Document_And_Entity_Informatio
Document And Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 29, 2013 | |
DocumentAndEntityInformationAbstract | ' | ' |
Entity Registrant Name | 'REEDS INC | ' |
Entity Central Index Key | '0001140215 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-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 Common Stock, Shares Outstanding | ' | 12,809,992 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
CONDENSED_BALANCE_SHEETS
CONDENSED BALANCE SHEETS (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
ASSETS | ' | ' |
Cash | $1,046,000 | $1,163,000 |
Inventory | 6,705,000 | 5,794,000 |
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $375,000 and $399,000, respectively | 3,185,000 | 1,961,000 |
Prepaid inventory | 499,000 | 201,000 |
Prepaid and other current assets | 348,000 | 212,000 |
Total Current Assets | 11,783,000 | 9,331,000 |
Property and equipment, net of accumulated depreciation of $2,662,000 and $2,351,000, respectively | 3,571,000 | 3,422,000 |
Brand names | 1,029,000 | 1,029,000 |
Deferred financing fees, net of amortization of $64,000 and $26,000, respectively | 37,000 | 54,000 |
Total assets | 16,420,000 | 13,836,000 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' |
Accounts payable | 5,215,000 | 3,368,000 |
Accrued expenses | 134,000 | 233,000 |
Dividends payable | 0 | 74,000 |
Line of credit | 4,313,000 | 3,023,000 |
Current portion of long term financing obligation | 100,000 | 90,000 |
Current portion of capital leases payable | 80,000 | 69,000 |
Current portion of term loan | 159,000 | 176,000 |
Total current liabilities | 10,001,000 | 7,033,000 |
Long term financing obligation, less current portion, net of discount of $538,000 and $576,000, respectively | 2,170,000 | 2,208,000 |
Capital leases payable, less current portion | 48,000 | 98,000 |
Term loan, less current portion | 525,000 | 399,000 |
Total Liabilities | 12,744,000 | 9,738,000 |
Stockholders' equity: | ' | ' |
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 and 10,411 shares issued and outstanding, respectively | 94,000 | 104,000 |
Series B Convertible Preferred stock, $10 par value, 500,000 shares authorized, 0 and 45,062 shares issued and outstanding, respectively | 0 | 456,000 |
Common stock, $.0001 par value, 19,500,000 shares authorized, 12,809,992 and 12,084,673 shares issued and outstanding, respectively | 1,000 | 1,000 |
Additional paid in capital | 24,908,000 | 23,996,000 |
Accumulated deficit | -21,327,000 | -20,459,000 |
Total stockholders' equity | 3,676,000 | 4,098,000 |
Total liabilities and stockholders' equity | $16,420,000 | $13,836,000 |
CONDENSED_BALANCE_SHEETS_Paren
CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Condensed Balance Sheets Parenthetical | ' | ' |
Allowance for Doubtful Accounts and returns and discounts (in Dollars) | $375,000 | $399,000 |
Accumulated Depreciation (in Dollars) | 2,662,000 | 2,351,000 |
Accumulated Amortization, deferred financing fees (in Dollars) | 64,000 | 26,000 |
Discount, long term financing obligation (in Dollars) | $538,000 | $576,000 |
Convertible Preferred stock Series A par value | $10 | $10 |
Convertible Preferred stock Series A shares authorized | 500,000 | 500,000 |
Convertible Preferred stock Series A shares issued | 9,411 | 10,411 |
Convertible Preferred stock Series A outstanding | 9,411 | 10,411 |
Convertible Preferred stock Series B par value | $10 | $10 |
Convertible Preferred stock Series B shares authorized | 500,000 | 500,000 |
Convertible Preferred stock Series B shares issued | 0 | 45,062 |
Convertible Preferred stock Series B outstanding | 0 | 45,062 |
Common stock par value | $0.00 | $0.00 |
Common stock, shares authorized | 19,500,000 | 19,500,000 |
Common stock, shares issued | 12,809,992 | 12,084,673 |
Common stock, shares outstanding | 12,809,992 | 12,084,673 |
CONDENSED_STATEMENTS_OF_OPERAT
CONDENSED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Condensed Statements Of Operations | ' | ' | ' | ' |
Sales | $10,076,000 | $7,888,000 | $27,721,000 | $22,258,000 |
Cost of tangible goods sold | 6,399,000 | 4,975,000 | 18,028,000 | 13,993,000 |
Cost of goods sold - idle capacity | 501,000 | 456,000 | 1,525,000 | 1,126,000 |
Gross profit | 3,176,000 | 2,457,000 | 8,168,000 | 7,139,000 |
Operating expenses: | ' | ' | ' | ' |
Delivery and handling expense | 1,040,000 | 763,000 | 2,900,000 | 1,827,000 |
Selling and marketing expense | 1,159,000 | 818,000 | 2,999,000 | 2,239,000 |
General and administrative expense | 763,000 | 693,000 | 2,663,000 | 2,238,000 |
Total operating expenses | 2,962,000 | 2,274,000 | 8,562,000 | 6,304,000 |
Income (loss) from operations | 214,000 | 183,000 | -394,000 | 835,000 |
Interest expense | -180,000 | -161,000 | -469,000 | -493,000 |
Net income (loss) | 34,000 | 22,000 | -863,000 | 342,000 |
Preferred stock dividends | 0 | -8,000 | -5,000 | -39,000 |
Net income (loss) attributable to common stockholders | $34,000 | $14,000 | ($868,000) | $303,000 |
Income (loss) per share available to common stockholders, basic | $0 | $0 | ($0.07) | $0.03 |
Weighted average number of shares outstanding - basic | 12,627,864 | 11,501,152 | 12,498,935 | 11,155,860 |
Income (loss) per share available to common stockholders, diluted | $0 | $0 | ($0.07) | $0.03 |
Weighted average number of shares outstanding - diluted | 13,496,714 | 12,288,503 | 12,498,935 | 11,706,186 |
CONDENSED_STATEMENT_OF_CHANGES
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) | Common Stock | Series A Preferred Stock | Series B Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2012 | $1,000 | $104,000 | $456,000 | $23,996,000 | ($20,459,000) | $4,098,000 |
Beginning Balance, Shares at Dec. 31, 2012 | 12,084,673 | 10,411 | 45,602 | ' | ' | ' |
Fair Value of common stock issued for services, Amount | ' | ' | ' | 5,000 | ' | 5,000 |
Fair Value of common stock issued for services, Shares | 1,250 | ' | 319,214 | ' | ' | 1,064 |
Proceeds from exercise of stock options, Amount | ' | ' | ' | 30,000 | ' | 30,000 |
Proceeds from exercise of stock options, Shares | 272,485 | ' | ' | ' | ' | ' |
Exercise of warrants, Amount | ' | ' | ' | 75,000 | ' | 75,000 |
Exercise of warrants, Shares | 79,416 | ' | ' | ' | ' | ' |
Common stock issued upon conversion of Series A preferred stock, Amount | ' | -10,000 | ' | 10,000 | ' | ' |
Common stock issued upon conversion of Series A preferred stock, Shares | 4,000 | -1,000 | ' | ' | ' | ' |
Common stock issued upon conversion of Series B preferred stock, Amount | ' | ' | -456,000 | 456,000 | ' | ' |
Common stock issued upon conversion of Series B preferred stock, Shares | 319,214 | ' | -45,602 | ' | ' | ' |
Fair value vesting of options issued to employees | ' | ' | ' | 257,000 | ' | 257,000 |
Common stock paid for Series A preferred stock dividend, Amount | ' | ' | ' | 5,000 | -5,000 | ' |
Common stock paid for Series A preferred stock dividend, Shares | 1,064 | ' | ' | ' | ' | ' |
Common stock paid for Series B preferred stock dividend, Amount | 74,000 | ' | ' | 74,000 | ' | ' |
Common stock paid for Series B preferred stock dividend, Shares | 47,890 | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | -863,000 | -863,000 |
Ending Balance, Amount at Sep. 30, 2013 | $1,000 | $94,000 | ' | $24,908,000 | ($21,327,000) | $3,676,000 |
Ending Balance, Shares at Sep. 30, 2013 | 12,809,992 | 9,411 | ' | ' | ' | ' |
CONDENSED_STATEMENTS_OF_CASH_F
CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash flows from operating activities: | ' | ' |
Net (loss) income | ($863,000) | $342,000 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ' | ' |
Depreciation and amortization | 387,000 | 556,000 |
Fair value of stock options issued to employees | 257,000 | 81,000 |
Fair value of common stock issued for services and bonus | 5,000 | 23,000 |
(Decrease) increase in allowance for doubtful accounts | -24,000 | 65,000 |
Changes in assets and liabilities: | ' | ' |
Accounts receivable | -1,200,000 | -1,338,000 |
Inventory | -911,000 | 136,000 |
Prepaid expenses and inventory and other current assets | -434,000 | -182,000 |
Accounts payable | 1,847,000 | 1,044,000 |
Accrued expenses | -99,000 | 9,000 |
Recycling fees payable | ' | -90,000 |
Net cash provided by (used in) operating activities | -1,035,000 | 646,000 |
Cash flows from investing activities: | ' | ' |
Purchase of property and equipment | -447,000 | -334,000 |
Net cash used in investing activities | -447,000 | -334,000 |
Cash flows from financing activities: | ' | ' |
Proceeds from stock option and warrant exercises | 105,000 | 135,000 |
Principal repayments on long term financing obligation | -66,000 | -52,000 |
Principal repayments on capital lease obligation | -52,000 | -41,000 |
Payment of deferred finance fees | -21,000 | -4,000 |
Increased borrowing on note payable | 217,000 | ' |
Principal repayments on notes payable | -108,000 | -113,000 |
Net (repayment) borrowing on line of credit | 1,290,000 | 479,000 |
Net cash (used) provided by financing activities | 1,365,000 | 404,000 |
Net (decrease) increase in cash | -117,000 | 716,000 |
Cash at beginning of period | 1,163,000 | 713,000 |
Cash at end of period | 1,046,000 | 1,429,000 |
Cash paid during the period for: | ' | ' |
Interest | 518,000 | 493,000 |
Non cash investing and financing activities: | ' | ' |
Series A Preferred stock converted to common stock | 10,000 | 212,000 |
Series B Preferred stock converted to common stock | 456,000 | 314,000 |
Dividends payable in common stock | 74,000 | 52,000 |
Common stock issued in settlement of Series A and B preferred stock dividend | 5,000 | 39,000 |
Property and equipment acquired through capital lease | $13,000 | ' |
1_Basis_of_Presentation
1. Basis of Presentation | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Note 1. Basis of Presentation | ' | ||||||||||||||||
The accompanying interim condensed financial statements are unaudited, but in the opinion of management of Reeds, Inc. (the "Company"), contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2013 and the results of operations and cash flows for the three and nine months ended September 30, 2013 and 2012. The balance sheet as of December 31, 2012 is derived from the Company’s audited financial statements. | |||||||||||||||||
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 22, 2013. | |||||||||||||||||
The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2013. | |||||||||||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expense during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, analysis of impairments of recorded intangibles, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. | |||||||||||||||||
In presenting the Company’s consolidated statement of operations for the three and nine months ended September 30, 2012, the Company previously presented $165,000 and $302,000, respectively, of inventory adjustments as cost of goods sold – idle capacity. In presenting the Company’s consolidated statement of operations for the three and nine months ended September 30, 2013, the Company has reclassified inventory adjustments from cost of goods sold – idle capacity into cost of tangible goods sold. | |||||||||||||||||
Income (Loss) per Common Share | |||||||||||||||||
Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stock holders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing the net income applicable to common stock holders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. | |||||||||||||||||
For the three and nine months ended September 30, 2012 and the three months ended September 30, 2013 the calculations of diluted earnings per share included stock options and warrants, calculated under the treasury method, and excluded preferred stock since the effect was antidilutive. For the nine months ended September 30, 2013 the calculations of basic and diluted loss per share are the same as the effect of stock options, warrants, and preferred stock are antidilutive. The calculation of weighted average shares outstanding – diluted is as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Net income (loss) attributable to common stockholders | $ | 34,000 | $ | 14,000 | $ | (868,000 | ) | $ | 303,000 | ||||||||
Denominator: | |||||||||||||||||
Weighted average shares outstanding - basic | 12,627,864 | 11,501,152 | 12,498,935 | 11,155,860 | |||||||||||||
Effect of dilutive instruments: | |||||||||||||||||
Warrants and options | 868,850 | 787,351 | – | 550,326 | |||||||||||||
Weighted average shares outstanding-diluted | 13,496,714 | 12,288,503 | 12,498,935 | 11,706,186 | |||||||||||||
At September 30, 2013, the Company had potentially dilutive securities that consisted of: | |||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Warrants | 211,182 | 361,916 | |||||||||||||||
Options | 657,668 | 778,667 | |||||||||||||||
Series A Preferred Stock | 41,644 | 101,644 | |||||||||||||||
Series B Preferred Stock | – | 342,895 | |||||||||||||||
Total | 910,494 | 1,585,122 | |||||||||||||||
Recent Accounting Pronouncements | |||||||||||||||||
There are recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC"), such pronouncements are not believed by management to have a material impact on the Company's present or future financial statements. | |||||||||||||||||
Concentrations | |||||||||||||||||
The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company may be exposed to risk for the amounts of funds held in one bank in excess of the insurance limit. In assessing the risk, the Company’s policy is to maintain cash balances with high quality financial institutions. The Company had cash balances in excess of the guarantee during the three and nine months ended September 30, 2013. | |||||||||||||||||
During the three months ended September 30, 2013, the Company had one customer which accounted for approximately 33% of sales, and in the three months ended September 30, 2012 two customers who accounted for approximately 30% and 11% of sales. During the nine months ended September 30, 2013, the Company had one customer, which accounted for approximately 34% of sales, and during the nine months ended September 30, 2012 the Company had two customers who accounted for approximately 31% and 11% of sales. No other customers accounted for more than 10% of sales in either year. As of September 30, 2013, the Company had accounts receivable due from a customer who comprised $734,000 (21%) of its total accounts receivable and as of December 31, 2012 the Company had accounts receivable due from two customers who comprised $475,000 (27%), and $264,000 (15%), respectively, of its total accounts receivable. | |||||||||||||||||
During the three months ended September 30, 2013, the Company had one vendor which accounted for approximately 31% of all purchases, and in the three months ended September 30, 2012 one vendor who accounted for approximately 35% of all purchases. During the nine months ended September 30, 2013, the Company had one vendor, which accounted for approximately 29% of all purchases, and during the nine months ended September 30, 2012 the Company had one vendor who accounted for approximately 35% of all purchases. No other vendor accounted for more than 10% of all purchases in either year. As of September 30, 2013, the Company had accounts payable due to a vendor who comprised 35% of its total accounts payable and as of December 31, 2012 the Company had accounts payable due to one vendor who comprised 27% of its total accounts payable. No other account was in excess of 10% of the balance of accounts payable as of September 30, 2013 and December 31, 2012. | |||||||||||||||||
Advertising | |||||||||||||||||
Advertising costs are expensed as incurred. For the three months ended September 30, 2013 and 2012, advertising costs were $38,000 and $48,000, respectively, and for the nine months ended September 30, 2013 and 2012, advertising costs were $90,000 and $73,000, respectively. | |||||||||||||||||
Comprehensive Income | |||||||||||||||||
For the three and nine months ended September 30, 2013 and 2012, the Company had no items of comprehensive income. | |||||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||||
The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. Authoritative guidance provided by the FASB defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets: | |||||||||||||||||
Level 1—Quoted prices in active markets for identical assets or liabilities. | |||||||||||||||||
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. | |||||||||||||||||
Level 3—Unobservable inputs based on the Company's assumptions. | |||||||||||||||||
The Company had no such assets or liabilities recorded to be valued on the basis above at September 30, 2013 or December 31, 2012. |
2_Inventory
2. Inventory | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Note 2. Inventory | ' | ||||||||
Inventory consists of the following as of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw Materials and packaging | $ | 3,961,000 | $ | 3,524,000 | |||||
Finished Goods | 2,744,000 | 2,270,000 | |||||||
$ | 6,705,000 | $ | 5,794,000 |
3_Property_and_Equipment
3. Property and Equipment | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
3. Property and Equipment | ' | ||||||||
Property and equipment are comprised of the following as of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Land | $ | 1,108,000 | $ | 1,108,000 | |||||
Building | 1,802,000 | 1,737,000 | |||||||
Vehicles | 337,000 | 320,000 | |||||||
Machinery and equipment | 2,545,000 | 2,174,000 | |||||||
Office equipment | 441,000 | 434,000 | |||||||
6,233,000 | 5,773,000 | ||||||||
Accumulated depreciation | (2,662,000 | ) | (2,351,000 | ) | |||||
$ | 3,571,000 | $ | 3,422,000 | ||||||
Machinery and equipment at September 30, 2013 and December 31, 2012 includes equipment held under capital leases of $322,000 and $309,000, respectively. Accumulated depreciation on equipment held under capital leases was $208,000 and $149,000 at September 30, 2013 and December 31, 2012, respectively. |
4_Line_of_Credit
4. Line of Credit | 9 Months Ended |
Sep. 30, 2013 | |
Range of Exercise Price Lower | ' |
Note 4. Line of Credit | ' |
On September 20, 2013, the revolving line of credit was increased from $4,000,000 to $4,500,000. At the same time, the revolving line of credit was temporarily increased to $4,800,000 and the over-advances based on inventory collateral were increased to $500,000, both for a six month period ending February 28, 2014. At September 30, 2013 and December 31, 2012, the aggregate amount outstanding under the line of credit was $4,313,000 and $3,023,000 respectively, and the Company had approximately $365,000 of availability on this line of credit at September 30, 2013. The interest rate on the revolving line of credit is at the prime rate plus 3.75% (7% at September 30, 2013). The line of credit is based on 85% of eligible accounts receivable and 50% of eligible inventory. The line of credit expires on November 7, 2014 and is secured by substantially all of the Company’s assets. |
5_Term_Loan
5. Term Loan | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Term Loan | ' | ||||||||
Note 5. Term Loan | ' | ||||||||
On May 1, 2013 the term loan was increased to $750,000. Other terms of the term loan remain the same. The term loan bears interest at the prime rate plus 11.6%, which shall not be below 14.85%, is secured by all of the unencumbered assets of the Company, and is to be repaid in 48 equal installments of principal and interest of $21,000. | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Term loan | $ | 684,000 | $ | 575,000 | |||||
Less current portion | (159,000 | ) | (176,000 | ) | |||||
Long term debt | $ | 525,000 | $ | 399,000 |
6_Longterm_Financing_Obligatio
6. Long-term Financing Obligation | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
ShareOutstandingExcercised | ' | ||||||||
Note 6. Long-term Financing Obligation | ' | ||||||||
In 2009 the Company sold two buildings and its brewery equipment and concurrently entered into a long-term lease agreement for the same property and equipment. In connection with the lease the Company has the option to repurchase the buildings and brewery equipment from 12 months after the commencement date to the end of the lease term at the greater of the fair market value or an agreed upon amount. Since the lease contains a buyback provision and other related terms, the Company determined it had continuing involvement that did not warrant the recognition of a sale; therefore, the transaction has been accounted for as a long-term financing. The proceeds from the sale, net of transaction costs, have been recorded as a financing obligation in the amount of $3,056,000. Monthly payments under the financing agreement are recorded as interest expense and a reduction in the financing obligation at an implicit rate of 9.9%. The financing obligation is personally guaranteed up to a limit of $150,000 by the principal shareholder and Chief Executive Officer. | |||||||||
In connection with the financing obligation, the Company issued an aggregate of 400,000 warrants to purchase its common stock at $1.20 per share for five years. The 400,000 warrants were valued at $752,000 and reflected as a debt discount, using the Black Scholes option pricing model. The following assumptions were utilized in valuing the 400,000 warrants: strike price of $2.10 to $2.25; term of 5 years; volatility of 91.36% to 110.9%; expected dividends 0%; and discount rate of 2.15% to 2.20%. The 400,000 warrants were recorded as valuation discount and are being amortized over 15 years, the term of the purchase option. Amortization of valuation discount during the nine months ended September 30, 2013 and 2012 was $75,000 and $96,000, respectively. | |||||||||
Long term financing obligation is comprised of the following as of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Financing obligation | $ | 2,808,000 | $ | 2,874,000 | |||||
Valuation discount | (538,000 | ) | (576,000 | ) | |||||
2,270,000 | 2,298,000 | ||||||||
Less current portion | (100,000 | ) | (90,000 | ) | |||||
Long term financing obligation | $ | 2,170,000 | $ | 2,208,000 |
7_Stockholders_Equity
7. Stockholders' Equity | 9 Months Ended |
Sep. 30, 2013 | |
Equity [Abstract] | ' |
Note 7. Stockholders' Equity | ' |
Preferred Stock | |
On July 22, 2013, dividends were paid on the Series A Preferred stock in the amount of $5,000, by issuing 1,064 shares of common stock. | |
During the nine months ended September 30, 2013, the remaining 45,602 shares of Series B Convertible Preferred Stock were converted to 319,214 shares of common stock. Accrued dividends of $74,000 were paid by issuing 47,890 shares of common stock. | |
Common Stock | |
During the nine months ended September 30, 2013, the Company issued 1,250 shares of common stock for services at $4.00 per share with a value of $5,000 for services rendered. |
8_Stock_Based_Compensation
8. Stock Based Compensation | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Stock Based Compensation | ' | ||||||||||||||
Note 8. Stock Based Compensation | ' | ||||||||||||||
Stock Options | |||||||||||||||
During the nine months ended September 30, 2013, the Company issued 394,000 incentive stock options at the market prices of $4.00 and $4.74 per share. Total stock-based compensation recognized on the Company’s statement of operations for the three and nine months ended September 30, 2013 was $69,000 and $257,000, respectively, as compared to 2012 expense of $26,000 and $81,000. As of September 30, 2013, the aggregate value of unvested options was $797,000, which will vest over an average period of two or three years. There were 343,332 stock options exercised in the nine months ended September 30, 2013 at exercise prices between $0.75 and $2.22. The Company received $30,000 for 35,000 of such exercises and allowed cash-less exercise of 308,332 of such options and issued 237,485 shares of common stock. | |||||||||||||||
Stock options granted under our equity incentive plans generally vest over 2 to 3 years from the date of grant, 1/2 and 1/3 per year, respectively; and expire 5 years from the date of grant. The following table summarizes stock option activity for the nine months ended September 30, 2013: | |||||||||||||||
Shares | Weighted-Average | Weighted-Average | Aggregate | ||||||||||||
Exercise Price | Remaining | Intrinsic | |||||||||||||
Contractual | Value | ||||||||||||||
Terms (Years) | |||||||||||||||
Outstanding at December 31, 2012 | 607,000 | $1.27 | |||||||||||||
Granted | 394,000 | $4.16 | |||||||||||||
Exercised | -343,332 | $1.13 | |||||||||||||
Forfeited or expired | - | - | |||||||||||||
Outstanding at September 30, 2013 | 657,668 | $3.07 | 4.1 | $1,626,000 | |||||||||||
Exercisable at September 30, 2013 | 154,085 | $2.34 | 3.5 | $ 468,000 | |||||||||||
The aggregate intrinsic value was calculated as the difference between the market price, which was $5.56, and the exercise price of the Company’s common stock as of September 30, 2013. | |||||||||||||||
The following table summarizes information about stock options at September 30, 2013: | |||||||||||||||
Options Outstanding at September 30, 2013 | Options Exercisable at | ||||||||||||||
30-Sep-13 | |||||||||||||||
Range of Exercise | Number of Shares | Weighted Average | Weighted | Number | Weighted | ||||||||||
Price | Outstanding | Remaining | Average | of Shares | Average | ||||||||||
Contractual Life (years) | Exercise Price | Exercisable | Exercise | ||||||||||||
Price | |||||||||||||||
$0.01 - $1.99 | 198,668 | 3.4 | $1.28 | 68,667 | $1.44 | ||||||||||
$2.00 - $4.99 | 459,000 | 4.5 | $3.85 | 85,418 | $3.00 | ||||||||||
657,668 | 154,085 | ||||||||||||||
Stock Warrants | |||||||||||||||
During the nine months ended September 30, 2013, 106,071 warrants were exercised at prices of $2.10 and $2.25. The Company received $75,000 and issued 79,416 shares of common stock. The following table summarizes stock warrant activity for the nine months ended September 30, 2013: | |||||||||||||||
Shares | Weighted-Average | Weighted-Average | Aggregate | ||||||||||||
Exercise Price | Remaining | Intrinsic | |||||||||||||
Contractual | Value | ||||||||||||||
Terms (Years) | |||||||||||||||
Outstanding at December 31, 2012 | 317,253 | $2.40 | |||||||||||||
Granted | – | - | |||||||||||||
Exercised | (106,071 | ) | $2.16 | ||||||||||||
Forfeited or expired | – | - | |||||||||||||
Outstanding at September 30,2013 | 211,182 | $2.52 | 2.2 | $ | 641,000 | ||||||||||
Exercisable at September 30,2013 | 211,182 | $2.52 | 2.2 | $ | 641,000 | ||||||||||
The intrinsic value was calculated as the difference between the market price, which was $5.56, and the exercise price of the Company’s common stock, as of September 30, 2013. |
9_Income_Taxes
9. Income Taxes | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||||||
Note 9. Income Taxes | ' | ||||||||||||||||
For the three months ended September 30, 2013, net income was $34,000, and for the nine months ended September 30, 2013 net loss was ($863,000), no income tax provision was recorded. For the three and nine months ended September 30, 2012, net income was $22,000 and $342,000, respectively and our provision for income taxes was zero. We made no provision for income taxes during periods of net income due to our utilization of federal net operating loss carryforwards to offset both regular taxable income and alternative minimum taxable income. | |||||||||||||||||
In accordance with Accounting Standards Codification (“ASC”) 740-10, Income Taxes, the Company evaluates its deferred tax assets to determine if a valuation allowance is required based on the consideration of all available evidence using a “more likely than not” standard, with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability; the length of statutory carryover periods for operating losses and tax credit carryovers; and available tax planning alternatives. Our deferred tax assets are composed primarily of U.S. federal net operating loss carryforwards. Based on available objective evidence, management believes it is more likely than not that these deferred tax assets are not recognizable and will not be recognizable until its determined that we have sufficient taxable income. Under ASC 740-10, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods, and disclosures. As of September 30, 2013 or 2012, the Company does not have a liability for unrecognized tax uncertainties. | |||||||||||||||||
The following table reconciles the U.S. statutory rates to the Company's effective tax rate for the: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
30-Sep | 30-Sep | ||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
U.S. statutory rate | 34 | % | 34 | % | 34 | % | 34 | % | |||||||||
State tax net of federal benefit | 5 | % | 5 | % | 5 | % | 5 | % | |||||||||
Benefit of net operating loss carryforward | (39 | )% | (39 | )% | (39 | )% | (39 | )% | |||||||||
Valuation allowance | – | – | – | – | |||||||||||||
Effective tax rate | -% | -% | -% | -% |
1_Basis_of_Presentation_Polici
1. Basis of Presentation (Policies) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Basis of Presentation | ' | ||||||||||||||||
The accompanying interim condensed financial statements are unaudited, but in the opinion of management of Reeds, Inc. (the "Company"), contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2013 and the results of operations and cash flows for the three and nine months ended September 30, 2013 and 2012. The balance sheet as of December 31, 2012 is derived from the Company’s audited financial statements. | |||||||||||||||||
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 22, 2013. | |||||||||||||||||
The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2013. | |||||||||||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expense during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, analysis of impairments of recorded intangibles, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. | |||||||||||||||||
In presenting the Company’s consolidated statement of operations for the three and nine months ended September 30, 2012, the Company previously presented $165,000 and $302,000, respectively, of inventory adjustments as cost of goods sold – idle capacity. In presenting the Company’s consolidated statement of operations for the three and nine months ended September 30, 2013, the Company has reclassified inventory adjustments from cost of goods sold – idle capacity into cost of tangible goods sold. | |||||||||||||||||
Income (Loss) per Common Share | ' | ||||||||||||||||
Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stock holders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing the net income applicable to common stock holders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. | |||||||||||||||||
For the three and nine months ended September 30, 2012 and the three months ended September 30, 2013 the calculations of diluted earnings per share included stock options and warrants, calculated under the treasury method, and excluded preferred stock since the effect was antidilutive. For the nine months ended September 30, 2013 the calculations of basic and diluted loss per share are the same as the effect of stock options, warrants, and preferred stock are antidilutive. The calculation of weighted average shares outstanding – diluted is as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Net income (loss) attributable to common stockholders | $ | 34,000 | $ | 14,000 | $ | (868,000 | ) | $ | 303,000 | ||||||||
Denominator: | |||||||||||||||||
Weighted average shares outstanding - basic | 12,627,864 | 11,501,152 | 12,498,935 | 11,155,860 | |||||||||||||
Effect of dilutive instruments: | |||||||||||||||||
Warrants and options | 868,850 | 787,351 | – | 550,326 | |||||||||||||
Weighted average shares outstanding-diluted | 13,496,714 | 12,288,503 | 12,498,935 | 11,706,186 | |||||||||||||
At September 30, 2013, the Company had potentially dilutive securities that consisted of: | |||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Warrants | 211,182 | 361,916 | |||||||||||||||
Options | 657,668 | 778,667 | |||||||||||||||
Series A Preferred Stock | 41,644 | 101,644 | |||||||||||||||
Series B Preferred Stock | – | 342,895 | |||||||||||||||
Total | 910,494 | 1,585,122 | |||||||||||||||
Recent Accounting Pronouncements | ' | ||||||||||||||||
There are recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC"), such pronouncements are not believed by management to have a material impact on the Company's present or future financial statements. | |||||||||||||||||
Concentrations | ' | ||||||||||||||||
The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company may be exposed to risk for the amounts of funds held in one bank in excess of the insurance limit. In assessing the risk, the Company’s policy is to maintain cash balances with high quality financial institutions. The Company had cash balances in excess of the guarantee during the three and nine months ended September 30, 2013. | |||||||||||||||||
During the three months ended September 30, 2013, the Company had one customer which accounted for approximately 33% of sales, and in the three months ended September 30, 2012 two customers who accounted for approximately 30% and 11% of sales. During the nine months ended September 30, 2013, the Company had one customer, which accounted for approximately 34% of sales, and during the nine months ended September 30, 2012 the Company had two customers who accounted for approximately 31% and 11% of sales. No other customers accounted for more than 10% of sales in either year. As of September 30, 2013, the Company had accounts receivable due from a customer who comprised $734,000 (21%) of its total accounts receivable and as of December 31, 2012 the Company had accounts receivable due from two customers who comprised $475,000 (27%), and $264,000 (15%), respectively, of its total accounts receivable. | |||||||||||||||||
During the three months ended September 30, 2013, the Company had one vendor which accounted for approximately 31% of all purchases, and in the three months ended September 30, 2012 one vendor who accounted for approximately 35% of all purchases. During the nine months ended September 30, 2013, the Company had one vendor, which accounted for approximately 29% of all purchases, and during the nine months ended September 30, 2012 the Company had one vendor who accounted for approximately 35% of all purchases. No other vendor accounted for more than 10% of all purchases in either year. As of September 30, 2013, the Company had accounts payable due to a vendor who comprised 35% of its total accounts payable and as of December 31, 2012 the Company had accounts payable due to one vendor who comprised 27% of its total accounts payable. No other account was in excess of 10% of the balance of accounts payable as of September 30, 2013 and December 31, 2012. | |||||||||||||||||
Advertising | ' | ||||||||||||||||
Advertising costs are expensed as incurred. For the three months ended September 30, 2013 and 2012, advertising costs were $38,000 and $48,000, respectively, and for the nine months ended September 30, 2013 and 2012, advertising costs were $90,000 and $73,000, respectively. | |||||||||||||||||
Comprehensive Income | ' | ||||||||||||||||
For the three and nine months ended September 30, 2013 and 2012, the Company had no items of comprehensive income. | |||||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||||
The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. Authoritative guidance provided by the FASB defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets: | |||||||||||||||||
Level 1—Quoted prices in active markets for identical assets or liabilities. | |||||||||||||||||
Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. | |||||||||||||||||
Level 3—Unobservable inputs based on the Company's assumptions. | |||||||||||||||||
The Company had no such assets or liabilities recorded to be valued on the basis above at September 30, 2013 or December 31, 2012. |
1_Basis_of_Presentation_Tables
1. Basis of Presentation (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Income (Loss) per Common Share | ' | ||||||||||||||||
The calculation of weighted average shares outstanding – diluted is as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Net income (loss) attributable to common stockholders | $ | 34,000 | $ | 14,000 | $ | (868,000 | ) | $ | 303,000 | ||||||||
Denominator: | |||||||||||||||||
Weighted average shares outstanding - basic | 12,627,864 | 11,501,152 | 12,498,935 | 11,155,860 | |||||||||||||
Effect of dilutive instruments: | |||||||||||||||||
Warrants and options | 868,850 | 787,351 | – | 550,326 | |||||||||||||
Weighted average shares outstanding-diluted | 13,496,714 | 12,288,503 | 12,498,935 | 11,706,186 | |||||||||||||
Potentially dilutive securities | ' | ||||||||||||||||
At September 30, 2013, the Company had potentially dilutive securities that consisted of: | |||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Warrants | 211,182 | 361,916 | |||||||||||||||
Options | 657,668 | 778,667 | |||||||||||||||
Series A Preferred Stock | 41,644 | 101,644 | |||||||||||||||
Series B Preferred Stock | – | 342,895 | |||||||||||||||
Total | 910,494 | 1,585,122 |
2_Inventory_Tables
2. Inventory (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsExercisableWeightedAverageRemainingContractualTerm2 | ' | ||||||||
Inventory | ' | ||||||||
Inventory consists of the following as of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw Materials and packaging | $ | 3,961,000 | $ | 3,524,000 | |||||
Finished Goods | 2,744,000 | 2,270,000 | |||||||
$ | 6,705,000 | $ | 5,794,000 |
3_Property_and_Equipment_Table
3. Property and Equipment (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and equipment table | ' | ||||||||
Property and equipment are comprised of the following as of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Land | $ | 1,108,000 | $ | 1,108,000 | |||||
Building | 1,802,000 | 1,737,000 | |||||||
Vehicles | 337,000 | 320,000 | |||||||
Machinery and equipment | 2,545,000 | 2,174,000 | |||||||
Office equipment | 441,000 | 434,000 | |||||||
6,233,000 | 5,773,000 | ||||||||
Accumulated depreciation | (2,662,000 | ) | (2,351,000 | ) |
5_Term_Loan_Tables
5. Term Loan (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Term Loan | ' | ||||||||
Term Loan | ' | ||||||||
On May 1, 2013 the term loan was increased to $750,000. Other terms of the term loan remain the same. The term loan bears interest at the prime rate plus 11.6%, which shall not be below 14.85%, is secured by all of the unencumbered assets of the Company, and is to be repaid in 48 equal installments of principal and interest of $21,000. | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Term loan | $ | 684,000 | $ | 575,000 | |||||
Less current portion | (159,000 | ) | (176,000 | ) | |||||
Long term debt | $ | 525,000 | $ | 399,000 |
6_Longterm_Financing_Obligatio1
6. Long-term Financing Obligation (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
ShareOutstandingExcercised | ' | ||||||||
Long-term Financing Obligation | ' | ||||||||
Long term financing obligation is comprised of the following as of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Financing obligation | $ | 2,808,000 | $ | 2,874,000 | |||||
Valuation discount | (538,000 | ) | (576,000 | ) | |||||
2,270,000 | 2,298,000 | ||||||||
Less current portion | (100,000 | ) | (90,000 | ) | |||||
Long term financing obligation | $ | 2,170,000 | $ | 2,208,000 |
8_Stock_Based_Compensation_Tab
8. Stock Based Compensation (Tables) | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Stock Based Compensation | ' | ||||||||||||||
Stock option activity | ' | ||||||||||||||
Stock options granted under our equity incentive plans generally vest over 2 to 3 years from the date of grant, 1/2 and 1/3 per year, respectively; and expire 5 years from the date of grant. The following table summarizes stock option activity for the nine months ended September 30, 2013: | |||||||||||||||
Shares | Weighted-Average | Weighted-Average | Aggregate | ||||||||||||
Exercise Price | Remaining | Intrinsic | |||||||||||||
Contractual | Value | ||||||||||||||
Terms (Years) | |||||||||||||||
Outstanding at December 31, 2012 | 607,000 | $1.27 | |||||||||||||
Granted | 394,000 | $4.16 | |||||||||||||
Exercised | -343,332 | $1.13 | |||||||||||||
Forfeited or expired | - | - | |||||||||||||
Outstanding at September 30, 2013 | 657,668 | $3.07 | 4.1 | $1,626,000 | |||||||||||
Exercisable at September 30, 2013 | 154,085 | $2.34 | 3.5 | $ 468,000 | |||||||||||
Stock options outstanding and exercisable | ' | ||||||||||||||
The following table summarizes information about stock options at September 30, 2013: | |||||||||||||||
Options Outstanding at September 30, 2013 | Options Exercisable at | ||||||||||||||
30-Sep-13 | |||||||||||||||
Range of Exercise | Number of Shares | Weighted Average | Weighted | Number | Weighted | ||||||||||
Price | Outstanding | Remaining | Average | of Shares | Average | ||||||||||
Contractual Life (years) | Exercise Price | Exercisable | Exercise | ||||||||||||
Price | |||||||||||||||
$0.01 - $1.99 | 198,668 | 3.4 | $1.28 | 68,667 | $1.44 | ||||||||||
$2.00 - $4.99 | 459,000 | 4.5 | $3.85 | 85,418 | $3.00 | ||||||||||
657,668 | 154,085 | ||||||||||||||
Stock Warrants | ' | ||||||||||||||
During the nine months ended September 30, 2013, 106,071 warrants were exercised at prices of $2.10 and $2.25. The Company received $75,000 and issued 79,416 shares of common stock. The following table summarizes stock warrant activity for the nine months ended September 30, 2013: | |||||||||||||||
Shares | Weighted-Average | Weighted-Average | Aggregate | ||||||||||||
Exercise Price | Remaining | Intrinsic | |||||||||||||
Contractual | Value | ||||||||||||||
Terms (Years) | |||||||||||||||
Outstanding at December 31, 2012 | 317,253 | $2.40 | |||||||||||||
Granted | – | - | |||||||||||||
Exercised | (106,071 | ) | $2.16 | ||||||||||||
Forfeited or expired | – | - | |||||||||||||
Outstanding at September 30,2013 | 211,182 | $2.52 | 2.2 | $ | 641,000 | ||||||||||
Exercisable at September 30,2013 | 211,182 | $2.52 | 2.2 | $ | 641,000 |
9_Income_Taxes_Tables
9. Income Taxes (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Income Taxes Tables | ' | ||||||||||||||||
Reconciles the U.S. statutory rates | ' | ||||||||||||||||
The following table reconciles the U.S. statutory rates to the Company's effective tax rate for the: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
30-Sep | 30-Sep | ||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
U.S. statutory rate | 34 | % | 34 | % | 34 | % | 34 | % | |||||||||
State tax net of federal benefit | 5 | % | 5 | % | 5 | % | 5 | % | |||||||||
Benefit of net operating loss carryforward | (39 | )% | (39 | )% | (39 | )% | (39 | )% | |||||||||
Valuation allowance | – | – | – | – | |||||||||||||
Effective tax rate | -% | -% | -% | -% |
1_Basis_of_Presentation_Detail
1. Basis of Presentation (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Basis Of Presentation Details | ' | ' | ' | ' |
Net (loss) income attributable to common stockholders | $34,000 | $14,000 | ($868,000) | $303,000 |
Denominator: | ' | ' | ' | ' |
Weighted average shares outstanding - basic | 12,627,864 | 11,501,152 | 12,498,935 | 11,155,860 |
Effect of dilutive instruments: | ' | ' | ' | ' |
Warrants and options | $868,850 | $787,351 | ' | $550,326 |
Weighted average shares outstanding-diluted | 13,496,714 | 12,288,503 | 12,498,935 | 11,706,186 |
1_Basis_of_Presentation_Detail1
1. Basis of Presentation (Details1) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Summary of potentially dilutive securities | ' | ' |
Potentially dilutive securities | 910,494 | 1,585,122 |
Warrant | ' | ' |
Summary of potentially dilutive securities | ' | ' |
Potentially dilutive securities | 211,182 | 361,916 |
Stock Option | ' | ' |
Summary of potentially dilutive securities | ' | ' |
Potentially dilutive securities | 657,668 | 778,667 |
Series A Preferred Stock | ' | ' |
Summary of potentially dilutive securities | ' | ' |
Potentially dilutive securities | 41,644 | 101,644 |
Series B Preferred Stock | ' | ' |
Summary of potentially dilutive securities | ' | ' |
Potentially dilutive securities | ' | 342,895 |
1_Basis_of_Presentation_Detail2
1. Basis of Presentation (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | |
Customer One | Customer One | Customer One | Customer One | Customer Two | Customer Two | Customer A | Customer B | Customer C | Vendor One | Vendor One | Vendor One | Vendor One | vendor A | Vendor B | |||||
Percentage of sale accounted | ' | ' | ' | ' | 33.00% | 30.00% | 34.00% | 31.00% | 11.00% | 11.00% | ' | ' | ' | 31.00% | 35.00% | 29.00% | 35.00% | ' | ' |
Acccount recievables from customer | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $734,000 | $475,000 | $264,000 | ' | ' | ' | ' | ' | ' |
Major customers accounts receivable percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -21.00% | -27.00% | -15.00% | ' | ' | ' | ' | ' | ' |
Advertising costs | $38,000 | $48,000 | $90,000 | $73,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Major customers accounts payables percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 35.00% | 27.00% |
2_Inventory_Details
2. Inventory (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Summary of inventory | ' | ' |
Raw Materials and packaging | $3,961,000 | $3,524,000 |
Finished Goods | 2,744,000 | 2,270,000 |
Inventory, total | $6,705,000 | $5,794,000 |
3_Property_and_Equipment_Detai
3. Property and Equipment (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Property, Plant and Equipment [Abstract] | ' | ' |
Land | $1,108,000 | $1,108,000 |
Building | 1,802,000 | 1,737,000 |
Vehicles | 337,000 | 320,000 |
Machinery and equipment | 2,545,000 | 2,174,000 |
Office equipment | 441,000 | 434,000 |
Total property and equipment | 6,233,000 | 5,773,000 |
Accumulated depreciation | -2,662,000 | -2,351,000 |
Property, plant and equipment, net | $3,571,000 | $3,422,000 |
3_Property_and_Equipment_Detai1
3. Property and Equipment (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Property, Plant and Equipment [Abstract] | ' | ' |
Equipment held under capital leases | $322,000 | $309,000 |
Accumulated depreciation for assets held under capital lease | $208,000 | $149,000 |
4_Line_of_Credit_Details_Narra
4. Line of Credit (Details Narrative) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Revolving Credit Facility | Revolving Credit Facility | ||
Amount outstanding under line of credit facility | ' | $4,313,000 | $3,023,000 |
Availability on line of credit facility | ' | $365,000 | ' |
Interest rate on the revolving line of credit | 7.00% | ' | ' |
Line of credit expiration date | 7-Nov-14 | ' | ' |
5_Term_Loan_Details
5. Term Loan (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Summary of term loan | ' | ' |
Term loan | $684,000 | $575,000 |
Less current portion | -159,000 | -176,000 |
Long term debt | $525,000 | $399,000 |
6_Longterm_Financing_Obligatio2
6. Long-term Financing Obligation (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
ShareOutstandingExcercised | ' | ' |
Financing obligation | $2,808,000 | $2,874,000 |
Valuation discount | -538,000 | -576,000 |
Financing obligation, net of discount | 2,270,000 | 2,298,000 |
Less current portion | -100,000 | -90,000 |
Long term financing obligation | $2,170,000 | $2,208,000 |
6_Longterm_Financing_Obligatio3
6. Long-term Financing Obligation (Details Narrative) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
ShareOutstandingExcercised | ' | ' |
Amortization of valuation discount | $75,000 | $96,000 |
7_Stockholders_Equity_Details_
7. Stockholders' Equity (Details Narrative) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Common stock issued for services, Amount | $5,000 |
Common stock issued for services, Shares | 1,064 |
Series A Preferred Stock | ' |
Common stock paid for Series B preferred stock dividend, Amount | ' |
Common stock paid for Series B preferred stock dividend, Shares | ' |
Common stock issued for services, Amount | ' |
Common stock issued for services, Shares | ' |
Dividends accrued Preferred stock, Shares | 1,064 |
Series B Preferred Stock | ' |
Common stock issued upon conversion of Series B preferred stock, Shares | 45,602 |
Common stock paid for Series B preferred stock dividend, Shares | ' |
Common stock issued for services, Amount | ' |
Common stock issued for services, Shares | 319,214 |
Common Stock | ' |
Common stock paid for Series B preferred stock dividend, Amount | 74,000 |
Common stock paid for Series B preferred stock dividend, Shares | 47,890 |
Common stock issued for services, Amount | ' |
Common stock issued for services, Shares | 1,250 |
Common stock for services | $4 |
8_Stock_Based_Compensation_Det
8. Stock Based Compensation (Details) (Stock Option, USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Stock Option | ' |
Stock Options | ' |
Shares outstanding Beginning | 607,000 |
Shares granted | 394,000 |
Shares exercised | -343,332 |
Shares forfeited or expired | ' |
Shares outstanding Ending | 657,668 |
Shares exercisable | 154,085 |
Weighted Average Exercise Price | ' |
Weighted average exercise price of share outstanding Beginning | $1.27 |
Weighted average exercise price of share granted | $4.16 |
Weighted average exercise price of share exercised | $1.13 |
Weighted average exercise price of share forfeited or expired | ' |
Weighted average exercise price of share outstanding Ending | $3.07 |
Weighted average exercise price of share exercisable | $2.34 |
Weighted Average Remaining Contractual Terms | ' |
Weighted average remaining contractual terms of share outstanding | '4 years 1 month 6 days |
Weighted average remaining contractual terms of share exercisable | '3 years 6 months |
Aggregate Intrinsic Value | ' |
Aggregate intrinsic value of share outstanding | $1,626,000 |
Aggregate intrinsic value of share exercisable | $468,000 |
8_Stock_Based_Compensation_Det1
8. Stock Based Compensation (Details1) (USD $) | Sep. 30, 2013 |
Number of Shares Outstanding | 657,668 |
Number of Shares Exercisable | 154,085 |
$0.01-$1.99 | ' |
Range of Exercise Price Lower | 0.01 |
Range of Exercise Price Upper | 1.99 |
Number of Shares Outstanding | 198,668 |
Weighted Average Remaining Contractual Life (years) | '3 years 4 months 24 days |
Weighted Average Exercise Price | 1.28 |
Number of Shares Exercisable | 68,667 |
Weighted Average Exercise Price | 1.44 |
$2.00-$4.99 | ' |
Range of Exercise Price Lower | 2 |
Range of Exercise Price Upper | 2 |
Number of Shares Outstanding | 459,000 |
Weighted Average Remaining Contractual Life (years) | '4 years 6 months |
Weighted Average Exercise Price | 3.85 |
Number of Shares Exercisable | 85,418 |
Weighted Average Exercise Price | 3 |
8_Stock_Based_Compensation_Det2
8. Stock Based Compensation (Details 2) (Warrant, USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Warrant | ' |
Shares outstanding Beginning | 317,253 |
Shares granted | ' |
Shares exercised | ($106,071) |
Shares forfeited or expired | ' |
Shares outstanding Ending | 211,182 |
Shares exercisable | 211,182 |
Weighted average exercise price of share outstanding Beginning | $2.40 |
Weighted average exercise price of share granted | ' |
Weighted average exercise price of share exercised | $2.16 |
Weighted average exercise price of share forfeited or expired | ' |
Weighted average exercise price of share outstanding Ending | $2.52 |
Weighted average exercise price of share exercisable | $2.52 |
Weighted average remaining contractual terms of share outstanding | '2 years 2 months 12 days |
Weighted average remaining contractual terms of share exercisable | '2 years 2 months 12 days |
Aggregate intrinsic value of share outstanding | 641,000 |
Aggregate intrinsic value of share exercisable | $641,000 |
8_Stock_Based_Compensation_Det3
8. Stock Based Compensation (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Proceeds from options exercied | ' | ' | $105,000 | $135,000 |
Stock Option | ' | ' | ' | ' |
Incentive stock options, issued | ' | ' | 394,000 | ' |
Incentive stock options at the market price | ' | ' | $4 | ' |
Stock-based compensation expense recognized | 69,000 | 26,000 | 257,000 | 81,000 |
Aggregate value of unvested options | 797,000 | ' | 797,000 | ' |
Vesting period | ' | ' | '2-3 Years | ' |
Stock options exercised | ' | ' | 343,332 | ' |
Proceeds from options exercied | ' | ' | $30,000 | ' |
Options exercised | ' | ' | 30,000 | ' |
Options exercised, cashless | ' | ' | 308,332 | ' |
Common stock issued for exercise of options | ' | ' | 237,485 | ' |
Aggregate intrinsic value | ' | ' | $5.56 | ' |
Warrants exercised, per share | ' | ' | $2.10 | ' |
Warrants exercised, shares | ' | ' | 106,071 | ' |
Common stock issued upon exercise of warrants | ' | ' | 75,000 | ' |
Warrant | ' | ' | ' | ' |
Warrants exercised, per share | ' | ' | $2.25 | ' |
Common stock issued upon exercise of warrants | ' | ' | 79,416 | ' |
9_Income_Taxes_Details
9. Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Taxes Tables | ' | ' | ' | ' |
U.S. statutory rate | 3400.00% | 3400.00% | 3400.00% | 3400.00% |
State tax net of federal benefit | 500.00% | 500.00% | 500.00% | 500.00% |
Benefit of net operating loss carryforward | -3900.00% | -3900.00% | -3900.00% | -3900.00% |
Valuation allowance | ' | ' | ' | ' |
Effective tax rate | 0.00% | 0.00% | 0.00% | 0.00% |
9_Income_Taxes_Details_Narrati
9. Income Taxes (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Taxes Tables | ' | ' | ' | ' | ' |
Net income (loss) | $34,000 | $22,000 | $22,000 | ($863,000) | $342,000 |