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Summary of Significant Accounting Policies (Policies) | 9 Months Ended
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Sep. 30, 2014
Summary of Significant Accounting Policies [Abstract] |
Interim financial information | Interim financial information - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting of normal accruals, considered necessary for a fair presentation of the interim financial statements have been included. Results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The condensed consolidated financial statements and notes should be read in conjunction with the financial statements and notes for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2014.
Basis of consolidation | Basis of consolidation - The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, SG Building and SG Brazil. All intercompany balances and transactions have been eliminated.
Accounting estimates | Accounting estimates - The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant areas which require the Company to make estimates include revenue recognition, stock-based compensation, warrant liabilities and allowance for doubtful accounts. Actual results could differ from those estimates.
Operating cycle | Operating cycle - The length of the Company’s contracts varies, but is typically between six to twelve months. Assets and liabilities relating to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets as they will be liquidated in the normal course of contract completion, which at times could exceed one year.
Revenue recognition | Revenue recognition - The Company accounts for its long-term contracts associated with the design, engineering, manufacture and project management of building projects and related services, using the percentage-of-completion accounting method. Under this method, revenue is recognized based on the extent of progress towards completion of the long-term contract. The Company uses the cost to cost basis because management considers it to be the best available measure of progress on these contracts. Contract costs include all direct material and labor costs and those indirect costs related to contract performance. General and administrative costs, marketing and business development expenses and pre-project expenses are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. An amount equal to contract costs attributable to claims is included in revenue when realization is probable and the amount can be reliably estimated. The asset, “Costs and estimated earnings in excess of billing on uncompleted contracts,” represents revenue recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billing in excess of revenue recognized. The Company offers a one-year warranty on completed contracts. For the three and nine months ended September 30, 2014, the Company recognized $1,820 and $20,815, respectively, in warranty claims. The Company does not anticipate that any additional claims are likely to occur for warranties that are currently outstanding. Accordingly, no warranty reserve is considered necessary for any of the periods presented. The Company also supplies repurposed containers to its customers. In these cases, the Company serves as a supplier to its customers for standard and made to order products that it sells at fixed prices. Revenue from these contracts is generally recognized when the products have been delivered to the customer, accepted by the customer and collection is reasonably assured. Revenue is recognized upon completion of the following: an order for product is received from a customer; written approval for the payment schedule is received from the customer and the corresponding required deposit or payments are received; a common carrier signs documentation accepting responsibility for the unit as agent for the customer; and the unit is delivered to the customer’s receiving point. The title and risk of loss passes to the customer at the customer’s receiving point. Amounts billed to customers in a sales transaction for shipping and handling are classified as revenue. Products sold are generally paid for based on schedules provided for in each individual customer contract including upfront deposits and progress payments as products are being manufactured. Funds received in advance of meeting the criteria for revenue recognition are deferred and are recorded as revenue when they are earned.
Fair value measurements | Fair value measurements - Financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which the Company believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximized the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value:
Level 1 | Quoted prices in active markets for identical assets or liabilities
Level 2 | Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 | Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Financial liabilities measured at fair value on a recurring basis are summarized below:
|  | September 30, 2014 |  |  | Quoted prices in active market for identical assets (Level l) |  |  | Significant other observable inputs (Level 2) |  |  | Significant unobservable inputs (Level 3) |
Warrant Liabilities |  | $ | 1,004,220 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,004,220 |
Conversion Option Liabilities |  |  | 519,946 |  |  |  | - |  |  |  | - |  |  |  | 519,946 |
|  | $ | 1,524,166 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,524,166 |
|  | December 31, 2013 |  |  | Quoted prices in active market for identical assets (Level l) |  |  | Significant other observable inputs (Level 2) |  |  | Significant unobservable inputs (Level 3) |
Warrant Liabilities |  | $ | 214,738 |  |  | $ | - |  |  | $ | - |  |  | $ | 214,738 |
Conversion Option Liabilities |  |  | 2,873 |  |  |  | - |  |  |  | - |  |  |  | 2,873 |
|  | $ | 217,611 |  |  | $ | - |  |  | $ | - |  |  | $ | 217,611 |
Warrant and conversion option liabilities are measured at fair value using the lattice pricing model and are classified within Level 3 of the valuation hierarchy. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer. The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:`
|  | For the nine months ended September 30, 2014 |  |  | For the nine months ended September 30, 2013 |
Beginning balance |  | $ | 217,611 |  |  | $ | 406,557 |
Aggregate fair value of conversion option liabilities and warrants issued |  |  | 1,815,529 |  |  |  | 170,027 |
Change in fair value related to increase in warrants issued for anti-dilutive adjustment |  |  | 745,920 |  |  |  | - |
Change in fair value of conversion option liabilities and warrants |  |  | (1,254,894 | ) |  |  | (290,973 | )
Ending balance |  | $ | 1,524,166 |  |  | $ | 285,611 |
The significant assumptions and valuation methods that the Company used to determine fair value and the change in fair value of the Company’s derivative financial instruments are discussed in Notes 6 and 8. The Company presented warrant and conversion option liabilities at fair value on its condensed consolidated balance sheets, with the corresponding changes in fair value recorded in the Company’s condensed consolidated statements of operations for the applicable reporting periods. As disclosed in Notes 6 and 8, the Company computed the fair value of the warrant and conversion option liability at the date of issuance and the reporting dates of September 30, 2014 and December 31, 2013 using the lattice pricing method. The calculation of the lattice pricing model involves the use of the fair value of the Company’s common stock, estimated term, volatility, risk-free interest rates, the size of the time step and dividend yield (if applicable). The Company developed the assumptions that were used as follows: The fair value of the Company’s common stock was obtained from publicly quoted prices as well as valuation models developed by the Company. The results of the valuation were assessed for reasonableness by comparing such amount to sales of other equity and equity linked securities to unrelated parties for cash and intervening events affected in the price of the Company’s stock. The term represents the remaining contractual term of the derivative; the volatility rate was developed based on analysis of the Company’s historical stock price volatility and the historical volatility rates of several other similarly situated companies (using a number of observations that was at least equal to or exceeded the number of observations in the life of the derivative financial instrument at issue); the risk free interest rates were obtained from publicly available US Treasury yield curve rates; the dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future. The size of the time step is used to determine the up ratio and down ratio probabilities applied in the lattice model and are proportional to the remaining term of the derivative instrument.
Concentrations of credit risk | Concentrations of credit risk - Financial instruments that potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. The Company has not experienced any losses in such account and believes that it is not exposed to any significant credit risk on the account. With respect to receivables, concentrations of credit risk are limited to a few customers in the construction industry. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers other than normal lien rights. At September 30, 2014 and December 31, 2013, 91% and 87%, respectively, of the Company’s accounts receivable were due from three and two customers, respectively. Revenue relating to one and three customers, respectively, represented approximately 89% and 92% of the Company’s total revenue for the three months ended September 30, 2014 and 2013, respectively. Revenue relating to two customers represented approximately 86% and 77% of the Company’s total revenue for the nine months ended September 30, 2014 and 2013, respectively. Costs of revenue relating to one vendor, who is a related party and disclosed in Note 11, represented approximately 7% and 22% of the Company’s total cost of revenue for the three months ended September 30, 2014 and 2013. Costs of revenue relating to one and two unrelated vendors, respectively, represented approximately 54% and 56%, respectively, of the Company’s total cost of revenue for the three months ended September 30, 2014 and 2013. Costs of revenue relating to one vendor, who is a related party and disclosed in Note 11, represented approximately 19% and 30% of the Company’s total cost of revenue for the nine months ended September 30, 2014 and 2013. Cost of revenue relating to one unrelated vendor represented approximately 68% and 34%, respectively, of the Company’s total cost of revenue for the nine months ended September 30, 2014 and 2013. The Company believes it has access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers.

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