Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 14, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Nxt-ID, Inc. | |
Entity Central Index Key | 0001566826 | |
Trading Symbol | NXTD | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Ex Transition Period | false | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 29,229,209 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash | $ 1,227,803 | $ 425,189 |
Restricted cash | 1,473,617 | 1,189,452 |
Accounts receivable, net | 103,316 | 247,023 |
Inventory, net | 1,224,337 | 870,513 |
Prepaid expenses and other current assets | 574,329 | 443,324 |
Assets associated with discontinued operations | 209,532 | 222,227 |
Total Current Assets | 4,812,934 | 3,397,728 |
Property and equipment: | ||
Equipment | 183,044 | 183,044 |
Furniture and fixtures | 89,029 | 89,029 |
Tooling and molds | 630,481 | 630,481 |
Property and equipment, gross | 902,554 | 902,554 |
Accumulated depreciation | (775,537) | (757,198) |
Property and equipment, net | 127,017 | 145,356 |
Right-of-use assets | 233,165 | |
Assets associated with discontinued operations | 12,206,482 | 12,270,726 |
Goodwill | 15,479,662 | 15,479,662 |
Other intangible assets, net of amortization of $2,030,320 and $1,842,475, respectively | 6,574,247 | 6,762,092 |
Total Assets | 39,433,507 | 38,055,564 |
Current Liabilities | ||
Accounts payable | 2,089,963 | 1,259,129 |
Accrued expenses | 1,763,437 | 1,701,561 |
Short-term debt | 1,602,556 | 1,265,151 |
Other current liabilities - contingent consideration | 884,315 | 553,126 |
Liabilities associated with discontinued operations | 315,857 | 365,293 |
Total Current Liabilities | 6,656,128 | 5,144,260 |
Other long-term liabilities - contingent consideration | 2,233,826 | 2,350,592 |
Long-term debt | 319,440 | 372,680 |
Term loan facility, net of debt discount of $584,916 and $620,193, respectively and deferred debt issuance costs of $1,039,582 and $1,102,280, respectively | 13,092,387 | 13,278,577 |
Other long-term liabilities | 99,744 | |
Liabilities associated with discontinued operations | 31,386 | |
Deferred tax liability | 365,397 | 365,397 |
Total Liabilities | 22,798,308 | 21,511,506 |
Commitments and Contingencies | ||
Series C Preferred Stock | ||
Series C Preferred Stock, par value $0.0001 per share: 2,000 shares designated; 2,000 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 1,807,300 | 1,807,300 |
Stockholders' Equity | ||
Common Stock, par value $0.0001 per share: 100,000,000 shares authorized; 26,564,921 and 25,228,072 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 2,656 | 2,523 |
Additional paid-in capital | 66,138,426 | 64,748,871 |
Accumulated deficit | (51,313,183) | (50,014,636) |
Total Stockholders' Equity | 14,827,899 | 14,736,758 |
Total Liabilities, Series C Preferred Stock and Stockholders' Equity | 39,433,507 | 38,055,564 |
Series B Preferred Stock | ||
Stockholders' Equity | ||
Preferred Stock, value | ||
Series A Preferred Stock | ||
Stockholders' Equity | ||
Preferred Stock, value |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Other intangible assets, net of amortization | $ 2,030,320 | $ 1,842,475 |
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 | 100,000,000 | 100,000,000 |
Common stock, shares issued | 26,564,921 | 25,228,072 |
Common stock, shares outstanding | 26,564,921 | 25,228,072 |
Term loan facility | ||
Net of debt discount | $ 584,916 | $ 620,193 |
Deferred debt issuance costs | $ 1,039,582 | $ 1,102,280 |
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 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
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 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series C Preferred Stock | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 2,000 | 2,000 |
Preferred stock, shares issued | 2,000 | 2,000 |
Preferred stock, shares outstanding | 2,000 | 2,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Revenues | $ 4,181,710 | $ 4,336,515 |
Cost of goods sold | 1,019,634 | 1,207,347 |
Gross Profit | 3,162,076 | 3,129,168 |
Operating Expenses | ||
General and administrative | 1,599,959 | 1,720,738 |
Selling and marketing | 849,513 | 1,067,810 |
Research and development | 204,953 | 146,137 |
Total Operating Expenses | 2,654,425 | 2,934,685 |
Operating Income | 507,651 | 194,483 |
Other Expense | ||
Interest expense | (586,201) | (757,478) |
Change in fair value of contingent consideration | (214,423) | (197,709) |
Total Other Expense | (800,624) | (955,187) |
Loss before Income Taxes | (292,973) | (760,704) |
Income Tax Benefit | 83,849 | |
Loss from Continuing Operations | (292,973) | (676,855) |
Loss from Discontinued Operations | (1,005,574) | (935,958) |
Net Loss | (1,298,547) | (1,612,813) |
Preferred stock dividends | (25,000) | (25,000) |
Net Loss applicable to Common Stockholders | $ (1,323,547) | $ (1,637,813) |
Loss Per Share from Continuing Operations - Basic and Diluted | $ (0.01) | $ (0.03) |
Loss Per Share from Discontinued Operations - Basic and diluted | (0.04) | (0.04) |
Net Loss Per Share - Basic and Diluted | $ (0.05) | $ (0.07) |
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 25,995,867 | 24,093,935 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Changes in Equity (Unaudited) - USD ($) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Beginning balance at Dec. 31, 2017 | $ 2,358 | $ 62,052,483 | $ (42,924,674) | $ 19,130,167 | |
Beginning balance, shares at Dec. 31, 2017 | 23,583,593 | ||||
Issuance of common stock for services | $ 12 | 250,715 | 250,727 | ||
Issuance of common stock for services, shares | 116,255 | ||||
Exercise of common stock purchase warrants for cash | $ 10 | 199,990 | 200,000 | ||
Exercise of common stock purchase warrants for cash, shares | 100,000 | ||||
Exercise of common stock purchase warrants on a cashless basis | $ 44 | (44) | |||
Exercise of common stock purchase warrants on a cashless basis, shares | 437,018 | ||||
Shares issued in connection with the management incentive plan | $ 16 | 353,003 | 353,019 | ||
Shares issued in connection with the management incentive plan, shares | 163,435 | ||||
Fees incurred in connection with equity offerings | (70,611) | (70,611) | |||
Net loss | (1,612,813) | (1,612,813) | |||
Preferred stock dividends | (25,000) | (25,000) | |||
Ending balance at Mar. 31, 2018 | $ 2,440 | 62,760,536 | (44,537,487) | 18,225,489 | |
Ending balance, shares at Mar. 31, 2018 | 24,400,301 | ||||
Beginning balance at Dec. 31, 2018 | $ 2,523 | 64,748,871 | (50,014,636) | 14,736,758 | |
Beginning balance, shares at Dec. 31, 2018 | 25,228,072 | ||||
Issuance of common stock for services | $ 21 | 185,229 | 185,250 | ||
Issuance of common stock for services, shares | 212,622 | ||||
Issuance of common stock for cash, net of fees | $ 108 | 1,282,702 | 1,282,810 | ||
Issuance of common stock for cash, net of fees, shares | 1,084,227 | ||||
Shares issued in connection with the management incentive plan | $ 4 | 46,796 | 46,800 | ||
Shares issued in connection with the management incentive plan, shares | 40,000 | ||||
Fees incurred in connection with equity offerings | (100,172) | (100,172) | |||
Net loss | (1,298,547) | (1,298,547) | |||
Preferred stock dividends | (25,000) | (25,000) | |||
Ending balance at Mar. 31, 2019 | $ 2,656 | $ 66,138,426 | $ (51,313,183) | $ 14,827,899 | |
Ending balance, shares at Mar. 31, 2019 | 26,564,921 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash Flows from Operating Activities | ||
Net Loss | $ (1,298,547) | $ (1,612,813) |
Loss from discontinued operations | (1,005,574) | (935,958) |
Loss from continuing operations | (292,973) | (676,855) |
Adjustments to reconcile net loss to net cash used in operating activities of continuing operations: | ||
Depreciation | 18,339 | 31,646 |
Stock based compensation | 229,937 | 399,794 |
Amortization of debt discount | 35,277 | |
Amortization of intangible assets | 187,845 | 187,845 |
Amortization of deferred debt issuance costs | 62,698 | 88,131 |
Change in fair value of contingent consideration | 214,423 | 197,709 |
Deferred taxes | (83,849) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 143,707 | (48,596) |
Inventory | (353,824) | (28,519) |
Prepaid expenses and other current assets | (175,692) | (254,694) |
Accounts payable | 759,774 | 593,468 |
Accrued expenses | (63,653) | (471,530) |
Total Adjustments | 1,058,831 | 611,405 |
Net Cash Provided by (Used in) Operating Activities of Continuing Operations | 765,858 | (65,450) |
Net Cash Used in Investing Activities of Continuing Operations | ||
Cash Flows from Financing Activities | ||
Pay down of short-term debt | (106,481) | |
Proceeds received in connection with issuance of common stock, net | 1,282,810 | |
Payment of closing related fees | (15,204) | (45,243) |
Proceeds from exercise of common stock warrants | 200,000 | |
Net Cash Provided by Financing Activities of Continuing Operations | 1,267,606 | 48,276 |
Net Increase (Decrease) in Cash and Restricted Cash from Continuing Operations | 2,033,464 | (17,174) |
Cash Flows from Discontinued Operations: | ||
Cash used by operating activities of discontinued operations | (944,658) | (1,065,751) |
Cash used in investing activities of discontinued operations | (2,027) | (6,866) |
Net Cash Used by Discontinued Operations | (946,685) | (1,072,617) |
Net Increase (Decrease) in Cash and Restricted Cash | 1,086,779 | (1,089,791) |
Cash and Restricted Cash - Beginning of Period | 1,614,641 | 5,676,786 |
Cash and Restricted Cash - End of Period | 2,701,420 | 4,586,995 |
Cash paid during the periods for: | ||
Interest | 480,239 | 488,050 |
Taxes | ||
Non-cash financing activities: | ||
Accrued fees incurred in connection with equity offerings | 84,968 | 25,362 |
Accrued Series C Preferred Stock dividends | $ 25,000 | $ 25,000 |
Organization and Basis of Prese
Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | Note 1 – Organization and Basis of Presentation Organization and Principal Business Activities Nxt-ID, Inc. ("Nxt-ID" or the "Company") was incorporated in the State of Delaware on February 8, 2012. As of December 31, 2018, the Company is no longer an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). The Company is a security technology company and operates its business in one segment – hardware and software security systems and applications. The Company is engaged in the development of proprietary products and solutions that serve multiple end markets, including the security, healthcare, financial technology and the Internet of Things ("IoT") markets. The Company evaluates the performance of its business on, among other things, profit and loss from operations. With extensive experience in access control, biometric and behavior-metric identity verification, security and privacy, encryption and data protection, payments, miniaturization, and sensor technologies, the Company develops and markets solutions for payment, IoT and healthcare 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's wholly-owned subsidiary, Fit Pay, Inc. ("Fit Pay"), has a proprietary technology platform that delivers payment, credential management, authentication and other secure services to the IoT ecosystem. The platform uses tokenization, a payment security technology that replaces cardholders' account information with a unique digital identifier, to transact highly secure contactless payment and authentication services. On a newly created company to the Company's stockholders through the execution of a spin-off. As a result, the Company reclassified its financial technology business to discontinued operations for all periods reported. The Company's financial technology business is comprised of its Fit Pay subsidiary and the intellectual property developed by the Company, including the Flye Smartcard and the Wocket. On April 29, 2019, a Registration Statement on Form 10 was filed by PartX with the Securities and Exchange Commission ("SEC") in connection with the planned spin-off of the Company's payments, authentication and credential management business. See Note 4. Basis of Presentation The accompanying unaudited condensed consolidated financial statements as of March 31, 2019, and for the three months ended March 31, 2019 and 2018 have been prepared in accordance with the accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC and on the same basis as the Company prepares its annual audited consolidated financial statements. The unaudited condensed consolidated balance sheet as of March 31, 2019 and the condensed consolidated statements of operations, changes in equity and cash flows for the three months ended March 31, 2019 and March 31, 2018 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for the three months ended March 31, 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2019, or for any future interim period. The condensed consolidated balance sheet at December 31, 2018 has been derived from audited consolidated financial statements. However, it does not include all of the information and notes required by U.S. GAAP for complete consolidated financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2018 and the notes thereto included in the Company's Annual Report on Form 10-K, which was filed with the SEC on April 1, 2019. |
Liquidity and Management Plans
Liquidity and Management Plans | 3 Months Ended |
Mar. 31, 2019 | |
Liquidity and Management Plans [Abstract] | |
LIQUIDITY AND MANAGEMENT PLANS | Note 2 – Liquidity And Management Plans The Company generated operating income from continuing operations of $507,651 and incurred a net loss from continuing operations of $292,973 during the three months ended March 31, 2019. Certain of these factors raise substantial doubt about the Company's ability to sustain operations for at least one year from the issuance of these financial statements. However, given the Company's cash position at March 31, 2019, anticipated future cash proceeds from the sale of common stock from the January 2019 At-the-Market Offering and its projected cash flow from operations, the Company believes that it will have sufficient capital to sustain operations over the next twelve months following the date of this filing to alleviate such substantial doubt. As of March 31, 2019, the Company (excluding discontinued operations) had a working capital deficiency of $1,736,869 and stockholders' equity of $14,827,899. 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. Should the Company not be successful in obtaining the necessary financing, or generate sufficient revenue to fund its operations, the Company would need to engage in certain cost containment efforts, and/or curtail certain of its operational activities. During the three months ended March 31, 2019, the Company received net proceeds of $1,282,810 from the sale of common stock in connection with the January 2019 At-the-Market Offering (See Note 6). However, the Company can give no assurance that any cash raised subsequent to March 31, 2019 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 | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 3 – Summary Of Significant Accounting Policies Use of estimates in the financial statements The preparation of condensed consolidated financial statements in conformity with U.S. 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 including those related to the fair value of acquired assets and liabilities, stock based compensation, derivative instruments, income taxes, accounts receivable and inventories, right-of-use assets and other matters that affect the condensed consolidated financial statements and disclosures. Actual results could differ from those estimates. Principles of consolidation The condensed consolidated financial statements include the accounts of Nxt-ID and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Revenue Recognition The Company's revenues consist of product sales to either end customers or to distributors and its sales are recognized at a point-in-time under the core principle of recognizing revenue when control of the product transfers to the customer. The Company recognizes revenue when it ships or delivers the product from its fulfillment center to its customer, when the customer accepts and has legal title of the product, and the Company has a present right to payment for the product. For the three months ended March 31, 2019 and 2018, the Company had no sales recognized over time. The Company invoices its customers at the same time that the Company's performance obligation is satisfied. The Company generally receives customer orders with a specified delivery date and orders typically fluctuate from month-to-month based on customer demand and general business conditions. The Company offers standard product warranty coverage which provides assurance that the Company's products will conform to the contractually agreed-upon specifications for a limited period from the date of shipment. The Company's warranty liabilities and related expense have not been material and were not material in the accompanying condensed consolidated financial statements as of March 31, 2019 and December 31, 2018, and for the three months ended March 31, 2019 and 2018. Accounts Receivable Accounts receivable is stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the receivable reserves as necessary whenever events or circumstances indicate the carrying value may not be recoverable. At March 31, 2019 and December 31, 2018, the Company had an allowance for doubtful accounts of $126,733. Inventory 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 March 31, 2019, inventory was comprised of $142,567 in raw materials and $1,081,770 in finished goods on hand. Inventory at December 31, 2018 was comprised of $870,513 in finished goods on hand. The Company is required to prepay for certain inventory with certain vendors until credit terms can be established. As of March 31, 2019 and December 31, 2018, the Company had prepaid inventory of $271,242 and $317,488, respectively. These prepayments were made primarily for finished goods inventory, and prepaid inventory is included in prepaid expenses and other current assets on the condensed consolidated balance sheets. Other Intangible Assets At March 31, 2019, the other intangible assets relating to the acquisition of LogicMark are comprised of patents of $3,099,254; trademarks of $1,088,742; and customer relationships of $2,386,251. At December 31, 2018, the other intangible assets relating to the acquisition of LogicMark are comprised of patents of $3,191,159; trademarks of $1,104,246; and customer relationships of $2,466,687. The Company will continue amortizing 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 three months ended March 31, 2019 and 2018, the Company had amortization expense of $187,845 and $187,845, respectively, related to the LogicMark intangible assets. As of March 31, 2019, total amortization expense estimated for the remainder of fiscal year 2019 is approximately $574,000, and for each of the next five fiscal years, 2020 through 2024, the total amortization expense is estimated to be as follows: 2020 - $762,000; 2021 - $762,000; 2022 - $762,000; 2023 - $762,000; and 2024 - $762,000. 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. Stock-based compensation is recorded in the same component of operating expenses as if it were paid in cash. 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 shares of common stock outstanding. Diluted loss per share includes the effect of diluted common stock equivalents. Potentially dilutive securities from the exercise of warrants to purchase 4,782,448 shares of common stock as of March 31, 2019 were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of March 31, 2018, potentially dilutive securities from the exercise of warrants to purchase 4,602,650 shares of common stock were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Reclassifications Certain accounts in the prior period consolidated financial statements have been reclassified for comparison purposes to conform to the presentation of the current period consolidated financial statements. These reclassifications had no effect on the previously reported net loss. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ASU 2018-13, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. Adoption of this guidance is required for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating this guidance and the impact of this update on its condensed consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, "I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception". Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, "Distinguishing Liabilities from Equity," because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. This ASU was adopted and did not have a material impact on the Company's condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 84 2)", Prior to the adoption, the Company evaluated Topic 842, including the initial review of any necessary changes to existing processes and systems that would be required to implement this standard, in order to determine its impact on the Company's consolidated financial statements and related disclosures. The Company adopted Topic 842 on January 1, 2019 using the updated modified retrospective transition approach allowed under ASU 2018-11 and did not restate prior periods. The Company recognized ROU assets and related lease liabilities on its condensed consolidated balance sheet as of January 1, 2019 of approximately $267,516 and $269,820, respectively, related to its operating lease commitments, and there was no cumulative impact on retained earnings as of January 1, 2019. Topic 842 did not have a material impact on the Company's condensed consolidated statements of income and condensed consolidated statements of cash flow for the three months ended March 31, 2019, nor did it have any impact on the Company's compliance with debt covenants. The adoption of Topic 842 provided various optional practical expedients in transition, some of which the Company elected. Going forward, the impact of Topic 842 on the Company's consolidated financial statements will be dependent upon the Company's lease portfolio. The accounting for finance leases (formerly referred to as "capital leases") remains substantially unchanged. See Note 7 herein for further details regarding the impact of the adoption of Topic 842 and other information related to the Company's lease portfolio. Other recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption. |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | Note 4 – Discontinued Operations The following table presents the assets and liabilities related to the financial technology product line classified as assets and liabilities associated with discontinued operations (See Note 1) in the condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018: March 31, December 31, 2019 2018 Accounts receivable, net $ 127,135 $ 125,318 Prepaid expenses and other assets 82,397 96,909 Total current assets associated with discontinued operations $ 209,532 $ 222,227 Property and equipment, net 36,629 38,793 Right-of-use assets 91,655 - Goodwill 9,119,709 9,119,709 Other intangible assets 2,958,489 3,112,224 Total non-current assets associated with discontinued operations $ 12,206,482 $ 12,270,726 Accounts payable $ 132,604 $ 175,982 Accrued expenses 180,753 185,978 Customer deposits 2,500 3,333 Total liabilities associated with discontinued operations $ 315,857 $ 365,293 The following table represents the financial results of the discontinued operations for the three months ended March 31, 2019 and 2018: For the Three Months Ended March 31, 2019 2018 Net sales $ 221,476 $ 594,093 Cost of sales 62,981 262,132 Gross profit 158,495 331,961 Operating expenses 1,162,358 1,267,192 Interest expense 1,711 727 Loss from discontinued operations $ (1,005,574 ) $ (935,958 ) (1) The contingent liability associated with the earn-out payment due to certain of the Fit Pay legacy shareholders is not included in discontinued operations. |
Debt Refinancing
Debt Refinancing | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
DEBT REFINANCING | Note 5 – Debt refinancing On May 24, 2018, LogicMark, a wholly owned subsidiary of Nxt-ID, entered into a Senior Secured Credit Agreement (the "Credit Agreement") with the lenders thereto and Sagard Holdings Manager LP, as administrative agent and collateral agent for the lenders party to the Credit Agreement (collectively, the "Lender"), whereby the Lender extended a term loan (the "Term Loan") to LogicMark in the principal amount of $16,000,000. The maturity date of the Term Loan is May 24, 2023. The outstanding principal amount of the Term Loan bears interest at a rate of LIBOR, adjusted monthly, plus 9.5% per annum (approximately 11.99% as of March 31, 2019). The Company incurred $1,253,970 in deferred debt issue costs related to the Term Loan. During the three months ended March 31, 2019, the Company amortized $62,698 of the deferred debt issue costs which is included in interest expense in the condensed consolidated statement of operations. At March 31, 2019 the unamortized The Credit Agreement contains customary financial covenants. As of March 31, 2019, the Company was in compliance with such covenants. The performance of LogicMark under the Credit Agreement is secured by: (a) a senior lien granted pursuant to a Security Agreement on all of the assets of LogicMark, the Company, 3D-ID, LLC (one of the Company's wholly-owned subsidiaries) and Fit Pay (one of the Company's wholly-owned subsidiaries); (b) a senior lien granted pursuant to an Intellectual Property Security Agreement on all of the intellectual property assets of the foregoing companies; and (c) a pledge of certain pledged securities of the foregoing companies pursuant to a Securities Pledge Agreement. The performance of LogicMark is guaranteed pursuant to a Guaranty Agreement by the Company, 3D-ID, LLC and Fit Pay. In addition to entering into the Credit Agreement, the Company issued two (2) common stock purchase warrants (each, a "Sagard Warrant") to Sagard Credit Partners, LP. Each Sagard Warrant is exercisable for 244,081 shares of the Company's common stock (collectively, the "Sagard Warrant Shares"). Each Sagard Warrant will be exercisable beginning on May 24, 2018, for a period of five (5) years. The exercise price per share is $3.90 for the first Sagard Warrant and $4.88 for the second Sagard Warrant. The exercise price and the amount of shares of the Company's common stock issuable upon exercise of each Sagard Warrant are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes or dilutive issuances. On May 24, 2018 the Company recorded a debt discount of $705,541. The debt discount is attributable to the aggregate fair value on the issuance date of both Sagard Warrants. The debt discount is being amortized using the effective interest method over the five-year term of the Term Loan. During the three months ended March 31, 2019, the Company recorded $35,277 of debt discount amortization related to the Sagard Warrants. The debt discount amortization is included as part of interest expense in the condensed consolidated statement of operations. Each Sagard Warrant contains a covenant of the Company that within ninety (90) days of May 24, 2018, at the Company's sole cost and expense, it will file or cause to be filed a registration statement covering the resale of the Sagard Warrant Shares, and will promptly provide confirmation of such registration to the holder. The registration statement covering the resale of the Sagard Warrant Shares was filed and became effective in July 2018. To the extent a legal opinion is required in connection therewith, such opinion shall be obtained by the Company at the Company's expense. In no event shall the Company be responsible for any broker or similar commissions of any holder or any legal fees or other costs of the holder of the Sagard Warrants. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | Note 6 – Stockholders' Equity January 2019 At-the-Market Offering On January 8, 2019, the Company entered into a sales agreement with A.G.P./Alliance Global Partners ("A.G.P.") for an at-the-market offering, pursuant to which the Company may sell, at its option, shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $15 million to or through A.G.P., as sales agent. The Company will pay A.G.P. commissions for its services in acting as the Company's sales agent in the sale of its common stock pursuant to the sales agreement. A.G.P. will be entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds from the sale of the Company's common stock on the Company's behalf pursuant to the sales agreement. The Company also has agreed to reimburse A.G.P. for its reasonable out-of-pocket expenses, including the fees and disbursements of counsel to A.G.P., incurred in connection with the offering, in an amount not to exceed $35,000. During the three months ended March 31, 2019, the Company received $1,282,810 in net proceeds from the sale of 1,084,227 shares of its common stock under the sales agreement with A.G.P. 2013 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 of directors, 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 975,886 shares of common stock at January 1, 2019. During the three months ended March 31, 2019, the Company issued an aggregate of 112,485 shares of common stock under the LTIP to five (5) non-employee directors for serving on the Company's board. The aggregate fair value of the shares issued to the directors was $100,000. 2017 Stock Incentive Plan On August 24, 2017, a majority of the Company's stockholders approved at the 2017 Annual Stockholders' Meeting the 2017 Stock Incentive Plan ("2017 SIP"). The aggregate maximum number of shares of common stock (including shares underlying options) that may be issued under the 2017 SIP pursuant to awards of restricted shares or options will be limited to 10% of the outstanding shares of common stock, which calculation shall be made on the first (1 st In addition, during the three months ended March 31, 2019, the Company issued 40,000 shares of common stock with an aggregate fair value of $46,800 to certain non-executive employees related to the Company's 2018 management incentive plan. During the three months ended March 31, 2019, the Company accrued $110,000 of management and employee bonus expense. During the three months ended March 31, 2019, the Company issued 100,137 shares of common stock with a fair value of $85,250 to non-employees for services rendered. Warrants As of March 31, 2019, the Company had outstanding warrants to purchase an aggregate of 4,782,448 shares of common stock with a weighted average exercise price and remaining life of $5.32 and 3.29 years, respectively. At March 31, 2019, the warrants had no aggregate intrinsic value. During the three months ended March 31, 2019, warrants to purchase an aggregate of 307,904 shares of common stock with a weighted-average exercise price of $7.08 expired. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Note 7 – Commitments and Contingencies Legal Matters From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of our business. 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 our subsidiaries, threatened against or affecting our company, or any of our subsidiaries in which an adverse decision could have a material adverse effect upon our business, operating results, or financial condition. Commitments The Company leases office space and a fulfillment center in the U.S., which are classified as operating leases expiring at various dates. The Company determines if an arrangement qualifies as a lease at the lease inception. The Company adopted Topic 842 effective January 1, 2019. Operating lease liabilities are recorded based on the present value of the future lease payments over the lease term, assessed as of the commencement date. The Company's real estate leases, which are for office space and a fulfillment center, generally have a lease term between 3 and 5 years. The Company also leases a copier with a lease term of 5 years. The Company's leases are comprised of fixed lease payments and also include executory costs such as common area maintenance, as well as property insurance and property taxes. As a practical expedient under Topic 842, the Company has elected to account for the lease and non-lease components as a single lease component for its real estate leases. Lease payments, which may include lease components, non-lease components and non-components, are included in the measurement of the Company's lease liabilities to the extent that such payments are either fixed amounts or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract. Any actual costs in excess of such amounts are expensed as incurred as variable lease cost. The Company's lease agreements generally do not specify an implicit borrowing rate, and as such, the Company utilizes its incremental borrowing rate by lease term, in order to calculate the present value of the future lease payments. The discount rate represents a risk-adjusted rate on a secured basis, and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. On January 1, 2019, the discount rate used on existing leases at adoption was determined based on the remaining lease term using available data as of that date. The Company did not have new or renewed leases commencing in 2019. Certain of the Company's lease agreements, primarily related to real estate, include options for the Company to either renew (extend) or early terminate the lease. Leases with renewal options allow the Company to extend the lease term typically between 1 and 3 years. Renewal options are reviewed at lease commencement to determine if such options are reasonably certain of being exercised, which could impact the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or specific characteristics unique to the particular lease that would make it reasonably certain that the Company would exercise such option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in the Company's ROU asset and lease liability) unless there is an economic, financial or business reason to do so. For the three months ended March 31, 2019, total operating lease cost was $41,938 and is recorded in cost of sales and selling, general and administrative expenses, dependent on the nature of the leased asset. The operating lease cost is recognized on a straight-line basis over the lease term. The following summarizes (i) the future minimum undiscounted lease payments under non-cancelable lease for the remainder of 2019 as well as each of the next five years and thereafter, incorporating the practical expedient to account for lease and non-lease components as a single lease component for our existing real estate leases, (ii) a reconciliation of the undiscounted lease payments to the present value of the lease liabilities recognized, and (iii) the lease-related account balances on the Company's condensed consolidated balance sheet, as of March 31, 2019: Year Ending December 31, 2019 (excluding the three months ended March 31, 2019) $ 126,487 2020 88,827 2021 23,279 2022 18,185 2023 12,123 Total future minimum lease payments $ 268,901 Less imputed interest (33,181 ) Total present value of future minimum lease payments $ 235,720 As of March 31, 2019 Operating lease right-of-use assets $ 233,165 Other accrued expenses $ 135,976 Other long-term liabilities $ 99,744 $ 235,720 As of March 31, 2019 Weighted Average Remaining Lease Term 1.6 years Weighted Average Discount Rate 11.74 % Prior to January 1, 2019, the Company accounted for its leases in accordance with Topic 840, "Leases." At December 31, 2018, the Company was committed under operating leases for office space and a fulfillment center, which expired at various dates. As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and under previous lease accounting guidance, future minimum lease payments under non-cancelable operating leases as of December 31, 2018 totaled $173,062, comprised of $97,597 for 2019, $70,309 for 2020, and $5,156 for 2021. Debt Maturity The maturity of the Company's debt is as follows: 2019 (remainder) $ 1,602,556 2020 212,961 2021 106,479 2022 - 2023 14,716,885 Total debt $ 16,638,881 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Note 8 – Subsequent Events The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. On April 1, 2019, the Company issued 8,436 shares of its common stock for the payment of services with a grant date fair value of $7,500. On April 2, 2019, the Company entered into a securities purchase agreement with an investor in connection with the registered direct public offering of 2,469,136 shares of the Company’s common stock, for a purchase price of approximately $2,000,000. The shares of common stock were offered at a price of $0.81 per share. In connection with the offering, the Company also issued to the investor for no additional consideration a common stock purchase warrant to purchase 2,469,136 shares of common stock. The warrant was exercisable immediately upon issuance at an exercise price of $1.05 per share and will expire on the fifth (5 th On April 25, 2019, the Company issued 105,833 shares of its common stock to certain employees under the 2017 management incentive plan. On April 25, 2019, the Company issued 80,883 shares of its common stock to certain employees under the 2018 management incentive plan. On May 3, 2019, LogicMark, a wholly-owned subsidiary of the Company, completed the closing of a $16.5 million senior secured term loan. The Company will use the proceeds from the term loan to refinance LogicMark’s existing term loan facility with Sagard Holdings Manager LP and to pay other costs related to the refinancing. The key aspects of the new term loan facility include an interest rate of LIBOR plus 11.00%, a three-year maturity date from the closing date and minimum principal payments over the three-year term amortized over 96 months. This refinancing also removes a covenant included in LogicMark’s existing term loan facility with Sagard Holdings Manager LP and allows the Company to proceed with the proposed spin-off of its Fit Pay subsidiary and its payments, authentication and credential management business. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | Use of estimates in the financial statements The preparation of condensed consolidated financial statements in conformity with U.S. 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 including those related to the fair value of acquired assets and liabilities, stock based compensation, derivative instruments, income taxes, accounts receivable and inventories, right-of-use assets and other matters that affect the condensed consolidated financial statements and disclosures. Actual results could differ from those estimates. |
PRINCIPLES OF CONSOLIDATION | Principles of consolidation The condensed consolidated financial statements include the accounts of Nxt-ID and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. |
REVENUE RECOGNITION | Revenue Recognition The Company's revenues consist of product sales to either end customers or to distributors and its sales are recognized at a point-in-time under the core principle of recognizing revenue when control of the product transfers to the customer. The Company recognizes revenue when it ships or delivers the product from its fulfillment center to its customer, when the customer accepts and has legal title of the product, and the Company has a present right to payment for the product. For the three months ended March 31, 2019 and 2018, the Company had no sales recognized over time. The Company invoices its customers at the same time that the Company's performance obligation is satisfied. The Company generally receives customer orders with a specified delivery date and orders typically fluctuate from month-to-month based on customer demand and general business conditions. The Company offers standard product warranty coverage which provides assurance that the Company's products will conform to the contractually agreed-upon specifications for a limited period from the date of shipment. The Company's warranty liabilities and related expense have not been material and were not material in the accompanying condensed consolidated financial statements as of March 31, 2019 and December 31, 2018, and for the three months ended March 31, 2019 and 2018. |
ACCOUNTS RECEIVABLE | Accounts Receivable Accounts receivable is stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the receivable reserves as necessary whenever events or circumstances indicate the carrying value may not be recoverable. At March 31, 2019 and December 31, 2018, the Company had an allowance for doubtful accounts of $126,733. |
INVENTORY | Inventory 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 March 31, 2019, inventory was comprised of $142,567 in raw materials and $1,081,770 in finished goods on hand. Inventory at December 31, 2018 was comprised of $870,513 in finished goods on hand. The Company is required to prepay for certain inventory with certain vendors until credit terms can be established. As of March 31, 2019 and December 31, 2018, the Company had prepaid inventory of $271,242 and $317,488, respectively. These prepayments were made primarily for finished goods inventory, and prepaid inventory is included in prepaid expenses and other current assets on the condensed consolidated balance sheets. |
OTHER INTANGIBLE ASSETS | Other Intangible Assets At March 31, 2019, the other intangible assets relating to the acquisition of LogicMark are comprised of patents of $3,099,254; trademarks of $1,088,742; and customer relationships of $2,386,251. At December 31, 2018, the other intangible assets relating to the acquisition of LogicMark are comprised of patents of $3,191,159; trademarks of $1,104,246; and customer relationships of $2,466,687. The Company will continue amortizing 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 three months ended March 31, 2019 and 2018, the Company had amortization expense of $187,845 and $187,845, respectively, related to the LogicMark intangible assets. As of March 31, 2019, total amortization expense estimated for the remainder of fiscal year 2019 is approximately $574,000, and for each of the next five fiscal years, 2020 through 2024, the total amortization expense is estimated to be as follows: 2020 - $762,000; 2021 - $762,000; 2022 - $762,000; 2023 - $762,000; and 2024 - $762,000. |
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. Stock-based compensation is recorded in the same component of operating expenses as if it were paid in cash. 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 shares of common stock outstanding. Diluted loss per share includes the effect of diluted common stock equivalents. Potentially dilutive securities from the exercise of warrants to purchase 4,782,448 shares of common stock as of March 31, 2019 were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of March 31, 2018, potentially dilutive securities from the exercise of warrants to purchase 4,602,650 shares of common stock were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. |
RECLASSIFICATIONS | Reclassifications Certain accounts in the prior period consolidated financial statements have been reclassified for comparison purposes to conform to the presentation of the current period consolidated financial statements. These reclassifications had no effect on the previously reported net loss. |
RECENT ACCOUNTING PRONOUNCEMENTS | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ASU 2018-13, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. Adoption of this guidance is required for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating this guidance and the impact of this update on its condensed consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, "I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception". Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, "Distinguishing Liabilities from Equity," because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. This ASU was adopted and did not have a material impact on the Company's condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 84 2)", Prior to the adoption, the Company evaluated Topic 842, including the initial review of any necessary changes to existing processes and systems that would be required to implement this standard, in order to determine its impact on the Company's consolidated financial statements and related disclosures. The Company adopted Topic 842 on January 1, 2019 using the updated modified retrospective transition approach allowed under ASU 2018-11 and did not restate prior periods. The Company recognized ROU assets and related lease liabilities on its condensed consolidated balance sheet as of January 1, 2019 of approximately $267,516 and $269,820, respectively, related to its operating lease commitments, and there was no cumulative impact on retained earnings as of January 1, 2019. Topic 842 did not have a material impact on the Company's condensed consolidated statements of income and condensed consolidated statements of cash flow for the three months ended March 31, 2019, nor did it have any impact on the Company's compliance with debt covenants. The adoption of Topic 842 provided various optional practical expedients in transition, some of which the Company elected. Going forward, the impact of Topic 842 on the Company's consolidated financial statements will be dependent upon the Company's lease portfolio. The accounting for finance leases (formerly referred to as "capital leases") remains substantially unchanged. See Note 7 herein for further details regarding the impact of the adoption of Topic 842 and other information related to the Company's lease portfolio. Other recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of discontinued operations | March 31, December 31, 2019 2018 Accounts receivable, net $ 127,135 $ 125,318 Prepaid expenses and other assets 82,397 96,909 Total current assets associated with discontinued operations $ 209,532 $ 222,227 Property and equipment, net 36,629 38,793 Right-of-use assets 91,655 - Goodwill 9,119,709 9,119,709 Other intangible assets 2,958,489 3,112,224 Total non-current assets associated with discontinued operations $ 12,206,482 $ 12,270,726 Accounts payable $ 132,604 $ 175,982 Accrued expenses 180,753 185,978 Customer deposits 2,500 3,333 Total liabilities associated with discontinued operations $ 315,857 $ 365,293 For the Three Months Ended March 31, 2019 2018 Net sales $ 221,476 $ 594,093 Cost of sales 62,981 262,132 Gross profit 158,495 331,961 Operating expenses 1,162,358 1,267,192 Interest expense 1,711 727 Loss from discontinued operations $ (1,005,574 ) $ (935,958 ) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future lease obligation | Year Ending December 31, 2019 (excluding the three months ended March 31, 2019) $ 126,487 2020 88,827 2021 23,279 2022 18,185 2023 12,123 Total future minimum lease payments $ 268,901 Less imputed interest (33,181 ) Total present value of future minimum lease payments $ 235,720 |
Schedule of lease expense | As of March 31, 2019 Operating lease right-of-use assets $ 233,165 Other accrued expenses $ 135,976 Other long-term liabilities $ 99,744 $ 235,720 |
Schedule of weighted average remaining lease term | As of March 31, 2019 Weighted Average Remaining Lease Term 1.6 years Weighted Average Discount Rate 11.74 % |
Schedule of maturity of the Company's debt | 2019 (remainder) $ 1,602,556 2020 212,961 2021 106,479 2022 - 2023 14,716,885 Total debt $ 16,638,881 |
Liquidity and Management Plans
Liquidity and Management Plans (Details) - USD ($) | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Liquidity and Management Plans (Textual) | ||||
Operating income from continuing operations | $ 507,651 | $ 194,483 | ||
Net loss from continuing operations | (292,973) | (676,855) | ||
Working capital deficiency | 1,736,869 | |||
Stockholders' equity | 14,827,899 | $ 18,225,489 | $ 14,736,758 | $ 19,130,167 |
Net proceeds exercise of common stock warrants | $ 1,282,810 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Summary of Significant Accounting Policies (Textual) | |||
Allowance for doubtful accounts | $ 126,733 | $ 126,733 | |
Inventory raw materials | 142,567 | ||
Inventory finished goods | 1,081,770 | 870,513 | |
Prepaid inventory | 271,242 | 317,488 | |
Amortization expense | 574,000 | ||
Amortization expense estimated for 2020 | 762,000 | ||
Amortization expense estimated for 2021 | 762,000 | ||
Amortization expense estimated for 2022 | 762,000 | ||
Amortization expense estimated for 2023 | 762,000 | ||
Amortization expense estimated for 2024 | 762,000 | ||
Amortization expense of intangible assets | $ 187,845 | $ 187,845 | |
Potentially dilutive securities | 307,904 | ||
Right of use assets and related lease liability, description | The Company recognized ROU assets and related lease liabilities on its condensed consolidated balance sheet as of January 1, 2019 of approximately $267,516 and $269,820, respectively, related to its operating lease commitments, and there was no cumulative impact on retained earnings as of January 1, 2019. | ||
Logic Mark Investment Partners [Member] | Patents [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Other intangible assets, estimated useful lives | 11 years | ||
Fair value of patents | $ 3,099,254 | 3,191,159 | |
Logic Mark Investment Partners [Member] | Trademarks [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Other intangible assets, estimated useful lives | 20 years | ||
Fair value of trademarks | $ 1,088,742 | 1,104,246 | |
Logic Mark Investment Partners [Member] | Customer Relationships [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Other intangible assets, estimated useful lives | 10 years | ||
Fair value of customer relationships | $ 2,386,251 | $ 2,466,687 | |
Common Stock [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Potentially dilutive securities | 4,782,448 | ||
Warrant [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Potentially dilutive securities | 4,782,448 | 4,602,650 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Discontinued Operations and Disposal Groups [Abstract] | ||
Accounts receivable, net | $ 127,135 | $ 125,318 |
Prepaid expenses and other assets | 82,397 | 96,909 |
Total current assets associated with discontinued operations | 209,532 | 222,227 |
Property and equipment, net | 36,629 | 38,793 |
Right-of-use assets | 91,655 | |
Goodwill | 9,119,709 | 9,119,709 |
Other intangible assets | 2,958,489 | 3,112,224 |
Total non-current assets associated with discontinued operations | 12,206,482 | 12,270,726 |
Accounts payable | 132,604 | 175,982 |
Accrued expenses | 180,753 | 185,978 |
Customer deposits | 2,500 | 3,333 |
Total liabilities associated with discontinued operations | $ 315,857 | $ 365,293 |
Discontinued Operations (Deta_2
Discontinued Operations (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Net sales | $ 221,476 | $ 594,093 |
Cost of sales | 62,981 | 262,132 |
Gross profit | 158,495 | 331,961 |
Operating expenses | 1,162,358 | 1,267,192 |
Interest expense | 1,711 | 727 |
Loss from discontinued operations | $ (1,005,574) | $ (935,958) |
Debt Refinancing (Details)
Debt Refinancing (Details) - USD ($) | Dec. 10, 2018 | May 24, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 |
Debt Refinancing (Textual) | |||||
Amortized of the deferred debt issuance costs | $ 62,698 | ||||
Warrant exercise price | $ 7.08 | ||||
Warrant exercisable term | 5 years | ||||
Debt discount amortization | $ 62,698 | $ 88,131 | |||
Credit agreement, description | The terms and conditions of the Credit Agreement, LogicMark is required to deposit 50% of its excess cash flow generated into a restricted bank account for a maximum period of one (1) year. Excess cash flow is defined as LogicMark's adjusted earnings before interest, taxes, depreciation and amortization less any debt service, debt prepayments and capital expenditures. At the end of the one (1) year period, the restricted cash may be used either to pay down the Term Loan or LogicMark will have the ability to transfer the restricted cash balance to an operating bank account and use the cash for operational purposes. | ||||
Credit agreement, description | LogicMark entered into a Consent to the Credit Agreement (the "Consent") with Sagard Holdings Manager LP whereby LogicMark temporarily withdrew $500,000 from the restricted cash balance. In accordance with the Consent, the repayment of the temporary withdrawal was to be made no later than January 31, 2019. On April 1, 2019, the Company entered into an amendment to the Consent where by the repayment date of the temporary withdrawal was extended to no later than April 5, 2019. As a result of the Consent and the amended Consent, the Company had an accrued usage fee of $125,000 due to the Lender as of March 31, 2019. | ||||
Warrants and Registration Rights [Member] | |||||
Debt Refinancing (Textual) | |||||
Debt discount | $ 705,541 | ||||
Debt discount amortization | $ 35,277 | ||||
Term Loan [Member] | |||||
Debt Refinancing (Textual) | |||||
Principal amount | $ 16,000,000 | ||||
Percentage of term loan bears interest rate | 9.50% | 11.99% | |||
Deferred debt issue costs | $ 1,253,970 | ||||
Maturity date of the term loan | May 24, 2023 | ||||
Warrant exercisable | 4.88 | 244,081 | |||
Warrant exercise price | $ 3.90 | ||||
Warrant exercisable term | 5 years | ||||
Term Loan Facility [Member] | |||||
Debt Refinancing (Textual) | |||||
Debt discount | $ 584,916 | $ 620,193 | |||
Acquisition Of Logicmark Llc [Member] | |||||
Debt Refinancing (Textual) | |||||
Restricted cash | $ 1,283,115 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) | Jan. 08, 2019 | Jan. 04, 2013 | Aug. 24, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 |
Stockholders' Equity (Textual) | ||||||
Preferred stock, par value | $ 0.0001 | $ 0.0001 | ||||
Preferred stock dividend | $ 25,000 | $ 25,000 | ||||
Warrant exercise price | $ 7.08 | |||||
Warrants to purchase aggregate | 307,904 | |||||
Exercised warrants | $ 1,282,810 | |||||
Common stock fair value for fully-vested services rendered | 185,250 | $ 250,727 | ||||
Employee bonus expense | $ 110,000 | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | ||||
AllianceGlobalPartners [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Common stock, par value | $ 0.0001 | |||||
Aggregate offering price | 15,000,000 | 35,000 | ||||
Fixed interest rate related to the interest rate compansation | 3.00% | |||||
Net proceeds from common stock sold | $ 1,282,810 | |||||
Common stock shares issued | 1,084,227 | |||||
Non Executive Employees [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Converted shares of common stock | 100,137 | |||||
Common stock fair value for fully-vested services rendered | $ 85,250 | |||||
Director [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Aggregate fair value | $ 100,000 | |||||
Warrant [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Warrant exercise price | $ 5.32 | |||||
Warrants to purchase aggregate | 4,782,448 | 4,602,650 | ||||
Warrants remaining life term | 3 years 3 months 15 days | |||||
Long-Term Stock Incentive Plan [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
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 of directors, 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 975,886 shares of common stock at January 1, 2019. | |||||
Common stock shares issued | 112,485 | |||||
Stock Compensation Plan [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Common stock voting rights, description | The aggregate maximum number of shares of common stock (including shares underlying options) that may be issued under the 2017 SIP pursuant to awards of restricted shares or options will be limited to 10% of the outstanding shares of common stock, which calculation shall be made on the first (1st) business day of each new fiscal year; provided that for fiscal year 2017, 1,500,000 shares of common stock may be delivered to participants under the 2017 SIP. | |||||
Stock Compensation Plan [Member] | Non Executive Employees [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Aggregate fair value | $ 46,800 | |||||
Aggregate fair value, shares | 40,000 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Mar. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 (excluding the three months ended March 31, 2019) | $ 126,487 |
2020 | 88,827 |
2021 | 23,279 |
2022 | 18,185 |
2023 | 12,123 |
Total future minimum lease payments | 268,901 |
Less imputed interest | (33,181) |
Total present value of future minimum lease payments | $ 235,720 |
Commitments and Contingencies_3
Commitments and Contingencies (Details 1) | Mar. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease right of use assets | $ 233,165 |
Other accrued expenses | 135,976 |
Other long-term liabilities | 99,744 |
Total | $ 235,720 |
Commitments and Contingencies_4
Commitments and Contingencies (Details 2) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Weighted Average Remaining Lease Term | 1 year 7 months 6 days |
Weighted Average Discount Rate | 11.74% |
Commitments and Contingencies_5
Commitments and Contingencies (Details 3) | Mar. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 (remainder) | $ 1,602,556 |
2020 | 212,961 |
2021 | 106,479 |
2022 | |
2023 | 14,716,885 |
Total debt | $ 16,638,881 |
Commitments and Contingencies_6
Commitments and Contingencies (Details Textual) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Commitments and Contingencies (Textual) | |
Operating lease, description | As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and under previous lease accounting guidance, future minimum lease payments under non-cancelable operating leases as of December 31, 2018 totaled $173,062, comprised of $97,597 for 2019, $70,309 for 2020, and $5,156 for 2021. |
Operating lease cost | $ 41,938 |
Lease term renewal term, description | Leases with renewal options allow the Company to extend the lease term typically between 1 and 3 years. |
Operating lease straight line basis lease term, description | (i) the future minimum undiscounted lease payments under non-cancelable lease for the remainder of 2019 as well as each of the next five years and thereafter, incorporating the practical expedient to account for lease and non-lease components as a single lease component for our existing real estate leases, (ii) a reconciliation of the undiscounted lease payments to the present value of the lease liabilities recognized, and (iii) the lease-related account balances on the Company's condensed consolidated balance sheet. |
Real estate lease term, description | The Company's real estate leases, which are for office space and a fulfillment center, generally have a lease term between 3 and 5 years. The Company also leases a copier with a lease term of 5 years. |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | May 03, 2019 | Apr. 25, 2019 | Apr. 02, 2019 | Apr. 01, 2019 | Mar. 31, 2019 | Mar. 31, 2018 |
Subsequent Events (Textual) | ||||||
Grant date fair value | $ 185,250 | $ 250,727 | ||||
Subsequent Event [Member] | ||||||
Subsequent Events (Textual) | ||||||
Issuance of common stock, shares | 8,436 | |||||
Grant date fair value | $ 7,500 | |||||
Securities purchase agreement description | The Company entered into a securities purchase agreement with an investor in connection with the registered direct public offering of 2,469,136 shares of the Company's common stock, for a purchase price of approximately $2,000,000. The shares of common stock were offered at a price of $0.81 per share. In connection with the offering, the Company also issued to the investor for no additional consideration a common stock purchase warrant to purchase 2,469,136 shares of common stock. The warrant was exercisable immediately upon issuance at an exercise price of $1.05 per share and will expire on the fifth (5th) anniversary of the initial exercise date. | |||||
Subsequent event, description | LogicMark, a wholly-owned subsidiary of the Company, completed the closing of a $16.5 million senior secured term loan. The Company will use the proceeds from the term loan to refinance LogicMark’s existing term loan facility with Sagard Holdings Manager LP and to pay other costs related to the refinancing. The key aspects of the new term loan facility include an interest rate of LIBOR plus 11.00%, a three-year maturity date from the closing date and minimum principal payments over the three-year term amortized over 96 months. This refinancing also removes a covenant included in LogicMark’s existing term loan facility with Sagard Holdings Manager LP and allows the Company to proceed with the proposed spin-off of its Fit Pay subsidiary and its payments, authentication and credential management business. | |||||
Subsequent Event [Member] | 2017 Management Incentive Plan [Member] | ||||||
Subsequent Events (Textual) | ||||||
Issuance of common stock, shares | 105,833 | |||||
Subsequent Event [Member] | 2018 Management Incentive Plan [Member] | ||||||
Subsequent Events (Textual) | ||||||
Issuance of common stock, shares | 80,883 |