Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 22, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | True Drinks Holdings, Inc. | ||
Entity Central Index Key | 1,134,765 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
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 | $ 9,065,000 | ||
Entity Common Stock, Shares Outstanding | 112,049,107 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 376,840 | $ 668,326 |
Accounts receivable, net | 1,843,415 | 343,709 |
Inventory | 1,558,719 | 1,363,443 |
Prepaid expenses and other current assets | 75,923 | 628,675 |
Total current assets | 3,854,897 | 3,004,153 |
Restricted Cash | 209,360 | 133,198 |
Property and equipment, net | 4,530 | 4,587 |
Patents, net | 1,070,588 | 1,211,765 |
Trademarks, net | 0 | 6,849 |
Goodwill | 3,474,502 | 3,474,502 |
Total assets | 8,613,877 | 7,835,054 |
Current Liabilities: | ||
Accounts payable and accrued expenses | 1,623,046 | 1,922,285 |
Debt | 1,336,819 | 4,263,002 |
Derivative liabilities | 6,199,021 | 1,569,522 |
Total current liabilities | 9,158,886 | $ 7,754,809 |
Commitments and Contingencies (Note 7) | ||
Stockholders' Equity | ||
Common Stock, $0.001 par value, 300,000,000 and 120,000,000 shares authorized, 111,434,284 and 48,622,675 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively | 111,434 | $ 48,623 |
Preferred Stock – Series B (liquidation preference of $4 per share), $0.001 par value, 2,750,000 shares authorized, 1,317,870 and 1,490,995 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively | 1,318 | 1,491 |
Preferred Stock – Series C (liquidation preference $100 per share), $0.001 par value, 150,000 and 0 shares authorized, 48,853 and 0 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively | 49 | 0 |
Additional paid in capital | 29,690,834 | 18,388,212 |
Accumulated deficit | (30,348,644) | (18,358,081) |
Total Stockholders’ (Deficit) Equity | (545,009) | 80,245 |
Total Liabilities and Stockholders’ (Deficit) Equity | $ 8,613,877 | $ 7,835,054 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Common stock, par value | $ .001 | $ .001 |
Common stock, shares authorized | 300,000,000 | 120,000,000 |
Common stock, shares issued | 111,434,284 | 48,622,675 |
Common stock, shares outstanding | 111,434,284 | 48,622,675 |
Series B Preferred Stock | ||
Preferred stock liquidation preference | $ 4 | $ 4 |
Preferred stock, par value | $ .001 | $ .001 |
Preferred stock, shares authorized | 2,750,000 | 2,750,000 |
Preferred stock, shares issued | 1,317,870 | 1,490,995 |
Preferred stock, shares outstanding | 1,317,870 | 1,490,995 |
Series C Preferred Stock | ||
Preferred stock liquidation preference | $ 100 | $ 100 |
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, shares authorized | 150,000 | 0 |
Preferred stock, shares issued | 48,853 | 0 |
Preferred stock, shares outstanding | 48,853 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||
Net sales | $ 6,121,097 | $ 4,693,414 |
Cost of Sales | 6,282,087 | 4,401,702 |
Gross (Loss) Profit | (160,990) | 291,712 |
Operating expenses | ||
Selling and marketing | 5,073,211 | 4,388,108 |
General and administrative | 5,475,673 | 4,450,101 |
Total operating expenses | 10,548,884 | 8,838,209 |
Operating Loss | (10,709,874) | (8,546,497) |
Other Expense | ||
Change in fair value of derivative liabilities | 1,262,329 | 621,159 |
Interest expense | (257,389) | (202,773) |
Other (expense) income | (2,285,629) | 11,508 |
Other expense | (1,280,689) | 429,894 |
Net loss | (11,990,563) | (8,116,603) |
Dividends on Preferred Stock | 271,838 | 434,096 |
Net loss attributable to common stockholders | $ (12,262,401) | $ (8,550,699) |
Net loss per share, Basic and diluted | $ (0.16) | $ (0.23) |
Weighted average shares of Common Stock outstanding, basic and diluted | 75,346,961 | 36,429,303 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Preferred Stock (Series B and C) | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 27,886 | $ 1,777 | $ 14,751,170 | $ (10,241,478) | $ 4,539,355 |
Beginning Balance, Shares at Dec. 31, 2013 | 27,885,587 | 1,776,923 | |||
Conversion of preferred stock to common stock, Amount | $ 16,022 | $ (1,001) | (15,021) | 0 | |
Conversion of common stock to preferred stock, Shares | 16,021,632 | (1,001,352) | |||
Issuance of Common Stock for debt, Amount | $ 2,004 | 599,647 | 601,651 | ||
Issuance of Common Stock for debt, Shares | 2,004,002 | ||||
Issuance of Preferred Stock for debt conversions, Amount, net of warrants issued | $ 205 | 619,154 | 619,359 | ||
Issuance of Preferred stock for debt conversions, Shares, net of warrants issued | 204,732 | ||||
Issuance of Common Stock for services, Amount | $ 1,751 | $ 5 | 542,775 | 544,531 | |
Issuance of Common Stock for services, Shares | 1,751,270 | 5,692 | |||
Issuance of Preferred Stock for cash, Amount, net of warrants issued | $ 505 | 1,440,064 | 1,440,569 | ||
Issuance of Preferred Stock for cash, Shares, net of warrants issued | 505,000 | ||||
Cashless exercise of warrants, Amount | $ 78 | (78) | 0 | ||
Cashless exercise of warrants, Shares | 78,427 | ||||
Stock-based compensation | 497,271 | 497,271 | |||
Dividends declared on Preferred Stock | (434,096) | (434,096) | |||
Reclassification of Derivative liability | 44,751 | 44,751 | |||
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 882 | $ 342,575 | 343,457 | ||
Issuance of Common Stock for dividends on Preferred Stock, Shares | 881,757 | ||||
Net Loss | $ (8,116,603) | (8,116,603) | |||
Ending Balance, Amount at Dec. 31, 2014 | $ 48,623 | $ 1,491 | $ 80,245 | ||
Ending Balance, Shares at Dec. 31, 2014 | 48,622,675 | 140,995 | 18,388,212 | (18,358,081) | 80,245 |
Conversion of preferred stock to common stock, Amount | $ 55,947 | $ (252) | $ (55,695) | $ 0 | |
Conversion of common stock to preferred stock, Shares | 55,947,335 | (252,891) | |||
Issuance of Preferred Stock for debt conversions, Amount, net of warrants issued | $ 12 | 835,514 | 835,526 | ||
Issuance of Preferred stock for debt conversions, Shares, net of warrants issued | 12,148 | ||||
Issuance of Common Stock for services, Amount | $ 2,414 | 485,412 | 487,826 | ||
Issuance of Common Stock for services, Shares | 2,413,811 | ||||
Issuance of Preferred Stock for cash, Amount, net of warrants issued | $ 116 | 8,750,478 | 8,750,594 | ||
Issuance of Preferred Stock for cash, Shares, net of warrants issued | 116,471 | ||||
Stock-based compensation | 1,055,448 | 1,055,448 | |||
Dividends declared on Preferred Stock | (271,838) | (271,838) | |||
Issuance of Common Stock for Employee Bonuses, Amount | $ 2,188 | 216,594 | 218,782 | ||
Issuance of Common Stock for Employee Bonuses, Shares | 2,187,818 | ||||
Issuance of Common Stock for dividends on Preferred Stock, Amount | $ 1,512 | 287,459 | 288,971 | ||
Issuance of Common Stock for dividends on Preferred Stock, Shares | 1,512,645 | ||||
Issuance of Restricted Stock to Employees, Amount | $ 750 | (750) | 0 | ||
Issuance of Restricted Stock to Employees, Shares | 750,000 | ||||
Net Loss | $ (11,990,563) | (11,990,563) | |||
Ending Balance, Amount at Dec. 31, 2015 | $ 111,434 | $ 1,367 | $ 29,690,834 | $ (30,348,644) | $ (545,009) |
Ending Balance, Shares at Dec. 31, 2015 | 111,434,284 | 1,366,723 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flows from operating activities: | ||
Net loss | $ (11,990,563) | $ (8,116,603) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 3,087 | 6,161 |
Amortization | 148,026 | 182,843 |
Provision for bad debt expense | (51,769) | (48,473) |
Change in estimated fair value of derivative liabilities | (1,262,329) | (621,159) |
Fair value of warrants issued for guaranty | 2,263,783 | 0 |
Fair value of stock issued for services | 487,826 | 544,531 |
Fair value of stock issued for bonuses | 218,782 | 0 |
Stock based compensation | 1,055,448 | 497,271 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,447,937) | (120,168) |
Inventory | (195,276) | (306,687) |
Prepaid expenses and other current assets | 552,752 | (37,241) |
Accounts payable and accrued expenses | (214,899) | 1,369,819 |
Net cash used in operating activities | (10,433,069) | (6,649,706) |
Cash flows from investing activities: | ||
Change in restricted cash | (76,162) | (133) |
Purchase of property and equipment | (3,030) | (2,349) |
Net cash used in investing activities | (79,192) | (2,482) |
Cash flow from financing activities: | ||
Proceeds from issuance of Series B Preferred Stock, net | 0 | 1,857,413 |
Proceeds from issuance of Series C Preferred Stock, net | 11,999,958 | 0 |
Proceeds from debt | 1,103,817 | 4,263,002 |
Repayments on debt | (2,883,000) | (1,936,667) |
Net cash provided by financing activities | 10,220,775 | 4,183,748 |
NET DECREASE IN CASH | (291,486) | (2,468,440) |
CASH - beginning of period | 668,326 | 3,136,766 |
CASH - end of period | 376,840 | 668,326 |
SUPPLEMENTAL DISCLOSURES | ||
Cash paid for interest | 179,056 | 7,944 |
Non-cash transactions: | ||
Conversion of preferred stock to common stock | 55,695 | 15,021 |
Conversion of notes payable and accrued interest to common stock | 0 | 818,926 |
Conversion of notes payable and accrued interest to Series C preferred stock | 1,214,207 | 0 |
Dividend paid in common stock | 288,971 | 343,457 |
Dividends declared but unpaid | $ 271,838 | $ 434,096 |
Reclassification of derivative liability | 0 | 44,751 |
Warrants issued in connection with Series B Offering | $ 0 | $ 616,411 |
Warrants issued in connection with Series C Offering | $ 3,249,364 | $ 0 |
Warrants issued in connection with debt conversions | 378,681 | 0 |
Issuance of common stock for settlement of debt | $ 0 | $ 601,651 |
Cashless exercise of warrants | $ 0 | $ 78 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
Organization And Summary Of Significant Accounting Policies | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Overview True Drinks Holdings, Inc. (the " Company us we True Drinks Our principal place of business is 18662 MacArthur Boulevard, Suite 110, Irvine, California, 92612. Our telephone number is (949) 203-3500. Our corporate website address is http://www.truedrinks.com Common Stock Recent Developments Bottling Agreement with Niagara Bottling On October 9, 2015, we entered into an agreement (the Niagara Agreement Niagara The Niagara Agreement requires the Company to deliver to Niagara its minimum volume requirements for the upcoming 12-month period on or before February 1st of each year (the Annual Commitment Our largest shareholder, Mr. Vincent C. Smith, executed a personal guaranty of our obligations under the Niagara Agreement (the Personal Guaranty Red Beard Note Personal Guaranty Warrant Extension of Licensing Agreements During the quarter ended September 30, 2015, we entered into a renewed Licensing Agreements with both Marvel Characters B.V. ( Marvel Disney Increase of Authorized Common Stock On June 10, 2015, we filed a Certificate of Amendment to our Articles of Incorporation to increase the total authorized shares of Common Stock from 120.0 million shares to 200.0 million shares, and on January 4, 2016, we filed a second Certificate of Amendment to our Articles of Incorporation to increase the total authorized shares of Common Stock from 200.0 million to 300.0 million shares. Creation of Series C Preferred and Amendments to Series C Certificate of Designation On February 18, 2015, we filed the Certificate of Designation, Preferences, Rights and Limitations of the Series C Convertible Preferred Stock (the Series C Certificate of Designation Series C Preferred Financing Activity Series C Offerings March Note Exchange On March 27, 2015, holders of outstanding notes totaling $1,147,000 and accrued interest totaling $67,207 agreed to exchange all remaining principal and accrued interest into shares of Series C Preferred on substantially similar terms to those offered in the February 2015 offering of Series C Preferred (the March Note Exchange Note Financing Note Investors Secured Notes Note Warrants Note Financing Consulting Agreement January Note Exchange 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, 2015, the Company incurred a net loss of $11,990,563. At December 31, 2015, the Company has negative working capital of $5,303,989 and an accumulated deficit of $30,348,644. 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, derivative liabilities, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates. Revenue Recognition In accordance with Staff Accounting Bulletin (" SAB ") No. 104 Revenue Recognition in Financial Statements Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less, to be cash equivalents. The Company maintains cash with high credit quality financial institutions. At certain times, such amounts may exceed Federal Deposit Insurance Corporation ( FDIC Restricted Cash At December 31, 2015, the Company had $209,360 in restricted cash with a financial institution securing a letter of credit. The letter of credit matures in August 2017 and was issued as part of the contractual obligations related to the Disney Agreement, as described above in Note 1, under the heading Recent Developments 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 managements knowledge. Management develops an estimate of the allowance for doubtful accounts receivable based on the perceived likelihood of ultimate payment. Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts. The allowance for doubtful accounts was approximately $110,000 and $162,000 at December 31, 2015 and December 31, 2014, 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 utilized a variety of suppliers to purchase raw materials for the AquaBall Naturally Flavored Water during the year ended December 31, 2015. We anticipate that beginning in May 2016, all production of AquaBall TM will be completed by Niagara Bottling, LLC pursuant to the terms and conditions of our 5-year bottling agreement. Niagara will handle all aspects of production, including the procurement of all raw materials necessary to produce AquaBall TM . During 2015, 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. One customer represented 79% of the Companys accounts receivable and 47% of sales during the year ended December 31, 2015, while one customer represented 37% of the Companys sales and three customers represented 44% of accounts receivable during the year ended December 31, 2014. No other customers exceeded 10% of the Companys sales or accounts receivable during the year ended December 31, 2015 or 2014. A significant portion of our revenue comes from sales of the AquaBall Naturally Flavored Water. For the year ended December 31, 2015 and 2014, sales of AquaBall accounted for 97% and 90% of the Companys 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, except for derivative liabilities. The Companys 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. Inventory reserves were not significant as of December 31, 2015 or 2014. Inventory is comprised of the following: December 31, 2015 December 31, 2014 Purchased materials $ 689,703 $ 796,609 Finished goods 869,016 566,834 Total $ 1,558,719 $ 1,363,443 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, 2015 and 2014. 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 2015 or 2014. Intangible Assets Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Companys products, customer list, and the estimated value of GT Beverage Company, LLCs interlocking spherical bottle patent acquired on March 31, 2012. The Companys 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, 2015 or December 31, 2014. 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 Stock-Based Compensation Total stock-based compensation expense, for all of the Companys stock-based awards recognized for the year ended December 31, 2015 and 2014 was $1,055,448 and $497,271, respectively. The Company uses a Black-Scholes option-pricing model (the Black-Scholes Model Shares, warrants and options issued to non-employees for services are accounted for at fair value, based on the fair value of instrument issued or the fair value of the services received, whichever is more readily determinable. Derivative Instruments A derivative is an instrument whose value is derived from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts ( embedded derivatives Binomial Lattice Net Loss Per Share 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, 2015 and 2014, the Company had 120,573,694 and 52,577,964 shares of Common Stock equivalents outstanding, respectively. Research and Development Research and development costs are expensed as incurred. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This accounting standard is effective for the Company for the year ending December 31, 2017 including interim reporting periods within that reporting period. Early adoption is not permitted. The Company is currently evaluating the impact this accounting standard will have on the Company's financial position, results of operations or cash flows. On February 25, 2016, the FASB issued ASU 2016-2, " Leases |
STOCKHOLDERS EQUITY
STOCKHOLDERS EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders Equity | |
STOCKHOLDERS EQUITY | Securities Common Stock Series A Preferred Series B Preferred Series B Preferred Convertible Stock ( Series B Preferred Stated Value Series B Conversion Shares During the year ended December 31, 2015, the Company declared $271,838 in dividends on outstanding shares of its Series B Preferred. The Company issued a total of 1,512,645 shares of Common Stock to pay $288,971 of cumulative unpaid dividends. As of December 31, 2015, there remained $271,838 in cumulative unpaid dividends on the Series B Preferred Series C Preferred Series C Conversion Shares Issuances Between January and February 2014, the Company issued 505,000 shares of its Series B Preferred to certain accredited investors pursuant to subscription agreements in exchange for total net proceeds of $1,857,413. The investors also received five-year warrants to purchase 2,356,667 shares of the Companys Common Stock for $0.30 per share. The Company also issued 667,467 warrants to its capital advisors in connection with the investment. Each warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all warrants issued totaling $416,844, was recorded to derivative liabilities during the year ended December 31, 2014. During 2014, holders of 1,001,352 shares of the Series B Preferred Stock converted those shares into 16,021,632 shares of Common Stock. In May and July 2014, the Company issued 69,138 and 9,289 shares of Common Stock, respectively, pursuant to a cashless exercise of a total of 179,633 outstanding warrants. During 2014, holders of $818,926 in outstanding principal, lenders fees and interest on certain convertible notes payable exchanged this total for 204,732 shares of Series B Preferred and warrants to purchase 921,596 shares of Common Stock for $0.30 per share. Each warrant issued contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all warrants issued totaling $199,567, was recorded to derivative liabilities. The total value of all such warrants, $199,567, was recorded against Additional Paid In Capital. During 2014, the Company issued 1,751,270 shares of Common Stock and 5,692 shares of Series B Preferred in connection with various consulting agreements. The Company expensed the fair value of the Common Stock issued of $544,531 to consulting expense. During 2014, the Company issued 2,004,002 shares of Common Stock in consideration for the settlement of lawsuits and related legal payments. During 2015, the Company and certain accredited investors entered into securities purchase agreements to purchase up to 117,648 shares of Series C Preferred Stock. The Company issued an aggregate total of 116,471 shares of Series C Preferred during 2015 for prices ranging from $100 per share to $113.33 per share for a total gross proceeds of approximately $12 million. As additional consideration for participating in this offering, the purchasers were issued five-year warrants to purchase an aggregate total of 26,449,913 shares of Common Stock, exercisable at $0.15 per share. Each warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of all such warrants issued, totaling $3,249,364, was recorded to derivative liabilities during the year ended December 31, 2015. On March 27, 2015, holders of outstanding notes totaling $1,147,000 and accrued interest totaling $67,207 agreed to exchange all remaining principal and accrued interest into shares of Series C Preferred on substantially similar terms to those offered in the February 2015 offering of Series C Preferred. As a result of the execution of certain Exchange Agreements and the consummation of March Note Exchange, the Company issued an aggregate total of 12,148 shares of Series C Preferred and five-year warrants to purchase an aggregate total of 2,834,536 shares of Common Stock for $0.15 per share. Each warrant issued in connection with the March Note Exchange contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature results in the warrants being classified as a derivative liability and, as such, the value of all warrants issued in connection with the March Note Exchange, totaling $378,681, was recorded to derivative liabilities during the year ended December 31, 2015. On October 9, 2015 the Company issued to Vincent C. Smith a five-year warrant to purchase 17,500,000 shares of Common Stock for $0.188 per share as consideration for the execution of a personal guaranty of True Drinks obligations under the Niagara Agreement. The warrant contains a price-protection feature that adjusts the exercise price in the event of certain dilutive issuances of securities. Such price-protection feature is determined to be a derivative liability and, as such, the value of the warrant issued totaling $2,263,783, was recorded to derivative liabilities and is included in other expense in the accompanying consolidated statements of operations as of December 31, 2015. During the year ended December 31, 2015, the Company issued 2,413,811 shares of Common Stock in connection with certain consulting agreements. The Company expensed the fair value of the Common Stock issued of $487,826. On April 22, 2015, the Company cancelled 2,593,912 options to certain former Directors of the Company. The Company replaced these stock options with 2,594,914 warrants, 1,120,478 of these warrants had an exercise price of $0.25 per share, and 1,474,436 of the warrants had an exercise price of $0.38 per share. The expiration date of 1,120,478 of the warrants is November 12, 2016, and the expiration date on 1,474,436 of the warrants is March 9, 2018. On October 9, 2015, the Company issued five-year warrants for 884,209 shares at an exercise price of $0.19 per share in exchange for services. The warrants vest over a 12-month period. As of December 31, 2015, 221,053 warrant shares had vested and $19,895 was expensed accordingly. |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 12 Months Ended |
Dec. 31, 2015 | |
Stock Options And Warrants | |
STOCK OPTIONS AND WARRANTS | Warrants A summary of the Companys warrant activity for the years ended December 31, 2015 and 2014 is presented below: Warrants Outstanding Weighted Average Exercise Price Outstanding, December 31, 2013 12,590,467 $ 0.55 Granted 4,022,936 0.30 Exercised (179,633 ) 0.25 Expired (58,500 ) 25.09 Outstanding, December 31, 2014 16,375,270 $ 0.40 Granted 50,543,837 0.16 Exercised Expired Outstanding, December 31, 2015 66,919,107 $ 0.18 As of December 31, 2015, the Company had the following outstanding warrants to purchase shares of its Common Stock: Warrants Outstanding Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Yrs.) 61,453 $ 30.00 0.06 63,098,264 $ 0.15 4.13 1,120,479 $ 0.25 1.74 1,474,435 $ 0.38 1.53 1,164,476 $ 0.19 4.76 66,919,107 $ 0.18 4.04 Non-Qualified Stock Options No options were granted during the year ended December 31, 2015 and the Company and holders of all options to purchase shares of the Companys Common Stock agreed to cancel or forfeit their options. Stock option activity during the year ended December 31, 2015 is summarized as follows: Options Outstanding Weighted Average Exercise Price Options outstanding at December 31, 2014 12,379,593 $ 0.37 Exercised - - Granted - - Forfeited (12,379,593 ) 0.37 Expired - - Options outstanding at December 31, 2015 - $ - Cancellation of Stock Options and Issuance of Restricted Stock On August 6, 2015, the Companys board of directors authorized an issuance of an aggregate total of 19,491,375 shares of restricted Common Stock pursuant to the terms and conditions of the Companys 2013 Stock Incentive Plan to certain employees, including those that agreed to cancel previously issued stock options. In December 2015, the Company issued 750,000 shares of restricted stock under the plan. The cancellation of the stock options and issuance of restricted stock was accounted for as a modification in accordance with the provisions of ASC Topic 718 Compensation Stock Compensation. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets | |
INTANGIBLE ASSETS | The Company has incurred costs to trademark eight of its current products and marketing nomenclatures. During 2015, the Company purchased a patent in relation to the purchase of GT Beverage, and also assumed the trademarks of Bazi Intl. Patents and trademarks are being amortized over the lesser of their remaining life or 15 years. Intangible assets are: December 31, 2015 December 31, 2014 Patents and trademarks $ 1,706,849 $ 1,706,849 Accumulated amortization (636,261 ) (488,235 ) $ 1,070,588 $ 1,218,614 Amortization expense for the year ended December 31, 2015 and 2014 was $148,768 and $182,843, respectively. For these assets, amortization expense over the next five years and thereafter is expected to be as follows: Patent and Trademark Amortization 2016 $ 141,177 2017 141,177 2018 141,177 2019 141,177 2020 141,177 2021 and thereafter 364,703 $ 1,070,588 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes | |
INCOME TAXES | The Company does not have significant income tax expense or benefit for the years ended December 31, 2015 or 2014. 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, 2015 and 2014. Such tax net operating loss carryforwards ( NOL 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, 2015 and 2014 as follows: 2015 2014 Deferred tax asset NOLs $ 11,040,000 $ 6,800,000 Less valuation allowance (11,040,000 ) (6,800,000 ) Net deferred tax asset $ - $ - In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the history of the Company and projections for future taxable income over the periods in which the deferred tax assets are realizable, management believes it is not more likely than not that the Company will realize the benefits of these deductible differences and therefore a full valuation allowance against the deferred tax assets has been established. As a result of the Merger with Bazi Intl. on October 15, 2012, the Company may have access to utilize a portion of the net operating loss carryforwards of Bazi Intl., which, in total, were approximately $25 million at the time of the Merger. The Company is uncertain as to the portion of the Bazi net operating loss carryforwards that may be limited by Section 382 of the Internal Revenue Code. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carryforwards if there has been a change of ownership as described in Section 382 of the Internal Revenue Code. Such an analysis has not been performed by the Company to determine the impact of these provisions on the Companys net operating losses, though management believes the impact would be minimal, if any. A limitation under these provisions would reduce the amount of losses available to offset future taxable income of the Company. ASC 740 prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken on income tax returns. ASC Topic 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. Based on managements assessment of ASC Topic 740, management concluded that the Company does not have any uncertain tax positions as of December 31, 2015. 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 have several years of past due income tax returns. Until returns are filed and the related statute of limitations are met (generally 3 years for federal and 4 years for state), such past due returns remain open to examination by applicable authorities. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2015 | |
ConvertibleNotesAbstract | |
DEBT | A summary of convertible notes payable as of December 31, 2015 is as follows: Amount Outstanding December 31, 2013 $ 2,596,667 Borrowings 4,263,002 Repayments (1,936,667 ) Conversions to Common stock (660,000 ) Outstanding, December 31, 2014 $ 4,263,002 Borrowing 1,103,817 Repayments (2,883,000 ) Conversions to Series C preferred stock (1,147,000 ) Outstanding, December 31, 2015 $ 1,336,819 In March 2015, the Company paid off approximately $2.7 million of the Companys $3.8 million in outstanding promissory notes. Following these payments, the Company and each of the holders of the remaining notes entered into Exchange Agreements, wherein the holders agreed to exchange the remaining principal of $1,147,000 and accrued interest of any such notes into shares of Series C Preferred on substantially similar terms to those offered in connection with the issuance of shares of Series C Preferred and warrants consummated in February 2015. As described under Note 2, Shareholders Equity Subsequent Events In September 2015, the Company issued promissory notes to certain related parties in the aggregate principal amount of $100,000. The notes expired on October 31, 2015 and were repaid. Upon repayment, the Company paid a lender's fee to the related parties equal to 10% of the principal amount. Line-of-Credit Facility The Company entered into a line-of-credit agreement with a financial institution on June 30, 2014. The terms of the agreement allow the Company to borrow up to the lesser of $1.5 million or 85% of the sum of eligible accounts receivables. At December 31, 2015, the total outstanding on the line-of-credit approximated $482,000 and the Company did not have any availability to borrow. The line-of-credit bears interest at Prime rate (3.5% as of December 31, 2015) plus 4.5% per annum, as well as a monthly fee of 0.50% on the average amount outstanding on the line, and is secured by the accounts receivables that are funded against. The line-of-credit matures on July 31, 2016. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
Commitments And Contingencies | |
COMMITMENTS AND CONTINGENCIES | The Company has entered in a number of agreements with various consultants. Termination of any of these agreements could result in termination fees. The Company leases its corporate office in Irvine, California on a one-year term. The Company recently moved into a new office and extended its lease from an expiration date of July 31, 2016 to December 31, 2016. Total rent expense related to the Company's operating lease for the year ended December 31, 2015 was $55,640. Total remaining payments on the lease through December 31, 2016 are $42,687. The Company maintains employment agreements with certain key members of management. The agreements provide for minimum base salaries, eligibility for stock options, performance bonuses and severance payments. The Company has entered in a number of agreements with various consultants. Termination of any of these agreements could result in termination fees. 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 Companys financial position or results of operations. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2015 | |
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 Companys market assumptions. These two types of inputs create the following fair value hierarchy: - Level 1 - Level 2 - Level 3 This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value. The Company assesses its recurring fair value measurements as defined by FASB ASC 810. Liabilities measured at estimated fair value on a recurring basis include derivative liabilities. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial liabilities among the levels occur at the beginning of the reporting period. There were no transfers between Level 1, Level 2 and/or Level 3 during the year ended December 31, 2015. The Company had no Level 1 or 2 fair value measurements during 2015 or 2014. The following table presents the estimated fair value of financial liabilities measured at estimated fair value on a recurring basis included in the Companys financial statements as of December 31, 2015 and 2014: Level 1 Level 2 Level 3 Total carrying value Quoted market prices in active markets Internal Models with significant observable market parameters Internal models with significant unobservable market parameters Derivative liabilities - December 31, 2015 $ 6,199,021 $ - $ - $ 6,199,021 Derivative liabilities - December 31, 2014 $ 1,569,522 $ - $ - $ 1,569,522 The following table presents the changes in recurring fair value measurements included in net loss for the years ended December 31, 2015 and 2014: Recurring Fair Value Measurements Changes in Fair Value Included in Net Loss For the Year Ended December 31, 2015 Other Income Other Expense Total Derivative liabilities - December 31, 2015 $ 1,262,329 $ - $ 1,262,329 Derivative liabilities - December 31, 2014 $ 621,159 $ - $ 621,159 The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2015 and 2014: December 31, 2014 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2015 Derivative liabilities $ 1,569,522 $ 5,891,828 $ - $ (1,262,329 ) $ 6,199,021 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, 2014: December 31, 2013 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2014 Derivative liabilities $ 1,619,021 $ 616,411 $ (44,751) $ (621,159 ) $ 1,569,522 |
LICENSING AGREEMENTS
LICENSING AGREEMENTS | 12 Months Ended |
Dec. 31, 2015 | |
Licensing Agreements | |
LICENSING AGREEMENTS | We originally entered into a three-year licensing agreement with Disney Consumer Products, Inc. and an 18-month licensing agreement with Marvel Characters, B.V. (collectively, the Licensing Agreements In 2015, the Company and Disney entered into a renewed Licensing Agreement, which extended the Companys license with Disney through March 31, 2017 (the Disney Agreement The former Marvel Licensing Agreement ( Marvel Agreement On August 22, 2015, the Company and Marvel o feature certain Marvel characters on bottles of AquaBall Naturally Flavored Water through December 31, 2017 5% royalty rate on sales of AquaBall Naturally Flavored Water adorned with Marvel characters, paid quarterly, through December 31, 2017, with a total guarantee of $200,000. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company evaluated subsequent events through the date the accompanying consolidated financial statements were issued. Subsequent to December 31, 2015, the following events occurred: January Note Exchange |
ORGANIZATION AND SUMMARY OF S17
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Organization And Summary Of Significant Accounting Policies Policies | |
Organization and Business | True Drinks Holdings, Inc. (the " Company us we True Drinks Our principal place of business is 18662 MacArthur Boulevard, Suite 110, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com Common Stock |
Recent Development | Bottling Agreement with Niagara Bottling On October 9, 2015, we entered into an agreement (the Niagara Agreement Niagara The Niagara Agreement requires the Company to deliver to Niagara its minimum volume requirements for the upcoming 12-month period on or before February 1st of each year (the Annual Commitment Our largest shareholder, Mr. Vincent C. Smith, executed a personal guaranty of our obligations under the Niagara Agreement (the Personal Guaranty Red Beard Note Personal Guaranty Warrant Extension of Licensing Agreements During the quarter ended September 30, 2015, we entered into a renewed Licensing Agreements with both Marvel Characters B.V. ( Marvel Disney Increase of Authorized Common Stock On June 10, 2015, we filed a Certificate of Amendment to ourArticles of Incorporation to increase the total authorized shares of Common Stock from 120.0 million shares to 200.0 million shares, and on January 4, 2016, we filed a second Certificate of Amendment to our Articles of Incorporation to increase the total authorized shares of Common Stock from 200.0 million to 300.0 million shares. Creation of Series C Preferred and Amendments to Series C Certificate of Designation On February 18, 2015, we filed the Certificate of Designation, Preferences, Rights and Limitations of the Series C Convertible Preferred Stock (the Series C Certificate of Designation Series C Preferred Financing Activity Series C Offerings March Note Exchange On March 27, 2015, holders of outstanding notes totaling $1,147,000 and accrued interest totaling $67,207 agreed to exchange all remaining principal and accrued interest into shares of Series C Preferred on substantially similar terms to those offered in the February 2015 offering of Series C Preferred (the March Note Exchange Note Financing Note Investors Secured Notes Note Warrants Note Financing Consulting Agreement. During the year ended December 31, 2015, the Company issued 2,413,811 shares of Common Stock in connection with certain consulting agreements. The Company expensed the fair value of the Common Stock issued of $487,826 to consulting expense. January Note Exchange |
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, 2015, the Company incurred a net loss of $11,990,563. At December 31, 2015, the Company has negative working capital of $5,303,989 and an accumulated deficit of $30,348,644. 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, derivative liabilities, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates. |
Revenue Recognition | In accordance with Staff Accounting Bulletin (" SAB ") No. 104 Revenue Recognition in Financial Statements |
Cash and Cash Equivalents | The Company considers all highly liquid investments with original maturities of three months or less, to be cash equivalents. The Company maintains cash with high credit quality financial institutions. At certain times, such amounts may exceed Federal Deposit Insurance Corporation ( FDIC |
Restricted Cash | At December 31, 2015, the Company had $209,360 in restricted cash with a financial institution securing a letter of credit. The letter of credit matures in August 2017 and was issued as part of the contractual obligations related to the Disney Agreement, as described above in Note 1, under the heading Recent Developments |
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 managements knowledge. Management develops an estimate of the allowance for doubtful accounts receivable based on the perceived likelihood of ultimate payment. Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts. The allowance for doubtful accounts was approximately $110,000 and $162,000 at December 31, 2015 and December 31, 2014, 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 utilized a variety of suppliers to purchase raw materials for the AquaBall Naturally Flavored Water during the year ended December 31, 2015. We anticipate that beginning in May 2016, all production of AquaBall TM will be completed by Niagara Bottling, LLC pursuant to the terms and conditions of our 5-year bottling agreement. Niagara will handle all aspects of production, including the procurement of all raw materials necessary to produce AquaBall TM . During 2015, 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. One customer represented 79% of the Companys accounts receivable and 47% of sales during the year ended December 31, 2015, while one customer represented 37% of the Companys sales and three customers represented 44% of accounts receivable during the year ended December 31, 2014. No other customers exceeded 10% of the Companys sales or accounts receivable during the year ended December 31, 2015 or 2014. A significant portion of our revenue comes from sales of the AquaBall Naturally Flavored Water. For the year ended December 31, 2015 and 2014, sales of AquaBall accounted for 97% and 90% of the Companys 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, except for derivative liabilities. The Companys 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. Inventory reserves were not significant as of December 31, 2015 or 2014. Inventory is comprised of the following: December 31, 2015 December 31, 2014 Purchased materials $ 689,703 $ 796,609 Finished goods 869,016 566,834 Total $ 1,558,719 $ 1,363,443 |
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, 2015 and 2014. |
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 2015 or 2014. |
Intangible assets | Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Companys products, customer list, and the estimated value of GT Beverage Company, LLCs interlocking spherical bottle patent acquired on March 31, 2012. The Companys 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, 2015 or December 31, 2014. |
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 |
Stock-Based Compensation | Total stock-based compensation expense, for all of the Companys stock-based awards recognized for the year ended December 31, 2015 and 2014 was $1,055,448 and $497,271, respectively. The Company uses a Black-Scholes option-pricing model (the Black-Scholes Model Shares, warrants and options issued to non-employees for services are accounted for at fair value, based on the fair value of instrument issued or the fair value of the services received, whichever is more readily determinable. |
Derivative Instruments | A derivative is an instrument whose value is derived from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts ( embedded derivatives Binomial Lattice |
Net Loss Per Share | 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, 2015 and 2014, the Company had 120,573,694 and 52,577,964 shares of Common Stock equivalents outstanding, respectively. |
Research and Development | Research and development costs are expensed as incurred. |
Recent Accounting Pronouncements | In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606. This ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This accounting standard is effective the Company for the year ending December 31, 2017, including interim reporting periods within that reporting period. Early adoption is not permitted. The Company is currently evaluating the impact this accounting standard will have on the Company's financial position, results of operations or cash flows. On February 25, 2016, the FASB issued ASU 2016-2, "Leases" (Topic 842), which is intended to improve financial reporting for lease transactions. This ASU will require organizations that lease assets, such as real estate, airplanes and manufacturing equipment, to recognize on their balance sheet the assets and liabilities for the rights to use those assets for the lease term and obligations to make lease payments created by those leases that have terms of greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as finance or operating lease. This ASU will also require disclosures to help investors and other financial statement users better understand the amount and timing of cash flows arising from leases. These disclosures will include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The ASU is effective for the Company for the year ending December 31, 2019 and interim reporting periods within that year, and early adoption is permitted. Management has not yet determined the effect of this ASU on the Company's financial statements. |
ORGANIZATION AND SUMMARY OF S18
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Organization And Summary Of Significant Accounting Policies Tables | |
Inventory | Inventory is comprised of the following: December 31, 2015 December 31, 2014 Purchased materials $ 689,703 $ 796,609 Finished goods 869,016 566,834 Total $ 1,558,719 $ 1,363,443 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Issuance of common stock to founders, Shares | |
Summary warrant activity | A summary of the Companys warrant activity for the years ended December 31, 2015 and 2014 is presented below: Warrants Outstanding Weighted Average Exercise Price Outstanding, December 31, 2013 12,590,467 $ 0.55 Granted 4,022,936 0.30 Exercised (179,633 ) 0.25 Expired (58,500 ) 25.09 Outstanding, December 31, 2014 16,375,270 $ 0.40 Granted 50,543,837 0.16 Exercised Expired Outstanding, December 31, 2015 66,919,107 $ 0.18 As of December 31, 2015, t |
Outstanding warrants to purchase its common stock | As of December 31, 2015, the Company had the following outstanding warrants to purchase shares of its Common Stock: Warrants Outstanding Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Yrs.) 61,453 $ 30.00 0.06 63,098,264 $ 0.15 4.13 1,120,479 $ 0.25 1.74 1,474,435 $ 0.38 1.53 1,164,476 $ 0.19 4.76 66,919,107 $ 0.18 4.04 |
Stock option activity | Stock option activity during the year ended December 31, 2015 is summarized as follows: Options Outstanding Weighted Average Exercise Price Options outstanding at December 31, 2014 12,379,593 $ 0.37 Exercised - - Granted - - Forfeited (12,379,593 ) 0.37 Expired - - Options outstanding at December 31, 2015 - $ - |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets Tables | |
Intangible assets | Intangible assets are: December 31, 2015 December 31, 2014 Patents and trademarks $ 1,706,849 $ 1,706,849 Accumulated amortization (636,261 ) (488,235 ) $ 1,070,588 $ 1,218,614 |
Future amortization expense | For these assets, amortization expense over the next five years and thereafter is expected to be as follows: Patent and Trademark Amortization 2016 $ 141,177 2017 141,177 2018 141,177 2019 141,177 2020 141,177 2021 and thereafter 364,703 $ 1,070,588 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes Tables | |
Deferred tax asset | 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, 2015 and 2014 as follows: 2015 2014 Deferred tax asset NOLs $ 11,040,000 $ 6,800,000 Less valuation allowance (11,040,000 ) (6,800,000 ) Net deferred tax asset $ - $ - |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Debt Tables | |
Convertible notes payable | A summary of convertible notes payable as of December 31, 2015 is as follows: Amount Outstanding December 31, 2013 $ 2,596,667 Borrowings 4,263,002 Repayments (1,936,667 ) Conversions to Common stock (660,000 ) Outstanding, December 31, 2014 $ 4,263,002 Borrowing 1,103,817 Repayments (2,883,000 ) Conversions to common stock (1,147,000 ) Outstanding, December 31, 2015 $ 1,336,819 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair value of financial liabilities on a recurring basis | The following table presents the estimated fair value of financial liabilities measured at estimated fair value on a recurring basis included in the Companys financial statements as of December 31, 2015 and 2014: Level 1 Level 2 Level 3 Total carrying value Quoted market prices in active markets Internal Models with significant observable market parameters Internal models with significant unobservable market parameters Derivative liabilities - December 31, 2015 $ 6,199,021 $ - $ - $ 6,199,021 Derivative liabilities - December 31, 2014 $ 1,569,522 $ - $ - $ 1,569,522 |
Changes in recurring fair value measurements included in net loss | The following table presents the changes in recurring fair value measurements included in net loss for the years ended December 31, 2015 and 2014: Recurring Fair Value Measurements Changes in Fair Value Included in Net Loss For the Year Ended December 31, 2015 Other Income Other Expense Total Derivative liabilities - December 31, 2015 $ 1,262,329 $ - $ 1,262,329 Derivative liabilities - December 31, 2014 $ 621,159 $ - $ 621,159 |
Summary of changes in the fair value of our Level 3 financial liabilities | The table below sets forth a summary of changes in the fair value of our Level 3 financial liabilities for the year ended December 31, 2015: December 31, 2014 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2015 Derivative liabilities $ 1,569,522 $ 5,891,828 $ - $ (1,262,329 ) $ 6,199,021 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, 2014: December 31, 2013 Recorded new Derivative Liabilities Reclassification of Derivative Liabilities Change in Estimated Fair Value Recognized in Results of Operations December 31, 2014 Derivative liabilities $ 1,619,021 $ 616,411 $ (44,751) $ (621,159 ) $ 1,569,522 |
ORGANIZATION AND SUMMARY OF S24
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Inventory | ||
Purchased materials | $ 689,703 | $ 796,609 |
Finished goods | 869,016 | 566,834 |
Total | $ 1,558,719 | $ 1,363,443 |
ORGANIZATION AND SUMMARY OF S25
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
State of incorporation | Nevada | |
Date of incorporation | Jan. 1, 2001 | |
Net Loss | $ (11,990,563) | $ (8,116,603) |
Negative working capital | 5,303,989 | |
Accumulated deficit | 30,348,644 | 18,358,081 |
Restricted cash | 209,360 | 133,198 |
Accounts receivable allowance for doubtful accounts | $ 110,000 | $ 162,000 |
Concentration risk | 97.00% | 90.00% |
Stock based compensation expense | $ 1,055,448 | $ 497,271 |
Antidilutive shares | 120,573,694 | 52,577,964 |
Accounts Receivable [Member] | ||
Concentration risk | 79.00% | 44.00% |
Sales [Member] | ||
Concentration risk | 47.00% | 37.00% |
STOCKHOLDERS EQUITY (Details Na
STOCKHOLDERS EQUITY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
STOCKHOLDERS EQUITY | ||
Debt converted to shares | $ (1,147,000) | $ (660,000) |
Repayment of notes payable | 2,700,000 | |
Unpaid dividends | $ 68,441 | |
Warrants vested | 221,053 | |
Share based compensation expense | $ 19,895 | |
Issuance1 [Member] | ||
STOCKHOLDERS EQUITY | ||
Shares issued | 505,000 | |
Proceeds from issuance of shares | $ 1,857,413 | |
Issuance 2 [Member] | ||
STOCKHOLDERS EQUITY | ||
Warrants issued | 667,467 | |
Warrant fair value | $ 416,844 | |
Issuance 4 [Member] | ||
STOCKHOLDERS EQUITY | ||
Shares issued | 12,148 | |
Warrant fair value | $ 378,681 | |
Issuance 5 [Member] | ||
STOCKHOLDERS EQUITY | ||
Shares issued | 1,751,270 | |
Fair value expensed to consulting expense | $ 544,531 | |
Issuance 6 [Member] | ||
STOCKHOLDERS EQUITY | ||
Shares issued | 2,413,811 | |
Fair value expensed to consulting expense | $ 487,826 | |
Issuance 7 [Member] | ||
STOCKHOLDERS EQUITY | ||
Warrants issued | 2,594,914 | |
Option cancelled | 2,593,912 | |
Issuance 7 [Member] | Minimum [Member] | ||
STOCKHOLDERS EQUITY | ||
Warrants issued | 1,120,478 | |
Warrant exercise price | $ .25 | |
Issuance 7 [Member] | Maximum [Member] | ||
STOCKHOLDERS EQUITY | ||
Warrants issued | 1,474,436 | |
Warrant exercise price | $ .38 | |
Issuance 8 [Member] | ||
STOCKHOLDERS EQUITY | ||
Warrants issued | 884,209 | |
Warrant exercise price | $ .19 | |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS EQUITY | ||
Shares converted | 1,544,565 | |
Shares issued on conversion of preferred | 25,304,017 | |
Conversion share rate | $ 0.25 | |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS EQUITY | ||
Preferred stated value | 4 | |
Conversion share rate | .25 | |
Series C Preferred Stock [Member] | ||
STOCKHOLDERS EQUITY | ||
Preferred stated value | 100 | |
Conversion share rate | $ .15 |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Warrant Outstanding | ||
Outstanding, beginning of period | 16,375,270 | 12,590,467 |
Granted | 50,543,837 | 4,022,936 |
Exercised | 0 | (179,633) |
Expired | 0 | (58,500) |
Outstanding, end of period | 66,919,107 | 16,375,270 |
Weighted average exercise price | ||
Outstanding Weighted Average Exercise Prices, beginning of period | $ .40 | $ .55 |
Granted | .16 | .30 |
Exercised | 0 | .25 |
Expired | $ 0 | 25.09 |
Outstanding Weighted Average Exercise Prices, end of period | $ .40 |
STOCK OPTIONS AND WARRANTS (D28
STOCK OPTIONS AND WARRANTS (Details 1) - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Warrants outstanding | 221,053 | ||
Outstanding Weighted Average Exercise Prices | $ .40 | $ .55 | |
Warrant [Member] | |||
Warrants outstanding | 61,453 | ||
Outstanding Weighted Average Exercise Prices | $ 30 | ||
Weighted average remaining life (Yrs) | 22 days | ||
Warrant 2 [Member] | |||
Warrants outstanding | 63,098,264 | ||
Outstanding Weighted Average Exercise Prices | $ .15 | ||
Weighted average remaining life (Yrs) | 4 years 1 month 17 days | ||
Warrant 3 [Member] | |||
Warrants outstanding | 1,120,479 | ||
Outstanding Weighted Average Exercise Prices | $ .25 | ||
Weighted average remaining life (Yrs) | 1 year 8 months 27 days | ||
Warrant 4 [Member] | |||
Warrants outstanding | 1,474,435 | ||
Outstanding Weighted Average Exercise Prices | $ 0.38 | ||
Weighted average remaining life (Yrs) | 1 year 6 months 11 days | ||
Warrant 5 [Member] | |||
Warrants outstanding | 1,164,476 | ||
Outstanding Weighted Average Exercise Prices | $ 0.19 | ||
Weighted average remaining life (Yrs) | 4 years 9 months 4 days | ||
Total Warrants [Member] | |||
Warrants outstanding | 66,919,107 | ||
Outstanding Weighted Average Exercise Prices | $ .18 | ||
Weighted average remaining life (Yrs) | 4 years 14 days |
STOCK OPTIONS AND WARRANTS (D29
STOCK OPTIONS AND WARRANTS (Details 2) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Options Outstanding | |
Outstanding | shares | 12,379,593 |
Exercised | shares | 0 |
Granted | shares | 0 |
Forfeited | shares | (12,379,593) |
Expired | shares | 0 |
Outstanding | shares | 0 |
Weighted average exercise price | |
Outstanding Weighted Average Exercise Prices | $ / shares | $ .37 |
Exercised | $ / shares | 0 |
Granted | $ / shares | 0 |
Forfeited | $ / shares | .37 |
Expired | $ / shares | 0 |
Outstanding Weighted Average Exercise Prices | $ / shares | $ 0 |
STOCK OPTIONS AND WARRANTS (D30
STOCK OPTIONS AND WARRANTS (Details Narrative) | 12 Months Ended |
Dec. 31, 2015shares | |
Stock Options And Warrants Details Narrative | |
Authorized issuance of restricted Common Stock | 19,491,375 |
Issuance of restricted Common Stock | 750,000 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Intangible Assets Details | ||
Patents and trademarks | $ 1,706,849 | $ 1,706,849 |
Accumulated amortization | (636,261) | (488,235) |
Total intangible assets | $ 1,070,588 | $ 1,218,614 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) | Dec. 31, 2015USD ($) |
Patents and Trademark Amortization Future Expense | |
2,016 | $ 141,177 |
2,017 | 141,177 |
2,018 | 141,177 |
2,019 | 141,177 |
2,020 | 141,177 |
2021 and thereafter | 364,703 |
Total | $ 1,070,588 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Intangible Assets Details Narrative | ||
Amortization expense | $ 148,768 | $ 182,843 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Income Taxes Details | ||
Deferred tax asset - NOL's | $ 11,040,000 | $ 6,800,000 |
Less valuation allowance | $ (11,040,000) | $ (6,800,000) |
Net deferred tax asset |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2015 | Oct. 25, 2012 |
Net operating loss carryforwards (NOLs) | ||
Net operating loss available to offset future taxable income | ||
Bazi [Member] | ||
Net operating loss carryforwards of Bazi | $ 25,000,000 |
DEBT (Details)
DEBT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Debt Details | ||
Outstanding, beginning of period | $ 4,263,002 | $ 2,596,667 |
Borrowings | 1,103,817 | 4,263,002 |
Repayments | (2,883,000) | (1,936,667) |
Conversions to Series C preferred stock | (1,147,000) | (660,000) |
Outstanding, end of period | $ 1,336,819 | $ 4,263,002 |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Repayment of notes payable | $ 2,700,000 | |
Line of credit, amount outstanding | 482,000 | |
Line of credit, maximum borrowing capacity | 1,500,000 | |
Secured notes issued | 1,103,817 | $ 4,263,002 |
Secured Note 1 [Member] | ||
Secured notes issued | $ 855,000 | |
Secured note interest rate | 12.00% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2016 | |
Commitments And Contingencies Details Narrative | ||
Total rent expense related to operating leases | $ 55,640 | |
Remaining lease payments | $ 42,687 |
FAIR VALUE MEASUREMENTS (Detai
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Derivative liabilities | $ (6,199,021) | $ (1,569,522) | $ (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 | $ (6,199,021) | $ (1,569,522) |
FAIR VALUE MEASUREMENTS (Det40
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Change in Estimated Fair Value Recognized in Results of Operations | $ 1,262,329 | $ 621,159 |
Revenue [Member] | ||
Change in Estimated Fair Value Recognized in Results of Operations | $ 1,262,329 | $ 621,159 |
Expenses [Member] | ||
Change in Estimated Fair Value Recognized in Results of Operations |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Level 3 Financial Liabilities | ||
Derivative liabilities, beginning balance | $ 1,569,522 | $ 1,619,021 |
Recorded new derivative liabilities | $ 5,891,828 | 616,411 |
Reclassification of Derivative Liabilities | (44,751) | |
Change in Estimated Fair Value Recognized in Results of Operations | $ (1,262,329) | (621,159) |
Derivative liabilities | $ 6,199,021 | $ 1,569,522 |
LICENSING AGREEMENTS (Details N
LICENSING AGREEMENTS (Details Narrative) - USD ($) | 12 Months Ended | 24 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2017 | Mar. 31, 2017 | |
DisneyMember | |||
Agreeement term | 3 years | ||
Royalty rate | 5.00% | ||
Royalty guarantee | $ 450,870 | ||
Common marketing fund contributions requirement, per agreement | $ 820,000 | ||
MarvelMember | |||
Agreeement term | 18 months | ||
Royalty rate | 5.00% | 5.00% | |
Royalty guarantee | $ 37,500 | $ 200,000 |