Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 22, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | True Drinks Holdings, Inc. | ||
Entity Central Index Key | 1,134,765 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 11,600,000 | ||
Entity Common Stock, Shares Outstanding | 199,693,811 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 15,306 | $ 376,840 |
Accounts receivable, net | 536,817 | 1,843,415 |
Inventory, net | 318,912 | 1,558,719 |
Prepaid expenses and other current assets | 127,258 | 75,923 |
Total Current Assets | 998,293 | 3,854,897 |
Restricted Cash | 209,570 | 209,360 |
Property and Equipment, net | 11,064 | 4,530 |
Patents, net | 250,000 | 1,070,588 |
Goodwill | 3,474,502 | 3,474,502 |
Total Assets | 4,943,429 | 8,613,877 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,258,252 | 1,623,046 |
Debt | 109,682 | 1,336,819 |
Derivative liabilities | 5,792,572 | 6,199,021 |
Total Current Liabilities | 7,160,506 | 9,158,886 |
Commitments and Contingencies (Note 7) | ||
Stockholders’ Deficit: | ||
Common Stock, $0.001 par value, 300,000,000 and 120,000,000 shares authorized, 119,402,009 and 111,434,284 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively | 119,402 | 111,434 |
Preferred Stock – Series B (liquidation preference of $4 per share), $0.001 par value, 2,750,000 shares authorized, 1,292,870 and 1,317,870 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively | 1,293 | 1,318 |
Preferred Stock – Series C (liquidation preference $100 per share), $0.001 par value, 200,000 and 150,000 shares authorized, 109,352 and 48,853 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively | 109 | 49 |
Additional paid in capital | 33,456,325 | 29,690,834 |
Accumulated deficit | (35,794,206) | (30,348,644) |
Total Stockholders’ Deficit | (2,217,077) | (545,009) |
Total Liabilities and Stockholders’ Deficit | $ 4,943,429 | $ 8,613,877 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Common stock, par value | $ .001 | $ .001 |
Common stock, shares authorized | 300,000,000 | 120,000,000 |
Common stock, shares issued | 119,402,009 | 111,434,284 |
Common stock, shares outstanding | 119,402,009 | 111,434,284 |
Series B Preferred Stock [Member] | ||
Preferred stock liquidation preference | $ 4 | $ 4 |
Preferred stock, par value | $ .001 | $ .001 |
Preferred stock, shares authorized | 2,750,000 | 2,750,000 |
Preferred stock, shares issued | 1,292,870 | 1,317,870 |
Preferred stock, shares outstanding | 1,292,870 | 1,317,870 |
Series C Preferred Stock | ||
Preferred stock liquidation preference | $ 100 | $ 100 |
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, shares authorized | 200,000 | 150,000 |
Preferred stock, shares issued | 109,352 | 48,853 |
Preferred stock, shares outstanding | 109,352 | 48,853 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Net Sales | $ 2,575,448 | $ 6,121,097 |
Cost of Sales | 2,253,585 | 6,282,087 |
Gross Profit (Loss) | 321,863 | (160,990) |
Operating Expenses | ||
Selling and marketing | 3,782,941 | 5,073,211 |
General and administrative | 4,825,017 | 5,475,673 |
Total operating expenses | 8,607,958 | 10,548,884 |
Operating Loss | (8,286,095) | (10,709,874) |
Other Income (Expense) | ||
Change in fair value of derivative liabilities | 3,566,170 | 1,262,329 |
Interest expense | (39,789) | (257,389) |
Other expense | (685,848) | (2,285,629) |
Other Income (Expense) | 2,840,533 | (1,280,689) |
Net Loss | (5,445,562) | (11,990,563) |
Dividends on Preferred Stock | 263,588 | 271,838 |
Net loss attributable to common stockholders | $ (5,709,150) | $ (12,262,401) |
Net loss per share, Basic and diluted | $ (0.05) | $ (0.16) |
Weighted average shares of Common Stock outstanding, basic and diluted | 115,292,366 | 75,346,961 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Series B Preferred Stock | Series C Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2014 | $ 48,623 | $ 1,491 | ||||
Beginning Balance, Shares at Dec. 31, 2014 | 48,622,675 | 140,995 | 18,388,212 | (18,358,081) | 80,245 | |
Conversion of preferred stock to common stock, Amount | $ 55,947 | $ (173) | $ (79) | $ (55,695) | $ 0 | |
Conversion of common stock to preferred stock, Shares | 55,947,335 | (173,125) | (79,766) | |||
Issuance of Preferred Stock Series C for debt conversions, Amount, net of warrants issued | $ 12 | 835,514 | 835,526 | |||
Issuance of Preferred Stock Series C for debt conversions, Shares, net of warrants issued | 12,148 | |||||
Issuance of Common Stock for services, Amount | $ 2,414 | 485,412 | 487,826 | |||
Issuance of Common Stock for services, Shares | 2,413,811 | |||||
Issuance of Preferred Stock for cash, Amount, net of warrants issued | $ 116 | 8,750,478 | 8,750,594 | |||
Issuance of Preferred Stock for cash, Shares, net of warrants issued | 116,471 | |||||
Stock-based compensation | 1,055,448 | 1,055,448 | ||||
Dividends declared on Preferred Stock | (271,838) | (271,838) | ||||
Issuance of Common Stock for Employee Bonuses, Amount | $ 2,188 | 216,594 | 218,782 | |||
Issuance of Common Stock for Employee Bonuses, Shares | 2,187,818 | |||||
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 1,512 | 287,459 | 288,971 | |||
Issuance of Common Stock for dividends on Preferred Stock, Shares | 1,512,645 | |||||
Issuance of Restricted Common Stock to Employees, Amount | $ 750 | (750) | 0 | |||
Issuance of Restricted Common Stock to Employees, Shares | 750,000 | |||||
Net Loss | $ (11,990,563) | (11,990,563) | ||||
Ending Balance, Amount at Dec. 31, 2015 | $ 111,434 | $ 1,318 | $ 49 | 29,690,834 | (30,348,644) | (545,009) |
Ending Balance, Shares at Dec. 31, 2015 | 111,434,284 | 1,317,870 | 48,853 | |||
Conversion of preferred stock to common stock, Amount | $ 3,009 | $ (25) | $ (4) | (2,980) | 0 | |
Conversion of common stock to preferred stock, Shares | 3,009,335 | (25,000) | (3,914) | |||
Issuance of Preferred Stock Series C for debt conversions, Amount, net of warrants issued | 407,228 | 407,232 | ||||
Issuance of Common Stock for services, Amount | $ 200 | 17,800 | 18,000 | |||
Issuance of Common Stock for services, Shares | 200,000 | |||||
Issuance of Preferred Stock for cash, Amount, net of warrants issued | 2,932,978 | 2,933,047 | ||||
Stock-based compensation | 370,695 | 370,695 | ||||
Dividends declared on Preferred Stock | (265,009) | (265,009) | ||||
Issuance of Common Stock for cash exercise of warrants, Amount | $ 300 | 11,700 | 45,000 | |||
Issuance of Common Stock for cash exercise of warrants, Shares | 3,000 | |||||
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 1,839 | 262,690 | 264,529 | |||
Issuance of Common Stock for dividends on Preferred Stock, Shares | 1,838,390 | |||||
Issuance of Restricted Common Stock to Employees, Amount | $ 2,620 | (2,620) | 0 | |||
Issuance of Restricted Common Stock to Employees, Shares | 2,620,000 | |||||
Net Loss | (5,445,562) | (5,445,562) | ||||
Ending Balance, Amount at Dec. 31, 2016 | $ 119,402 | $ 1,292,870 | $ 109,352 | $ 33,456,325 | $ (35,794,206) | $ (2,217,077) |
Ending Balance, Shares at Dec. 31, 2016 | 119,402,009 | 1,293 | 109 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (5,445,562) | $ (11,990,563) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 5,241 | 3,087 |
Amortization | 141,177 | 148,026 |
Impairment of patent | 679,411 | 0 |
Provision for bad debt expense | 8,029 | (51,769) |
Change in estimated fair value of derivative liabilities | (3,566,170) | (1,262,329) |
Fair value of warrants issued for guaranty | 0 | 2,263,783 |
Fair value of stock issued for services | 18,000 | 487,826 |
Fair value of stock issued for bonuses | 0 | 218,782 |
Stock based compensation | 370,695 | 1,055,448 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 1,298,569 | (1,447,937) |
Inventory | 1,239,807 | (195,276) |
Prepaid expenses and other current assets | (51,335) | 552,752 |
Accounts payable and accrued expenses | (365,274) | (214,899) |
Net cash used in operating activities | (5,667,412) | (10,433,069) |
Cash flows from investing activities: | ||
Change in restricted cash | (210) | (76,162) |
Purchase of property and equipment | (11,775) | (3,030) |
Net cash used in investing activities | (11,985) | (79,192) |
Cash flow from financing activities: | ||
Proceeds from warrants exercised for cash | 45,000 | 0 |
Proceeds from issuance of Series C Preferred Stock, net | 6,000,000 | 11,999,958 |
Net repayments on line-of-credit facility | (377,137) | |
Proceeds from notes payable | 0 | 1,103,817 |
Repayments on notes payable | (350,000) | (2,883,000) |
Net cash provided by financing activities | 5,317,863 | 10,220,775 |
NET DECREASE IN CASH | (361,534) | (291,486) |
CASH AND CASH EQUIVALENTS - beginning of period | 376,840 | 668,326 |
CASH AND CASH EQUIVALENTS - end of period | 15,306 | 376,840 |
SUPPLEMENTAL DISCLOSURES | ||
Cash paid for interest | 41,758 | 179,056 |
Non-cash financing and investing activities: | ||
Conversion of preferred stock to common stock | 2,980 | 55,695 |
Conversion of notes payable and accrued interest to Series C preferred stock | 500,000 | 1,214,207 |
Dividend paid in common stock | 264,529 | 288,971 |
Dividends declared but unpaid | 265,099 | 271,838 |
Warrants issued in connection with Series C Offering | $ 3,066,953 | $ 3,249,364 |
Warrants issued in connection with debt conversions | 92,768 | 378,681 |
Issuance of restricted stock | $ 2,620 | $ 0 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Organization And Summary Of Significant Accounting Policies | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Overview True Drinks Holdings, Inc. (the “ Company us we True Drinks Our principal place of business is 18662 MacArthur Boulevard, Suite 110, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock, par value $0.001 per share (“ Common Stock Recent Developments January Note Exchange On January 20, 2016, the Company and Note Investors holding Secured Notes in the principal amount of $500,000 entered into Note Exchange Agreements pursuant to which the Note Investors agreed to convert the outstanding principal balance of their Secured Notes into an aggregate total of 4,413 shares of Series C Preferred and five-year warrants to purchase up to an aggregate total of 1,029,701 shares of Common Stock for $0.17 per share. Completion of April Series C Offering On April 13, 2016, the Company and one of the Company’s current shareholders, Red Beard Holdings, LLC (“ Red Beard April Purchase Agreement Purchasers Series C Preferred April Series C Offering The Company issued an aggregate total of 25,000 shares of Series C Preferred on April 13, 2016, 10,000 shares of Series C Preferred on July 15, 2016 and, between August 31, 2016 and September 13, 2016, the Company issued an aggregate total of 25,000 shares of Series C Preferred. As additional consideration for participating in the April Series C Offering, the Purchasers received five-year warrants to purchase up to an aggregate total of approximately 33.3 million shares of the Company’s Common Stock for $0.15 per share. Creation of Series D Convertible Preferred Stock On January 24, 2017, the Company filed the Certificate of Designation, Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “ Certificate of Designation Series D Preferred Each share of Series D Preferred has a stated value of $100 per share, and, following the expiration of the 20 day calendar day period set forth in Rule 14c-2(b) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act Conversion Shares Securities Act Series D Offering On February 8, 2017 (the “ Initial Investment Date Series D Investors Series D Purchase Agreement Series D Offering Series D Warrants On the Initial Investment Date, the Company issued to Series D Investors an aggregate total of 31,750 shares of Series D Preferred, as well as Series D Warrants to purchase up to an aggregate total of 42,333,341 shares of Common Stock. Between the Initial Investment Date and the date of this Annual Report, the Company has issued an additional 5,000 shares of Series D Preferred and Series D Warrants to purchase up to an aggregate total of 6,666,669 shares of Common Stock. The issuance of the shares of Series D Preferred to date has resulted in gross proceeds to the Company of approximately $3.7 million. Warrant Exchange Beginning on February 8, 2017, the Company and certain holders of outstanding Common Stock purchase warrants (the “ Outstanding Warrants Exchange Agreement Warrant Exchange Program To date the Company has issued 73,106,453 shares of Common Stock, in exchange for the cancellation of 146,212,905 Outstanding Warrants. Basis of Presentation and Going Concern The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. For the year ended December 31, 2016, the Company incurred a net loss of $5,445,562. At December 31, 2016, the Company has negative working capital of $6,162,213 and an accumulated deficit of $35,794,206. A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Bazi, Inc. and GT Beverage Company, LLC. All inter-company accounts and transactions have been eliminated in the preparation of these condensed consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, derivative liabilities, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates. Revenue Recognition In accordance with Staff Accounting Bulletin (" SAB ") No. 104 “ Revenue Recognition in Financial Statements Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less, to be cash equivalents. The Company maintains cash with high credit quality financial institutions. At certain times, such amounts may exceed Federal Deposit Insurance Corporation (“ FDIC Restricted Cash At December 31, 2016, the Company had $209,570 in restricted cash with a financial institution securing a letter of credit. The letter of credit matures in August 2017 and was issued as part of the contractual obligations related to the Disney Agreement, as more fully described in Note 9, “ Licensing Agreements Accounts Receivable The Company records its trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated sales returns and allowances, and uncollectible accounts to reflect any losses anticipated and charged to the provision for doubtful accounts. Credit is extended to our customers based on an evaluation of their financial condition; generally, collateral is not required. An estimate of uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances, age of customer receivable balances, the customer’s financial condition and current economic trends, all of which are subject to change. Actual uncollected amounts have historically been consistent with the Company’s expectations. Receivables are charged off against the reserve for doubtful accounts when, in management’s estimation, further collection efforts would not result in a reasonable likelihood of receipt, or later as proscribed by statutory regulations. Concentrations The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with two financial institutions. There are funds in excess of the federally insured amount, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal. All production of AquaBall™ is done by Niagara through the Niagara Agreement. Niagara handles all aspects of production including the procurement of all raw materials necessary to produce AquaBall™. We utilize two facilities currently to handle any necessary repackaging of AquaBall into six packs or 15-packs for club customers. During 2016, we relied significantly on one supplier for 100% of our purchases of certain raw materials for Bazi®. Bazi, Inc. has sourced these raw materials from this supplier since 2007 and does not anticipate any issues with the supply of these raw materials. We did not have any significant concentrations in either sales or accounts receivable during the year ended December 31, 2016, while one customer represented 79% of the Company’s accounts receivable and 47% of sales during the year ended December 31, 2015. No other customers exceeded 10% of the Company’s sales or accounts receivable during the year ended December 31, 2016 or 2015. A significant portion of our revenue comes from sales of the AquaBall™ Naturally Flavored Water. For the year ended December 31, 2016 and 2015, sales of AquaBall™ accounted for 92% and 97% of the Company’s total revenue, respectively. Fair Value of Financial Instruments The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses, and notes payable. Management believes that the carrying amount of these financial instruments approximates their fair values, due to their relatively short-term nature. The carrying amount of the Company’s debt is considered a level 3 liability, based on inputs that are unobservable. Inventory The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement. Inventories are stated at the lower of cost (based on the first-in, first-out method) or market (net realizable value). Cost includes shipping and handling fees and costs, which are subsequently expensed to cost of sales. The Company provides for estimated losses from obsolete or slow-moving inventories, and writes down the cost of inventory at the time such determinations are made. Reserves are estimated based on inventory on hand, historical sales activity, industry trends, the retail environment, and the expected net realizable value. The Company maintained inventory reserves of $110,000 and $0 as of December 31, 2016 and December 31, 2015, respectively. This inventory reserve is related to our remaining finished goods inventory of AquaBall prior to the production of our new formulation of AquaBall produced by Niagara. The prior formulation AquaBall is still being sold, but only to select accounts at a reduced price. Inventory is comprised of the following: December 31, 2016 December 31, 2015 Purchased materials $ 89,358 $ 689,703 Finished goods 339,554 869,016 Allowance for obsolescence reserve (110,000 ) - Total $ 318,912 $ 1,558,719 Property and Equipment Property and equipment are stated at cost. The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years. Property and equipment is not significant to the consolidated financial statements as of or for the years ended December 31, 2016 and 2015. Long-Lived Assets The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset. An impairment was not deemed necessary in 2016 or 2015. Goodwill and identifiable intangible assets As a result of acquisitions, we have goodwill and other identifiable intangible assets. In business combinations, goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Accounting for acquired goodwill in accordance with GAAP requires significant judgment with respect to the determination of the valuation of the acquired assets and liabilities assumed in order to determine the final amount of goodwill recorded in business combinations. Goodwill is not amortized, rather, it is evaluated for impairment on an annual basis, or more frequently when a triggering event occurs between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value. Such impairment evaluations compare the reporting unit’s estimated fair value to its carrying value. Identifiable intangible assets consist primarily of customer relationships recognized in business combinations. Identifiable intangible assets with finite lives are amortized over their estimated useful lives, which represent the period over which the asset is expected to contribute directly or indirectly to future cash flows. Identifiable intangible assets are reviewed for impairment whenever events and circumstances indicate the carrying value of such assets or liabilities may not be recoverable and exceed their fair value. If an impairment loss exists, the carrying amount of the identifiable intangible asset is adjusted to a new cost basis. The new cost basis is amortized over the remaining useful life of the asset. Tests for impairment or recoverability require significant management judgment, and future events affecting cash flows and market conditions could adversely impact the valuation of these assets and result in impairment losses. During the year ended December 31, 2016 we recognized impairment on identifiable intangible assets of $679,411 related to the interlocking spherical bottle patent acquired in the acquisition of GT Beverage Company, Inc. As of December 31, 2015, no impairment had been recognized on identifiable intangible assets. Income Taxes The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740 (“ ASC Topic 740 Stock-Based Compensation Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the year ended December 31, 2016 and 2015 was $370,695 and $1,055,448, respectively. The Company uses a Black-Scholes option-pricing model (the “ Black-Scholes Model Shares, warrants and options issued to non-employees for services are accounted for at fair value, based on the fair value of instrument issued or the fair value of the services received, whichever is more readily determinable. Derivative Instruments A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts (“ embedded derivatives Binomial Lattice Net Loss Per Share We compute earnings (loss) per share using the two-class method, as unvested restricted common stock contains nonforfeitable rights to dividends and meets the criteria of a participating security. Under the two-class method, earnings are allocated between common stock and participating securities. The presentation of basic and diluted earnings per share is required only for each class of common stock and not for participating securities. As such, we present basic and diluted earnings per share for our one class of common stock. The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. A company’s reported net earnings is reduced by the amount allocated to participating securities to arrive at the earnings allocated to common stockholders for purposes of calculating earnings per share. At December 31, 2016 and 2015, the Company had 198,957,185 and 120,573,694 shares of Common Stock equivalents outstanding, respectively. Unvested restricted common stock, common stock options, and the Warrants are antidilutive and excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vesting are greater than the cost to reacquire the same number of shares at the average market price during the period. For the years ended December 31, 2016 and 2015, the impact of all outstanding unvested shares of restricted common stock, common stock options, and the Warrants are excluded from diluted loss per share as their impact would be antidilutive. The Company has evaluated its business to determine if it has multiple segments and has determined that it operates under a single segment. Research and Development Research and development costs are expensed as incurred. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers,” which amended the FASB Accounting Standards Codification (“ASC”) and created a new Topic ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance throughout the Industry Topics of the Codification. For the Company’s annual and interim reporting periods the mandatory adoption date of ASC 606 is January 1, 2018, and there will be two methods of adoption allowed, either a full retrospective adoption or a modified retrospective adoption. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to the first quarter of 2018. In March 2016, April 2016, May 2016, and December 2016, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20, respectively, as clarifications to ASU 2014-09. ASU 2016-08 clarifies how to identify the unit of accounting for the principal versus agent evaluation, how to apply the control principle to certain types of arrangements, such as service transactions, and reframed the indicators in the guidance to focus on evidence that an entity is acting as a principal rather than as an agent. ASU 2016-10 clarifies the existing guidance on identifying performance obligations and licensing implementation. ASU 2016-12 adds practical expedients related to the transition for contract modifications and further defines a completed contract, clarifies the objective of the collectability assessment and how revenue is recognized if collectability is not probable, and when non-cash considerations should be measured. ASU 2016-20 corrects or improves guidance in thirteen narrow focus aspects of the guidance. The effective dates for these ASUs are the same as the effective date for ASU No. 2014-09, for the Company’s annual and interim periods beginning January 1, 2018. These ASU’s also require enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows. The Company will adopt the new revenue standards in its first quarter of 2018. The Company has not selected a transition method. The Company is still completing the assessment of the impact of these ASUs on its consolidated financial statements; however at the current time the Company does not expect that the adoption of these ASUs will have a material impact on its consolidated financial statements, financial condition or results of operations. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of this standard be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. ASU 2015-11 will be effective for the Company’s annual and interim reporting periods beginning January 1, 2017, with early adoption permitted. The Company is currently evaluating the impact of this ASU; however the Company does not expect that the adoption of ASU 2015-11 will have a material impact on its consolidated financial statements, financial condition or results of operations. On February 25, 2016, the FASB issued ASU 2016-2, " Leases In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ ASU 2016-09 In August 2016, FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments,” (“ ASU 2016-15 In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 will become effective for us beginning April 1, 2018, or fiscal 2019. ASU 2016-18 is required to be applied retrospectively. Upon the adoption, amounts described as restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. |
STOCKHOLDERS EQUITY
STOCKHOLDERS EQUITY | 12 Months Ended |
Dec. 31, 2016 | |
Stockholders Equity | |
STOCKHOLDERS EQUITY | Securities Common Stock Series A Preferred Series B Preferred Series B Preferred Convertible Stock (“ Series B Preferred Stated Value” Series B Conversion Shares During the year ended December 31, 2016, the Company declared $263,588 in dividends on outstanding shares of its Series B Preferred. The Company issued a total of 1,838,390 shares of Common Stock to pay $264,529 of cumulative unpaid dividends. As of December 31, 2016, there remained $66,080 in cumulative unpaid dividends on the Series B Preferred. Series C Preferred Series C Conversion Shares Issuances During 2015, the Company and certain accredited investors entered into securities purchase agreements to purchase up to 117,648 shares of Series C Preferred Stock. The Company issued an aggregate total of 116,471 shares of Series C Preferred during 2015 for prices ranging from $100 per share to $113.33 per share for a total gross proceeds of approximately $12 million. As additional consideration for participating in this offering, the purchasers were issued five-year warrants to purchase an aggregate total of 26,449,913 shares of Common Stock, exercisable at $0.15 per share. Each warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all such warrants issued, totaling $3,249,364, was recorded to derivative liabilities during the year ended December 31, 2015. On March 27, 2015, holders of outstanding notes totaling $1,147,000 and accrued interest totaling $67,207 agreed to exchange all remaining principal and accrued interest into shares of Series C Preferred on substantially similar terms to those offered in the February 2015 offering of Series C Preferred. As a result of the execution of certain Exchange Agreements and the consummation of March Note Exchange, the Company issued an aggregate total of 12,148 shares of Series C Preferred and five-year warrants to purchase an aggregate total of 2,834,536 shares of Common Stock for $0.15 per share. Each warrant issued in connection with the March Note Exchange contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature results in the warrants being classified as a derivative liability and, as such, the value of all warrants issued in connection with the March Note Exchange, totaling $378,681, was recorded to derivative liabilities during the year ended December 31, 2015. On October 9, 2015, the Company issued to Vincent C. Smith a five-year warrant to purchase 17,500,000 shares of Common Stock for $0.188 per share as consideration for the execution of a personal guaranty of True Drinks’ obligations under the Niagara Agreement. The warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of the warrant issued totaling $2,263,783, was recorded to derivative liabilities and is included in other expense in the accompanying consolidated statements of operations as of December 31, 2015. During the year ended December 31, 2015, the Company issued 2,413,811 shares of Common Stock in connection with certain consulting agreements. The Company expensed the fair value of the Common Stock issued of $487,826. On April 22, 2015, the Company cancelled 2,593,912 options to certain former Directors of the Company. The Company replaced these stock options with 2,594,914 warrants, 1,120,478 of these warrants had an exercise price of $0.25 per share, and 1,474,436 of the warrants had an exercise price of $0.38 per share. The expiration date of 1,120,478 of the warrants is November 12, 2016, and the expiration date on 1,474,436 of the warrants is March 9, 2018. On October 9, 2015, the Company issued five-year warrants for 884,209 shares at an exercise price of $0.19 per share in exchange for services. The warrants vest over a 12-month period. As of December 31, 2015, 221,053 warrant shares had vested and $19,895 was expensed accordingly. On November 25, 2015, the Company and certain accredited investors entered into securities purchase agreements to purchase up to 30,000 shares of Series C Preferred for $100 per share over the course of three separate closings. The Company issued an aggregate total of 10,000 shares of Series C Preferred and five-year warrants to purchase 2,333,333 shares of Common Stock, exercisable at $0.15 per share, on November 25, 2015, 10,000 shares of Series C Preferred and five-year warrants to purchase 2,333,333 shares of Common Stock, exercisable at $0.15 per share, on December 16, 2015, and 10,000 shares of Series C Preferred and five-year warrants to purchase 2,333,333 shares of Common Stock, exercisable at $0.15 per share, on January 19, 2016. Each warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all such warrants issued was recorded to derivative liabilities with $548,022 being recorded between November and December 2015, and $210,275 recorded in January 2016. On January 20, 2016, the Company and holders of Secured Notes in the principal amount of $500,000 entered into Note Exchange Agreements, pursuant to which these holders exchanged the outstanding principal balance of their Secured Notes into an aggregate total of 4,413 shares of Series C Preferred and five-year warrants to purchase up to an aggregate total of 1,029,413 shares of Common Stock for $0.17 per share. Each warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all such warrants issued, totaling $92,768, was recorded to derivative liabilities. During 2016, the Company issued 60,000 shares of Series C Preferred for $100 per share over the course of three separate closings. As additional consideration for participating in the April Series C Offering, the Purchasers received five-year warrants to purchase up to an aggregate total of approximately 33.3 million shares of Common Stock for $0.15 per share. At the completion of the April Series C Offering, the Company had issued warrants to purchase up to an aggregate total of approximately 33.4 million shares of Common Stock. Each warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all such warrants issued, totaling $2,856,678, was recorded to derivative liabilities. |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 12 Months Ended |
Dec. 31, 2016 | |
Stock Options And Warrants | |
STOCK OPTIONS AND WARRANTS | Warrants A summary of the Company’s warrant activity for the years ended December 31, 2016 and 2015 is presented below: Warrants Outstanding Weighted Average Exercise Price Outstanding, December 31, 2014 16,375,270 $ 0.40 Granted 50,543,837 0.16 Exercised - - Expired - - Outstanding, December 31, 2015 66,919,107 $ 0.18 Granted 36,696,083 0.15 Exercised (300,000 ) 0.15 Expired (1,918,774 ) 1.23 Outstanding, December 31, 2016 101,396,416 $ 0.15 As of December 31, 2016, the Company had the following outstanding warrants to purchase shares of its Common Stock: Warrants Outstanding Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Yrs.) 99,494,347 $ 0.15 4.11 427,633 $ 0.19 4.22 737,218 $ 0.25 1.69 737,218 $ 0.38 1.69 101,396,416 $ 0.15 4.07 Non-Qualified Stock Options The Company granted options to purchase an aggregate total of 3,460,000 shares of Common Stock during the year ended December 31, 2016. The options vest evenly over a four-year period. The weighted average estimated fair value per share of the stock options at grant date was $0.06 per share. Such fair values were estimated using the Black-Scholes stock option pricing model and the following weighted average assumptions. 2016 Expected life 2.5 years Estimated volatility 75.0 % Risk-free interest rate 0.66 % Dividends - Stock option activity during the year ended December 31, 2016 is summarized as follows: Options Outstanding Weighted Average Exercise Price Options outstanding at December 31, 2015 - $ - Exercised - - Granted 3,820,000 0.15 Forfeited 720,000 0.15 Expired - - Options outstanding at December 31, 2016 3,100,000 $ 0.15 Cancellation of Stock Options and Issuance of Restricted Stock The cancellation of the stock options and issuance of restricted stock was accounted for as a modification in accordance with the provisions of ASC Topic 718 Compensation – Stock Compensation. Restricted Common S tock Awards On August 6, 2015, the Company’s board of directors authorized an issuance of an aggregate total of 19,491,375 shares of restricted Common Stock pursuant to the terms and conditions of the Company’s 2013 Stock Incentive Plan to certain employees, including those that agreed to cancel previously issued stock options. The shares were valued at $0.121 and a total of $1,698,870 will be expensed over the vesting period. There were 7,200,000 shares which vested on the grant date with the remaining shares vesting over 4 years. In December 2015, the Company issued 750,000 shares of restricted stock under the plan. The Company granted a total of 2,000,000 shares of restricted Common Stock pursuant to the terms and conditions of the Company’s 2013 Stock Incentive Plan to certain employees. The shares were valued at $0.061 per share and a total of $122,000 will be expensed over the vesting period. There were 500,000 shares which vested on the grant date with the remaining shares vesting over 3 years. During the year ended December 31, 2016, the Company issued 2,620,000 shares of restricted stock under the plan. As of December 31, 2016, a total of 5,079,908 shares were unvested out of the total of 16,142,229 granted shares. A summary of the Company’s restricted common stock activity for the years ended December 31, 2016 and 2015 is presented below: Restricted Common Stock Awards Outstanding, December 31, 2014 - Granted 19,491,375 Forfeited - Outstanding, December 31, 2015 19,491,375 Granted 2,000,000 Forfeited (5,349,146 ) Outstanding, December 31, 2016 16,142,229 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2016 | |
Intangible Assets | |
INTANGIBLE ASSETS | The Company has incurred costs to trademark eight of its current products and marketing nomenclatures. During 2015, the Company purchased a patent in relation to the purchase of GT Beverage, and also assumed the trademarks of Bazi Intl. Patents and trademarks are being amortized over the lesser of their remaining life or 15 years. Intangible assets are: December 31, 2016 December 31, 2015 Patents and trademarks $ 1,027,438 $ 1,706,849 Accumulated amortization (777,438 ) (636,261 ) $ 250,000 $ 1,070,588 Amortization expense for the year ended December 31, 2016 and 2015 was $141,177 and $148,768, respectively. In 2016, the Company stopped using the bottle associated with the spherical bottle patent. The Company is evaluating its options for the patent. As such, the Company estimated the value of the patent using a discounted cash flows approach. This valuation lead to the Company recording an impairment charge of $679,411 to the Patent. For these assets, amortization expense over the next five years and thereafter is expected to be as follows: Patent and Trademark Amortization 2017 $ 37,975 2018 37,975 2019 37,975 2020 37,975 2021 37,975 2022 and thereafter 60,125 $ 250,000 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes | |
INCOME TAXES | The Company does not have significant income tax expense or benefit for the year ended December 31, 2016 or 2015. Tax net operating loss carryforwards have resulted in a net deferred tax asset with a 100% valuation allowance applied against such asset at December 31, 2016 and 2015. Such tax net operating loss carryforwards (“ NOL 2016 2015 Income tax expense (benefit) at statutory rate $ (1,851,491 ) $ (4,076,791 ) Change in valuation allowance 1,851,491 4,076,791 ) Income tax expense $ — $ — The components of income tax expense (benefit) attributable to continuing operations are as follows: 2016 2015 Current expense: Federal $ — $ — State — — Deferred expense (benefit): Federal $ — $ — State — — Total $ — $ — The income tax effect of temporary differences between financial and tax reporting and net operating loss carryforwards gives rise to a deferred tax asset at December 31, 2016 and 2015 as follows: 2016 2015 Deferred tax asset –NOL’s $ 13,200,000 $ 11,040,000 Less valuation allowance (13,200,000 ) (11,040,000 ) Net deferred tax asset $ — $ — In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the history of the Company and projections for future taxable income over the periods in which the deferred tax assets are realizable, management believes it is not more likely than not that the Company will realize the benefits of these deductible differences and therefore a full valuation allowance against the deferred tax assets has been established. As a result of the merger with Bazi Intl. on October 15, 2012, the Company may have access to utilize a portion of the net operating loss carryforwards of Bazi Intl., which, in total, were approximately $25 million at the time of the merger. The Company is uncertain as to the portion of the Bazi net operating loss carryforwards that may be limited by Section 382 of the Internal Revenue Code. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carryforwards if there has been a change of ownership as described in Section 382 of the Internal Revenue Code. Such an analysis has not been performed by the Company to determine the impact of these provisions on the Company’s net operating losses, though management believes the impact would be minimal, if any. A limitation under these provisions would reduce the amount of losses available to offset future taxable income of the Company. ASC 740 prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken on income tax returns. ASC Topic 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. Based on management’s assessment of ASC Topic 740, management concluded that the Company does not have any uncertain tax positions as of December 31, 2016. There have been no income tax related interest or penalties assessed or recorded and if interest and penalties were to be assessed, the Company would charge interest and penalties to income tax expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2016 | |
ConvertibleNotesAbstract | |
DEBT | A summary of convertible notes payable as of December 31, 2016 and 2015 is as follows: Amount Outstanding, December 31, 2014 $ 4,030,000 Borrowings 1,470,000 Repayments (3,498,000 ) Conversions to Series C Preferred Stock (1,147,000 ) Outstanding, December 31, 2015 $ 855,000 Borrowings - Repayments (355,000 ) Conversions to Series C Preferred Stock (500,000 ) Outstanding, December 31, 2016 $ - A summary the line-of-credit as of December 31, 2016 and 2015 is as follows: Amount Outstanding, December 31, 2014 $ 233,000 Net Borrowings 249,000 Outstanding, December 31, 2015 $ 482,000 Net Repayments (372,000 ) Outstanding, December 31, 2016 $ 110,000 In March 2015, the Company paid off approximately $2.7 million of the Company’s $3.8 million in outstanding promissory notes. Following these payments, the Company and each of the holders of the remaining notes entered into Exchange Agreements, wherein the holders agreed to exchange the remaining principal of $1,147,000 and accrued interest of any such notes into shares of Series C Preferred on substantially similar terms to those offered in connection with the issuance of shares of Series C Preferred and warrants consummated in February 2015. As described under Note 2, “ Shareholder’s Equity Stockholder’s Equity In September 2015, the Company issued promissory notes to certain related parties in the aggregate principal amount of $100,000. The notes expired on October 31, 2015 and were paid. Upon repayment, the Company paid a lender's fee to the related parties equal to 10% of the principal amount. Line-of-Credit Facility The Company entered into a line-of-credit agreement with a financial institution on June 30, 2014. The terms of the agreement allow the Company to borrow up to the lesser of $1.5 million or 85% of the sum of eligible accounts receivables. At December 31, 2016, the total outstanding on the line-of-credit was $109,682 and the Company did not have any availability to borrow. The line-of-credit bears interest at Prime rate (3.5% as of December 31, 2016) plus 4.5% per annum, as well as a monthly fee of 0.50% on the average amount outstanding on the line, and is secured by the accounts receivables that are funded against. The line-of-credit matures on July 31, 2017. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments And Contingencies | |
COMMITMENTS AND CONTINGENCIES | The Company leases its corporate office in Irvine, California on a one-year term. The current lease term is set to expire on September 30, 2017. Total rent expense related to the Company's operating lease for the year ended December 31, 2016 was $57,159. Total remaining payments on the lease through September 30, 2017 are $28,458. The Company maintains employment agreements with certain key members of management. The agreements provide for minimum base salaries, eligibility for stock options, performance bonuses and severance payments. Legal Proceedings From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur. In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Company’s financial position or results of operations. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | The application of fair value measurements may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability or whether management has elected to carry the item at its estimated fair value. FASB ASC 820-10-35 specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy: - Level 1 - Level 2 - Level 3 This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value. The Company assesses its recurring fair value measurements as defined by FASB ASC 810. Liabilities measured at estimated fair value on a recurring basis include derivative liabilities. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial liabilities among the levels occur at the beginning of the reporting period. There were no transfers between Level 1, Level 2 and/or Level 3 during the year ended December 31, 2016. The Company had no Level 1 or 2 fair value measurements during 2016 or 2015. The following table presents the estimated fair value of financial liabilities measured at estimated fair value on a recurring basis included in the Company’s financial statements as of December 31, 2016 and 2015: Level 1 Level 2 Level 3 Total carrying value Quoted market prices in active markets Internal Models with significant observable market parameters Internal models with significant unobservable market parameters Derivative liabilities - December 31, 2016 $ 5,792,572 $ - $ - $ 5,792,572 Derivative liabilities - December 31, 2015 $ 6,199,021 $ - $ - $ 6,199,021 The following table presents the changes in recurring fair value measurements included in net loss for the years ended December 31, 2016 and 2015: Recurring Fair Value Measurements Changes in Fair Value Included in Net Loss Other Income Other Expense Total Derivative liabilities - December 31, 2016 $ 3,566,170 $ - $ 3,566,170 Derivative liabilities - December 31, 2015 $ 1,262,329 $ - $ 1,262,329 The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2016: December 31, 2015 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2016 Derivative liabilities $ 6,199,021 $ 3,159,721 $ - $ (3,566,170 ) $ 5,792,572 The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2015: December 31, 2014 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2015 Derivative liabilities $ 1,569,522 $ 5,891,828 $ - $ (1,262,329 ) $ 6,199,021 |
LICENSING AGREEMENTS
LICENSING AGREEMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Licensing Agreements | |
LICENSING AGREEMENTS | We first entered into licensing agreements with Disney Consumer Products, Inc. and an 18-month licensing agreement with Marvel Characters, B.V. (collectively, the “ Licensing Agreements In 2015, the Company and Disney entered into a renewed Licensing Agreement, which extended the Company’s license with Disney through March 31, 2017 (the “ Disney Agreement On August 22, 2015, the Company and Marvel o feature certain Marvel characters on bottles of AquaBall™ Naturally Flavored Water through December 31, 2017 5% royalty rate on sales of AquaBall™ Naturally Flavored Water adorned with Marvel characters, paid quarterly, through December 31, 2017, with a total guarantee of $200,000. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company evaluated subsequent events through the date the accompanying consolidated financial statements were issued and determined that no subsequent event activity required additional disclosure. |
ORGANIZATION AND SUMMARY OF S17
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Organization And Summary Of Significant Accounting Policies Policies | |
Overview | True Drinks Holdings, Inc. (the “ Company us we True Drinks Our principal place of business is 18662 MacArthur Boulevard, Suite 110, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock, par value $0.001 per share (“ Common Stock |
Recent Development | January Note Exchange On January 20, 2016, the Company and Note Investors holding Secured Notes in the principal amount of $500,000 entered into Note Exchange Agreements pursuant to which the Note Investors agreed to convert the outstanding principal balance of their Secured Notes into an aggregate total of 4,413 shares of Series C Preferred and five-year warrants to purchase up to an aggregate total of 1,029,701 shares of Common Stock for $0.17 per share. Completion of April Series C Offering On April 13, 2016, the Company and one of the Company’s current shareholders, Red Beard Holdings, LLC (“ Red Beard April Purchase Agreement Purchasers Series C Preferred April Series C Offering The Company issued an aggregate total of 25,000 shares of Series C Preferred on April 13, 2016, 10,000 shares of Series C Preferred on July 15, 2016 and, between August 31, 2016 and September 13, 2016, the Company issued an aggregate total of 25,000 shares of Series C Preferred. As additional consideration for participating in the April Series C Offering, the Purchasers received five-year warrants to purchase up to an aggregate total of approximately 33.3 million shares of the Company’s Common Stock for $0.15 per share. Creation of Series D Convertible Preferred Stock On January 24, 2017, the Company filed the Certificate of Designation, Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (the “ Certificate of Designation Series D Preferred Each share of Series D Preferred has a stated value of $100 per share, and, following the expiration of the 20 day calendar day period set forth in Rule 14c-2(b) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act Conversion Shares Securities Act Series D Offering On February 8, 2017 (the “ Initial Investment Date Series D Investors Series D Purchase Agreement Series D Offering Series D Warrants On the Initial Investment Date, the Company issued to Series D Investors an aggregate total of 31,750 shares of Series D Preferred, as well as Series D Warrants to purchase up to an aggregate total of 42,333,341 shares of Common Stock. Between the Initial Investment Date and the date of this Annual Report, the Company has issued an additional 5,000 shares of Series D Preferred and Series D Warrants to purchase up to an aggregate total of 6,666,669 shares of Common Stock. The issuance of the shares of Series D Preferred to date has resulted in gross proceeds to the Company of approximately $3.7 million. Warrant Exchange Beginning on February 8, 2017, the Company and certain holders of outstanding Common Stock purchase warrants (the “ Outstanding Warrants Exchange Agreement Warrant Exchange Program To date the Company has issued 73,106,453 shares of Common Stock, in exchange for the cancellation of 146,212,905 Outstanding Warrants. |
Basis of Presentation and Going Concern | The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. For the year ended December 31, 2016, the Company incurred a net loss of $5,445,562. At December 31, 2016, the Company has negative working capital of $6,162,213 and an accumulated deficit of $35,794,206. A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Principles of Consolidation | The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Bazi, Inc. and GT Beverage Company, LLC. All inter-company accounts and transactions have been eliminated in the preparation of these condensed consolidated financial statements. |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, derivative liabilities, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates. |
Revenue Recognition | In accordance with Staff Accounting Bulletin (" SAB ") No. 104 “ Revenue Recognition in Financial Statements |
Cash and Cash Equivalents | The Company considers all highly liquid investments with original maturities of three months or less, to be cash equivalents. The Company maintains cash with high credit quality financial institutions. At certain times, such amounts may exceed Federal Deposit Insurance Corporation (“ FDIC |
Restricted Cash | At December 31, 2016, the Company had $209,570 in restricted cash with a financial institution securing a letter of credit. The letter of credit matures in August 2017 and was issued as part of the contractual obligations related to the Disney Agreement, as more fully described in Note 9, “ Licensing Agreements |
Accounts Receivable | The Company records its trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated sales returns and allowances, and uncollectible accounts to reflect any losses anticipated and charged to the provision for doubtful accounts. Credit is extended to our customers based on an evaluation of their financial condition; generally, collateral is not required. An estimate of uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances, age of customer receivable balances, the customer’s financial condition and current economic trends, all of which are subject to change. Actual uncollected amounts have historically been consistent with the Company’s expectations. Receivables are charged off against the reserve for doubtful accounts when, in management’s estimation, further collection efforts would not result in a reasonable likelihood of receipt, or later as proscribed by statutory regulations. |
Concentrations | The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with two financial institutions. There are funds in excess of the federally insured amount, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal. All production of AquaBall™ is done by Niagara through the Niagara Agreement. Niagara handles all aspects of production including the procurement of all raw materials necessary to produce AquaBall™. We utilize two facilities currently to handle any necessary repackaging of AquaBall into six packs or 15-packs for club customers. During 2016, we relied significantly on one supplier for 100% of our purchases of certain raw materials for Bazi®. Bazi, Inc. has sourced these raw materials from this supplier since 2007 and does not anticipate any issues with the supply of these raw materials. We did not have any significant concentrations in either sales or accounts receivable during the year ended December 31, 2016, while one customer represented 79% of the Company’s accounts receivable and 47% of sales during the year ended December 31, 2015. No other customers exceeded 10% of the Company’s sales or accounts receivable during the year ended December 31, 2016 or 2015. A significant portion of our revenue comes from sales of the AquaBall™ Naturally Flavored Water. For the year ended December 31, 2016 and 2015, sales of AquaBall™ accounted for 92% and 97% of the Company’s total revenue, respectively. |
Fair Value of Financial Instruments | The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses, and notes payable. Management believes that the carrying amount of these financial instruments approximates their fair values, due to their relatively short-term nature. The carrying amount of the Company’s debt is considered a level 3 liability, based on inputs that are unobservable. |
Inventory | The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement. Inventories are stated at the lower of cost (based on the first-in, first-out method) or market (net realizable value). Cost includes shipping and handling fees and costs, which are subsequently expensed to cost of sales. The Company provides for estimated losses from obsolete or slow-moving inventories, and writes down the cost of inventory at the time such determinations are made. Reserves are estimated based on inventory on hand, historical sales activity, industry trends, the retail environment, and the expected net realizable value. The Company maintained inventory reserves of $110,000 and $0 as of December 31, 2016 and December 31, 2015, respectively. This inventory reserve is related to our remaining finished goods inventory of AquaBall prior to the production of our new formulation of AquaBall produced by Niagara. The prior formulation AquaBall is still being sold, but only to select accounts at a reduced price. Inventory is comprised of the following: December 31, 2016 December 31, 2015 Purchased materials $ 89,358 $ 689,703 Finished goods 339,554 869,016 Allowance for obsolescence reserve (110,000 ) - Total $ 318,912 $ 1,558,719 |
Property and Equipment | Property and equipment are stated at cost. The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years. Property and equipment is not significant to the consolidated financial statements as of or for the years ended December 31, 2016 and 2015. |
Long-Lived Assets | The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset. An impairment was not deemed necessary in 2016 or 2015. |
Goodwill and identifiable intangible assets | As a result of acquisitions, we have goodwill and other identifiable intangible assets. In business combinations, goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Accounting for acquired goodwill in accordance with GAAP requires significant judgment with respect to the determination of the valuation of the acquired assets and liabilities assumed in order to determine the final amount of goodwill recorded in business combinations. Goodwill is not amortized, rather, it is evaluated for impairment on an annual basis, or more frequently when a triggering event occurs between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value. Such impairment evaluations compare the reporting unit’s estimated fair value to its carrying value. Identifiable intangible assets consist primarily of customer relationships recognized in business combinations. Identifiable intangible assets with finite lives are amortized over their estimated useful lives, which represent the period over which the asset is expected to contribute directly or indirectly to future cash flows. Identifiable intangible assets are reviewed for impairment whenever events and circumstances indicate the carrying value of such assets or liabilities may not be recoverable and exceed their fair value. If an impairment loss exists, the carrying amount of the identifiable intangible asset is adjusted to a new cost basis. The new cost basis is amortized over the remaining useful life of the asset. Tests for impairment or recoverability require significant management judgment, and future events affecting cash flows and market conditions could adversely impact the valuation of these assets and result in impairment losses. During the year ended December 31, 2016 we recognized impairment on identifiable intangible assets of $679,411 related to the interlocking spherical bottle patent acquired in the acquisition of GT Beverage Company, Inc. As of December 31, 2015, no impairment had been recognized on identifiable intangible assets. |
Income Taxes | The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740 (“ ASC Topic 740 |
Stock-Based Compensation | Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the year ended December 31, 2016 and 2015 was $370,695 and $1,055,448, respectively. The Company uses a Black-Scholes option-pricing model (the “ Black-Scholes Model Shares, warrants and options issued to non-employees for services are accounted for at fair value, based on the fair value of instrument issued or the fair value of the services received, whichever is more readily determinable. |
Derivative Instruments | A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts (“ embedded derivatives Binomial Lattice |
Net Loss Per Share | We compute earnings (loss) per share using the two-class method, as unvested restricted common stock contains nonforfeitable rights to dividends and meets the criteria of a participating security. Under the two-class method, earnings are allocated between common stock and participating securities. The presentation of basic and diluted earnings per share is required only for each class of common stock and not for participating securities. As such, we present basic and diluted earnings per share for our one class of common stock. The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. A company’s reported net earnings is reduced by the amount allocated to participating securities to arrive at the earnings allocated to common stockholders for purposes of calculating earnings per share. At December 31, 2016 and 2015, the Company had 198,957,185 and 120,573,694 shares of Common Stock equivalents outstanding, respectively. Unvested restricted common stock, common stock options, and the Warrants are antidilutive and excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vesting are greater than the cost to reacquire the same number of shares at the average market price during the period. For the years ended December 31, 2016 and 2015, the impact of all outstanding unvested shares of restricted common stock, common stock options, and the Warrants are excluded from diluted loss per share as their impact would be antidilutive. The Company has evaluated its business to determine if it has multiple segments and has determined that it operates under a single segment. |
Research and Development | Research and development costs are expensed as incurred. |
Recent Accounting Pronouncements | In May 2014, the FASB issued ASU No. 2014-09 “Revenue from Contracts with Customers,” which amended the FASB Accounting Standards Codification (“ASC”) and created a new Topic ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance throughout the Industry Topics of the Codification. For the Company’s annual and interim reporting periods the mandatory adoption date of ASC 606 is January 1, 2018, and there will be two methods of adoption allowed, either a full retrospective adoption or a modified retrospective adoption. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 to the first quarter of 2018. In March 2016, April 2016, May 2016, and December 2016, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20, respectively, as clarifications to ASU 2014-09. ASU 2016-08 clarifies how to identify the unit of accounting for the principal versus agent evaluation, how to apply the control principle to certain types of arrangements, such as service transactions, and reframed the indicators in the guidance to focus on evidence that an entity is acting as a principal rather than as an agent. ASU 2016-10 clarifies the existing guidance on identifying performance obligations and licensing implementation. ASU 2016-12 adds practical expedients related to the transition for contract modifications and further defines a completed contract, clarifies the objective of the collectability assessment and how revenue is recognized if collectability is not probable, and when non-cash considerations should be measured. ASU 2016-20 corrects or improves guidance in thirteen narrow focus aspects of the guidance. The effective dates for these ASUs are the same as the effective date for ASU No. 2014-09, for the Company’s annual and interim periods beginning January 1, 2018. These ASU’s also require enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows. The Company will adopt the new revenue standards in its first quarter of 2018. The Company has not selected a transition method. The Company is still completing the assessment of the impact of these ASUs on its consolidated financial statements; however at the current time the Company does not expect that the adoption of these ASUs will have a material impact on its consolidated financial statements, financial condition or results of operations. In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of this standard be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. ASU 2015-11 will be effective for the Company’s annual and interim reporting periods beginning January 1, 2017, with early adoption permitted. The Company is currently evaluating the impact of this ASU; however the Company does not expect that the adoption of ASU 2015-11 will have a material impact on its consolidated financial statements, financial condition or results of operations. On February 25, 2016, the FASB issued ASU 2016-2, " Leases In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ ASU 2016-09 In August 2016, FASB issued ASU No. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments,” (“ ASU 2016-15 In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 will become effective for us beginning April 1, 2018, or fiscal 2019. ASU 2016-18 is required to be applied retrospectively. Upon the adoption, amounts described as restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. |
ORGANIZATION AND SUMMARY OF S18
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Organization And Summary Of Significant Accounting Policies Tables | |
Inventory | December 31, 2016 December 31, 2015 Purchased materials $ 89,358 $ 689,703 Finished goods 339,554 869,016 Allowance for obsolescence reserve (110,000 ) - Total $ 318,912 $ 1,558,719 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Issuance of common stock to founders, Shares | |
Summary warrant activity | Warrants Outstanding Weighted Average Exercise Price Outstanding, December 31, 2014 16,375,270 $ 0.40 Granted 50,543,837 0.16 Exercised - - Expired - - Outstanding, December 31, 2015 66,919,107 $ 0.18 Granted 36,696,083 0.15 Exercised (300,000 ) 0.15 Expired (1,918,774 ) 1.23 Outstanding, December 31, 2016 101,396,416 $ 0.15 |
Outstanding warrants to purchase its common stock | Warrants Outstanding Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Yrs.) 99,494,347 $ 0.15 4.11 427,633 $ 0.19 4.22 737,218 $ 0.25 1.69 737,218 $ 0.38 1.69 101,396,416 $ 0.15 4.07 |
Weighted average assumption | 2016 Expected life 2.5 years Estimated volatility 75.0 % Risk-free interest rate 0.66 % Dividends - |
Stock option activity | Options Outstanding Weighted Average Exercise Price Options outstanding at December 31, 2015 - $ - Exercised - - Granted 3,820,000 0.15 Forfeited 720,000 0.15 Expired - - Options outstanding at December 31, 2016 3,100,000 $ 0.15 |
Restricted stock activity | Restricted Common Stock Awards Outstanding, December 31, 2014 - Granted 19,491,375 Forfeited - Outstanding, December 31, 2015 19,491,375 Granted 2,000,000 Forfeited (5,349,146 ) Outstanding, December 31, 2016 16,142,229 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Intangible Assets Tables | |
Intangible assets | December 31, 2016 December 31, 2015 Patents and trademarks $ 1,027,438 $ 1,706,849 Accumulated amortization (777,438 ) (636,261 ) $ 250,000 $ 1,070,588 |
Future amortization expense | Patent and Trademark Amortization 2017 $ 37,975 2018 37,975 2019 37,975 2020 37,975 2021 37,975 2022 and thereafter 60,125 $ 250,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes Tables | |
Provision for income taxes | 2016 2015 Income tax expense (benefit) at statutory rate $ (1,851,491 ) $ (4,076,791 ) Change in valuation allowance 1,851,491 4,076,791 ) Income tax expense $ — $ — |
Components of income tax expense | The components of income tax expense (benefit) attributable to continuing operations are as follows: 2016 2015 Current expense: Federal $ — $ — State — — Deferred expense (benefit): Federal $ — $ — State — — Total $ — $ — |
Deferred tax asset | 2016 2015 Deferred tax asset –NOL’s $ 13,200,000 $ 11,040,000 Less valuation allowance (13,200,000 ) (11,040,000 ) Net deferred tax asset $ - $ - |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Tables | |
Convertible notes payable | Amount Outstanding, December 31, 2014 $ 4,030,000 Borrowings 1,470,000 Repayments (3,498,000 ) Conversions to Series C Preferred Stock (1,147,000 ) Outstanding, December 31, 2015 $ 855,000 Borrowings - Repayments (355,000 ) Conversions to Series C Preferred Stock (500,000 ) Outstanding, December 31, 2016 $ - |
Line of credit | Amount Outstanding, December 31, 2014 $ 233,000 Net Borrowings 249,000 Outstanding, December 31, 2015 $ 482,000 Net Repayments (372,000 ) Outstanding, December 31, 2016 $ 110,000 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair value of financial liabilities on a recurring basis | The following table presents the estimated fair value of financial liabilities measured at estimated fair value on a recurring basis included in the Company’s financial statements as of December 31, 2016 and 2015: Level 1 Level 2 Level 3 Total carrying value Quoted market prices in active markets Internal Models with significant observable market parameters Internal models with significant unobservable market parameters Derivative liabilities - December 31, 2016 $ 5,792,572 $ - $ - $ 5,792,572 Derivative liabilities - December 31, 2015 $ 6,199,021 $ - $ - $ 6,199,021 |
Changes in recurring fair value measurements included in net loss | The following table presents the changes in recurring fair value measurements included in net loss for the years ended December 31, 2016 and 2015: Recurring Fair Value Measurements Changes in Fair Value Included in Net Loss Other Income Other Expense Total Derivative liabilities - December 31, 2016 $ 3,566,170 $ - $ 3,566,170 Derivative liabilities - December 31, 2015 $ 1,262,329 $ - $ 1,262,329 |
Summary of changes in the fair value of our Level 3 financial liabilities | The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2016: December 31, 2015 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2016 Derivative liabilities $ 6,199,021 $ 3,159,721 $ - $ (3,566,170 ) $ 5,792,572 The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2015: December 31, 2014 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2015 Derivative liabilities $ 1,569,522 $ 5,891,828 $ - $ (1,262,329 ) $ 6,199,021 |
ORGANIZATION AND SUMMARY OF S24
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory | ||
Purchased materials | $ 89,358 | $ 689,703 |
Finished goods | 339,554 | 869,016 |
Allowance for obsolescence reserve | (110,000) | 0 |
Total | $ 318,912 | $ 1,558,719 |
ORGANIZATION AND SUMMARY OF S25
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
State of incorporation | Nevada | |
Date of incorporation | Jan. 1, 2001 | |
Net Loss | $ (5,445,562) | $ (11,990,563) |
Negative working capital | 6,162,213 | |
Accumulated deficit | 35,794,206 | 30,348,644 |
Restricted cash | 209,570 | 209,360 |
Inventory reserves | 110,000 | 0 |
Impairment of patent | 679,411 | 0 |
Stock based compensation expense | $ 370,695 | $ 1,055,448 |
Antidilutive shares | 198,957,185 | 120,573,694 |
Sales [Member] | ||
Concentration risk | 47.00% | |
Accounts Receivable [Member] | ||
Concentration risk | 79.00% |
STOCKHOLDERS EQUITY (Details Na
STOCKHOLDERS EQUITY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Dividends declared but unpaid | $ 265,099 | $ 271,838 |
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 264,529 | 288,971 |
Issuance of Common Stock for dividends on Preferred Stock, Shares | 1,838,390 | |
Issuance of Common Stock for services, Amount | $ 18,000 | 487,826 |
Issuance of Common Stock for services, Shares | $ 2,413,811 | |
Warrants vested | 221,053 | |
Share based compensation expense | $ 19,895 | |
Issuance1 [Member] | ||
Warrants issued fair value | 3,249,364 | |
Issuance 2 [Member] | ||
Warrants issued fair value | 378,681 | |
Issuance 3 [Member] | ||
Warrants issued fair value | $ 2,263,783 |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Warrant Outstanding | ||
Outstanding, beginning of period | 66,919,107 | 16,375,270 |
Granted | 36,696,083 | 50,543,837 |
Exercised | (300,000) | 0 |
Expired | (1,918,774) | 0 |
Outstanding, end of period | 101,396,416 | 66,919,107 |
Weighted average exercise price | ||
Outstanding Weighted Average Exercise Prices, beginning of period | $ .18 | $ .40 |
Granted | .15 | .16 |
Exercised | .15 | 0 |
Expired | 1.23 | 0 |
Outstanding Weighted Average Exercise Prices, end of period | $ .15 | $ .18 |
STOCK OPTIONS AND WARRANTS (D28
STOCK OPTIONS AND WARRANTS (Details 1) - $ / shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Warrants outstanding | 221,053 | ||
Outstanding Weighted Average Exercise Prices | $ .15 | $ .18 | $ .40 |
Warrant [Member] | |||
Warrants outstanding | 99,494,347 | ||
Outstanding Weighted Average Exercise Prices | $ .15 | ||
Weighted average remaining life (Yrs) | 4 years 1 month 10 days | ||
Warrant 2 [Member] | |||
Warrants outstanding | 427,633 | ||
Outstanding Weighted Average Exercise Prices | $ .19 | ||
Weighted average remaining life (Yrs) | 4 years 2 months 19 days | ||
Warrant 3 [Member] | |||
Warrants outstanding | 737,218 | ||
Outstanding Weighted Average Exercise Prices | $ .25 | ||
Weighted average remaining life (Yrs) | 1 year 8 months 8 days | ||
Warrant 4 [Member] | |||
Warrants outstanding | 737,218 | ||
Outstanding Weighted Average Exercise Prices | $ .38 | ||
Weighted average remaining life (Yrs) | 1 year 8 months 8 days | ||
Total Warrants [Member] | |||
Warrants outstanding | 101,396,416 | ||
Outstanding Weighted Average Exercise Prices | $ .15 | ||
Weighted average remaining life (Yrs) | 4 years 25 days |
STOCK OPTIONS AND WARRANTS (D29
STOCK OPTIONS AND WARRANTS (Details 2) | 12 Months Ended |
Dec. 31, 2016 | |
Stock Options And Warrants Details 2 | |
Expected life | 2 years 6 months |
Estimated volatility | 75.00% |
Risk-free interest rate | 0.66% |
Dividends | 0.00% |
STOCK OPTIONS AND WARRANTS (D30
STOCK OPTIONS AND WARRANTS (Details 3) | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Options Outstanding | |
Outstanding | shares | 0 |
Exercised | shares | 0 |
Granted | shares | 3,820,000 |
Forfeited | shares | 720,000 |
Expired | shares | 0 |
Outstanding | shares | 3,100,000 |
Weighted average exercise price | |
Outstanding Weighted Average Exercise Prices | $ / shares | $ 0 |
Exercised | $ / shares | 0 |
Granted | $ / shares | 0.15 |
Forfeited | $ / shares | 0.15 |
Expired | $ / shares | 0 |
Outstanding Weighted Average Exercise Prices | $ / shares | $ 0.15 |
STOCK OPTIONS AND WARRANTS (D31
STOCK OPTIONS AND WARRANTS (Details 4) - shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock Options And Warrants Details 2 [Default Label] | ||
Restricted stock at beginning of period | 19,491,375 | |
Restricted stock granted | 2,000 | 19,491,375 |
Restricted stock foreited | (5,349,146) | |
Restricted stock at end of period | 16,142,229 | 19,491,375 |
STOCK OPTIONS AND WARRANTS (D32
STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock Options And Warrants Details Narrative | ||
Stock based compensation | $ 370,695 | $ 1,055,448 |
Issuance of restricted Common Stock | 2,620,000 | 750,000 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible Assets Details | ||
Patents and trademarks | $ 1,027,438 | $ 1,706,849 |
Accumulated amortization | (777,438) | (636,261) |
Total intangible assets | $ 250,000 | $ 1,070,588 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) | Dec. 31, 2016USD ($) |
Patents and Trademark Amortization Future Expense | |
2,017 | $ 37,975 |
2,018 | 37,975 |
2,019 | 37,975 |
2,020 | 37,975 |
2,021 | 37,975 |
2022 and thereafter | 60,125 |
Total | $ 250,000 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible Assets Details Narrative | ||
Amortization expense | $ 141,177 | $ 148,768 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Income Taxes Details | ||
Deferred tax asset - NOL's | $ 13,200,000 | $ 11,040,000 |
Less valuation allowance | (13,200,000) | (11,040,000) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes Details | ||
Income tax expense (benefit) at statutory rate | $ (1,851,491) | $ (4,076,791) |
Change in valuation allowance | 1,851,491 | 4,076,791 |
Income tax expense |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) | Dec. 31, 2016USD ($) |
Income Taxes Details Narrative | |
Net operating loss carryforwards (NOLs) | $ 33,000,000 |
DEBT (Details)
DEBT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Debt Details | ||
Outstanding, beginning of period | $ 855,000 | $ 4,030,000 |
Borrowings | 0 | 1,470,000 |
Repayments | (355,000) | (3,498,000) |
Conversions to Series C preferred stock | (500,000) | (1,147,000) |
Outstanding, end of period | $ 855,000 |
DEBT (Details 1)
DEBT (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Debt Details | ||
Outstanding, beginning of period | $ 482,000 | $ 233,000 |
Net borrowings (repayments) | (372,000) | 249,000 |
Outstanding, end of period | $ 110,000 | $ 482,000 |
DEBT (Details Narrative)
DEBT (Details Narrative) | Dec. 31, 2016USD ($) |
Debt Details Narrative | |
Line of credit, amount outstanding | $ 109,682 |
Line of credit, maximum borrowing capacity | $ 1,500,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Sep. 30, 2017 | |
Commitments And Contingencies Details Narrative | ||
Total rent expense related to operating leases | $ 57,159 | |
Remaining lease payments | $ 28,458 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Derivative liabilities | $ 5,792,572 | $ 6,199,021 | $ 1,569,522 |
Fair Value, Inputs, Level 1 [Member] | |||
Derivative liabilities | 0 | 0 | |
Fair Value, Inputs, Level 2 [Member] | |||
Derivative liabilities | 0 | 0 | |
Fair Value, Inputs, Level 3 [Member] | |||
Derivative liabilities | $ 5,792,572 | $ 6,199,021 |
FAIR VALUE MEASUREMENTS (Deta44
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Change in Estimated Fair Value Recognized in Results of Operations | $ 3,566,170 | $ 1,262,329 |
Sales [Member] | ||
Change in Estimated Fair Value Recognized in Results of Operations | 3,566,170 | 1,262,329 |
Operating Expense [Member] | ||
Change in Estimated Fair Value Recognized in Results of Operations | $ 0 | $ 1,262,329 |
FAIR VALUE MEASUREMENTS (Deta45
FAIR VALUE MEASUREMENTS (Details 2) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Level 3 Financial Liabilities | |||
Derivative liabilities, beginning balance | $ 5,792,572 | $ 6,199,021 | $ 1,569,522 |
Recorded new derivative liabilities | 3,159,721 | 5,891,828 | |
Reclassification of Derivative Liabilities | 0 | 0 | |
Change in Estimated Fair Value Recognized in Results of Operations | (3,566,170) | (1,262,329) | |
Derivative liabilities | $ 5,792,572 | $ 6,199,021 | $ 1,569,522 |
LICENSING AGREEMENTS (Details N
LICENSING AGREEMENTS (Details Narrative) - USD ($) | 12 Months Ended | 24 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2017 | Mar. 31, 2017 | |
MarvelMember | |||
Agreeement term | 18 months | ||
Royalty rate | 5.00% | 5.00% | |
Royalty guarantee | $ 37,500 | $ 200,000 | |
DisneyMember | |||
Agreeement term | 3 years | ||
Royalty rate | 5.00% | ||
Royalty guarantee | $ 450,870 | ||
Common marketing fund contributions requirement, per agreement | $ 820,000 |