of 4,333,333 shares of restricted common stock of the Company to Dixie and 9,500,000 shares of restricted common stock of the Company to Willett in exchange for the cancellation of repayment obligations of the Company in the amount of $302,500 arising under the Unit Purchase Agreement between CSA, LLC, a wholly-owned subsidiary of the Company, Dixie and Willett dated October 15, 2013
On August 24, 2017, the Company entered into a Stock Purchase Agreement with Willett. The Agreement provided for the purchase and issuance of 1,333,333 shares of restricted common stock of the Company to Willett for a purchase price of $40,000.
9.
SUBSEQUENT EVENTS
The Company has evaluated subsequent events through November 30, 2017, the date these financial statements were available for issuance and is not aware of any event that would have a material impact on the accompanying financial statements.