Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Jun. 18, 2018 | Jun. 30, 2017 | |
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, 2017 | ||
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 | $ 12,500,000 | ||
Entity Common Stock, Shares Outstanding | 228,460,602 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 76,534 | $ 15,306 |
Accounts receivable, net | 55,469 | 536,817 |
Inventory, net | 1,176,101 | 318,912 |
Prepaid expenses and other current assets | 80,918 | 127,258 |
Total Current Assets | 1,389,022 | 998,293 |
Restricted Cash | 0 | 209,570 |
Property and Equipment, net | 5,896 | 11,064 |
Patents, net | 0 | 250,000 |
Goodwill | 3,474,502 | 3,474,502 |
Total Assets | 4,869,420 | 4,943,429 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 7,432,799 | 1,258,252 |
Debt, Short-term | 764,563 | 109,682 |
Derivative liabilities | 8,337 | 5,792,572 |
Total Current Liabilities | 8,205,699 | 7,160,506 |
Debt, long-term | 2,050,000 | |
Total liabilities | 10,255,699 | 7,160,506 |
Commitments and Contingencies (Note 7) | ||
Stockholders’ Deficit: | ||
Common Stock, $0.001 par value, 300,000,000 shares authorized, 218,151,591 and 119,402,009 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively | 218,152 | 119,402 |
Additional paid in capital | 42,635,493 | 33,456,325 |
Accumulated deficit | (48,241,349) | (35,794,206) |
Total Stockholders’ Deficit | (5,386,279) | (2,217,077) |
Total Liabilities and Stockholders’ Deficit | 4,869,420 | 4,943,429 |
Series B Preferred Stock | ||
Stockholders’ Deficit: | ||
Preferred Stock | 1,285 | 1,293 |
Series C Preferred Stock | ||
Stockholders’ Deficit: | ||
Preferred Stock | 106 | 109 |
Series D Preferred Stock | ||
Stockholders’ Deficit: | ||
Preferred Stock | $ 34 | $ 0 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 218,151,591 | 119,402,009 |
Common stock, shares outstanding | 218,151,591 | 119,402,009 |
Series B Preferred Stock | ||
Preferred stock liquidation preference | $ 4 | $ 4 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,750,000 | 2,750,000 |
Preferred stock, shares issued | 1,285,585 | 1,292,870 |
Preferred stock, shares outstanding | 1,285,585 | 1,292,870 |
Series C Preferred Stock | ||
Preferred stock liquidation preference | $ 100 | $ 100 |
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares issued | 105,704 | 109,352 |
Preferred stock, shares outstanding | 105,704 | 109,352 |
Series D Preferred Stock | ||
Preferred stock liquidation preference | $ 100 | $ 0 |
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, shares authorized | 50,000 | 0 |
Preferred stock, shares issued | 34,250 | 0 |
Preferred stock, shares outstanding | 34,250 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Net Sales | $ 3,823,334 | $ 2,575,448 |
Cost of Sales | 3,052,144 | 2,253,585 |
Gross Profit | 771,190 | 321,863 |
Operating Expenses | ||
Selling and marketing | 5,620,193 | 3,782,941 |
General and administrative | 5,079,138 | 4,825,017 |
Contract settlement expense | 4,514,569 | 0 |
Total operating expenses | 15,213,900 | 8,607,958 |
Operating Loss | (14,442,710) | (8,286,095) |
Other (Expense) Income | ||
Change in fair value of derivative liabilities | 2,331,888 | 3,566,170 |
Impairment of patent | (130,000) | (679,411) |
Interest (expense) | (158,419) | (39,789) |
Other (expense) | (47,902) | (6,437) |
Total Other (Expense) Income | 1,995,567 | 2,840,533 |
NET LOSS | (12,447,143) | (5,445,562) |
Declared Dividends on Preferred Stock | 261,793 | 263,588 |
Net loss attributable to common stockholders | $ (12,708,936) | $ (5,709,150) |
Net loss per share basic and diluted | $ (.07) | $ (0.05) |
Weighted average common shares outstanding, basic and diluted | 193,799,475 | 115,292,366 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2015 | $ 111,434 | $ 1,318 | $ 49 | $ 0 | $ 29,690,834 | $ (30,348,644) | $ (545,009) |
Beginning Balance, Shares at Dec. 31, 2015 | 111,434,284 | 1,317,870 | 48,853 | 0 | |||
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, net of warrants issued, Amount | $ 4 | 407,228 | 407,232 | ||||
Issuance of Preferred Stock Series C for debt conversions, net of warrants issued, Shares | 4,413 | ||||||
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, net of warrants issued, Amount | $ 60 | 2,932,978 | 2,933,047 | ||||
Issuance of Preferred Stock for cash, net of warrants issued, Shares | 60,000 | ||||||
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 | 44,700 | 45,000 | ||||
Issuance of Common Stock for cash exercise of warrants, Shares | 300,000 | ||||||
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 | $ 1,293 | $ 109 | $ 0 | 33,456,325 | (35,794,206) | (2,217,077) |
Ending Balance, Shares at Dec. 31, 2016 | 119,402,009 | 1,292,870 | 109,352 | 0 | |||
Conversion of preferred stock to common stock, Amount | $ 10,132 | $ (8) | $ (3) | $ (12) | (10,109) | 0 | |
Conversion of common stock to preferred stock, Shares | 10,131,901 | (7,285) | (3,648) | (11,375) | |||
Issuance of Common Stock for services, Amount | $ 7,209 | 598,291 | 605,500 | ||||
Issuance of Common Stock for services, Shares | 7,209,156 | ||||||
Issuance of Preferred Stock for cash, net of warrants issued, Amount | $ 46 | 1,934,523 | 1,934,569 | ||||
Issuance of Preferred Stock for cash, net of warrants issued, Shares | 45,625 | ||||||
Stock-based compensation | 530,005 | 530,005 | |||||
Dividends declared on Preferred Stock | (261,793) | (261,793) | |||||
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 2,385 | 259,780 | 262,165 | ||||
Issuance of Common Stock for dividends on Preferred Stock, Shares | 2,385,387 | ||||||
Issuance of Common Stock in exchange for warrants, Amount | $ 79,024 | 6,001,254 | 6,080,278 | ||||
Issuance of Common Stock in exchange for warrants, Shares | 79,023,138 | ||||||
Warrants issued as debt discount | 127,217 | 127,217 | |||||
Net loss | (12,447,143) | (12,447,143) | |||||
Ending Balance, Amount at Dec. 31, 2017 | $ 218,152 | $ 1,285 | $ 106 | $ 34 | $ 42,635,493 | $ (48,241,349) | $ (5,386,279) |
Ending Balance, Shares at Dec. 31, 2017 | 218,151,591 | 1,285,585 | 105,704 | 34,250 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (12,447,143) | $ (5,445,562) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 5,168 | 5,241 |
Amortization | 120,000 | 141,177 |
Accretion of debt discount | 26,460 | 0 |
Impairment of patent | 679,411 | 0 |
Provision for bad debt expense | 273,294 | 8,029 |
Provision for inventory losses | (17,000) | 0 |
Change in estimated fair value of derivative liabilities | (2,331,888) | (3,566,170) |
Fair value of stock issued for services | 605,500 | 18,000 |
Stock based compensation | 530,005 | 370,695 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 208,054 | 1,298,569 |
Inventory | (840,189) | 1,239,807 |
Prepaid expenses and other current assets | 46,340 | (51,335) |
Accounts payable and accrued expenses | 7,262,995 | (365,274) |
Net cash used in operating activities | (6,428,404) | (5,667,412) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Change in restricted cash | 209,570 | (210) |
Purchase of property and equipment | 0 | (11,775) |
Net cash provided by (used in) investing activities | 209,570 | (11,985) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from warrants exercised for cash | 0 | 45,000 |
Proceeds from issuance of Series C Preferred Stock, net | 0 | 6,000,000 |
Proceeds from issuance of Series D Preferred Stock, net | 4,562,500 | 0 |
Net repayments on line-of-credit facility | (96,444) | (377,137) |
Proceeds from notes payable | 2,050,000 | 0 |
Repayments on notes payable | (235,994) | (350,000) |
Net cash provided by financing activities | 6,280,062 | 5,317,863 |
NET INCREASE (DECREASE) IN CASH | 61,228 | (361,534) |
CASH AND CASH EQUIVALENTS - beginning of year | 15,306 | 376,840 |
CASH AND CASH EQUIVALENTS - end of year | 76,534 | 15,306 |
SUPPLEMENTAL DISCLOSURES | ||
Cash paid for interest | 75,708 | 41,758 |
Non-cash financing and investing activities: | ||
Conversion of preferred stock to common stock | 10,109 | 2,980 |
Conversion of notes payable and accrued interest to series C preferred stock | 0 | 500,000 |
Dividend paid in common stock | 262,165 | 264,529 |
Dividends declared but unpaid | 261,793 | 265,009 |
Debt discount recorded in connection with borrowings on debt | 127,217 | 0 |
Notes payable issued in exchange for accounts payable | 1,049,564 | 0 |
Warrants issued in connection with preferred offering | $ 2,627,931 | $ 3,159,721 |
Warrants issued in connection with debt conversions | 6,080,278 | 0 |
Issuance of restricted stock | $ 0 | $ 2,620 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
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 2 Park Plaza, Suite 1200, Irvine, California 92614. Our telephone number is (949) 203-3500. Our corporate website address is http://www.truedrinks.com. Our common stock, par value $0.001 per share (“ Common Stock Recent Developments Cessation of Production of AquaBall®, and Management’s Plan Subsequent to the end of the fiscal year ended December 31, 2017, due to the weakness in the sale of the Company’s principal product, AquaBall® Naturally Flavored Water, and continued substantial operating losses, the Company’s Board of Directors determined to discontinue the production of AquaBall®, and, as set forth below, terminate the bottling agreement by and between Niagara Bottling LLC, the Company’s contract bottling manufacturer (“ Bottler Niagara Bottling Agreement Disney In May 2018, the Company sold its remaining AquaBall® inventory to Red Beard Holdings, LLC (“ Red Beard Purchase Price Red Beard Note The Company has reduced its staff to one employee and has taken other steps to minimize general, administrative and other operating costs. Management has also worked to reduce accounts payable by negotiating settlements with creditors to settle accounts payable utilizing a loan from Red Beard specifically for this purpose, and is currently negotiating with its remaining creditors to settle additional accounts payable. Management is currently exploring, together with Red Beard, available options to maximize the value of AquaBall® as well as Bazi®, which may include entering into a license or similar agreement with a third party to continue the production, marketing and sale of AquaBall® and Bazi®. In addition, although no assurances can be given, management is exploring, together Red Beard, opportunities to consummate a transaction that would maximize the value of the Company as a fully reporting public operating company. Termination of Bottling Agreement and Issuance of Notes On April 5, 2018 (the “ Effective Date Settlement Outstanding Amount Affiliate Guaranty 2015 Agreements Under the terms of the Settlement, in exchange for the termination of the 2015 Agreements, the Bottler agreed to accept, among other things: (i) a promissory note in the principal amount of $4,644,906 (the “ Principal Amount Note One Note Two Cash Payment The Principal Amount and all interest payments due under Note One shall be due and payable to the Bottler in full on or before the December 31, 2019 (the “ Note Payment provided, however Note Two shall have no force or effect except under certain conditions and shall be reduced by any payments made to the Bottler under the terms of the Settlement. True Drinks and the Company shall be jointly and severally responsible for all amounts due, if any, under Note Two, which shall automatically expire and terminate on December 31, 2019. In consideration for the guarantee of the Company’s obligations in connection with the Settlement, including as a joint and several obligor under the terms of Note One, the Company is obligated to issue Red Beard 348,367,950 shares of the Company’s Common Stock (the “ Shares Amendment In connection with the Settlement, and in order to make the Cash Payment described above, the Company issued the Red Beard Note to Red Beard, which Red Beard Note accrues interest at a rate of 5% per annum. In May 2018, as a result of the sale to Red Beard of the Company’s remaining AquaBall® inventory, the principal amount of the Red Beard Note was reduced by the Purchase Price. Pursuant to the terms of the Red Beard Note, Red Beard shall have the right, at its sole option, to convert the outstanding balance due into that number of fully paid and non-assessable shares of the Company’s Common Stock equal to the outstanding balance divided by $0.005 (the “ Conversion Option provided, however All outstanding principal and interest due under the terms of the Red Beard Note shall be due and payable to Red Beard in full on or before December 31, 2019, and is secured by a continuing security interest in substantially all of the Company’s assets. 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, 2017, the Company incurred a net loss of $12,447,143. At December 31, 2017, the Company had negative working capital of $6,816,677 and an accumulated deficit of $48,241,349. 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. 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, 2017, the Company did not have any restricted cash with a financial institution securing a letter of credit. The Company’s previous letter of credit matured in August 2017 and was issued as part of the contractual obligations related to the Disney Licensing 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. Based on our estimates, we recorded an allowance for doubtful accounts of approximately $391,000 and $118,000 as of December 31, 2017 and 2016, respectfully. 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. Prior to the termination of the Bottling Agreement in early 2018, all production of AquaBall® was done by Niagara. Niagara handled all aspects of production, including the procurement of all raw materials necessary to produce AquaBall®. We utilized two facilities to handle any necessary repackaging of AquaBall® into six packs or 15-packs for club customers. During 2017, 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. No customer made up more than 10% of accounts receivable at December 31, 2017 or 2016. No customer made up more than 10% of net sales for each of the years ended December 31, 2017 and 2016. A significant portion of our revenue during the years ended December 31, 2017 and 2016 came from sales of the AquaBall® Naturally Flavored Water. For the years ended December 31, 2017 and 2016, sales of AquaBall® accounted for 94% and 92% of the Company’s total revenue, respectively. Fair Value of Financial Instruments The Company’s financial instruments consist of cash, accounts receivable, accounts payable, derivative liability 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 As of December 31, 2017 and 2016, the Company purchased 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 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 $93,000 and $110,000 as of December 31, 2017 and 2016, respectively. The 2017 inventory reserve is related to our current inventory as of December 31, 2017 against our forecasted inventory movement until such inventory must be retired due to aging. The 2016 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. Inventory is comprised of the following: December 31, 2017 December 31, 2016 Purchased materials $ 29,012 $ 89,358 Finished goods 1,240,089 339,554 Allowance for obsolescence reserve (93,000 ) (110,000 Total $ 1,176,101 $ 318,912 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, 2017 and 2016. 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 2017 or 2016. 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 years ended December 31, 2017 and 2016 we recognized impairment on identifiable intangible assets of $130,000 and $679,411, respectively, related to the interlocking spherical bottle patent acquired in the acquisition of GT Beverage Company, Inc. 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, 2017 and 2016 was $530,005 and $370,695, 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, 2017 and 2016, the Company had 116,700,107 and 198,957,185 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, 2017 and 2016, 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: Topic 606. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This accounting standard is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact this accounting standard will have on the Company's financial statements. The Company has elected to adopt the guidance beginning in fiscal 2018 using the full retrospective approach, which applies the standard to all periods presented. The Company is performing a preliminary assessment of the impact of adoption of this guidance, including required disclosures, and does not expect a significant impact on processes, systems or controls. The Company will continue to evaluate the impact of adoption of this guidance. On February 25, 2016, the Financial Accounting Standards Board (“ FASB ASU 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 During the quarter ended December 31, 2017, the Company early adopted Accounting Standards Update (ASU) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
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, 2017, the Company declared $261,793 in dividends on outstanding shares of its Series B Preferred. The Company issued a total of 2,385,387 shares of Common Stock to pay $262,165 of cumulative unpaid dividends. As of December 31, 2017, there remained $65,708 in cumulative unpaid dividends on the Series B Preferred. Series C Preferred Series C Conversion Shares Subsequent to the year end, and in connection with dilution resulting from the Niagara Settlement, the conversion price was reset to $0.025 per share. Series D Preferred Series D Conversion Shares” Series D Preferred Series D Conversion Shares Subsequent to the year end, and in connection with dilution resulting from the Niagara Settlement, the conversion price was reset to $0.025 per share. Issuances 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. Between February 8, 2017 and August 21, 2017, the Company issued an aggregate total of 45,625 shares of Series D Preferred for $100 per share in a series of private placement transactions. As additional consideration, investors in the Series D Financing received warrants to purchase up to 60,833,353 shares of Common Stock, an amount equal to 200% of the Series D Conversion Shares issuable upon conversion of shares of Series D Preferred purchased under the Series D Financing, exercisable for $0.15 per share. In accordance with the terms and conditions of the Securities Purchase Agreement executed in connection with the Series D Financing, all warrants issued were exchanged for shares of Common Stock pursuant to the Warrant Exchange Program (defined below). During the year ended December 31, 2017, 11,375 shares of Series D Preferred were converted to Common Stock. Beginning on February 8, 2017 the Company and holders of the Outstanding Warrants entered into Warrant Exchange Agreements pursuant to which each holder agreed to cancel their respective Outstanding Warrants in exchange for one-half of a share of Common Stock for every share of Common Stock otherwise issuable upon exercise of Outstanding Warrants (the “ Warrant Exchange Program |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 12 Months Ended |
Dec. 31, 2017 | |
Stock Options And Warrants | |
STOCK OPTIONS AND WARRANTS | Warrants On July 26, 2017, the Company commenced an offering of Senior Secured Promissory Notes (the “ Secured Notes Secured Note Financing A summary of the Company’s warrant activity for the years ended December 31, 2017 and 2016 is presented below: Warrants Outstanding Weighted Average Exercise Price 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 Granted 68,666,690 0.15 Exercised - - Expired - - Exchanged (158,080,242 ) 0.15 Outstanding, December 31, 2017 11,982,864 $ 0.17 As of December 31, 2017, 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.) 10,080,795 $ 0.15 3.72 427,633 $ 0.19 2.97 737,218 $ 0.25 0.44 737,218 $ 0.38 0.44 11,982,864 $ 0.17 3.29 Non-Qualified Stock Options During the year ended December 31, 2017, the Company granted options to certain employees and each member of the Company’s Board of Directors to purchase an aggregate total of 41,390,782 shares of Common Stock. Each option granted during the year ended December 30, 2017 has an exercise price of between $0.07 and $0.15 per share, and expires five years from the date of issuance. As further described below, certain of these options were issued in exchange for the cancellation of previously issued restricted stock awards to our then Chief Marketing Officer, Chief Financial Officer and Chief Operating Officer. The weighted average estimated fair value per share of the stock options at grant date was $0.03 per share. Such fair values were estimated using the Black-Scholes stock option pricing model and the following weighted average assumptions. 2017 Expected life 30 months Estimated volatility 75.0 % Risk-free interest rate 1.1 % Dividends - Stock option activity during the year ended December 31, 2017 is summarized as follows: Options Outstanding Weighted Average Exercise Price Options outstanding at December 31, 2016 3,100,000 $ 0.15 Exercised - - Granted 41,390,782 0.07 Forfeited (2,720,000 ) 0.13 Expired - - Options outstanding at December 31, 2017 41,770,782 $ 0.08 Restricted Common Stock Awards During the year ended December 31, 2017, our then Chief Marketing Officer, Chief Financial Officer and Chief Operating Officer cancelled 10,720,252 previously issued restricted stock awards in exchange for stock options to purchase an aggregate total of 10,720,252 shares of Common Stock. In addition, the Company issued a total of 1,302,084 shares of restricted stock to James Greco, our Chief Executive Officer at that time, pursuant to the employment agreement entered into by the Company and Mr. Greco in April 2017, and an aggregate total of 2,289,156 shares of restricted stock to our directors as payment of accrued but unpaid board fees. The Company granted a total of 3,591,240 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 between $0.04 and $0.07 per share and a total of $194,158 was expensed during the year ended December 31, 2017, as all shares granted vested during the year. During the year ended December 31, 2017, the Company did not issue any shares of restricted stock under the plan. As of December 31, 2017, a total of 525,987 shares were unvested out of the total of 3,354,061 granted shares. A summary of the Company’s restricted common stock activity for the years ended December 31, 2017 and 2016 is presented below: Restricted Common Stock Awards Outstanding, December 31, 2015 19,491,375 Granted 2,000,000 Issued (3,370,000 ) Forfeited (5,349,146 Outstanding, December 31, 2016 12,772,229 Granted 3,591,240 Issued (2,289,156 ) Forfeited (10,720,252 ) Outstanding, December 31, 2017 3,354,061 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
Intangible Assets | |
INTANGIBLE ASSETS | The Company has incurred costs to trademark each of its 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, 2017 December 31, 2016 Patents and trademarks $ 920,588 $ 1,027,438 Accumulated amortization (920,588 ) (777,438 ) $ - $ 250,000 Amortization expense for the year ended December 31, 2017 and 2016 was $120,000 and $141,177, 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 impairment charges of $130,00 and $679,411 to the Patent during the years ended December 31, 2017 and 2016, respectively. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes | |
INCOME TAXES | The Company does not have significant income tax expense or benefit for the year ended December 31, 2017 or 2016. 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, 2017 and 2016. Such tax net operating loss carryforwards (“ NOL The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to the net loss before provision for income taxes for the years ended December 31, 2017 and 2016 are as follows: 2017 2016 Income tax expense (benefit) at statutory rate $ (2,613,900 ) $ (1,851,491 ) Change in valuation allowance 2,613,900 1,851,491 Income tax expense $ - $ - The components of income tax expense (benefit) attributable to continuing operations are as follows: 2017 2016 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, 2017 and 2016 as follows: 2017 2016 Deferred tax asset –NOL’s $ 10,131,000 $ 13,200,000 Less valuation allowance (10,131,000 ) (13,200,000 ) 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. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“ Tax Act 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, 2017. 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, 2017 | |
Debt | |
DEBT | 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, 2017, the total outstanding on the line-of-credit was $13,238 and the Company did not have any availability to borrow. The line-of-credit bears interest at Prime rate (4.50% as of December 31, 2017) plus 4.5% per annum, as well as a monthly fee of 0.50% on the average amount outstanding on the line with a $2,500 minimun, and is secured by the accounts receivables that are funded against. The Company has notified the lender of its intention not to renew this facility when it matures on July 31, 2018. A summary of the line-of-credit as of December 31, 2017 and 2016 is as follows: Amount Outstanding, December 31, 2016 $ 109,682 Net Borrowings (96,444 ) Outstanding December 31, 2017 $ 13,238 Note Payable In April 2017, the Company converted approximately $1,088,000 of accounts payable into a secured note payable agreement with Niagara (the “ Niagara Note Secured Note Financing As disclosed in Note 3 above, on July 26, 2017, the Company commenced an offering of Secured Notes in the aggregate principal amount of up to $1.5 million to certain accredited investors. The amount available was subsequently raised to $2.3 million. Between July 26, 2017 and December 31, 2017, the Company offered and sold Secured Notes in the aggregate principal amount of $2,050,000 and issued warrants to purchase up to 6,833,337 shares of Common Stock to participating accredited investors. The warrants were valued at $228,043 and were recorded as a discount to notes payable. During the year ended December 31, 2017, a total of $51,060 of the debt discount was amortized and recorded as interest expense. The Secured Notes (i) bear interest at a rate of 8% per annum, (ii) have a maturity date of 1.5 years from the date of issuance, and (iii) are subject to a pre-payment and change in control premium of 125% of the principal amount of the Secured Notes at the time of pre-payment or change in control, as the case may be. To secure the Company’s obligations under the Secured Notes, the Company granted to participating investors a continuing security interest in substantially all of the Company’s assets pursuant to the terms and conditions of a Security Agreement (the “ Security Agreement Of the $2,050,000 of Secured Notes issued during the year ended December 31, 2017, five notes totaling $1,200,000 were issued to a related party. The issuance of these notes included warrants to purchase up to 4,000,002 shares of Common Stock. A summary of the note payable as of December 31, 2017 and 2016 is as follows: Amount Outstanding, December 31, 2016 $ - Conversion of accounts payable into note payable 1,088,076 Borrowings on secured notes 2,050,000 Recording of debt discount on secured notes (127,217 ) Amortization of debt discount to interest expense 26,460 Repayments (235,994 ) Outstanding December 31, 2017 $ 2,801,315 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies | |
COMMITMENTS AND CONTINGENCIES | During the quarter ended September 30, 2017, the Company moved its corporate headquarters and entered into a new lease for the facility, which lease was scheduled to expire on March 31, 2019. Due to the Company’s financial condition and management’s plan, the lease was terminated on May 11, 2018. The Company is currently negotiating a fee to be paid to the lessee as consideration for the termination of the lease. Total rent expense related to this and our previous operating lease for the year ended December 31, 2017 was $65,765. Management is currently occupying office space located at 2 Park Plaza in Irvine California, which the Company rents for $500 per month. As of December 31, 2016 and 2017, the Company maintained employment agreements with certain key members of management. The agreements provided 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. Other than as set forth below, there are no additional pending or threatened legal proceedings at this time. Delhaize America Supply Chain Services, Inc. v. True Drinks, Inc Delhaize |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2017 | |
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, 2017. The Company had no Level 1 or 2 fair value measurements during 2017 or 2016. 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, 2017 and 2016: 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, 2017 $ 8,337 $ - $ - $ 8,337 Derivative liabilities - December 31, 2016 $ 5,792,572 $ - $ - $ 5,792,572 The following table presents the changes in recurring fair value measurements included in net loss for the years ended December 31, 2017 and 2016: Recurring Fair Value Measurements Changes in Fair Value Included in Net Loss Other Income Other Expense Total Derivative liabilities - December 31, 2017 $ 2,331,888 $ - $ 2,331,888 Derivative liabilities - December 31, 2016 $ 3,566,170 $ - $ 3,566,170 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, 2017: December 31, 2016 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2017 Derivative liabilities $ 5,792,572 $ 2,627,931 $ (6,080,278 ) $ (2,331,888 ) $ 8,337 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 |
LICENSING AGREEMENTS
LICENSING AGREEMENTS | 12 Months Ended |
Dec. 31, 2017 | |
Licensing Agreements | |
LICENSING AGREEMENTS | We first entered into licensing agreements with Disney Consumer Products, Inc. (“ Disney Marvel Licensing Agreements ® ® In March 2017, the Company and Disney entered into a renewed Licensing Agreement, which extended the Company’s license with Disney through March 31, 2019. The terms of the Disney Licensing Agreement entitle Disney to receive a royalty rate of 5% on sales of AquaBall ® ®, the Company notified Disney of the Company’s desire to terminate the licensing agreement in early 2018. ® and terminate the Licensing Agreement, and considering amounts due, Disney drew from a letter of credit funded by Red Beard in the amount of $378,000 on or about June 1, 2018. In the event the Company is unable to negotiate a settlement of or otherwise prevail in resolving all issues in dispute under the License Agreement, an additional $378,000 may be due and owing Disney thereunder. 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 over the period from January 1, 2016 through December 31, 2017. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | As more thoroughly discussed in Note 1 above, the Company’s Board of Directors determined to discontinue the production of AquaBall®, to terminate the Bottling Agreement and to sell all of the Company’s remaining AquaBall® inventory to Red Beard. The Company issued certain Promissory Notes to Red Beard in connection with these decisions, as more specifically set forth in Note 1 above. In addition, Red Beard has agreed to loan the Company up to $250,000 to allow the Company to settle certain accounts payable owing to certain creditors. As of June 25, 2018, the Company has settled approximately $550,000 in accounts payable to these creditors in consideration for the payment to such creditors of approximately $110,000. The terms of the promissory note to be issued to Red Beard reflecting the loan, the proceeds from which were used to settle the accounts payable, are currently being negotiated Management has reviewed and evaluated additional subsequent events and transactions occurring after the balance sheet date through the filing of this Annual Report on Form 10-K and determined that, other than as disclosed above, no subsequent events occurred. |
ORGANIZATION AND SUMMARY OF S17
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Organization And Summary Of Significant Accounting Policies Policies | |
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, 2017, the Company incurred a net loss of $12,447,143. At December 31, 2017, the Company had negative working capital of $6,816,677 and an accumulated deficit of $48,241,349. 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. 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, 2017, the Company did not have any restricted cash with a financial institution securing a letter of credit. The Company’s previous letter of credit matured in August 2017 and was issued as part of the contractual obligations related to the Disney Licensing 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. Based on our estimates, we recorded an allowance for doubtful accounts of approximately $391,000 and $118,000 as of December 31, 2017 and 2016, respectfully. |
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. Prior to the termination of the Bottling Agreement in early 2018, all production of AquaBall® was done by Niagara. Niagara handled all aspects of production, including the procurement of all raw materials necessary to produce AquaBall®. We utilized two facilities to handle any necessary repackaging of AquaBall® into six packs or 15-packs for club customers. During 2017, 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. No customer made up more than 10% of accounts receivable at December 31, 2017 or 2016. No customer made up more than 10% of net sales for each of the years ended December 31, 2017 and 2016. A significant portion of our revenue during the years ended December 31, 2017 and 2016 came from sales of the AquaBall® Naturally Flavored Water. For the years ended December 31, 2017 and 2016, sales of AquaBall® accounted for 94% and 92% of the Company’s total revenue, respectively. |
Fair Value of Financial Instruments | The Company’s financial instruments consist of cash, accounts receivable, accounts payable, derivative liability 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 | As of December 31, 2017 and 2016, the Company purchased 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 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 $93,000 and $110,000 as of December 31, 2017 and 2016, respectively. The 2017 inventory reserve is related to our current inventory as of December 31, 2017 against our forecasted inventory movement until such inventory must be retired due to aging. The 2016 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. Inventory is comprised of the following: December 31, 2017 December 31, 2016 Purchased materials $ 29,012 $ 89,358 Finished goods 1,240,089 339,554 Allowance for obsolescence reserve (93,000 ) (110,000) Total $ 1,176,101 $ 318,912 |
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, 2017 and 2016. |
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 2017 or 2016. |
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 years ended December 31, 2017 and 2016 we recognized impairment on identifiable intangible assets of $130,000 and $679,411, respectively, related to the interlocking spherical bottle patent acquired in the acquisition of GT Beverage Company, Inc. |
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, 2017 and 2016 was $530,005 and $370,695, 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, 2017 and 2016, the Company had 116,700,107 and 198,957,185 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, 2017 and 2016, 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: Topic 606. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This accounting standard is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact this accounting standard will have on the Company's financial statements. The Company has elected to adopt the guidance beginning in fiscal 2018 using the full retrospective approach, which applies the standard to all periods presented. The Company is performing a preliminary assessment of the impact of adoption of this guidance, including required disclosures, and does not expect a significant impact on processes, systems or controls. The Company will continue to evaluate the impact of adoption of this guidance. On February 25, 2016, the Financial Accounting Standards Board (“ FASB ASU 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 During the quarter ended December 31, 2017, the Company early adopted Accounting Standards Update (ASU) No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
ORGANIZATION AND SUMMARY OF S18
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Organization And Summary Of Significant Accounting Policies Tables | |
Inventory | December 31, 2017 December 31, 2016 Purchased materials $ 29,012 $ 89,358 Finished goods 1,240,089 339,554 Allowance for obsolescence reserve (93,000 ) (110,000 Total $ 1,176,101 $ 318,912 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Issuance of common stock to founders, Shares | |
Summary warrant activity | Warrants Outstanding Weighted Average Exercise Price 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 Granted 68,666,690 0.15 Exercised - - Expired - - Exchanged (158,080,242 ) 0.15 Outstanding, December 31, 2017 11,982,864 $ 0.17 |
Outstanding warrants to purchase its common stock | Warrants Outstanding Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Yrs.) 10,080,795 $ 0.15 3.72 427,633 $ 0.19 2.97 737,218 $ 0.25 0.44 737,218 $ 0.38 0.44 11,982,864 $ 0.17 3.29 |
Weighted average assumption | 2017 Expected life 30 months Estimated volatility 75.0 % Risk-free interest rate 1.1 % Dividends - |
Stock option activity | Options Outstanding Weighted Average Exercise Price Options outstanding at December 31, 2016 3,100,000 $ 0.15 Exercised - - Granted 41,390,782 0.07 Forfeited (2,720,000 ) 0.13 Expired - - Options outstanding at December 31, 2017 41,770,782 $ 0.08 |
Restricted stock activity | Restricted Common Stock Awards Outstanding, December 31, 2015 19,491,375 Granted 2,000,000 Issued (3,370,000 ) Forfeited (5,349,146 Outstanding, December 31, 2016 12,772,229 Granted 3,591,240 Issued (2,289,156 ) Forfeited (10,720,252 ) Outstanding, December 31, 2017 3,354,061 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Intangible Assets Tables | |
Intangible assets | December 31, 2017 December 31, 2016 Patents and trademarks $ 920,588 $ 1,027,438 Accumulated amortization (920,588 ) (777,438 ) $ - $ 250,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes Tables | |
Provision for income taxes | 2017 2016 Income tax expense (benefit) at statutory rate $ (2,613,900 ) $ (1,851,491 ) Change in valuation allowance 2,613,900 1,851,491 Income tax expense $ - $ - |
Components of income tax expense | 2017 2016 Current expense: Federal $ - $ - State - - Deferred expense (benefit): Federal $ - $ - State - - Total $ - $ - |
Deferred tax asset | 2017 2016 Deferred tax asset –NOL’s $ 10,131,000 $ 13,200,000 Less valuation allowance (10,131,000 ) (13,200,000 ) Net deferred tax asset $ - $ - |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Tables | |
Line of credit | Amount Outstanding, December 31, 2016 $ 109,682 Net Borrowings (96,444 ) Outstanding December 31, 2017 $ 13,238 |
Notes payable | Amount Outstanding, December 31, 2016 $ - Conversion of accounts payable into note payable 1,088,076 Borrowings on secured notes 2,050,000 Recording of debt discount on secured notes (127,217 ) Amortization of debt discount to interest expense 26,460 Repayments (235,994 ) Outstanding December 31, 2017 $ 2,801,315 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair value of financial liabilities on a recurring basis | 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, 2017 $ 8,337 $ - $ - $ 8,337 Derivative liabilities - December 31, 2016 $ 5,792,572 $ - $ - $ 5,792,572 |
Changes in recurring fair value measurements included in net loss | Recurring Fair Value Measurements Changes in Fair Value Included in Net Loss Other Income Other Expense Total Derivative liabilities - December 31, 2017 $ 2,331,888 $ - $ 2,331,888 Derivative liabilities - December 31, 2016 $ 3,566,170 $ - $ 3,566,170 |
Summary of changes in the fair value of our Level 3 financial liabilities | December 31, 2016 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2017 Derivative liabilities $ 5,792,572 $ 2,627,931 $ (6,080,278 ) $ (2,331,888 ) $ 8,337 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 |
ORGANIZATION AND SUMMARY OF S24
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Inventory | ||
Purchased materials | $ 29,012 | $ 89,358 |
Finished goods | 1,240,089 | 339,554 |
Allowance for obsolescence reserve | (93,000) | (110,000) |
Total | $ 1,176,101 | $ 318,912 |
ORGANIZATION AND SUMMARY OF S25
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Organization And Summary Of Significant Accounting Policies Details Narrative | ||
State of incorporation | Nevada | |
Date of incorporation | Jan. 1, 2001 | |
Net Loss | $ (12,447,143) | $ (5,445,562) |
Negative working capital | 6,816,677 | |
Accumulated deficit | 48,241,349 | 35,794,206 |
Inventory reserves | 93,000 | 110,000 |
Impairment of patent | 679,411 | 0 |
Stock based compensation expense | $ 530,005 | $ 370,695 |
Antidilutive shares | 116,700,107 | 198,957,185 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Dividends declared but unpaid | $ 261,793 | $ 265,009 |
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 262,165 | $ 264,529 |
Series D Preferred Stock | ||
Conversion of common stock to preferred stock, Shares | (11,375) |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Warrant Outstanding | ||
Outstanding, beginning of period | 101,396,416 | 66,919,107 |
Granted | 68,666,690 | 36,696,083 |
Exercised | 0 | (300,000) |
Expired | 0 | (1,918,774) |
Exchanged | (158,080,242) | 0 |
Outstanding, end of period | 11,982,864 | 101,396,416 |
Weighted average exercise price | ||
Outstanding Weighted Average Exercise Prices, beginning of period | $ 0.15 | $ 0.18 |
Granted | 0.15 | 0.15 |
Exercised | 0 | 0.15 |
Expired | 0 | 1.23 |
Exchanged | 0.15 | 0 |
Outstanding Weighted Average Exercise Prices, end of period | $ 0.17 | $ 0.15 |
STOCK OPTIONS AND WARRANTS (D28
STOCK OPTIONS AND WARRANTS (Details 1) - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Outstanding Weighted Average Exercise Prices | $ 0.17 | $ 0.15 | $ 0.18 |
Warrant [Member] | |||
Warrants outstanding | 10,080,795 | ||
Outstanding Weighted Average Exercise Prices | $ 0.15 | ||
Weighted average remaining life (Yrs) | 3 years 8 months 19 days | ||
Warrant 2 [Member] | |||
Warrants outstanding | 427,633 | ||
Outstanding Weighted Average Exercise Prices | $ 0.19 | ||
Weighted average remaining life (Yrs) | 2 years 11 months 19 days | ||
Warrant 3 [Member] | |||
Warrants outstanding | 737,218 | ||
Outstanding Weighted Average Exercise Prices | $ 0.25 | ||
Weighted average remaining life (Yrs) | 5 months 8 days | ||
Warrant 4 [Member] | |||
Warrants outstanding | 737,218 | ||
Outstanding Weighted Average Exercise Prices | $ 0.38 | ||
Weighted average remaining life (Yrs) | 5 months 8 days | ||
Total Warrants [Member] | |||
Warrants outstanding | 11,982,864 | ||
Outstanding Weighted Average Exercise Prices | $ 0.17 | ||
Weighted average remaining life (Yrs) | 3 years 3 months 14 days |
STOCK OPTIONS AND WARRANTS (D29
STOCK OPTIONS AND WARRANTS (Details 2) | 12 Months Ended |
Dec. 31, 2017 | |
Stock Options And Warrants Details 2 | |
Expected life | 30 months |
Estimated volatility | 75.00% |
Risk-free interest rate | 1.10% |
Dividends | 0.00% |
STOCK OPTIONS AND WARRANTS (D30
STOCK OPTIONS AND WARRANTS (Details 3) | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Options Outstanding | |
Outstanding | shares | 3,100,000 |
Exercised | shares | 0 |
Granted | shares | 41,390,782 |
Forfeited | shares | (2,720,000) |
Expired | shares | 0 |
Outstanding | shares | 41,770,782 |
Weighted average exercise price | |
Outstanding Weighted Average Exercise Prices | $ / shares | $ .15 |
Exercised | $ / shares | 0 |
Granted | $ / shares | .07 |
Forfeited | $ / shares | .13 |
Expired | $ / shares | .00 |
Outstanding Weighted Average Exercise Prices | $ / shares | $ .08 |
STOCK OPTIONS AND WARRANTS (D31
STOCK OPTIONS AND WARRANTS (Details 4) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock Options And Warrants Details 2 [Default Label] | ||
Restricted stock at beginning of period | 12,772,229 | 19,491,375 |
Restricted stock granted | 3,591,240 | 2,000,000 |
Restricted stock issued | (2,289,156) | (3,370,000) |
Restricted stock foreited | (10,720,252) | (5,349,146) |
Restricted stock at end of period | 3,354,061 | 12,772,229 |
STOCK OPTIONS AND WARRANTS (D32
STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock Options And Warrants Details Narrative | ||
Stock based compensation | $ 530,005 | $ 370,695 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible Assets Details | ||
Patents and trademarks | $ 920,588 | $ 1,027,438 |
Accumulated amortization | (920,588) | (777,438) |
Total intangible assets | $ 0 | $ 250,000 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible Assets Details Narrative | ||
Amortization expense | $ 120,000 | $ 141,177 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details | ||
Income tax expense (benefit) at statutory rate | $ (2,613,900) | $ (1,851,491) |
Change in valuation allowance | 2,613,900 | 1,851,491 |
Income tax expense | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Current expense: | ||
Federal | $ 0 | $ 0 |
State | 0 | 0 |
Deferred expense (benefit): | ||
Federal | 0 | 0 |
State | 0 | 0 |
Total | $ 0 | $ 0 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Taxes Details | ||
Deferred tax asset - NOL's | $ 10,131,000 | $ 13,200,000 |
Less valuation allowance | (10,131,000) | (13,200,000) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) | Dec. 31, 2017USD ($) |
Income Taxes Details Narrative | |
Net operating loss carryforwards (NOLs) | $ 40,900,000 |
DEBT (Details)
DEBT (Details) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Debt Details | |
Outstanding, beginning of period | $ 109,682 |
Net borrowings (repayments) | (96,444) |
Outstanding, end of period | $ 13,238 |
DEBT (Details 1)
DEBT (Details 1) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Debt Details | |
Outstanding, beginning of period | $ 0 |
Conversion of accounts payable into note payable | 1,088,076 |
Borrowings on secured notes | 2,050,000 |
Recording of debt discount on secured notes | (127,217) |
Amortization of debt discount to interest expense | 26,460 |
Repayments | (235,994) |
Outstanding, end of period | $ 2,801,315 |
DEBT (Details Narrative)
DEBT (Details Narrative) | Dec. 31, 2017USD ($) |
Debt Details Narrative | |
Line of credit, amount outstanding | $ 13,238 |
Line of credit, maximum borrowing capacity | $ 1,500,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Commitments And Contingencies Details Narrative | |
Total rent expense related to operating leases | $ 65,765 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Derivative liabilities | $ 8,337 | $ 5,792,572 | $ 6,199,021 |
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 | $ 8,337 | $ 5,792,572 |
FAIR VALUE MEASUREMENTS (Deta44
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Change in Estimated Fair Value Recognized in Results of Operations | $ 2,331,888 | $ 3,566,170 |
Other Income | ||
Change in Estimated Fair Value Recognized in Results of Operations | 2,331,888 | 3,566,170 |
Other Expense | ||
Change in Estimated Fair Value Recognized in Results of Operations | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS (Deta45
FAIR VALUE MEASUREMENTS (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Level 3 Financial Liabilities | ||
Derivative liabilities, beginning balance | $ 5,792,572 | $ 6,199,021 |
Recorded new derivative liabilities | 2,627,931 | 3,159,721 |
Reclassification of Derivative Liabilities | (6,080,278) | 0 |
Change in Estimated Fair Value Recognized in Results of Operations | (2,331,888) | (3,566,170) |
Derivative liabilities, ending balance | $ 8,337 | $ 5,792,572 |
LICENSING AGREEMENTS (Details N
LICENSING AGREEMENTS (Details Narrative) - MarvelMember | Dec. 31, 2017USD ($) |
Royalty guarantee | $ 807,000 |
Letter of credit | 378,000 |
Pending letter of credit | $ 378,000 |