Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 28, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'True Drinks Holdings, Inc. | ' | ' |
Entity Central Index Key | '0001134765 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $21,421,000 |
Entity Common Stock, Shares Outstanding | ' | 34,451,822 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
CONSOLIDATED_BALANCE_SHEET
CONSOLIDATED BALANCE SHEET (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
ASSETS | ' | ' |
Cash | $3,136,766 | $4,449 |
Accounts receivable, net | 175,068 | 130,909 |
Inventory | 1,056,756 | 832,874 |
Prepaid expenses and other current assets | 591,434 | 268,716 |
Total current assets | 4,960,024 | 1,236,948 |
Restricted Cash | 133,065 | 81,270 |
Property and equipment, net | 8,399 | 25,399 |
Patents, net | 1,352,941 | 1,494,118 |
Trademarks, net | 48,516 | 98,516 |
Goodwill | 3,474,502 | 3,474,502 |
Other Assets | ' | 3,948 |
Total assets | 9,977,447 | 6,414,701 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' |
Accounts payable and accrued expenses | 1,222,404 | 1,292,147 |
Convertible notes payable | 680,000 | 772,000 |
Term loan | 1,916,667 | ' |
Derivative liabilities | 1,619,021 | ' |
Total current liabilities | 5,438,092 | 2,064,147 |
Stockholders' Equity | ' | ' |
Common Stock, $0.001 par value, 40,000,000 shares authorized, 27,885,587 and 1,337,335 shares outstanding at December 31, 2013 and December 31, 2012, respectively | 27,886 | 1,337 |
Preferred Stock – Series A (liquidation preference of $10 per share), $0.001 par value, 2,250,000 and 5,000,000 shares authorized, 0 and 1,544,565 shares outstanding at December 31, 2013 and December 31, 2012, respectively | ' | 1,545 |
Preferred Stock - Series B (liquidation preference of $4 per share), $0.001 par value, 2,750,000 and 0 shares authorized, 1,776,923 and 0 shares outstanding at December 31, 2013 and December 31, 2012, respectively | 1,777 | ' |
Additional paid in capital | 14,751,170 | 7,467,015 |
Accumulated deficit | -10,241,478 | -3,119,343 |
Total stockholders' equity | 4,539,355 | 4,350,554 |
Total liabilities and shareholders' equity | $9,977,447 | $6,414,701 |
CONSOLIDATED_BALANCE_SHEET_Par
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Preferred stock, par value | $0.00 | ' |
Preferred stock, shares authorized | 5,000,000 | ' |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares outstanding | 27,885,587 | ' |
Series A Preferred Stock [Member] | ' | ' |
Preferred stock liquidation preference | $10 | $10 |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 2,250,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 1,544,565 |
Series B Preferred Stock [Member] | ' | ' |
Preferred stock liquidation preference | $4 | ' |
Preferred stock, par value | $0.00 | ' |
Preferred stock, shares authorized | 2,750,000 | ' |
Preferred stock, shares issued | 1,776,923 | ' |
Common stock, par value | $4 | ' |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement [Abstract] | ' | ' |
Net sales | $2,649,473 | $1,021,908 |
Cost of Sales | 2,127,711 | 749,529 |
Gross Profit | 521,762 | 272,379 |
Operating expenses | ' | ' |
Selling and marketing | 2,224,801 | 692,242 |
General and administrative | 3,701,094 | 2,580,985 |
Total operating expenses | 5,925,895 | 3,273,227 |
Operating Loss | -5,404,133 | -3,000,848 |
Other Expense | ' | ' |
Change in fair value of derivative liability | 1,361,597 | ' |
Interest expense - accredtion of debt discount | -864,921 | ' |
Interest expense | -1,824,074 | -119,942 |
Other expense | -390,604 | 1,447 |
Net loss | ($7,122,135) | ($3,119,343) |
Basic and diluted net loss per share | ($0.26) | ($0.14) |
Weighted average common shares outstanding, basic and diluted | 27,489,422 | 22,757,712 |
CONSOLIDATED_STATEMENT_OF_SHAR
CONSOLIDATED STATEMENT OF SHARESHOLDERS' EQUITY (USD $) | Common Stock | Preferred Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) | Total |
Beginning Balance, Amount at Jan. 19, 2012 | ' | ' | ' | ' | ' |
Issuance of common stock to founders, Amount | $855 | ' | ' | ' | ' |
Issuance of common stock to founders, Shares | 854,500 | ' | ' | ' | ' |
Issuance of common stock for services, Amount | 30 | ' | 167,520 | ' | ' |
Issuance of common stock for services, Shares | 30,000 | ' | ' | ' | ' |
Issuance of common stock for cash, Amount | 367 | ' | 3,374,615 | ' | ' |
Issuance of common stock for cash, Shares | 367,375 | ' | ' | ' | ' |
Issuance of common stock for GT Beverage Company, LLC, Amount | 293 | ' | 2,926,607 | ' | ' |
Issuance of common stock for GT Beverage Company, LLC, Shares | 292,690 | ' | ' | ' | ' |
Ending Balance, Amount at Oct. 15, 2012 | 1,545 | ' | 6,468,742 | ' | 6,470,287 |
Ending Balance, Shares at Oct. 15, 2012 | 1,544,565 | ' | ' | ' | ' |
Effect of reverse merger and reverse stock split, Amount | 1,192 | ' | 726,613 | ' | 727,805 |
Effect of reverse merger and reverse stock split, Shares | 1,192,335 | ' | ' | ' | ' |
Conversion of preferred stock to common stock, Amount | -1,545 | 1,545 | ' | ' | ' |
Conversion of common stock to preferred stock, Shares | -1,544,565 | 1,544,565 | ' | ' | ' |
Issuance of common stock related to debt financing, Amount | 145 | ' | 108,605 | ' | 108,750 |
Issuance of common stock related to debt financing, Shares | 145,000 | ' | ' | ' | ' |
Stock-based compensation | ' | ' | 163,055 | ' | 163,055 |
Net Loss | ' | ' | ' | -3,119,343 | -3,119,343 |
Ending Balance, Amount at Dec. 31, 2012 | 1,337 | 1,545 | 7,467,015 | -3,119,343 | 4,350,554 |
Ending Balance, Shares at Dec. 31, 2012 | 1,337,335 | 1,544,565 | ' | ' | ' |
Conversion of preferred stock to common stock, Amount | 25,304 | -1,545 | -23,759 | ' | ' |
Conversion of common stock to preferred stock, Shares | 25,304,017 | -1,544,565 | ' | ' | ' |
Issuance of common stock related to debt financing, Amount | 269 | ' | 208,821 | ' | 209,090 |
Issuance of common stock related to debt financing, Shares | 268,800 | ' | ' | ' | ' |
Issuance of Common Stock for debt conversions, Amount | 861 | ' | 859,957 | ' | 860,818 |
Issuance of Common Stock for debt conversions, Shares | 860,821 | ' | ' | ' | ' |
Issuance of Preferred Stock for debt conversions, Amount, net of warrants issued | ' | 264 | 823,396 | ' | 823,660 |
Issuance of Preferred stock for debt conversions, Shares, net of warrants issued | ' | 264,423 | ' | ' | ' |
Elimination of derivative liability from conversion of debt to preferred stock | ' | ' | 64,970 | ' | 64,970 |
Issuance of Common Stock for services, Amount | 115 | ' | 122,135 | ' | 122,250 |
Issuance of Common Stock for services, Shares | 114,614 | ' | ' | ' | ' |
Issuance of Preferred Stock for services, Amount | ' | 18 | 69,982 | ' | 70,000 |
Issuance of Preferred Stock for services, Shares | ' | 17,500 | ' | ' | ' |
Issuance of Preferred Stock for cash, Amount, net of warrants issued | ' | 1,495 | 4,364,488 | ' | 4,365,983 |
Issuance of Preferred Stock for cash, Shares, net of warrants issued | ' | 1,495,000 | ' | ' | ' |
Stock-based compensation | ' | ' | 794,165 | ' | 794,165 |
Net Loss | ' | ' | ' | -7,122,135 | -7,122,135 |
Ending Balance, Amount at Dec. 31, 2013 | $27,886 | $1,777 | $14,751,170 | ($10,241,478) | $4,539,355 |
Ending Balance, Shares at Dec. 31, 2013 | 27,885,587 | 1,776,923 | ' | ' | ' |
CONSOLIDATED_STATEMENT_OF_CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($7,122,135) | ($3,119,343) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation | 18,298 | 8,668 |
Amortization | 191,177 | 114,215 |
Accretion of deferred financing costs | 864,921 | ' |
Provision for bad debt expense | 150,000 | 54,396 |
Change in estimated fair value of derivative | -1,361,597 | ' |
Amortization of debt discount | 1,332,543 | ' |
Stock issued to founders | ' | 855 |
Fair value of stock issued for services | 401,341 | 276,300 |
Stock based compensation | 794,165 | 163,055 |
Accounts receivable | -194,159 | -185,305 |
Inventory | -223,882 | -785,874 |
Prepaid expenses and other current assets | -322,718 | -268,716 |
Other assets | 3,948 | -3,948 |
Accounts payable and accrued expenses | 76,210 | -306,692 |
Net cash used in operating activities | -5,391,888 | -4,052,389 |
Cash flows from investing activities: | ' | ' |
Change in restricted cash | -51,795 | -81,270 |
Purchase of property and equipment | -1,298 | -7,671 |
Purchase of trademarks | ' | -6,849 |
Net cash used in investing activities | -53,093 | -95,790 |
Cash flow from financing activities: | ' | ' |
Proceeds from issuance in common stock | ' | 3,374,982 |
Proceeds from issuance of Series B Preferred Stock, net | 5,483,144 | ' |
Proceeds from convertible notes payable | 4,549,000 | 772,000 |
Proceeds from term loan | 2,000,000 | ' |
Deferred financing costs paid | -420,813 | ' |
Repayments on convertibles notes payable | -2,950,700 | ' |
Repayments on term loan | -83,333 | ' |
Net cash provided by financing activities | 8,577,298 | 4,146,982 |
CASH OF ACQUIRED COMPANY | ' | 5,646 |
NET INCREASE (DECREASE) IN CASH | 3,123,317 | 4,449 |
CASH - beginning of period | 4,449 | ' |
CASH - end of period | 3,136,766 | 4,449 |
SUPPLEMENTAL DISCLOSURES | ' | ' |
Interest paid in cash | 211,247 | ' |
Non-cash transactions: | ' | ' |
Conversion of preferred stock to common stock | 25,304 | ' |
Conversion of notes payable and accrued interest to common stock | 1,836,253 | ' |
Warrants issued as deferred financing costs | 444,108 | ' |
Warrants issued as debt discount | 1,332,543 | ' |
Elimination of derivative liability from conversion of debt to preferred stock | 64,970 | ' |
Warrants issued in connection with Series B Offering | $1,268,937 | ' |
ORGANIZATION_AND_SUMMARY_OF_SI
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Organization And Summary Of Significant Accounting Policies | ' | ||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
Overview | |||||||
True Drinks, Inc. (the "Company", "us", "True Drinks" or "we") was formed on January 19, 2012 in Delaware to create and commercialize all-natural, vitamin-enhanced drinks. Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall™ Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles. We distribute AquaBall™ nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online. We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed online and through our existing database of customers. | |||||||
On June 7, 2012, True Drinks, Inc., Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Bazi International, Inc. (“Bazi Intl.”), and Bazi Intl. entered into an agreement and tax-free plan of merger (the “Merger Agreement”), wherein Merger Sub merged with and into the Company and True Drinks continued as the surviving corporation (the “Merger”). As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company. The Merger closed on October 15, 2012 (the “Closing Date”). As a result of Merger, True Drinks, Inc.’s former shareholders owned approximately 95.5% of the combined post-Merger entity via shares of Series A Convertible Preferred Stock (“Series A Preferred”) issued as part of the Merger. The Company subsequently changed its name from “Bazi International, Inc.” to “True Drinks Holdings, Inc.” The Merger was accounted for as a public company “reverse merger,” and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. within the capital structure of Bazi Intl. | |||||||
Bazi Intl. was originally incorporated in the state of Nevada in January 2001. True Drinks, formerly named GT Beverage Company, Inc., was originally incorporated in the state of Delaware in January 2012. True Drinks acquired GT Beverage Company, LLC on March 31, 2012 in a business combination, primarily to acquire the use of a spherical bottle patent held by GT Beverage Company, LLC. | |||||||
Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock, par value $0.001 (“Common Stock”), is currently listed for quotation on the OTCQB marketplace (“OTCQB”) under the symbol TRUU. | |||||||
Reverse Stock Split | |||||||
On January 18, 2013, we amended our Articles of Incorporation to create a 100 to 1 reverse split of our Common Stock. Accordingly, our authorized Common Stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding Common Stock decreased from 133,733,469 to 1,337,335 shares. As a result of the reverse stock split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of the Merger) to reflect the reverse split. | |||||||
Recent Developments | |||||||
Note Offering. On June 20, 2013 the Company commenced a private offering of: (i) convertible promissory notes (the “Notes”) in the aggregate principal amount of up to $3.3 million; and (ii) and five-year warrants to purchase shares of the Company’s Common Stock at an exercise price of $1.10 per share (the “Warrants”) to certain accredited investors (the “Note Offering”). During the year ended December 31, 2013, the Company issued Notes in the aggregate principal amount of $3,126,000, which amount included $600,000 issued as consideration for the exchange of the outstanding principal and accrued interest of certain promissory notes previously issued by the Company. All outstanding principal and interest were either repaid or converted into equity- see below discussion under Term Loan and Note Conversion. | |||||||
License Agreement. In August 2013, the Company signed an extension of its licensing agreement with Marvel Characters B.V. to extend the expiration date to December 31, 2015 (the “Marvel Agreement”). The Marvel Agreement allows True Drinks to use a range of different Marvel characters on AquaBall™ packaging in exchange for a royalty payment, paid quarterly, equal to 5% of the proceeds from the sale of AquaBalls™ adorned with Marvel characters in the United States and Canada. The Marvel Agreement has a total royalty guarantee of $150,000 over the term of the agreement. | |||||||
Creation of Series B Convertible Preferred Stock. On November 22, 2013, the Company filed the Certificate of Designation, Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the “Certificate of Designation”) with the Nevada Secretary of State, designating 2.75 million shares of the Company's Preferred Stock as Series B Convertible Preferred Stock (“Series B Preferred”). Each share of Series B Preferred has a stated value of $4.00 per share (“Stated Value”), and accrues annual dividends equal to 5% of the Stated Value, payable by the Company in quarterly installments, in either cash or shares of Common Stock. Pursuant to certain terms and conditions in the Certificate of Designation, each share of Series B Preferred is convertible, at the option of the holder, into that number of shares of Common Stock equal to the Stated Value, divided by $0.25 per share (the “Conversion Shares”). The Company also has the option to require conversion of the Series B Preferred into Conversion Shares in the event: (i) there are sufficient authorized shares of Common Stock reserved as Conversion Shares; (ii) the Conversion Shares are registered under the Securities Act of 1933, as amended, or the Conversion Shares are freely tradable, without restriction, under Rule 144 of the Securities Act; (iii) the daily trading volume of the Company's Common Stock, multiplied with the closing price, equals at least $250,000 for 20 consecutive trading days; and (iv) the average closing price of the Company's Common Stock is at least $0.62 per share for 10 consecutive trading days. | |||||||
Series B Offering. On November 25, 2013, the Company commenced a private offering of up to 2.0 million shares of Series B Preferred for $4.00 per share (“Purchase Price”), and five-year warrants (the “Warrants”), exercisable for $0.30 per share (the "Exercise Price"), to purchase that number of shares of the Company's Common Stock equal to 35% of the Purchase Price, divided by the Exercise Price (the “Series B Offering”). As of the date hereof, the Company and certain accredited investors entered into Securities Purchase Agreements to purchase 2.0 million shares of Series B Preferred, and Warrants to purchase approximately 9.3 million shares of Common Stock. | |||||||
Term Loan and Note Conversion. On November 29, 2013, the Company executed a Loan and Security Agreement and other ancillary documents for a $2.0 million term loan from Avid Bank (the "Bank") (the "Term Loan"), which Term Loan accrues interest at a rate of prime plus 2.75% and matures on November 29, 2015. The Company's repayment of the Term Loan is secured by a continuing security interest in substantially all of the Company's assets. Proceeds from the Term Loan, together with a portion of the proceeds from the Series B Offering were used to repay certain Notes issued, totaling approximately $2.5 million in principal and accrued interest (the "Note Repayment"). | |||||||
In addition to the Note Repayment, holders of the remaining Notes issued during the Note Offering agreed to cancel Notes totaling $739,706 in principal and accrued interest in exchange for 205,476 shares of Series B Preferred and Warrants to purchase 862,995 shares of Common Stock for $0.30 per share, on substantially the same terms offered in the Series B Offering (the "Note Conversion"). | |||||||
On November 29, 2013, the Company repaid approximately $400,000 in principal and accrued interest and fees from previous notes. In addition to the repayment, holders of previous notes agreed to cancel Notes totaling $235,729 in principal and accrued interest in exchange for 58,947 shares of Series B Preferred and Warrants to purchase 275,075 shares of Common Stock for $0.30 per share, on substantially the same terms offered in the Series B Offering. | |||||||
Basis of Presentation and Going Concern | |||||||
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. For the year ended December 31, 2013, the Company incurred a net loss of $7,122,135. At December 31, 2013, the Company has negative working capital of $478,068 and an accumulated deficit of $10,241,478. A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |||||||
Principles of Consolidation | |||||||
The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Inc., Bazi, Inc. and GT Beverage Company, LLC. All inter-company accounts and transactions have been eliminated in the preparation of these consolidated financial statements. | |||||||
Use of Estimates | |||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates. | |||||||
Revenue Recognition | |||||||
In accordance with Staff Accounting Bulletin ("SAB") No. 104 “Revenue Recognition in Financial Statements”, revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, slotting fees, discounts and freight and handling charges. With approved credit, we provide wholesale customers payment terms of up to net 30 days. Amounts received for unshipped merchandise are recorded as customer deposits and are included in accrued expenses. | |||||||
Cash and Cash Equivalents | |||||||
The Company considers all highly liquid investments with original maturities of three months or less, to be cash equivalents. The Company maintains cash with high credit quality financial institutions. At certain times, such amounts may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses on these amounts. At December 31, 2013 and 2012, the Company had no cash equivalents. | |||||||
Restricted Cash | |||||||
The Company had $133,065 and $81,270 in restricted cash with a financial institution securing a letter of credit at December 31, 2013 and 2012, respectively. The letter of credit matures in August 2015 and was issued as part of contractual obligations related to one of our licensing agreements with Disney Consumer Products, Inc. | |||||||
Accounts Receivable | |||||||
We maintain an allowance for doubtful accounts, which is analyzed on a periodic basis to ensure that it is adequate to the best of management’s knowledge. Management develops an estimate of the allowance for doubtful accounts receivable based on its own judgment as to the likelihood of ultimate payment. Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts. The allowance was approximately $210,000 and $54,000 at December 31, 2013 and December 31, 2012, respectively. | |||||||
Concentrations | |||||||
The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with two financial institutions. There are funds in excess of the federally insured amount, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal. | |||||||
We utilize a variety of suppliers to purchase raw materials for the AquaBallTM Naturally Flavored Water during the year ended December 31, 2013. | |||||||
During 2013, we relied significantly on one supplier for 100% of our purchases of certain raw materials for Bazi®. Bazi, Inc. has sourced these raw materials from this supplier since 2007 and does not anticipate any issues with the supply of these raw materials. | |||||||
During 2012, the Company relied significantly on one supplier for 100% of its purchases of AquaBall™ Naturally Flavored Water held for sale. During the year ended December 31, 2013, the Company began production of AquaBall™ with two additional suppliers. The Company owns the formula for both the AquaBall™ and Bazi®, and management believes that its purchasing requirements can be readily met from alternative sources. | |||||||
A significant portion of our revenue comes from sales of the AquaBall™ Naturally Flavored Water. Following the consummation of the Merger in October 2012, sales of Bazi® accounted for 1% of our total revenue. Before the Merger, the Company’s revenues consisted of sales of AquaBall™. For the year ended December 31, 2013 and 2012, sales of AquaBall™ accounted for 90% and 99% of the Company’s total revenue, respectively. | |||||||
Fair Value Matters | |||||||
The Company does not have any assets or liabilities carried at fair value on a recurring or non-recurring basis. | |||||||
The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses, and notes payable. Management believes that the carrying amount of these financial instruments approximates their fair values, due to their relatively short-term nature. | |||||||
Inventory | |||||||
Inventory is stated at the lower of cost or market on a FIFO (first-in first-out) basis. Provision is made to reduce excess or obsolete inventory to the estimated net realizable value. The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement. | |||||||
Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value. Changes in economic conditions or customer demand could result in obsolete or slow moving inventory that cannot be sold or must be sold at reduced prices and could result in an inventory reserve. No inventory reserves were considered necessary as of December 31, 2013 or 2012. | |||||||
Inventory is comprised of the following: | |||||||
December 31, | December 31, | ||||||
2013 | 2012 | ||||||
Purchased materials | $ | 659,835 | $ | 473,383 | |||
Finished goods | 396,921 | 359,491 | |||||
$ | 1,056,756 | $ | 832,874 | ||||
Property and Equipment | |||||||
Property and equipment are stated at cost. The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years. Property and equipment is not significant to the consolidated financial statements as of or for the years ended December 31, 2013 and 2012. | |||||||
Long-Lived Assets | |||||||
The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset. An impairment was not deemed necessary in 2013 or 2012. | |||||||
Intangible Assets | |||||||
Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Company’s products, customer list, and the estimated value of GT Beverage Company, LLC’s interlocking spherical bottle patent acquired on March 31, 2012. The Company’s intangible assets, are amortized over their estimated remaining useful lives. The Company evaluates the useful lives of its intangible assets annually and adjusts the lives according to the expected useful life. No impairment was deemed necessary as of December 31, 2013 or December 31, 2012. | |||||||
Goodwill | |||||||
Goodwill represents the future economic benefits arising from other assets acquired that are individually identified and separately recognized. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually. | |||||||
Income Taxes | |||||||
The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740 (“ASC Topic 740”), formerly Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. | |||||||
Stock-Based Compensation | |||||||
Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the year ended December 31, 2013 and 2012 was $794,165 and $163,055, respectively. | |||||||
The Company uses a Black-Scholes option-pricing model (the “Black-Scholes Model”) to estimate the fair value of the stock option and warrants. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the contractual term of the option. The expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. Currently it is based on the simplified approach provided by SAB 107. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant (see Note 4). | |||||||
Shares, warrants and options issued to non-employees for services are accounted for at fair value, based on the fair value of instrument issued or the fair value of the services received, whichever is more readily determinable. | |||||||
Derivative Instruments | |||||||
A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts (“embedded derivatives”) and for hedging activities. As a matter of policy, the Company does not invest in financial derivatives or engage in hedging transactions. However, the Company has entered into complex financing transactions that involve financial instruments containing certain features that have resulted in the instruments being deemed derivatives or containing embedded derivatives. The Company may engage in other similar complex debt transactions in the future, but not with the intention to enter into derivative instruments. Derivatives and embedded derivatives, if applicable, are measured at fair value using the binomial lattice- (“Binomial Lattice”) pricing model and marked to market and reflected on our consolidated statement of operations as other (income) expense at each reporting period. However, such new and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation of derivatives often incorporate significant estimates and assumptions, which may impact the level of precision in the financial statements. Furthermore, depending on the terms of a derivative or embedded derivative, the valuation of derivatives may be removed from the financial statements upon conversion of the underlying instrument into some other security. | |||||||
Net Loss Per Share | |||||||
Earnings per share require presentation of both basic earnings per common share and diluted earnings per common share. Since the Company has a net loss for all periods presented, common stock equivalents are not included in the weighted average calculation since their effect would be anti-dilutive. At December 31, 2013 and 2012, the Company had 72,900,080 and 4,755,183 shares of common stock equivalents outstanding, respectively. | |||||||
Research and Development | |||||||
Research and development costs are expensed as incurred. | |||||||
Recent Accounting Pronouncements | |||||||
The Company has reviewed all recently issued, but not yet effective accounting pronouncements and has concluded that there are no recently issued, but not yet effective pronouncements that may have a material impact on the Company’s future financial statements. |
BUSINESS_ACQUISITIONS
BUSINESS ACQUISITIONS | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Business Acquisitions | ' | ||||
BUSINESS ACQUISITIONS | ' | ||||
The Company did not engage in any business combination activity during the year ended December 31, 2013. During the year ended December 31, 2012, the Company completed two business combinations accounted for under the acquisition (purchase) method pursuant to ASC 805. | |||||
GT Beverage Company, LLC | |||||
On March 31, 2012, the Company completed the acquisition of GT Beverage by issuing 292,690 shares of Common Stock in exchange for all of the outstanding membership interests of GT Beverage. The primary purpose of the acquisition was to take advantage of GT Beverages’ patented spherical bottle for use in the Company's product AquaBall™ Naturally Flavored Water. These 292,690 shares of Common Stock were exchanged for 292,690 shares of the Company Series A Preferred Stock in connection with the Merger. GT Beverage had no sales or significant operations from January 1, 2012 through March 31, 2012, and, accordingly, as a predecessor entity, GT Beverage has not provided audited financial statements for the three-months ended March 31, 2012. | |||||
The acquisition date fair value was $2,926,900 for the purchase of GT Beverage’s outstanding member interests. The $2,926,900 consisted of 292,690 shares of the Company’s Common Stock with an estimated fair value of $2,926,900. The acquisition of GT Beverage has been accounted for using the acquisition method. Assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The allocation of the purchase price is based upon a valuation of certain assets acquired and liabilities assumed. The purchase price allocation was as follows: | |||||
Amount | |||||
Property and equipment | $ | 26,396 | |||
Patent for spherical bottle (useful life of 11.3 years) | 1,600,000 | ||||
Goodwill | 2,414,642 | ||||
Total assets acquired | 4,041,038 | ||||
Accounts payable, accrued expenses and other current liabilities | (1,114,138 | ) | |||
Total liabilities assumed | (1,114,138 | ) | |||
Total allocation of purchase price consideration | $ | 2,926,900 | |||
The useful life of the intangible asset was based upon the patterns in which the economic benefits related to the patent are expected to be realized, and the patent will be amortized on a basis reflecting those economic patterns. | |||||
The Company incurred $107,000 of legal costs related to this transaction, which has been recorded as general and administrative expense during the year ended December 31, 2012. | |||||
As noted above, there were no significant operations of GT Beverage from January 1, 2012 through March 31, 2012 and, accordingly, the pro forma financial information required by ASC 805 is not applicable. | |||||
Bazi International, Inc. | |||||
On October 15, 2012, the Company completed the acquisition of 100% of Bazi Intl., by exchanging shares of Company Common Stock for Bazi Intl. shares of voting convertible preferred stock. Bazi Intl.’s results of operations are reflected in the Company’s consolidated statements of operations from the acquisition date of October 15, 2012 through December 31, 2012. | |||||
The Company is considered the accounting acquiror due to its majority ownership, control of the board of directors, and officer positions held post acquisition. Accordingly, the acquisition has been accounted for as a public company reverse merger. Bazi Intl. was not a public company shell, as defined by the SEC, therefore the acquisition (purchase) method of accounting under ASC 805 has been used and the Company's capital structure has been restated to reflect the capital structure of Bazi Intl at the acquisition date. | |||||
The acquisition date estimated fair value was $727,805, consisting of 1,192,335 shares of the Company’s Common Stock with an estimated fair value of $727,805. The acquisition of Bazi Intl. has been accounted for using the acquisition method. Assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The allocation of the purchase price is based upon a valuation of certain assets acquired and liabilities assumed. The purchase price allocation was as follows: | |||||
Amount | |||||
Cash | $ | 5,646 | |||
Inventory | 47,000 | ||||
Customer List (useful life of 2 years) | 100,000 | ||||
Goodwill | 1,059,860 | ||||
Total assets acquired | 1,212,506 | ||||
Accounts payable, accrued expenses and other current liabilities | (484,701 | ) | |||
Total liabilities assumed | (484,701 | ) | |||
Total allocation of purchase price consideration | $ | 727,805 | |||
The useful life of the intangible asset (customer list) was based upon the patterns in which the economic benefits related to the customer list are expected to be realized, and the customer list will be amortized on a basis reflecting those economic patterns. | |||||
The Company incurred $138,000 of legal costs related to this transaction, which has been recorded as general and administrative expense during the year ended December 31, 2012. | |||||
The unaudited pro forma information presented in the following table summarizes the Company’s consolidated results of operations for the year ended December 31, 2012, as if the acquisition of Bazi Intl. had occurred on January 1, 2012. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2012, nor is it intended to be a projection of future results. | |||||
Pro Forma (Unaudited) | |||||
Year Ended December 31, 2012 | |||||
Revenues | $ | 1,488,515 | |||
Net loss | $ | (5,001,653 | ) | ||
Basic net loss per share | $ | (0.22 | ) | ||
SHAREHOLDERS_EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2013 | |
Shareholders Equity | ' |
SHAREHOLDERS' EQUITY | ' |
The holders of Common Stock are entitled to receive, when and as declared by the Board of Directors, dividends payable either in cash, in property or in shares of Common Stock of the Company. Dividends have no cumulative rights and dividends will not accumulate if the Board of Directors does not declare such dividends. | |
The holders of Series A Preferred stock are entitled to receive, when and as declared by the Board of Directors, dividends payable either in cash, in property or in shares of the Common Stock of the Company, in an amount equal to the aggregate amount of the dividend to which such shares of Series A Preferred would have been entitled had such share been converted into shares of Common Stock. The holders of Series A Preferred vote together with holders of Common Stock on an as-converted basis. On January 18, 2013, upon the filing of the Amendment to the Articles of Incorporation, the Company converted 1,544,565 shares of Series A Preferred issued to former True Drinks shareholders into 25,304,017 post-split shares of the Company’s Common Stock. In November 2013, the Company filed a Certificate of Elimination with the State of Nevada to eliminate the Series A Preferred Stock. | |
Each share of Series B Preferred has a stated value of $4.00 per share (“Stated Value”) and accrues annual dividends equal to 5% of the Stated Value, payable by the Company in quarterly installments, in either cash or shares of Common Stock. Each share of Series B Preferred is convertible, at the option of the holder, into that number of shares of Common Stock equal to the Stated Value, divided by $0.25 per share (the “Conversion Shares”). The Company also has the option to require the conversion of the Series B Preferred into Conversion Shares in the event: (i) there are sufficient authorized shares of Common Stock reserved as Conversion Shares; (ii) the Conversion Shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or the Conversion Shares are freely tradable, without restriction, under Rule 144 of the Securities Act; (iii) the daily trading volume of the Company's Common Stock, multiplied with the closing price, equals at least $250,000 for 20 consecutive trading days; and (iv) the average closing price of the Company's Common Stock is at least $0.62 per share for 10 consecutive trading days. | |
In January 2012, the Company formed and issued founders shares of its Common Stock to certain individuals and entities totaling 854,500 shares. As of the merger with Bazi Intl. on October 15, 2012, these shares were converted into 854,500 shares of the Company’s Series A Preferred shares. | |
In February and March 2012, the Company issued 163,000 shares of its Common Stock to certain accredited investors pursuant to subscription agreements in exchange for a total of $1,625,000. As of the merger with Bazi Intl. on October 15, 2012, these shares were exchanged for 163,000 shares of the Company’s Series A Preferred shares. | |
On April 1, 2012, the Company completed the acquisition of the ownership interest in GT Beverage Company, LLC in exchange for 292,690 shares of its Common Stock. As of the merger with Bazi Intl. on October 15, 2012, these shares were exchanged for 292,690 shares of the Company’s Series A Preferred shares. | |
Between April and June 2012, the Company issued 186,875 shares of its Common Stock to certain accredited investors pursuant to subscription agreements in exchange for a total of $1,574,982 in cash. As of the merger with Bazi Intl. on October 15, 2012, these shares were exchanged for 186,875 shares of the Company’s Series A Preferred shares. | |
In June 2012, the Company issued 15,000 shares of its Common Stock for services provided to the Company valued at $150,000 based on the fair value of the Company’s stock. As of the merger with Bazi Intl. on October 15, 2012, these shares were exchanged for 15,000 shares of the Company’s Series A Preferred shares. | |
In July 2012, the Company issued 17,500 shares of its Common Stock to certain accredited investors pursuant to subscription agreements in exchange for a total of $175,000 in cash. As of the merger with Bazi Intl. on October 15, 2012, these shares were exchanged for 17,500 shares of the Company’s Series A Preferred shares. | |
In October 2012 (pre-merger), the Company issued 15,000 shares of its Common Stock for services provided to the Company valued at $15,000 based on the fair value of the Company’s stock. As of the merger with Bazi Intl. on October 15, 2012, these shares were exchanged for 15,000 shares of the Company’s Series A Preferred shares. | |
On October 15, 2012, the Company issued 1,192,335 shares of its Common Stock to the holders of 100% of the outstanding shares of Bazi International, Inc. pursuant to the Merger with Bazi Intl. | |
Between October and December 2012 (post-merger), the Company issued 145,000 shares of its Common Stock to certain accredited investors in connection with bridge loans made to the Company. Such loans have short-term maturities of approximately 4 months. The Company expensed the fair value of the common stock issued of approximately $108,000 to interest expense immediately. (See Note 7). | |
Between January and September 2013, the Company issued 268,800 shares of its Common Stock as offering costs relating to bridge loans made to the Company. Such loans have short-term maturities of approximately four months. The Company expensed the fair value of the Common Stock issued of $209,090 to interest expense during the year ended December 31, 2013. | |
In March 2013, the Company issued 38,250 shares of its Common Stock in connection with two consulting agreements. The Company expensed the fair value of the Common Stock issued of $38,250 to consulting expense. | |
Between April and May 2013, the Company issued a total of 860,821 shares of its Common Stock to holders of $860,818 in outstanding convertible notes payable, lenders fees and accrued interest upon receiving conversion notices on the underlying notes. | |
Between July and August 2013, the Company issued 76,364 shares of its Common Stock in connection with two consulting agreements. The Company expensed the fair value of the Common Stock issued of $84,000 to consulting expense. | |
In November 2013, the Company issued 1,495,000 shares of its Series B Preferred Stock to certain accredited investors pursuant to subscription agreements in exchange for a total of $5,980,000 in cash less cash fees of $496,854. The investors also received Warrants to purchase 6,976,667 shares of the Company’s Common Stock for $0.30 per share. The Company also issued 1,235,867 warrants to Merriman Capital in connection with the investment. The total value of all such Warrants, $1,117,163, was recorded against Additional Paid In Capital. | |
In November 2013, the Company issued 264,423 shares of its Series B Preferred Stock to holders of $975,434 in outstanding convertible notes payable, lenders fees and accrued interest upon receiving conversion notices on the underlying notes. In addition, investors received Warrants to purchase 1,138,070 shares of the Company’s Common Stock for $0.30 per share. The total value of these Warrants, $151,774, was recorded against Additional Paid In Capital. In addition, $64,970 of liability associated with a derivative on certain of the notes was recorded to Additional Paid In Capital. | |
In December 2013, the Company issued 17,500 shares of its Series B Preferred Stock to certain directors on its Board of Directors in exchange for $70,000 in outstanding board fees. In addition, the directors also received Warrants to purchase 81,667 shares of the Company’s Common Stock for $0.30 per share. |
STOCK_OPTIONS_AND_WARRANTS
STOCK OPTIONS AND WARRANTS | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Stock Options And Warrants | ' | ||||||||||||||||||||||
STOCK OPTIONS AND WARRANTS | ' | ||||||||||||||||||||||
Warrants | |||||||||||||||||||||||
A summary of the Company’s warrant activity for the years ended December 31, 2013 and 2012 is presented below: | |||||||||||||||||||||||
Warrants | Weighted | ||||||||||||||||||||||
Outstanding | Average | ||||||||||||||||||||||
Exercise Price | |||||||||||||||||||||||
Outstanding, January 19, 2012 | - | $ | - | ||||||||||||||||||||
Outstanding Warrants Assumed with Merger on October 15, 2012 | 145,185 | 52 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Expired | (12,845 | ) | 154 | ||||||||||||||||||||
Outstanding, December 31, 2012 | 132,340 | $ | 43 | ||||||||||||||||||||
Granted | 12,470,514 | 0.3 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Expired | (12,387 | ) | 3.2 | ||||||||||||||||||||
Outstanding, December 31, 2013 | 12,590,467 | $ | 0.55 | ||||||||||||||||||||
As of December 31, 2013, the Company had the following outstanding warrants to purchase its Common Stock: | |||||||||||||||||||||||
Warrants Outstanding | Weighted Average | Weighted Average | |||||||||||||||||||||
Exercise Price Per Share | Remaining Life (Yrs) | ||||||||||||||||||||||
62,453 | $ | 30 | 2.06 | ||||||||||||||||||||
57,500 | $ | 25 | 0.5 | ||||||||||||||||||||
3,038,243 | $ | 0.25 | 4.56 | ||||||||||||||||||||
9,432,271 | $ | 0.3 | 4.9 | ||||||||||||||||||||
12,590,467 | $ | 0.55 | 4.79 | ||||||||||||||||||||
Non-Qualified Stock Options | |||||||||||||||||||||||
In 2013, the Company granted 245,739 stock options pursuant to an option agreement with one employee. The grant date fair value of the options granted during the year ended December 31, 2013 was $0.35 per share for a total of $86,009 to be expensed over the vesting periods of the options. Such fair values were estimated using the Black-Scholes stock option pricing model and the following weighted average assumptions. | |||||||||||||||||||||||
2013 | |||||||||||||||||||||||
Expected life | 2.5 years | ||||||||||||||||||||||
Estimated volatility | 75 | % | |||||||||||||||||||||
Risk-free interest rate | 0.65 | % | |||||||||||||||||||||
Dividends | - | ||||||||||||||||||||||
The weighted average estimated fair value per share of the stock options at grant date was $0.35 during the year ended December 31, 2013. The expected life of options granted is based on the “simplified method” described in ASC 718-10 due to changes in the vesting terms and the contractual life of current option grants. Assumed volatility is based on the historical volatility of companies within the similar industry. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding to the expected term of the options. | |||||||||||||||||||||||
Stock option activity during the years ended December 31, 2013 and 2012 is summarized as follows: | |||||||||||||||||||||||
Number of | Weighted-Average | ||||||||||||||||||||||
Shares | Exercise Price | ||||||||||||||||||||||
Options outstanding at January 19, 2012 | - | $ | - | ||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Granted | 3,870,387 | 0.69 | |||||||||||||||||||||
Forfeited | - | - | |||||||||||||||||||||
Expired | - | - | |||||||||||||||||||||
Options outstanding at December 31, 2012 | 3,870,387 | $ | 0.69 | ||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Granted | 245,739 | 1.1 | |||||||||||||||||||||
Forfeited | (122,868 | ) | 1.02 | ||||||||||||||||||||
Expired | - | - | |||||||||||||||||||||
Options outstanding at December 31, 2013 | 3,993,258 | $ | 0.7 | ||||||||||||||||||||
The following table summarizes information about the Company’s stock options outstanding as of December 31, 2013: | |||||||||||||||||||||||
Outstanding Options | |||||||||||||||||||||||
Weighted Average | Exercisable Options | ||||||||||||||||||||||
Remaining | Aggregate | Aggregate | |||||||||||||||||||||
Range of | Contractual Life | Intrinsic | Intrinsic | ||||||||||||||||||||
Exercise Prices | Number | (Years) | Value | Number | Value | ||||||||||||||||||
$ | 0.61 | 3,133,172 | 3.17 | $ | - | 1,310,610 | $ | - | |||||||||||||||
$ | 1.1 | 245,739 | 4.5 | - | - | - | |||||||||||||||||
$ | 1.017 | 614,347 | 3.6 | - | 245,740 | $ | - | ||||||||||||||||
Totals | 3,993,258 | 3.32 | $ | - | 1,556,350 | $ | - | ||||||||||||||||
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Intangible Assets | ' | |||||||
INTANGIBLE ASSETS | ' | |||||||
The Company has incurred costs to trademark eight of its current products and marketing nomenclatures. During the year, the Company purchased a patent in relation to the purchase of GT Beverage, and also assumed the trademarks of Bazi Intl. Patents and trademarks are being amortized over the lesser of their remaining life or 15 years. | ||||||||
Intangible assets are: | ||||||||
December 31, | December 31, | |||||||
2013 | 2012 | |||||||
Patents and trademarks | $ | 1,706,849 | $ | 1,706,849 | ||||
Accumulated amortization | (305,392 | ) | (114,215 | ) | ||||
$ | 1,401,457 | $ | 1,592,634 | |||||
Amortization expense for the year ended December 31, 2013 and 2012 was $191,177 and $114,216, respectively. For these assets, amortization expense over the next five years is expected to be as follows: | ||||||||
Patent and trademark amortization | ||||||||
2014 | $ | 168,042 | ||||||
2015 | 145,172 | |||||||
2016 | 141,177 | |||||||
2017 | 141,177 | |||||||
2018 | 141,177 | |||||||
2019 and therafter | 664,712 | |||||||
$ | 1,401,457 | |||||||
INCOME_TAXES
INCOME TAXES | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Income Taxes | ' | |||||||
INCOME TAXES | ' | |||||||
The Company does not have significant income tax expense or benefit for the year ended December 31, 2013 or 2012. Tax net operating loss carryforwards have resulted in a net deferred tax asset with a 100% valuation allowance applied against such asset at December 31, 2013 and 2012. Such tax net operating loss carryforwards (“NOL”) approximated $10.2 million and $3.1 million at December 31, 2013 and 2012, respectively. Some or all of such NOL may be limited by Section 382 of the Internal Revenue Code. | ||||||||
The income tax effect of temporary differences between financial and tax reporting and net operating loss carryforwards gives rise to a deferred tax asset at December 31, 2013 and 2012 as follows: | ||||||||
2013 | 2012 | |||||||
Deferred tax asset –NOL’s | $ | 3,800,000 | $ | 1,160,000 | ||||
Less valuation allowance | (3,800,000 | ) | (1,160,000 | ) | ||||
Net deferred tax asset | $ | - | $ | - | ||||
At December 31, 2013 approximately $10,200,000 of net operating loss carryforwards for federal and state income tax purposes were available to offset future taxable income through the year 2033, of which these net operating losses will begin to expire in the year 2032. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the history of the Company and projections for future taxable income over the periods in which the deferred tax assets are realizable, management believes it is not more likely than not that the Company will realize the benefits of these deductible differences and therefore a full valuation allowance against the deferred tax assets has been established. | ||||||||
As a result of the Merger with Bazi Intl. on October 15, 2012, the Company may have access to utilize a portion of the net operating loss carryforwards of Bazi Intl., which, in total, were approximately $25 million at the time of the Merger. The Company is uncertain as of the timing of this filing as to the portion of the Bazi net operating loss carryforwards that may be limited by Section 382 of the Internal Revenue Code. | ||||||||
The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carryforwards if there has been a change of ownership as described in Section 382 of the Internal Revenue Code. Such an analysis has not been performed by the Company to determine the impact of these provisions on the Company’s net operating losses, though management believes the impact would be minimal, if any. A limitation under these provisions would reduce the amount of losses available to offset future taxable income of the Company. | ||||||||
In June 2006, the Financial Accounting Standards Board (“FASB”) issued ASC Topic 740 (formerly Interpretation No. 48, “Accounting for Uncertainties in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes”. ASC 740 prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken on income tax returns. ASC Topic 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. | ||||||||
Based on management’s assessment of ASC Topic 740, management concluded that the Company does not have any uncertain tax positions as of December 31, 2013. There have been no income tax related interest or penalties assessed or recorded and if interest and penalties were to be assessed, the Company would charge interest and penalties to income tax expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date. The Company and its subsidiaries file income tax returns in the U.S. and various state jurisdictions and there are open statutes of limitations for taxing authorities to audit the Company’s tax returns from 2008 through the current year. |
DEBT
DEBT | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Debt | ' | ||||
DEBT | ' | ||||
Note Offering | |||||
On June 20, 2013 the Company commenced a private offering of: (i) Notes in the aggregate principal amount of up to $3.3 million; and (ii) and Warrants to certain accredited investors (the “Note Offering”). During the year ended December 31, 2013, the Company issued Notes in the aggregate principal amount of $3,126,000, which amount included $600,000 issued as consideration for the exchange of the outstanding principal and accrued interest of certain promissory notes previously issued by the Company. As additional consideration to investors and as consideration for offering costs, the Company issued 2,438,243 Warrants to purchase the Company’s common stock, in addition to the 600,000 Warrants issued with the May Notes. As of November 29, 2013, all Notes issued during the Offering were either paid in full as a result of the Note Repayment, or exchanged for shares of Series B Preferred and Warrants in connection with the Note Conversion. | |||||
Each Note accrued interest at a rate of 12% per annum, and was set to mature on November 29, 2013. Each Note was convertible, at the option of the holder thereof into that number of shares of the Company’s Common Stock, equal to the outstanding principal balance of the Note, plus accrued but unpaid interest, divided by $2.00. The Notes contained "anti-dilution" protection, such that if the Company were to conduct a qualifying equity transaction, the conversion price of the Notes would be the lower of $2.00 or 90% of the price of the qualifying equity transaction. Management determined that the embedded conversion feature was a derivative liability and recorded a debt discount of $324,603 based on the estimated fair value of the derivative liability. Such amount was determined by a third-party valuation firm using a Monte Carlo simulation and is being amortized into interest expense over the term of the note. Each Note was also accompanied by Warrants to purchase a number of shares of the Company’s Common Stock equal to 75% of the aggregate principal amount of the Notes divided by the lower of $1.10 or the price of a qualifying equity transaction. Under ASC 815, management determined that each Warrant’s price-protection feature is also a derivative liability and recorded a debt discount of $1,007,940 based on the estimated fair value of the derivative liability. This amount is being amortized into interest expense over the term of the note. | |||||
In November 2013, each Note was either repaid or converted into the Company’s Series B Offering. A total of $2,508,716 was repaid in principal and accrued interest. The remaining Notes totaling $739,706 was converted into Company’s Series B Offering. | |||||
Significant assumptions used in such valuations included: | |||||
Expected life | 5 years | ||||
Estimated volatility | 75.00% | ||||
Risk-free interest rate | 0.07% - 0.10% | ||||
Expected dividends | None | ||||
A summary of convertible notes payable, net as of December 31, 2013, is as follows: | |||||
Amount | |||||
Outstanding, December 31, 2012 | $ | 772,000 | |||
Notes issued | 4,549,000 | ||||
Notes repaid | (2,950,700 | ) | |||
Notes converted to Common Stock | (1,690,300 | ) | |||
Debt discount recorded | (1,332,543 | ) | |||
Debt discount amortized | 1,332,543 | ||||
Outstanding December 31, 2013 | $ | 680,000 | |||
Bridge Financing | |||||
Between October and December 2012, the Company consummated the sale of senior secured convertible notes (“Bridge Notes”) to a limited number of accredited investors, resulting in net proceeds to the Company of $725,000. As additional consideration for the purchase of the Bridge Notes, each investor received 5,000 shares of the Company’s Common Stock per $25,000 of principal amount purchased. Each Bridge Note has a term of 120 days, and accrues interest at 9% per annum. A fee of 10% was added to each Bridge Note, as a lender’s fee. The principal, interest and lender’s fee are convertible, at the option of the holder, into shares of the Company’s Common Stock at a price of $1.00 per share. The Company has repaid $125,000 in principal, $12,500 in fees, and $4,830 in interest to certain holders of the Bridge Notes. In April and May 2013, Bridge Notes in the aggregate principal amount, plus accrued interest, of $376,222 were converted into 376,225 shares of the Company’s Common Stock. The maturities on the outstanding Bridge Notes was extended through November 29, 2013. | |||||
In December 2012, the Company issued promissory notes to certain investors, resulting in net proceeds to the Company of $47,000. These promissory notes have a term of 30 days, and included a lender’s fee of 10%. These promissory notes were repaid in full in January 2013. | |||||
In January 2013, we completed a private placement, wherein we issued an aggregate principal amount of $660,000 in unsecured convertible promissory notes (the “January Notes”) to certain purchasers. As additional consideration for the purchase of the January Notes, each purchaser received 5,000 post-split shares of the Company’s Common Stock per $25,000 of principal amount purchased. The January Notes have a term of 120 days and accrue interest at a rate of 9% per annum. At maturity, the holders of the January Notes have the right to convert all principal and accrued but unpaid interest into shares of Common Stock at a conversion price equal to $1.00 per share. In May 2013, the maturity date of certain January Notes in the aggregate principal amount of $500,000 was extended to November 29, 2013, and the remaining balance of the January Notes, totaling $180,568 of principal and accrued interest, were converted into 180,568 shares of the Company’s Common Stock. | |||||
In February and March 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $389,000 (the “March Notes”) to certain purchasers. As additional consideration for the purchase of the March Notes, each purchaser received 5,000 shares of the Company’s Common Stock per $25,000 of principal amount purchased. The March Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the March Notes, each note is convertible into shares of the Company’s Common Stock at a conversion price equal to $1.00 per share. In May 2013, March Notes in the aggregate principal amount, plus accrued interest, of $234,543 were converted into 234,543 shares of the Company’s Common Stock. | |||||
In April 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $195,000 (the “April Notes”) to certain purchasers. As additional consideration for the purchase of the April Notes, each purchaser received 5,000 shares of the Company’s Common Stock per $25,000 of principal amount purchased. The April Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the April Notes, the April Notes are convertible into shares of the Company’s Common Stock at a conversion price equal to $1.00 per share. In May 2013, April Notes totaling $69,484 of principal and accrued interest were converted into 69,485 shares of the Company’s Common Stock. | |||||
In May 2013, we completed a private placement, wherein we issued unsecured promissory notes in the aggregate principal amount of $600,000 (the “May Notes”) and unsecured convertible promissory notes in the aggregate principal amount of $150,000 (the “Convertible May Notes”) to certain purchasers. As additional consideration for the purchase of the Convertible May Notes, each purchaser received 5,000 shares of the Company’s Common Stock per $25,000 of principal amount purchased. | |||||
The May Notes matured on August 6, 2013 and accrued interest at a rate of 12% per annum. In connection with, and as further consideration for the purchase of the May Notes, the Company issued a total of 600,000 5-year warrants to purchase shares of the Company’s Common Stock at a price of $1.10 per share to the purchasers. The Convertible May Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Each Convertible May Note is convertible into shares of the Company’s Common Stock at a conversion price equal to $1.00 per share. In June 2013, the May Notes were converted into the Notes from the Offering initiated in June, 2013. | |||||
In November 2013, the Company repaid $397,473 in outstanding principal, lender’s fees and interest on its outstanding convertible notes. In addition, $235,778 of outstanding principal, lender’s fees and interest on its outstanding convertible notes were converted into the Company’s Series B Offering. | |||||
Term Loan | |||||
In November 2013, the Company secured a commercial term loan in the amount of $2.0 million from Avid Bank. The loan has a term of 2 years, accrues interest at 2.75% above prime, is secured against virtually all of the Company’s assets, and requires an Asset Coverage Ratio of assets to outstanding principal of 1.5. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2013 | |
Commitments And Contingencies | ' |
COMMITMENTS AND CONTINGENCIES | ' |
The Company has entered in a number of consulting agreements with various consultants. Termination of any of these agreements could result in termination fees. | |
The Company leases its office in Irvine, California on a one-year lease. Total rent expense for the year ended December 31, 2013 was approximately $46,000. Total remaining payments on the lease through July 31, 2013 are approximately $14,728. | |
The Company maintains employment agreements with certain key management. The agreements provide for minimum base salaries, eligibility for stock options, performance bonuses and severance payments. | |
Legal Proceedings | |
From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur. In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Company’s financial position or results of operations. | |
On July 1, 2011, a lawsuit was filed in the United States District Court, the Southern District of Ohio, Cincinnati Division, against GT Beverage Company, LLC (“GT LLC”) by Dominion Liquid Technologies, LLC. The lawsuit alleges that GT LLC breached terms of a 2010 co-packing agreement, which governed the relationship between the parties. As of February 2013, Dominion amended its complaint to add the Company as a defendant in the case. Dominion is seeking monetary damages in an amount exceeding $800,000. GT LLC has filed its answer denying all of Dominion’s claims and expects to vigorously defend the suit. A trial will likely be set in the second quarter of 2014. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||||||
The application of fair value measurements may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability or whether management has elected to carry the item at its estimated fair value. FASB ASC 820-10-35 specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy: | |||||||||||||||||||||
- Level 1: Observable inputs such as quoted prices in active markets; | |||||||||||||||||||||
- Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and | |||||||||||||||||||||
- Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |||||||||||||||||||||
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value. | |||||||||||||||||||||
The Company assesses its recurring fair value measurements as defined by FASB ASC 810. Liabilities measured at estimated fair value on a recurring basis include derivative liabilities. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial liabilities among the levels occur at the beginning of the reporting period. There were no transfers between Level 1, Level 2 and/or Level 3 during the year ended December 31, 2013. The Company had no Level 1 or 2 fair value measurements during 2013. | |||||||||||||||||||||
The following table presents the estimated fair value of financial liabilities measured at estimated fair value on a recurring basis included in the Company’s financial statements as of December 31, 2013: | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Total carrying value | Quoted market prices in active markets | Internal Models with significant observable market parameters | Internal models with significant unobservable market parameters | ||||||||||||||||||
Derivative liabilities | $ | 1,619,021 | $ | – | $ | – | $ | 1,619,021 | |||||||||||||
The following table presents the changes in recurring fair value measurements included in net loss for the year ended December 31, 2013: | |||||||||||||||||||||
Recurring Fair Value Measurements | |||||||||||||||||||||
Changes in Fair Value Included in Net Loss For the Year Ended December 31, 2013 | |||||||||||||||||||||
Revenues | Expenses | Total | |||||||||||||||||||
Derivative liabilities | $ | 1,361,597 | $ | – | $ | 1,361,597 | |||||||||||||||
The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2013: | |||||||||||||||||||||
31-Dec-12 | Write off of Derivative Liabilities | Change in Estimated Fair Value Recognized in Results of Operations | 31-Dec-13 | ||||||||||||||||||
Recorded new Derivative Liabilities | |||||||||||||||||||||
Derivative liabilities | $ | – | $ | 3,218,417 | $ | (237,799 | ) | $ | (1,361,597 | ) | $ | 1,619,021 | |||||||||
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
On May 11, 2012, the Company loaned Environmental Packaging Technologies, Inc. (“EPT”) the sum of $150,000 in exchange for a 50-day promissory note. The promissory note accrued interest at 10% per annum and includes a fee equal to 10% of principal balance of the note, payable to the Company. True Drinks’ former chairman and current investor is the chairman for EPT. In July and August 2013, the Company was repaid all principal, interest and fees in connection with the promissory note from EPT. | |
Our Board of Directors approved of this arrangement. | |
LICENSING_AGREEMENTS
LICENSING AGREEMENTS | 12 Months Ended |
Dec. 31, 2013 | |
Licensing Agreements | ' |
LICENSING AGREEMENTS | ' |
We entered into a three-year licensing agreement with Disney Consumer Products, Inc. (“Disney”) and an 18-month licensing agreement with Marvel Characters, B.V. ("Marvel") (the “Licensing Agreements”) in 2012. Each Licensing Agreement allows us to feature popular Disney and Marvel characters on AquaBall™ Naturally Flavored Water, allowing AquaBall™ to stand out among other beverages marketed towards children. Under the terms and conditions of the Licensing Agreements, we work with the Disney and Marvel teams to create colorful, eye-catching labels that surround the entire spherical shape of each AquaBall™. Once the label designs are approved, we work with Disney and Marvel to set retail calendars, rotating the placement of different AquaBall™ designs over the course of the year. | |
The terms of the Disney Licensing Agreement stipulates a royalty rate of 4% on the sales of AquaBall™ Naturally Flavored Water adorned with Disney characters, paid quarterly, with a total royalty guarantee of $231,600 over the term of the agreement which has a term ending date of March 31, 2015. In addition, the Company is required to spend 1% of sales on advertising and promotional opportunities. The Company is required to make common marketing fund contributions totaling $96,188 over the life of the agreement. | |
In August 2013, the Company signed an extension of its licensing agreement with Marvel Characters B.V. to extend the expiration date from December 31, 2013 to December 31, 2015 (the “Marvel Agreement”). The Marvel Agreement allows True Drinks to use a range of different Marvel characters on AquaBall™ packaging in exchange for a royalty payment, paid quarterly, equal to 5% of the proceeds from the sale of AquaBalls™ adorned with Marvel characters in the United States and Canada. The Marvel Agreement has a total royalty guarantee of $150,000 over the term of the agreement. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
On January 7, 2014, in connection with the Series B Offering, the Company sold 87,500 shares of Series B Preferred and issued Warrants to purchase an aggregate total of 408,333 shares of the Company's Common Stock for $0.30 per share to certain accredited investors. | |
In January 2014, the Company repaid $25,750 in outstanding principal, lender’s fees and interest on convertible notes payable. | |
On January 31, 2014, in connection with the Series B Offering, the Company sold 193,750 shares of Series B Preferred and issued Warrants to purchase an aggregate total of 904,167 shares of the Company's Common Stock for $0.30 per share to certain accredited investors. | |
On February 5, 2014, in connection with the Series B Offering, the Company sold 223,750 shares of Series B Preferred and issued Warrants to purchase an aggregate total of 1,044,167 shares of the Company's Common Stock for $0.30 per share to certain accredited investors. | |
In February 2014, holders of $789,938 in outstanding principal, lender’s fees and interest on convertible notes payable exchanged this total for 197,487 shares of the Company’s Series B Preferred Stock and Warrants to purchase 921,596 shares of the Company’s Common Stock for $0.30 per share. | |
On March 20, 2014, the Company appointed Scot Cohen to the fifth and final open spot on the Company’s Board of Directors. | |
Management has evaluated subsequent events through the date the accompanying consolidated financial statements were filed with the Securities and Exchange Commission, and noted no other significant subsequent events not elsewhere disclosed in these notes to consolidated financial statements. |
ORGANIZATION_AND_SUMMARY_OF_SI1
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Organization And Summary Of Significant Accounting Policies Policies | ' | ||||||
Organization and Business | ' | ||||||
True Drinks, Inc. (the "Company", "us", "True Drinks" or "we") was formed on January 19, 2012 in Delaware to create and commercialize all-natural, vitamin-enhanced drinks. Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall™ Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles. We distribute AquaBall™ nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online. We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed online and through our existing database of customers. | |||||||
On June 7, 2012, True Drinks, Inc., Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Bazi International, Inc. (“Bazi Intl.”), and Bazi Intl. entered into an agreement and tax-free plan of merger (the “Merger Agreement”), wherein Merger Sub merged with and into the Company and True Drinks continued as the surviving corporation (the “Merger”). As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company. The Merger closed on October 15, 2012 (the “Closing Date”). As a result of Merger, True Drinks, Inc.’s former shareholders owned approximately 95.5% of the combined post-Merger entity via shares of Series A Convertible Preferred Stock (“Series A Preferred”) issued as part of the Merger. The Company subsequently changed its name from “Bazi International, Inc.” to “True Drinks Holdings, Inc.” The Merger was accounted for as a public company “reverse merger,” and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. within the capital structure of Bazi Intl. | |||||||
Bazi Intl. was originally incorporated in the state of Nevada in January 2001. True Drinks, formerly named GT Beverage Company, Inc., was originally incorporated in the state of Delaware in January 2012. True Drinks acquired GT Beverage Company, LLC on March 31, 2012 in a business combination, primarily to acquire the use of a spherical bottle patent held by GT Beverage Company, LLC. | |||||||
Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock, par value $0.001 (“Common Stock”), is currently listed for quotation on the OTCQB marketplace (“OTCQB”) under the symbol TRUU. | |||||||
Reverse Stock Split | ' | ||||||
On January 18, 2013, we amended our Articles of Incorporation to create a 100 to 1 reverse split of our Common Stock. Accordingly, our authorized Common Stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding Common Stock decreased from 133,733,469 to 1,337,335 shares. As a result of the reverse stock split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of the Merger) to reflect the reverse split. | |||||||
Recent Development | ' | ||||||
Note Offering. On June 20, 2013 the Company commenced a private offering of: (i) convertible promissory notes (the “Notes”) in the aggregate principal amount of up to $3.3 million; and (ii) and five-year warrants to purchase shares of the Company’s Common Stock at an exercise price of $1.10 per share (the “Warrants”) to certain accredited investors (the “Note Offering”). During the year ended December 31, 2013, the Company issued Notes in the aggregate principal amount of $3,126,000, which amount included $600,000 issued as consideration for the exchange of the outstanding principal and accrued interest of certain promissory notes previously issued by the Company. All outstanding principal and interest were either repaid or converted into equity- see below discussion under Term Loan and Note Conversion. | |||||||
License Agreement. In August 2013, the Company signed an extension of its licensing agreement with Marvel Characters B.V. to extend the expiration date to December 31, 2015 (the “Marvel Agreement”). The Marvel Agreement allows True Drinks to use a range of different Marvel characters on AquaBall™ packaging in exchange for a royalty payment, paid quarterly, equal to 5% of the proceeds from the sale of AquaBalls™ adorned with Marvel characters in the United States and Canada. The Marvel Agreement has a total royalty guarantee of $150,000 over the term of the agreement. | |||||||
Creation of Series B Convertible Preferred Stock. On November 22, 2013, the Company filed the Certificate of Designation, Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the “Certificate of Designation”) with the Nevada Secretary of State, designating 2.75 million shares of the Company's Preferred Stock as Series B Convertible Preferred Stock (“Series B Preferred”). Each share of Series B Preferred has a stated value of $4.00 per share (“Stated Value”), and accrues annual dividends equal to 5% of the Stated Value, payable by the Company in quarterly installments, in either cash or shares of Common Stock. Pursuant to certain terms and conditions in the Certificate of Designation, each share of Series B Preferred is convertible, at the option of the holder, into that number of shares of Common Stock equal to the Stated Value, divided by $0.25 per share (the “Conversion Shares”). The Company also has the option to require conversion of the Series B Preferred into Conversion Shares in the event: (i) there are sufficient authorized shares of Common Stock reserved as Conversion Shares; (ii) the Conversion Shares are registered under the Securities Act of 1933, as amended, or the Conversion Shares are freely tradable, without restriction, under Rule 144 of the Securities Act; (iii) the daily trading volume of the Company's Common Stock, multiplied with the closing price, equals at least $250,000 for 20 consecutive trading days; and (iv) the average closing price of the Company's Common Stock is at least $0.62 per share for 10 consecutive trading days. | |||||||
Series B Offering. On November 25, 2013, the Company commenced a private offering of up to 2.0 million shares of Series B Preferred for $4.00 per share (“Purchase Price”), and five-year warrants (the “Warrants”), exercisable for $0.30 per share (the "Exercise Price"), to purchase that number of shares of the Company's Common Stock equal to 35% of the Purchase Price, divided by the Exercise Price (the “Series B Offering”). As of the date hereof, the Company and certain accredited investors entered into Securities Purchase Agreements to purchase 2.0 million shares of Series B Preferred, and Warrants to purchase approximately 9.3 million shares of Common Stock. | |||||||
Term Loan and Note Conversion. On November 29, 2013, the Company executed a Loan and Security Agreement and other ancillary documents for a $2.0 million term loan from Avid Bank (the "Bank") (the "Term Loan"), which Term Loan accrues interest at a rate of prime plus 2.75% and matures on November 29, 2015. The Company's repayment of the Term Loan is secured by a continuing security interest in substantially all of the Company's assets. Proceeds from the Term Loan, together with a portion of the proceeds from the Series B Offering were used to repay certain Notes issued, totaling approximately $2.5 million in principal and accrued interest (the "Note Repayment"). | |||||||
In addition to the Note Repayment, holders of the remaining Notes issued during the Note Offering agreed to cancel Notes totaling $739,706 in principal and accrued interest in exchange for 205,476 shares of Series B Preferred and Warrants to purchase 862,995 shares of Common Stock for $0.30 per share, on substantially the same terms offered in the Series B Offering (the "Note Conversion"). | |||||||
On November 29, 2013, the Company repaid approximately $400,000 in principal and accrued interest and fees from previous notes. In addition to the repayment, holders of previous notes agreed to cancel Notes totaling $235,729 in principal and accrued interest in exchange for 58,947 shares of Series B Preferred and Warrants to purchase 275,075 shares of Common Stock for $0.30 per share, on substantially the same terms offered in the Series B Offering. | |||||||
Basis of Presentation and Going Concern | ' | ||||||
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. For the year ended December 31, 2013, the Company incurred a net loss of $7,122,135. At December 31, 2013, the Company has negative working capital of $478,068 and an accumulated deficit of $10,241,478. A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |||||||
Principles of Consolidation | ' | ||||||
The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Inc., Bazi, Inc. and GT Beverage Company, LLC. All inter-company accounts and transactions have been eliminated in the preparation of these consolidated financial statements. | |||||||
Use of Estimates | ' | ||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates. | |||||||
Revenue Recognition | ' | ||||||
In accordance with Staff Accounting Bulletin ("SAB") No. 104 “Revenue Recognition in Financial Statements”, revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, slotting fees, discounts and freight and handling charges. With approved credit, we provide wholesale customers payment terms of up to net 30 days. Amounts received for unshipped merchandise are recorded as customer deposits and are included in accrued expenses. | |||||||
Cash and Cash Equivalents | ' | ||||||
The Company considers all highly liquid investments with original maturities of three months or less, to be cash equivalents. The Company maintains cash with high credit quality financial institutions. At certain times, such amounts may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses on these amounts. At December 31, 2013 and 2012, the Company had no cash equivalents. | |||||||
Restricted Cash | ' | ||||||
The Company had $133,065 and $81,270 in restricted cash with a financial institution securing a letter of credit at December 31, 2013 and 2012, respectively. The letter of credit matures in August 2015 and was issued as part of contractual obligations related to one of our licensing agreements with Disney Consumer Products, Inc. | |||||||
Accounts Receivable | ' | ||||||
We maintain an allowance for doubtful accounts, which is analyzed on a periodic basis to ensure that it is adequate to the best of management’s knowledge. Management develops an estimate of the allowance for doubtful accounts receivable based on its own judgment as to the likelihood of ultimate payment. Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts. The allowance was approximately $210,000 and $54,000 at December 31, 2013 and December 31, 2012, respectively. | |||||||
Concentrations | ' | ||||||
The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with two financial institutions. There are funds in excess of the federally insured amount, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal. | |||||||
We utilize a variety of suppliers to purchase raw materials for the AquaBallTM Naturally Flavored Water during the year ended December 31, 2013. | |||||||
During 2013, we relied significantly on one supplier for 100% of our purchases of certain raw materials for Bazi®. Bazi, Inc. has sourced these raw materials from this supplier since 2007 and does not anticipate any issues with the supply of these raw materials. | |||||||
During 2012, the Company relied significantly on one supplier for 100% of its purchases of AquaBall™ Naturally Flavored Water held for sale. During the year ended December 31, 2013, the Company began production of AquaBall™ with two additional suppliers. The Company owns the formula for both the AquaBall™ and Bazi®, and management believes that its purchasing requirements can be readily met from alternative sources. | |||||||
A significant portion of our revenue comes from sales of the AquaBall™ Naturally Flavored Water. Following the consummation of the Merger in October 2012, sales of Bazi® accounted for 1% of our total revenue. Before the Merger, the Company’s revenues consisted of sales of AquaBall™. For the year ended December 31, 2013 and 2012, sales of AquaBall™ accounted for 90% and 99% of the Company’s total revenue, respectively. | |||||||
Fair Value Matters | ' | ||||||
The Company does not have any assets or liabilities carried at fair value on a recurring or non-recurring basis. | |||||||
The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses, and notes payable. Management believes that the carrying amount of these financial instruments approximates their fair values, due to their relatively short-term nature. | |||||||
Inventory | ' | ||||||
Inventory is stated at the lower of cost or market on a FIFO (first-in first-out) basis. Provision is made to reduce excess or obsolete inventory to the estimated net realizable value. The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement. | |||||||
Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value. Changes in economic conditions or customer demand could result in obsolete or slow moving inventory that cannot be sold or must be sold at reduced prices and could result in an inventory reserve. No inventory reserves were considered necessary as of December 31, 2013 or 2012. | |||||||
Inventory is comprised of the following: | |||||||
December 31, | December 31, | ||||||
2013 | 2012 | ||||||
Purchased materials | $ | 659,835 | $ | 473,383 | |||
Finished goods | 396,921 | 359,491 | |||||
$ | 1,056,756 | $ | 832,874 | ||||
Property and Equipment | ' | ||||||
Property and equipment are stated at cost. The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years. Property and equipment is not significant to the consolidated financial statements as of or for the years ended December 31, 2013 and 2012. | |||||||
Long-Lived Assets | ' | ||||||
The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset. An impairment was not deemed necessary in 2013 or 2012. | |||||||
Intangible assets | ' | ||||||
Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Company’s products, customer list, and the estimated value of GT Beverage Company, LLC’s interlocking spherical bottle patent acquired on March 31, 2012. The Company’s intangible assets, are amortized over their estimated remaining useful lives. The Company evaluates the useful lives of its intangible assets annually and adjusts the lives according to the expected useful life. No impairment was deemed necessary as of December 31, 2013 or December 31, 2012. | |||||||
Goodwill | ' | ||||||
Goodwill represents the future economic benefits arising from other assets acquired that are individually identified and separately recognized. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually. | |||||||
Income Taxes | ' | ||||||
The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740 (“ASC Topic 740”), formerly Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. | |||||||
Stock-Based Compensation | ' | ||||||
Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the year ended December 31, 2013 and 2012 was $794,165 and $163,055, respectively. | |||||||
The Company uses a Black-Scholes option-pricing model (the “Black-Scholes Model”) to estimate the fair value of the stock option and warrants. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the contractual term of the option. The expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. Currently it is based on the simplified approach provided by SAB 107. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant (see Note 4). | |||||||
Shares, warrants and options issued to non-employees for services are accounted for at fair value, based on the fair value of instrument issued or the fair value of the services received, whichever is more readily determinable. | |||||||
Derivative Instruments | ' | ||||||
A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts (“embedded derivatives”) and for hedging activities. As a matter of policy, the Company does not invest in financial derivatives or engage in hedging transactions. However, the Company has entered into complex financing transactions that involve financial instruments containing certain features that have resulted in the instruments being deemed derivatives or containing embedded derivatives. The Company may engage in other similar complex debt transactions in the future, but not with the intention to enter into derivative instruments. Derivatives and embedded derivatives, if applicable, are measured at fair value using the binomial lattice- (“Binomial Lattice”) pricing model and marked to market and reflected on our consolidated statement of operations as other (income) expense at each reporting period. However, such new and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation of derivatives often incorporate significant estimates and assumptions, which may impact the level of precision in the financial statements. Furthermore, depending on the terms of a derivative or embedded derivative, the valuation of derivatives may be removed from the financial statements upon conversion of the underlying instrument into some other security. | |||||||
Net Loss Per Share | ' | ||||||
Earnings per share require presentation of both basic earnings per common share and diluted earnings per common share. Since the Company has a net loss for all periods presented, common stock equivalents are not included in the weighted average calculation since their effect would be anti-dilutive. At December 31, 2013 and 2012, the Company had 72,900,080 and 4,755,183 shares of common stock equivalents outstanding, respectively. | |||||||
Research and Development | ' | ||||||
Research and development costs are expensed as incurred. | |||||||
Recent Accounting Pronouncements | ' | ||||||
The Company has reviewed all recently issued, but not yet effective accounting pronouncements and has concluded that there are no recently issued, but not yet effective pronouncements that may have a material impact on the Company’s future financial statements. |
ORGANIZATION_AND_SUMMARY_OF_SI2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Organization And Summary Of Significant Accounting Policies Tables | ' | ||||||
Inventory | ' | ||||||
Inventory is comprised of the following: | |||||||
December 31, | December 31, | ||||||
2013 | 2012 | ||||||
Purchased materials | $ | 659,835 | $ | 473,383 | |||
Finished goods | 396,921 | 359,491 | |||||
$ | 1,056,756 | $ | 832,874 | ||||
BUSINESS_ACQUISITIONS_Tables
BUSINESS ACQUISITIONS (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Business Acquisitions Tables | ' | ||||
GT Beverage purchase price allocation | ' | ||||
Amount | |||||
Property and equipment | $ | 26,396 | |||
Patent for spherical bottle (useful life of 11.3 years) | 1,600,000 | ||||
Goodwill | 2,414,642 | ||||
Total assets acquired | 4,041,038 | ||||
Accounts payable, accrued expenses and other current liabilities | (1,114,138 | ) | |||
Total liabilities assumed | (1,114,138 | ) | |||
Total allocation of purchase price consideration | $ | 2,926,900 | |||
Bazi purchase price allocation | ' | ||||
Amount | |||||
Cash | $ | 5,646 | |||
Inventory | 47,000 | ||||
Customer List (useful life of 2 years) | 100,000 | ||||
Goodwill | 1,059,860 | ||||
Total assets acquired | 1,212,506 | ||||
Accounts payable, accrued expenses and other current liabilities | (484,701 | ) | |||
Total liabilities assumed | (484,701 | ) | |||
Total allocation of purchase price consideration | $ | 727,805 | |||
Pro forma results of operations - Bazi acquisition | ' | ||||
Pro Forma (Unaudited) | |||||
Year Ended December 31, 2012 | |||||
Revenues | $ | 1,488,515 | |||
Net loss | $ | (5,001,653 | ) | ||
Basic net loss per share | $ | (0.22 | ) |
STOCK_OPTIONS_AND_WARRANTS_Tab
STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||
Stock Options And Warrants Tables | ' | ||||||||||||||||||||||
Summary warrant activity | ' | ||||||||||||||||||||||
Warrants | Weighted | ||||||||||||||||||||||
Outstanding | Average | ||||||||||||||||||||||
Exercise Price | |||||||||||||||||||||||
Outstanding, January 19, 2012 | - | $ | - | ||||||||||||||||||||
Outstanding Warrants Assumed with Merger on October 15, 2012 | 145,185 | 52 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Expired | (12,845 | ) | 154 | ||||||||||||||||||||
Outstanding, December 31, 2012 | 132,340 | $ | 43 | ||||||||||||||||||||
Granted | 12,470,514 | 0.3 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Expired | (12,387 | ) | 3.2 | ||||||||||||||||||||
Outstanding, December 31, 2013 | 12,590,467 | $ | 0.55 | ||||||||||||||||||||
Outstanding warrants to purchase its common stock | ' | ||||||||||||||||||||||
Warrants Outstanding | Weighted Average | Weighted Average | |||||||||||||||||||||
Exercise Price Per Share | Remaining Life (Yrs) | ||||||||||||||||||||||
62,453 | $ | 30 | 2.06 | ||||||||||||||||||||
57,500 | $ | 25 | 0.5 | ||||||||||||||||||||
3,038,243 | $ | 0.25 | 4.56 | ||||||||||||||||||||
9,432,271 | $ | 0.3 | 4.9 | ||||||||||||||||||||
12,590,467 | $ | 0.55 | 4.79 | ||||||||||||||||||||
Weighted average assumption | ' | ||||||||||||||||||||||
2013 | |||||||||||||||||||||||
Expected life | 2.5 years | ||||||||||||||||||||||
Estimated volatility | 75 | % | |||||||||||||||||||||
Risk-free interest rate | 0.65 | % | |||||||||||||||||||||
Dividends | - | ||||||||||||||||||||||
Stock option activity | ' | ||||||||||||||||||||||
Number of | Weighted-Average | ||||||||||||||||||||||
Shares | Exercise Price | ||||||||||||||||||||||
Options outstanding at January 19, 2012 | - | $ | - | ||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Granted | 3,870,387 | 0.69 | |||||||||||||||||||||
Forfeited | - | - | |||||||||||||||||||||
Expired | - | - | |||||||||||||||||||||
Options outstanding at December 31, 2012 | 3,870,387 | $ | 0.69 | ||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Granted | 245,739 | 1.1 | |||||||||||||||||||||
Forfeited | (122,868 | ) | 1.02 | ||||||||||||||||||||
Expired | - | - | |||||||||||||||||||||
Options outstanding at December 31, 2013 | 3,993,258 | $ | 0.7 | ||||||||||||||||||||
Stock Option Outstanding | ' | ||||||||||||||||||||||
Outstanding Options | |||||||||||||||||||||||
Weighted Average | Exercisable Options | ||||||||||||||||||||||
Remaining | Aggregate | Aggregate | |||||||||||||||||||||
Range of | Contractual Life | Intrinsic | Intrinsic | ||||||||||||||||||||
Exercise Prices | Number | (Years) | Value | Number | Value | ||||||||||||||||||
$ | 0.61 | 3,133,172 | 3.17 | $ | - | 1,310,610 | $ | - | |||||||||||||||
$ | 1.1 | 245,739 | 4.5 | - | - | - | |||||||||||||||||
$ | 1.017 | 614,347 | 3.6 | - | 245,740 | $ | - | ||||||||||||||||
Totals | 3,993,258 | 3.32 | $ | - | 1,556,350 | $ | - |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Intangible Assets Tables | ' | |||||||
Intangible assets | ' | |||||||
Intangible assets are: | ||||||||
December 31, | December 31, | |||||||
2013 | 2012 | |||||||
Patents and trademarks | $ | 1,706,849 | $ | 1,706,849 | ||||
Accumulated amortization | (305,392 | ) | (114,215 | ) | ||||
$ | 1,401,457 | $ | 1,592,634 | |||||
Future amortization expense | ' | |||||||
Patent and trademark amortization | ||||||||
2014 | $ | 168,042 | ||||||
2015 | 145,172 | |||||||
2016 | 141,177 | |||||||
2017 | 141,177 | |||||||
2018 | 141,177 | |||||||
2019 and therafter | 664,712 | |||||||
$ | 1,401,457 | |||||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Income Taxes Tables | ' | |||||||
Deferred tax asset | ' | |||||||
2013 | 2012 | |||||||
Deferred tax asset –NOL’s | $ | 3,800,000 | $ | 1,160,000 | ||||
Less valuation allowance | (3,800,000 | ) | (1,160,000 | ) | ||||
Net deferred tax asset | $ | - | $ | - | ||||
DEBT_Tables
DEBT (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Debt Tables | ' | ||||
Significant assumptions | ' | ||||
Significant assumptions used in such valuations included: | |||||
Expected life | 5 years | ||||
Estimated volatility | 75.00% | ||||
Risk-free interest rate | 0.07% - 0.10% | ||||
Expected dividends | None | ||||
A | |||||
Convertible notes payable | ' | ||||
A summary of convertible notes payable, net as of December 31, 2013, is as follows: | |||||
Amount | |||||
Outstanding, December 31, 2012 | $ | 772,000 | |||
Notes issued | 4,549,000 | ||||
Notes repaid | (2,950,700 | ) | |||
Notes converted to Common Stock | (1,690,300 | ) | |||
Debt discount recorded | (1,332,543 | ) | |||
Debt discount amortized | 1,332,543 | ||||
Outstanding December 31, 2013 | $ | 680,000 | |||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||
Fair value of financial liabilities on a recurring basis | ' | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Total carrying value | Quoted market prices in active markets | Internal Models with significant observable market parameters | Internal models with significant unobservable market parameters | ||||||||||||||||||
Derivative liabilities | $ | 1,619,021 | $ | – | $ | – | $ | 1,619,021 | |||||||||||||
Changes in recurring fair value measurements included in net loss | ' | ||||||||||||||||||||
Recurring Fair Value Measurements | |||||||||||||||||||||
Changes in Fair Value Included in Net Loss For the Year Ended December 31, 2013 | |||||||||||||||||||||
Revenues | Expenses | Total | |||||||||||||||||||
Derivative liabilities | $ | 1,361,597 | $ | – | $ | 1,361,597 | |||||||||||||||
Summary of changes in the fair value of our Level 3 financial liabilities | ' | ||||||||||||||||||||
31-Dec-12 | Write off of Derivative Liabilities | Change in Estimated Fair Value Recognized in Results of Operations | 31-Dec-13 | ||||||||||||||||||
Recorded new Derivative Liabilities | |||||||||||||||||||||
Derivative liabilities | $ | – | $ | 3,218,417 | $ | (237,799 | ) | $ | (1,361,597 | ) | $ | 1,619,021 | |||||||||
ORGANIZATION_AND_SUMMARY_OF_SI3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Inventory | ' | ' |
Purchased materials | $659,835 | $473,383 |
Finished goods | 396,921 | 359,491 |
Total | $1,056,756 | $832,874 |
ORGANIZATION_AND_SUMMARY_OF_SI4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Shareholders and owners ownership | 9.00% | ' |
Royalty rate | 4.00% | ' |
Net loss | $7,122,135 | $3,119,343 |
Negative working capital | 478,068 | ' |
Accumulated deficit | 10,241,478 | 3,119,343 |
Share-based compensation expense | 794,165 | 163,055 |
Shares of common stock equivalents outstanding | 27,885,587 | ' |
Restricted cash | 133,065 | 81,270 |
Accounts receivable allowance for doubtful accounts | '210000 | '54000 |
Vendor concentration | 86.00% | 100.00% |
Federally insured amount | 250,000 | ' |
Percentage of total revenue, AquaBall | 90.00% | 99.00% |
Private Offering [Member] | ' | ' |
Warrants issued | 70,000 | ' |
Unsecured promissory notes issued | $397,473 | ' |
Warrant exercise price per share | $1.10 | ' |
Warrant term | '2 years | ' |
Subscription Arrangement [Member] | ' | ' |
Stock issued upon conversion of note | 234,543 | ' |
BUSINESS_ACQUISITIONS_Details
BUSINESS ACQUISITIONS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Patent for spherical bottle (useful life of 11.3 years) | $1,352,941 | $1,494,118 |
GT Beverage [Member] | ' | ' |
Property and equipment | 26,396 | ' |
Patent for spherical bottle (useful life of 11.3 years) | 1,600,000 | ' |
Goodwill | 2,414,642 | ' |
Total assets acquired | 4,041,038 | ' |
Accounts payable, accrued expenses and other current liabilities | -1,114,138 | ' |
Total liabilities assumed | -1,114,138 | ' |
Total allocation of purchase price consideration | $2,926,900 | ' |
BUSINESS_ACQUISITIONS_Details_
BUSINESS ACQUISITIONS (Details 1) (Bazi [Member], USD $) | Dec. 31, 2013 |
Bazi [Member] | ' |
Cash | $5,646 |
Inventory | 47,000 |
Customer List (useful life of 2 years) | 100,000 |
Goodwill | 1,059,860 |
Total assets acquired | 1,212,506 |
Accounts payable, accrued expenses and other current liabilities | -484,701 |
Total liabilities assumed | -484,701 |
Total allocation of purchase price consideration | $727,805 |
BUSINESS_ACQUISITIONS_Details_1
BUSINESS ACQUISITIONS (Details 2) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Pro Forma (Unaudited) Financials, Bazi Acquisition | ' |
Revenues | $1,488,515 |
Net loss | ($5,001,653) |
Basic net loss per share | ($0.22) |
BUSINESS_ACQUISITIONS_Details_2
BUSINESS ACQUISITIONS (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
GT Beverage [Member] | ' |
Shares of common stock issued to complete acquisition of GT Beverage | 292,690 |
Series A Preferred stock shares | 292,690 |
Acquisition date fair value, GT Beverage | $2,926,900 |
Legal costs related to GT Beverage acquisition | 107,000 |
Bazi [Member] | ' |
Shares of common stock issued to complete acquisition of GT Beverage | 1,192,335 |
Acquisition date fair value, GT Beverage | 727,805 |
Legal costs related to GT Beverage acquisition | 138,000 |
Common stock acquisition shares (Bazi) fair value | $727,805 |
SHAREHOLDERS_EQUITY_Details_Na
SHAREHOLDERS' EQUITY (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Debt converted to shares | ($1,690,300) |
Issuance1 [Member] | ' |
Shares converted | 1,544,565 |
Shares issued on conversion of preferred | 25,304,017 |
Conversion share rate | $0.25 |
Issuance 2 [Member] | ' |
Shares converted | 854,500 |
Shares issued | 854,500 |
Issuance 3 [Member] | ' |
Shares converted | 163,000 |
Shares issued | 163,000 |
Proceeds from issuance of shares | 1,625,000 |
Issuance 4 [Member] | ' |
Shares converted | 292,690 |
Shares issued | 292,690 |
Issuance 5 [Member] | ' |
Shares converted | 186,875 |
Shares issued | 186,875 |
Proceeds from issuance of shares | 1,574,982 |
Issuance 6 [Member] | ' |
Shares converted | 15,000 |
Shares issued | 15,000 |
Fair value of common stock issued | 150,000 |
Issuance 7 [Member] | ' |
Shares converted | 17,500 |
Shares issued | 17,500 |
Proceeds from issuance of shares | 175,000 |
Issuance 8 [Member] | ' |
Shares converted | 15,000 |
Shares issued | 15,000 |
Fair value of common stock issued | 15,000 |
Issuance 9 [Member] | ' |
Shares issued | 1,192,335 |
Issuance 10 [Member] | ' |
Shares issued | 145,000 |
Fair value expensed to interest expense | 108,000 |
Issuance 12 [Member] | ' |
Shares issued | 268,800 |
Fair value expensed to interest expense | 209,090 |
Issuance 13 [Member] | ' |
Shares issued | 38,250 |
Fair value expensed to consulting expense | 38,250 |
Issuance 14 [Member] | ' |
Shares issued | 860,821 |
Debt converted to shares | 860,818 |
Issuance 15 [Member] | ' |
Shares issued | 76,364 |
Fair value expensed to consulting expense | 84,000 |
Issuance 16 [Member] | ' |
Shares issued | 1,495,000 |
Proceeds from issuance of shares | 5,980,000 |
Cash fees of subscription agreement | 496,854 |
Warrants issued | 6,976,667 |
Warrant exercise price | $0.30 |
Warrant fair value | 117,163 |
Issuance 17 [Member] | ' |
Warrants issued | 1,235,867 |
Issuance 18 [Member] | ' |
Shares issued | 264,423 |
Debt converted to shares | 975,434 |
Warrants issued | 1,138,070 |
Warrant exercise price | $0.30 |
Warrant fair value | 151,774 |
Warrant liability recorded to Additional paid in capital | 64,970 |
Issuance 19 [Member] | ' |
Shares issued | 17,500 |
Debt converted to shares | $70,000 |
Warrants issued | 81,667 |
Warrant exercise price | $0.30 |
STOCK_OPTIONS_AND_WARRANTS_Det
STOCK OPTIONS AND WARRANTS (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2013 | |
Warrant Outstanding | ' | ' |
Exercised | ' | ' |
Expired | ' | ' |
Weighted average exercise price | ' | ' |
Exercised | ' | ' |
Expired | ' | ' |
Warrant [Member] | ' | ' |
Warrant Outstanding | ' | ' |
Outstanding, beginning of period | ' | 132,340 |
Granted | 145,185 | 12,470,514 |
Exercised | ' | ' |
Expired | -12,845 | -12,387 |
Outstanding, end of period | 132,340 | 12,590,467 |
Weighted average exercise price | ' | ' |
Outstanding Weighted Average Exercise Prices, beginning of period | ' | $43 |
Granted | $52 | $0.30 |
Exercised | ' | ' |
Expired | $154 | $3.20 |
Outstanding Weighted Average Exercise Prices, end of period | $43 | $0.55 |
STOCK_OPTIONS_AND_WARRANTS_Det1
STOCK OPTIONS AND WARRANTS (Details 1) (USD $) | Dec. 31, 2013 |
Warrants outstanding | 3,993,258 |
Warrant [Member] | ' |
Warrants outstanding | 62,453 |
Outstanding Weighted Average Exercise Prices | 30 |
Weighted average remaining life (Yrs) | '2 years 0 months 22 days |
Warrant 2 [Member] | ' |
Warrants outstanding | 57,500 |
Outstanding Weighted Average Exercise Prices | 25 |
Weighted average remaining life (Yrs) | '0 years 6 months 0 days |
Warrant 3 [Member] | ' |
Warrants outstanding | 3,038,243 |
Outstanding Weighted Average Exercise Prices | 0.25 |
Weighted average remaining life (Yrs) | '4 years 6 months 22 days |
Warrant 4 [Member] | ' |
Warrants outstanding | 9,432,271 |
Outstanding Weighted Average Exercise Prices | 0.3 |
Weighted average remaining life (Yrs) | '4 years 10 months 24 days |
Total Warrants [Member] | ' |
Warrants outstanding | 12,590,467 |
Outstanding Weighted Average Exercise Prices | 0.55 |
Weighted average remaining life (Yrs) | '4 years 9 months 15 days |
STOCK_OPTIONS_AND_WARRANTS_Det2
STOCK OPTIONS AND WARRANTS (Details 2) | 12 Months Ended |
Dec. 31, 2013 | |
Stock Options And Warrants Details 2 | ' |
Risk-free interest rate | 0.65% |
Expected volatility | 75.00% |
Dividend yield | ' |
Expected term | '2 years 6 months |
STOCK_OPTIONS_AND_WARRANTS_Det3
STOCK OPTIONS AND WARRANTS (Details 3) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2013 | |
Options Outstanding | ' | ' |
Outstanding | ' | 3,870,387 |
Exercised | ' | ' |
Granted | 3,870,387 | 245,739 |
Forfeited | ' | -122,868 |
Expired | ' | ' |
Outstanding | 3,870,387 | 3,993,258 |
Weighted average exercise price | ' | ' |
Outstanding Weighted Average Exercise Prices | ' | $0.69 |
Exercised | ' | ' |
Granted | $0.69 | $1.10 |
Forfeited | ' | $1.02 |
Expired | ' | ' |
Outstanding Weighted Average Exercise Prices | $0.69 | $0.70 |
STOCK_OPTIONS_AND_WARRANTS_Det4
STOCK OPTIONS AND WARRANTS (Details 4) (USD $) | Dec. 31, 2013 |
Number of options | 3,993,258 |
Weighted Average Remaining Contractual Life | '3 years 3 months 26 days |
Aggregate Intrinsic Value | ' |
Number of options exercisable | 1,556,350 |
Aggregate Intrinsic Value | ' |
Range of exercise price 0.61 [Member] | ' |
Number of options | 3,133,173 |
Weighted Average Remaining Contractual Life | '3 years 2 months 1 day |
Aggregate Intrinsic Value | ' |
Number of options exercisable | 1,310,610 |
Aggregate Intrinsic Value | ' |
Range of exercise price 1.10 [Member] | ' |
Number of options | 245,739 |
Weighted Average Remaining Contractual Life | '4 years 6 months 0 days |
Aggregate Intrinsic Value | ' |
Number of options exercisable | ' |
Range of exercise price 1.02 [Member] | ' |
Number of options | 614,347 |
Weighted Average Remaining Contractual Life | '3 years 7 months 6 days |
Aggregate Intrinsic Value | ' |
Number of options exercisable | 245,740 |
Aggregate Intrinsic Value | ' |
STOCK_OPTIONS_AND_WARRANTS_Det5
STOCK OPTIONS AND WARRANTS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2013 | |
Stock Options And Warrants Details Narrative | ' | ' |
Non-qualified stock options | 3,870,387 | 245,739 |
Grant date fair value of options granted, per share | ' | $0.35 |
Grant date fair value of options granted, total | ' | $86,009 |
Weighted average fair value per share | ' | $0.35 |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Intangible Assets Details | ' | ' |
Patents and trademarks | $1,706,849 | $1,706,849 |
Accumulated amortization | -305,392 | -114,215 |
Total intangible assets | $1,401,457 | $1,592,634 |
INTANGIBLE_ASSETS_Details_1
INTANGIBLE ASSETS (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Patents and Trademark Amortization Future Expense | ' | ' |
2014 | $168,042 | ' |
2015 | 145,172 | ' |
2016 | 141,177 | ' |
2017 | 141,177 | ' |
2018 | 141,177 | ' |
2019 and thereafter | 664,712 | ' |
Intangible assets | $48,516 | $98,516 |
INTANGIBLE_ASSETS_Details_Narr
INTANGIBLE ASSETS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Intangible Assets Details Narrative | ' | ' |
Amortization expense | $191,177 | $114,216 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes Details | ' | ' |
Deferred tax asset - NOL's | $3,800,000 | $1,160,000 |
Less valuation allowance | -3,800,000 | -1,160,000 |
Net deferred tax asset | ' | ' |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes Details Narrative | ' | ' |
Net operating loss carryforwards (NOLs) | $10,200,000 | $3,100,000 |
Net operating loss available to offset future taxable income | 10,200,000 | ' |
Net operating loss carryforwards of Bazi | $25,000,000 | ' |
DEBT_Details
DEBT (Details) | 12 Months Ended |
Dec. 31, 2013 | |
Debt Details | ' |
Expected life | '2 years 6 months |
Estimated volatility | 75.00% |
Risk-free interest rate, minimum | 7.00% |
Risk-free interest rate, maximum | 10.00% |
Expected dividends | ' |
DEBT_Details_1
DEBT (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Debt Details 1 | ' |
Outstanding, December 31, 2012 | $772,000 |
Notes issued | 4,549,000 |
Notes repaid | -2,950,700 |
Notes converted to common stock | -1,690,300 |
Debt discount recorded | -1,332,543 |
Debt discount amortized | 1,332,543 |
Outstanding, December 31, 2013 | $680,000 |
DEBT_Details_Narrative
DEBT (Details Narrative) (USD $) | 12 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | |
Oct to Dec Notes [Member] | Private Offering [Member] | Subscription Arrangement [Member] | April Notes [Member] | May Notes Conversion [Member] | January Note [Member] | |||
Convertible promissory notes aggregate principal amount | ' | ' | $3,300,000 | $397,473 | ' | ' | ' | $660,000 |
Warrant price-protection, derivative liability | 1,007,940 | ' | ' | ' | ' | ' | ' | ' |
Notes repaid | ' | ' | 2,508,716 | ' | ' | ' | ' | ' |
Series B remaining notes, converted into Series B shares | ' | ' | 739,706 | ' | ' | ' | ' | ' |
Exercise price per share | ' | ' | $1 | ' | ' | ' | ' | ' |
Bridge notes net proceeds | 47,000 | ' | 725,000 | ' | 389,000 | 195,000 | 600,000 | ' |
Post-split shares of stock received per $25K bridge note | ' | ' | 5,000 | ' | ' | ' | ' | 5,000 |
Bridge note term | '30 days | ' | '0 years 3 months 29 days | ' | ' | ' | ' | ' |
Bridge note lender fee | 10.00% | ' | 10.00% | ' | ' | ' | ' | ' |
Conversion price notes | ' | $1 | ' | ' | ' | ' | ' | ' |
Shareholders and owners ownership | ' | 9.00% | ' | ' | ' | ' | ' | ' |
Unsecured promissory notes issued | ' | ' | 3,300,000 | 397,473 | ' | ' | ' | 660,000 |
Unsecured promissory notes term | ' | ' | '120 days | '2 years | ' | ' | ' | ' |
January notes extended | ' | ' | ' | 500,000 | ' | ' | ' | ' |
Principal converted into stock | ' | ' | $376,222 | $235,778 | $234,543 | $69,484 | ' | $180,568 |
Stock issued upon conversion of note | ' | ' | 376,225 | ' | 234,543 | 69,485 | 5,000 | 180,568 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Jul. 31, 2013 | |
Commitments And Contingencies Details Narrative | ' | ' |
Total rent expense related to operating leases | $46,000 | ' |
Remaining lease payments | ' | 14,728 |
Monetary damages | $800,000 | ' |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Derivative liabilities | $1,619,021 | ' |
Fair Value, Inputs, Level 1 [Member] | ' | ' |
Derivative liabilities | ' | ' |
Fair Value, Inputs, Level 2 [Member] | ' | ' |
Derivative liabilities | ' | ' |
Fair Value, Inputs, Level 3 [Member] | ' | ' |
Derivative liabilities | $1,619,021 | ' |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Change in Estimated Fair Value Recognized in Results of Operations | $1,361,597 |
Revenue [Member] | ' |
Change in Estimated Fair Value Recognized in Results of Operations | 1,361,597 |
Expenses [Member] | ' |
Change in Estimated Fair Value Recognized in Results of Operations | ' |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details 2) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Level 3 Financial Liabilities | ' |
Derivative liabilities, beginning balance | ' |
Recorded new derivative liabilities | 3,218,417 |
Write off of Derivative Liabilities | -237,799 |
Change in Estimated Fair Value Recognized in Results of Operations | -1,361,597 |
Derivative liabilities | $1,619,021 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions Details Narrative | ' |
Loan principal amount | $150,000 |
Promissory note interest | 10.00% |
Promissory note term | '1 month 20 days |
LICENSING_AGREEMENTS_Details_N
LICENSING AGREEMENTS (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Royalty rate | 4.00% |
DisneyMember | ' |
Royalty guarantee | 231,600 |
Common marketing fund contributions requirement, per agreement | 96,188 |
MarvelMember | ' |
Royalty guarantee | 150,000 |
SUBSEQUENT_EVENTS_Details_Narr
SUBSEQUENT EVENTS (Details Narrative) (USD $) | 12 Months Ended | 3 Months Ended | ||||
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 24, 2014 | Mar. 24, 2014 | Mar. 24, 2014 | Mar. 24, 2014 | |
Private Offering [Member] | Private Offering 2 [Member] | Private Offering 3 [Member] | Private Offering 4 [Member] | |||
Preferred stock and warrants issued | ' | ' | 87,500 | 193,750 | 223,750 | 197,487 |
Shares sold in offering, conversion to common shares | ' | ' | 408,333 | 904,167 | 1,044,167 | 921,596 |
Per share value | ' | ' | $0.30 | $0.30 | $0.30 | $0.30 |
Repayment of note | $83,333 | ' | $25,750 | ' | ' | $789,938 |