Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Apr. 07, 2017 | Jun. 30, 2016 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Nxt-ID, Inc. | ||
Entity Central Index Key | 1,566,826 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 11,453,722 | ||
Entity Common Stock, Shares Outstanding | 8,543,339 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current Assets | ||
Cash | $ 3,299,679 | $ 418,991 |
Restricted cash | 40,371 | 1,534,953 |
Accounts receivable | 1,218,705 | |
Inventory, net | 5,341,500 | 1,767,942 |
Prepaid expenses and other current assets | 1,347,627 | 986,595 |
Total Current Assets | 11,247,882 | 4,708,481 |
Property and equipment: | ||
Equipment | 175,537 | 105,902 |
Furniture and fixtures | 79,062 | 72,713 |
Tooling and molds | 581,881 | 390,952 |
Depreciable assets, Total | 836,480 | 569,567 |
Accumulated depreciation | (456,752) | (196,353) |
Property and equipment, net | 379,728 | 373,214 |
Goodwill | 15,479,662 | |
Other intangible assets, net of amortization of $318,842 and $0, respectively | 8,285,725 | |
Total Assets | 35,392,997 | 5,081,695 |
Current Liabilities | ||
Accounts payable | 2,070,658 | 1,333,137 |
Accrued expenses | 2,901,672 | 641,438 |
Customer deposits | 6,068,894 | 8,729 |
Short-term debt | 773,969 | |
Convertible notes payable, net of discount of $1,366,667 and $1,445,342, respectively, and net of deferred debt issuance costs of $123,563 and $52,810, respectively | 9,770 | 1,796,698 |
Derivative liability conversion feature | 420,360 | |
Other current liabilities - contingent consideration | 1,496,442 | |
Total Current Liabilities | 13,321,405 | 4,200,362 |
Other long-term liabilities - contingent consideration | 4,832,028 | |
Revolving loan facility, net of deferred debt issuance costs of $769,453 | 14,230,547 | |
Deferred tax liability | 190,286 | |
Total Liabilities | 32,574,266 | 4,200,362 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Common stock, $0.0001 par value: 10,000,000 shares authorized; 7,379,924 and 4,442,528 issued and outstanding, respectively | 738 | 444 |
Additional paid-in capital | 33,204,943 | 22,787,762 |
Accumulated deficit | (34,659,801) | (21,906,873) |
Total Stockholders' Equity | 2,818,731 | 881,333 |
Total Liabilities and Stockholders' Equity | 35,392,997 | 5,081,695 |
Series A Preferred stock | ||
Stockholders' Equity | ||
Preferred stock, value | 182,851 | |
Total Stockholders' Equity | 1,869,775 | |
Series B Preferred Stock | ||
Stockholders' Equity | ||
Preferred stock, value | 4,090,000 | |
Total Stockholders' Equity | $ 4,090,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Other intangible assets, net of amortization | $ 318,842 | $ 0 |
Convertible notes payable, net of discount | 1,366,667 | 1,445,342 |
Deferred debt issuance costs | 123,563 | $ 52,810 |
Debt issuance costs | $ 769,453 | |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 7,379,924 | 4,442,528 |
Common stock, shares outstanding | 7,379,924 | 4,442,528 |
Series A Preferred stock | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 3,125,000 | 3,125,000 |
Preferred stock, shares issued | 310,268 | |
Preferred stock, shares outstanding | 310,268 | |
Preferred stock, liquidation preferences | $ 440,594 | |
Series B Preferred Stock | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 4,500,000 | 4,500,000 |
Preferred stock, shares issued | 4,500,000 | |
Preferred stock, shares outstanding | 4,500,000 | |
Preferred stock, liquidation preferences | $ 5,625,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Statements of Operations [Abstract] | ||
Revenues | $ 7,736,320 | $ 616,854 |
Costs of goods sold | 4,434,868 | 1,823,824 |
Gross Profit (Loss) | 3,301,452 | (1,206,970) |
Operating Expenses | ||
General and administrative | 6,241,685 | 3,565,242 |
Selling and marketing | 2,881,668 | 3,423,567 |
Research and development | 888,187 | 2,728,518 |
Total Operating Expenses | 10,011,540 | 9,717,327 |
Operating Loss | (6,710,088) | (10,924,297) |
Other Income and (Expense) | ||
Interest income | 23 | 727 |
Interest expense | (3,275,059) | (1,249,961) |
Inducement expense | (755,000) | |
Loss on extinguishment of debt | (272,749) | (635,986) |
Realized gain on change in fair value of derivative liabilities | 47,242 | |
Change in fair value of derivative liabilities | (2,299,020) | 444,728 |
Total Other Expense, Net | (5,846,805) | (2,148,250) |
Loss before Income Taxes | (12,556,893) | (13,072,547) |
Provision for Income Taxes | (196,035) | (4,307) |
Net Loss | (12,752,928) | (13,076,854) |
Preferred stock dividend | (1,080,741) | |
Net Loss applicable to Common Stockholders | $ (13,833,669) | $ (13,076,854) |
Net Loss Per Share - Basic and Diluted | $ (2.24) | $ (4.82) |
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 6,172,272 | 2,711,198 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Total | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit |
Beginning balance at Dec. 31, 2014 | $ 2,735,344 | $ 248 | $ 11,565,115 | $ (8,830,019) | |
Beginning balance, Shares at Dec. 31, 2014 | 2,477,605 | ||||
Exercise of common stock purchase warrants, net of fees | 650,000 | $ 3 | 649,997 | ||
Exercise of common stock purchase warrants, net of fees, Shares | 32,500 | ||||
Issuance of common stock and warrants for cash, net of fees | 2,917,378 | $ 33 | 2,917,345 | ||
Issuance of common stock and warrants for cash, net of fees, Shares | 332,143 | ||||
Stock issued related to waiver of installment provisions | 139,921 | $ 6 | 139,915 | ||
Stock issued related to waiver of installment provisions, Shares | 58,300 | ||||
Issuance of common stock for services | 2,381,961 | $ 25 | 2,381,936 | ||
Issuance of common stock for services, Shares | 254,147 | ||||
Issuance of restricted stock to employees | 373,834 | $ 2 | 373,832 | ||
Issuance of restricted stock to employees, Shares | 16,000 | ||||
Release of escrowed common stock to officers | $ 1 | (1) | |||
Release of escrowed common stock to officers, Shares | 11,833 | ||||
Issuance of common stock and warrants in connection with the World Ventures Holding Transaction | 1,974,522 | $ 100 | 1,974,422 | ||
Issuance of common stock and warrants in connection with the World Ventures Holding Transaction, Shares | 1,005,000 | ||||
Shares issued in connection with the issuance of convertible notes on December 8, 2015 | 333,000 | $ 9 | 332,991 | ||
Shares issued in connection with the issuance of convertible notes on December 8, 2015, Shares | 90,000 | ||||
Conversion of convertible notes and interest to common stock | 183,793 | $ 14 | 183,779 | ||
Conversion of convertible notes and interest to common stock, Shares | 140,000 | ||||
Warrants issued in connection with the issuance of convertible notes on April 23, 2015, net of deferred financing costs | 1,513,434 | 1,513,434 | |||
Inducement fees | 755,000 | $ 3 | 754,997 | ||
Inducement fees, Shares | 25,000 | ||||
Net loss | (13,076,854) | (13,076,854) | |||
Ending balance at Dec. 31, 2015 | 881,333 | $ 444 | 22,787,762 | (21,906,873) | |
Ending balance, Shares at Dec. 31, 2015 | 4,442,528 | ||||
Issuance of common stock for services | 619,254 | $ 21 | 619,233 | ||
Issuance of common stock for services, Shares | 204,553 | ||||
Conversion of convertible notes and interest to common stock | 3,943,421 | $ 160 | 3,943,261 | ||
Conversion of convertible notes and interest to common stock, Shares | 1,601,905 | ||||
Reclassification of remaining conversion feature liability | 1,702,400 | 1,702,400 | |||
Issuance of common stock and warrants in connection with the acquisition of Logicmark | 900,000 | $ 8 | 899,992 | ||
Issuance of common stock and warrants in connection with the acquisition of Logicmark, Shares | 78,740 | ||||
Exercise of common stock purchase warrants in connection with the acquisition of Logicmark | $ 16 | (16) | |||
Exercise of common stock purchase warrants in connection with the acquisition of Logicmark, Shares | 157,480 | ||||
Conversion of Series A preferred stock and dividends to common stock | 374,217 | $ (2,086,924) | $ 83 | 2,461,058 | |
Conversion of Series A preferred stock and dividends to common stock, Shares | (2,189,732) | 834,718 | |||
Shares issued in connection with the management incentive plan for 2015 | 372,000 | $ 6 | 371,994 | ||
Shares issued in connection with the management incentive plan for 2015, Shares | 60,000 | ||||
Issuance of Series A preferred stock, net | 2,269,775 | $ 2,269,775 | |||
Issuance of Series A preferred stock, net, Shares | 2,500,000 | ||||
Issuance of Series B preferred stock, net | 4,090,000 | $ 4,090,000 | |||
Issuance of Series B preferred stock, net, Shares | 4,500,000 | ||||
Note discount recorded in connection with the issuance of Convertible Exchange notes on November 29, 2016 | 1,500,000 | 1,500,000 | |||
Net loss | (12,752,928) | (12,752,928) | |||
Preferred stock dividend | (1,080,741) | (1,080,741) | |||
Ending balance at Dec. 31, 2016 | $ 2,818,731 | $ 4,272,851 | $ 738 | $ 33,204,943 | $ (34,659,801) |
Ending balance, Shares at Dec. 31, 2016 | 4,810,268 | 7,379,924 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash Flows from Operating Activities | ||
Net loss | $ (12,752,928) | $ (13,076,854) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 260,399 | 183,196 |
Stock based compensation | 1,113,129 | 1,513,584 |
Amortization of debt discount | 648,365 | 1,093,371 |
Amortization of intangible assets | 318,842 | |
Amortization of discount on contingent consideration | 91,682 | |
Loss on extinguishment of debt | 272,749 | 635,986 |
Inducement fees | 755,000 | |
Non - cash inventory charges | 48,405 | 999,124 |
Amortization of deferred debt issuance costs | 631,994 | 35,683 |
Unrealized (loss) gain on change in fair value of derivative liabilities | 2,299,020 | (444,728) |
Realized gain on change in fair value of derivative liabilities | (47,242) | |
Stock issued related to waiver of installment provisions | 139,921 | |
Deferred taxes | 190,286 | |
Other | 44,628 | 69,850 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (721,230) | |
Inventory | (1,055,846) | (2,407,522) |
Prepaid expenses and other current assets | (362,399) | 400,497 |
Accounts payable | 120,008 | 1,352,881 |
Accrued expenses | 1,842,683 | 306,451 |
Customer deposits | 6,060,165 | (129,870) |
Total Adjustments | 11,865,666 | 4,456,182 |
Net Cash Used in Operating Activities | (950,048) | (8,620,672) |
Cash flows from Investing Activities | ||
Restricted cash | 1,494,582 | (1,506,514) |
Acquisition, net of cash acquired | (17,390,290) | |
Purchase of equipment | (39,073) | (381,767) |
Net Cash Used in Investing Activities | (15,934,781) | (1,888,281) |
Cash flows from Financing Activities | ||
Proceeds received from issuance of Series A preferred stock, net | 1,869,775 | |
Proceeds received from issuance of Series B preferred stock, net | 4,090,000 | |
Proceeds received from short-term promissory note | 400,000 | |
Pay down of short-term debt | (1,726,031) | |
Proceeds received in connection with issuance of common stock and warrants, net | 5,114,353 | |
Proceeds received from issuance of convertible exchange notes, net | 1,400,000 | |
Revolver borrowings, net | 13,906,250 | |
Payment of Series A preferred stock dividends | (123,457) | |
Proceeds from convertible notes payable | 2,962,304 | |
Proceeds received in connection with exercise of warrants | 650,000 | |
Fees paid in connection with equity offerings | (51,020) | |
Net Cash Provided by Financing Activities | 19,765,517 | 8,726,657 |
Net Increase (Decrease) in Cash | 2,880,688 | (1,782,296) |
Cash - Beginning of Year | 418,991 | 2,201,287 |
Cash - End of Year | 3,299,679 | 418,991 |
Cash paid during the periods for: | ||
Interest | 930,219 | |
Taxes | 8,764 | 1,000 |
Non-cash financing activities: | ||
Equipment purchases on payment terms | 18,420 | |
Fees incurred in connection with equity offerings | 222,453 | |
Issuance of common stock in connection with accelerated installments of note payable | 3,294,850 | 350,000 |
Reclassification of conversion feature liability in connection with note modification | 1,702,400 | |
Commitment shares issued in connection with December 8, 2015 notes | 333,000 | |
Additional convertible notes issued in connection with exchange of April 24, 2015 notes for December 8, 2015 notes | 500,000 | |
Fees incurred in connection with revolving credit facility | 256,250 | |
Issuance of common stock in connection with conversion of interest on convertible notes | 291,588 | |
Issuance of common stock in connection with conversion of Series A preferred stock | 2,189,732 | |
Accrued Series A preferred dividends | 92,442 | |
Accrued Series B preferred dividends | 490,625 | |
Exchange of short-term promissory note for Series A preferred stock | 400,000 | |
Issuance of common stock in connection with conversion of dividends on Series A preferred stock | 374,217 | |
Assets acquired and liabilities assumed: | ||
Current assets, including cash acquired of $109,710 | 3,541,323 | |
Property and equipment | 227,840 | |
Goodwill and other intangible assets | 24,084,229 | |
Accounts payable and accrued liabilities | (716,604) | |
Net Assets Acquired | 27,136,788 | |
Less: cash paid to acquire LogicMark | (17,500,000) | |
Non cash consideration | 9,636,788 | |
Non-cash consideration consisted of: | ||
Note payable issued to sellers | 2,500,000 | |
Common stock and warrants issued to sellers | 900,000 | |
Earn-out provision | 6,236,788 | |
Non-cash consideration | $ 9,636,788 |
Consolidated Statements of Cas7
Consolidated Statements of Cash Flows (Parenthetical) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Statement of Cash Flows [Abstract] | |
Cash acquired | $ 109,710 |
Organization and Principal Busi
Organization and Principal Business Activity | 12 Months Ended |
Dec. 31, 2016 | |
Organization and Principal Business Activity [Abstract] | |
ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITY | NOTE 1 - ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITY Nxt-ID, Inc. (“Nxt-ID” or the “Company”) was incorporated in the State of Delaware on February 8, 2012. Nxt-ID is a security technology company providing security for finance, assets and healthcare. The Company’s innovative MobileBio solution mitigates risks associated with mobile computing, m-commerce and smart OS-enabled devices. With extensive experience in biometric identity verification, security, privacy, encryption and data protection, payments, miniaturization and sensor technologies, the Company partners with industry leading companies to provide solutions for modern payment and the Internet of Things applications. The Company’s wholly-owned subsidiary, LogicMark, LLC (“LogicMark”), manufactures and distributes non-monitored and monitored personal emergency response systems sold through the United States Department of Veterans Affairs, healthcare durable medical equipment dealers and distributors and monitored security dealers and distributors. The Company operates its business in one segment, Hardware and Software Security Systems and Applications. The Company evaluates the performance of its business on, among other things, profit and loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense, income taxes and amortization related to certain intangible assets. On June 25, 2012, Nxt-ID, a company having similar ownership as 3D-ID, acquired 100% of the membership interests in 3D-ID (the “Acquisition”) in exchange for 20,000,000 shares of Nxt-ID common stock. Since this was a transaction between entities under common control, in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations”, Nxt-ID recognized the net assets of 3D-ID at their carrying amounts in the accounts of Nxt-ID on the date that 3D-ID was organized. 3D-ID, LLC (“3D-ID”) was organized and registered in the State of Florida on February 14, 2011. On July 25, 2016, the Company completed the acquisition of LogicMark, LLC (“LogicMark”) pursuant to an Interest Purchase Agreement by and among the Company, LogicMark and the holders of all of the membership interests of LogicMark (the “Logicmark Sellers”), dated May 17, 2016 (the “Interest Purchase Agreement”). Pursuant to the Interest Purchase Agreement, the Company acquired all of the membership interests of Logicmark from the Logicmark Sellers for (i) $17.5 million in cash consideration (ii) $2.5 million in a secured promissory note (the “Logicmark Note”) issued to Logicmark Investment Partners, LLC, as representative of the Logicmark Sellers (the “Logicmark Representative”) (iii) 78,740 shares of common stock, which were issued upon signing of the Interest Purchase Agreement (the “Logicmark Shares”), and (iv) warrants (the “Logicmark Warrants,”) to purchase an aggregate of 157,480 shares of common stock (the “Logicmark Warrant Shares”) for no additional consideration. In addition, the Company may be required to pay the Logicmark Sellers earn-out payments of (i) up to $1,500,000 for calendar year 2016 and (ii) up to $5,000,000 for calendar year 2017 if LogicMark meets certain gross profit targets set forth in the Interest Purchase Agreement. The Logicmark Warrants were all exercised on July 27, 2016. |
Reclassification of Deferred De
Reclassification of Deferred Debt Issuance Costs and Reverse Stock Split | 12 Months Ended |
Dec. 31, 2016 | |
Reclassification of Deferred Debt Issuance Costs and Reverse Stock Split [Abstract] | |
RECLASSIFICATION OF DEFERRED DEBT ISSUANCE COSTS AND REVERSE STOCK SPLIT | NOTE 2 - RECLASSIFICATION OF DEFERRED DEBT ISSUANCE COSTS AND REVERSE STOCK SPLIT On September 1, 2016, the Company’s board of directors and stockholders approved a resolution to amend the Company’s Certificate of Incorporation and to authorize the Company to effect a reverse split of the Company’s outstanding common stock at a ratio of 1-for-10 (the “Reverse Split”). On September 9, 2016, the Company effected the Reverse Split. Upon effectiveness of the Reverse Split, every 10 shares of outstanding common stock decreased to one share of common stock. Throughout this report, the Reverse Split was retroactively applied to all periods presented. In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which provides guidance for simplifying the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. This guidance will be effective for fiscal years beginning after December 15, 2015, and early adoption is permitted for financial statements that have not been previously issued. The standard requires application on a retrospective basis and represents a change in accounting principle. In addition, in August 2015, Accounting Standards Update 2015-15, Interest - Imputation of Interest (“ASU 2015-15”), was released, which codified guidance pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force (EITF) meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. |
Liquidity and Management Plans
Liquidity and Management Plans | 12 Months Ended |
Dec. 31, 2016 | |
Liquidity and Management Plans [Abstract] | |
LIQUIDITY AND MANAGEMENT PLANS | NOTE 3 - LIQUIDITY AND MANAGEMENT PLANS The Company is an emerging growth entity and incurred net losses of $12,752,928 during the year ended December 31, 2016. As of December 31, 2016 the Company had a working capital deficiency of $2,073,523 and stockholders’ equity of $2,818,731. As of December 31, 2015, the Company had substantial doubt about its ability to continue as a going concern as it had no revenues and required additional cash to execute its business plan. The accompanying 2015 financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As of December 31, 2016, the Company had alleviated this concern as it had raised additional capital and acquired a profitable revenue generating subsidiary, LogicMark LLC. In addition the Company began to recognize revenues from its contract with World Ventures Holdings Inc. In order to execute the Company’s long-term strategic plan to develop and commercialize its core products, fulfill its product development commitments and fund its obligations as they come due, the Company may need to raise additional funds, through public or private equity offerings, debt financings, or other means. During the twelve months ended December 31, 2016, the Company raised $1,869,775 in net proceeds from the issuance of the Company’s Series A Convertible Preferred Stock, $0.0001 par value (the “Series A Preferred Stock”) and $400,000 from the issuance of a promissory note that was converted into Series A Preferred Stock. In addition, the Company received $4,090,000 in net proceeds from the issuance of the Company’s Series B Convertible Preferred Stock, $0.0001 par value (the “Series B Preferred Stock”). However, the Company can give no assurance that any cash raised subsequent to December 31, 2016 will be sufficient to execute its business plan or meet its obligations. The Company can give no assurance that additional funds will be available on reasonable terms, or available at all, or that it will generate sufficient revenue to alleviate these conditions. The Company’s ability to execute its business plan is dependent upon its ability to raise additional equity, secure debt financing, and/or generate revenue. Should the Company not be successful in obtaining the necessary financing, or generate sufficient revenue to fund its operations, the Company would need to curtail certain of its operational activities. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management evaluates these significant estimates and assumptions included those related to the fair value of acquired assets and liabilities, stock based compensation, derivative instruments, income taxes and inventories, and other matters that affect the consolidated financial statements and disclosures. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Nxt-ID and its wholly-owned subsidiaries, 3D-ID and LogicMark. Intercompany balances and transactions have been eliminated in consolidation. CASH The Company considers all highly liquid securities with an original maturity date of three months or less when purchased to be cash equivalents. Due to their short-term nature, cash equivalents are carried at cost, which approximates fair value. At December 31, 2016 and 2015, the Company had no cash equivalents. RESTRICTED CASH At December 31, 2016 and 2015, the Company had restricted cash of $40,371 and $1,534,953, respectively. The restricted cash balance at December 31, 2015 included $1,500,000 received on December 31, 2015 as a result of the World Ventures Holdings transaction, described elsewhere in the notes to these consolidated financial statements. Restricted cash also includes amounts held back by the Company’s third party credit card processor for potential customer refunds, claims and disputes. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its cash balances in large well-established financial institutions located in the United States. At times, the Company’s cash balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. During the year ended December 31, 2016, the Company recognized revenue of $1,357,413 from WVH a related party. At December 31, 2016, the Company’s accounts receivable balance included $621,724 due from WVH. REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, the service has been rendered or product delivery has occurred, the price is fixed or readily determinable and collectability of the sale is reasonably assured. The Company’s wocket® smart wallet sales comprise multiple element arrangements including both the wocket® smart wallet device itself as well as unspecified future upgrades. The Company offers to all of its end-consumer customers a period of fourteen days post the actual receipt date in which to return their wocket® smart wallet. The Company was unable to reliably estimate returns at the time shipments were made during the year’s ended December 31, 2016 and 2015 due to lack of return history. Accordingly, the Company has recognized revenue only on those shipments whose fourteen day return period had lapsed by December 31, 2016 or 2015. Such sales during the fourteen day period ending December 31, 2016 or 2015 were not material. The Company accrues for the estimated costs associated with the one year wocket® smart wallet warranty at the time revenue associated with the sale is recorded, and periodically updates its estimated warranty cost based on actual experience. At December 31, 2016 and 2015, such amounts were not material. SHIPPING AND HANDLING Amounts billed to customers for shipping and handling are included in revenues. The related freight charges incurred by the Company are included in cost of goods and were not material for either the years ended December 31, 2016 or 2015. ACCOUNTS RECEIVABLE For the year ended December 31, 2016, the Company’s revenues included shipments of the wocket® smart wallet to customers who placed orders in 2016. For the year ended December 31, 2015, the Company’s revenues related to shipments of the wocket® smart wallet to customers who pre-ordered the product in 2014 as well as to those customers who ordered the product in 2015. In addition, the revenues for the year ended December 31, 2016 and 2015 included resale sales of the wocket® smart wallet to retail customers who resell the wocket® smart wallet through their respective distribution channels. The aggregate amount of these resale sales was $33,540 and $167,164 for the years ended December 31, 2016 and 2015, respectively. The terms and conditions of these sales provide the retail customers with trade credit terms. In addition, these sales were made to the retailers with no rights of return and are subject to the normal warranties offered to the ultimate consumer for product defects. Accounts receivable INVENTORY Effective October 1, 2015 for application prospectively, the Company adopted FASB Accounting Standards Update No. 2015-11, simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory is measured at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Previously, inventory was measured at the lower of cost or market. The Company adopted ASU 2015-11 in connection with its fourth quarter 2015 inventory valuation review, and prompted by the impact of EMV chip point of sale and Nearfield Communication technologies on our business. As a result, the Company’s fourth quarter 2015 inventory valuation charges were determined based upon our inventory’s net realizable value. The Company performs regular reviews of inventory quantities on hand and evaluates the realizable value of its inventories. The Company adjusts the carrying value of the inventory as necessary with estimated valuation reserves for excess, obsolete, and slow-moving inventory by comparing the individual inventory parts to forecasted product demand or production requirements. As of December 31, 2016 inventory was comprised of $3,797,499 in raw materials and $1,544,001 in finished goods on hand. As of December 31, 2015 inventory was comprised of $1,587,653 in raw materials and $180,289 in finished goods on hand. As an emerging growth company, the Company is required to prepay for raw materials with certain vendors until credit terms can be established. As of December 31, 2016 and 2015, $1,089,770 and $49,103, respectively of prepayments made primarily for raw materials inventory is included in prepaid expenses and other current assets on the consolidated balance sheet. LONG-LIVED ASSETS Long-lived assets, such as property and equipment, goodwill and other intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with ASC 360-10-35-17 through 35-35 “Measurement of an Impairment Loss.” The Company assesses the impairment of the assets based on the undiscounted future cash flow the assets are expected to generate compared to the carrying value of the assets. If the carrying amount of the assets is determined not to be recoverable, a write-down to fair value is recorded. Management estimates future cash flows using assumptions about expected future operating performance. Management’s estimates of future cash flows may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes to the Company’s business operations. PROPERTY AND EQUIPMENT Property and equipment consisting of furniture, fixtures and tooling is stated at cost. The costs of additions and improvements are generally capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful life of the respective asset as follows: Equipment 5 years Furniture and fixtures 3 to 5 years Tooling and molds 2 to 3 years Goodwill On July 25, 2016, the Company recorded goodwill of $15,479,662 as a result of the LogicMark acquisition. The Company will begin testing goodwill for impairment annually in the third quarter of each year using data as of August 1 of that year. Other Intangible Assets The Company’s intangible assets are all related to the LogicMark acquisition and are included in other intangible assets in the Company’s consolidated balance sheet at December 31, 2016. The Company had no intangible assets at December 31, 2015. At December 31, 2016, the other intangible assets are comprised of patents with a fair value of $3,936,612; trademarks with a fair value of $1,230,002; and customer relationships with a fair value of $3,119,111. The Company will amortize these intangible assets using the straight line method over their estimated useful lives which for the patents, trademarks and customer relationships are 11 years; 20 years; and 10 years, respectively. During the twelve months ended December 31, 2016, the Company had amortization expense of $318,842 related to the intangible assets. Amortization expense estimated for each of the next five fiscal years, 2017 through 2021 will be approximately $764,000 per year. CONVERTIBLE INSTRUMENTS The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts that feature conversion options. The accounting standards require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in the results of operations. Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt using the straight line method which approximates the interest rate method. See Note 7. DERIVATIVE FINANCIAL INSTRUMENTS The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes option valuation model to value the derivative instruments at inception and on subsequent valuation dates. The conversion feature embedded within Company’s convertible note payable does not have fixed settlement provisions as the conversion price varies based on the trading price of the Company’s common stock and the potential number of common shares to be issued upon conversion is indeterminable up to a maximum of 120,000 shares of common stock. In addition, the warrants issued in connection with the Offering (as defined in Note 8) do not have fixed settlement provisions as their exercise prices may be lowered if the Company conducts an offering in the future at a price per share below the exercise price of the warrants. Accordingly, the conversion feature and warrants have been recognized as derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. (See Note 8.) DEBT DISCOUNT AND AMORTIZATION OF DEBT DISCOUNT Debt discount represents the fair value of embedded conversion options of various convertible debt instruments and attached convertible equity instruments issued in connection with debt instruments. The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt. The amortization of debt discount is included as a component of interest expense included in other income and expenses in the accompanying statements of operations. INCOME TAXES The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company will classify as income tax expense any interest and penalties. The Company has no material uncertain tax positions for any of the reporting periods presented. Generally, the tax authorities may examine the partnership/corporate tax returns for three years from the date of filing. The Company has filed all of its tax returns for all prior periods through December 31, 2015. STOCK-BASED COMPENSATION The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. The Company accounts for equity instruments issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation charges are amortized over the vesting period or as earned. The Company generally issues new shares of common stock to satisfy conversion and warrant exercises. NET LOSS PER SHARE Basic loss per share was computed using the weighted average number of common shares outstanding. Diluted loss per share includes the effect of diluted common stock equivalents. Potentially dilutive securities of 2,581,104 realizable from the convertible Series A and Series B Preferred Stock (defined below), 575,000 from the convertible exchange notes and from the exercise of 1,829,049 warrants as of December 31, 2016 were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of December 31, 2015, potentially dilutive securities realizable from the conversion of convertible notes and related accrued interest and from the exercise of 761,549 warrants were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. RESEARCH AND DEVELOPMENT Research and development costs consist of expenditures incurred during the course of planned research and investigation aimed at the discovery of new knowledge, which will be useful in developing new products or processes. The Company expenses all research and development costs as incurred. RECENT ACCOUNTING PRONOUNCEMENTS In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 is intended to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the ASU 2016-15 and does not believe this ASU will have a material impact on its condensed consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12 (“ASU 2016-12”), “Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements and Practical Expedients.” ASU 2016-12 will affect all entities that enter into contracts with customers to transfer goods or services (that are an output of the entity’s ordinary activities) in exchange for consideration. The amendments in this update affect the guidance in ASU 2014-09 which is not yet effective, the amendments in this update affect narrow aspects of Topic 606 including among others: assessing collectability criterion, noncash consideration, and presentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for ASU 2014-09. The Company is currently evaluating the effect that ASU 2016-12 will have on the Company’s financial position and results of operations. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”), “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 will affect all entities that issue share-based payment awards to their employees and is effective for annual periods beginning after December 15, 2016 for public entities. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company is currently evaluating the effect that ASU 2016-09 will have on the Company’s financial position and results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently assessing the potential impact of ASU 2016-02 on the audited financial statements and related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, |
Acquisition of LogicMark LLC
Acquisition of LogicMark LLC | 12 Months Ended |
Dec. 31, 2016 | |
Acquisition of LogicMark LLC [Abstract] | |
ACQUISITION OF LOGICMARK LLC | NOTE 5 – ACQUISITION OF LOGICMARK LLC On July 25, 2016, the Company completed the acquisition of LogicMark. The Company determined that as of July 25, 2016, it was more likely than not that these gross profit targets as it relates to the contingent considerations would be achieved and any fair value adjustment of the earnout was due to time value of the payout. On July 25, 2016, and in order to fund part of the proceeds of the LogicMark acquisition, the Company and a group of lenders, including ExWorks Capital Fund I, L.P. as agent for the lenders (collectively, the “Lenders”), entered into a Loan and Security Agreement (the “Loan Agreement”), whereby the Lenders extended a revolving loan (the “Revolving Loan”) to the Company in the principal amount of $15,000,000 (the “Debt Financing”). The Company incurred $1,357,356 in deferred debt issue costs related to the revolving loan. At December 31, 2016 the unamortized balance of those deferred debt issue costs was $769,453. The maturity date of the Revolving Loan is July 25, 2017, and the Revolving Loan bears interest at a rate of 15% per annum. The Loan Agreement contains customary covenants, including an EBITDA requirement and a fixed change ratio, as defined in the agreement. As of December 31, 2016, the Company was in compliance with such covenants. The Company has the ability to extend the Revolver for two additional years at its sole discretion with no subjective acceleration by the lender, provided the Company is not in default on the loan. The Company intends to exercise the option to extend the maturity date and accordingly, the Company has classified the Revolver as a non-current liability as of December 31, 2016. On September 23, 2016, the Company entered into a forbearance agreement with LogicMark Investment Partners, LLC (the “Lender”) in connection with a Secured Subordinated Promissory Note originally issued on July 22, 2016 in the amount of $2,500,000 which expired on September 22, 2016 (the “Note”). The Company formally requested that the Lender extend the Note on September 20, 2016, and finalized the amendment on September 23, 2016. Under the terms of the forbearance agreement, the Lender agreed to extend the Note and the Company agreed to pay to the Lender in immediately available funds: (i) $250,000 on September 23, 2016; (ii) $100,000 on October 24, 2016; and (iii) $1,150,000, plus all accrued and unpaid interest due under the Note on October 31, 2016. The Company also agreed to reduce the Escrow Amount (as defined in the Purchase Agreement) by a total of $500,000, and to make certain other changes to the definition of “Escrow Amount” in the Purchase Agreement. The Company also agreed to make certain representations and warranties in respect of the Lender’s forbearance. The Logic Note originally was to mature on September 23, 2016 but was extended to April 15, 2017. Allocation of Purchase Price The purchase price to acquire Logicmark was $27,136,788 of which $17,500,000 was paid by the Company in cash and $9,636,788 in non-cash consideration. The non-cash consideration was comprised of a $2,500,000 seller note, $900,000 of common stock and warrants issued to the sellers and $6,236,788 in earn-out provisions. At the date of acquisition, the earn-out provisions were discounted using a prime borrowing rate of 3.5%. The purchase price was allocated to the tangible and identifiable assets acquired and liabilities assumed of LogicMark based upon their estimated fair values. The excess purchase price over the fair value of the underlying net assets acquired was allocated to goodwill. The Company completed its analysis of the fair value of the net assets acquired through the use of an independent valuation firm and management’s estimates. The following table summarizes the final assessment of the estimated fair values of the identifiable assets acquired and liabilities assumed net of cash acquired, as of the date of acquisition of July 25, 2016. Cash $ 109,710 Accounts receivable 494,591 Inventories 2,566,117 Other current assets 370,905 Property and equipment 227,840 Goodwill 15,479,662 Intangible assets 8,604,567 Assets acquired 27,853,392 Accounts payable 507,857 Accrued liabilities 208,747 Liabilities assumed 716,604 Net assets acquired $ 27,136,788 Pro Forma Financial Information The following table summarizes the unaudited pro forma financial information assuming that the LogicMark acquisition occurred on January 1, 2015, and its results had been included in the Company’s financial results for the twelve months ended December 31, 2016 and 2015. The pro forma combined amounts are based upon available information and reflect a reasonable estimate of the effects of the LogicMark acquisition for the periods presented on the basis set forth herein. The following unaudited pro forma combined financial information is presented for informational purposes only and does not purport to represent what the financial position or results of operations would have been had the LogicMark acquisition in fact occurred on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Twelve months ended December 31, 2016 2015 (unaudited) Pro forma: Net Sales $ 15,673,801 $ 11,702,194 Net Loss applicable to Common Stockholders $ (13,671,124 ) $ (16,394,632 ) Net Loss Per Share - Basic and Diluted applicable to Common Stockholders $ (2.22 ) $ (6.05 ) The unaudited pro forma net loss attributable to Nxt-ID, Inc. has been calculated using actual historical information and is adjusted for certain pro forma adjustments based on the assumption that the LogicMark acquisition and the application of fair value adjustments to intangible assets occurred on January 1, 2015. For the twelve months ended December 31, 2016, the pro forma financial information excluded the acquisition-related expenses of $605,228, which are included in the actual reported results, but excluded from the pro forma amounts above due to their nonrecurring nature. In addition, the pro forma adjustments for the twelve months ended December 31, 2016 include the following adjustments, (a) amortization expense related to the acquired intangible assets of $731,242; (b) interest expense including the amortization of deferred debt issue costs of $2,851,185; (c) reduction in depreciation expense of $35,543; and (d) amortization of the inventory fair value adjustment of $945,212. For the twelve months ended December 31, 2015, the pro forma financial information reflects the following adjustments; (a) amortization expense related to the acquired intangible assets of $731,242; (b) interest expense including the amortization of deferred debt issue costs of $4,735,767; (c) reduction in depreciation expense of $29,948; and (d) amortization of the inventory fair value adjustment of $945,212. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2016 | |
Accrued Expenses [Abstract] | |
ACCRUED EXPENSES | NOTE 6 - ACCRUED EXPENSES Accrued expenses consist of the following: December 31, 2016 2015 Salaries and payroll taxes $ 77,037 $ 18,380 Reimbursable expenses 5,000 5,000 Consulting fees 25,547 32,173 Audit fees - 35,000 Merchant bank fees 31,124 - Rent 1,147 3,077 State income taxes 1,135 4,150 Legal fees 7,568 81,281 Management incentives 604,125 372,000 Interest expense 691,684 45,100 Dividends – Series A & B preferred stock 583,067 - Liquidated damages – Series B preferred stock 360,000 - Finder’s fees 256,250 - Other 257,988 45,277 Totals $ 2,901,672 $ 641,438 |
Convertible Notes Payable
Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Convertible Notes Payable [Abstract] | |
CONVERTIBLE NOTES PAYABLE | NOTE 7 - CONVERTIBLE NOTES PAYABLE November 2016 Exchange On November 29, 2016, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with certain holders of a portion of the Original LogicMark Notes (the “Holders”) pursuant to which the Company exchanged with the Holders of $1,500,000 of Original Notes held by the Holders in exchange for: (i) an aggregate principal amount of $1,500,000 of new secured subordinated promissory notes (the “Exchange Notes”) and (ii) warrants (the “Warrants”, and together with the Exchange Notes, the “Exchange Securities”) convertible into 500,000 shares of common stock of the Company, par value $0.0001 (the “Common Stock”). The Holders purchased the $1,500,000 of Original Notes from LogicMark Investment prior to this transaction. The Exchange Notes will mature on November 29, 2017 and accrue interest at a rate of 15.0% per annum. The Exchange Notes are convertible at any time, in whole or in part, at the option of the Investors into shares of Common Stock at a conversion price of $3.00 per share (the “Conversion Price”). The Conversion Price is subject to adjustment for stock dividends, stock splits, combinations or similar events. The conversion option embedded in the convertible exchange notes was determined to contain beneficial conversion features, resulting in the bifurcation of those features as an equity instrument (resulting in a debt discount) At issuance. After allocation of the gross proceeds to the warrants (discussed below) and beneficial conversion feature, the total debt discount recognized was equal to the face of the convertible exchange notes, The debt discount is being amortized over the term of the debt and the Company Amortized $133,333 of the debt discount for the year ended December 31, 2016. The Company may prepay, in whole but not in part, without premium or penalty, the outstanding principal, together with accrued but unpaid interest on the outstanding principal, if any. The Warrants will be exercisable beginning on November 29, 2016, and will be exercisable for a period of five years. The exercise price with respect to the Warrants is $3.00 per share (the “Exercise Price”). The Exercise Price and the amount of shares of Common Stock issuable upon exercise of the Warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes. December 2015 Private Placement On December 8, 2015, the Company entered into a securities purchase agreement (the “December Purchase Agreement”) with certain accredited investors (the “December Purchasers”) pursuant to which the Company sold an aggregate of $1,500,000 in principal amount of Senior Secured Convertible Notes (the “December Notes”) for an aggregate purchase price of $1,500,000 (the “December Offering”). The Notes matured on December 8, 2016 (the “December Maturity Date”), less any amounts converted or redeemed prior to the December Maturity Date. The December Notes bear interest at a rate of 8% per annum. The December Notes were convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $2.35 per share, as modified. In case of an Event of Default (as defined in the December Notes), the notes are convertible at 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days, until such Event of Default has been cured. The conversion price is subject to adjustment for stock dividends, stock splits, combinations or similar events. The Notes are repayable from the earlier of June 7, 2016 or the effective date of the initial registration statement that was filed with this offering, (The Installment Trigger Date). The installment payments are to be made on the l st th In connection with the sale of the December Notes, the Company also issued to the December Purchasers an aggregate of 90,000 shares of the Company’s common stock in consideration of each Investor’s execution and delivery of the December Purchase Agreement (the “Commitment Shares”). The Commitment Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the SEC on April 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637). As described above, the April Purchasers exchanged the April Convertible Notes plus accrued but unpaid interest into the convertible notes that were issued on December 8, 2015. (The December Notes). As a result, the Company incurred a loss on extinguishment of the April Convertible Notes of $635,986 which resulted primarily from the write off of the remaining unamortized note discount and deferred debt issue costs on extinguishment. In order to obtain their consent to issue the December Notes on December 8, 2015, and to effect the exchange, the Company issued to each of the April Purchasers additional December Notes with a face value of $500,000. On December 8, 2015, the total outstanding principal amount of these convertible notes was $2,134,850. On December 28, 2015, the note holders accelerated installment repayments in an aggregate amount of $350,000 which the Company satisfied by an issuance of common stock as a result of a waiver by the holders which allowed the Company to issue common stock below $2.50. As a result of this repayment, the outstanding amount of the convertible notes held by the April Purchasers was $1,784,850 on December 31, 2015. The total face amount of the Notes outstanding on December 8, 2015 were $3,644,850. On December 8, 2015 the Company recorded a debt discount of $1,719,700 and a derivative liability of $912,330. During December 2015, the holders of the Notes accelerated $350,000 in installments in exchange for common stock as a result of a waiver by the holders which allowed the Company to issue common stock below $2.50. At December 31, 2015, the balance on the Notes outstanding was $3,294,850. The debt discount is attributable to the value of the separately accounted for conversion feature and common stock issued in connection with the sale of the December Notes. The embedded conversion feature derivatives relate to the conversion option, the installment payments and the accelerated installment option of the December Notes. The embedded derivatives were evaluated under FASB ASC Topic 815-15 On February 12, 2016, in exchange for the consents given to the Company by the December Purchasers and the April Purchasers to allow for the issuance of shares in connection with the WVH Transaction (described below), the December Notes were amended to a fixed conversion price of $2.35. As a result of the modification, the Company fair valued the conversion option up to the date of modification and re-classified the remaining conversion feature liability of $1,702,400 as of the date of modification to additional paid-in-capital. During the year ended December 31, 2016, the holders of the December Notes accelerated $2,456,679 in installments and $253,028 of interest in exchange for 1,228,828 shares of common stock. During the twelve months ended December 31, 2016, the holders of the December Notes also converted $838,171 of the convertible notes and $38,560 of interest in exchange for 373,077 shares of common stock. At December 31, 2016, the outstanding balance on the December Notes was $0. As it relates to the accelerated installments, the Company incurred a loss on extinguishment of debt of $272,749. The loss on extinguishment of debt was equivalent to the excess fair value of the common stock issued to the holders of the December Notes as compared to the net carrying value of the convertible debt. The fair value of the common stock issued in payment of interest exceeded the amount of interest owed by $34,628. This amount is included as part of interest expense on the consolidated statement of operations. November 2015, Term Note On November 25, 2015, the Company issued the Term Note with a principal amount of $200,000 to an accredited purchaser (the “November Purchaser”). The Term Note was scheduled to mature on December 15, 2015. The interest rate was 12% per annum with a minimum guaranteed interest of $10,000. The November Purchaser converted the entire principal amount into the December Offering described above. July 2015 Convertible Note On July 27, 2015, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company sold an aggregate of $222,222 in principal amount of the 8% Convertible Notes for an aggregate purchase price of $200,000. The Company received net proceeds of $200,000 from the sale of the 8% Convertible Notes. The 8% Convertible Notes matured on September 11, 2015 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The 8% Convertible Notes bear interest at a rate of 8% per annum, subject to increase to the lesser of 24% per annum or the maximum rate permitted under applicable law upon the occurrence of certain events of default. The 8% Convertible Notes were convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $35.00 per share, which was subject to adjustment for stock dividends, stock splits, combinations or similar events. The Company was able to prepay in cash any portion of the principal amount of the 8% Convertible Notes and any accrued and unpaid interest. If such prepayment was made within sixty (60) days after the issuance date of the 8% Convertible Notes, the Company would pay an amount in cash equal to 109% of the sum of the then outstanding principal amount of the note and interest; thereafter, if such prepayment was made, the Company would pay an amount in cash equal to 114% of the sum of the then outstanding principal amount of the note and interest. In the event the Company effects a registered offering either utilizing Form S-1 or Form S-3 (a “Registered Offering”), the Holder would have the right to convert the entire amount of the purchase price into such Registered Offering. On August 4, 2015, the Company closed a Registered Offering and the holder of the 8% Convertible Notes elected to convert the entire purchase price amount into common shares. The conversion price used to convert the entire purchase price into common stock was equivalent to the equity offering price of $17.50 on August 4, 2015 and not the conversion price of $35.00 stipulated in the securities purchase agreement. As a result of the change in the conversion price, the Company recorded additional inducement expense of $100,000 in three months ended September 30, 2015. April 2015 Private Placement On April 24, 2015, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with a group of accredited investors (the “April Purchasers”) pursuant to which the Company sold to such purchasers an aggregate of $1,575,000 principal amount of secured convertible notes (the “Convertible Notes”), a Class A Common Stock Purchase Warrant (the “Class A Warrant”) to purchase up to 46,875 shares of the Company’s common stock and a Class B Common Stock Purchase Warrant (the “Class B Warrant,” and together with the Class A Warrant, the “April Warrants”) to purchase up to 46,875 shares of the Company’s common stock. The Convertible Notes bear interest at 6% per annum and are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $25.20 per share. The April Warrants are exercisable beginning six (6) months after issuance through the fifth (5 th The Company recorded a debt discount of $1,575,000 related to the sale of the Convertible Notes and the April Warrants. The debt discount reflects the underlying fair value of the April Warrants of approximately $860,000 on the date of the transaction and a beneficial conversion charge of approximately $715,000. During the period April 23, 2015 through December 8, 2015, the Company amortized $983,836 of the debt discount as a component of interest expense in the accompanying statements of operations. In connection with the sale of the Convertible Notes and April Warrants, the Company entered into a registration rights agreement, dated April 24, 2015 (the “April Registration Rights Agreement”), with the April Purchasers, pursuant to which the Company agreed to register the shares of common stock underlying the Convertible Notes and Warrants on a Form S-3 registration statement to be filed with the Securities and Exchange Commission within ten (10) business days after the date of the issuance of the Convertible Notes and April Warrants (the “April Filing Date”) and to cause the April Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”) within ninety (90) days following the April Filing Date. If certain of its obligations under the April Registration Rights Agreement are not met, the Company is required to pay partial liquidated damages to each April Purchaser. On May 8, 2015, the Company filed a registration statement on Form S-3 with the SEC to register the shares issuable upon the conversion of the Convertible Notes, the related accrued interest and the exercise of the April Warrants. Such registration statement was declared effective with the SEC on May 14, 2015. In connection with the sale of the Convertible Notes and the April Warrants, the Company entered into a security agreement, dated April 24, 2015 (the “April Security Agreement”), between the Company, 3D-ID and the collateral agent thereto. Pursuant to the Security Agreement, the April Purchasers were granted a security interest in certain personal property of the Company and 3D-ID to secure the payment and performance of all obligations of the Company and 3D-ID under the Convertible Notes, April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement. In addition, in connection with the Security Agreement, 3D-ID executed a subsidiary guaranty, pursuant to which it agreed to guarantee and act as surety for payment of the Convertible Notes and other obligations of the Company under the April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement. As described above, the April Purchasers exchanged the April Convertible Notes into the convertible notes that were issued on December 8, 2015. (The December Notes). As a result, the Company incurred a loss on extinguishment of the April Convertible Notes of $635,986 which resulted primarily from the write off of the remaining unamortized note discount and deferred debt issue costs on extinguishment. In order to obtain their consent to issue the December Notes on December 8, 2015, and to effect the exchange, the Company issued to each of the April Purchasers additional December Notes with a face value of $500,000. On December 8, 2015, the total outstanding principal amount of these convertible notes was $2,134,850. On December 28, 2015, the note holders accelerated installment repayments in an aggregate amount of $350,000 which the Company satisfied by an issuance of common stock as a result of a waiver by the holders which allowed the Company to issue common stock below $2.50. As a result of this repayment, the outstanding amount of the convertible notes held by the April Purchasers was $1,784,850 on December 31, 2015. In exchange for the consents given to the Company by the December Purchasers and the April Purchasers in connection with the consent to the WVH transaction (described below), the December Notes as defined on page F-12 under December 15 Private Placement, the Exchange Notes, and the Additional December Notes were amended. One of the significant amendments was as follows: the notes are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price the lesser of (a) $5.50 per share and (b) from and after an Event of Default (as defined in the December Notes), 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior thirty (30) trading days, until such Event of Default has been cured. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Dec. 31, 2016 | |
Derivative Liabilities [Abstract] | |
DERIVATIVE LIABILITIES | NOTE 8 - DERIVATIVE LIABILITIES Fair value of financial instruments is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company has categorized its financial assets and liabilities measured at fair value into a three-level hierarchy. The conversion features embedded within the Company’s convertible notes payable issued in connection with December 8, 2015 private placement (as defined in Note 7) did not have fixed settlement provisions on the date they were initially issued because the conversion price could be lowered if certain provisions included in the note agreement occurred before conversion. During 2015, the derivative liabilities were valued using the Monte Carlo simulation model and the following weighted average assumptions on December 8, 2015 and December 31, 2015. During the twelve months ended December 31, 2016, the Company had five separate valuations performed using the Monte Carlo simulation model. The valuations coincided with the number of accelerated installments occurring during the twelve months ended December 31, 2016. All of the 2016 valuations occurred during the first quarter of 2016. The table for 2016 reflects the range of weighted average assumptions used for the 2016 valuations. January 12, - December 31, 2016 2015 Embedded Conversion Feature Liability: Risk-free interest rate 0.46%-0.59 0.62 % Expected volatility 100.00% 100.00 % Expected life (in years) 0.91-0.70 0.92 Expected dividend yield - - Face Value of convertible notes $ 3,209,850 - $1,208,850 3,294,850 Fair value $ - $ 420,360 Fair Value Measurement Valuation Hierarchy ASC 820, “Fair Value Measurements and Disclosures,” establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company did not have any liabilities carried at fair value measured as a recurring basis as of December 31, 2016. The following table provides the liabilities carried at fair value measured on a recurring basis as of December 31, 2015: Fair Value Measurements at December 31, 2015 Total Quoted Significant Significant Derivative liabilities $ 420,360 $ - $ - $ 420,360 The carrying amounts of cash, inventory, prepaid expenses, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The Company’s other financial instruments include its convertible notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting department, who reports to the Principal Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting department and are approved by the Principal Financial Officer. Level 3 Valuation Techniques Level 3 financial liabilities consist of the conversion feature liability and common stock purchase warrants for which there are no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. A significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. During December 31, 2016 and 2015, there were no transfers in or out of level 3 from other levels in the fair value hierarchy. The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis: For the year ended December 31, 2016 For the year ended Beginning liability balance $ 420,360 $ - Loss on change in fair value of derivative liabilities 2,299,020 - Recognition of conversion feature liability - 912,330 Gain on derivative liabilities resulting from accelerated amortizations (1,016,980 ) - Net realized gain on conversion feature liabilities - (47,242 ) Net unrealized gain on conversion feature liabilities - (444,728 ) Adjustment to additional paid-in capital upon conversion and modification (1,702,400 ) - Ending balance $ - $ 420,360 Other Fair Value Measurements During the year ended December 31, 2016, the Company recorded $91,682 of interest expense related to the amortization of the discount of the contingent consideration. The fair value measurements were based on significant inputs not observed in the market and thus represented a level 3 measurement. |
Strategic Agreements With World
Strategic Agreements With World Ventures Holdings | 12 Months Ended |
Dec. 31, 2016 | |
Strategic Agreements With World Ventures Holdings [Abstract] | |
STRATEGIC AGREEMENTS WITH WORLD VENTURES HOLDINGS | NOTE 9 – STRATEGIC AGREEMENTS WITH WORLD VENTURES HOLDINGS On December 31, 2015, we entered into a Master Product Development Agreement (the “Development Agreement”) with World Ventures Holdings, LLC (“WVH”). The Development Agreement commenced on December 31, 2015, and has an initial term of two (2) years (the “Initial Term”). Thereafter, the Development Agreement will automatically renew for additional successive one (1) year terms (each a “Renewal Term”) unless and until WVH provides written notice of non-renewal at least thirty (30) days prior to the end of the Initial Term or then-current Renewal Term. Each Renewal Term will commence immediately on expiration of the Initial Term or preceding Renewal Term. The Development Agreement may also be terminated earlier pursuant to certain conditions. In connection with the Development Agreement, on December 31, 2015, the Company entered into a securities purchase agreement (the “WVH Purchase Agreement”) with WVH providing for the issuance and sale by the Company of 1,005,000 shares (the “WVH Shares”) of Common Stock and a common stock purchase warrant (the “WVH Warrant”) to purchase 251,250 shares (the “WVH Warrant Shares”) of Common Stock, for an aggregate purchase price of $2,000,000. The WVH Warrant is initially exercisable on the five (5) month anniversary of the issuance date at an exercise price equal to $7.50 per share and has a term of exercise equal to two (2) years and seven (7) months from the date on which first exercisable. On April 28, 2016, the exercise price of the WVH Warrant was modified to $4.00. Pursuant to the Development Agreement, WVH retained the Company to design, develop and manufacture a series of Proprietary Products (as defined in the Development Agreement) for distribution through WVH’s network of sales representatives, members, consumers, employees, contractors or affiliates. In conjunction with the Development Agreement, the Company and WVH contractually agreed to dedicate $1,500,000 of the $2,000,000 in total proceeds received by the Company to the development and manufacture of the product for WVH. In addition, any expenditure of the $1,500,000 in proceeds is restricted in that the Company will need prior approval from WVH on a monthly basis in order to fund the estimated expenditures needed for the development of the product for WVH from the $1,500,000. Accordingly, the $1,500,000 is included in the restricted cash balance on the accompanying Balance Sheet at December 31, 2015. During the twelve months ended December 31, 2016, the Company used the entire $1,500,000 in restricted cash received from WVH on December 31, 2015 for the design and development of products specifically for WVH. The expenses related to the design and development of products for WVH during the twelve months ended December 31, 2016 are included in research and development expenses. During the twelve months ended December 31, 2016, the Company received deposits totaling $6,068,894 from WVH against initial purchase orders received from WVH. The deposits received from WVH are included in the consolidated balance sheet line item labeled customer deposits as of December 31, 2016. During the year ended December 31, 2016, the Company recorded revenue of $1,357,413 related to WVH. At December 31, 2016, the Company’s accounts receivable balance included $621,724 due from WVH. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2016 | |
Stockholders' Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 10 - STOCKHOLDERS’ EQUITY April 2015 Private Placement On April 24, 2015, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with a group of accredited investors (the “April Purchasers”) pursuant to which the Company sold to such purchasers an aggregate of $1,575,000 principal amount of secured convertible notes (the “April Convertible Notes”), a Class A Common Stock Purchase Warrant (the “Class A Warrant”) to purchase up to 46,875 shares of the Company’s common stock and a Class B Common Stock Purchase Warrant (the “Class B Warrant,” and together with the Class A Warrant, the “April Warrants”) to purchase up to 46,875 shares of the Company’s common stock. The April Convertible Notes bear interest at 6% per annum and are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $25.20 per share. The April Warrants are exercisable beginning six (6) months after issuance through the fifth (5 th The Company recorded a debt discount of $1,575,000 related to the sale of the April Convertible Notes and the April Warrants. The debt discount reflects the underlying fair value of the April Warrants of approximately $860,000 on the date of the transaction and a beneficial conversion charge of approximately $715,000. The debt discount will be amortized to interest expense over the earlier of (i) term of the April Convertible Notes or (ii) conversion of the debt. In connection with the sale of the April Convertible Notes and April Warrants, the Company entered into a registration rights agreement, dated April 24, 2015 (the “April Registration Rights Agreement”), with the April Purchasers, pursuant to which the Company agreed to register the shares of common stock underlying the April Convertible Notes and April Warrants on a Form S-3 registration statement to be filed with the Securities and Exchange Commission (the “SEC”) within ten (10) business days after the date of the issuance of the April Convertible Notes and April Warrants (the “April Filing Date”) and to cause the April Registration Statement to be declared effective under the Securities Act within ninety (90) days following the April Filing Date. If certain of its obligations under the April Registration Rights Agreement are not met, the Company is required to pay partial liquidated damages to each April Purchaser. On May 8, 2015, the Company filed a registration statement on Form S-3 with the SEC to register the shares issuable upon the conversion of the April Convertible Notes, the related accrued interest and the exercise of the April Warrants. Such registration statement was declared effective with the SEC on May 14, 2015. In connection with the sale of the April Convertible Notes and the April Warrants, the Company entered into a security agreement, dated April 24, 2015 (the “April Security Agreement”), between the Company, 3D-ID and the collateral agent thereto. Pursuant to the Security Agreement, the April Purchasers were granted a security interest in certain personal property of the Company and 3D-ID to secure the payment and performance of all obligations of the Company and 3D-ID under the April Convertible Notes, April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement. In addition, in connection with the April Security Agreement, 3D-ID executed a subsidiary guaranty, pursuant to which it agreed to guarantee and act as surety for payment of the April Convertible Notes and other obligations of the Company under the April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement. As described below, the April purchaser exchanged the April Convertible Notes into convertible notes that were identical to the convertible notes that were issued on December 8, 2015. July 2015 Private Placement On July 27, 2015, the Company entered into a securities purchase agreement with an accredited investors (the “July Purchaser”) pursuant to which the Company sold an aggregate of $222,222 in principal amount of the 8% Original Issue Discount Convertible Notes (the “8% Convertible Notes”) for an aggregate purchase price of $200,000. The Company received net proceeds of $200,000 from the sale of the 8% Convertible Notes. The 8% Convertible Notes will mature on September 11, 2015 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The 8% Convertible Notes bear interest at a rate of 8% per annum, subject to increase to the lesser of 24% per annum or the maximum rate permitted under applicable law upon the occurrence of certain events of default. The 8% Convertible Notes are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $35.00 per share, which is subject to adjustment for stock dividends, stock splits, combinations or similar events. The Company agreed that if it effected a registered offering either utilizing Form S-1 or Form S-3 (a “Registered Offering”), the Holder shall have the right to convert the entire amount of the subscription amount into such Registered Offering. The July Purchaser converted the entire amount of the subscription amount into the August Offering described below. The conversion price used to convert the entire purchase price into common stock was equivalent to the equity offering price of $17.50 on August 4, 2015 and not the conversion price of $35.00 stipulated in the securities purchase agreement. As a result of the change in the conversion price, the Company recorded additional inducement expense of $100,000 at the time of conversion. August 2015 Offerings On August 4, 2015, the Company closed with certain purchasers (the “August 2015 Purchasers”) a public offering (the “August Offering”) providing for the issuance and sale by the Company of 172,143 shares of the Company’s common stock at a price to the public of $17.50 per share (the “Registered Shares”) for an aggregate purchase price of $3,012,500. In connection with the sale of the Registered Shares, the Company also entered into a Warrant Purchase Agreement (the “Warrant Purchase Agreement”) with the August 2015 Purchasers providing for the issuance and sale by the Company of warrants to purchase 86,072 shares of the Company’s common stock at a purchase price of $0.0000001 per warrant (the “August 2015 Warrants”). Each August 2015 Warrant shall be initially exercisable on the six (6) month anniversary of the issuance date an exercise price equal to $23.50 per share and have a term of exercise equal to five (5) years from the date on which first exercisable. The Registered Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the Securities and Exchange Commission (the “SEC”) on April 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637) (the “Registration Statement”). Pursuant to a Registration Rights Agreement, dated July 30, 2015, by and between the Company and the August 2015 Purchasers, the Company agreed to file one or more registration statements with the SEC covering the resale of the shares of common stock issuable upon exercise of the August 2015 Warrants. The placement agent in connection with the Registered Shares was Northland Securities, Inc. October 2015 Public Offering On October 21, 2015, the Company closed on an underwritten public offering of its common stock. The Company offered 150,000 shares of common stock at a price to the public of $7.00 per share. The Company received gross proceeds from the offering, before deducting underwriting discounts and commission and other estimated offering expenses payable by the Company, of approximately $1,050,000. The underwriter was Aegis Capital Corp. December 2015 Private Placement In connection with the sale of the December Notes, the Company also issued to the December Purchasers an aggregate of 90,000 shares of the Company’s common stock in consideration of each Investor’s execution and delivery of the December Purchase Agreement (the “Commitment Shares”). The Commitment Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the SEC on April 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637). April 2016 Offering On April 11, 2016, the Company closed a registered offering (the “April 2016 Offering”) of shares of its Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”). The Company sold 2,500,000 shares of Series A Pref erred Stock at a price of $1.00 per share July 2016 Offering On July 25, 2016, the Company closed a private placement (the “July 2016 Offering”) of shares of its Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) and warrants (the “July 2016 Warrants”) to purchase 562,500 shares of the Company’s common stock. The Company sold 4,500,000 shares of Series B Pref erred Stock at a price of $1.00 per share Warrants The following table summarizes the Company’s warrants outstanding and exercisable at December 31, 2015 and 2016: Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Warrants Price In Years Value Outstanding at January 1, 2015 362,978 $ 28.00 4.51 $ 283,828 Issued 431,071 17.80 4.04 - Exercised (32,500 ) 20.00 - - Cancelled - - - - Outstanding and Exercisable at December 31, 2015 761,549 $ 22.60 3.83 $ - Issued 1,224,980 4.69 4.13 - Exercised (157,480 ) - - - Cancelled - - - - Outstanding and Exercisable at December 31, 2016 1,829,049 $ 12.00 3.92 $ - Long-Term Stock Incentive Plan On January 4, 2013, a majority of the Company’s stockholders approved by written consent the Company’s 2013 Long-Term Stock Incentive Plan (“LTIP”). The maximum aggregate number of shares of common stock that may be issued under the LTIP, including stock awards, stock issued to directors for serving on the Company’s board, and stock appreciation rights, is limited to 10% of the shares of common stock outstanding on the first business or trading day of any fiscal year, which is 554,054 at December 31, 2016. During the year ended December 31, 2016, the Company issued 51,705 shares under the plan to three non-executive directors for serving on the Company’s board. The aggregate fair value of the shares issued to the directors was $180,000. Also during the year ended December 31, 2016, the Company issued 60,000 shares with an aggregate fair value of $372,000 to executive and certain non-executive employees related to the Company’s 2015 management incentive plan. The aggregate fair value of $372,000 was expensed entirely in 2015. During the year ended December 31, 2015, the Company issued 26,961 shares under the plan to three non-executive directors for serving on the Company’s board. The aggregate fair value of the shares issued to the directors was $180,000. Also during the year ended December 31, 2015, the Company issued 5,000 shares with an aggregate fair value of $147,500 to one non-executive employee. These shares were issued with no Company imposed restrictions and as a result, the aggregate fair value of $147,500 was expensed entirely in 2015. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes [Abstract] | |
INCOME TAXES | NOTE 11 - INCOME TAXES As of December 31, 2016, the Company had US federal and state net operating loss (“NOLs”) carryovers of $24,152,902 and $12,469,752, respectively, available to offset future taxable income, which expire beginning in 2033. In addition, the Company had tax credit carryforwards of $187,856 at December 31, 2016 that will be available to reduce future tax liabilities. The tax credit carryforwards will begin to expire beginning in 2033. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change of control. The Company has determined that a change of control has not occurred as of December 31, 2016 and therefore none of the NOLs are limited under Section 382. The Company has no material uncertain tax positions for any of the reporting periods presented. The Company has filed all of its tax returns for all prior periods through December 31, 2015. As a result, the Company’s net operating loss carryovers will now be available to offset any future taxable income. The Company is subject to taxation in the United States and various states. As of December 31, 2016 the Company’s tax years post 2012 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2016 the Company is no longer subject to U.S. federal or state examinations by tax authorities for years before December 31, 2013. The income tax provision consists of the following: December 31, 2016 2015 Current Federal $ - $ - State 5,749 4,307 5,749 4,307 Deferred Federal (2,843,866 ) (3,543,673 ) State (281,625 ) (362,722 ) (3,125,491 ) (3,906,395 ) Change in valuation allowance 3,315,776 3,906,395 Total income tax provision $ 196,035 $ 4,307 A reconciliation of the effective income tax rate and the statutory federal income tax rate is as follows: December 31, 2016 2015 U.S. federal statutory rate 34.00 % 34.00 % State income tax rate, net of federal benefit 1.45 1.81 Inducement expenses - (2.33 ) Other permanent differences (10.60 ) (3.63 ) Less: valuation allowance (26.41 ) (29.88 ) Provision for income taxes (1.56 )% (.03 )% In assessing the realization 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 temporary differences representing net future deductible amounts became deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, Management believes that significant uncertainties exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2016 and 2015, the change in valuation allowance was $3,315,776 and $3,906,395. The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below: December 31, 2016 2015 Deferred tax assets: Net operating loss carryforward $ 8,887,756 $ 6,109,750 Tax credits 187,856 177,909 Accruals and reserves 546,286 315,580 Restricted stock 42,140 4,238 Tangible and intangible assets 62,352 - Charitable donations 3,738 3,759 Total deferred tax assets before valuation allowance: $ 9,730,128 $ 6,611,236 Valuation allowance (9,920,414 ) (6,604,638 ) Deferred tax assets, net of valuation allowance (190,286 ) 6,598 Deferred tax liabilities: Fixed assets $ - $ (6,598 ) Convertible debt - Total deferred tax liabilities - (6,598 ) Net deferred tax asset (liability) $ (190,286 ) $ - |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12 - COMMITMENTS AND CONTINGENCIES LEGAL MATTERS On November 12, 2015, the Company received a complaint that one of its technologies infringed upon one or more claims of a patent(s) issued to the claimant. The claimant has subsequently acknowledged that the Company is not currently infringing on their patent(s) as the technology in question is not commercially available at the current time. The Company is in the process of negotiating a future royalty agreement with the claimant should it decide to introduce this technology in the future. From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. Other than as described above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the company or any of its subsidiaries, threatened against or affecting the company, or any of its subsidiaries in which an adverse decision could have a material adverse effect upon its business, operating results, or financial condition. COMMITMENTS On September 12, 2014, the Company entered into a lease agreement for office space in Oxford, Connecticut. The term of the lease was for two (2) years with a monthly rent of $2,300 in the first year, increasing to $2,450 per month in the second year. On October 10, 2016, the Company extended the lease term for the office space in Oxford, Connecticut for six additional months with a monthly rent of $2,450. On October 3, 2014, the Company entered into a lease agreement for customer service and warehouse space in Melbourne, Florida. The lease term commenced on January 1, 2015. The term of the lease is for three (3) years with a current monthly rent amount of $6,837 which includes the base rent, an escrow for taxes and insurance, common area maintenance charges and applicable sale tax. As a result of the LogicMark acquisition on July 25, 2016, we assumed two facility leases. One of the leases is for office space located in Plymouth, Minnesota. This lease agreement expires in February 2018 and the current monthly rent is $1,170. In addition, LogicMark also subleases office and warehouse space located in Louisville, Kentucky. The monthly rent for the space is $8,850 and this sublease agreement is due to expire in July 2017. The Company incurred rent expense of $154,194 and $124,698 for the years ended December 31, 2016 and December 31, 2015, respectively. Minimum lease payments for non-cancelable operating leases are as follows: Future Lease Obligations 2017 $ 172,586 2018 2,340 Total future lease obligations $ 174,926 Effective October 1, 2015, we extended the employment agreement with Gino M. Pereira, our Chief Executive Officer. The term of the employment agreement is for 3 years and the term began on October 1, 2015. Effective January 1, 2017, Mr. Pereira’s base salary increased to $381,150 from $346,500. The employment agreement also provides for: ● Payment of all necessary and reasonable out-of-pocket expenses incurred by the executive in the performance of his duties under the agreement. ● Eligibility to participate in bonus or incentive compensation plans that may be established by the board of directors from time to time applicable to the executive’s services. ● Eligibility to receive equity awards as determined by the board of directors, or a committee of the board of directors, composed in compliance with the corporate governance standards of any applicable listing exchange. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13 - SUBSEQUENT EVENTS The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. On January 3, 2017, the Company issued 6,000 shares of its common stock for the payment of services with a grant date fair market value of $16,680. On various dates during the first quarter of 2017, purchasers of the Series A Preferred Stock converted in aggregate $306,109 of Series A Preferred Stock and dividends into 130,259 shares of common stock. On various dates during the first quarter of 2017, purchasers of the Series B Preferred Stock converted in aggregate $1,682,031 of Series B Preferred Stock, dividends and liquidated damages into 762,097 shares of common stock. On March 28, 2017, the Company issued 27,500 shares of its common stock for the payment of services with a grant date fair market value of $52,250. On March 28, 2017, the Company issued 237,559 shares of its common stock to certain employees under the 2016 bonus plan. On March 26, 2017, the Company signed a binding Letter of Intent (“LOI”) with Fit Pay, Inc., a Delaware corporation (“Fit Pay”), regarding the acquisition by the Company of all of the equity of Fit Pay (the “Transaction”). Following the Transaction, Fit Pay will become a wholly owned subsidiary of the Company. The purchase price of the Transaction will consist of: (i) the issuance of 19.99% of the outstanding shares of the capital stock of the Company to the shareholders of Fit Pay; (ii) the issuance by the Company of $2,000,000 worth of non-voting, non-convertible, shares of junior preferred stock to (the “Junior Preferred Stock”) to certain holders of preferred shares of Fit Pay, which Junior Preferred Stock shall earn a cumulative dividend of 5% per annum, which will increase to a dividend of 10% per annum after the Company’s market capitalization is $75,000,000 for greater than thirty (30) consecutive days; and (iii) an earn-out payment to the then former shareholders of Fit Pay of 12.5% of the gross revenue derived from the Seller’s technology by the Company, for the sixteen (16) quarter period beginning on October 1, 2017. The parties intend to negotiate and execute a definitive agreement for the Transaction in accordance with the terms of the LOI. The definitive agreements will include customary closing conditions including necessary approvals. The Company and Fit Pay have agreed not to initiate or enter into any discussion with any other prospective purchaser of the assets and/or liabilities, or of the stock or business of Fit Pay prior to May 26, 2017. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management evaluates these significant estimates and assumptions included those related to the fair value of acquired assets and liabilities, stock based compensation, derivative instruments, income taxes and inventories, and other matters that affect the consolidated financial statements and disclosures. Actual results could differ from those estimates. |
PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Nxt-ID and its wholly-owned subsidiaries, 3D-ID and LogicMark. Intercompany balances and transactions have been eliminated in consolidation. |
CASH | CASH The Company considers all highly liquid securities with an original maturity date of three months or less when purchased to be cash equivalents. Due to their short-term nature, cash equivalents are carried at cost, which approximates fair value. At December 31, 2016 and 2015, the Company had no cash equivalents. |
RESTRICTED CASH | RESTRICTED CASH At December 31, 2016 and 2015, the Company had restricted cash of $40,371 and $1,534,953, respectively. The restricted cash balance at December 31, 2015 included $1,500,000 received on December 31, 2015 as a result of the World Ventures Holdings transaction, described elsewhere in the notes to these consolidated financial statements. Restricted cash also includes amounts held back by the Company’s third party credit card processor for potential customer refunds, claims and disputes. |
CONCENTRATIONS OF CREDIT RISK | CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its cash balances in large well-established financial institutions located in the United States. At times, the Company’s cash balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. During the year ended December 31, 2016, the Company recognized revenue of $1,357,413 from WVH a related party. At December 31, 2016, the Company’s accounts receivable balance included $621,724 due from WVH. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, the service has been rendered or product delivery has occurred, the price is fixed or readily determinable and collectability of the sale is reasonably assured. The Company’s wocket® smart wallet sales comprise multiple element arrangements including both the wocket® smart wallet device itself as well as unspecified future upgrades. The Company offers to all of its end-consumer customers a period of fourteen days post the actual receipt date in which to return their wocket® smart wallet. The Company was unable to reliably estimate returns at the time shipments were made during the year’s ended December 31, 2016 and 2015 due to lack of return history. Accordingly, the Company has recognized revenue only on those shipments whose fourteen day return period had lapsed by December 31, 2016 or 2015. Such sales during the fourteen day period ending December 31, 2016 or 2015 were not material. The Company accrues for the estimated costs associated with the one year wocket® smart wallet warranty at the time revenue associated with the sale is recorded, and periodically updates its estimated warranty cost based on actual experience. At December 31, 2016 and 2015, such amounts were not material. |
SHIPPING AND HANDLING | SHIPPING AND HANDLING Amounts billed to customers for shipping and handling are included in revenues. The related freight charges incurred by the Company are included in cost of goods and were not material for either the years ended December 31, 2016 or 2015. |
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE For the year ended December 31, 2016, the Company’s revenues included shipments of the wocket® smart wallet to customers who placed orders in 2016. For the year ended December 31, 2015, the Company’s revenues related to shipments of the wocket® smart wallet to customers who pre-ordered the product in 2014 as well as to those customers who ordered the product in 2015. In addition, the revenues for the year ended December 31, 2016 and 2015 included resale sales of the wocket® smart wallet to retail customers who resell the wocket® smart wallet through their respective distribution channels. The aggregate amount of these resale sales was $33,540 and $167,164 for the years ended December 31, 2016 and 2015, respectively. The terms and conditions of these sales provide the retail customers with trade credit terms. In addition, these sales were made to the retailers with no rights of return and are subject to the normal warranties offered to the ultimate consumer for product defects. Accounts receivable |
INVENTORY | INVENTORY Effective October 1, 2015 for application prospectively, the Company adopted FASB Accounting Standards Update No. 2015-11, simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory is measured at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Previously, inventory was measured at the lower of cost or market. The Company adopted ASU 2015-11 in connection with its fourth quarter 2015 inventory valuation review, and prompted by the impact of EMV chip point of sale and Nearfield Communication technologies on our business. As a result, the Company’s fourth quarter 2015 inventory valuation charges were determined based upon our inventory’s net realizable value. The Company performs regular reviews of inventory quantities on hand and evaluates the realizable value of its inventories. The Company adjusts the carrying value of the inventory as necessary with estimated valuation reserves for excess, obsolete, and slow-moving inventory by comparing the individual inventory parts to forecasted product demand or production requirements. As of December 31, 2016 inventory was comprised of $3,797,499 in raw materials and $1,544,001 in finished goods on hand. As of December 31, 2015 inventory was comprised of $1,587,653 in raw materials and $180,289 in finished goods on hand. As an emerging growth company, the Company is required to prepay for raw materials with certain vendors until credit terms can be established. As of December 31, 2016 and 2015, $1,089,770 and $49,103, respectively of prepayments made primarily for raw materials inventory is included in prepaid expenses and other current assets on the consolidated balance sheet. |
LONG-LIVED ASSETS | LONG-LIVED ASSETS Long-lived assets, such as property and equipment, goodwill and other intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with ASC 360-10-35-17 through 35-35 “Measurement of an Impairment Loss.” The Company assesses the impairment of the assets based on the undiscounted future cash flow the assets are expected to generate compared to the carrying value of the assets. If the carrying amount of the assets is determined not to be recoverable, a write-down to fair value is recorded. Management estimates future cash flows using assumptions about expected future operating performance. Management’s estimates of future cash flows may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes to the Company’s business operations. |
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment consisting of furniture, fixtures and tooling is stated at cost. The costs of additions and improvements are generally capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful life of the respective asset as follows: Equipment 5 years Furniture and fixtures 3 to 5 years Tooling and molds 2 to 3 years |
GOODWILL | Goodwill On July 25, 2016, the Company recorded goodwill of $15,479,662 as a result of the LogicMark acquisition. The Company will begin testing goodwill for impairment annually in the third quarter of each year using data as of August 1 of that year. |
OTHER INTANGIBLE ASSETS | Other Intangible Assets The Company’s intangible assets are all related to the LogicMark acquisition and are included in other intangible assets in the Company’s consolidated balance sheet at December 31, 2016. The Company had no intangible assets at December 31, 2015. At December 31, 2016, the other intangible assets are comprised of patents with a fair value of $3,936,612; trademarks with a fair value of $1,230,002; and customer relationships with a fair value of $3,119,111. The Company will amortize these intangible assets using the straight line method over their estimated useful lives which for the patents, trademarks and customer relationships are 11 years; 20 years; and 10 years, respectively. During the twelve months ended December 31, 2016, the Company had amortization expense of $318,842 related to the intangible assets. Amortization expense estimated for each of the next five fiscal years, 2017 through 2021 will be approximately $764,000 per year. |
CONVERTIBLE INSTRUMENTS | CONVERTIBLE INSTRUMENTS The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts that feature conversion options. The accounting standards require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in the results of operations. Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt using the straight line method which approximates the interest rate method. See Note 5. |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes option valuation model to value the derivative instruments at inception and on subsequent valuation dates. The conversion feature embedded within Company’s convertible note payable does not have fixed settlement provisions as the conversion price varies based on the trading price of the Company’s common stock and the potential number of common shares to be issued upon conversion is indeterminable up to a maximum of 120,000 shares of common stock. In addition, the warrants issued in connection with the Offering (as defined in Note 8) do not have fixed settlement provisions as their exercise prices may be lowered if the Company conducts an offering in the future at a price per share below the exercise price of the warrants. Accordingly, the conversion feature and warrants have been recognized as derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. (See Note 8.) |
DEBT DISCOUNT AND AMORTIZATION OF DEBT DISCOUNT | DEBT DISCOUNT AND AMORTIZATION OF DEBT DISCOUNT Debt discount represents the fair value of embedded conversion options of various convertible debt instruments and attached convertible equity instruments issued in connection with debt instruments. The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt. The amortization of debt discount is included as a component of interest expense included in other income and expenses in the accompanying statements of operations. |
INCOME TAXES | INCOME TAXES The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company will classify as income tax expense any interest and penalties. The Company has no material uncertain tax positions for any of the reporting periods presented. Generally, the tax authorities may examine the partnership/corporate tax returns for three years from the date of filing. The Company has filed all of its tax returns for all prior periods through December 31, 2015. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. The Company accounts for equity instruments issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation charges are amortized over the vesting period or as earned. The Company generally issues new shares of common stock to satisfy conversion and warrant exercises. |
NET LOSS PER SHARE | NET LOSS PER SHARE Basic loss per share was computed using the weighted average number of common shares outstanding. Diluted loss per share includes the effect of diluted common stock equivalents. Potentially dilutive securities of 2,581,104 realizable from the convertible Series A and Series B Preferred Stock (defined below), 575,000 from the convertible exchange notes and from the exercise of 1,829,049 warrants as of December 31, 2016 were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of December 31, 2015, potentially dilutive securities realizable from the conversion of convertible notes and related accrued interest and from the exercise of 761,549 warrants were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. |
RESEARCH AND DEVELOPMENT | RESEARCH AND DEVELOPMENT Research and development costs consist of expenditures incurred during the course of planned research and investigation aimed at the discovery of new knowledge, which will be useful in developing new products or processes. The Company expenses all research and development costs as incurred. |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 is intended to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the ASU 2016-15 and does not believe this ASU will have a material impact on its condensed consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12 (“ASU 2016-12”), “Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements and Practical Expedients.” ASU 2016-12 will affect all entities that enter into contracts with customers to transfer goods or services (that are an output of the entity’s ordinary activities) in exchange for consideration. The amendments in this update affect the guidance in ASU 2014-09 which is not yet effective, the amendments in this update affect narrow aspects of Topic 606 including among others: assessing collectability criterion, noncash consideration, and presentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for ASU 2014-09. The Company is currently evaluating the effect that ASU 2016-12 will have on the Company’s financial position and results of operations. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”), “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 will affect all entities that issue share-based payment awards to their employees and is effective for annual periods beginning after December 15, 2016 for public entities. The areas for simplification in ASU 2016-09 involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company is currently evaluating the effect that ASU 2016-09 will have on the Company’s financial position and results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently assessing the potential impact of ASU 2016-02 on the audited financial statements and related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of estimated useful life of property and equipment | Equipment 5 years Furniture and fixtures 3 to 5 years Tooling and molds 2 to 3 years |
Acquisition of LogicMark LLC (T
Acquisition of LogicMark LLC (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Acquisition of LogicMark LLC [Abstract] | |
Schedule of estimated fair values of identifiable assets acquired and liabilities assumed | Cash $ 109,710 Accounts receivable 494,591 Inventories 2,566,117 Other current assets 370,905 Property and equipment 227,840 Goodwill 15,479,662 Intangible assets 8,604,567 Assets acquired 27,853,392 Accounts payable 507,857 Accrued liabilities 208,747 Liabilities assumed 716,604 Net assets acquired $ 27,136,788 |
Summary of proforma of financial position or results of operations | Twelve months ended December 31, 2016 2015 (unaudited) Pro forma: Net Sales $ 15,673,801 $ 11,702,194 Net Loss applicable to Common Stockholders $ (13,671,124 ) $ (16,394,632 ) Net Loss Per Share - Basic and Diluted applicable to Common Stockholders $ (2.22 ) $ (6.05 ) |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accrued Expenses [Abstract] | |
Schedule of accrued expenses | December 31, 2016 2015 Salaries and payroll taxes $ 77,037 $ 18,380 Reimbursable expenses 5,000 5,000 Consulting fees 25,547 32,173 Audit fees - 35,000 Merchant bank fees 31,124 - Rent 1,147 3,077 State income taxes 1,135 4,150 Legal fees 7,568 81,281 Management incentives 604,125 372,000 Interest expense 691,684 45,100 Dividends – Series A & B preferred stock 583,067 - Liquidated damages – Series B preferred stock 360,000 - Finder’s fees 256,250 - Other 257,988 45,277 Totals $ 2,901,672 $ 641,438 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Derivative Liabilities [Abstract] | |
Schedule of derivative liabilities | January 12, - December 31, 2016 2015 Embedded Conversion Feature Liability: Risk-free interest rate 0.46%-0.59 0.62 % Expected volatility 100.00% 100.00 % Expected life (in years) 0.91-0.70 0.92 Expected dividend yield - - Face Value of convertible notes $ 3,209,850 - $1,208,850 3,294,850 Fair value $ - $ 420,360 |
Schedule of fair value measured on recurring basis | Fair Value Measurements at December 31, 2015 Total Quoted Significant Significant Derivative liabilities $ 420,360 $ - $ - $ 420,360 |
Summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis | For the year ended December 31, 2016 For the year ended Beginning liability balance $ 420,360 $ - Loss on change in fair value of derivative liabilities 2,299,020 - Recognition of conversion feature liability - 912,330 Gain on derivative liabilities resulting from accelerated amortizations (1,016,980 ) - Net realized gain on conversion feature liabilities - (47,242 ) Net unrealized gain on conversion feature liabilities - (444,728 ) Adjustment to additional paid-in capital upon conversion and modification (1,702,400 ) - Ending balance $ - $ 420,360 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Stockholders' Equity [Abstract] | |
Summary of warrants outstanding and exercisable | Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Warrants Price In Years Value Outstanding at January 1, 2015 362,978 $ 28.00 4.51 $ 283,828 Issued 431,071 17.80 4.04 - Exercised (32,500 ) 20.00 - - Cancelled - - - - Outstanding and Exercisable at December 31, 2015 761,549 $ 22.60 3.83 $ - Issued 1,224,980 4.69 4.13 - Exercised (157,480 ) - - - Cancelled - - - - Outstanding and Exercisable at December 31, 2016 1,829,049 $ 12.00 3.92 $ - |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes [Abstract] | |
Schedule of income tax provision | December 31, 2016 2015 Current Federal $ - $ - State 5,749 4,307 5,749 4,307 Deferred Federal (2,843,866 ) (3,543,673 ) State (281,625 ) (362,722 ) (3,125,491 ) (3,906,395 ) Change in valuation allowance 3,315,776 3,906,395 Total income tax provision $ 196,035 $ 4,307 |
Schedule of reconciliation of effective income tax rate and statutory federal income tax rate | December 31, 2016 2015 U.S. federal statutory rate 34.00 % 34.00 % State income tax rate, net of federal benefit 1.45 1.81 Inducement expenses - (2.33 ) Other permanent differences (10.60 ) (3.63 ) Less: valuation allowance (26.41 ) (29.88 ) Provision for income taxes (1.56 )% (.03 )% |
Sxhedule of deferred tax assets and liabilities | December 31, 2016 2015 Deferred tax assets: Net operating loss carryforward $ 8,887,756 $ 6,109,750 Tax credits 187,856 177,909 Accruals and reserves 546,286 315,580 Restricted stock 42,140 4,238 Tangible and intangible assets 62,352 - Charitable donations 3,738 3,759 Total deferred tax assets before valuation allowance: $ 9,730,128 $ 6,611,236 Valuation allowance (9,920,414 ) (6,604,638 ) Deferred tax assets, net of valuation allowance (190,286 ) 6,598 Deferred tax liabilities: Fixed assets $ - $ (6,598 ) Convertible debt - Total deferred tax liabilities - (6,598 ) Net deferred tax asset (liability) $ (190,286 ) $ - |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
Schedule of future lease obligation | 2017 $ 172,586 2018 2,340 Total future lease obligations $ 174,926 |
Organization and Principal Bu29
Organization and Principal Business Activity (Details) - USD ($) | Jul. 25, 2016 | Jul. 22, 2016 | Jun. 25, 2012 | Dec. 31, 2016 | Dec. 31, 2015 |
Organization and Principal Business Activity (Textual) | |||||
Accrued interest rate | 15.00% | 100.00% | |||
Common stock acquired in exchange | 20,000,000 | ||||
Acquisition of membership interests, description | (i) $17.5 million in cash consideration (ii) $2.5 million in a secured promissory note (the "Logicmark Note") issued to Logicmark Investment Partners, LLC, as representative of the Logicmark Sellers (the "Logicmark Representative") (iii) 78,740 shares of common stock, which were issued upon signing of the Interest Purchase Agreement (the "Logicmark Shares"), and (iv) warrants (the "Logicmark Warrants,") to purchase an aggregate of 157,480 shares of common stock (the "Logicmark Warrant Shares") for no additional consideration. | ||||
Payments to LogicMark sellers, description | The Logicmark Note originally was to mature on September 23, 2016 but was extended to April 15, 2017. During 2016 the Company paid down $1,726,031 of the Seller Note with cash generated from operations as well as from the net cash proceeds received of $1,400,000 from the issuance of the convertible exchange notes issued on November 29, 2016. The Note accrues interest at a rate of 15% per annum. The Logicmark Warrants were all exercised on July 27, 2016. | ||||
Convertible notes payable, maturity date | Sep. 23, 2016 | Sep. 22, 2016 | Dec. 8, 2016 | ||
Issuance of common stock shares | 78,740 | ||||
Secured promissory note | $ 15,000,000 | ||||
Pay down of short-term debt | $ (1,726,031) | ||||
Proceeds received from issuance of convertible exchange notes, net | $ 1,400,000 |
Reclassification of Deferred 30
Reclassification of Deferred Debt Issuance Costs and Reverse Stock Split (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Reclassification of Deferred Debt Issuance Costs and Reverse Stock Split (Textual) | ||
Reverse stock split, description | On September 1, 2016, the Company's board of directors and stockholders approved a resolution to amend the Company's Certificate of Incorporation and to authorize the Company to effect a reverse split of the Company's outstanding common stock at a ratio of 1-for-10 (the "Reverse Split"). On September 9, 2016, the Company effected the Reverse Split. Upon effectiveness of the Reverse Split, every 10 shares of outstanding common stock decreased to one share of common stock. | |
Deferred debt issuance costs to convertible notes payable | $ 52,810 |
Liquidity and Management Plans
Liquidity and Management Plans (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Liquidity and Management Plans (Textual) | |||
Net loss | $ (12,752,928) | $ (13,076,854) | |
Working capital deficiency | 2,073,523 | ||
Stockholders' equity | $ 2,818,731 | $ 881,333 | $ 2,735,344 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 | |
Issuance of a promissory note | $ 400,000 | ||
Series A Convertible Preferred Stock [Member] | |||
Liquidity and Management Plans (Textual) | |||
Stockholders' equity | $ 1,869,775 | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 | |
Series B Convertible Preferred Stock [Member] | |||
Liquidity and Management Plans (Textual) | |||
Stockholders' equity | $ 4,090,000 | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2016 | |
Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 5 years |
Furniture and fixtures [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 5 years |
Furniture and fixtures [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Tooling and molds [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Tooling and molds [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 2 years |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Summary of Significant Accounting Policies (Textual) | ||
Restricted cash | $ 40,371 | $ 1,534,953 |
Restricted cash balance | 1,500,000 | |
Sales revenue | 33,540 | 167,164 |
Inventory raw materials | 3,797,499 | 1,587,653 |
Inventory finished goods | 1,544,001 | 180,289 |
Prepayments of raw materials inventory | $ 1,089,770 | 49,103 |
Antidilutive earnings per share, amount | 2,581,104 | |
Goodwill | $ 15,479,662 | |
Amortization expense of intangible assets | 318,842 | |
Amortization expense estimated for 2017 | 764,000 | |
Amortization expense estimated for 2018 | 764,000 | |
Amortization expense estimated for 2019 | 764,000 | |
Amortization expense estimated for 2020 | 764,000 | |
Amortization expense estimated for 2021 | 764,000 | |
Amortization expense | $ 764,000 | |
Shares issued upon conversion | 1,228,828 | |
Convertible Exchange Notes [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Antidilutive earnings per share, amount | 575,000 | |
Patents [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Other intangible assets, estimated useful lives | 11 years | |
Fair value of patents | $ 3,936,612 | |
Trademarks [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Other intangible assets, estimated useful lives | 20 years | |
Fair value of trademarks | $ 1,230,002 | |
Customer relationships [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Other intangible assets, estimated useful lives | 10 years | |
Fair value of customer relationships | $ 3,119,111 | |
WVH LLC [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Sales revenue | 1,357,413 | |
Accounts receivable due from WVH | $ 621,724 | |
Warrants [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Antidilutive earnings per share, amount | 1,829,049 | 761,549 |
Acquisition of LogicMark LLC (D
Acquisition of LogicMark LLC (Details) | Jul. 25, 2016USD ($) |
Acquisition of LogicMark LLC [Abstract] | |
Cash | $ 109,710 |
Accounts receivable | 494,591 |
Inventories | 2,566,117 |
Other current assets | 370,905 |
Property and equipment | 227,840 |
Goodwill | 15,479,662 |
Intangible assets | 8,604,567 |
Assets acquired | 27,853,392 |
Accounts payable | 507,857 |
Accrued liabilities | 208,747 |
Liabilities assumed | 716,604 |
Net assets acquired | $ 27,136,788 |
Acquisition of LogicMark LLC 35
Acquisition of LogicMark LLC (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Pro forma: | ||
Net Sales | $ 15,673,801 | $ 11,702,194 |
Net Loss applicable to Common Stockholders | $ (13,671,124) | $ (16,394,632) |
Net Loss Per Share - Basic and Diluted applicable to Common Stockholders | $ (2.23) | $ (6.05) |
Acquisition of LogicMark LLC 36
Acquisition of LogicMark LLC (Details Textual) - USD ($) | Jul. 25, 2016 | Jul. 22, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Jun. 25, 2012 |
Acquisition of LogicMark LLC (Textual) | |||||
Secured promissory note maturity date | Sep. 23, 2016 | Sep. 22, 2016 | Dec. 8, 2016 | ||
Debt instrument principal amount | $ 15,000,000 | ||||
Issuance of common stock shares | 78,740 | ||||
Forbearance agreement, description | (i) $250,000 on September 23, 2016; (ii) $100,000 on October 24, 2016; and (iii) $1,150,000, plus all accrued and unpaid interest due under the Note on October 31, 2016. | ||||
Escrow amount | $ 500,000 | ||||
Secured subordinated promissory note | $ 2,500,000 | ||||
Acquisition related expenses | $ 605,228 | ||||
Amortization expense related intangible assets | 731,242 | $ 731,242 | |||
Amortization deferred debt issuance costs | 2,851,185 | 4,735,767 | |||
Reduction depreciation expense | 35,543 | 29,948 | |||
Amortization of inventory fair value adjustment | 945,212 | $ 945,212 | |||
Debt issuance costs | 1,357,356 | ||||
Unamortized balance of deferred debt issue costs | 769,453 | ||||
Purchase price to acquire Logicmark | 27,136,788 | ||||
Amount paid in cash | 17,500,000 | ||||
Non-cash consideration | $ 9,636,788 | ||||
Non-cash consideration, description | The non-cash consideration was comprised of a $2,500,000 seller note, $900,000 of common stock and warrants issued to the sellers and $6,236,788 in earn-out provisions. | ||||
Prime borrowing rate | 15.00% | 100.00% | |||
Prime rate [Member] | |||||
Acquisition of LogicMark LLC (Textual) | |||||
Prime borrowing rate | 3.50% | ||||
Revolving Credit Facility [Member] | |||||
Acquisition of LogicMark LLC (Textual) | |||||
Secured promissory note maturity date | Jul. 25, 2017 | ||||
Debt instrument principal amount | $ 15,000,000 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Accrued Expenses [Abstract] | ||
Salaries and payroll taxes | $ 77,037 | $ 18,380 |
Reimbursable expenses | 5,000 | 5,000 |
Consulting fees | 25,547 | 32,173 |
Audit fees | 35,000 | |
Merchant bank fees | 31,124 | |
Rent | 1,147 | 3,077 |
State income taxes | 1,135 | 4,150 |
Legal fees | 7,568 | 81,281 |
Management incentives | 604,125 | 372,000 |
Interest expense | 691,684 | 45,100 |
Dividends - Series A & B preferred stock | 583,067 | |
Liquidated damages - Series B preferred stock | 360,000 | |
Finder's fees | 256,250 | |
Other | 257,988 | 45,277 |
Totals | $ 2,901,672 | $ 641,438 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) | Jul. 25, 2016 | Dec. 28, 2015 | Dec. 08, 2015 | Nov. 25, 2015 | Apr. 24, 2015 | Nov. 29, 2016 | Jul. 22, 2016 | Jul. 27, 2015 | Sep. 30, 2015 | Dec. 08, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Feb. 12, 2016 | Aug. 04, 2015 |
Short-term Debt [Line Items] | ||||||||||||||
Loss on extinguishment of debt | $ (272,749) | $ (635,986) | ||||||||||||
Conversion of debt | 2,456,679 | |||||||||||||
Convertible notes payable, maturity date | Sep. 23, 2016 | Sep. 22, 2016 | Dec. 8, 2016 | |||||||||||
Proceeds from convertible notes payable | $ 2,962,304 | |||||||||||||
Debt issuance costs | 1,357,356 | |||||||||||||
Installments in exchange for common stock | 350,000 | |||||||||||||
Amortization of debt discount | 648,365 | $ 1,093,371 | ||||||||||||
Aggregate principal amount of secured convertible notes | $ 15,000,000 | |||||||||||||
Common stock conversion price | $ 2.50 | |||||||||||||
Adjustment to additional paid-in capital upon modification | 1,702,400,000 | |||||||||||||
Term note, minimum interest | $ 253,028 | |||||||||||||
Shares issued upon conversion | 1,228,828 | |||||||||||||
Notes outstanding | $ 3,294,850 | |||||||||||||
Loss on conversion of convertible note interest | $ 34,628 | |||||||||||||
Inducement expense | 755,000 | |||||||||||||
December 2015 Private Placement [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Number of common stock issued | 90,000 | |||||||||||||
April Purchase Agreement [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Loss on extinguishment of debt | $ 635,986 | |||||||||||||
Conversion of debt | 1,784,850 | |||||||||||||
Proceeds from convertible notes payable | $ 1,481,500 | |||||||||||||
Debt issuance costs | 93,500 | |||||||||||||
Fair value of warrants | 860,000 | |||||||||||||
Beneficial conversion feature | 715,000 | |||||||||||||
Debt conversion, description | The Company satisfied by an issuance of common stock as a result of a waiver by the holders which allowed the Company to issue common stock below $2.50. | |||||||||||||
Amortization of debt discount | 1,575,000 | $ 983,836 | ||||||||||||
Aggregate principal amount of secured convertible notes | $ 350,000 | 500,000 | $ 1,575,000 | 500,000 | ||||||||||
Convertible notes bear interest per annum | 6.00% | |||||||||||||
Common stock conversion price | $ 25.20 | $ 2.35 | ||||||||||||
Convertible debt principal amount | $ 2,134,850 | 2,134,850 | ||||||||||||
Warrants exercisable, term | 6 months | |||||||||||||
April Purchase Agreement [Member] | Class A Warrant [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Common stock purchase warrant, shares | 46,875 | |||||||||||||
Exercise price | $ 30.20 | |||||||||||||
April Purchase Agreement [Member] | Class B Warrant [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Common stock purchase warrant, shares | 46,875 | |||||||||||||
Exercise price | $ 50 | |||||||||||||
December Purchase Agreement [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Conversion of debt | $ 838,171 | |||||||||||||
Debt conversion, description | The December Notes bear interest at a rate of 8% per annum. The December Notes were convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $2.35 per share, as modified. In case of an Event of Default (as defined in the December Notes), the notes are convertible at 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days, until such Event of Default has been cured. | (a) $5.50 per share and (b) from and after an Event of Default (as defined in the December Notes), 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior thirty (30) trading days, until such Event of Default has been cured. | ||||||||||||
Amortization of debt discount | $ 109,535 | |||||||||||||
Convertible debt principal amount | $ 1,500,000 | 1,500,000 | ||||||||||||
Debt instrument, description | 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days at the option of the Company. | |||||||||||||
Term note, minimum interest | $ 38,560 | |||||||||||||
Shares issued upon conversion | 373,077 | |||||||||||||
Debt discount | $ 1,719,700 | |||||||||||||
Notes outstanding | 3,644,850 | 3,644,850 | $ 0 | |||||||||||
Derivative liability | 912,330 | 912,330 | ||||||||||||
November Purchaser Agreement [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Convertible notes payable, maturity date | Dec. 15, 2015 | Nov. 29, 2017 | ||||||||||||
Amortization of debt discount | $ 133,333 | |||||||||||||
Common stock conversion price | $ 3 | |||||||||||||
Convertible notes bear interest | 12.00% | |||||||||||||
Convertible debt principal amount | $ 200,000 | $ 1,500,000 | ||||||||||||
Debt instrument, description | (i) an aggregate principal amount of $1,500,000 of new secured subordinated promissory notes (the "Exchange Notes") and (ii) warrants (the "Warrants", and together with the Exchange Notes, the "Exchange Securities") convertible into 500,000 shares of common stock of the Company, par value $0.0001 (the "Common Stock"). The Holders purchased the $1,500,000 of Original Notes from LogicMark Investment prior to this transaction. | |||||||||||||
Term note, minimum interest | $ 10,000 | |||||||||||||
Warrants exercisable, term | 5 years | |||||||||||||
Warrant exercise price | $ 3 | |||||||||||||
Accrued interest rate of per annum | 15.00% | |||||||||||||
8% Convertible Notes [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Convertible notes payable, maturity date | Sep. 11, 2015 | |||||||||||||
Proceeds from convertible notes payable | $ 200,000 | |||||||||||||
Aggregate principal amount of secured convertible notes | $ 200,000 | |||||||||||||
Common stock conversion price | $ 35 | $ 35 | ||||||||||||
Convertible notes bear interest | 8.00% | |||||||||||||
Convertible debt principal amount | $ 222,222 | |||||||||||||
Debt instrument, description | If such prepayment was made within sixty (60) days after the issuance date of the 8% Convertible Notes, the Company would pay an amount in cash equal to 109% of the sum of the then outstanding principal amount of the note and interest; thereafter, if such prepayment was made, the Company would pay an amount in cash equal to 114% of the sum of the then outstanding principal amount of the note and interest. | |||||||||||||
Maximum interest rate for convertible notes payable | 24.00% | |||||||||||||
Inducement expense | $ 100,000 | |||||||||||||
Equity offering price | $ 17.50 | |||||||||||||
Convertible Note [Member] | ||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||
Loss on extinguishment of debt | 635,986 | |||||||||||||
Aggregate principal amount of secured convertible notes | $ 350,000 | 500,000 | 500,000 | |||||||||||
Common stock conversion price | $ 2.50 | |||||||||||||
Convertible debt principal amount | $ 2,134,850 | $ 2,134,850 |
Derivative Liabilities (Details
Derivative Liabilities (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 29, 2016 | Dec. 31, 2015 | |
Embedded Conversion Feature Liability: | ||
Risk-free interest rate | 0.62% | |
Expected volatility | 100.00% | 100.00% |
Expected life (in years) | 11 months 1 day | |
Expected dividend yield | ||
Face Value of convertible notes | $ 3,294,850 | |
Fair value | $ 420,360 | |
Minimum [Member] | ||
Embedded Conversion Feature Liability: | ||
Risk-free interest rate | 0.46% | |
Expected life (in years) | 8 months 12 days | |
Face Value of convertible notes | $ 1,208,850 | |
Maximum [Member] | ||
Embedded Conversion Feature Liability: | ||
Risk-free interest rate | 0.59% | |
Expected life (in years) | 10 months 28 days | |
Face Value of convertible notes | $ 3,209,850 |
Derivative Liabilities (Detai40
Derivative Liabilities (Details 1) - USD ($) | Mar. 29, 2016 | Dec. 31, 2015 |
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative liabilities | $ 420,360 | |
Fair Value, Recurring [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative liabilities | 420,360 | |
Fair Value, Recurring [Member] | Quoted prices in active markets (Level 1) | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative liabilities | ||
Fair Value, Recurring [Member] | Significant other observable inputs (Level 2) | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative liabilities | ||
Fair Value, Recurring [Member] | Significant unobservable inputs (Level 3) | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Derivative liabilities | $ 420,360 |
Derivative Liabilities (Detai41
Derivative Liabilities (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||
Adjustment to additional paid-in capital upon conversion and modification | $ (1,702,400,000) | |
Fair Value, Inputs, Level 3 [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Beginning liability balance | 420,360 | |
Loss on change in fair value of derivative liabilities | 2,299,020 | |
Recognition of conversion feature liability | 912,330 | |
Gain on derivative liabilities resulting from accelerated amortizations | (1,016,980) | |
Net realized gain on conversion feature liabilities | (47,242) | |
Net unrealized gain on conversion feature liabilities | (444,728) | |
Adjustment to additional paid-in capital upon conversion and modification | (1,702,400) | |
Ending balance | $ 420,360 |
Derivative Liabilities (Detai42
Derivative Liabilities (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Derivative Liabilities (Textual) | ||
Amortization of discount on contingent consideration | $ 91,682 |
Strategic Agreements With Wor43
Strategic Agreements With World Ventures Holdings (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Apr. 28, 2016 | |
Strategic Agreements With World Ventures Holdings (Textual) | |||
Aggregate purchase price | $ 1,974,522 | ||
Restricted cash | $ 40,371 | 1,534,953 | |
Customer deposits | 6,068,894 | $ 8,729 | |
WVH [Member] | |||
Strategic Agreements With World Ventures Holdings (Textual) | |||
Expenditure description | The WVH Warrant is initially exercisable on the five (5) month anniversary of the issuance date at an exercise price equal to $7.50 per share and has a term of exercise equal to two (2) years and seven (7) months from the date on which first exercisable. On April 28, 2016, the exercise price of the WVH Warrant was modified to $4.00. | ||
Warrant exercise price | $ 4 | ||
Revenue | 1,357,413 | ||
Accounts receivable due from WVH | 621,724 | ||
Development Agreement [Member] | |||
Strategic Agreements With World Ventures Holdings (Textual) | |||
Cost of sales representatives, members, consumers, employees, contractors or affiliates | 1,500,000 | $ 1,500,000 | |
Development and manufacture cost | $ 2,000,000 | ||
Expenditure description | In addition, any expenditure of the $1,500,000 in proceeds is restricted in that the Company will need prior approval from WVH on a monthly basis in order to fund the estimated expenditures needed for the development of the product for WVH from the $1,500,000. | ||
Restricted cash | $ 1,500,000 | ||
Development Agreement [Member] | WVH [Member] | |||
Strategic Agreements With World Ventures Holdings (Textual) | |||
Expenditure description | The Development Agreement commenced on December 31, 2015, and has an initial term of two (2) years (the "Initial Term"). Thereafter, the Development Agreement will automatically renew for additional successive one (1) year terms (each a "Renewal Term") unless and until WVH provides written notice of non-renewal at least thirty (30) days prior to the end of the Initial Term or then-current Renewal Term. | ||
Securities Purchase Agreement [Member] | |||
Strategic Agreements With World Ventures Holdings (Textual) | |||
Sale of common stock, shares | 1,005,000 | ||
Common stock purchase warrant | 251,250 | ||
Aggregate purchase price | $ 2,000,000 | ||
Warrant exercise price | $ 0.75 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - Warrants [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Warrants | ||
Number of Warrants Outstanding and Exercisable, Beginning | 761,549 | 362,978 |
Number of Warrants Issued | 1,224,980 | 431,071 |
Number of Warrants Exercised | (157,480) | (32,500) |
Number of Warrants Cancelled | ||
Number of Warrants Outstanding and Exercisable, Ending | 1,829,049 | 761,549 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price Outstanding and Exercisable, Beginning | $ 22.60 | $ 28 |
Weighted Average Exercise Price Issued | 4.69 | 17.80 |
Weighted Average Exercise Price Exercised | 20 | |
Weighted Average Exercise Price Cancelled | ||
Weighted Average Exercise Price Outstanding and Exercisable, Ending | $ 12 | $ 22.60 |
Weighted Average Remaining Life In Years | ||
Weighted Average Remaining Life In Years Outstanding and Exercisable, Beginning | 3 years 9 months 29 days | 4 years 6 months 4 days |
Weighted Average Remaining Life In Years, Issued | 4 years 1 month 17 days | 4 years 15 days |
Weighted Average Remaining Life In Years Outstanding and Exercisable, Ending | 3 years 11 months 1 day | 3 years 9 months 29 days |
Intrinsic Value Outstanding and Exercisable, Beginning | $ 283,828 | |
Intrinsic Value Outstanding and Exercisable, Ending |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) | Jul. 25, 2016USD ($)$ / sharesshares | Apr. 11, 2016USD ($)$ / sharesshares | Dec. 08, 2015USD ($)shares | Aug. 04, 2015USD ($)$ / sharesshares | Apr. 24, 2015USD ($)$ / sharesshares | Jul. 30, 2016$ / shares | Jul. 25, 2016USD ($)$ / sharesshares | Jul. 22, 2016USD ($) | Oct. 21, 2015USD ($)$ / sharesshares | Jul. 27, 2015USD ($)$ / shares | Sep. 30, 2015USD ($) | Dec. 08, 2015USD ($) | Dec. 31, 2016USD ($)NonExecutiveDirectors$ / sharesshares | Dec. 31, 2015USD ($)NonExecutiveDirectorsNonExecutiveEmployees$ / sharesshares | Feb. 12, 2016$ / shares | Dec. 28, 2015USD ($) | Dec. 31, 2014$ / sharesshares | Sep. 15, 2014$ / shares | Sep. 10, 2014$ / shares | Jan. 13, 2014$ / shares |
Common stock issued | shares | 7,379,924 | 4,442,528 | ||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||
Gross proceeds from Issuance of common stock | $ 5,114,353 | |||||||||||||||||||
Proceeds from warrant exercises | 650,000 | |||||||||||||||||||
Inducement expense | 755,000 | |||||||||||||||||||
Secured promissory note | $ 15,000,000 | $ 15,000,000 | ||||||||||||||||||
Additional paid-in capital | 33,204,943 | 22,787,762 | ||||||||||||||||||
Stock issued for services rendered, shares | shares | 157,480 | |||||||||||||||||||
Stock issued for services rendered | 619,254 | 2,381,961 | ||||||||||||||||||
Debt issuance costs | 1,357,356 | |||||||||||||||||||
Amortization of debt discount | 648,365 | $ 1,093,371 | ||||||||||||||||||
Convertible notes payable, maturity date | Sep. 23, 2016 | Sep. 22, 2016 | Dec. 8, 2016 | |||||||||||||||||
Proceeds from convertible notes payable | $ 2,962,304 | |||||||||||||||||||
Common stock conversion price | $ / shares | $ 2.50 | |||||||||||||||||||
Aggregate purchase price of senior secured convertible notes | $ 2,500,000 | |||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||
Other long-term assets | $ 900,000 | |||||||||||||||||||
Common stock and warrants issued to acquire Logic Mark | $ 900,000 | |||||||||||||||||||
Series A Preferred Stock [Member] | ||||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||
Series B Preferred Stock [Member] | ||||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||
8% Convertible Notes [Member] | ||||||||||||||||||||
Inducement expense | $ 100,000 | |||||||||||||||||||
Secured promissory note | $ 200,000 | |||||||||||||||||||
Convertible notes payable, maturity date | Sep. 11, 2015 | |||||||||||||||||||
Proceeds from convertible notes payable | $ 200,000 | |||||||||||||||||||
Convertible notes bear interest | 8.00% | |||||||||||||||||||
Convertible debt principal amount | $ 222,222 | |||||||||||||||||||
Maximum interest rate for convertible notes payable | 24.00% | |||||||||||||||||||
Common stock conversion price | $ / shares | $ 35 | $ 35 | ||||||||||||||||||
Share price per share | $ / shares | 17.50 | |||||||||||||||||||
Equity offering price | $ / shares | 17.50 | |||||||||||||||||||
Debt instrument, description | If such prepayment was made within sixty (60) days after the issuance date of the 8% Convertible Notes, the Company would pay an amount in cash equal to 109% of the sum of the then outstanding principal amount of the note and interest; thereafter, if such prepayment was made, the Company would pay an amount in cash equal to 114% of the sum of the then outstanding principal amount of the note and interest. | |||||||||||||||||||
April Purchase Agreement [Member] | ||||||||||||||||||||
Secured promissory note | $ 500,000 | $ 1,575,000 | $ 500,000 | $ 350,000 | ||||||||||||||||
Convertible notes bear interest per annum | 6.00% | |||||||||||||||||||
Debt issuance costs | $ 93,500 | |||||||||||||||||||
Fair value of class A and B Warrants | 860,000 | |||||||||||||||||||
Beneficial conversion feature | 715,000 | |||||||||||||||||||
Amortization of debt discount | 1,575,000 | 983,836 | ||||||||||||||||||
Proceeds from convertible notes payable | $ 1,481,500 | |||||||||||||||||||
Convertible debt principal amount | 2,134,850 | 2,134,850 | ||||||||||||||||||
Common stock conversion price | $ / shares | $ 25.20 | $ 2.35 | ||||||||||||||||||
April Purchase Agreement [Member] | Series A Preferred Stock [Member] | ||||||||||||||||||||
Shares purchased | shares | 46,875 | |||||||||||||||||||
Conversion of Series A Preferred stock and dividends into shares of common stock | $ 2,662,794 | |||||||||||||||||||
Conversion of Series A Preferred stock and dividends into shares of common stock, Shares | shares | 834,718 | |||||||||||||||||||
April Purchase Agreement [Member] | Series B Preferred Stock [Member] | ||||||||||||||||||||
Shares purchased | shares | 46,875 | |||||||||||||||||||
December Purchase Agreement [Member] | ||||||||||||||||||||
Derivative liability | 912,330 | 912,330 | ||||||||||||||||||
Amortization of debt discount | $ 109,535 | |||||||||||||||||||
Convertible debt principal amount | $ 1,500,000 | 1,500,000 | ||||||||||||||||||
Debt instrument, description | 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days at the option of the Company. | |||||||||||||||||||
Common Stock [Member] | ||||||||||||||||||||
Common stock issued | shares | 50,000 | |||||||||||||||||||
Shares purchased | shares | 1,601,905 | 140,000 | ||||||||||||||||||
Stock issued for services rendered, shares | shares | 204,553 | 254,147 | ||||||||||||||||||
Stock issued for services rendered | $ 21 | $ 25 | ||||||||||||||||||
Common stock and warrants issued to acquire Logic Mark | $ 8 | |||||||||||||||||||
Warrants [Member] | ||||||||||||||||||||
Number of warrants | shares | 1,829,049 | 761,549 | 362,978 | |||||||||||||||||
Number of warrants exercised | shares | 157,480 | 32,500 | ||||||||||||||||||
Warrant exercise price | $ / shares | $ 12 | $ 22.60 | $ 28 | |||||||||||||||||
Purchasers [Member] | Warrants [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 3.25 | |||||||||||||||||||
June Purchasers [Member] | Common Stock [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 20 | |||||||||||||||||||
Warrant term | 5 years | |||||||||||||||||||
June Purchasers [Member] | Warrants [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 20 | |||||||||||||||||||
August Purchasers [Member] | ||||||||||||||||||||
Warrants issued to purchase common stock | shares | 50,000 | |||||||||||||||||||
Public Offering [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 3.288 | |||||||||||||||||||
August 2015 Public Offering and Private Placement [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 23.50 | |||||||||||||||||||
August 2015 Offerings [Member] | ||||||||||||||||||||
Aggregate purchase price of common stock | $ 3,012,500 | |||||||||||||||||||
Issuance of common stock, shares | shares | 172,143 | |||||||||||||||||||
Issuance of stock price per share | $ / shares | $ 17.50 | |||||||||||||||||||
August 2015 Offerings [Member] | Warrant Purchase Agreement [Member] | ||||||||||||||||||||
Warrants issued to purchase common stock | shares | 86,072 | |||||||||||||||||||
Common stock price per warrant | $ / shares | $ 0.00 | |||||||||||||||||||
Warrant purchase agreement, description | Each August 2015 Warrant shall be initially exercisable on the six (6) month anniversary of the issuance date an exercise price equal to $23.50 per share and have a term of exercise equal to five (5) years from the date on which first exercisable. | |||||||||||||||||||
October 2015 Public Offering [Member] | ||||||||||||||||||||
Issuance of stock price per share | $ / shares | $ 7 | |||||||||||||||||||
Number of common stock issued | shares | 150,000 | |||||||||||||||||||
Gross proceeds from public offering | $ 1,050,000 | |||||||||||||||||||
December 2015 Private Placement [Member] | ||||||||||||||||||||
Number of common stock issued | shares | 90,000 | |||||||||||||||||||
December 2015 Private Placement [Member] | Senior Secured Convertible Notes [Member] | ||||||||||||||||||||
Secured promissory note | $ 1,500,000 | $ 1,500,000 | ||||||||||||||||||
Interest rate | 8.00% | 8.00% | ||||||||||||||||||
April 2016 Offering [Member] | Series A Preferred Stock [Member] | ||||||||||||||||||||
Issuance of stock price per share | $ / shares | $ 1 | |||||||||||||||||||
Number of common stock issued | shares | 2,500,000 | |||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | |||||||||||||||||||
Cumulative dividends rate | 25.00% | |||||||||||||||||||
Preferred stock dividend | $ 230,225 | $ 590,116 | ||||||||||||||||||
Payable of agent fees and other estimated offering expenses | 2,500,000 | |||||||||||||||||||
Stock issuance cost | ||||||||||||||||||||
July 2016 Offering [Member] | Series B Preferred Stock [Member] | ||||||||||||||||||||
Issuance of stock price per share | $ / shares | $ 1 | $ 1 | ||||||||||||||||||
Warrants issued to purchase common stock | shares | 562,500 | |||||||||||||||||||
Common stock conversion price | $ / shares | 4 | $ 4 | ||||||||||||||||||
Warrant exercise price | $ / shares | $ 7.50 | |||||||||||||||||||
Warrant term | 5 years | |||||||||||||||||||
Number of common stock issued | shares | 4,500,000 | |||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||
Cumulative dividends rate | 25.00% | |||||||||||||||||||
Preferred stock dividend | 490,625 | |||||||||||||||||||
Payable of agent fees and other estimated offering expenses | $ 4,500,000 | |||||||||||||||||||
Stock issuance cost | $ 410,000 | $ 410,000 | ||||||||||||||||||
January 13, 2014 offering [Member] | ||||||||||||||||||||
Closing balance of private offering | 1,000,000 | |||||||||||||||||||
Exercised oversubscription amount in offering | $ 350,000 | |||||||||||||||||||
Common stock issued | shares | 4,154 | |||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | |||||||||||||||||||
Stock sold in private offering, warrant shares | shares | 135,000 | |||||||||||||||||||
Common stock exercise price | $ / shares | $ 32.50 | |||||||||||||||||||
Proceeds from private offering | $ 45,000 | |||||||||||||||||||
Aggregate purchase price of common stock | $ 1,350,000 | |||||||||||||||||||
January 13, 2014 offering [Member] | Purchasers [Member] | ||||||||||||||||||||
Common stock issued | shares | 41,539 | |||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | |||||||||||||||||||
Securities Purchase Agreement [Member] | Class Warrant [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 3.02 | |||||||||||||||||||
Securities Purchase Agreement [Member] | Class B Warrant [Member] | ||||||||||||||||||||
Warrant exercise price | $ / shares | $ 5 | |||||||||||||||||||
Securities Purchase Agreement [Member] | July 2015 Private Placement [Member] | 8% Convertible Notes [Member] | ||||||||||||||||||||
Debt instrument, description | On July 27, 2015, the Company entered into a securities purchase agreement with accredited investors (the ''July Purchasers'') pursuant to which the Company sold an aggregate of $222,222 in principal amount of the 8% Original Issue Discount Convertible Notes (the ''8% Convertible Notes'') for an aggregate purchase price of $200,000. The Company received net proceeds of $200,000 from the sale of the 8% Convertible Notes. | |||||||||||||||||||
December 2013 Offering [Member] | ||||||||||||||||||||
Number of warrants | shares | 45,000 | |||||||||||||||||||
January 2014 Offering [Member] | ||||||||||||||||||||
Number of warrants | shares | 90,000 | |||||||||||||||||||
Long-Term Stock Incentive Plan [Member] | ||||||||||||||||||||
Long-term stock incentive plan, description | The maximum aggregate number of shares of common stock that may be issued under the LTIP, including stock awards, stock issued to directors for serving on the Company's board, and stock appreciation rights, is limited to 10% of the shares of common stock outstanding on the first business or trading day of any fiscal year, which is 554,054 at December 31, 2016. | |||||||||||||||||||
Shares issued under stock incentive plan | $ 372,000 | |||||||||||||||||||
Long-Term Stock Incentive Plan [Member] | Non Executive Director [Member] | ||||||||||||||||||||
Number of employees under stock incentive plan | NonExecutiveDirectors | 3 | |||||||||||||||||||
Number of non-executive employees | NonExecutiveDirectors | 3 | |||||||||||||||||||
Shares issued under stock incentive plan | $ 180,000 | $ 180,000 | ||||||||||||||||||
Shares issued under stock incentive plan, shares | shares | 51,705 | 26,961 | ||||||||||||||||||
Long-Term Stock Incentive Plan [Member] | Executive Officer [Member] | ||||||||||||||||||||
Shares issued under stock incentive plan | $ 372,000 | |||||||||||||||||||
Shares issued under stock incentive plan, shares | shares | 60,000 | |||||||||||||||||||
Long-Term Stock Incentive Plan [Member] | Non Executive Employees [Member] | ||||||||||||||||||||
Number of non-executive employees | NonExecutiveEmployees | 1 | |||||||||||||||||||
Shares issued under stock incentive plan | $ 372,000 | $ 147,500 | ||||||||||||||||||
Shares issued under stock incentive plan, shares | shares | 60,000 | 5,000 | ||||||||||||||||||
Aggregate purchase price of common stock | $ 147,500 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Current | ||
Federal | ||
State | 5,749 | 4,307 |
Total | 5,749 | 4,307 |
Deferred | ||
Federal | (2,843,866) | (3,543,673) |
State | (281,625) | (362,722) |
Total | (3,125,491) | (3,906,395) |
Change in valuation allowance | 3,315,776 | 3,906,395 |
Total income tax provision | $ 196,035 | $ 4,307 |
Income Taxes (Details 1)
Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes [Abstract] | ||
U.S. federal statutory rate | 34.00% | 34.00% |
State income tax rate, net of federal benefit | 1.45% | 1.81% |
Inducement expenses | (2.33%) | |
Other permanent differences | (10.60%) | (3.63%) |
Less: valuation allowance | (26.41%) | (29.88%) |
Provision for income taxes | (1.56%) | (0.03%) |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 8,887,756 | $ 6,109,750 |
Tax credits | 187,856 | 177,909 |
Accruals and reserves | 546,286 | 315,580 |
Restricted stock | 42,140 | 4,238 |
Tangible and intangible assets | 62,352 | |
Charitable donations | 3,738 | 3,759 |
Total deferred tax assets before valuation allowance: | 9,730,128 | 6,611,236 |
Valuation allowance | (9,920,414) | (6,604,638) |
Deferred tax assets, net of valuation allowance | (190,286) | 6,598 |
Deferred tax liabilities: | ||
Fixed assets | (6,598) | |
Convertible debt | ||
Total deferred tax liabilities | (6,598) | |
Net deferred tax asset (liability) | $ (190,286) |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes (Textual) | ||
Net operating loss carryovers | $ 187,856 | |
Operating loss carryforwards, expiration date | Dec. 31, 2033 | |
Tax credit carryforwards | ||
Tax credit carryforward, expiration date | Dec. 31, 2033 | |
Change in valuation allowance | $ (3,315,776) | $ (3,906,395) |
Federal [Member] | ||
Income Taxes (Textual) | ||
Net operating loss carryovers | 24,152,902 | |
State [Member] | ||
Income Taxes (Textual) | ||
Net operating loss carryovers | $ 12,469,752 |
Commitments and Contingencies50
Commitments and Contingencies (Details) | Dec. 31, 2016USD ($) |
Commitments and Contingencies [Abstract] | |
2,017 | $ 172,586 |
2,018 | 2,340 |
Total future lease obligations | $ 174,926 |
Commitments and Contingencies51
Commitments and Contingencies (Details Textual) - USD ($) | Jan. 03, 2017 | Oct. 10, 2016 | Sep. 12, 2014 | Dec. 31, 2016 | Dec. 31, 2015 |
Commitments and Contingencies (Textual) | |||||
Monthly rent for first year | $ 2,300 | ||||
Monthly rent for second year | $ 2,450 | ||||
Term of the lease | 2 years | 3 years | |||
Monthly rent amount | $ 2,450 | $ 6,837 | |||
Rent expenses | $ 154,194 | $ 124,698 | |||
Mr. Pereira [Member] | |||||
Commitments and Contingencies (Textual) | |||||
Employment agreement term | 3 years | ||||
Mr. Pereira [Member] | Subsequent Event [Member] | Maximum [Member] | |||||
Commitments and Contingencies (Textual) | |||||
Base salary increased | $ 346,500 | ||||
Mr. Pereira [Member] | Subsequent Event [Member] | Minimum [Member] | |||||
Commitments and Contingencies (Textual) | |||||
Base salary increased | $ 381,150 | ||||
Office Space [Member] | |||||
Commitments and Contingencies (Textual) | |||||
Monthly rent amount | $ 1,170 | ||||
Lease expiration, date | Feb. 28, 2018 | ||||
Subleases Office [Member] | |||||
Commitments and Contingencies (Textual) | |||||
Monthly rent amount | $ 8,850 | ||||
Lease expiration, date | Jul. 31, 2017 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Mar. 26, 2017 | Jan. 03, 2017 | Jul. 25, 2016 | Mar. 28, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Subsequent Events (Textual) | |||||||
Shares of common stock for payment of services | 157,480 | ||||||
Payment of services grant date fair market value | $ 619,254 | $ 2,381,961 | |||||
Subsequent Event [Member] | |||||||
Subsequent Events (Textual) | |||||||
Shares of common stock for payment of services | 6,000 | 27,500 | |||||
Payment of services grant date fair market value | $ 16,680 | $ 52,250 | |||||
Shares of common stock to employees under 2016 bonus plan | 237,559 | ||||||
Purchase price transaction, description | (i) The issuance of 19.99% of the outstanding shares of the capital stock of the Company to the shareholders of Fit Pay; (ii) the issuance by the Company of $2,000,000 worth of non-voting, non-convertible, shares of junior preferred stock to (the "Junior Preferred Stock") to certain holders of preferred shares of Fit Pay, which Junior Preferred Stock shall earn a cumulative dividend of 5% per annum, which will increase to a dividend of 10% per annum after the Company's market capitalization is $75,000,000 for greater than thirty (30) consecutive days; and (iii) an earn-out payment to the then former shareholders of Fit Pay of 12.5% of the gross revenue derived from the Seller's technology by the Company, for the sixteen (16) quarter period beginning on October 1, 2017. The parties intend to negotiate and execute a definitive agreement for the Transaction in accordance with the terms of the LOI. | ||||||
Subsequent Event [Member] | Series A Preferred Stock [Member] | |||||||
Subsequent Events (Textual) | |||||||
Preferred stock converted into common stock, value | $ 306,109 | ||||||
Preferred stock converted into common stock, Shares | 130,259 | ||||||
Subsequent Event [Member] | Series B Preferred Stock [Member] | |||||||
Subsequent Events (Textual) | |||||||
Preferred stock converted into common stock, value | $ 1,682,031 | ||||||
Preferred stock converted into common stock, Shares | 762,097 |