Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Jun. 30, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | REED'S, INC. | |
Entity Central Index Key | 1,140,215 | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filer | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 25,970,000 | |
Entity Common Stock, Shares Outstanding | 24,619,591 | |
Trading Symbol | REED | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2,017 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 12,127,000 | $ 451,000 |
Accounts receivable, net of allowance for doubtful accounts and returns and discounts of $601,000 and $256,000, respectively | 2,691,000 | 2,485,000 |
Inventory, net of reserve for obsolescence of $509,000 and $115,000, respectively | 5,931,000 | 6,885,000 |
Prepaid expenses and other current assets | 199,000 | 500,000 |
Total Current Assets | 20,948,000 | 10,321,000 |
Property and equipment, net of accumulated depreciation and impairment reserves of $9,339,000 and $4,863,000, respectively | 353,000 | 7,726,000 |
Equipment held for sale, net | 2,370,000 | |
Intangible assets | 805,000 | 805,000 |
Total assets | 24,476,000 | 18,852,000 |
Current Liabilities: | ||
Accounts payable | 7,480,000 | 5,959,000 |
Accrued expenses | 220,000 | 215,000 |
Advances from officers | 277,000 | |
Line of credit | 3,301,000 | 4,384,000 |
Current portion of capital leases payable | 198,000 | 183,000 |
Current portion of long term financing obligation | 222,000 | 190,000 |
Current portion of bank notes | 6,947,000 | 953,000 |
Total current liabilities | 18,645,000 | 11,884,000 |
Capital leases payable, less current portion | 236,000 | 438,000 |
Long term financing obligation, less current portion, net of discount of $714,000 and $825,000, respectively | 1,250,000 | 1,363,000 |
Bank notes, less current portion | 5,919,000 | |
Convertible note to a related party | 3,690,000 | |
Warrant liability | 36,000 | 775,000 |
Other long term liabilities | 111,000 | 130,000 |
Total Liabilities | 23,968,000 | 20,509,000 |
Stockholders’ equity (deficit): | ||
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding | 94,000 | 94,000 |
Common stock, $.0001 par value, 40,000,000 shares authorized, 24,619,591 and 13,982,230 shares issued and outstanding, respectively | 2,000 | 1,000 |
Common stock issuable, 400,000 shares payable | 680,000 | |
Additional paid in capital | 49,833,000 | 29,971,000 |
Accumulated deficit | (50,101,000) | (31,723,000) |
Total stockholders’ equity (deficit) | 508,000 | (1,657,000) |
Total liabilities and stockholders’ equity (deficit) | $ 24,476,000 | $ 18,852,000 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts and returns and discounts | $ 601,000 | $ 256,000 |
Inventory, reserve for obsolescence net | 509,000 | 115,000 |
Property and equipment, accumulated depreciation | 5,414,000 | 4,603,000 |
Long term financing obligation, discount | $ 714,000 | $ 825,000 |
Series A Convertible Preferred stock, par value | $ 10 | $ 10 |
Series A Convertible Preferred stock, shares authorized | 500,000 | 500,000 |
Series A Convertible Preferred stock, shares issued | 9,411 | 9,411 |
Series A Convertible Preferred stock, shares outstanding | 9,411 | 9,411 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 24,619,591 | 13,982,230 |
Common stock, shares outstanding | 24,619,591 | 13,982,230 |
Common stock issuable shares | 400,000 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Net Sales | $ 37,714,000 | $ 42,472,000 |
Cost of goods sold | 30,821,000 | 33,230,000 |
Gross profit | 6,893,000 | 9,242,000 |
Operating expenses: | ||
Delivery and handling expense | 3,942,000 | 3,902,000 |
Selling and marketing expense | 3,021,000 | 3,701,000 |
General and administrative expense | 5,754,000 | 3,954,000 |
Impairment of assets | 5,925,000 | 484,000 |
Total operating expenses | 18,642,000 | 12,041,000 |
Loss from operations | (11,749,000) | (2,799,000) |
Interest expense | (3,491,000) | (1,978,000) |
Financing costs and warrant modification | (2,776,000) | |
Change in fair value of warrant liability | 3,275,000 | (232,000) |
Extinguishment of convertible note | (3,632,000) | |
Net loss | (18,373,000) | (5,009,000) |
Preferred Stock Dividends | (5,000) | (5,000) |
Net loss attributable to common stockholders | $ (18,378,000) | $ (5,014,000) |
Loss per share – basic and diluted | $ (1.24) | $ (0.37) |
Weighted average number of shares outstanding – basic and diluted | 14,775,828 | 13,619,930 |
Statements of Changes in Stockh
Statements of Changes in Stockholders' Equity (Deficit) - USD ($) | Common Stock [Member] | Preferred Stock [Member] | Common Stock Issuable [Member] | Additional Paid In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2015 | $ 1,000 | $ 94,000 | $ 27,399,000 | $ (26,709,000) | $ 785,000 | |
Balance, Shares at Dec. 31, 2015 | 13,160,860 | 9,411 | ||||
Fair value of common shares issued for services | 15,000 | 15,000 | ||||
Fair value of common shares issued for services, shares | 4,228 | |||||
Common shares issued upon exercise of warrants | 45,000 | 45,000 | ||||
Common shares issued upon exercise of warrants, shares | 16,260 | |||||
Common shares issued upon exercise of options | 71,000 | 71,000 | ||||
Common shares issued upon exercise of options, shares | 76,966 | |||||
Fair value of vested options | 658,000 | 658,000 | ||||
Common shares issued upon sale of securities | 1,687,000 | 1,687,000 | ||||
Common shares issued upon sale of securities, shares | 722,412 | |||||
Fair value vesting of warrants issued as debt discount | 91,000 | 91,000 | ||||
Series A preferred Stock dividend | 5,000 | (5,000) | ||||
Series A preferred Stock dividend, shares | 1,504 | |||||
Common shares issued for cash, shares | 76,966 | |||||
Premium related to the issuance of convertible note | ||||||
Net loss | (5,009,000) | (5,009,000) | ||||
Balance at Dec. 31, 2016 | $ 1,000 | $ 94,000 | 29,971,000 | (31,723,000) | (1,657,000) | |
Balance, Shares at Dec. 31, 2016 | 13,982,230 | 9,411 | ||||
Fair value of common shares issued for services | 99,000 | 99,000 | ||||
Fair value of common shares issued for services, shares | 62,365 | |||||
Common shares issued upon exercise of warrants | 1,650,000 | $ 1,650,000 | ||||
Common shares issued upon exercise of warrants, shares | 1,122,376 | |||||
Common shares issued upon exercise of options, shares | ||||||
Series A preferred Stock dividend | 5,000 | (5,000) | ||||
Series A preferred Stock dividend, shares | 1,640 | |||||
Common shares issued for cash | 200,000 | 200,000 | ||||
Common shares issued for cash, shares | 117,647 | |||||
Common shares issued for cash, net of offering costs | $ 1,000 | 12,886,000 | 12,887,000 | |||
Common shares issued for cash, net of offering costs, shares | 9,333,333 | |||||
Common stock issuable to the Board | $ 680,000 | 680,000 | ||||
Common stock issuable to the Board, shares | 400,000 | |||||
Fair value of vesting of options to employees and directors | 276,000 | 276,000 | ||||
Premium related to the issuance of convertible note | 1,423,000 | 1,423,000 | ||||
Extinguishment of warrant liability | 2,634,000 | 2,634,000 | ||||
Fair value of warrants issued for financing costs | 689,000 | 689,000 | ||||
Net loss | (18,373,000) | (18,373,000) | ||||
Balance at Dec. 31, 2017 | $ 2,000 | $ 94,000 | $ 400,000 | $ 49,833,000 | $ (50,101,000) | $ 508,000 |
Balance, Shares at Dec. 31, 2017 | 24,619,591 | 9,411 | 680,000 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (18,373,000) | $ (5,009,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 551,000 | 387,000 |
Amortization of debt discount | 1,379,000 | 255,000 |
Fair value of vested stock options issued to employees | 276,000 | 658,000 |
Common stock payable to the Board | 680,000 | |
Fair value of common stock issued for services | 99,000 | 15,000 |
Fair value of warrants issued as financing costs | 908,000 | |
Cost of the modifications of warrants | 1,868,000 | |
(Decrease) increase in allowance for doubtful accounts | 345,000 | (100,000) |
Increase in inventory reserve | 394,000 | |
Increase in reserve for impairment of assets | 5,925,000 | 484,000 |
Change in fair value of warrant liability | (3,275,000) | 232,000 |
Loss on extinguishment of debt | 3,632,000 | |
Loss on sale of equipment | 63,000 | |
Accrued interest on convertible note | 290,000 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (551,000) | 509,000 |
Inventory | 560,000 | 1,089,000 |
Prepaid expenses and other assets | 301,000 | 269,000 |
Accounts payable | 1,521,000 | (1,499,000) |
Accrued expenses | 34,000 | 17,000 |
Other long term liabilities | (49,000) | 160,000 |
Net cash used in operating activities | (3,422,000) | (2,533,000) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (813,000) | (410,000) |
Net cash used in investing activities | (813,000) | (410,000) |
Cash flows from financing activities: | ||
Advances from officers, net | 277,000 | |
Proceeds from warrant exercises | 1,650,000 | 116,000 |
Principal payments on capital expansion loan | (725,000) | (375,000) |
Proceeds from sale of common stock | 13,087,000 | 2,230,000 |
Proceeds from the issuance of convertible note | 3,083,000 | |
Principal repayments on long term financial obligation | (191,000) | (160,000) |
Principal repayments on capital lease payable | (187,000) | (174,000) |
Net repayments on line of credit | (1,083,000) | (59,000) |
Net cash provided by financing activities | 15,911,000 | 1,578,000 |
Net increase (decrease) in cash | 11,676,000 | (1,365,000) |
Cash at beginning of period | 451,000 | 1,816,000 |
Cash at end of period | 12,127,000 | 451,000 |
Supplemental disclosures of cash flow information: | ||
Interest | 1,806,000 | 1,746,000 |
Non Cash Investing and Financing Activities | ||
Property and equipment acquired through capital expansion loan | 723,000 | 2,442,000 |
Property and equipment acquired through capital lease obligations | 152,000 | |
Reclass of property to equipment held for sale | 4,370,000 | |
Fair value of note discount issued as a derivative | 3,083,000 | 91,000 |
Fair value of warrants granted as debt discount | 91,000 | |
Dividends payable in common stock | 5,000 | 5,000 |
Extinguishment of warrant liability | 2,634,000 | |
Premium related to the issuance of convertible note | $ 1,423,000 |
Operations and Liquidity
Operations and Liquidity | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Operations and Liquidity | (1) Operations and Liquidity A) Nature of Operations Reed’s Inc. (the “Company”) is the owner and maker of a leading portfolio of handcrafted, natural beverages in the natural and specialty foods industry, selling to specialty gourmet, natural food, retail, and convenience stores and restaurants nationwide and internationally. The Company’s two major core brands are Reed’s Ginger Beer and Virgil’s soda beverages. Reed’s Ginger Brews are unique in the beverage industry, being brewed, not manufactured, using fresh ginger, spices and fruits in a brewing process predating commercial soft drinks. Virgil’s sodas include award winning Root Beer and other soft drinks that are made using natural ingredients. B) Cash and Liquidity The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended December 31, 2017 the Company recorded a net loss of $18,373,000 and utilized cash in operations of $3,422,000. As of December 31, 2017, the Company had a cash balance of $12,127,000 and had available borrowing on our existing line of credit of $1,012,000. We estimate the Company currently has sufficient cash and liquidity to meet its anticipated working capital requirements for the next twelve months. The Company’s has a secured working capital facility with $3.3 million of outstanding borrowings at December 31, 2017, expiring in October 2018, which we believe will be renewed and or be replaced. In addition, the Company’s bank notes (“Notes”), totaling $6.9 million also become due in October 2018. The Company believes it can successfully restructure its debt before the Notes mature utilizing a combination of the cash on hand and or the cash realized from sale of the plant facility and other assets . Furthermore, the pending sale of the Company’s facility is expected to relieve the Company of its long term financial obligation. Historically, we have financed our operations primarily through private sales of common stock, issuance of preferred stock, a line of credit from a financial institution, and cash generated from operations. We anticipate our primary capital source will be positive cash flow from operations. If our sales goals do not materialize as planned, we believe the Company can reduce its operating costs and achieve positive cash flow from operations. However, we may not generate sufficient revenues from product sales in the future to achieve profitable operations. If we are not able to achieve profitable operations at some point in the future, or restructure our debt as planned, we may have insufficient working capital to maintain our operations as we presently intend to conduct them or to fund our expansion, marketing, and product development plans. There can be no assurance we will be able to obtain such financing on acceptable terms, or at all. As previously mentioned, the Company anticipates a closing of the sale of the Los Angeles plan to be completed in the summer 2018. These actions may lead to certain charges including, but not limited to additional cash-related expenses, non-cash impairment charges, discontinued operations and/or other costs in connection with exit and disposal activities. Such transactions will be recognized when appropriate and may require cash payments for obligations such as one-time employee involuntary termination benefits, lease and other contract termination costs, costs to close facilities, employee relocation costs and ongoing benefit arrangements. During the year ended December 31, 2017, the Company satisfied a listing deficiency with the NYSE. The listing criteria required the company to reach $6,000,000 in shareholder equity. During the year end review of reserves for bad debt, inventory obsolescence, impairment reserve on property and equipment, and contingent liabilities the Company recognized non-cash adjustments that took the company below the continued listing criteria. The Company will continue to work with the NYSE to explore all options to remain listed should the NYSE find the Company deficient. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | (2) Significant Accounting Policies A) Use of Estimates 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 and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term assets and intangibles, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. B) Accounts Receivable The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding. The allowance for doubtful accounts and returns and discounts is established through a provision reducing the carrying value of receivables. At December 31, 2017 and 2016, the allowance for doubtful accounts and returns and discounts was approximately $601,000 and $256,000, respectively. C) Inventory Inventory is stated at the lower of cost to purchase and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and/or our ability to sell the product(s) concerned and production requirements. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. D) Property and Equipment and Related Depreciation Property and equipment is stated at cost. Expenditures for major renewals and improvements that extend the useful lives of property and equipment or increase production capacity are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is calculated using accelerated and straight-line methods over the estimated useful lives of the assets as follows: Property and Equipment Type Years of Depreciation Building 39 years Machinery and equipment 5-12 years Vehicles 5 years Office equipment 5-7 years Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the year ended December 31, 2016, the Company recognized a $260,000 charge for impairments for certain equipment considered obsolete since it would no longer be needed with the Los Angeles plant completion. On March 24, 2018, the Company received a letter of intent from a party, partially owned by Chris Reed, one of the Company’s officers and directors, for the purchase of substantially all of the assets of the Los Angeles plant. It is anticipated the Board of Directors will approve the offer and the sale will be completed in the summer of 2018. The letter of intent offers the Company $1,250,000 in cash for the LA plant buildings, equipment, and fixed assets. In addition, the Company will be relieved of the $1,400,000 long-term liability attached to the property. Based on the terms of the offer, the Company has recorded an impairment charge totaling $5,925,000, representing the difference between the offer terms and the net book value of the assets to be sold and the relief of the long-term liability. In 2016, the Company established a reserve totaling $260,000 for obsolete equipment deemed no longer needed with the Los Angeles plant completion. E) Intangible Assets and Impairment Policy Intangible assets are comprised of indefinite-lived brand names acquired and have been assigned an indefinite life as we currently anticipate these brand names will contribute cash flows to the Company perpetually. These indefinite-lived intangible assets are not amortized but are assessed for impairment annually and evaluated annually to determine whether the indefinite useful life is appropriate. As part of our impairment test, we first assess qualitative factors to determine whether it is more likely than not the indefinite-lived intangible asset is impaired. If further testing is necessary, we compare the estimated fair value of our indefinite-lived intangible asset with its book value. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, as determined by its discounted cash flows, an impairment loss is recognized in an amount equal to that excess. For the year ended December 31, 2016, the Company recognized an impairment charge of $224,000 for the China Cola brand. There were no impairment charges incurred during the year ended December 31, 2017. F) Concentrations The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $250,000 at December 31, 2017. The Company may be exposed to risk for the amounts of funds held in bank accounts more than 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 more than the guarantee during the years ended December 31, 2017 and 2016. During the year ended December 31, 2017, the Company had two customers who accounted for approximately 23% and 16% of its sales, respectively; and during the year ended December 31, 2016, the Company had two customers who accounted for approximately 22% and 12% of its sales, respectively. No other customer accounted for more than 10% of sales in either year. As of December 31, 2017, the Company had accounts receivable due from two customers who had balances totaling $823,000 and $450,000, respectively, representing 25% and 14% of total accounts receivable, respectively; and as of December 31, 2016, the Company had accounts receivable due from one customer who comprised $719,000 (25%) of its total accounts receivable. No other customer accounted for more than 10% of accounts receivable in either year. During the year ended December 31, 2017, the Company had utilized three separate co-pack packers for most its production and bottling of beverage products in the Eastern United States. Although there are other packers and the Company has outfitted our own brewery and bottling plant, a change in packers may cause a delay in the production process, which could ultimately affect operating results. During the years ended December 31, 2017 and 2016, the Company had one vendor which accounted for approximately 20% and 26%, respectively of its total purchases. At December 31, 2017, the Company had accounts payable due to one vendor who comprised 20% of its total accounts payable. At December 31, 2016, the Company had accounts payable due to two vendors who comprised 13% and 10% of its total accounts payable. No other account was more than 10% of the balance of accounts payable in either year. G) 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 carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of capital lease obligations, convertible note, and long-term financing obligations approximate their fair values since the interest rates on these obligations are based on prevailing market interest rates. The fair value of the warrant liability was estimated using Level 2 inputs to estimate the liability at December 31, 2017 and 2016 totaling $36,000 and of $775,000, respectively. H) Cost of Goods Sold Cost of goods sold is comprised of the costs of raw materials and packaging utilized in the manufacture of products, co-packing fees, repacking fees, in-bound freight charges, as well as certain internal transfer costs. Additionally, cost of goods sold consists of direct production costs in excess of charges allocated to finished goods in production. Plant costs include labor costs, production supplies, repairs and maintenance, direct inventory write-off charges and adjustments to the inventory reserve. Charges for labor and overhead allocated to finished goods are determined on a market cost basis, which may be lower than the actual costs incurred. Plant costs in excess of production allocations are expensed in the period incurred rather than added to the cost of finished goods produced. Expenses not related to the production of our products are classified as operating expenses. I) Delivery and Handling Expense Shipping and handling costs are comprised of purchasing and receiving costs, inspection costs, warehousing costs, transfer freight costs, and other costs associated with product distribution after manufacture and are included as part of operating expenses. J) Income Taxes The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. K) Revenue Recognition Revenue is recognized on the sale of a product when the risk of loss transfers to our customers, and collection of the receivable is reasonably assured, which generally occurs when the product is shipped. A product is not shipped without an order from the customer and credit acceptance procedures performed. The allowance for returns is regularly reviewed and adjusted by management based on historical trends of returned items. Amounts paid by customers for shipping and handling costs are included in sales. The Company accounts for certain sales incentives for customers, including slotting fees, as a reduction of gross sales. These sales incentives for the years ended December 31, 2017 and 2016 were approximately $4,004,000 and $3,726,000, respectively. L) Net Loss Per Share Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders 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 if their effect is antidilutive. For the years ended December 31, 2017 and 2016, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. The potentially dilutive securities consisted of the following: December 31, 2017 December 31, 2016 Convertible note 2,266,667 - Warrants 7,325,282 803,909 Series A Preferred Stock 37,644 37,644 Options 677,500 1,048,500 Total 10,307,093 1,890,053 M) Advertising Costs Advertising costs are expensed as incurred and are included in selling expense in the amount of $491,000 and $254,000, for the years ended December 31, 2017 and 2016, respectively. N) Stock Compensation Expense The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) whereas the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Options granted to non-employees are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods. O) Reclassification In presenting the Company’s Statement of Operations for the year ended December 31, 2016, the Company previously included a $260,000 charge for obsolete equipment in cost of goods sold and also included $254,000 of the amortization of a debt discount with respect to certain warrants in general and administrative expenses. In presenting the Company’s Statement of Operations for the years ended December 31, 2017 and 2016, the Company has reclassified the charge for the obsolete equipment to Impairment of assets and the amortization of the debt discount in interest expense. P) Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20 all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. The standard can be adopted either retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows but does not believe the adoption of this standard will have a material effect, if any. The Company will adopt the provisions of this statement in the first quarter of fiscal 2018. In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements. The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows. The Company will adopt the provisions of this statement in the first quarter of fiscal 2019 and believes that the adoption of this pronouncement will not have a material effect if any. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered, and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. The adoption of ASU 2017-11 is not expected to have a material impact on the Company’s financial position, results of operations, and cash flows. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventory | (3) Inventory Inventory is valued at the lower of cost (first-in, first-out) or market, and is comprised of the following: December 31, 2017 December 31, 2016 Raw Materials and Packaging $ 2,670,000 $ 3,874,000 Finished Goods 3,261,000 3,011,000 Total $ 5,931,000 $ 6,885,000 The Company has prepaid for glass raw materials at year end which will not be used until the following year. Total prepaid inventory at December 31, 2017 and 2016, totaled $40,000 and $294,000, respectively. The Company has recorded an obsolescence reserve for potentially slow moving and obsolete inventory. The reserve at December 31, 2017 and 2016, totaled $509,000 and $115,000, respectively. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | (4) Property and Equipment Property and equipment is comprised of the following: December 31, 2017 December 31, 2016 Land $ 1,107,000 $ 1,107,000 Building 2,360,000 1,875,000 Vehicles 568,000 600,000 Machinery and equipment 4,924,000 3,696,000 Equipment under capital leases 226,000 226,000 Office equipment 507,000 475,000 Construction In Progress - 4,610,000 Book value 9,692,000 12,589,000 Accumulated depreciation (5,414,000 ) (4,603,000 ) Impairment reserve (3,925,000 ) (260,000 ) Net book value $ 353,000 $ 7,726,000 On March 24, 2018, the Company received a letter of intent from a party, partially owned by Chris Reed, one of the Company’s current officers and directors, for the purchase of substantially all of the assets of the Los Angeles plant. It is anticipated the Board of Directors will approve the offer and the sale will be completed in the summer of 2018. The letter of intent offers the Company $1,250,000 in cash for the LA plant buildings, equipment, and fixed assets. In addition, the Company will be relieved of the $1,400,000 long-term liability attached to the property. Based on the terms of the offer, the Company has recorded an impairment charge totaling $5,925,000, representing the difference between the offer terms and the net book value of the assets to be sold and the relief of the long-term liability. In 2016, the Company established a reserve totaling $260,000 for obsolete equipment deemed no longer needed with the Los Angeles plant completion. Depreciation expense for the years ended December 31, 2017 and 2016 totaled $551,000 and $387,000, respectively. Accumulated depreciation on equipment held under capital leases totaled $414,000 and $226,000 as of December 31, 2017, and 2016, respectively. (See Note 7 Capital Leases Payable Equipment held for sale consists of the following: December 31, 2017 December 31, 2016 Equipment held for sale $ 4,370,000 $ - Reserve (2,000,000 ) - Net book value $ 2,370,000 $ - In 2017, the Company agreed to pre-pay the CAPEX Loan (See Note 6 Line of Credit and Bank Notes |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | (5) Intangible Assets Intangible assets consist of trademarks for the Company’s brand names: December 31, 2017 December 31, 2016 Virgil’s $ 576,000 $ 576,000 Sonoma Sparkler 229,000 229,000 Brand names $ 805,000 $ 805,000 Virgil’s and Sonoma Sparkler brand names are deemed to have indefinite lives and are not amortized, but are tested for impairment annually. For the year ended December 31, 2016, the Company recognized an impairment charge, completely writing off its China Cola Brand, totaling $224,000. No impairment charge was incurred for the year ended December 31, 2017. |
Line of Credit and Bank Notes
Line of Credit and Bank Notes | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Line of Credit and Bank Notes | (6) Line of Credit and Bank Notes The Company has a Loan and Security Agreement with PMC Financial Services Group, LLC (“PMC”) that provides a $6,000,000 revolving line of credit, a $3,000,000 term loan and a Capital Expansion loan up to $4,700,000. The loans are secured by substantially all the assets of the Company and were due on January 1, 2019. As a condition to PMC’s approval of the transaction described in Note 9 Convertible Note to a Related Party The Line of Credit and Bank Notes are as follows: Revolving Line of Credit - There is a monthly management fee of .45% of the average monthly loan balance. The revolving line of credit is based on 85% of accounts receivable and 60% of eligible inventory and is secured by substantially all of the Company’s assets. As of December 31, 2017, the Company had $1,012,000 of borrowing availability under the line of credit agreement. The line of credit matures on October 21, 2018 and is not subject to pre-payment penalty. Bank Notes December 31, 2017 December 31, 2016 Term Loans $ 3,000,000 $ 3,000,000 CAPEX loan 3,947,000 3,950,000 Valuation discount - (78,000 ) Net 6,947,000 6,872,000 Current portion (6,947,000 ) (953,000 ) Long term portion $ - $ 5,919,000 Term Loans: In connection with the Loan and Security Agreement with PMC, the Company entered into two Term Loans of $1,500,000 each, for an aggregate borrowing of $3,000,000. The term loans are secured by all of the unencumbered assets of the Company and are due October 21, 2018. The annual interest rate on the loans are discussed below. As of December 31, 2017, and 2016, the amount outstanding was $3,000,000 and $3,000,000 respectively. Capital Expansion (“CAPEX”) Loan: In connection with the Loan and Security Agreement with PMC, the Company entered into a Capital expansion loan which, after amendment, allows for total borrowings of $4,700,000. The loans are secured by all of the property and equipment purchased under the loan. The interest rate on the CAPEX loan is the prime rate plus 5.75% (9.5% at December 31, 2017). The entire CAPEX loan is due October 21, 2018. At December 31, 2017 and 2016, the balance on the CAPEX loan was $3,947,000 and $3,950,000 respectively, and as of December 31, 2017, the Company had no further borrowing availability. In 2017, the Company agreed to pre-pay the CAPEX Loan by at least $300,000 from the proceeds of the sale of idle equipment, when the sale should occur. In January 2018, $312,000 of equipment was sold and the CAPEX Loan was repaid for this amount. Valuation Discount (Issuance of Warrants upon Amendments): In prior years, the Company issued 225,000 warrants to PMC in connection with the restructuring of the notes. The aggregate value of the warrants was valued at $179,000 using the Black Scholes Merton option pricing model and was recorded as a valuation discount and has been amortized over the term loans. On December 7, 2016, the Company agreed to reprice the exercise price of 175,000 common stock purchase warrants granted. The incremental value of the PMC warrants before and after the modification of $38,000 is being amortized over the remaining term of the loans. As of December 31, 2016, the unamortized balance of the loans was $78,000. During the year ended 2017, the remaining unamortized balance was fully amortized. Interest Rates Notwithstanding the other borrowing terms above, if Excess Borrowing Availability under the $6 million Revolving line of credit remains more than $1,500,000 at all times during the preceding month (currently the Company has no further Borrowing Availability) the additional interest rate for all loans will be eliminated. The following chart summarizes borrowing rates for the loans as of December 31, 2017: Description Base Interest Rate Increase in Prime Current Original rate Additional Interest Current rate Line of Credit (Prime Plus) 3.60 % 1.25 % 4.85 % 3.00 % 7.85 % Term A 9.00 % 1.25 % 10.25 % 3.00 % 13.25 % Term B 11.60 % 1.25 % 12.85 % 3.00 % 15.85 % CAPEX Loan 9.00 % 1.25 % 10.25 % 3.00 % 13.25 % There is a .45% monthly monitoring fee for the line of credit. When added to current rate, the current annual rate on the line of credit is approximately 13.25%. |
Capital Leases Payable
Capital Leases Payable | 12 Months Ended |
Dec. 31, 2017 | |
Leases [Abstract] | |
Capital Leases Payable | (7) Capital Leases Payable The Company leases equipment for its brewery operations with an aggregate value of $944,000 under nine non-cancelable capital leases. Monthly payments range from $341 to $10,441 per month, including interest, at interest rates ranging from 6.51% to 17.31% per annum. The Company’s total payment obligation for the leases aggregates $19,000 per month at December 31, 2017. The leases expire at various dates through 2021. Future minimum lease payments under capital leases are as follows: Years Ending December 31, 2018 $ 227,000 2019 188,000 2020 59,000 2021 2,000 Total payments $ 476,000 Less: Amount representing interest (42,000 ) Present value of net minimum lease payments $ 434,000 Less: Current portion (198,000 ) Non-current portion $ 236,000 |
Long Term Financing Obligation
Long Term Financing Obligation | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Long Term Financing Obligation | (8) Long Term Financing Obligation Long term financing obligation is comprised of the following: December 31, 2017 2016 Financing obligation $ 2,186,000 $ 2,378,000 Valuation discount (714,000 ) (825,000 ) Net long term financing obligation $ 1,472,000 $ 1,553,000 Less current portion (222,000 ) (190,000 ) Long term financing obligation $ 1,250,000 $ 1,363,000 On June 15, 2009, the Company closed escrow on the sale of its 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, were originally recorded as a financing obligation in the amount of $3,056,000. Monthly payments under the financing agreement of approximately $35,000 are recorded as interest expense and a reduction in the financing obligation at an implicit rate of 9.9%. The financing obligation was personally guaranteed up to a limit of $150,000 by former Chief Executive Officer and current Chief Innovation Officer, Christopher J. Reed. In connection with the financing obligation and subsequent amendments, the Company issued an aggregate of 600,000 warrants to purchase its common stock. The 600,000 warrants were valued at an aggregate amount of $1,336,000 and were recorded as a valuation discount at the date of issuance, and are being amortized over 15 years, the term of the purchase option. The balance of the unamortized valuation discount at December 31, 2017 and 2016 was $714,000 and $825,000, respectively. Amortization of valuation discount was $110,000 for each of the years ended December 31, 2017 and 2016. The aggregate amount due under the financing obligation at December 31, 2017 and 2016 was $2,186,000 and $2,378,000, respectively. Aggregate future obligations under the financing obligation are as follows: Year Amount 2018 222,000 2019 259,000 2020 299,000 2021 344,000 2022 395,000 Thereafter 667,000 Total $ 2,186,000 |
Convertible Note to a Related P
Convertible Note to a Related Party | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Note to a Related Party | (9) Convertible Note to a Related Party The Convertible Note to a Related Party consists of the following: December 31, 2017 2016 12% Convertible Note Payable $ 3,400,000 $ - Accrued Interest 290,000 - Convertible Note Payable, Net $ 3,690,000 $ - On April 21, 2017 (“Closing Date”), pursuant to a Securities Purchase Agreement (“Purchase Agreement”), the Company sold and issued a secured, convertible, subordinated, non-redeemable note in the principal amount of $3,400,000 (“Note”) and a warrant to purchase 1,416,667 shares of common stock (“Warrant Shares”) to Raptor/Harbor Reeds SPV LLC (“Purchaser”). Raptor/Harbor Reeds owns 27.64% of the Company’s common stock at December 31, 2017. The Note bears interest at a rate of 12% per annum, compounded monthly on a 360-day year/ 30-day month basis. The Note is secured by a second priority security interest in the Company’s assets, which is subordinate to the first priority security interest of PMC Financial Services Group, LLC (“PMC”). The Note matures on the two-year anniversary of the Closing date and may not be prepaid. After 180 days, the Note may be converted, at any time and from time to time, into 1,133,333 shares of common stock of the Company (“Conversion Shares”). Wunderlich Securities, the Company’s placement agent, received a fee of $160,000 for placement agency services. In addition, the Company incurred other direct costs of $157,000 resulting in net proceeds to the Company of $3,083,000. The Warrant Shares will expire on the fifth (5th) anniversary of the Closing Date and have an exercise price equal to $4.00. The Warrant Shares will not be exercisable until 180 days after the Closing date. The Note and Warrant contain customary anti-dilution provisions and the Conversion Shares and Warrant Shares are subject to a registration rights agreement. The investor was granted a right to participate in future financing transactions of the Company for a term of two years. In addition, the warrants issued to the investor included a fundamental transaction provision, and, as such, were accounted for as warrant liability. Upon their issuance, the fair value of these warrants was determined to be $3,302,000 using the Black-Scholes-Merton option pricing model (see Note 10 for further discussion of warrant liability). In accordance with the current accounting guidance $3,083,000 of this amount was recorded as a valuation discount, and the excess of the fair value of the warrant liability at the issuance date over the amount allocated to valuation discount of $219,000 was accounted for as a financing cost. As such, the Company recognized a debt discount at the dates of issuance in the aggregate amount of $3,400,000 related to the fair value of the warrant liability of $3,083,000 and cash offering costs of $317,000. The debt discount is to be amortized over the term of the note. Amortization of the note discount through December 12, 2017 was $1,191,000 and the unamortized debt discount at that date was $2,209,000. On April 19, 2017, three accredited investors that are party to the Securities Purchase Agreement dated May 26, 2016 and hold participation rights in the Company’s financing transactions agreed to waive their participation rights with regard to the April 21, 2017 financing. In consideration, these investors’ participation rights, expiring in May 2017, were extended for a period of two years. In addition, the Company increased the terms of their outstanding warrants by one year and reduced the exercise price from $4.25 to $3.00, The incremental change in their fair value of $187,000 was accounted for as an increase in the fair value of the warrant liabilities as of the date of modification and recorded as a cost of warrant modification. In addition, the Company also issued five-year warrants to purchase an aggregate of 210,111 shares of common stock at the exercise price of $3.00 to these investors. The newly issued warrants contain customary anti-dilution provisions and included a fundamental transaction provision and were accounted for as warrant liability. As such, the fair value of the new warrants of $571,000 was accounted for as a warrant liability and a financing cost at the issue date. Fair value was determined using the Black-Scholes-Merton option pricing model. On July 13, 2017, the Company entered into warrant exercise agreements with the investors to reprice the warrants to purchase 1,416,667 related to the Purchase Agreement and the 210,111 shares of our common stock discussed above. On December 12, 2017, in connection with the reduction of the offering price in the Rights Offering (Note 11) to $1.50, the Company entered into an amendment to the Note further reducing the conversion price of the Note to $1.50. The Company analyzed whether the modifications of the conversion price of the Note would require application of the provisions of ASC Topic 470-50, Accounting for Modification [or Exchange] of Convertible Debt Instruments (“ASC 470-50”). Based on the Company’s analysis, the Company determined that such modification resulted in a change of more than 10% of the fair value of the Note, and as such, accounted for the transaction as an extinguishment. Extinguishment accounting requires the removal of old liability at carrying value and the establishment of the new note at fair value. The Company retained an independent third-party valuation firm to calculate for the fair value of the new note using discounted cash flow and Black Scholes methods and determined the fair value to be $4,823,000. As such, the original Note of $3,400,000 and corresponding unamortized discount of $2,209,000 was eliminated. Simultaneously, the new Note of $3,400,000 was recorded and a corresponding premium of $1,423,000, representing the excess of the fair value over the face value of the Note, was recorded to additional paid in capital in capital. The loss realized in connection with the extinguishment of the Note totaled $3,632,000 and is reflected in the accompanying Statement of Operations. |
Warrant Liability
Warrant Liability | 12 Months Ended |
Dec. 31, 2017 | |
Warrant Liability | |
Warrant Liability | (10) Warrant Liability Various stock sales made by the Company to finance operations have been accompanied by the issuance of warrants. Some of these warrant agreements contain fundamental transaction provisions which may give rise to an obligation of the Company to pay cash to the warrant holders. For accounting purposes, in accordance with ASC 480, Distinguishing Liabilities from Equity The fair value of the warrant liability was determined at the following reporting, issuance, and modification dates using the Black-Scholes-Merton option pricing model and the following assumptions: As of December 31, 2016 Upon Issuance April 21, 2017 Upon Modification April 21, 2017 Upon Modification July 13, 2017 As of December 31, 2017 (1) (2) (3) (4) (5) Stock Price $ 4.10 $ 4.75 $ 4.75 $ 2.35 $ 1.55 Risk free interest rate 1.58 % 1.51 % 1.51 % 1.65 % 1.74 % Expected Volitility 54.71 % 49.33 % 49.33 % 53.75 % 56.06 % Expected life in years 4.42 5.00 5.00 4.77 to 4.89 3.42 Expected dividend yield 0 % 0 % 0 % 0 % 0 % Number of Warrants 418,909 1,626,778 280,147 1,906,925 138,762 Fair Value of Warrants $ 775,000 $ 3,873,000 $ 187,000 $ 1,109,000 $ 36,000 (1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions. (2) On April 21, 2017 and April 19, 2017, the Company granted warrants to purchase 1,416,667 shares and 210,111 shares, respectively, of the Company’s common stock in connection with the Company’s issuance of the Convertible Note. The warrants included fundamental transaction provisions resulting in the total fair value of $3,873,000 to be classified as an increase to the warrant liability. On July 13, 2017, these warrants were repriced as discussed below. (3) On April 19, 2017, three accredited investors that are party to the Securities Purchase Agreement dated May 26, 2016 and hold participation rights in the Company’s financing transactions agreed to waive their participation rights with regard to the April 21, 2017 financing. In consideration, these investors’ participation rights, expiring in May 2017, were extended for a period of two years. In addition, on April 21, 2017, the Company increased the terms of their outstanding 280,147 warrants by one year and reduced the exercise price from $4.25 to $3.00, The incremental change in their fair value of $187,000 on the modification date was reported as an increase to the warrant liability. (4) On July 13, 2017, the Company entered into warrant exercise agreements with certain investors holding participation rights in our financing transactions to reprice warrants to purchase 1,906,925 shares of our common stock. The warrants’ exercise prices were lowered from $3 and $4 per share to $1.50 per share, and the incremental cost before and after the modification of the warrants resulted in an incremental charge of $1,109,000. The warrants were also changed to modify language pertaining to a “fundamental transaction,” eliminating the need to classify the warrants as a warrant liability. Upon modification, the investors exercised warrants into 1,122,376 shares of common stock at the repriced $1.50 per share resulting in proceeds to the Company of $1,650,000. The fair value of the warrant liability for these warrants at the date of exercise was $1,601,000 and was reclassified from the warrant liability to additional paid in capital. At the same date, the Company and the holders of the remaining warrants agreed to modify the language of the fundamental transaction clause for the remaining 784,549 investor warrants, where the definition became dependent on obtaining board approval, thus eliminating the need for the liability classification of warrants. Accordingly, the fair value of these warrants totaling $1,033,000 was reclassified from the warrant liability to additional paid in capital. (5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The change in the fair value of the warrant liability was $3,275,000 and $232,000 for the years ended December 31, 2017 and 2016, respectively. The risk-free interest rate used in the calculations was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the expected volatility. The expected life of the warrants was determined by the remaining contractual life of the warrant instrument. The expected dividend yield was determined to be zero since the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | (11) Stockholders’ Equity Series A Convertible Preferred Stock - The Series A Preferred shares have a 5% pro-rata annual non-cumulative dividend. The dividend can be paid in cash or, in the sole and absolute discretion of our board of directors, in shares of common stock based on its then fair market value. The Company cannot declare or pay any dividend on shares of our securities ranking junior to the preferred stock until the holders of the preferred stock have received the full non-cumulative dividend to which they are entitled. In addition, the holders of the preferred stock are entitled to receive pro rata distributions of dividends on an “as converted” basis with the holders of our common stock. In the event of any liquidation, dissolution or winding up of the Company, or if there is a change of control event (as defined in the Certificate of Designations of Series A Preferred Stock), then, subject to the rights of the holders of our more senior securities, if any, the holders of Series A preferred stock are entitled to receive, prior to the holders of any junior securities, $10.00 per share plus all accrued and unpaid dividends. Thereafter, all remaining assets shall be distributed pro rata among all security holders. Since June 30, 2008, the Company has the right, but not the obligation, to redeem all or any portion of the Series A preferred stock by paying the holders thereof the sum of the original purchase price per share, which was $10.00, plus all accrued and unpaid dividends. The Series A preferred stock may be converted, at the option of the holder, at any time after issuance and prior to the date such stock is redeemed, into four shares of common stock, subject to adjustment in the event of stock splits, reverse stock splits, stock dividends, recapitalization, reclassification, and similar transactions. The Company is obligated to reserve authorized but unissued shares of common stock enough such shares to affect the conversion of all outstanding shares of Series A preferred stock. Except as provided by law, the holders of our Series A preferred stock do not have the right to vote on any matters, including, without limitation, the election of directors. However, so long as any shares of Series A preferred stock are outstanding, the Company shall not, without first obtaining the approval of at least a majority of the holders of the Series A preferred stock, authorize or issue any equity security having a preference over the Series A preferred stock with respect to dividends, liquidation, redemption or voting, including any other security convertible into or exercisable for any equity security other than any senior preferred stock. The Company accrued and paid a $5,000 dividend Common Stock - Common Stock Issued in Connection with the Rights Offering – On December 6, 2017, the Company entered into a definitive backstop commitment agreement (“Backstop Agreement”) with Raptor/ Harbor Reeds SPV LLC (“Raptor”) whereby Raptor agreed to purchase from the Company a minimum of $6 million of unregistered units not subscribed in the Rights Offering in a private placement, subject to customary terms and conditions. Raptor had the right to exercise its basic subscription right and over-subscription privilege as a rights holder in the Rights Offering (subject to pro-ration) but had no obligation to do so. As compensation for the backstop commitment and subject to the closing of the Rights Offering, the Company issued to Raptor, five-year warrants to purchase a minimum of 750,000 shares of the Company’s common stock. Based on the completion of the Rights Offering because the offering was oversubscribed, Raptor did not purchase any unregistered units in a private placement under the provisions of the Backstop Agreement. In connection with the offering, the Company also agreed to register the shares of common stock underlying the units (including shares of common stock underlying the warrants contained in the units) and shares of common stock underlying the backstop warrants. The Company registered the shares in February 2018. Common Stock Issued Pursuant to a Dealer-Manager Agreement in the Rights Offering - In connection with the DM Agreement, the Company agreed to pay to Maxim as the dealer-manager, a cash fee equal to: (i) 7% of the gross proceeds received by the Company directly from exercises of the subscription rights, other than from exercises by our officers and directors or Raptor /Harbor Reed’s SPV LLC (“Raptor”), (ii) 4% of the gross proceeds received from certain investors having prior existing relationships with the Company, and (iii) 2% of the gross proceeds received by the Company from the backstop commitment, as described below, or from Raptor’s exercise of the subscription rights. The Company paid Maxim $830,000 for it DM agreement and an additional $75,000 for expenses for a total of $905,000. Additionally, the Company has granted to Maxim the right of participation to act as book runner or co-manager with at least 25.0% of the economics for any and all future equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by the Company or any of the Company’s subsidiaries or successor entities until December 11, 2018. The Company has agreed to indemnify Maxim and its respective affiliates against certain liabilities arising under the Securities Act of 1933, as amended. Maxim’s participation in the offering is subject to customary conditions contained in the DM Agreement, including the receipt by Maxim of an opinion of the Company’s counsel. Maxim and its affiliates may also provide to the Company from time to time in the future, in the ordinary course of their business, certain financial advisory, investment banking and other services for which Maxim will be entitled to receive fees. Common Stock Issued in Connection with the Sale of Shares - In connection with the exercise of investor warrants, the Company issued 1,122,376 shares of its common stock at $1.50 per share with gross proceeds of $1,650,000. In 2016, the Company entered into a securities purchase agreement with institutional investors in a private financing transaction for the issuance and sale of 692,412 shares of the Company’s common stock and warrants to purchase 346,206 shares of common stock. The Company also sold 30,000 shares of its common stock to certain officers of the Company at $3.90 per share with total proceeds of $117,000. The net proceeds to the Company from the sale of the shares totaled $1,687,000 after deducting underwriting discounts, commissions and offering expenses. Common Stock Issued for Services - During the year ended December 31, 2016, the Company issued 4,228 shares of common stock for consulting services valued at an aggregate value of $15,000 for services rendered. Common Stock Issuable – |
Stock Options and Warrants
Stock Options and Warrants | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options and Warrants | (12) Stock Options and Warrants Stock Options – Stock option activity consists of the following: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Terms (Years) Aggregate Intrinsic Value Outstanding at December 31, 2015 980,000 $ 3.96 Granted 172,500 4.01 Exercised (84,000 ) 1.36 Forfeited or expired (20,000 ) 4.92 Outstanding at December 31, 2016 1,048,500 4.68 3.80 $ 61,000 Granted 60,000 $ 2.20 Exercised - - Forfeited (431,000 ) 4.88 Outstanding at December 31, 2017 677,500 4.35 4.14 $ - Exercisable at December 31, 2017 475,400 4.41 3.41 $ - During the years ended December 31, 2017 and 2016, the Company granted 60,000 and 172,500 options, respectively, to purchase the Company’s common stock at a weighted average exercise price of $2.20 and $4.01, respectively, to employees under the Plans. The fair value of the options granted during the years ended December 31, 2017 and 2016 was $39,000 and $714,000, respectively. The weighted-average grant date fair value of options granted during 2017 and 2016 was $.65 and $4.01, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model using the assumptions noted in the following table. For purposes of determining the expected life of the option, an average of the estimated holding period is used. The risk-free rate for periods within the contractual life of the options is based on the U. S. Treasury yield in effect at the time of the grant. Year ended December 31, 2017 2016 Expected volatility 52 % 57 % Expected dividends — — Expected average term (in years) 2.00 1.77 Risk free rate - average 1.47 % 0.77%-1.81% Forfeiture rate 0 0 The aggregate fair value of the options vesting, net of forfeitures, during the years ended December 31, 2017 and 2016 was $276,000 and $658,000, respectively, and has been reported as compensation cost. As of December 31, 2017, the aggregate value of unvested options was $795,000 which will be amortized as compensation cost as the options vest, over 2 to 4 years. During the year ended December 31, 2016 there were 84,000 options exercised into 76,966 shares of common stock at an average price of $1.37. Most of these exercises were cash-less; however, the Company did receive proceeds from certain exercises aggregating $71,000. There were no options exercised in 2017. As of December 31, 2017, the aggregate intrinsic values of $0, for both outstanding and exercisable options, was calculated as the difference between the Company’s market price of $1.55 and the exercise price. Additional information regarding options outstanding and exercisable as of December 31, 2017, is as follows: Options Outstanding Options Exercisable Range of Exercise Price Number of Shares Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Number of Shares Exercisable Weighted Average Exercise Price $2.20-$3.74 202,500 $ 3.27 8.99 115,400 $ 3.45 $4.00 - $5.39 475,000 $ 4.80 2.07 360,000 $ 4.71 677,500 $ 4.35 4.14 475,400 $ 4.41 A summary of the status of the Company’s non-vested shares granted under the Company’s stock option plan as of December 31, 2017 and changes during the year then ended is as follows: Shares Weighted- Average Grant Date Fair Value Nonvested at December 31, 2016 504,966 4.68 Granted 60,000 0.65 Vested 68,134 4.88 Forfeited (431,000 ) 3.95 Nonvested at December 31, 2017 202,100 4.35 On January 10, 2018, pursuant to its employment agreement dated June 28, 2017 with Valentin Stalowir, Chief Executive Officer, the Company’s board of directors granted to Mr. Stalowir 371,218 restricted stock units and options to purchase 371,218 shares of stock. The securities are to be issued pursuant to Reed’s 2017 Incentive Compensation Plan. The options will have an exercise price of $1.70. Other terms of the granted securities will be set by the Company’s compensation committee in compliance with the 2017 Incentive Compensation Plan. Warrants Warrant activity is as follows: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Terms (Years) Aggregate Intrinsic Value Outstanding at December 31,2015 341,261 $ 5.17 3.30 $ 152,000 Granted 478,909 $ 4.50 Exercised (16,260 ) $ 2.77 Forfeited or expired (1 ) Outstanding at December 31, 2016 803,909 $ 4.50 4.00 $ 26,000 Granted 7,643,749 $ 1.95 Exercised (1,122,376 ) $ 1.50 Forfeited or expired - $ - Outstanding at December 31, 2017 7,325,282 $ 2.09 3.43 $ 115,955 Exercisable at December 31, 2017 1,395,246 $ 2.68 3.76 $ 78,374 Stock sales made by the Company to finance operations have been accompanied by the issuance of warrants. For warrants issued in connection with these transactions see Note 9 Convertible Note to a Related Party Note 11 Stockholders’ Equity The aggregate intrinsic value was calculated as the difference between the closing market price, which was $1.55, and the exercise price of the Company’s common stock warrants as of December 31, 2017. On April 21, 2017 (“Closing Date”), in connection with the issuance of a secured convertible subordinated non-redeemable note (See Note 9 Convertible Note to a Related Party On April 19, 2017, three accredited investors that are party to the Securities Purchase Agreement dated May 26, 2016 and hold participation rights in the Company’s financing transactions agreed to waive their participation rights with regard to the April 21, 2017 financing. In consideration, these investors’ participation rights, expiring in May 2017, were extended for a period of two years. In addition, the Company increased the terms of their outstanding 280,147 warrants by one year and reduced the exercise price from $4.25 to $3.00, The incremental change in their fair value of $187,000 was accounted for as an increase in the fair value of the warrant liabilities as of the date of modification and recorded as a cost of warrant modification. In addition, the Company also issued five-year warrants to purchase an aggregate of 210,111 shares of common stock at the exercise price of $3.00 to these investors. The newly issued warrants contain customary anti-dilution provisions and included a fundamental transaction provision and were accounted for as warrant liability. As such, the fair value of the new warrants of $571,000 was accounted for as a warrant liability and a financing cost at the issue date. The fair value was determined using the Black-Scholes-Merton option pricing model. On July 13, 2017, the Company entered into warrant exercise agreements with certain investors holding participation rights in our financing transactions to reprice warrants to purchase 1,906,925 shares of our common stock. The warrants’ exercise prices were lowered from $3 and $4 per share to $1.50 per share, The Company determined the incremental cost before and after the modification of the warrants resulted in an incremental charge of $1,109,000. The warrants were also changed to modify language pertaining to a “fundamental transaction” eliminating the need to classify the warrants as warrant liabilities. Upon modification, the investors exercised warrants into 1,122,376 shares of common stock at the repriced $1.50 per share resulting in proceeds to the Company of $1,650,000. The Company’s modification of the fundamental transaction clause enabled the remaining investor warrants of 784,549 with a fair value of $1,033,000 to be reclassified from a liability to equity. Additionally, as part of the warrant exercise agreements, the Company issued to the investors, pro rata based on the number of shares each investor exercised, a second tranche of warrants to purchase 512,560 shares of our common stock and on July 19, 2017 a third tranche of warrants to purchase 87,745 shares of our common stock. The second tranche of warrants have a term of 5 years, may be exercised commencing six months after issuance and have an exercise price of $2.00. The third tranche of warrants were exercisable immediately upon issuance for a term of 5 years and have an exercise price of $1.55. The newly issued warrants contain customary anti-dilution provisions. The aggregate fair value of the new warrants totaling $689,000 was determined using the Black-Scholes-Merton option pricing model with a volatility of 53.75% an interest free rate of 1.65% and a stock price of $2.35. The fair value of the warrants was reported as a financing costs on their respective issuance dates. Financing warrant costs totaled $1,480,000 for the year ended December 31, 2017. On December 28, 2017, in connection with the Rights Offering, the Company sold warrants to purchase 4,666,666 shares of common stock, with each warrant exercisable for one share of common stock at an exercise price of $2.025 per share. On December 28, 2017 as compensation for the backstop commitment and subject to the closing of the Rights Offering, the Company issued to Raptor, five-year warrants to purchase a minimum of 750,000 shares of the Company’s common stock, with each warrant exercisable for one share of common stock at an exercise price of $1.50 per share. On June 2, 2016, the Company granted warrants to purchase 346,206 shares of common stock in connection with the common stock offering. The warrants have an exercise price of $4.25 per share and a term of 5 years. In addition, the Company granted Maxim Group LLC who acted as the placement agent for the offering warrants to purchase up to 72,703 shares of common stock at an exercise price of $3.74 and are exercisable for a term of 5 years. During the year ended December 31, 2016, 16,260 warrants were exercised into 16,260 shares of common stock for $45,000. Warrants outstanding at December 31, 2017 and their respective exercise price and expiration dates are as follows: As of December 31, 2016 As of December 31, 2017 Number Price Expiration Dates Number Price Expiration Dates 200,000 5.60 Sep-19 200,000 $ 5.60 Sep-19 125,000 4.10 May-21 125,000 $ 4.10 May-21 10,000 3.90 Oct-21 10,000 $ 3.90 Oct-21 50,000 4.10 Nov-21 50,000 $ 4.10 Nov-21 418,909 $ 3.74 - 4.25 Jun-21 138,762 $ 3.74 - 4.25 Jun-21 - - - 784,549 $ 1.50 Apr-22 - - - 600,305 $ 1.55 - 2.00 Jul-22 - - - 4,666,666 $ 2.03 Dec-20 - - - 750,000 $ 1.50 Dec-22 803,909 7,325,282 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (13) Income Taxes At December 31, 2017 and 2016, the Company had available Federal and state net operating loss carryforwards to reduce future taxable income. The amounts available were approximately $34.8 million and $21.3 million for Federal purposes, respectively, and $18.2 million and $14.5 million for state purposes respectively. The Federal carryforward expires in 2034 and the state carryforward expires in 2019. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit. Due to the restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carry forwards, the utilization of the Company’s NOL may be limited to statutory limits as a result of recent change in stock ownership. NOLs incurred subsequent to the latest change in control, are not subject to the limitation. The Company recognizes tax benefits from uncertain tax positions 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. As of December 31, 2017 and 2016, the Company did not have a liability for unrecognized tax benefits. The Company recognizes as income tax expense, interest and penalties on uncertain tax provisions. As of December 31, 2017, and 2016, the Company has not accrued interest or penalties related to uncertain tax positions. Tax years 2010 through 2017 remain open to examination by the major taxing jurisdictions to which the Company is subject. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred tax asset at that time. Significant components of the Company’s deferred income tax assets are as follows: December 31, 2017 December 31 2016 Deferred income tax asset: Net operating loss carryforward $ 8,927,000 $ 10,325,000 Accounts receivable allowances 227,000 - Inventory reserves 148,000 - Reserve on asset impairment 655,000 - Total deferred tax asset 9,957,000 10,325,000 Valuation allowance (9,957,000 ) (10,325,000 ) Net deferred income tax asset $ - $ - Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows: December 31, 2017 December 31, 2016 Federal Statutory tax rate (34 %) (34 %) State tax, net of federal benefit (5 %) (5 %) (39 %) (39 %) Effect of change in tax rate 10 % -% Valuation allowance 29 % 39 % Effective tax rate -% -% |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (14) Commitments and Contingencies Lease Commitments The Company has leased warehouse space under non-cancelable operating leases in the past and is currently leasing facilities on a month to month basis. Rental expense under these agreements and other operating leases for the years ended December 31, 2017 and 2016 totaled $56,000 and $54,000, respectively. Other Commitments The Company has entered into contracts with customers with clauses committing the Company to pay fees if the Company terminates the agreement early or without cause. The contracts call for the customer to have the right to distribute the Company’s products to a defined type of retailer within a defined geographic region. If the Company should terminate the contract or not automatically renew the agreements without cause, amounts would be due to the customer. As of December 31,2017 and 2016, the Company has no plans to terminate or not renew any agreement with any of their customers; accordingly, no such fees have been accrued in the accompanying financial statements. Legal Proceedings From time to time, we are a party to claims and legal proceedings arising in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and provides for potential losses on such litigation if the amount of the loss is estimable and the loss is probable. We believe there are no material litigation matters at the current time. Although the results of such litigation matters and claims cannot be predicted with certainty, we believe the final outcome of such claims and proceedings will not have a material adverse impact on our financial position, liquidity, or results of operations. |
Related Party Activity
Related Party Activity | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Activity | (15) Related Party Activity During the year, Judy Reed, wife of Christopher J. Reed, served as Corporate Secretary along with being a member of the Board of Directors. Her replacement to the board was elected November 29, 2017 and she has agreed to remain as Corporate Secretary. Complete compensation information follows below in Part III. In 2017, Chris Reed (the former CEO and current CIO), Robert Reed (the brother of Chris Reed, CIO), and Dan Miles (CFO), collectively advanced $571,000 to the Company for working capital uses. In 2017, the Company repaid $240,000 to Robert Reed and subsequent to year end, in January 2018, the remaining balance was repaid to Chris Reed and Dan Miles. In 2017, the Company issued 4,300 shares of its common stock to a related party valued at $2.20 per share with an aggregate value of $9,000 for services rendered. In 2017, the Company entered into the following transactions with Raptor SPV LLC, in which Mr. Doherty has an indirect material interest as principal and significant shareholder of Raptor SPV LLC: On April 21, 2017, pursuant to a securities purchase agreement, Reed’s sold and issued a secured convertible subordinated non-redeemable note in the principal amount of $3,400,000 and a warrant to purchase 1,416,667 shares of common stock to Raptor SPV LLC. The note bears interest at a rate of 12% per annum, compounded monthly on a 360-day year/ 30-day month basis. The note is secured by a second priority security interest in the Company’s assets, which is subordinate to the first priority security interest of PMC Financial Services Group, LLC. The note may not be prepaid and originally matured on April 21, 2019. The maturity date was subsequently extended to April 21, 2021. The note may be converted, at any time and from time to time, into shares of common stock of the Company. The original conversion price of the note was $3.00, and this conversion price was subsequently reduced to $1.75, and again to $1.50. The warrant will expire on April 21, 2019 and had an original exercise price equal to $4.00 per share, which exercise price was subsequently reduced to $1.50. The note and warrant contain customary anti-dilution provisions and the shares of common stock issuable upon conversion of the note and exercise of the warrant have been registered on Form S-1. Raptor SPV LLC was also granted a right to participate in future financing transactions of the Company for a term of two years. In connection with the issuance of the note, the Company reimbursed Raptor SPV LLC direct costs totaling $157,000 incurred to issue the note. On July 13, 2017, we entered into a warrant exercise agreement with Raptor SPV LLC to induce Raptor to purchase 766,667 shares of our common stock. The repriced warrants have an exercise price per share of $1.50 and were revised to modify language pertaining to “Fundamental Transactions”. Restrictions upon exercise were waived as to the repriced warrants. Reed’s received gross proceeds of $1,150,000 from Raptor’s exercise of the repriced warrants. We also issued to the Raptor additional second tranche warrants to purchase up to 350,000 shares of our common stock and additional third tranche warrants to purchase up to 60,000 shares of our common stock. Second tranche warrants have a term of five years, may be exercised commencing 6 months from the date of issuance and have an exercise price equal to $2.00. The third tranche warrants were exercisable immediately upon issuance for a term of five-years, with an exercise price equal to $1.55. Raptor SPV LLC was also granted the right to appoint a non-voting observer to our board of directors for so long as Raptor SPV LLC or its affiliates is a beneficial owner of our stock. As of the date hereof, Raptor SPV LLC has not made such an appointment. On December 6, 2017, we entered into a backstop agreement with Raptor, whereby Raptor agreed to purchase from us a minimum of $6 million of units pursuant to its subscription rights and in a private placement, subject to customary terms and conditions. In the rights offering, Raptor SPV LLC exercised its basic and over-subscription rights to purchase 2,666,667 units and acquired 2,666,667 shares of common stock and warrants to purchase up to 1,333,333 shares of common stock for an aggregate purchase price of $4,000,000. In addition, pursuant to the backstop commitment agreement, as amended, the Company issued to Raptor SPV LLC warrants to purchase 750,000 shares of common stock. These warrants have an exercise price equal to $1.50, are not exercisable for a term of 180 days from the date of issuance and have a cashless exercise feature and registration rights. We will be subject to certain liquidated damages if we do not register the warrant shares within the prescribed time frame. Subsequent to year end, in January 2018, the board of directors appointed Daniel J. Doherty III to serve as a director. Mr. Doherty is a principal and significant shareholder of Raptor/ Harbor Reeds, SPV, LLC (“Raptor”), the Company’s largest shareholder. Mr. Doherty has joint voting and dispositive control of the equity securities held by Raptor with another of its principals. On March 24, 2018, the Company received a letter of intent from a party, partially owned by Chris Reed, one of the Company’s current officers and directors, for the purchase of substantially all of the assets of the Los Angeles plant. See further description regarding the offer in Note 4 Property and Equipment |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | (16) Subsequent Events On January 10, 2018, pursuant to its employment agreement dated June 28, 2017 with Valentin Stalowir, Chief Executive Officer, the Company’s board of directors granted to Mr. Stalowir 371,218 restricted stock units and options to purchase 371,218 shares of stock. The securities are to be issued pursuant to Reed’s 2017 Incentive Compensation Plan. The options will have an exercise price of $1.70. Other terms of the granted securities will be set by the Company’s compensation committee in compliance with the 2017 Incentive Compensation Plan. In 2017, the Company agreed to pre-pay the CAPEX Loan by at least $300,000 from the proceeds of the sale of idle equipment, when the sale should occur. In January 2018, $312,000 of equipment was sold and the CAPEX Loan was repaid for this amount. On January 10, 2018, the board of directors issued 400,000 shares of common stock at $1.70 per share totaling $680,000 to independent board members for past services provided in 2017. On March 24, 2018, the Company received a letter of intent from a party, partially owned by Chris Reed, one of the Company’s current officers and directors, for the purchase of substantially all of the assets of the Los Angeles plant. See further description regarding the offer in Note 4 Property and Equipment On March 28, 2018, the Company approved stock options to CEO Valentin Stalowir, to purchase 412,735 shares of common stock with a strike price of $1.60 that vest over four years with performance criteria approved by the Board. Mr. Stalowir also received 412,736 Restricted Stock Units; and stock options to purchase an aggregate of 982,000 shares of common stock (intended to be granted as incentive stock options, subject to the requirements of the plan and applicable law) to employees; and that non-statutory stock options to purchase an aggregate of 1,134,000 shares of common stock to employees listed as “Senior Management”, subject to applicable securities laws. The option portions are subject to performance based criteria approved by the Board of Directors. |
Significant Accounting Polici23
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Use of Estimates | A) Use of Estimates 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 and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term assets and intangibles, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services. |
Accounts Receivable | B) Accounts Receivable The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding. The allowance for doubtful accounts and returns and discounts is established through a provision reducing the carrying value of receivables. At December 31, 2017 and 2016, the allowance for doubtful accounts and returns and discounts was approximately $601,000 and $256,000, respectively. |
Inventory | C) Inventory Inventory is stated at the lower of cost to purchase and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and/or our ability to sell the product(s) concerned and production requirements. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. |
Property and Equipment and Related Depreciation | D) Property and Equipment and Related Depreciation Property and equipment is stated at cost. Expenditures for major renewals and improvements that extend the useful lives of property and equipment or increase production capacity are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is calculated using accelerated and straight-line methods over the estimated useful lives of the assets as follows: Property and Equipment Type Years of Depreciation Building 39 years Machinery and equipment 5-12 years Vehicles 5 years Office equipment 5-7 years Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the year ended December 31, 2016, the Company recognized a $260,000 charge for impairments for certain equipment considered obsolete since it would no longer be needed with the Los Angeles plant completion. On March 24, 2018, the Company received a letter of intent from a party, partially owned by Chris Reed, one of the Company’s officers and directors, for the purchase of substantially all of the assets of the Los Angeles plant. It is anticipated the Board of Directors will approve the offer and the sale will be completed in the summer of 2018. The letter of intent offers the Company $1,250,000 in cash for the LA plant buildings, equipment, and fixed assets. In addition, the Company will be relieved of the $1,400,000 long-term liability attached to the property. Based on the terms of the offer, the Company has recorded an impairment charge totaling $5,925,000, representing the difference between the offer terms and the net book value of the assets to be sold and the relief of the long-term liability. In 2016, the Company established a reserve totaling $260,000 for obsolete equipment deemed no longer needed with the Los Angeles plant completion. |
Intangible Assets and Impairment Policy | E) Intangible Assets and Impairment Policy Intangible assets are comprised of indefinite-lived brand names acquired and have been assigned an indefinite life as we currently anticipate these brand names will contribute cash flows to the Company perpetually. These indefinite-lived intangible assets are not amortized but are assessed for impairment annually and evaluated annually to determine whether the indefinite useful life is appropriate. As part of our impairment test, we first assess qualitative factors to determine whether it is more likely than not the indefinite-lived intangible asset is impaired. If further testing is necessary, we compare the estimated fair value of our indefinite-lived intangible asset with its book value. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, as determined by its discounted cash flows, an impairment loss is recognized in an amount equal to that excess. For the year ended December 31, 2016, the Company recognized an impairment charge of $224,000 for the China Cola brand. There were no impairment charges incurred during the year ended December 31, 2017. |
Concentrations | F) Concentrations The Company’s cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $250,000 at December 31, 2017. The Company may be exposed to risk for the amounts of funds held in bank accounts more than 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 more than the guarantee during the years ended December 31, 2017 and 2016. During the year ended December 31, 2017, the Company had two customers who accounted for approximately 23% and 16% of its sales, respectively; and during the year ended December 31, 2016, the Company had two customers who accounted for approximately 22% and 12% of its sales, respectively. No other customer accounted for more than 10% of sales in either year. As of December 31, 2017, the Company had accounts receivable due from two customers who had balances totaling $823,000 and $450,000, respectively, representing 25% and 14% of total accounts receivable, respectively; and as of December 31, 2016, the Company had accounts receivable due from one customer who comprised $719,000 (25%) of its total accounts receivable. No other customer accounted for more than 10% of accounts receivable in either year. During the year ended December 31, 2017, the Company had utilized three separate co-pack packers for most its production and bottling of beverage products in the Eastern United States. Although there are other packers and the Company has outfitted our own brewery and bottling plant, a change in packers may cause a delay in the production process, which could ultimately affect operating results. During the years ended December 31, 2017 and 2016, the Company had one vendor which accounted for approximately 20% and 26%, respectively of its total purchases. At December 31, 2017, the Company had accounts payable due to one vendor who comprised 20% of its total accounts payable. At December 31, 2016, the Company had accounts payable due to two vendors who comprised 13% and 10% of its total accounts payable. No other account was more than 10% of the balance of accounts payable in either year. |
Fair Value of Financial Instruments | G) 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 carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of capital lease obligations, convertible note, and long-term financing obligations approximate their fair values since the interest rates on these obligations are based on prevailing market interest rates. The fair value of the warrant liability was estimated using Level 2 inputs to estimate the liability at December 31, 2017 and 2016 totaling $36,000 and of $775,000, respectively. |
Cost of Goods Sold | H) Cost of Goods Sold Cost of goods sold is comprised of the costs of raw materials and packaging utilized in the manufacture of products, co-packing fees, repacking fees, in-bound freight charges, as well as certain internal transfer costs. Additionally, cost of goods sold consists of direct production costs in excess of charges allocated to finished goods in production. Plant costs include labor costs, production supplies, repairs and maintenance, direct inventory write-off charges and adjustments to the inventory reserve. Charges for labor and overhead allocated to finished goods are determined on a market cost basis, which may be lower than the actual costs incurred. Plant costs in excess of production allocations are expensed in the period incurred rather than added to the cost of finished goods produced. Expenses not related to the production of our products are classified as operating expenses. |
Delivery and Handling Expenses | I) Delivery and Handling Expense Shipping and handling costs are comprised of purchasing and receiving costs, inspection costs, warehousing costs, transfer freight costs, and other costs associated with product distribution after manufacture and are included as part of operating expenses. |
Income Taxes | J) Income Taxes The Company uses an asset and liability approach for financial accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. |
Revenue Recognition | K) Revenue Recognition Revenue is recognized on the sale of a product when the risk of loss transfers to our customers, and collection of the receivable is reasonably assured, which generally occurs when the product is shipped. A product is not shipped without an order from the customer and credit acceptance procedures performed. The allowance for returns is regularly reviewed and adjusted by management based on historical trends of returned items. Amounts paid by customers for shipping and handling costs are included in sales. The Company accounts for certain sales incentives for customers, including slotting fees, as a reduction of gross sales. These sales incentives for the years ended December 31, 2017 and 2016 were approximately $4,004,000 and $3,726,000, respectively. |
Net Loss Per Share | L) Net Loss Per Share Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders 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 if their effect is antidilutive. For the years ended December 31, 2017 and 2016, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. The potentially dilutive securities consisted of the following: December 31, 2017 December 31, 2016 Convertible note 2,266,667 - Warrants 7,325,282 803,909 Series A Preferred Stock 37,644 37,644 Options 677,500 1,048,500 Total 10,307,093 1,890,053 |
Advertising Costs | M) Advertising Costs Advertising costs are expensed as incurred and are included in selling expense in the amount of $491,000 and $254,000, for the years ended December 31, 2017 and 2016, respectively. |
Stock Compensation Expense | N) Stock Compensation Expense The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) whereas the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Options granted to non-employees are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods. |
Reclassification | O) Reclassification In presenting the Company’s Statement of Operations for the year ended December 31, 2016, the Company previously included a $260,000 charge for obsolete equipment in cost of goods sold and also included $254,000 of the amortization of a debt discount with respect to certain warrants in general and administrative expenses. In presenting the Company’s Statement of Operations for the years ended December 31, 2017 and 2016, the Company has reclassified the charge for the obsolete equipment to Impairment of assets and the amortization of the debt discount in interest expense. |
Recent Accounting Pronouncements | P) Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20 all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. The standard can be adopted either retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows but does not believe the adoption of this standard will have a material effect, if any. The Company will adopt the provisions of this statement in the first quarter of fiscal 2018. In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the financial statements. The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows. The Company will adopt the provisions of this statement in the first quarter of fiscal 2019 and believes that the adoption of this pronouncement will not have a material effect if any. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered, and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. The adoption of ASU 2017-11 is not expected to have a material impact on the Company’s financial position, results of operations, and cash flows. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Significant Accounting Polici24
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Estimated Useful Lives of Property and Equipment and Related Depreciation | Depreciation is calculated using accelerated and straight-line methods over the estimated useful lives of the assets as follows: Property and Equipment Type Years of Depreciation Building 39 years Machinery and equipment 5-12 years Vehicles 5 years Office equipment 5-7 years |
Schedule of Potentially Dilutive Securities | For the years ended December 31, 2017 and 2016, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. The potentially dilutive securities consisted of the following: December 31, 2017 December 31, 2016 Convertible note 2,266,667 - Warrants 7,325,282 803,909 Series A Preferred Stock 37,644 37,644 Options 677,500 1,048,500 Total 10,307,093 1,890,053 |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory is valued at the lower of cost (first-in, first-out) or market, and is comprised of the following: December 31, 2017 December 31, 2016 Raw Materials and Packaging $ 2,670,000 $ 3,874,000 Finished Goods 3,261,000 3,011,000 Total $ 5,931,000 $ 6,885,000 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment is comprised of the following: December 31, 2017 December 31, 2016 Land $ 1,107,000 $ 1,107,000 Building 2,360,000 1,875,000 Vehicles 568,000 600,000 Machinery and equipment 4,924,000 3,696,000 Equipment under capital leases 226,000 226,000 Office equipment 507,000 475,000 Construction In Progress - 4,610,000 Book value 9,692,000 12,589,000 Accumulated depreciation (5,414,000 ) (4,603,000 ) Impairment reserve (3,925,000 ) (260,000 ) Net book value $ 353,000 $ 7,726,000 |
Schedule of Equipment Held for Sale | Equipment held for sale consists of the following: December 31, 2017 December 31, 2016 Equipment held for sale $ 4,370,000 $ - Reserve (2,000,000 ) - Net book value $ 2,370,000 $ - |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets Trademarks | Intangible assets consist of trademarks for the Company’s brand names: December 31, 2017 December 31, 2016 Virgil’s $ 576,000 $ 576,000 Sonoma Sparkler 229,000 229,000 Brand names $ 805,000 $ 805,000 |
Line of Credit and Bank Notes (
Line of Credit and Bank Notes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Bank Notes | Bank Notes December 31, 2017 December 31, 2016 Term Loans $ 3,000,000 $ 3,000,000 CAPEX loan 3,947,000 3,950,000 Valuation discount - (78,000 ) Net 6,947,000 6,872,000 Current portion (6,947,000 ) (953,000 ) Long term portion $ - $ 5,919,000 |
Schedule of Interest Rates of Loans | The following chart summarizes borrowing rates for the loans as of December 31, 2017: Description Base Interest Rate Increase in Prime Current Original rate Additional Interest Current rate Line of Credit (Prime Plus) 3.60 % 1.25 % 4.85 % 3.00 % 7.85 % Term A 9.00 % 1.25 % 10.25 % 3.00 % 13.25 % Term B 11.60 % 1.25 % 12.85 % 3.00 % 15.85 % CAPEX Loan 9.00 % 1.25 % 10.25 % 3.00 % 13.25 % |
Capital Leases Payable (Tables)
Capital Leases Payable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments Under Capital Leases | Future minimum lease payments under capital leases are as follows: Years Ending December 31, 2018 $ 227,000 2019 188,000 2020 59,000 2021 2,000 Total payments $ 476,000 Less: Amount representing interest (42,000 ) Present value of net minimum lease payments $ 434,000 Less: Current portion (198,000 ) Non-current portion $ 236,000 |
Long Term Financing Obligation
Long Term Financing Obligation (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Long Term Financing Obligation | Long term financing obligation is comprised of the following: December 31, 2017 2016 Financing obligation $ 2,186,000 $ 2,378,000 Valuation discount (714,000 ) (825,000 ) Net long term financing obligation $ 1,472,000 $ 1,553,000 Less current portion (222,000 ) (190,000 ) Long term financing obligation $ 1,250,000 $ 1,363,000 |
Schedule of Aggregate Future Obligations Under the Financing Obligation | The aggregate amount due under the financing obligation at December 31, 2017 and 2016 was $2,186,000 and $2,378,000, respectively. Aggregate future obligations under the financing obligation are as follows: Year Amount 2018 222,000 2019 259,000 2020 299,000 2021 344,000 2022 395,000 Thereafter 667,000 Total $ 2,186,000 |
Convertible Note to a Related31
Convertible Note to a Related Party (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Notes | The Convertible Note to a Related Party consists of the following: December 31, 2017 2016 12% Convertible Note Payable $ 3,400,000 $ - Accrued Interest 290,000 - Convertible Note Payable, Net $ 3,690,000 $ - |
Warrant Liability (Tables)
Warrant Liability (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Warrant Liability | |
Schedule of Warrant Liability Using Assumptions | The fair value of the warrant liability was determined at the following reporting, issuance, and modification dates using the Black-Scholes-Merton option pricing model and the following assumptions: As of December 31, 2016 Upon Issuance April 21, 2017 Upon Modification April 21, 2017 Upon Modification July 13, 2017 As of December 31, 2017 (1) (2) (3) (4) (5) Stock Price $ 4.10 $ 4.75 $ 4.75 $ 2.35 $ 1.55 Risk free interest rate 1.58 % 1.51 % 1.51 % 1.65 % 1.74 % Expected Volitility 54.71 % 49.33 % 49.33 % 53.75 % 56.06 % Expected life in years 4.42 5.00 5.00 4.77 to 4.89 3.42 Expected dividend yield 0 % 0 % 0 % 0 % 0 % Number of Warrants 418,909 1,626,778 280,147 1,906,925 138,762 Fair Value of Warrants $ 775,000 $ 3,873,000 $ 187,000 $ 1,109,000 $ 36,000 |
Stock Options and Warrants (Tab
Stock Options and Warrants (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Stock Option Activity | Stock option activity consists of the following: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Terms (Years) Aggregate Intrinsic Value Outstanding at December 31, 2015 980,000 $ 3.96 Granted 172,500 4.01 Exercised (84,000 ) 1.36 Forfeited or expired (20,000 ) 4.92 Outstanding at December 31, 2016 1,048,500 4.68 3.80 $ 61,000 Granted 60,000 $ 2.20 Exercised - - Forfeited (431,000 ) 4.88 Outstanding at December 31, 2017 677,500 4.35 4.14 $ - Exercisable at December 31, 2017 475,400 4.41 3.41 $ - |
Schedule of Fair Value of Option Award Valuation Assumptions | The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model using the assumptions noted in the following table. For purposes of determining the expected life of the option, an average of the estimated holding period is used. The risk-free rate for periods within the contractual life of the options is based on the U. S. Treasury yield in effect at the time of the grant. Year ended December 31, 2017 2016 Expected volatility 52 % 57 % Expected dividends — — Expected average term (in years) 2.00 1.77 Risk free rate - average 1.47 % 0.77%-1.81% Forfeiture rate 0 0 |
Schedule of Information Regarding Stock Options | Additional information regarding options outstanding and exercisable as of December 31, 2017, is as follows: Options Outstanding Options Exercisable Range of Exercise Price Number of Shares Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Number of Shares Exercisable Weighted Average Exercise Price $2.20-$3.74 202,500 $ 3.27 8.99 115,400 $ 3.45 $4.00 - $5.39 475,000 $ 4.80 2.07 360,000 $ 4.71 677,500 $ 4.35 4.14 475,400 $ 4.41 |
Schedule of Nonvested Shares Granted Under the Stock Option Plan | A summary of the status of the Company’s non-vested shares granted under the Company’s stock option plan as of December 31, 2017 and changes during the year then ended is as follows: Shares Weighted- Average Grant Date Fair Value Nonvested at December 31, 2016 504,966 4.68 Granted 60,000 0.65 Vested 68,134 4.88 Forfeited (431,000 ) 3.95 Nonvested at December 31, 2017 202,100 4.35 |
Schedule of Stock Warrants Activity | Warrant activity is as follows: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Terms (Years) Aggregate Intrinsic Value Outstanding at December 31,2015 341,261 $ 5.17 3.30 $ 152,000 Granted 478,909 $ 4.50 Exercised (16,260 ) $ 2.77 Forfeited or expired (1 ) Outstanding at December 31, 2016 803,909 $ 4.50 4.00 $ 26,000 Granted 7,643,749 $ 1.95 Exercised (1,122,376 ) $ 1.50 Forfeited or expired - $ - Outstanding at December 31, 2017 7,325,282 $ 2.09 3.43 $ 115,955 Exercisable at December 31, 2017 1,395,246 $ 2.68 3.76 $ 78,374 |
Schedule of Outstanding Warrants to Purchase Common Stock | Warrants outstanding at December 31, 2017 and their respective exercise price and expiration dates are as follows: As of December 31, 2016 As of December 31, 2017 Number Price Expiration Dates Number Price Expiration Dates 200,000 5.60 Sep-19 200,000 $ 5.60 Sep-19 125,000 4.10 May-21 125,000 $ 4.10 May-21 10,000 3.90 Oct-21 10,000 $ 3.90 Oct-21 50,000 4.10 Nov-21 50,000 $ 4.10 Nov-21 418,909 $ 3.74 - 4.25 Jun-21 138,762 $ 3.74 - 4.25 Jun-21 - - - 784,549 $ 1.50 Apr-22 - - - 600,305 $ 1.55 - 2.00 Jul-22 - - - 4,666,666 $ 2.03 Dec-20 - - - 750,000 $ 1.50 Dec-22 803,909 7,325,282 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Income Tax Assets | Significant components of the Company’s deferred income tax assets are as follows: December 31, 2017 December 31 2016 Deferred income tax asset: Net operating loss carryforward $ 8,927,000 $ 10,325,000 Accounts receivable allowances 227,000 - Inventory reserves 148,000 - Reserve on asset impairment 655,000 - Total deferred tax asset 9,957,000 10,325,000 Valuation allowance (9,957,000 ) (10,325,000 ) Net deferred income tax asset $ - $ - |
Schedule of Reconciliation of Effective Income Tax Rate to U.S. Statutory Rate | Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows: December 31, 2017 December 31, 2016 Federal Statutory tax rate (34 %) (34 %) State tax, net of federal benefit (5 %) (5 %) (39 %) (39 %) Effect of change in tax rate 10 % -% Valuation allowance 29 % 39 % Effective tax rate -% -% |
Operations and Liquidity (Detai
Operations and Liquidity (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Net loss | $ 18,373,000 | $ 5,009,000 | |
Net cash provided by (used in) operating activities | 3,422,000 | 2,533,000 | |
Cash balance | 12,127,000 | 451,000 | $ 1,816,000 |
Line of credit | 1,012,000 | ||
Working capital | $ 3,300,000 | ||
Maturity due date | Oct. 21, 2018 | ||
Notes payable to bank | $ 6,900,000 | ||
Shareholder equity | $ 508,000 | (1,657,000) | $ 785,000 |
Bank Notes [Member] | |||
Maturity due date | Oct. 21, 2018 | ||
Notes payable to bank | $ 6,947,000 | $ 6,872,000 |
Significant Accounting Polici36
Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for doubtful accounts and returns and discounts | $ 601,000 | $ 256,000 |
Impairments charges | 5,925,000 | 484,000 |
Reserves for obsolute equipment | 260,000 | |
Maximum cash deposit guaranteed by FDIC | 250,000 | |
Warrant liability | 36,000 | 775,000 |
Sales incentives | 4,004,000 | 3,726,000 |
Selling expense | 491,000 | 254,000 |
General and administrative expense | 5,754,000 | 3,954,000 |
Amortization of a debt discount | $ 1,379,000 | 255,000 |
Scenario, Previously Reported [Member] | ||
General and administrative expense | $ 260,000 | |
Customer One [Member] | Sales Revenue, Net [Member] | ||
Percentage of sale accounted to customer | 23.00% | 22.00% |
Customer One [Member] | Accounts Receivable [Member] | ||
Percentage of sale accounted to customer | 25.00% | 25.00% |
Account receivables from customer | $ 823,000 | $ 719,000 |
Customer Two [Member] | Sales Revenue, Net [Member] | ||
Percentage of sale accounted to customer | 16.00% | 12.00% |
Customer Two [Member] | Accounts Receivable [Member] | ||
Percentage of sale accounted to customer | 14.00% | |
Account receivables from customer | $ 450,000 | |
Other Customer [Member] | Sales Revenue, Net [Member] | Minimum [Member] | ||
Percentage of sale accounted to customer | 10.00% | |
Other Customer [Member] | Accounts Receivable [Member] | Minimum [Member] | ||
Percentage of sale accounted to customer | 10.00% | |
Vendor One [Member] | ||
Percentage of sale accounted to customer | 20.00% | 26.00% |
Vendor One [Member] | Accounts Payable [Member] | ||
Percentage of sale accounted to customer | 20.00% | 13.00% |
Vendor Two [Member] | Accounts Payable [Member] | ||
Percentage of sale accounted to customer | 10.00% | |
Other Vendor [Member] | Accounts Payable [Member] | Minimum [Member] | ||
Percentage of sale accounted to customer | 10.00% | |
China Cola Brand [Member] | ||
Impairment of intangible assets | $ 224,000 | |
March 24, 2018 [Member] | Board of Directors [Member] | ||
Letter of intent offers in cash | 1,250,000 | |
long-term liability | $ 1,400,000 |
Significant Accounting Polici37
Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment and Related Depreciation (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Building [Member] | |
Expected useful life of assets | P39Y |
Machinery And Equipment [Member] | Minimum [Member] | |
Expected useful life of assets | P5Y |
Machinery And Equipment [Member] | Maximum [Member] | |
Expected useful life of assets | P12Y |
Vehicles [Member] | |
Expected useful life of assets | P5Y |
Office Equipment [Member] | Minimum [Member] | |
Expected useful life of assets | P5Y |
Office Equipment [Member] | Maximum [Member] | |
Expected useful life of assets | P7Y |
Significant Accounting Polici38
Significant Accounting Policies - Schedule of Potentially Dilutive Securities (Details) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Potentially dilutive securities | 10,307,093 | 1,890,053 |
Convertible Note [Member] | ||
Potentially dilutive securities | 2,266,667 | |
Warrants [Member] | ||
Potentially dilutive securities | 7,325,282 | 803,909 |
Series A Preferred Stock [Member] | ||
Potentially dilutive securities | 37,644 | 37,644 |
Options [Member] | ||
Potentially dilutive securities | 677,500 | 1,048,500 |
Inventory (Details Narrative)
Inventory (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | ||
Prepaid inventory | $ 40,000 | $ 294,000 |
Inventory reserve for obsolescence | $ 509,000 | $ 115,000 |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw Materials and Packaging | $ 2,670,000 | $ 3,874,000 |
Finished Goods | 3,261,000 | 3,011,000 |
Inventory, total | $ 5,931,000 | $ 6,885,000 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Impairment of assets | $ 5,925,000 | $ 484,000 |
Depreciation expense | 551,000 | 387,000 |
Accumulated depreciation for equipment held under capital leases | 414,000 | 226,000 |
Reserve for obsolete equipment | $ 260,000 | |
Capex Loan [Member] | Minimum [Member] | ||
Repayments of debt | 300,000 | |
March 24, 2018 [Member] | Board of Directors [Member] | ||
Letter of intent offers in cash | 1,250,000 | |
long-term liability | 1,400,000 | |
January 10, 2018 [Member] | Capex Loan [Member] | ||
Repayments of debt | $ 312,000 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Abstract] | ||
Land | $ 1,107,000 | $ 1,107,000 |
Building | 2,360,000 | 1,875,000 |
Vehicles | 568,000 | 600,000 |
Machinery and equipment | 4,924,000 | 3,696,000 |
Equipment under capital leases | 226,000 | 226,000 |
Office equipment | 507,000 | 475,000 |
Construction in progress | 4,610,000 | |
Book value | 9,692,000 | 12,589,000 |
Accumulated depreciation | (5,414,000) | (4,603,000) |
Impairment reserve | (3,925,000) | (260,000) |
Net book value | $ 353,000 | $ 7,726,000 |
Property and Equipment - Sche43
Property and Equipment - Schedule of Equipment Held for Sale (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Abstract] | ||
Equipment held for sale | $ 4,370,000 | |
Reserve | (2,000,000) | |
Net book value | $ 2,370,000 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
China Cola Brand [Member] | ||
Impairment of intangible assets, finite-lived | $ 224,000 |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets Trademarks (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Brand names | $ 805,000 | $ 805,000 |
Virgil's [Member] | ||
Brand names | 576,000 | 576,000 |
Sonoma Sparkler [Member] | ||
Brand names | $ 229,000 | $ 229,000 |
Line of Credit and Bank Notes46
Line of Credit and Bank Notes (Details Narrative) | Dec. 07, 2016USD ($)shares | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($)shares |
Line of credit | $ 1,012,000 | ||
Term loan | $ 2,186,000 | ||
Loan maturity date | Oct. 21, 2018 | ||
Line of credit borrowing availability | $ 6,000,000 | ||
Prepaid inventory | 630,000 | ||
Line of credit current | $ 3,301,000 | $ 4,384,000 | |
Monthly management fee percentage | 0.45 | ||
Percentage of borrowing based on accounts receivable | 85.00% | ||
Percentage of borrowing based on eligible inventory | 60.00% | ||
Line of credit maturity date | Oct. 21, 2018 | ||
Loan interest rate | 13.25% | ||
Change in fair value of warrant liability | $ (3,275,000) | 232,000 | |
Valuation discount amortized during the period | $ 1,379,000 | 255,000 | |
Unamortized balance of loans | 78,000 | ||
Monthly monitoring fee percentage | 0.45% | ||
Revolving Line of Credit [Member] | |||
Line of credit borrowing availability | $ 6,000,000 | ||
Capex Loan [Member] | |||
Loan maturity date | Oct. 21, 2018 | ||
Term loan outstanding principal balance | $ 3,947,000 | 3,950,000 | |
Loan interest rate | 9.50% | ||
Capex Loan [Member] | January 10, 2018 [Member] | |||
Repayments of Debt | $ 312,000 | ||
Capex Loan [Member] | Prime Rate [Member] | |||
Loan interest rate | 5.75% | ||
Term Loans [Member] | |||
Term loan outstanding principal balance | $ 3,000,000 | $ 3,000,000 | |
Minimum [Member] | Revolving Line of Credit [Member] | |||
Line of credit borrowing availability | 1,500,000 | ||
Minimum [Member] | Capex Loan [Member] | |||
Repayments of Debt | $ 300,000 | ||
PMC Financial Services Group, LLC [Member] | |||
Valuation discount amortized during the period | $ 38,000 | ||
PMC Financial Services Group, LLC [Member] | Two Term Loans [Member] | |||
Loan maturity date | Oct. 21, 2018 | ||
Line of credit borrowing availability | $ 3,000,000 | ||
Term loan amount | 1,500,000 | ||
PMC Financial Services Group, LLC [Member] | Issuance of Warrants Upon Amendments [Member] | |||
Warrants granted | shares | 175,000 | 225,000 | |
Change in fair value of warrant liability | 179,000 | ||
PMC Financial Services Group, LLC [Member] | Loan and Security Agreement [Member] | |||
Line of credit | 6,000,000 | ||
Term loan | $ 3,000,000 | ||
Loan maturity date | Jan. 1, 2019 | ||
Loan maturity description | on April 21, 2017, Reeds Inc. and PMC entered into Amendment Number Fifteen to Amended and Restated Loan and Security Agreement changing the Revolving Loan Maturity Date, Term Loan Maturity Date, Cap Ex Loan Maturity Date and Term Loan B Maturity Date from January 1, 2019, to October 21, 2018. | ||
PMC Financial Services Group, LLC [Member] | Loan and Security Agreement [Member] | Capex Loan [Member] | |||
Term loan | $ 4,700,000 | ||
PMC Financial Services Group, LLC [Member] | Loan and Security Agreement [Member] | Maximum [Member] | |||
Capital expansion loan | $ 4,700,000 |
Line of Credit and Bank Notes -
Line of Credit and Bank Notes - Schedule of Bank Notes (Details) - USD ($) | Dec. 31, 2017 | Dec. 12, 2017 | Dec. 31, 2016 |
Valuation discount | $ (2,209,000) | $ (78,000) | |
Net | $ 6,900,000 | ||
Current portion | 6,947,000 | 953,000 | |
Long-term portion | 5,919,000 | ||
Bank Notes [Member] | |||
Term Loans | 3,000,000 | 3,000,000 | |
CAPEX loan | 3,947,000 | 3,950,000 | |
Valuation discount | (78,000) | ||
Net | 6,947,000 | 6,872,000 | |
Current portion | (6,947,000) | (953,000) | |
Long-term portion | $ 5,919,000 |
Line of Credit and Bank Notes48
Line of Credit and Bank Notes - Schedule of Interest Rates of Loans (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Line of Credit (Prime Plus) [Member] | |
Original Rate | 4.85% |
Additional Interest | 3.00% |
Current rate | 7.85% |
Term A [Member] | |
Original Rate | 10.25% |
Additional Interest | 3.00% |
Current rate | 13.25% |
Term B [Member] | |
Original Rate | 12.85% |
Additional Interest | 3.00% |
Current rate | 15.85% |
CAPEX Loan [Member] | |
Original Rate | 10.25% |
Additional Interest | 3.00% |
Current rate | 13.25% |
Base Interest Rate [Member] | Line of Credit (Prime Plus) [Member] | |
Original Rate | 3.60% |
Base Interest Rate [Member] | Term A [Member] | |
Original Rate | 9.00% |
Base Interest Rate [Member] | Term B [Member] | |
Original Rate | 11.60% |
Base Interest Rate [Member] | CAPEX Loan [Member] | |
Original Rate | 9.00% |
Increase in Prime [Member] | Line of Credit (Prime Plus) [Member] | |
Original Rate | 1.25% |
Increase in Prime [Member] | Term A [Member] | |
Original Rate | 1.25% |
Increase in Prime [Member] | Term B [Member] | |
Original Rate | 1.25% |
Increase in Prime [Member] | CAPEX Loan [Member] | |
Original Rate | 1.25% |
Capital Leases Payable (Details
Capital Leases Payable (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($)Installments | |
Equipment held under capital leases | $ 944,000 |
Number of non-cancelable capital leases | Installments | 9 |
Payment of lease amount | $ 19,000 |
Lease expire year | 2,021 |
Minimum [Member] | |
Payment of lease range per month | $ 341 |
Percentage of interest for lease amount | 6.51% |
Maximum [Member] | |
Payment of lease range per month | $ 10,441 |
Percentage of interest for lease amount | 17.31% |
Capital Leases Payable - Schedu
Capital Leases Payable - Schedule of Future Minimum Lease Payments Under Capital Leases (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Leases [Abstract] | ||
2,018 | $ 227,000 | |
2,019 | 188,000 | |
2,020 | 59,000 | |
2,021 | 2,000 | |
Total payments | 476,000 | |
Less: Amount representing interest | (42,000) | |
Present value of net minimum lease payments | 434,000 | |
Less: Current portion | 198,000 | $ 183,000 |
Non-current portion | $ 236,000 | $ 438,000 |
Long Term Financing Obligatio51
Long Term Financing Obligation (Details Narrative) - USD ($) | 12 Months Ended | |||||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 12, 2017 | Apr. 21, 2017 | Apr. 19, 2017 | Jun. 02, 2016 | |||
Proceeds from sale of transaction cost | $ 3,056,000 | |||||||
Financing interest expenses | $ 35,000 | |||||||
Percentage of interest expense and reduction in the financing obligation at implicit rate | 9.90% | |||||||
Number of warrants to purchase of common stock | 1,416,667 | 210,111 | ||||||
Change in fair value of warrant liability | $ (3,275,000) | $ 232,000 | ||||||
Unamortized valuation discount | 78,000 | $ 2,209,000 | ||||||
Valuation discount amortized during the period | 1,379,000 | 255,000 | ||||||
Aggregate amount due under financing obligation | 2,186,000 | $ 2,378,000 | ||||||
Christopher J. Reed [Member] | ||||||||
Proceeds financial obligation limit guaranteed by related party | $ 150,000 | |||||||
Warrants [Member] | ||||||||
Number of warrants to purchase of common stock | 138,762 | [1] | 418,909 | [2] | 346,206 | |||
Unamortized valuation discount | $ 2,209,000 | |||||||
Warrants [Member] | Financing Obligation [Member] | ||||||||
Number of warrants to purchase of common stock | 600,000 | |||||||
Change in fair value of warrant liability | $ 1,336,000 | |||||||
Valuation of discount amortized period | 15 years | |||||||
Unamortized valuation discount | $ 714,000 | $ 825,000 | ||||||
Valuation discount amortized during the period | $ 110,000 | $ 110,000 | ||||||
[1] | (5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The change in the fair value of the warrant liability was $3,275,000 and $232,000 for the years ended December 31, 2017 and 2016, respectively. | |||||||
[2] | (1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions. |
Long Term Financing Obligatio52
Long Term Financing Obligation - Schedule of Long Term Financing Obligation (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Valuation discount | $ (714,000) | $ (825,000) |
Net long term financing obligation | 2,186,000 | |
Less current portion | 222,000 | 190,000 |
Long term financing obligation | 1,250,000 | 1,363,000 |
Long Term Financing Obligation [Member] | ||
Financing obligation | 2,186,000 | 2,378,000 |
Valuation discount | (714,000) | (825,000) |
Net long term financing obligation | 1,472,000 | 1,553,000 |
Less current portion | (222,000) | (190,000) |
Long term financing obligation | $ 1,250,000 | $ 1,363,000 |
Long Term Financing Obligatio53
Long Term Financing Obligation - Schedule of Aggregate Future Obligations Under the Financing Obligation (Details) | Dec. 31, 2017USD ($) |
Debt Disclosure [Abstract] | |
2,018 | $ 222,000 |
2,019 | 259,000 |
2,020 | 299,000 |
2,021 | 344,000 |
2,022 | 395,000 |
Thereafter | 667,000 |
Total | $ 2,186,000 |
Convertible Note to a Related54
Convertible Note to a Related Party (Details Narrative) - USD ($) | Dec. 12, 2017 | Apr. 21, 2017 | Apr. 19, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 06, 2017 | Jul. 13, 2017 | Jun. 02, 2016 | ||
Secured convertible debt principal amount | $ 3,400,000 | |||||||||
Number of warrants to purchase of common stock | 1,416,667 | 210,111 | ||||||||
Warrants exercise price per share | $ 4 | $ 1.50 | ||||||||
Fair value of warrants | $ 3,275,000 | $ (232,000) | ||||||||
Valuation discount amortized during the period | 1,379,000 | 255,000 | ||||||||
Unamortized discount | 2,209,000 | 78,000 | ||||||||
Warrant term | 2 years | |||||||||
Conversion price | $ 3 | |||||||||
Extinguishment of convertible note | 3,632,000 | (3,632,000) | ||||||||
Investor One [Member] | ||||||||||
Number of warrants to purchase of common stock | 1,416,667 | |||||||||
Investor Two [Member] | ||||||||||
Number of warrants to purchase of common stock | 210,111 | |||||||||
Three Accredited Investors [Member] | ||||||||||
Number of warrants to purchase of common stock | 280,147 | |||||||||
Three Accredited Investors [Member] | Maximum [Member] | ||||||||||
Warrants exercise price per share | $ 4.25 | |||||||||
Three Accredited Investors [Member] | Minimum [Member] | ||||||||||
Warrants exercise price per share | $ 3 | |||||||||
Independent Third Party Member | ||||||||||
Fair value of convertible note | $ 4,823,000 | |||||||||
Warrants [Member] | ||||||||||
Fair value of warrants | (36,000) | [1] | $ (775,000) | [2] | ||||||
Valuation discount amortized during the period | $ 1,191,000 | |||||||||
Warrants [Member] | ||||||||||
Number of warrants to purchase of common stock | 138,762 | [1] | 418,909 | [2] | 346,206 | |||||
Warrants exercise price per share | $ 4.25 | |||||||||
Unamortized discount | $ 2,209,000 | |||||||||
5th Anniversary [Member] | Warrants [Member] | ||||||||||
Warrants exercise price per share | $ 4 | |||||||||
Fair value of warrants | $ 3,302,000 | |||||||||
Valuation discount amortized during the period | 219,000 | |||||||||
Unamortized discount | 3,400,000 | |||||||||
Cash offering cost | 317,000 | |||||||||
5th Anniversary [Member] | Note and Warrant [Member] | ||||||||||
Fair value of warrants | 3,083,000 | |||||||||
Valuation discount amortized during the period | $ 3,083,000 | |||||||||
Rights Offering [Member] | ||||||||||
Number of warrants to purchase of common stock | 4,666,666 | |||||||||
Warrants exercise price per share | $ 2.025 | |||||||||
Cash offering cost | $ 12,887,000 | |||||||||
Conversion price | $ 1.50 | |||||||||
Wunderlich Securities [Member] | Placement Agency Services [Member] | ||||||||||
Debt fee amount | $ 160,000 | |||||||||
Convertible Notes [Member] | ||||||||||
Conversion price | $ 1.50 | |||||||||
New Note [Member] | ||||||||||
Secured convertible debt principal amount | $ 3,400,000 | |||||||||
Unamortized premium | $ 1,423,000 | |||||||||
Raptor/Harbor Reeds SPV LLC [Member] | ||||||||||
Number of warrants to purchase of common stock | 1,416,667 | |||||||||
Ownership percentage | 27.64% | |||||||||
Warrants exercise price per share | $ 4 | |||||||||
Securities Purchase Agreement [Member] | ||||||||||
Secured convertible debt principal amount | $ 3,400,000 | |||||||||
Number of warrants to purchase of common stock | 1,416,667 | |||||||||
Note bears interest rate | 12.00% | |||||||||
Debt converted into shares of common stock | 1,133,333 | |||||||||
Other direct costs | $ 157,000 | |||||||||
Proceeds from issuance of debt | $ 3,083,000 | |||||||||
Securities Purchase Agreement [Member] | Three Accredited Investors [Member] | ||||||||||
Number of warrants to purchase of common stock | 210,111 | |||||||||
Warrants exercise price per share | $ 3 | |||||||||
Fair value of warrants | $ 187,000 | |||||||||
Warrant term | 5 years | |||||||||
Securities Purchase Agreement [Member] | Three Accredited Investors [Member] | Maximum [Member] | ||||||||||
Warrants exercise price per share | $ 4.25 | |||||||||
Securities Purchase Agreement [Member] | Three Accredited Investors [Member] | Minimum [Member] | ||||||||||
Warrants exercise price per share | $ 3 | |||||||||
Securities Purchase Agreement [Member] | New Warrants [Member] | ||||||||||
Fair value of warrants | $ 571,000 | $ 571,000 | ||||||||
[1] | (5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The change in the fair value of the warrant liability was $3,275,000 and $232,000 for the years ended December 31, 2017 and 2016, respectively. | |||||||||
[2] | (1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions. |
Convertible Note to a Related55
Convertible Note to a Related Party - Schedule of Convertible Notes (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Convertible Note Payable, Net | $ 3,690,000 | |
Convertible Notes [Member] | ||
12% Convertible Note Payable | 3,400,000 | |
Accrued Interest | 290,000 | |
Convertible Note Payable, Net | $ 3,690,000 |
Convertible Note to a Related56
Convertible Note to a Related Party - Schedule of Convertible Notes (Details) (Parenthetical) | 12 Months Ended |
Dec. 31, 2017 | |
Convertible Notes [Member] | |
Percentage of convertible note | 12.00% |
Warrant Liablity (Details Narra
Warrant Liablity (Details Narrative) - USD ($) | Apr. 21, 2017 | Apr. 19, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 28, 2017 | Dec. 06, 2017 | Jul. 13, 2017 |
Fair value of warrants | $ 3,275,000 | $ (232,000) | |||||
Number of warrants to purchase of common stock | 1,416,667 | 210,111 | |||||
Warrant term | 2 years | ||||||
Warrants exercise price per share | $ 4 | $ 1.50 | |||||
Cost of the modifications of warrants | $ 1,868,000 | ||||||
Proceeds from warrant exercised | 1,650,000 | 116,000 | |||||
Additional Paid In Capital [Member] | |||||||
Fair value of warrants | 1,601,000 | ||||||
Warrant Liability One [Member] | |||||||
Fair value of warrants | 138,762 | ||||||
Number of warrants to purchase of common stock | 4,666,666 | ||||||
Warrants exercise price per share | $ 2.025 | ||||||
Investor [Member] | |||||||
Fair value of warrants | $ 1,033,000 | ||||||
Number of warrants to purchase of common stock | 784,549 | ||||||
Fundamental Transaction Provision [Member] | |||||||
Fair value of warrants | 418,909 | ||||||
Fundamental Transaction Provision [Member] | Warrant Liability One [Member] | |||||||
Fair value of warrants | $ 3,275,000 | $ 232,000 | |||||
Fundamental Transaction Clause [Member] | |||||||
Fair value of warrants | $ 3,873,000 | ||||||
Securities Purchase Agreement [Member] | |||||||
Number of warrants to purchase of common stock | 1,416,667 | ||||||
Securities Purchase Agreement [Member] | Three Investor [Member] | |||||||
Fair value of warrants | $ 187,000 | ||||||
Warrant term | 1 year | ||||||
Warrants outstanding | 280,147 | ||||||
Securities Purchase Agreement [Member] | Three Investor [Member] | Maximum [Member] | |||||||
Warrants exercise price per share | $ 4.25 | ||||||
Securities Purchase Agreement [Member] | Three Investor [Member] | Minimum [Member] | |||||||
Warrants exercise price per share | $ 3 | ||||||
Warrant Exercise Agreements [Member] | Investor [Member] | |||||||
Number of warrants to purchase of common stock | 1,122,376 | 1,906,925 | |||||
Warrants exercise price per share | $ 1.50 | ||||||
Cost of the modifications of warrants | $ 1,109,000 | ||||||
Proceeds from warrant exercised | $ 1,650,000 | ||||||
Warrant Exercise Agreements [Member] | Investor [Member] | Maximum [Member] | |||||||
Warrants exercise price per share | $ 4 | ||||||
Warrant Exercise Agreements [Member] | Investor [Member] | Minimum [Member] | |||||||
Warrants exercise price per share | $ 3 |
Warrant Liability - Schedule of
Warrant Liability - Schedule of Warrant Liability Using Assumptions (Details) - USD ($) | Jul. 13, 2017 | Apr. 21, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Apr. 19, 2017 | Jun. 02, 2016 | |||||
Risk free interest rate | 1.47% | ||||||||||
Expected Volatility | 52.00% | 57.00% | |||||||||
Expected life in years | 2 years | 1 year 9 months 7 days | |||||||||
Number of Warrants | 1,416,667 | 210,111 | |||||||||
Fair Value - Warrants | $ (3,275,000) | $ 232,000 | |||||||||
Minimum [Member] | |||||||||||
Risk free interest rate | 0.77% | ||||||||||
Maximum [Member] | |||||||||||
Risk free interest rate | 1.81% | ||||||||||
Issuance Date [Member] | |||||||||||
Stock Price | [1] | $ 4.75 | |||||||||
Risk free interest rate | [1] | 1.51% | |||||||||
Expected Volatility | [1] | 49.33% | |||||||||
Expected life in years | [1] | 5 years | |||||||||
Expected dividend yield | [1] | 0.00% | |||||||||
Number of Warrants | [1] | 1,626,778 | |||||||||
Fair Value - Warrants | [1] | $ 3,873,000 | |||||||||
Modification Date [Member] | |||||||||||
Stock Price | $ 2.35 | [2] | $ 4.75 | [3] | |||||||
Risk free interest rate | 1.65% | [2] | 1.51% | [3] | |||||||
Expected Volatility | 53.75% | [2] | 49.33% | [3] | |||||||
Expected life in years | [3] | 5 years | |||||||||
Expected dividend yield | 0.00% | [2] | 0.00% | [3] | |||||||
Number of Warrants | 1,906,925 | [2] | 280,147 | [3] | |||||||
Fair Value - Warrants | $ 1,109,000 | [2] | $ 187,000 | [3] | |||||||
Modification Date [Member] | Minimum [Member] | |||||||||||
Expected life in years | [2] | 4 years 9 months 7 days | |||||||||
Modification Date [Member] | Maximum [Member] | |||||||||||
Expected life in years | [2] | 4 years 10 months 21 days | |||||||||
Warrants [Member] | |||||||||||
Risk free interest rate | 1.74% | [4] | 1.58% | [5] | |||||||
Expected Volatility | 56.06% | [4] | 54.71% | [5] | |||||||
Expected life in years | 3 years 5 months 1 day | [4] | 4 years 5 months 1 day | [5] | |||||||
Expected dividend yield | 0.00% | [4] | 0.00% | [5] | |||||||
Fair Value - Warrants | $ 36,000 | [4] | $ 775,000 | [5] | |||||||
Warrants [Member] | |||||||||||
Stock Price | $ 1.55 | [4] | $ 4.10 | [5] | |||||||
Number of Warrants | 138,762 | [4] | 418,909 | [5] | 346,206 | ||||||
[1] | (2) On April 21, 2017 and April 19, 2017, the Company granted warrants to purchase 1,416,667 shares and 210,111 shares, respectively, of the Company’s common stock in connection with the Company’s issuance of the Convertible Note. The warrants included fundamental transaction provisions resulting in the total fair value of $3,873,000 to be classified as an increase to the warrant liability. On July 13, 2017, these warrants were repriced as discussed below. | ||||||||||
[2] | (4) On July 13, 2017, the Company entered into warrant exercise agreements with certain investors holding participation rights in our financing transactions to reprice warrants to purchase 1,906,925 shares of our common stock. The warrants’ exercise prices were lowered from $3 and $4 per share to $1.50 per share, and the incremental cost before and after the modification of the warrants resulted in an incremental charge of $1,109,000. The warrants were also changed to modify language pertaining to a “fundamental transaction,” eliminating the need to classify the warrants as a warrant liability. | ||||||||||
[3] | (3) On April 19, 2017, three accredited investors that are party to the Securities Purchase Agreement dated May 26, 2016 and hold participation rights in the Company’s financing transactions agreed to waive their participation rights with regard to the April 21, 2017 financing. In consideration, these investors’ participation rights, expiring in May 2017, were extended for a period of two years. In addition, on April 21, 2017, the Company increased the terms of their outstanding 280,147 warrants by one year and reduced the exercise price from $4.25 to $3.00, The incremental change in their fair value of $187,000 on the modification date was reported as an increase to the warrant liability. | ||||||||||
[4] | (5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The change in the fair value of the warrant liability was $3,275,000 and $232,000 for the years ended December 31, 2017 and 2016, respectively. | ||||||||||
[5] | (1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions. |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) | Dec. 06, 2017USD ($)$ / sharesshares | Dec. 06, 2017USD ($)$ / sharesshares | Apr. 19, 2017shares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 28, 2017$ / sharesshares | Apr. 21, 2017$ / sharesshares |
Preferred stock, par value | $ / shares | $ 10 | $ 10 | $ 10 | $ 10 | |||||
Preferred stock, shares authorized | 500,000 | 500,000 | 500,000 | 500,000 | |||||
Preferred stock, shares outstanding | 9,411 | 9,411 | 9,411 | 9,411 | |||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Common stock, shares authorized | 40,000,000 | 40,000,000 | 40,000,000 | 40,000,000 | |||||
Common stock, shares outstanding | 13,982,230 | 24,619,591 | 24,619,591 | 13,982,230 | |||||
Purchase of distribution offering | $ | $ 4,000,000 | ||||||||
Number of warrants to purchase of common stock | 210,111 | 1,416,667 | |||||||
Warrant exercise price per share | $ / shares | $ 1.50 | $ 1.50 | $ 4 | $ 4 | |||||
Warrant term | 2 years | ||||||||
Number of value issuance and sale of common stock during period | $ | $ 1,687,000 | ||||||||
Common stock issued for services, value | $ | $ (99,000) | $ (15,000) | |||||||
Chief Executive Officer [Member] | |||||||||
Number of shares issuance and sale of common stock during period | 30,000 | ||||||||
Sale of stock price per share | $ / shares | $ 3.90 | $ 3.90 | |||||||
Number of value issuance and sale of common stock during period | $ | $ 117,000 | ||||||||
Raptor [Member] | |||||||||
Number of warrants to purchase of common stock | 750,000 | ||||||||
Warrant exercise price per share | $ / shares | $ 1.50 | ||||||||
Raptor/Harbor Reeds SPV LLC [Member] | |||||||||
Number of warrants to purchase of common stock | 1,416,667 | ||||||||
Warrant exercise price per share | $ / shares | $ 4 | ||||||||
Gross proceeds from offering percentage | 0.02 | ||||||||
Backstop Agreement [Member] | Raptor [Member] | Minimum [Member] | |||||||||
Purchase of distribution offering | $ | $ 6,000,000 | ||||||||
Number of warrants to purchase of common stock | 750,000 | 750,000 | |||||||
Warrant term | 5 years | ||||||||
DM Agreement [Member] | |||||||||
Gross proceeds from offering percentage | 0.07 | ||||||||
Maximum amount paid for agreement | $ | $ 830,000 | ||||||||
Additional amount paid | $ | 75,000 | $ 75,000 | |||||||
Other expense | $ | $ 905,000 | ||||||||
Securities Purchase Agreement [Member] | |||||||||
Number of warrants to purchase of common stock | 1,416,667 | ||||||||
Number of value issuance and sale of common stock during period | $ | $ 1,687,000 | ||||||||
Series A Preferred Stock [Member] | |||||||||
Number of preferred stock converted | |||||||||
Rights Offering [Member] | |||||||||
Preferred stock, par value | $ / shares | $ 0.001 | $ 0.001 | |||||||
Purchase of distribution offering | $ | $ 14,000,000 | ||||||||
Number of shares issuance and sale of common stock during period | 9,333,333 | ||||||||
Number of warrants to purchase of common stock | 4,666,666 | 4,666,666 | |||||||
Warrant exercise price per share | $ / shares | $ 2.025 | $ 2.025 | |||||||
Net proceeds from offering | $ | $ 12,887,000 | ||||||||
Preferred Shareholders [Member] | |||||||||
Dividend payable to preferred shareholders | $ | $ 5,000 | $ 5,000 | |||||||
Number of preferred stock converted | 1,640 | 1,504 | |||||||
Investors [Member] | |||||||||
Number of shares issuance and sale of common stock during period | 1,122,376 | ||||||||
Gross proceeds from offering percentage | 0.04 | ||||||||
Sale of stock price per share | $ / shares | 1.50 | $ 1.50 | |||||||
Number of value issuance and sale of common stock during period | $ | $ 1,650,000 | ||||||||
Investors [Member] | Securities Purchase Agreement [Member] | |||||||||
Number of shares issuance and sale of common stock during period | 692,412 | ||||||||
Number of warrants to purchase of common stock | 346,206 | 346,206 | |||||||
Co-Manager [Member] | Maximum [Member] | |||||||||
Gross proceeds from offering percentage | 0.250 | ||||||||
Board of Directors [Member] | |||||||||
Number of shares issuance and sale of common stock during period | 117,647 | ||||||||
Sale of stock price per share | $ / shares | 1.70 | $ 1.70 | |||||||
Number of value issuance and sale of common stock during period | $ | $ 200,000 | ||||||||
Common stock issued for services, shares | 58,065 | ||||||||
Shares issued price per share | $ / shares | 1.55 | $ 1.55 | |||||||
Common stock issued for services, value | $ | $ 90,000 | ||||||||
Related Party [Member] | |||||||||
Common stock issued for services, shares | 4,300 | ||||||||
Shares issued price per share | $ / shares | 2.20 | $ 2.20 | |||||||
Common stock issued for services, value | $ | $ 9,000 | ||||||||
Consulting Services [Member] | |||||||||
Common stock issued for services, shares | 4,228 | ||||||||
Common stock issued for services, value | $ | $ 15,000 | ||||||||
Board of Directions [Member] | January 10, 2018 [Member] | |||||||||
Common stock issued for services, shares | 400,000 | ||||||||
Shares issued price per share | $ / shares | 1.70 | $ 1.70 | |||||||
Common stock issued for services, value | $ | $ 680,000 | ||||||||
Series A Preferred Stock [Member] | |||||||||
Percentage of noncumulative preferred stock | 5.00% | ||||||||
Series A Preferred Stock [Member] | |||||||||
Preferred stock, par value | $ / shares | $ 10 | $ 10 | |||||||
Preferred stock, shares authorized | 500,000 | 500,000 | |||||||
Preferred stock, shares outstanding | 9,411 | 9,411 | |||||||
Preferred stock shares, liquidation preference | $ / shares | $ 10 | $ 10 | |||||||
Preferred stock holders rights to receive at price per share | $ / shares | $ 10 | $ 10 |
Stock Options and Warrants (Det
Stock Options and Warrants (Details Narrative) - USD ($) | Dec. 28, 2017 | Jul. 19, 2017 | Jul. 13, 2017 | Apr. 21, 2017 | Apr. 19, 2017 | Jun. 02, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 06, 2017 | ||
Percentage of option fixed price | 100.00% | ||||||||||
Shares granted | 60,000 | 172,500 | |||||||||
Stock options at market price per share | $ 2.20 | $ 4.01 | |||||||||
Fair value of options granted | $ 39,000 | $ 714,000 | |||||||||
Weighted-average grant date fair value | $ 0.65 | $ 4.01 | |||||||||
Stock based compensation cost | $ 276,000 | $ 658,000 | |||||||||
Aggregate value of unvested options | $ 795,000 | ||||||||||
Number of option issued under cash-less exercise | 84,000 | ||||||||||
Number of common stock shares issued during the period | 76,966 | ||||||||||
Number of option issued under cash-less exercise price per share | $ 3.36 | $ 1.36 | |||||||||
Proceeds from stock options exercised | $ 71,000 | ||||||||||
Aggregate intrinsic values | $ 0 | ||||||||||
Market price per share | $ 0.65 | $ 4.10 | |||||||||
Warrants to purchase common stock | 1,416,667 | 210,111 | |||||||||
Warrants exercise price per share | $ 4 | $ 1.50 | |||||||||
Fair value of warrants | $ 3,275,000 | $ (232,000) | |||||||||
Proceeds from warrant exercised | 1,650,000 | 116,000 | |||||||||
Warrants [Member] | |||||||||||
Fair value of warrants | $ (36,000) | [1] | $ (775,000) | [2] | |||||||
Number of warrants exercised | 16,260 | ||||||||||
Warrant Tranche Two [Member] | |||||||||||
Warrants to purchase common stock | 512,560 | ||||||||||
Warrants exercise price per share | $ 2 | ||||||||||
Warrants term | 5 years | ||||||||||
Warrant Tranche Three [Member] | |||||||||||
Warrants to purchase common stock | 87,745 | ||||||||||
Warrants exercise price per share | $ 1.55 | ||||||||||
Warrants term | 5 years | ||||||||||
Investor [Member] | |||||||||||
Warrants to purchase common stock | 784,549 | ||||||||||
Fair value of warrants | $ 1,033,000 | ||||||||||
Securities Purchase Agreement [Member] | |||||||||||
Warrants to purchase common stock | 1,416,667 | ||||||||||
Warrant Exercise Agreements [Member] | Investors [Member] | |||||||||||
Warrants to purchase common stock | 1,906,925 | 1,122,376 | |||||||||
Warrants exercise price per share | $ 1.50 | ||||||||||
Incremental charge of warrants | $ 1,109,000 | ||||||||||
Proceeds from warrant exercised | $ 1,650,000 | ||||||||||
Warrant Exercise Agreements [Member] | Investor [Member] | |||||||||||
Warrants to purchase common stock | 1,906,925 | 1,122,376 | |||||||||
Warrants exercise price per share | $ 1.50 | ||||||||||
Proceeds from warrant exercised | $ 1,650,000 | ||||||||||
Three Accredited Investors [Member] | |||||||||||
Warrants to purchase common stock | 280,147 | ||||||||||
Three Accredited Investors [Member] | Securities Purchase Agreement [Member] | |||||||||||
Warrants to purchase common stock | 210,111 | ||||||||||
Warrants exercise price per share | $ 3 | ||||||||||
Warrants term | 5 years | ||||||||||
Fair value of warrants | $ 187,000 | ||||||||||
New Warrants [Member] | Securities Purchase Agreement [Member] | |||||||||||
Fair value of warrants | $ 571,000 | $ 571,000 | |||||||||
Warrants [Member] | |||||||||||
Warrants to purchase common stock | 346,206 | 138,762 | [1] | 418,909 | [2] | ||||||
Warrants exercise price per share | $ 4.25 | ||||||||||
Warrants term | 5 years | ||||||||||
Stock price per share | $ 1.55 | [1] | $ 4.10 | [2] | |||||||
Warrants [Member] | Black-Scholes-Merton Option Pricing Model [Member] | |||||||||||
Fair value of warrants | $ 689,000 | ||||||||||
Volatility rate | 53.75% | ||||||||||
Risk free interest rate | 1.65% | ||||||||||
Stock price per share | $ 2.35 | ||||||||||
Financing costs | $ 1,480,000 | ||||||||||
Warrants [Member] | Maxim Group LLC [Member] | |||||||||||
Warrants to purchase common stock | 72,703 | ||||||||||
Warrants exercise price per share | $ 3.74 | ||||||||||
Warrants term | 5 years | ||||||||||
Warrant Liability One [Member] | |||||||||||
Warrants to purchase common stock | 4,666,666 | ||||||||||
Warrants exercise price per share | $ 2.025 | ||||||||||
Fair value of warrants | $ 138,762 | ||||||||||
Common Stock [Member] | |||||||||||
Number of common stock shares issued during the period | 117,647 | ||||||||||
Number of warrants exercised | 16,260 | ||||||||||
Stock warrant received value | $ 45,000 | ||||||||||
Raptor/Harbor Reeds SPV LLC [Member] | |||||||||||
Warrants to purchase common stock | 1,416,667 | ||||||||||
Warrants exercise price per share | $ 4 | ||||||||||
Warrants term | 2 years | ||||||||||
Raptor/Harbor Reeds SPV LLC [Member] | Warrant Exercise Agreements [Member] | |||||||||||
Warrants to purchase common stock | 766,667 | ||||||||||
Proceeds from warrant exercised | $ 1,150,000 | ||||||||||
Raptor [Member] | |||||||||||
Warrants to purchase common stock | 750,000 | ||||||||||
Warrants exercise price per share | $ 1.50 | ||||||||||
Warrants term | 5 years | ||||||||||
January 10, 2018 [Member] | Chief Executive Officer [Member] | Restricted Stock [Member] | |||||||||||
Shares granted | 371,218 | ||||||||||
January 10, 2018 [Member] | Chief Executive Officer [Member] | Stock Options [Member] | |||||||||||
Number of option issued under cash-less exercise price per share | $ 1.70 | ||||||||||
Options to purchase shares of common stock | 371,218 | ||||||||||
Minimum [Member] | |||||||||||
Option vesting period | 2 years | ||||||||||
Minimum [Member] | Warrant Exercise Agreements [Member] | Investors [Member] | |||||||||||
Warrants exercise price per share | $ 3 | ||||||||||
Minimum [Member] | Warrant Exercise Agreements [Member] | Investor [Member] | |||||||||||
Warrants exercise price per share | 3 | ||||||||||
Minimum [Member] | Three Accredited Investors [Member] | |||||||||||
Warrants exercise price per share | $ 3 | ||||||||||
Minimum [Member] | Three Accredited Investors [Member] | Securities Purchase Agreement [Member] | |||||||||||
Warrants exercise price per share | 3 | ||||||||||
Maximum [Member] | |||||||||||
Option vesting period | 4 years | ||||||||||
Maximum [Member] | Warrant Exercise Agreements [Member] | Investors [Member] | |||||||||||
Warrants exercise price per share | 4 | ||||||||||
Maximum [Member] | Warrant Exercise Agreements [Member] | Investor [Member] | |||||||||||
Warrants exercise price per share | $ 4 | ||||||||||
Maximum [Member] | Three Accredited Investors [Member] | |||||||||||
Warrants exercise price per share | 4.25 | ||||||||||
Maximum [Member] | Three Accredited Investors [Member] | Securities Purchase Agreement [Member] | |||||||||||
Warrants exercise price per share | $ 4.25 | ||||||||||
2007 Stock Option Plan [Member] | |||||||||||
Number of option authorized | 1,500,000 | ||||||||||
2015 Stock Option Plan [Member] | |||||||||||
Number of option authorized | 3,000,000 | ||||||||||
[1] | (5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The change in the fair value of the warrant liability was $3,275,000 and $232,000 for the years ended December 31, 2017 and 2016, respectively. | ||||||||||
[2] | (1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions. |
Stock Options and Warrants - Sc
Stock Options and Warrants - Schedule of Stock Option Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Shares, Granted | 60,000 | 172,500 |
Shares, Exercised | ||
Weighted-Average Exercise Price, Granted | $ 2.20 | $ 4.01 |
Weighted-Average Exercise Price, Exercised | $ 3.36 | $ 1.36 |
Weighted-Average Remaining Contractual Terms (Years), Outstanding Ending | 4 years 1 month 20 days | |
Stock Option [Member] | ||
Shares Outstanding, Beginning balance | 1,048,500 | 980,000 |
Shares, Granted | 60,000 | 172,500 |
Shares, Exercised | (84,000) | |
Shares, Forfeited or expired | (431,000) | (20,000) |
Shares Outstanding, Ending balance | 677,500 | 1,048,500 |
Shares Exercisable | 475,400 | |
Weighted-Average Exercise Price, Outstanding, Beginning | $ 4.68 | $ 3.96 |
Weighted-Average Exercise Price, Granted | 2.20 | 4.01 |
Weighted-Average Exercise Price, Exercised | 1.36 | |
Weighted-Average Exercise Price, Forfeited or expired | 4.88 | 4.92 |
Weighted-Average Exercise Price, Outstanding, Ending | 4.35 | $ 4.68 |
Weighted-Average Exercise Price, Exercisable | $ 4.41 | |
Weighted-Average Remaining Contractual Terms (Years), Outstanding Beginning | 3 years 9 months 18 days | |
Weighted-Average Remaining Contractual Terms (Years), Outstanding Ending | 4 years 1 month 20 days | 3 years 9 months 18 days |
Weighted-Average Remaining Contractual Terms (Years), Exercisable | 3 years 4 months 28 days | |
Aggregate Intrinsic Value, Share Outstanding, Beginning | $ 61,000 | |
Aggregate Intrinsic Value, Share Outstanding, Ending | $ 61,000 | |
Aggregate Intrinsic Value, Share Exercisable |
Stock Options and Warrants - 62
Stock Options and Warrants - Schedule of Fair Value of Option Award Valuation Assumptions (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Expected volatility | 52.00% | 57.00% |
Expected dividends | ||
Expected average term (in years) | 2 years | 1 year 9 months 7 days |
Risk free rate - average | 1.47% | |
Forfeiture rate | 0.00% | 0.00% |
Minimum [Member] | ||
Risk free rate - average | 0.77% | |
Maximum [Member] | ||
Risk free rate - average | 1.81% |
Stock Options and Warrants - 63
Stock Options and Warrants - Schedule of Information Regarding Stock Options (Details) | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Number of Shares Outstanding | shares | 677,500 |
Weighted Average Exercise Price | $ 4.35 |
Weighted Average Remaining Contractual Life (years) | 4 years 1 month 20 days |
Number of Shares Exercisable | shares | 475,400 |
Weighted Average Exercise Price | $ 4.41 |
Range One [Member] | |
Range of Exercise Price Lower Limit | 2.20 |
Range of Exercise Price Upper limit | $ 3.74 |
Number of Shares Outstanding | shares | 202,500 |
Weighted Average Exercise Price | $ 3.27 |
Weighted Average Remaining Contractual Life (years) | 8 years 11 months 26 days |
Number of Shares Exercisable | shares | 115,400 |
Weighted Average Exercise Price | $ 3.45 |
Range Two [Member] | |
Range of Exercise Price Lower Limit | 4 |
Range of Exercise Price Upper limit | $ 5.39 |
Number of Shares Outstanding | shares | 475,000 |
Weighted Average Exercise Price | $ 4.80 |
Weighted Average Remaining Contractual Life (years) | 2 years 26 days |
Number of Shares Exercisable | shares | 360,000 |
Weighted Average Exercise Price | $ 4.71 |
Stock Options and Warrants - 64
Stock Options and Warrants - Schedule of Nonvested Shares Granted Under the Stock Option Plan (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Nonvested, Shares Outstanding, Beginning | 504,966 | |
Nonvested, Shares Granted | 60,000 | 172,500 |
Nonvested, Shares Vested | 68,134 | |
Nonvested, Shares Forfeited | (431,000) | |
Nonvested, Shares Outstanding, Ending | 202,100 | 504,966 |
Weighted-Average Grant Date Fair Value, Nonvested Shares Outstanding, Beginning balance | $ 4.68 | |
Weighted-Average Grant Date Fair Value, Nonvested Shares Granted | 0.65 | $ 4.10 |
Weighted-Average Grant Date Fair Value, Nonvested Shares Vested | 4.88 | |
Weighted-Average Grant Date Fair Value, Nonvested Shares Forfeited | 3.95 | |
Weighted-Average Grant Date Fair Value, Nonvested Shares Outstanding, Ending balance | $ 4.35 | $ 4.68 |
Stock Options and Warrants - 65
Stock Options and Warrants - Schedule of Stock Warrants Activity (Details) - Warrants [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Shares Outstanding, Beginning Balance | 803,909 | 341,261 |
Shares, Granted | 7,643,749 | 478,909 |
Shares, Exercised | (1,122,376) | (16,260) |
Shares, Forfeited or expired | (1) | |
Shares Outstanding, Ending Balance | 7,325,282 | 803,909 |
Shares Exercisable, Ending Balance | 1,395,246 | |
Weighted-Average Exercise Price, Outstanding Beginning Balance | $ 4.50 | $ 5.17 |
Weighted-Average Exercise Price, Granted | 1.95 | 4.50 |
Weighted-Average Exercise Price, Exercised | 1.50 | 2.77 |
Weighted-Average Exercise Price, Forfeited or expired | ||
Weighted-Average Exercise Price, Outstanding Ending Balance | 2.09 | $ 4.50 |
Weighted-Average Exercise Price, Exercisable Ending Balance | $ 2.68 | |
Weighted-Average Remaining Contractual Terms (Years), Outstanding Beginning Balance | 4 years | 3 years 3 months 19 days |
Weighted-Average Remaining Contractual Terms (Years), Outstanding Ending Balance | 3 years 5 months 5 days | 4 years |
Weighted-Average Remaining Contractual Terms (Years), Exercisable Ending Balance | 3 years 9 months 3 days | |
Aggregate Intrinsic Value Shares Outstanding Beginning | $ 26,000 | $ 152,000 |
Aggregate Intrinsic Value Shares Outstanding Ending | 115,955 | $ 26,000 |
Aggregate Intrinsic Value Shares Exercisable | $ 78,374 |
Stock Options and Warrants - 66
Stock Options and Warrants - Schedule of Outstanding Warrants to Purchase Common Stock (Details) - $ / shares | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 06, 2017 | Jun. 02, 2016 | |
Warrants exercise price | $ 4 | $ 1.50 | ||
Warrants One [Member] | ||||
Number of warrants outstanding | 200,000 | 200,000 | ||
Warrants exercise price | $ 5.60 | $ 5.60 | ||
Warrants expiration dates | Sep19 | Sep19 | ||
Warrants Two [Member] | ||||
Number of warrants outstanding | 125,000 | 125,000 | ||
Warrants exercise price | $ 4.10 | $ 4.10 | ||
Warrants expiration dates | May21 | May21 | ||
Warrants Three [Member] | ||||
Number of warrants outstanding | 10,000 | 10,000 | ||
Warrants exercise price | $ 3.90 | $ 3.90 | ||
Warrants expiration dates | Oct21 | Oct21 | ||
Warrants Four [Member] | ||||
Number of warrants outstanding | 50,000 | 50,000 | ||
Warrants exercise price | $ 4.10 | $ 4.10 | ||
Warrants expiration dates | Nov21 | Nov21 | ||
Warrants Five [Member] | ||||
Number of warrants outstanding | 138,762 | 418,909 | ||
Warrants expiration dates | Jun21 | Jun21 | ||
Warrants Five [Member] | Minimum [Member] | ||||
Warrants exercise price | $ 3.74 | $ 3.74 | ||
Warrants Five [Member] | Maximum [Member] | ||||
Warrants exercise price | $ 4.25 | $ 4.25 | ||
Warrants Six [Member] | ||||
Number of warrants outstanding | 784,549 | |||
Warrants exercise price | $ 1.50 | |||
Warrants expiration dates | Apr22 | | ||
Warrants Seven [Member] | ||||
Number of warrants outstanding | 600,305 | |||
Warrants exercise price | ||||
Warrants expiration dates | Jul22 | | ||
Warrants Seven [Member] | Minimum [Member] | ||||
Warrants exercise price | $ 1.55 | |||
Warrants Seven [Member] | Maximum [Member] | ||||
Warrants exercise price | $ 2 | |||
Warrants Eight [Member] | ||||
Number of warrants outstanding | 4,666,666 | |||
Warrants exercise price | $ 2.03 | |||
Warrants expiration dates | Dec20 | | ||
Warrants Nine [Member] | ||||
Number of warrants outstanding | 750,000 | |||
Warrants exercise price | $ 1.50 | |||
Warrants expiration dates | Dec22 | | ||
Warrants [Member] | ||||
Number of warrants outstanding | 7,325,282 | 803,909 | ||
Warrants exercise price | $ 4.25 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal net operating loss carryforwards | $ 34,800,000 | $ 21,300,000 |
State net operating loss carryforwards | $ 18,200,000 | $ 14,500,000 |
Federal carryforward loss expires year | 2,034 | |
State carryforward loss expires year | 2,019 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Income Tax Assets (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carry forward | $ 8,927,000 | $ 10,325,000 |
Accounts receivable allowances | 227,000 | |
Inventory reserves | 148,000 | |
Reserve on asset impairment | 655,000 | |
Total deferred tax asset | 9,957,000 | 10,325,000 |
Valuation allowance | (9,957,000) | (10,325,000) |
Net deferred income tax asset |
Income Taxes - Schedule of Reco
Income Taxes - Schedule of Reconciliation of Effective Income Tax Rate to U.S. Statutory Rate (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal Statutory tax rate | (34.00%) | (34.00%) |
State tax net of federal benefit | (5.00%) | (5.00%) |
Foreign income tax rate differential | (39.00%) | (39.00%) |
Change in valuation | 10.00% | 0.00% |
Valuation allowance | 29.00% | 39.00% |
Effective tax rate | 0.00% | 0.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rental expense | $ 56,000 | $ 54,000 |
Related Party Activity (Details
Related Party Activity (Details Narrative) - USD ($) | Dec. 06, 2017 | Dec. 06, 2017 | Jul. 13, 2017 | Apr. 21, 2017 | Apr. 19, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 28, 2017 | Dec. 12, 2017 | Jun. 02, 2016 | ||
Advance to affiliate | $ 571,000 | |||||||||||
Repayments of related party | 240,000 | |||||||||||
Number of shares issued for services, value | $ (99,000) | $ (15,000) | ||||||||||
Secured convertible debt principal amount | $ 3,400,000 | |||||||||||
Number of warrants to purchase of common stock | 1,416,667 | 210,111 | ||||||||||
Maturity date | Oct. 21, 2018 | |||||||||||
Conversion price per share | $ 3 | |||||||||||
Warrant expiration date | Apr. 21, 2019 | |||||||||||
Warrant exercise price per share | $ 1.50 | $ 1.50 | $ 4 | |||||||||
Proceeds from warrant exercised | $ 1,650,000 | $ 116,000 | ||||||||||
Warrant term | 2 years | |||||||||||
Purchase of distribution offering | $ 4,000,000 | |||||||||||
Common Stock [Member] | ||||||||||||
Number of shares issued for services, shares | 62,365 | 4,228 | ||||||||||
Number of shares issued for services, value | ||||||||||||
Warrants [Member] | ||||||||||||
Number of warrants to purchase of common stock | 138,762 | [1] | 418,909 | [2] | 346,206 | |||||||
Warrant exercise price per share | $ 4.25 | |||||||||||
Raptor/Harbor Reeds SPV LLC [Member] | ||||||||||||
Number of warrants to purchase of common stock | 1,416,667 | |||||||||||
Warrant exercise price per share | $ 4 | |||||||||||
Direct costs | $ 157,000 | |||||||||||
Raptor [Member] | ||||||||||||
Number of warrants to purchase of common stock | 750,000 | |||||||||||
Warrant exercise price per share | $ 1.50 | |||||||||||
Reduced [Member] | ||||||||||||
Conversion price per share | 1.75 | |||||||||||
Reduced conversion price per share | $ 1.50 | |||||||||||
Securities Purchase Agreement [Member] | ||||||||||||
Secured convertible debt principal amount | $ 3,400,000 | |||||||||||
Number of warrants to purchase of common stock | 1,416,667 | |||||||||||
Note bears interest rate | 12.00% | |||||||||||
Maturity date | Apr. 21, 2019 | |||||||||||
Maturity date description | The maturity date was subsequently extended to April 21, 2021. | |||||||||||
Warrant Exercise Agreements [Member] | Raptor/Harbor Reeds SPV LLC [Member] | ||||||||||||
Number of warrants to purchase of common stock | 766,667 | |||||||||||
Note bears interest rate | 150.00% | |||||||||||
Proceeds from warrant exercised | $ 1,150,000 | |||||||||||
Warrant Exercise Agreements [Member] | Raptor/Harbor Reeds SPV LLC [Member] | Second Tranche Warrants [Member] | ||||||||||||
Number of warrants to purchase of common stock | 350,000 | |||||||||||
Note bears interest rate | 200.00% | |||||||||||
Warrant term | 5 years | |||||||||||
Warrant Exercise Agreements [Member] | Raptor/Harbor Reeds SPV LLC [Member] | Third Tranche Warrants [Member] | ||||||||||||
Number of warrants to purchase of common stock | 60,000 | |||||||||||
Note bears interest rate | 155.00% | |||||||||||
Warrant term | 5 years | |||||||||||
Backstop Agreement [Member] | Common Stock [Member] | ||||||||||||
Rights to purchase subscriptions shares | 2,666,667 | |||||||||||
Backstop Agreement [Member] | Warrants [Member] | ||||||||||||
Rights to purchase subscriptions shares | 1,333,333 | |||||||||||
Backstop Agreement [Member] | Raptor [Member] | ||||||||||||
Rights to purchase subscriptions shares | 2,666,667 | |||||||||||
Backstop Agreement [Member] | Raptor [Member] | Minimum [Member] | ||||||||||||
Number of warrants to purchase of common stock | 750,000 | 750,000 | ||||||||||
Warrant term | 5 years | |||||||||||
Purchase of distribution offering | $ 6,000,000 | |||||||||||
Related Party [Member] | ||||||||||||
Number of shares issued for services, shares | 4,300 | |||||||||||
Shares issued price per share | $ 2.20 | |||||||||||
Number of shares issued for services, value | $ 9,000 | |||||||||||
[1] | (5) Warrant valuation on December 31, 2017 for 138,762 warrants containing fundamental transaction provisions. The change in the fair value of the warrant liability was $3,275,000 and $232,000 for the years ended December 31, 2017 and 2016, respectively. | |||||||||||
[2] | (1) Warrant valuation on December 31, 2016 for 418,909 warrants containing fundamental transaction provisions. |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Mar. 28, 2018 | Jan. 10, 2018 | Jan. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Shares granted | 60,000 | 172,500 | |||
Number of option issued exercise price per share | $ 3.36 | $ 1.36 | |||
Number of shares issued for services, value | $ (99,000) | $ (15,000) | |||
Board of Directors [Member] | |||||
Number of shares issued for services, shares | 58,065 | ||||
Number of shares issued for services, value | $ 90,000 | ||||
Share issued price per share | $ 1.55 | ||||
Minimum [Member] | |||||
Options to purchase shares of common stock vesting period | 2 years | ||||
Subsequent Event [Member] | Board of Directors [Member] | |||||
Number of shares issued for services, shares | 400,000 | ||||
Number of shares issued for services, value | $ 680,000 | ||||
Share issued price per share | $ 1.70 | ||||
Subsequent Event [Member] | CAPEX Loan [Member] | Minimum [Member] | |||||
Repayments of Debt | $ 312,000 | $ 300,000 | |||
Subsequent Event [Member] | Mr. Stalowir [Member] | Restricted Stock [Member] | |||||
Shares granted | 371,218 | ||||
Subsequent Event [Member] | Mr. Stalowir [Member] | Stock Options [Member] | |||||
Options to purchase shares of common stock | 371,218 | ||||
Number of option issued exercise price per share | $ 1.70 | ||||
Subsequent Event [Member] | Chief Executive Officer [Member] | Restricted Stock [Member] | |||||
Options to purchase shares of common stock | 412,736 | ||||
Subsequent Event [Member] | Chief Executive Officer [Member] | Stock Options [Member] | |||||
Options to purchase shares of common stock | 412,735 | ||||
Share issued price per share | $ 1.60 | ||||
Options to purchase shares of common stock vesting period | 4 years | ||||
Subsequent Event [Member] | Employees [Member] | |||||
Options to purchase shares of common stock | 982,000 | ||||
Non-statutory optionsa to purchase shares of common stock | 1,134,000 |