Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 11, 2014 | Apr. 08, 2014 | |
Document And Entity Information [Abstract] | ' | ' | ' |
Document Type | '10-K | ' | ' |
Amendment Flag | 'false | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Entity Registrant Name | 'Hangover Joe's Holding Corp | ' | ' |
Entity Central Index Key | '0001388132 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Common Stock, Shares Outstanding | ' | ' | 122,591,301 |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'Yes | ' | ' |
Entity Public Float | ' | $1,350,000 | ' |
Is Entity's Reporting Status Current? | 'No | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
CURRENT ASSETS | ' | ' |
Cash | $2,882 | $8,779 |
Accounts receivable, net | ' | 131,273 |
Inventory | ' | 26,634 |
Prepaid expenses | ' | 188,570 |
Total current assets | 2,882 | 355,256 |
PROPERTY AND EQUIPMENT,NET | 2,149 | 3,215 |
TOTAL ASSETS | 5,031 | 358,471 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 972,139 | 594,866 |
Accrued expenses | 528,627 | 960,465 |
Stock subscription deposit | 342,500 | ' |
Revolving credit facility | 416,436 | ' |
Mandatorily redeemable Series B preferred stock | 67,500 | ' |
Inventory financing payable | ' | 97,611 |
Payable to shareholder | ' | 20,000 |
Notes payable | 130,149 | ' |
Note payable - related party | 180,440 | 89,422 |
Current liabilities | 2,637,791 | 1,762,364 |
COMMITMENTS AND CONTINGENCIES | ' | ' |
DEFICIT | ' | ' |
Preferred stock; $0.10 par value; 10,000,000 authorized shares Series A; 425,000 authorized shares, no shares (2013) and 87,501 shares (2012) issued and outstanding Series C; 5,000,000 authorized shares, no shares issued or oustanding Series D; 200,000 authorized shares, no shares issued or oustanding | ' | 315,078 |
Common shares to be issued under Series A conversion | 315,078 | ' |
Common stock; $0.001 par value; 150,000,000 authorized shares, 122,591,301 shares (2013) and 120,846,348 shares (2012) issued and outstanding | 122,592 | 120,847 |
Additional paid-in capital | 1,582,104 | 623,790 |
Accumulated deficit | -4,652,534 | -2,463,608 |
Total deficit | -2,632,760 | -1,403,893 |
TOTAL LIABILITIES AND DEFICIT | $5,031 | $358,471 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Preferred stock, par value per share | $0.10 | ' |
Preferred stock, shares authorized | 10,000,000 | ' |
Common Stock, par value per share | $0.00 | ' |
Common Stock, shares authorized | 150,000,000 | ' |
Common Stock, shares issued | 122,591,301 | 120,846,348 |
Common stock, shares outstanding | 122,591,301 | 120,846,348 |
Preferred Stock Series A [Member] | ' | ' |
Preferred stock, shares authorized | 425,000 | ' |
Preferred stock, shares issued | 0 | 87,501 |
Preferred stock, shares outstanding | 0 | 87,501 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Statement of Comprehensive Income [Abstract] | ' | ' |
NET SALES | $264,796 | $1,079,234 |
COST OF GOODS SOLD | 262,302 | 761,441 |
GROSS PROFIT | 2,494 | 317,793 |
OPERATING EXPENSES | ' | ' |
Selling and marketing | 783,834 | 840,823 |
General and administrative | 1,065,497 | 770,574 |
Management fees - related party | ' | 192,500 |
Settlement costs | 5,500 | 652,500 |
Total operating expenses | 1,849,331 | 2,456,397 |
LOSS FROM OPERATIONS | -1,846,837 | -2,138,604 |
OTHER EXPENSE | ' | ' |
Interest expense - Related party | -4,098 | ' |
Other | -337,991 | -6,511 |
NET LOSS | ($2,188,926) | ($2,145,115) |
BASIC AND DILUTED NET LOSS PER COMMON SHARE | ($0.02) | ($0.02) |
Basic and diluted weighted average common shares outstanding | 122,448,054 | 92,551,863 |
CONSOLIDATED_STATEMENT_OF_CHAN
CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT (USD $) | Common Stock [Member] | Preferred Stock Series A [Member] | Common shares to be issued under Series A conversion [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balance at Dec. 31, 2011 | ' | ' | ' | $169,931 | ($318,493) | ($148,562) |
Balance, shares at Dec. 31, 2011 | ' | ' | ' | ' | ' | ' |
Withdrawals | ' | ' | ' | -10,579 | ' | ' |
Contributed services | ' | ' | ' | 50,000 | ' | ' |
Shares issued to founder, value | 4,291 | ' | ' | -4,277 | ' | 14 |
Shares issued to founders, in shares | 4,290,669 | ' | ' | ' | ' | ' |
Proceeds from issuance of common stock | 18,785 | ' | ' | 708,215 | ' | 727,000 |
Proceeds from issuance of common stock, shares | 18,784,678 | ' | ' | ' | ' | ' |
Common shares returned by founder | -613 | ' | ' | -19,387 | ' | ' |
Common shares returned by founder, shares | -612,953 | ' | ' | ' | ' | ' |
Common shares issued for accrued settlement costs | 268 | ' | ' | 18,459 | ' | ' |
Common shares issued for accrued settlement costs, shares | 267,526 | ' | ' | ' | ' | ' |
Acquisition of AMHC and sale of subsidiary interests | 36,808 | 321,081 | ' | -347,845 | ' | 10,044 |
Acquisition of AMHC and sale of subsidiary interests, shares | 36,807,821 | 89,168 | ' | ' | ' | ' |
Conversion of preferred to common stock | 13 | -6,003 | ' | 5,990 | ' | ' |
Conversion of preferred to common stock, shares | 13,336 | -1,667 | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | 114,378 | ' | 114,378 |
Issuance of common shares upon incorporation and legal reorganization of entities under common control | 61,295 | ' | ' | -61,095 | ' | ' |
Issuance of common shares upon incorporation and legal reorganization of entities under common control, shares | 61,295,271 | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | -2,145,115 | -2,145,115 |
Balance at Dec. 31, 2012 | 120,847 | 87,501 | ' | 623,790 | -2,463,608 | -1,403,893 |
Balance, shares at Dec. 31, 2012 | 120,846,348 | 315,078 | ' | ' | ' | ' |
Proceeds from issuance of common stock | 50 | ' | ' | 5,450 | ' | 5,500 |
Proceeds from issuance of common stock, shares | 50,000 | ' | ' | ' | ' | ' |
Common shares returned by founder | -4,500 | ' | ' | 4,500 | ' | ' |
Common shares returned by founder, shares | -4,500,000 | ' | ' | ' | ' | 4,500,000 |
Common shares issued for accrued settlement costs | 4,500 | ' | ' | 648,000 | ' | ' |
Common shares issued for accrued settlement costs, shares | 4,500,000 | ' | ' | ' | ' | ' |
Common shares issued for debt financing costs | 195 | ' | ' | 21,055 | ' | ' |
Common shares issued for debt financing costs, shares | 194,953 | ' | ' | ' | ' | ' |
Issuance of common shares upon incorporation and legal reorganization of entities under common control | 1,500 | ' | ' | 223,500 | ' | ' |
Issuance of common shares upon incorporation and legal reorganization of entities under common control, shares | 1,500,000 | ' | ' | ' | ' | ' |
Beneficial conversion feature | ' | ' | ' | 31,735 | ' | ' |
Warrants to acquire common shares issued for investor relations services | ' | ' | ' | 11,574 | ' | ' |
Conversion of Series A preferred stock to common stock | ' | -315,078 | 315,078 | ' | ' | ' |
Conversion of Series A preferred stock to common stock, shares | ' | -87,501 | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | -2,188,926 | -2,188,926 |
Balance at Dec. 31, 2013 | $122,592 | ' | $315,078 | $1,582,104 | ($4,652,534) | ($2,632,760) |
Balance, shares at Dec. 31, 2013 | 122,591,301 | ' | ' | ' | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CASH FLOW FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($2,188,926) | ($2,145,115) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Contributed services | ' | 50,000 |
Bad debt expense | 103,032 | 21,624 |
Amortization of prepaid consulting paid for in stock | 278,618 | 81,383 |
Amortization of debt issuance costs | 225,007 | ' |
Amortization of debt discount | 10,578 | ' |
Warrant issued for services | 11,574 | ' |
Accrued share-based consulting | 30,666 | ' |
Settlement costs to dissenting shareholder | 5,500 | 652,500 |
Depreciation expense | 1,066 | 1,097 |
Stock-based compensation | ' | 114,378 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 28,241 | -133,792 |
Prepaid expenses | -240,939 | -42,720 |
Deposits | ' | 7,500 |
Inventory | 26,634 | 20,111 |
Accounts payable | 377,273 | 521,583 |
Accrued expenses | 439,918 | 36,123 |
Net cash used in operating activities | -605,867 | -815,328 |
CASH FLOW FROM INVESTING ACTIVITIES: | ' | ' |
Net proceeds from sale of subsidiary interest | ' | 10,044 |
Purchase of property and equipment | ' | -2,562 |
Net cash used in investing activities | ' | 7,482 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from issuance of common stock | ' | 727,214 |
Deposit on stock subscription | 342,500 | ' |
Payment made to dissenting shareholder | -20,000 | ' |
Borrowings under revolving credit facility | 425,000 | ' |
Payments on revolving credit facility | -71,083 | ' |
Net payments under inventory financing payable | -97,610 | 73,899 |
Cash received for convertible note payable | 150,000 | ' |
Cash paid for debt issuance costs | -71,337 | ' |
Redemption of Series B preferred stock | -57,500 | ' |
Advances paid to from related party | ' | -26,957 |
Withdrawals | ' | -10,579 |
Net cash provided by (used in) financing activities | 599,970 | 763,577 |
Net decrease in cash | -5,897 | -44,269 |
Cash, beginning of period | 8,779 | 53,048 |
Cash, end of period | 2,882 | 8,779 |
SUPPLEMENTAL CASH FLOW DISCLOSURES | ' | ' |
Interest paid | 23,445 | 6,524 |
SUPPLEMENTAL DISCLOSURE NON-CASH ITEMS | ' | ' |
Mandatorily redeemable preferred stock issued for debt issuance costs | 125,000 | ' |
Common stock issued for debt issuance costs | 21,250 | ' |
Common stock issued for accrued settlement | 652,500 | ' |
Common stock issued for accrued payables | 225,000 | ' |
Beneficial conversion recorded on convertible note | 44,235 | ' |
Discount issued for debt issuance costs | 13,888 | ' |
Conversion of Series A preferred stock to common stock | $315,078 | $6,003 |
ORGANIZATION_DESCRIPTION_OF_BU
ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND MANAGEMENT'S PLANS | 12 Months Ended |
Dec. 31, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND MANAGEMENT'S PLANS | ' |
NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND MANAGEMENT’S PLANS | |
Organization: | |
Hangover Joe’s Holding Corporation (“HJHC” or the “Company”) was originally incorporated in the State of Colorado in December 2005 as Across America Real Estate Exchange, Inc. (“AAEX”). In May 2010, AAEX changed its name to Accredited Members Holding Corporation (“AMHC”). On July 25, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Hangover Joe’s, Inc., a privately-held Colorado corporation (“HOJ”), whereby on July 25, 2012, the Company acquired HOJ in a reverse triangular merger (the “Acquisition”). Prior to the Acquisition, the Company had 36,807,801 shares outstanding. Upon closing the Acquisition, the Company issued 83,514,827 common shares to the HOJ shareholders in exchange for all of their ownership interests in HOJ such that the former owners of HOJ owned approximately 69% of the Company post Acquisition. The shareholders of the Company prior to the Acquisition owned approximately 31% of the Company post Acquisition. In connection with the Acquisition on July 25, 2012, the Company changed its name to Hangover Joe’s Holding Corporation. | |
The Merger Agreement further provided that within five business days after the closing of the Acquisition, the Company would sell to Accredited Members Acquisition Corporation (“Buyer”) all of the equity interests in three of the Company’s subsidiaries (the “Sale”), being Accredited Members, Inc., AMHC Managed Services, Inc. and World Wide Premium Packers, Inc. (collectively, the “Subsidiaries”). Buyer is a privately-held Colorado corporation owned by two former directors of the Company, JW Roth and David Lavigne. The parties closed the Sale on July 27, 2012. The Buyer paid $10,000 and assumed all liabilities related to the business of the Subsidiaries in exchange for all of the shares in the Subsidiaries owned by the Company. | |
HOJ is a Colorado corporation formed on March 5, 2012. HOJ was formed for the purpose of acquiring all of the assets of both Hangover Joe’s Products LLC (“HOJ LLC”) and Hangover Joe’s Joint Venture (“HOJ JV”). HOJ LLC had conducted operations through HOJ JV, with the owner of HOJ LLC being one of the same owners and control persons of HOJ JV. Effective March 30, 2012, HOJ acquired the net assets of HOJ LLC and HOJ JV through the issuance of common stock of HOJ. Because HOJ had no significant assets or business operations prior to the merger and each of these entities were owned by the same control group, this transaction was accounted for as a reorganization of entities under common control. Accordingly, the historical results of operations of HOJ LLC and HOJ JV prior to March 30, 2012 are included in the results of operations of the Company. | |
Because all of the operating businesses of AMHC were contemporaneously sold within five business days after the Acquisition, the transaction has been accounted for as a recapitalization of HOJ. Accordingly, the accompanying consolidated financial statements include the financial position, results of operations and cash flows of HOJ and its predecessor entities, HOJ LLC and HOJ JV, prior to the date of Acquisition. The historical results of operations and cash flows of AMHC and the Subsidiaries prior to the date of the Acquisition have been excluded from the accompanying consolidated financial statements. The stockholders’ equity of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital. The restated consolidated accumulated deficit of the accounting acquirer (HOJ) has been carried forward after the exchange. | |
Description of Business: | |
The Company sells an all-natural, two-ounce beverage, formulated to help relieve the symptoms associated with alcohol induced hangovers – the Hangover Recovery Shot. The Hangover Recovery Shot is an officially licensed product of The Hangover movie series from Warner Brothers. The Company has registered the trademark “Hangover Joe’s Get Up & Go” with the U.S. Patent and Trademark office. The intellectual property relates to the Hangover Joe’s Recovery Shot, including but not limited to a license agreement dated July 19, 2011, between HOJ LLC and Warner Bros. Consumer Products, Inc. The license agreement permits HOJ to use the costumes, artwork logos, and other elements depicted in the 2009 movie “The Hangover” during the term of the license agreement, as amended, which expires January 31, 2016. The Company has sold its products primarily to convenience stores, liquor stores, and grocery stores through distribution agreements, as well as through online internet sales. The Company began selling a hangover recovery shot in February 2011 and began selling the licensed Hangover Joe’s Recovery Shot in July 2011. HOJ is actively seeking to expand the distribution of the Hangover Joe’s Recovery Shot. | |
Going Concern and Management's plans | |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company reported a net loss of approximately $2,189,000 for the year ended December 31, 2013, and a working capital deficiency and accumulated deficit of approximately $2,635,000 and $4,653,000, respectively, at December 31, 2013. The Company has a limited operating history and it has not generated any significant sales since the second quarter of 2013, and it has relied primarily on debt financing and private placements of its common stock to fund its operations; however, due to a lack of liquidity, the Company has had difficulty in paying its obligations and is in default on its revolving credit facility and other debt (Note 3), and the Company cannot provide any assurance it will be able to remedy the default or be able to raise funds through a future issuance of debt or equity to carry out its business plan. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts or classification of liabilities that may result from the possible inability of the Company to continue as a going concern. | |
Management has pursued, and intends to continue to pursue, debt and/or equity financing arrangements with potential investors in order to obtain sufficient working capital necessary to carry out its business plan (Notes 3 and 9). The Company has also taken steps to minimize costs, and has continued to explore various business opportunities. | |
In December 2013, the Company announced the signing of a distribution contract for the sale of Hangover Joes Recovery Shots in Japan, in which management believes the Company may be able to distribute its recovery shots through up to 8600 drug and food stores; however, the Company is waiting on Japanese regulatory approval necessary to distribute under this agreement. In addition, in January 2014, the Company entered into an agreement with Git-R-Done Productions, Inc., which allows the Company to launch a new non-caffeinated, all natural healthy energy shot, Git-R-Done-Energy. The launch of this new product is planned for the Spring / Summer of 2014. | |
The Company is also pursuing additional opportunities, but there can be no assurance that any existing or contemplated plans will materialize, and fulfilling any such existing or contemplated contracts will require significant marketing support and additional capital, of which there can be no assurance the Company will be able to raise funds sufficient to continue with the Company’s business plan. | |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | |
Dec. 31, 2013 | ||
Accounting Policies [Abstract] | ' | |
SIGNIFICANT ACCOUNTING POLICIES | ' | |
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES | ||
Basis of Presentation | ||
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP"). | ||
Principles of Consolidation | ||
The consolidated financial statements include the accounts of the Company and its 100%-owned subsidiary. All intercompany accounts, transactions, and profits are eliminated in consolidation. | ||
Use of Estimates | ||
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||
Significant estimates are used in accounting for certain items such as the allowance for doubtful accounts, revenue recognition, and stock-based compensation. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ. | ||
Accounts Receivable and Concentration of Credit Risk | ||
The Company is subject to credit risk through trade receivables. This credit risk has been mitigated by the diversification of the Company’s operations, as well as its customer base. The Company grants varying payment terms to its customers. Payment terms for customers can vary from due upon receipt up to net 45 days. | ||
Two customers comprised approximately 78% of the trade accounts receivable at December 31, 2012; these individual customer balances represent approximately 65%, and 13% of the total trade accounts receivable. Two customers accounted for approximately 20% of net sales for the year ended December 31, 2013; each of these individual customers’ sales represent approximately 10% of annual net sales. Four customers accounted for 54% of net sales for the year ended December 31, 2012; these individual customers’ sales represent approximately 19%, 16%, 10% and 10% of annual net sales. | ||
Ongoing credit evaluations of customers’ financial condition are performed. Collateral is not required. The Company maintains an allowance when necessary for doubtful accounts that is the Company’s best estimate of potentially uncollectible trade receivables. Provisions are made based upon a specific review of all significant outstanding invoices that are considered potentially uncollectible in whole or in part. For those invoices not specifically reviewed or considered uncollectible, general provisions are provided at different rates, based upon the age of the receivable, historical experience, and other currently available evidence. The allowance estimates are adjusted as additional information becomes known or as payments are made. As of December 31, 2013, the allowance for doubtful accounts was $146,604, and at December 31, 2012, the allowance for doubtful accounts was $21,624. | ||
Inventory | ||
Inventory is valued at the lower of cost (first-in, first-out) or market value. The inventory at December 31, 2012 primarily consisted of packing supplies. The Company has no inventory on hand at December 31, 2013. | ||
License and Royalties | ||
The Company has a license with Warner Bros. Consumer Products, Inc. (“WBCP”) that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover and the 2012 movie, The Hangover Part II. This license, as amended, expires January 31, 2016. The terms of the WBCP license provide for royalties based on a percentage of products sold, as defined, as well as agreed-upon guaranteed minimum royalties. Guaranteed minimum royalty payments are made periodically over the term of the license and are recorded when paid as an asset in the balance sheet. The asset is amortized to expense as revenue from the related products is recognized. If management determines that all or a portion of the minimum guaranteed amounts appear not to be recoverable through future product sales, the non recoverable portion is charged to expense at that time The WBCP license agreement contains various convenants, terms and conditions, the violation of which could result in the termination of the WBCP License. | ||
Revenue Recognition | ||
The Company sells its product primarily through third-party distributors. The Company is not guaranteed any minimum level of sales or transactions. The Company also offers its products for sale through its website at www.hangoverjoes.com. | ||
The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery to third party distributors and consumers via the Company’s website has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer. For sales to distributors, revenue is usually recognized at the time of delivery. The Company defers revenues on products sold to distributors for which there is a lack of credit history or if the distribution may be in a new market in which the Company has no prior experience. The Company defers revenue in these situations until cash is received. For sales through the Company’s website, revenue is recognized at time of shipment. | ||
Management evaluates the terms of its sales in consideration of the criteria outlined in Principal Agent Consideration with regards to its determination of gross versus net reporting of revenue for transactions with customers. The Company sells, through its website, Hangover Joe’s Recovery Shots. In these transactions, management has determined that the Company (i) acts as principal; (ii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns; and (iii) has latitude in establishing price with the customer. For these transactions, the Company recognizes revenue on a gross basis. | ||
The Company offers a variety of incentives and discounts to distributors, customers and consumers through various programs to support the distribution of its products. These incentives and discounts include cash discounts, price allowances, volume based rebates and product placement fees. These incentives and discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $1,800 and $43,100 for the years ended December 31, 2013 and 2012, respectively. | ||
Cost of Goods Sold | ||
Cost of goods sold consists of the costs of raw materials utilized in the production of its product, co-packing fees, and in-bound freight charges. Raw material costs generally account for the largest portion of the cost of goods sold. Raw materials include bottles, ingredients and packaging materials. The manufacturer is responsible for the ingredients. Costs of goods sold also include obsolescence charges and license and royalty expenses. | ||
Supplier/Manufacturer Concentration | ||
The Company relies on its third-party suppliers for raw materials necessary for its products, and it relies on third-party manufacturers for the production of its product. Although the Company believes that it could utilize alternative suppliers and manufacturers, any delay in locating and establishing relationships with other suppliers/manufacturers could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability. The Company’s third-party manufacturer acquires some ingredients from suppliers outside of the United States. Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations. These factors could result in a delay in or disruption of the supply of certain raw materials. Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company’s business. | ||
Sales and Marketing Expenses | ||
Sales and marketing costs include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials, trade shows, other marketing expenses and product design expenses. | ||
Advertising Expenses | ||
Advertising costs are expensed as incurred and are included in sales and marketing expense in the accompanying consolidated statements of operations. Total advertising expenses were approximately $102,000 and $122,000 for the years ended December 31, 2013 and 2012, respectively. | ||
Income Taxes | ||
Prior to March 2012, no provision for income taxes was provided in the accompanying financial statements because HOJ LLC (as a limited liability company), and HOJ JV (as a partnership), elected to file as partnerships, and therefore management believes that prior to December 31, 2012 the Company was not subject to income taxes, and, that such taxes were the responsibility of the individual member/partners. | ||
Beginning in March 2012, as a corporation, the Company now records a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements. The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized. Although the Company is to file income tax returns in the US Federal jurisdiction and various State jurisdictions, the Company has not filed income tax returns for the year ended December 31, 2012; however, as no taxes are estimated to be due, management does not believe these non-filings will have a material impact on the Company’s consolidated financial statements. | ||
The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. All tax years remain open and subject to U.S. Federal tax examination. Management does not believe that there are any current tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements. | ||
The Company’s policy is to classify tax related interest and penalties as income tax expense. There is no interest or penalties estimated on the underpayment of income taxes as a result of unrecognized tax benefits. | ||
Stock-Based Compensation | ||
Stock-Based Compensation is recognized for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. Stock-Based Compensation expense is recognized over the period of service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock option at the grant date by using an option pricing model, typically the Black-Scholes model. | ||
Net Loss per Share | ||
Basic net loss per share is computed by dividing the net loss applicable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. Historical loss per share of the accounting acquirer (HOJ) has been adjusted retroactively to reflect the new capital structure of the Company as a result of the Merger Agreement. Diluted net loss per share reflects the potential dilution that could occur if dilutive securities were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, unless the effect of such inclusion would reduce a loss or increase earnings per share. For each of the periods presented in the accompanying consolidated financial statements, the effect of the inclusion of dilutive shares would have resulted in a decrease in loss per share. Stock options, warrants, common shares underlying convertible preferred stock and convertible notes payable in the aggregate of 16,034,287 and 10,355,726 shares as of and for the year ended December 31, 2013 and 2012, respectively, were not included in the calculation of diluted net loss per common share because the effect would have been anti-dilutive. | ||
Fair Value of Financial Instruments | ||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. | ||
The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below. | ||
Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2013 and December 31, 2012, the Company had no financial assets or liabilities required to be reported for fair value purposes. | ||
The carrying value of the Company’s financial instruments, including cash, accounts receivable, notes and accounts payable, the mandatorily redeemable preferred stock, and the inventory financing payable approximate fair value at December 31, 2013 and December 31, 2012, due to the relatively short maturity of the respective instruments. The fair value of related party payables is not practicable to estimate due to the related party nature of the underlying transactions. | ||
Recent Accounting Pronouncements | ||
The Company reviews new accounting standards as issued. Management has not identified any recently issued accounting standards that it believes will have a significant impact on the Company’s consolidated financial statements. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2013 | |
Debt Disclosure [Abstract] | ' |
DEBT | ' |
NOTE 3 – DEBT | |
Inventory financing and factoring arrangements | |
In September 2012, the Company entered into a factoring agreement with a finance company which provided financing up to $250,000, secured by the accounts receivable and inventory of the Company. The finance company advanced to the Company up to 80% of eligible accounts receivable and was entitled to collect receivables directly from the Company’s customers. The Company paid a financing fee equal to 2.5% for receivable amounts outstanding up to 30 days and an additional rate of 0.084% per day (30.7% annualized) after the initial 30 days with a maximum exposure of 60 days. | |
In October 2012, the Company entered into a purchase order financing arrangement with this same finance company which supplemented the factoring agreement above. The finance company advanced up to 100% of the manufacturing and shipping costs at the time a Company purchase order was submitted to the manufacturer. The Company paid a financing fee equal to 3.85% of the purchase order amount for each transaction and an additional rate of 0.13% per day (47.4% annualized) after the initial 30 days. As of December 31, 2012, the inventory financing payable under the purchase order financing and factoring arrangement was $97,611. Amounts outstanding under this agreement were paid in full in January 2013 when the Company entered into the revolving credit facility. | |
Revolving credit facility | |
On January 10, 2013, the Company entered into a senior secured lending arrangement with TCA Global Credit Master Fund, LP (“TCA”) for up to a maximum borrowing of $6,000,000. The credit facility provided for an initial line of credit of $425,000 based upon accounts receivable and projected sales and is to be used only as permitted under the specified use of proceeds for working capital purposes. The initial line of credit had a six month term from the date of closing with a six month renewal option. The lending arrangement is secured by all of the assets of the Company and restricts the Company from paying dividends. As a partial guaranty under the TCA lending arrangement, the Company’s CEO personally guaranteed certain representations made by the Company to TCA. At closing, the Company was advanced $425,000 less fees and closing costs. | |
In connection with the agreement above, TCA charged an investment banking fee consisting of 125,000 shares of newly authorized Series B Preferred Shares of the Company equating to an aggregate of $125,000 in the Company’s capital stock. The shares are mandatorily redeemable and were scheduled to be repaid in 2013. Also in connection with the TCA agreement, the Company issued 194,954 shares of common stock to a consulting firm as consideration for a finder’s fee for this transaction. | |
The Company is in default in its agreement with TCA (Note 6). | |
Mandatorily Redeemable Series B Preferred Stock | |
On January 10, 2013, the Board of Directors approved the authorization of 125,000 shares of Series B Preferred Stock (the “Series B Preferred Stock”). In connection with the TCA transaction, the Company issued 125,000 shares of Series B Preferred Stock to TCA. The Series B Preferred Stock ranks pari passu to the Company’s common stock. The Holder of outstanding shares of Series B Preferred Stock shall be entitled to notice of any shareholders’ meeting and to vote as a single class with the Common Stock upon any matter submitted for approval by the holders of common stock. Each share of Series B Preferred Stock shall have one vote per share. All outstanding shares of Series B Preferred Stock will be entitled to be paid the “Liquidation Preference,” which is defined and calculated as follows: $125,000 in the aggregate (not on a per share basis), payable monthly at various amounts. In 2013, $57,000 was paid, and the remaining balance of $67,500 is due in full by virtue of the TCA default discussed above. The mandatorily redeemable preferred stock is presented as a current liability in the accompanying December 31, 2013 balance sheet. | |
Convertible Promissory Notes | |
JMJ Note | |
In June 2013, the Company closed on a 12%, 12-month convertible promissory note with JMJ Financial (“JMJ”) (the “JMJ Note”). The face amount of the JMJ Note reflects a principal sum of $500,000, with total borrowings that may be available of $450,000 (which is net of a 10% original issue discount). Upon closing of the JMJ Note, the Company received $100,000 from JMJ. In September 2013, the Company received an additional $25,000 from JMJ. | |
JMJ has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The conversion price is the lesser of $0.05 or 70% of the average of the three lowest closing prices in the 25 trading days previous to the conversion. Subsequent to December 31, 2013, a portion of the JMJ Note was converted into 6,000,000 common shares. | |
The Note is subject to various default provisions, and the occurrence of such an event of default will cause the outstanding principal amount under the JMJ Note, together with accrued and unpaid interest, and all other amounts payable under the JMJ Note, to become, at JMJ’s election, immediately due and payable to JMJ. | |
The Company determined a beneficial conversion feature existed at the commitment date. A beneficial conversion feature of approximately $32,000 was recorded as a discount to the note and has been amortized over the term of the loan. The debt discount recorded at December 31, 2013 was $14,800. The JMJ Note has an effective interest rate of approximately 34%. | |
JSJ Notes | |
In December 2013, the Company received $25,000 from JSJ Investments Inc. (“JSJ”) in exchange for a $25,000 convertible note (the “JSJ Note”). This note bears interest at 12% per annum and matures in May 2014. On or after the maturity date, any unpaid amounts and accrued interest are convertible by the holder, at the holder’s discretion, into shares of the Company’s common stock. The conversion price is at 50% discount of the average of the three lowest closing prices on the previous ten days, with a maximum conversion price equal to the price if determined on the note execution date. | |
The JSJ note is subject to various default provisions, and the occurrence of such an event of default will cause the outstanding principal and interest to become immediately due and payable to JSJ. | |
In March 2014, the Company entered into second convertible note with JSJ in exchange for $50,000. This note also bears interest at 12% per annum and matures in September 2014, with conversion terms similar to the December 2013 note. | |
The Company determined a beneficial conversion feature existed at the commitment date. A beneficial conversion feature of approximately $12,500 was recorded as a discount to the note and is being amortized over the term of the loan. The debt discount recorded at December 31, 2013 was $12,500. The 2013 JSJ Note has an effective interest rate of approximately 62%. |
ACCRUED_EXPENSES
ACCRUED EXPENSES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounts Payable and Accrued Liabilities [Abstract] | ' | ||||||||
ACCRUED EXPENSES | ' | ||||||||
NOTE 4 – ACCRUED EXPENSES | |||||||||
Accrued expenses as of December 31, 2013 and December 31, 2012 consist of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Accrued expenses | $ | 58,941 | $ | 37,005 | |||||
Deferred salaries | 208,714 | 45,960 | |||||||
Accrued settlement costs – paid for in common stock | - | 652,500 | |||||||
Accrued consulting costs – to be paid for in common stock | 165,166 | 225,000 | |||||||
Minimum guaranteed royalty obligation | 75,000 | - | |||||||
Accrued interest | 20,806 | - | |||||||
$ | 528,627 | $ | 960,465 | ||||||
In January 2013, the Company issued 4,500,000 and 1,500,000 common shares for the accrued settlement costs and accrued consulting costs, respectively (Note 6). | |||||||||
Investor Relations Agreement | |||||||||
In February 2013, the Company entered into an investor relations agreement with a firm which required the Company to pay a consulting fee of $2,500 per month and to provide 100,000 shares of the Company's common stock per month and warrants to purchase 100,000 shares of the Company’s common stock per month. Based on the terms of the agreement, the Company determined that the measurement date of the shares to be issued is on the dates that the shares are earned, which is monthly. Total compensation expense under this agreement for 2013 is $37,000. As the shares of common stock issuable under this agreement have not been issued as of December 31, 2013, the Company has recorded an accrued expense of $37,000 on the consolidated balance sheet until such shares are issued. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 5 – RELATED PARTY TRANSACTIONS | |
Promissory note payable, related party | |
The prior President/CEO of the Company (now a member of the board of directors) has advanced funds to the Company from time to time for working capital. As of December 31, 2013 and December 31, 2012, amounts payable to this party were $89,422. These advances were non-interest bearing, unsecured, and due on demand. On March 1, 2013, the Company converted the outstanding advance amount of $89,422 into a promissory note. Interest at the rate of 5.5% per annum is compounded and charged annually. Principal payments in the amount of $14,966 and accrued interest were to be paid in six installments, with the first payment due on June 15, 2013. No payments have been made through December 31, 2013. Interest expense and related interest payable on this note as of and for the year ended December 31, 2013 was $4,098. | |
Strategic Consulting Agreement, related party | |
In November 2012, the Company entered into a consulting agreement with The Bricktown Group (“Bricktown”) to provide beverage management and strategic advisory consulting services to the Company. The managing partner of Bricktown was appointed as the Company’s Chief Operating Officer (COO) in March 2013, and served as the Company’s COO until August 6, 2013. This consulting agreement had an initial term of six months and was automatically extented through November 2013. The agreement required the Company to pay an upfront retainer of $10,000 and monthly consulting fees of $10,000 per month, which was to be deferred until the Company raised at least $300,000 in debt or equity. The Company was to issue 3,000,000 shares of the Company's common stock in two tranches, of which 1,500,000 shares were issuable upon request after January 4, 2013 and 1,500,000 shares were issuable on March l, 2013. The first 1,500,000 shares are non-forfeitable and fully vested on the date of the agreement. | |
Based upon the terms of the agreement, the Company determined that the measurement date for the initial 1,500,000 shares to be issued under the agreement is the contract date and calculated a fair value of $225,000 based upon the closing market price on this date. Accordingly, the Company recorded an accrued consulting cost liability of $225,000 on the consolidated balance sheet as of December 31, 2012 until such shares are issued. The stock-based compensation associated with the initial shares of $225,000 was recorded as prepaid consulting costs and was amortized over the initial three months of this agreement. For the year ended December 31, 2013, the Company recognized consulting expense of $278,616 related to this agreement. The measurement date for the second tranche of 1,500,000 shares was March 1, 2013. The fair value of these shares of $135,000 was determined based upon the closing market price of the Company’s common stock on this date and was amortized over the remaining term of the contract. On January 10, 2013, the Company issued the initial 1,500,000 shares of its common stock to Bricktown. The second tranche of shares have not been issued as of December 31, 2013, and therefore a liability of $135,000 has been included within accrued expenses. | |
As of December 31, 2013, the Company has additional accounts payable of approximately $55,100 owed to Bricktown. | |
Other related party transactions | |
During the years ended December 31, 2013 and 2012, the Company recorded net sales of $4,693 and $4,100 for product sold to a company in which a member of the Company’s board of directors owns a significant interest. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
NOTE 6 – COMMITMENTS AND CONTINGENCIES | |
WBCP License Agreement | |
The Company has a license with WBCP that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover. This license had an initial term through January 31, 2013 and provides for certain royalties based on a percentage of products sold subject to certain agreed-upon guaranteed minimum royalty payments over the term of the license. | |
In January 2013, the Company entered into an extension of its product license agreement with WBCP extending the term of the agreement to January 31, 2016. Further, the extension added certain channels of distribution and requires the Company to pay $200,000 of Guaranteed Consideration, as defined, over a period of time. Pursuant to the agreement, $75,000 of Guaranteed Consideration was paid in January 2013, and $50,000 was due on October 1, 2013, of which $30,000 was unpaid at December 31, 2013 and which was subsequently paid in January 2014. On or before October 1, 2014, the Company is to pay Guaranteed Consideration of $50,000, and the remaining $25,000 is to be paid on or before October 1, 2015. | |
The WBCP license agreement contains various covenants, terms and conditions, such that violation of any such provisions could result in the termination of the WBCP license. Management believes it is in compliance with all such covenants, terms and conditions. | |
Royalty and Commission Agreements - Related Parties | |
The Company has a representative agreement with a former member of the Company’s board of directors. Under this agreement, as amended, this individual is entitled to a commission of between 4% and 6% of sales made by this individual, based on the nature of the sales, and a royalty of 3% of all sales made by the Company, as defined. Commissions and royalty expense to this individual for the years ended December 31, 2013 and 2012 totaled approximately $42,500 and $49,500, respectively. Effective April 1, 2012, the Company agreed to pay this individual a $6,000 draw per month against commissions. As of December 31, 2012, net prepaid expenses related to draws in excess of commissions were approximately $28,000. As of December 31, 2013, the Company has accounts payable of approximately $34,890 related to this agreement. | |
The Company has an agreement with a second individual for design services. Under this agreement, as amended, this individual is entitled to receive a royalty of 2% of net sales, as defined. Royalty expense to this individual was $20,300 and $18,400 for the years ended December 31, 2013 and 2012, respectively. Effective April 1, 2012, the Company agreed to pay this individual a $3,000 draw per month against royalties. As of December 31, 2012, net prepaid expenses related to draws in excess of royalties were approximately $17,000. As of December 31, 2103, accounts payable under this agreement were $12,684. | |
Management Agreement with AMHC Managed Services | |
Effective March 1, 2012, HOJ entered into a management agreement (the “Management Agreement”) with AMHC Managed Services, Inc. (“AMHC Services”), a subsidiary of AMHC. The significant terms of the Management Agreement provided for monthly payments to AMHC Services in exchange for financial management and accounting services, corporate office and administrative services, and expertise regarding compliance with securities regulations. The Management Agreement term was 24 months, and required the Company to pay AMHC Services $27,500 per month. | |
On October 1, 2012, AMHC Services suspended the accounting and financial management services provided under the Management Agreement due to a dispute under the contract. In January 2013, the Company settled the dispute and terminated the Management Agreement in exchange for 3,000,000 shares of common stock (see below). | |
Settlement Agreement with AMHC Services and Other Claims | |
On January 14, 2013, the Company entered into a settlement agreement with AMHC Services, the principal owners of AMHC Services, and an independent third party pursuant to which the respective parties released each other from certain claims. Under the terms of the settlement, the Company issued AMHC Services 3,000,000 shares of its common stock, and issued the independent third party 1,500,000 shares of its common stock. The fair value of the shares issued under this settlement was $652,500 based upon the closing price of the stock on the date of the signed settlement agreement. Settlement expense of $192,500 was recorded in 2012 under this arrangement. | |
Litigation and Claims | |
On December 13, 2013, TCA filed suit against the Company and one of the Company’s officers asserting that the Company breached the credit agreement. TCA is seeking approximately $465,000. The Company has been engaged in settlement discussions with TCA, and management believes it has reached a tentative agreement and that it is likely that both parties will execute settlement documents and dispose of the case. If the case is not disposed, and proceeds, the Company intends to vigorously defend the matter. | |
On February 7, 2014, a former contractor of the Company filed suit against the Company for an unpaid account. The plaintiff is seeking approximately $65,000 from the Company. Subsequently, the Company filed a counter suit against the former contractor and two of its officers alleging breach of contract, fraud and racketeering. Discovery is not complete in these cases, and at this time, the Company cannot determine the likelihood of an outcome or a range of possible damages. The Company intends to vigorously defend the lawsuit and prosecute its cause of action. | |
The Company has also received legal claims for non-payment of past due amounts plus legal costs. Such amounts pursuant to these claims approximate $31,000. |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||||||||
STOCKHOLDERS' EQUITY | ' | ||||||||||||||||
NOTE 7 – STOCKHOLDERS’ DEFICIT | |||||||||||||||||
Preferred stock | |||||||||||||||||
The Company is authorized to issue up to 10,000,000 shares of Preferred stock, par value $0.10 per share. The Articles of Incorporation provide that the Preferred stock may be issued from time to time in one or more series and gives the Board of Directors authority to establish the designations, preferences, limitations, restrictions, and relative rights of each series of Preferred Stock | |||||||||||||||||
Series A Preferred Stock | |||||||||||||||||
Of the 10,000,000 shares of the Company’s authorized Preferred Stock, ($0.10 par value per share), 425,000 shares are designated as Series A Convertible Preferred Stock (the “Series A Preferred”). The holders of outstanding shares of Series A Preferred were entitled to notice of any shareholders’ meeting and to vote as a single class with the common stock upon any matter submitted for approval by the holders of common stock, on an as-converted basis, as defined. Each share of Series A Preferred had eight votes per share. If any dividend or distribution was declared or paid by the Company on common stock, whether payable in cash, property, securities or rights to acquire securities, the holders of the Series A Preferred were entitled to participate with the holders of common stock in such dividend or distribution, as defined. | |||||||||||||||||
Additionally, upon liquidation, dissolution or winding up on the Company, the Series A Preferred shareholders were entitled to be paid together with the common shareholders on a pro-rata basis. The Series A Preferred holders had the right to convert such shares of Series A Preferred in whole or in part, at any time, or from time-to-time upon written notice to the Company subject to the terms set forth below. The Series A Preferred may, or shall, be converted into shares of the Company’s authorized but unissued common stock on the following bases: (i) At the option of the holder, at any time before the “Financial Milestone” is met each share of Series A Preferred shall be convertible into eight shares of the Company’s common stock. (ii) Upon the “Financial Milestone” being met, each share of Series A Preferred shall automatically be converted into 28.8 shares of the Company’s common stock. (iii) If the “Financial Milestone” has not been met by October 8, 2013, each share of Series A Preferred then outstanding shall automatically be converted into eight shares of the Corporation’s Common Stock. | |||||||||||||||||
On October 8, 2013, pursuant to terms of the Series A Preferred Stock designation, 87,501 shares of Series A preferred were subject to an automatic conversion into 700,008 shares of the Company’s common stock. On October 8, 2013, each holder of record of shares of Series A Preferred is deemed to be the holder of record of common stock issuable upon the conversion not withstanding that common share certificates have not been delivered to the holders. As of December 31, 2013, common shares have not yet been issued pursuant to the conversion. | |||||||||||||||||
Series C Preferred Stock | |||||||||||||||||
In April 2013, the Board of Directors approved the authorization of 5,000,000 shares of Series C Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred shares have voting rights equal to three votes per share and contain an automatic conversion into 15,000,000 common shares immediately upon the Company obtaining shareholder approval of, and filing with the Colorado Secretary of State, an increase in authorized common stock to at least 200,000,000 shares. | |||||||||||||||||
In April 2013, the Company executed a term sheet with an accredited investor (“Investor”) for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of Series C Preferred Stock, and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The first tranche of $500,000 was to be deposited on or before May 17, 2013 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 was to be deposited on or before September 20, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above. As of December 31, 2013, the Company received $342,500 toward the first investment tranche. | |||||||||||||||||
The common shares and underlying common shares attributable to the Series C Preferred Stock and warrants will have piggyback registration rights that will be triggered if the Company files a registration statement with the Securities and Exchange Commission for the resale of other securities. The warrants may be redeemed by the Company if certain conditions are met, including that the shares underlying the warrants have been registered and the common stock trades at or above $.20 per share for 20 trading days. The Investor will be entitled to one seat on the Company's Board of Directors, and certain other development and distribution rights, as defined. Subsequent to December 31, 2013, the Company agreed to issue 10,275,000 common shares to the Investor for the $342,500 previously paid. | |||||||||||||||||
Series D Preferred Stock | |||||||||||||||||
In November 2013, the Company reached an agreement with crowdfunding company to raise up to $500,000 by offering 200,000 units to be sold at $2.50 per unit. Each unit to consist of one share of Series D Preferred Stock and 100 five-year warrants exercisable at $.05 per share upon a successful increase of the Company’s authorized common shares to 500,000,000. As of December 31, 2013 and through March 2014, no units have been sold under this agreement, and the Company has not increased its number of authorized shares. | |||||||||||||||||
Of the 10,000,000 shares of the Company’s authorized Preferred Stock, 200,000 shares are designated as Series D Convertible Preferred Stock (the “Series D Preferred”). The holders of outstanding shares of Series D Preferred are entitled to notice of any shareholders’ meeting and to vote as a single class with the common stock upon any matter submitted for approval by the holders of common stock, on an as-converted basis, as defined. Each share of Series D Preferred shall have one hundred votes per share. If any dividend or distribution is declared or paid by the Company on common stock, whether payable in cash, property, securities or rights to acquire securities, the holders of the Series D Preferred will be entitled to participate with the holders of common stock in such dividend or distribution, as defined. | |||||||||||||||||
Additionally, upon liquidation, dissolution or winding up on the Company, the Series D Preferred shareholders are entitled to be paid together with the common shareholders on a pro-rata basis. The Series D Preferred holders may convert such shares of Series D Preferred in whole or in part, at any time, or from time-to-time upon written notice to the Company subject to the terms set forth below. The Series D Preferred may, or shall, be converted into shares of the Company’s authorized but unissued common stock at the option of the holder, at any time after the Company is able to successfully increase its authorized common shares to 500,000,000 each share of Series D Preferred shall be convertible into one hundred shares of the Company’s common stock. Additionally, The Company may automatically convert such shares six months after the increase in authorized shares. | |||||||||||||||||
Common stock | |||||||||||||||||
The Company is authorized to issue up to 150,000,000 shares of $0.001 par value common stock. As discussed in Note 1, the Company entered into the Merger Agreement with HOJ, whereby the Company issued 83,514,827 common shares in exchange for all the outstanding shares of HOJ. This transaction has been accounted for as a recapitalization of HOJ and accordingly the historical stockholders’ equity transactions of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital. | |||||||||||||||||
Surrender of Founder’s shares | |||||||||||||||||
In January 2013, a shareholder of the Company surrendered 4,500,000 shares of common stock to the Company’s treasury for no consideration. The shares were initially issued to a founder in March 2012 and were returned to increase the number of common shares available. | |||||||||||||||||
Dissenting Shareholder | |||||||||||||||||
In connection with the Acquisition, an HOJ shareholder holding the equivalent of 612,953 shares of common stock asserted his rights as a dissenting shareholder under the Colorado Business Corporation Act and demanded payment for the fair value amount of his shares as of the date of the Acquisition. In July 2012, the Company estimated the fair value of these shares to be $20,000 and recorded a payable to shareholder in the amount of $20,000 and corresponding decrease to equity. | |||||||||||||||||
In February 15, 2013, the Company entered into a settlement agreement with the dissenting HOJ shareholder. Under the terms of the settlement agreement, the Company agreed to pay $5,000 cash at closing and $15,000 plus accrued interest at 5% within 90 days. The Company also agreed to issue 50,000 shares of the Company’s common stock. The fair value of the common stock at the date of settlement was $5,500. As of December 31, 2013, the outstanding amount has been repaid in full. | |||||||||||||||||
Stock options | |||||||||||||||||
Under the 2009 Stock Option Plan (the “2009 Plan”), the Company may grant non-statutory and incentive options to employees, directors and consultants. The exercise prices of the options granted are determined by the Plan Committee, whose members are appointed by the Board of Directors, and the exercise prices are generally to be established at the estimated fair value of the Company's common stock at the date of grant. Options granted have terms that do not exceed five years. As of December 31, 2013, there were no options outstanding under the 2009 plan. | |||||||||||||||||
In July 2012, the Company’s shareholders approved the 2012 Stock Option Plan (the “2012 Plan”). Under the 2012 Plan, the Company may grant stock options, restricted and other equity awarded to any employee, consultant, independent contractor, director or officer of the Company. As of December 31, 2013, stock options to purchase 2,266,190 shares of common stock are outstanding under the 2012 Plan. | |||||||||||||||||
In April 2013, the Company’s Board of Directors reduced the number of common shares reserved under the 2012 Stock Option Plan from 11,500,000 shares to 4,500,000 and reduced the number of common shares reserved under the 2009 Stock Option Plan from 7,000,000 shares to 650,000 shares thereby increasing the number of common shares available for issuance by 13,350,000. | |||||||||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton valuation model. Assumptions used for options granted in 2012 are as follows: expected volatility is based upon weighted average of historical volatility over the expected term of the option and implied volatility (186%); the expected term of stock options is based upon historical exercise behavior and expected exercised behavior (2-3 years); the risk-free interest rate is based upon implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option (0.25 - 0.33%); the dividend yield was assumed to be none as the Company does not anticipate paying any dividends in the foreseeable future. | |||||||||||||||||
The following is a summary of stock option activity for the years ended December 31, 2013 and 2012: | |||||||||||||||||
Options | Shares Under Option | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
Outstanding at January 1, 2012 | 2,087,070 | $ | 0.42 | $ | 2.97 | $ | 39,049 | ||||||||||
Issued for Services | 2,266,190 | 0.06 | |||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited / Cancelled | (1,437,070 | ) | 0.3 | ||||||||||||||
Outstanding at December 31, 2012 | 2,916,190 | $ | 0.11 | $ | 2.76 | $ | 32,486 | ||||||||||
Granted | - | - | |||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited / Cancelled | (650,000 | ) | - | ||||||||||||||
Outstanding at December 31, 2013 | 2,266,190 | $ | 0.06 | $ | 2.38 | 0 | |||||||||||
Vested or expected to vest at December 31, 2013 | 1,500,000 | 0.08 | 2.95 | 0 | |||||||||||||
Exercisable at December 31, 2013 | 1,500,000 | $ | 0.08 | $ | 2.95 | 0 | |||||||||||
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s common stock on December 31, 2013, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on December 31, 2013. | |||||||||||||||||
As a result of the reorganization described in Note 1, the Company has not recognized any stock-based compensation cost previously recorded on the books of AMHC prior to the date of reorganization. No stock-based compensation was recognized during the year ended December 31, 2013. Stock-based compensation of $114,378 was recorded in 2012. As of December 31, 2013, the Company does not expect outstanding options to acquire 766,190 shares of common stock will vest due to the performance criteria outlined in the option agreement. Compensation cost is revised if subsequent information indicates that the actual number of options vested is likely to differ from previous estimates. | |||||||||||||||||
The following table summarizes the activity and value of non-vested options as of and for the year ended December 31, 2013: | |||||||||||||||||
Number of | Weighted Average | ||||||||||||||||
Options | grant date | ||||||||||||||||
fair value | |||||||||||||||||
Non-vested options at January 1, 2012 | 603,217 | $ | 0.1 | ||||||||||||||
Granted | 2,266,190 | $ | 0.06 | ||||||||||||||
Vested | (1,546,684 | ) | $ | 0.07 | |||||||||||||
Forfeited/Cancelled | (556,533 | ) | $ | 0.27 | |||||||||||||
Non-vested options at December 31, 2012 | 766,190 | $ | 0.06 | ||||||||||||||
Granted | - | - | |||||||||||||||
Vested | - | - | |||||||||||||||
Forfeited/cancelled | - | - | |||||||||||||||
Non-vested options at December 31, 2013 | 766,190 | $ | 0.06 | ||||||||||||||
As of December 31, 2013, there was $42,159 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the qualified stock option plans. That cost is expected to be recognized over a weighted average period of one year if certain performance criteria are met. | |||||||||||||||||
Warrants: | |||||||||||||||||
Summarized information about warrants outstanding and exercisable at December 31, 2013 and 2012 is as follows: | |||||||||||||||||
Warrants | Shares | Weighted | Weighted | Aggregate | |||||||||||||
average | Average | intrinsic | |||||||||||||||
exercise | Remaining | value | |||||||||||||||
Price | contractual | ||||||||||||||||
Life | |||||||||||||||||
Outstanding at January 1, 2012 | 1,551,000 | $ | 0.29 | ||||||||||||||
Issued for Services | 6,229,528 | $ | 0.03 | ||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited/Cancelled | (1,041,000 | ) | $ | 0.29 | |||||||||||||
Outstanding at December 31, 2012 | 6,739,528 | $ | 0.05 | $ | 2.19 | $ | 259,892 | ||||||||||
Issued for Services | 150,000 | $ | 0.1 | ||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited/Cancelled | (3,564,764 | ) | $ | 0.04 | |||||||||||||
Outstanding at December 31, 2013 | 3,324,764 | $ | 0.04 | $ | 1.38 | $ | 0 | ||||||||||
Vested or expected to vest at December 31, 2013 | 260,000 | $ | 0.11 | $ | 2.02 | $ | 0 | ||||||||||
Exercisable at December 31, 2013 | 260,000 | $ | 0.11 | $ | 2.02 | $ | 0 | ||||||||||
In April 2012, the Company granted a warrant to a sales consultant and director of the Company to purchase up to 6,129,528 shares of common stock in connection with a two-year service agreement. This warrant has a three-year term and an exercise price of $0.0326 per share with 3,064,764 shares vesting each on January 1, 2013 and January 1, 2014 if the Company’s sales exceeded certain thresholds in 2012 and 2013, respectively. On January 1, 2013, the board of directors concluded the sales target for 2012 was not met and warrants to purchase 3,064,764 shares of Company common stock were cancelled. Management has evaluated the performance criteria and sales thresholds for 2013 were not met and accordingly no stock-based compensation has been recognized during the year ended December 31, 2013. | |||||||||||||||||
In February and March 2013, the Company granted a warrant to an investor relations firm to purchase up to 150,000 shares of common stock that vested immediately. The warrants have a three-year term and an exercise price of $0.11 and $.09 per share, and $11,574 of stock based compensation related to this warrant and is recorded in general and administrative expenses during the year ended December 31, 2013. | |||||||||||||||||
In January 2014, the Company granted a warrant to a former member of the Company's board of directors for services. The warrant provides for the purchase of up to 5,000,000 shares of the Company's common stock at $0.02 per share, exercisable immediately for a 15-year term. | |||||||||||||||||
Contributed Services | |||||||||||||||||
Prior to March 31, 2012, the Company’s owners/officers contributed management and administrative services to the Company. The fair value of those services has been recorded as an expense in the accompanying consolidated financial statements based on the estimated fair value for such services, with a corresponding credit to contributed capital. The fair value of the historical services was estimated based on the compensation per employment terms that were entered into in March 2012. Contributed services were $50,000 for the year ended 2012. | |||||||||||||||||
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
INCOME TAXES | ' | ||||||||
NOTE 8 – INCOME TAXES | |||||||||
As discussed in Note 1, the Company entered into the Merger Agreement with HOJ, whereby on July 25, 2012, the Company acquired HOJ in a reverse triangular merger (the “Acquisition”). Because all of the operating businesses of AMHC were contemporaneously sold within five business days after the Acquisition, the transaction has been accounted for as a recapitalization of HOJ. Accordingly, the consolidated statement of operations includes the historical results of HOJ (a Colorado Corporation) and its predecessor entities, HOJ LLC (a limited liability company) and HOJ JV (a partnership). | |||||||||
Through March 5, 2012 (the date of incorporation of HOJ), no provision for income taxes has been provided in the accompanying combined financial statements because HOJ LLC and HOJ JV elected to file as partnerships, and therefore HOJ was not subject to income taxes, and, that such taxes are the responsibility of the individual member/partners. | |||||||||
Beginning March 5, 2012, HOJ began recording a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements. The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized. | |||||||||
On July 25, 2012, the Company acquired HOJ and began recording a provision for deferred income tax assets and liabilities. As of December 31, 2012, the Company’s net deferred tax assets have been fully reserved, effectively by a valuation allowance, because management does not believe realization of the deferred tax assets is sufficiently assured at the balance sheet date. | |||||||||
No income tax benefit was recognized for the years ended December 31, 2013 or 2012 as indicated below: | |||||||||
2013 | 2012 | ||||||||
Deferred tax benefit: | |||||||||
Federal | $ | 765,000 | $ | 686,000 | |||||
State | 66,000 | 59,000 | |||||||
831,000 | 745,000 | ||||||||
Increase in valuation allowance | (831,000 | ) | (745,000 | ) | |||||
$ | - | $ | - | ||||||
The differences in the total income tax benefit that would result from applying the 35% federal statutory rate to loss before income taxes and the reported income tax for 2013 and 2012 are as follows: | |||||||||
2013 | 2012 | ||||||||
U.S. Federal tax expense at statutory rates | $ | (766,000 | ) | $ | (751,000 | ) | |||
State income taxes, net of federal tax benefit | (66,000 | ) | (65,000 | ) | |||||
Permanent differences | 1,000 | 3,000 | |||||||
Tax loss allocated to partners | - | 68,000 | |||||||
Increase in valuation allowance | 831,000 | 745,000 | |||||||
$ | - | $ | - | ||||||
The components of the deferred tax assets at December 31, 2013 and 2012 are as follows: | |||||||||
2013 | 2012 | ||||||||
Deferred tax assets | |||||||||
Allowance for doubtful accounts | $ | 56,000 | $ | 8,000 | |||||
Accrued settlement costs | - | 248,000 | |||||||
Accrued compensation - consulting | - | 48,000 | |||||||
Stock based compensation | 107,000 | 44,000 | |||||||
Deferred salaries | 88,000 | - | |||||||
Net operating loss carryforwards | 1,325,000 | 397,000 | |||||||
1,576,000 | 745,000 | ||||||||
Valuation allowance | (1,576,000 | ) | (745,000 | ) | |||||
$ | - | $ | - | ||||||
At December 31, 2013 the Company has U.S. net operating loss carry-forwards of approximately $3.3 million which expire in the years 2029 through 2033. | |||||||||
The valuation allowance for deferred tax assets at December 31, 2013 and 2012 relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily net operating loss carry forwards in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration. Based on the Company’s assessment, it has determined the deferred tax assets are not currently realizable. | |||||||||
Net Operating Loss Carry Forward Limitation | |||||||||
The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carry forwards if there has been a change in ownership as described in Section 382 of the Internal Revenue Code. As a result of the Acquisition in July 2012, substantial changes in the Company’s ownership have occurred that may limit or reduce the amount of net operating loss carry- forward that the Company could utilize in the future to offset taxable income. The Company has not completed a detailed Section 382 study to determine what impact, if any, that ownership changes may have had on the Company’s net operating loss carry-forwards. | |||||||||
Accounting for Uncertainty in Income Taxes | |||||||||
During the years ended December 31, 2013 and 2012, the Company has not identified any unrecognized tax benefits or had any additions or reductions in tax positions and therefore a reconciliation of the beginning and ending amount of unrecognized tax benefits is not presented. The Company does not have any unrecognized tax benefits as of December 31, 2013 and accordingly the Company’s effective tax rate will not be materially affected by unrecognized tax benefits. | |||||||||
The Company’s federal and state income tax returns remain open for examination for years subsequent to 2009. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
NOTE 9 – SUBSEQUENT EVENTS | |
On January 14, 2014, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $58,000 (the "Asher Note"). The financing closed on January 14, 2014. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on October 9, 2014. The Note is convertible into common stock, at Asher’s option, at a 45% discount to the average of the three lowest closing bid prices of the Company’s common stock during the 10 trading day period prior to conversion. | |
The Asher Note is subject to prepayment penalties up to a 140% multiple of the principal, interest and other amounts owing, as defined. Asher has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. The total net proceeds the Company received from this Offering was $58,000, less financing costs of $3,000. On April 15, 2014, the Company received a notice of default demanding immediate payment of a sum representing 150% of the outstanding principal plus default interest. | |
On March 19, 2014, the Company entered into a Securities Purchase Agreement with LG Capital Funding, LLC ("LG"), for the sale of an 8% convertible redeemable note in the principal amount of $26,500 (the "LG Note"). This financing closed on March 19, 2014. | |
The LG Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on March 19, 2015. The LG Note is convertible into common stock, at LG’s option, at a 45% discount to the average of the three lowest closing prices of the common stock during the 20 trading day period prior to conversion. The LG Note is subject to prepayment penalties up to a 150% multiple of the principal, interest and other amounts owing, as defined. After the expiration of 180 days following the date of the LG Note, the Company has no right of prepayment. | |
On March 24, 2014, the Company entered into a Securities Purchase Agreement with Adar Bays LLC (“Adar Bays”), for the sale of two convertible notes in the aggregate principal amount of $53,000 (with the first notes being in the amount of $26,500 and the second note being in the amount of $25,000). The Company received proceeds of $25,000 (net of financing costs) in exchange for an 8% convertible promissory note due on March 24, 2015. This note is convertible into common stock, at the holder’s option, at any time after 180 days at ta 55% discount to the lowest closing bid price of the Company’s common stock during the 20 day trading period prior to conversion, as defined. |
SIGNIFICANT_ACCOUNTING_POLICIE1
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |
Dec. 31, 2013 | ||
Accounting Policies [Abstract] | ' | |
Basis of Presentation | ' | |
Basis of Presentation | ||
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP"). | ||
Principles of Consolidation | ' | |
Principles of Consolidation | ||
The consolidated financial statements include the accounts of the Company and its 100%-owned subsidiary. All intercompany accounts, transactions, and profits are eliminated in consolidation. | ||
Use of estimates | ' | |
Use of Estimates | ||
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||
Significant estimates are used in accounting for certain items such as allowance for doubtful accounts, revenue recognition, and stock-based compensation. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ. | ||
Accounts Receivable and Concentration of Credit Risk | ' | |
Accounts Receivable and Concentration of Credit Risk | ||
The Company is subject to credit risk through trade receivables. This credit risk has been mitigated by the diversification of the Company’s operations, as well as its customer base. The Company grants varying payment terms to its customers. Payment terms for customers can vary from due upon receipt up to net 45 days. | ||
Two customers comprised approximately 78% of the trade accounts receivable at December 31, 2012; these individual customer balances represent approximately 65%, and 13% of the total trade accounts receivable. Two customers accounted for approximately 20% of net sales for the year ended December 31, 2013; each of these individual customers’ sales represent approximately 10% of annual net sales. Four customers accounted for 54% of net sales for the year ended December 31, 2012; these individual customers’ sales represent approximately 19%, 16%, 10% and 10% of annual net sales. | ||
Ongoing credit evaluations of customers’ financial condition are performed. Collateral is not required. The Company maintains an allowance when necessary for doubtful accounts that is the Company’s best estimate of potentially uncollectible trade receivables. Provisions are made based upon a specific review of all significant outstanding invoices that are considered potentially uncollectible in whole or in part. For those invoices not specifically reviewed or considered uncollectible, general provisions are provided at different rates, based upon the age of the receivable, historical experience, and other currently available evidence. The allowance estimates are adjusted as additional information becomes known or as payments are made. As of December 31, 2013, the allowance for doubtful accounts was $146,604, and at December 31, 2012, the allowance for doubtful accounts was $21,624. | ||
Inventory | ' | |
Inventory | ||
Inventory is valued at the lower of cost (first-in, first-out) or market value. The inventory at December 31, 2012 primarily consisted of packing supplies. The Company has no inventory on hand at December 31, 2013. | ||
License and Royalties | ' | |
License and Royalties | ||
The Company has a license with Warner Bros. Consumer Products, Inc. (“WBCP”) that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover and the 2012 movie, The Hangover Part II. This license, as amended, expires January 31, 2016. The terms of the WBCP license provide for royalties based on a percentage of products sold, as defined, as well as agreed-upon guaranteed minimum royalties. Guaranteed minimum royalty payments are made periodically over the term of the license and are recorded when paid as an asset in the balance sheet. The asset is amortized to expense as revenue from the related products is recognized. If management determines that all or a portion of the minimum guaranteed amounts appear not to be recoverable through future product sales, the non recoverable portion is charged to expense at that time The WBCP license agreement contains various convenants, terms and conditions, the violation of which could result in the termination of the WBCP License. | ||
Revenue Recognition | ' | |
Revenue Recognition | ||
The Company sells its product primarily through third-party distributors. The Company is not guaranteed any minimum level of sales or transactions. The Company also offers its products for sale through its website at www.hangoverjoes.com. | ||
The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery to third party distributors and consumers via the Company’s website has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer. For sales to distributors, revenue is usually recognized at the time of delivery. The Company defers revenues on products sold to distributors for which there is a lack of credit history or if the distribution may be in a new market in which the Company has no prior experience. The Company defers revenue in these situations until cash is received. For sales through the Company’s website, revenue is recognized at time of shipment. | ||
Management evaluates the terms of its sales in consideration of the criteria outlined in Principal Agent Consideration with regards to its determination of gross versus net reporting of revenue for transactions with customers. The Company sells, through its website, Hangover Joe’s Recovery Shots. In these transactions, management has determined that the Company (i) acts as principal; (ii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns; and (iii) has latitude in establishing price with the customer. For these transactions, the Company recognizes revenue on a gross basis. | ||
The Company offers a variety of incentives and discounts to distributors, customers and consumers through various programs to support the distribution of its products. These incentives and discounts include cash discounts, price allowances, volume based rebates and product placement fees. These incentives and discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $1,800 and $43,100 for the years ended December 31, 2013 and 2012, respectively. | ||
Cost of Goods Sold | ' | |
Cost of Goods Sold | ||
Cost of goods sold consists of the costs of raw materials utilized in the production of its product, co-packing fees, and in-bound freight charges. Raw material costs generally account for the largest portion of the cost of goods sold. Raw materials include bottles, ingredients and packaging materials. The manufacturer is responsible for the ingredients. Costs of goods sold also include obsolescence charges and license and royalty expenses. | ||
Supplier/Manufacturer Concentration | ' | |
Supplier/Manufacturer Concentration | ||
The Company relies on its third-party suppliers for raw materials necessary for its products, and it relies on third-party manufacturers for the production of its product. Although the Company believes that it could utilize alternative suppliers and manufacturers, any delay in locating and establishing relationships with other suppliers/manufacturers could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability. The Company’s third-party manufacturer acquires some ingredients from suppliers outside of the United States. Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations. These factors could result in a delay in or disruption of the supply of certain raw materials. Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company’s business. | ||
Sales and Marketing Expenses | ' | |
Sales and Marketing Expenses | ||
Sales and marketing costs include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials, trade shows, other marketing expenses and product design expenses. | ||
Advertising Expenses | ' | |
Advertising Expenses | ||
Advertising costs are expensed as incurred and are included in sales and marketing expense in the accompanying consolidated statements of operations. Total advertising expenses were approximately $102,000 and $122,000 for the years ended December 31, 2013 and 2012, respectively. | ||
Income Taxes | ' | |
Income Taxes | ||
Prior to March 2012, no provision for income taxes was provided in the accompanying financial statements because HOJ LLC (as a limited liability company), and HOJ JV (as a partnership), elected to file as partnerships, and therefore management believes that prior to December 31, 2012 the Company was not subject to income taxes, and, that such taxes were the responsibility of the individual member/partners. | ||
Beginning in March 2012, as a corporation, the Company now records a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements. The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized. Although the Company is to file income tax returns in the US Federal jurisdiction and various State jurisdictions, the Company has not filed income tax returns for the year ended December 31, 2012; however, as no taxes are estimated to be due, management does not believe these non-filings will have a material impact on the Company’s consolidated financial statements. | ||
The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. All tax years remain open and subject to U.S. Federal tax examination. Management does not believe that there are any current tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements. | ||
The Company’s policy is to classify tax related interest and penalties as income tax expense. There is no interest or penalties estimated on the underpayment of income taxes as a result of unrecognized tax benefits. | ||
Stock-Based Compensation | ' | |
Stock-Based Compensation | ||
Stock-Based Compensation is recognized for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. Stock-Based Compensation expense is recognized over the period of service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock option at the grant date by using an option pricing model, typically the Black-Scholes model. | ||
Net Loss Per Share | ' | |
Net Loss per Share | ||
Basic net loss per share is computed by dividing the net loss applicable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. Historical loss per share of the accounting acquirer (HOJ) has been adjusted retroactively to reflect the new capital structure of the Company as a result of the Merger Agreement. Diluted net loss per share reflects the potential dilution that could occur if dilutive securities were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, unless the effect of such inclusion would reduce a loss or increase earnings per share. For each of the periods presented in the accompanying consolidated financial statements, the effect of the inclusion of dilutive shares would have resulted in a decrease in loss per share. Stock options, warrants, common shares underlying convertible preferred stock and convertible notes payable in the aggregate of 16,034,287 and 10,355,726 shares as of and for the year ended December 31, 2013 and 2012 , respectively, were not included in the calculation of diluted net loss per common share because the effect would have been anti-dilutive. | ||
Fair Value of Financial Instruments | ' | |
Fair Value of Financial Instruments | ||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. | ||
The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below. | ||
· | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
· | Level 2: Observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. | |
· | Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | |
Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2013 and December 31, 2012, the Company had no financial assets or liabilities required to be reported for fair value purposes. | ||
The carrying value of the Company’s financial instruments, including cash, accounts receivable, notes and accounts payable, the mandatorily redeemable preferred stock, and the inventory financing payable approximate fair value at December 31, 2013 and December 31, 2012, due to the relatively short maturity of the respective instruments. The fair value of related party payables is not practicable to estimate due to the related party nature of the underlying transactions. | ||
Recent Accounting Pronouncements | ' | |
Recent Accounting Pronouncements | ||
The Company reviews new accounting standards as issued. Management has not identified any recently issued accounting standards that it believes will have a significant impact on the Company’s consolidated financial statements. |
ACCRUED_EXPENSES_Tables
ACCRUED EXPENSES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounts Payable and Accrued Liabilities [Abstract] | ' | ||||||||
Schedule of Accrued Expenses | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Accrued expenses | $ | 62,158 | $ | 37,005 | |||||
Deferred salaries | 208,714 | 45,960 | |||||||
Accrued settlement costs – paid for in common stock | - | 652,500 | |||||||
Accrued consulting costs – to be paid for in common stock | 165,166 | 225,000 | |||||||
Minimum guaranteed royalty obligation | 75,000 | ||||||||
Accrued interest | 20,806 | - | |||||||
$ | 528,627 | $ | 960,465 |
STOCKHOLDERS_EQUITY_Tables
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||||||||
Schedule of Stock Option Activity | ' | ||||||||||||||||
Options | Shares Under Option | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
Outstanding at January 1, 2012 | 2,087,070 | $ | 0.42 | $ | 2.97 | $ | 39,049 | ||||||||||
Issued for Services | 2,266,190 | 0.06 | |||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited / Cancelled | (1,437,070 | ) | 0.3 | ||||||||||||||
Outstanding at December 31, 2012 | 2,916,190 | $ | 0.11 | $ | 2.76 | $ | 32,486 | ||||||||||
Granted | - | - | |||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited / Cancelled | (650,000 | ) | - | ||||||||||||||
Outstanding at December 31, 2013 | 2,266,190 | $ | 0.06 | $ | 2.38 | 0 | |||||||||||
Vested or expected to vest at December 31, 2013 | 1,500,000 | 0.08 | 2.95 | 0 | |||||||||||||
Exercisable at December 31, 2013 | 1,500,000 | $ | 0.08 | $ | 2.95 | 0 | |||||||||||
Schedule of Nonvested Share Activity | ' | ||||||||||||||||
The following table summarizes the activity and value of non-vested options as of and for the year ended December 31, 2013: | |||||||||||||||||
Number of | Weighted Average | ||||||||||||||||
Options | grant date | ||||||||||||||||
fair value | |||||||||||||||||
Non-vested options at January 1, 2012 | 603,217 | $ | 0.1 | ||||||||||||||
Granted | 2,266,190 | $ | 0.06 | ||||||||||||||
Vested | (1,546,684 | ) | $ | 0.07 | |||||||||||||
Forfeited/Cancelled | (556,533 | ) | $ | 0.27 | |||||||||||||
Non-vested options at December 31, 2012 | 766,190 | $ | 0.06 | ||||||||||||||
Granted | - | - | |||||||||||||||
Vested | - | - | |||||||||||||||
Forfeited/cancelled | - | - | |||||||||||||||
Non-vested options at December 31, 2013 | 766,190 | $ | 0.06 | ||||||||||||||
Schedule of Warrant Activity | ' | ||||||||||||||||
Warrants | Shares | Weighted | Weighted | Aggregate | |||||||||||||
average | Average | intrinsic | |||||||||||||||
exercise | Remaining | value | |||||||||||||||
Price | contractual | ||||||||||||||||
Life | |||||||||||||||||
Outstanding at January 1, 2012 | 1,551,000 | $ | 0.29 | ||||||||||||||
Issued for Services | 6,229,528 | $ | 0.03 | ||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited/Cancelled | (1,041,000 | ) | $ | 0.29 | |||||||||||||
Outstanding at December 31, 2012 | 6,739,528 | $ | 0.05 | $ | 2.19 | $ | 259,892 | ||||||||||
Issued for Services | 150,000 | $ | 0.1 | ||||||||||||||
Exercised | - | - | |||||||||||||||
Forfeited/Cancelled | (3,564,764 | ) | $ | 0.04 | |||||||||||||
Outstanding at December 31, 2013 | 3,324,764 | $ | 0.04 | $ | 1.38 | $ | 0 | ||||||||||
Vested or expected to vest at December 31, 2013 | 260,000 | $ | 0.11 | $ | 2.02 | $ | 0 | ||||||||||
Exercisable at December 31, 2013 | 260,000 | $ | 0.11 | $ | 2.02 | $ | 0 | ||||||||||
INCOME_TAXES_TABLES
INCOME TAXES (TABLES) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Taxes Tables | ' | ||||||||
Schedule of Income Tax Benefit | ' | ||||||||
2013 | 2012 | ||||||||
Deferred tax benefit | $ | 765,000 | $ | 686,000 | |||||
Federal | 66,000 | 59,000 | |||||||
State | 831,000 | 745,000 | |||||||
Increase in valuation allowance | -831,000 | (745,000 | ) | ||||||
Net income tax benefit | $ | - | $ | - | |||||
Schedule of Income Tax Rate Reconciliation | ' | ||||||||
U.S. Federal tax benefit at statutory rate | $ | -766,000 | $ | (751,000 | ) | ||||
State income taxes, net of federal tax benefit | -66,000 | (65,000 | ) | ||||||
Permanent differences | -1,000 | 3,000 | |||||||
Income tax losses allocated to partners | 68,000 | ||||||||
Increase in valuation allowance | 831,000 | 745,000 | |||||||
Net income tax benefit | $ | $ | - | ||||||
Schedule of Deferred Tax Assets | ' | ||||||||
2013 | 2012 | ||||||||
Deferred tax assets | |||||||||
Allowance for doubtful accounts | $ | 56,000 | $ | 8,000 | |||||
Accrued settlement costs | - | 248,000 | |||||||
Accrued compensation - consulting | - | 48,000 | |||||||
Stock based compensation | 107,000 | 44,000 | |||||||
Deferred salaries | 88,000 | - | |||||||
Net operating loss carryforwards | 1,325,000 | 397,000 | |||||||
1,576,000 | 745,000 | ||||||||
Valuation allowance | (1,576,000 | ) | (745,000 | ) | |||||
$ | - | $ | - |
ORGANIZATION_DESCRIPTION_OF_BU1
ORGANIZATION, DESCRIPTION OF BUSINESS, AND MANAGEMENT'S PLANS (Details) (USD $) | 0 Months Ended | 12 Months Ended | ||
Jul. 27, 2012 | Jul. 25, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' |
Common stock, shares outstanding | ' | 36,807,801 | 122,591,301 | 120,846,348 |
Cash paid for acquired company | $10,000 | ' | ' | ' |
Number of shares issued for business acquisition | ' | 83,514,827 | 83,514,827 | 83,514,827 |
Existing shareholders new ownership percentage in company after merger and reorganization | ' | 31.00% | ' | ' |
HOJ shareholders new ownership percentage in company after merger and reorganization | ' | 69.00% | ' | ' |
Net loss | ' | ' | -2,188,926 | -2,145,115 |
Working capital deficiency | ' | ' | 2,635,000 | ' |
Accumulated deficit | ' | ' | ($4,652,534) | ($2,463,608) |
SIGNIFICANT_ACCOUNTING_POLICIE2
SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Significant Accounting Policies [Line Items] | ' | ' |
Allowance for doubtful accounts | $146,604 | $21,624 |
Sales incentives and discounts | 1,800 | 43,100 |
Advertising expense | $102,000 | $122,000 |
Antidilutive stock options, warrants and common shares | 16,034,287 | 10,355,726 |
Antidilutive shares included | 0 | 0 |
Trade Account Receivables [Member] | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' |
Number of customers | ' | 2 |
Concentration percentage | ' | 78.00% |
Trade Account Receivables [Member] | Major Customer Three [Member] | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' |
Concentration percentage | ' | 65.00% |
Trade Account Receivables [Member] | Major Customer Four [Member] | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' |
Concentration percentage | ' | 13.00% |
Net Revenue [Member] | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' |
Number of customers | ' | 4 |
Concentration percentage | ' | 54.00% |
DEBT_Details
DEBT (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | |||
Sep. 24, 2013 | Sep. 19, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Jan. 10, 2013 | Oct. 31, 2012 | |
D | ||||||
Inventory financing and factoring arrangements | ' | ' | ' | ' | ' | ' |
Maximum financing amount | ' | ' | ' | $250,000 | ' | ' |
Maximum financing percentage | ' | ' | ' | 80.00% | ' | 100.00% |
Financing fee, percentage of purchase order amount | ' | ' | ' | ' | ' | 3.85% |
Financing fee, percentage of receivables | ' | ' | ' | 2.50% | ' | ' |
Additional fee, percent per day after remaining open for 30 days | ' | ' | ' | 0.08% | ' | 0.13% |
Additional fee, annualized rate | ' | ' | ' | 30.70% | ' | 47.40% |
Inventory financing payable | ' | ' | ' | 97,611 | ' | ' |
Revolving Credit Facility | ' | ' | ' | ' | ' | ' |
Line of credit, maximum borrowing capacity | ' | ' | ' | ' | 6,000,000 | ' |
Line of credit, initial borrowing capacity | ' | ' | ' | ' | 425,000 | ' |
Line of credit, advance | ' | ' | ' | ' | 425,000 | ' |
Preferred shares issued for debt issuance costs | ' | ' | 125,000 | ' | ' | ' |
Value of peferred shares issued for debt issuance costs | ' | ' | 125,000 | ' | ' | ' |
Finders' fee, shares issued | ' | ' | 194,954 | ' | ' | ' |
Convertible preferred stock, liquidation preference | ' | ' | 125,000 | ' | ' | ' |
Interest rate | ' | ' | 12.00% | ' | ' | ' |
Debt issued | ' | ' | 500,000 | ' | ' | ' |
Proceeds from debt issuance, net of discount and costs | 25,000 | 100,000 | 450,000 | ' | ' | ' |
Debt conversion, price per share | ' | ' | $0.05 | ' | ' | ' |
Conversion price, percent of stock price | ' | ' | 70.00% | ' | ' | ' |
Number of trading days preceding any conversion | ' | ' | 25 | ' | ' | ' |
Beneficial conversion recorded on convertible note | ' | ' | 44,235 | ' | ' | ' |
Discount | ' | ' | $14,800 | ' | ' | ' |
ACCRUED_EXPENSES_Details
ACCRUED EXPENSES (Details) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | ||||
Feb. 15, 2013 | Jan. 31, 2013 | Dec. 31, 2013 | 1-May-13 | Apr. 01, 2013 | Mar. 01, 2013 | Dec. 31, 2012 | |
Accounts Payable and Accrued Liabilities [Abstract] | ' | ' | ' | ' | ' | ' | ' |
Accrued expenses | ' | ' | $58,941 | ' | ' | ' | $37,005 |
Deferred salaries | ' | ' | 208,714 | ' | ' | ' | 45,960 |
Accrued settlement costs - paid for in common stock | ' | ' | ' | ' | ' | ' | 652,500 |
Accrued consulting costs - paid for in common stock | ' | ' | 165,166 | ' | ' | 135,000 | 225,000 |
Minimum guaranteed royalty obligation | ' | ' | 75,000 | ' | ' | ' | ' |
Accrued interest | ' | ' | 20,806 | ' | ' | ' | ' |
Total accrued expenses | ' | ' | 528,627 | ' | ' | ' | 960,465 |
Shares issued for accrued settlement costs | ' | 4,500,000 | ' | ' | ' | ' | ' |
Shares issued for accrued consulting costs | ' | 1,500,000 | ' | ' | ' | ' | ' |
Consulting agreement, monthly fee | 2,500 | ' | 10,000 | ' | ' | ' | ' |
Consulting agreement, shares issuable | 100,000 | ' | 3,000,000 | ' | ' | ' | ' |
Consulting agreeement, warrants issuable | 100,000 | ' | ' | ' | ' | ' | ' |
Consulting agreement, fair value | 37,000 | ' | ' | 37,000 | 37,000 | 37,000 | ' |
Consulting agreement, accrued expense | $37,000 | ' | ' | ' | ' | ' | ' |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details) (USD $) | 0 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Mar. 01, 2013 | Jun. 15, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Related Party Transactions [Abstract] | ' | ' | ' | ' | ' |
Advances to related party | ' | ' | $89,422 | $89,422 | $89,422 |
Promissory note payable | 89,422 | ' | ' | ' | ' |
Interest rate | 5.50% | ' | ' | ' | ' |
Periodic principal payments to be paid in six installments | ' | 14,966 | ' | ' | ' |
Net sales from related party | ' | ' | $4,693 | $4,100 | ' |
Ownership percentage in related party | ' | ' | 32.00% | 32.00% | ' |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 0 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||
Feb. 15, 2013 | Dec. 31, 2013 | Mar. 01, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | |
WBCP License Agreement [Member] | WBCP License Agreement [Member] | WBCP License Agreement [Member] | Board of Directors [Member] | Board of Directors [Member] | Design Services [Member] | Design Services [Member] | Accredited Members Holding Corp [Member] | Independent Third Party [Member] | |||||
Commitments And Contingencies [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Management services agreement, monthly fee | ' | $27,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Management service agreement, term | ' | '24 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, term | ' | '9 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, extension | ' | '180 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, retainer | ' | 10,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, monthly fee | 2,500 | 10,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, deferral until capital raise amount | ' | 300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, shares issuable | 100,000 | 3,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, shares issuable on demand | ' | 1,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting agreement, shares issuable on specific date | ' | 1,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accrued consulting costs - paid for in common stock | ' | 165,166 | 135,000 | 225,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Prepaid consulting costs | ' | ' | ' | 225,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consulting expense | ' | 278,616 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payment for license rights | ' | ' | ' | ' | ' | ' | 75,000 | ' | ' | ' | ' | ' | ' |
Sales commission, minimum percentage of individual sales | ' | ' | ' | ' | ' | ' | ' | 4.00% | ' | ' | ' | ' | ' |
Sales commission, maximum percentage of individual sales | ' | ' | ' | ' | ' | ' | ' | 6.00% | ' | ' | ' | ' | ' |
Royalty, percentage of all sales | ' | ' | ' | ' | ' | ' | ' | 3.00% | ' | 2.00% | ' | ' | ' |
Royalty expense | ' | ' | ' | ' | 27,000 | 73,875 | 75,000 | 42,543 | 49,500 | 8,465 | 13,900 | ' | ' |
Settlement, shares issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,000,000 | 1,500,000 |
Settlement liability | ' | ' | ' | 652,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Monthly draw against commission or royalty | ' | ' | ' | ' | ' | ' | ' | 6,000 | ' | 3,000 | ' | ' | ' |
Prepaid expenses | ' | ' | ' | ' | ' | ' | ' | $0 | $28,000 | ' | $17,000 | ' | ' |
STOCKHOLDERS_EQUITY_Narrative_
STOCKHOLDERS' EQUITY (Narrative) (Details) (USD $) | 0 Months Ended | 12 Months Ended | |||||
Jul. 25, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 08, 2014 | Apr. 30, 2013 | Apr. 13, 2013 | Feb. 15, 2013 | |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Preferred stock, shares authorized | ' | 10,000,000 | ' | ' | ' | ' | ' |
Preferred stock, par value per share | ' | $0.10 | ' | ' | ' | ' | ' |
Subscription agreement, investment | ' | ' | ' | $20,000 | ' | $500,000 | ' |
Subscription agreement, number of Series C Preferred shares | ' | ' | ' | ' | ' | 5,000,000 | ' |
Subscription agreement, number of common shares | ' | ' | ' | ' | 15,000,000 | ' | ' |
Subscription agreement, number of common shares called by warrants | ' | ' | ' | ' | ' | 250,000 | ' |
Subscription agreement, warrants to purchase common shares issued in exchange for second tranche investment | ' | ' | ' | ' | ' | 250,000 | ' |
Subscription agreement, Series C Preferred Stock issued in exchanged for second tranche investment | ' | ' | ' | ' | ' | 5,000,000 | ' |
Common Stock, shares authorized | ' | 150,000,000 | ' | ' | ' | ' | ' |
Common Stock, par value per share | ' | $0.00 | ' | ' | ' | ' | ' |
Number of shares issued for business acquisition | 83,514,827 | 83,514,827 | 83,514,827 | ' | ' | ' | ' |
Dissenting Shareholder, cash at closing | ' | ' | ' | ' | ' | ' | 5,000 |
Dissenting Shareholder, cash within 90 days | ' | ' | ' | ' | ' | ' | 15,000 |
Dissenting shareholder, interest rate for accrued interest payable | ' | ' | ' | ' | ' | ' | 5.00% |
Dissenting Shareholder, shares issuable | ' | 612,953 | ' | ' | ' | ' | 50,000 |
Dissenting Shareholder, fair value of shares issuable | ' | $20,000 | ' | ' | ' | ' | $5,500 |
Options to acquire shares not expected to vest | ' | 3,064,764 | ' | ' | ' | ' | ' |
Common shares returned by founder, shares | ' | 4,500,000 | ' | ' | ' | ' | ' |
Excercise price of warrant | ' | 0.12 | ' | ' | ' | ' | ' |
Stock Option Plan 2009 | ' | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Shares authorized under plan | ' | 7,000,000 | ' | ' | ' | ' | ' |
Options outstanding | ' | 650,000 | ' | ' | ' | ' | ' |
Authorized shares decreased | ' | 650,000 | ' | ' | ' | ' | ' |
Stock Option Plan 2012 | ' | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Shares authorized under plan | ' | 11,500,000 | ' | ' | ' | ' | ' |
Options outstanding | ' | 2,266,190 | ' | ' | ' | ' | ' |
Authorized shares decreased | ' | 4,500,000 | ' | ' | ' | ' | ' |
Preferred Stock Series A [Member] | ' | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Preferred stock, shares authorized | ' | 425,000 | ' | ' | ' | ' | ' |
Voting rights | ' | 8 | ' | ' | ' | ' | ' |
Number of shares issued for each share of convertible preferred stock that is converted prior to 'Financial Milestones' being reached | ' | 8 | ' | ' | ' | ' | ' |
Number of shares issued for each share of convertible preferred stock that is converted after 'Financial Milestones' are reached and before October 8, 2013 deadline | ' | 28.8 | ' | ' | ' | ' | ' |
Number of shares issued for each share of convertible preferred stock that is converted after 'Financial Milestones' are reached and after October 8, 2013 deadline. | ' | 8 | ' | ' | ' | ' | ' |
Series C Preferred Stock [Member] | ' | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Preferred stock, shares authorized | ' | ' | ' | ' | 5,000,000 | ' | ' |
Voting rights | ' | 3 | ' | ' | ' | ' | ' |
Common Stock, shares authorized | ' | ' | ' | ' | 200,000,000 | ' | ' |
STOCKHOLDERS_EQUITY_Details_2
STOCKHOLDERS EQUITY (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Number of Options | ' | ' |
Nonvested options, beginning balance | 766,190 | 603,217 |
Granted | ' | 2,266,190 |
Vested | ' | -1,546,684 |
Forfeited/cancelled | ' | -556,533 |
Nonvested options, ending balance | 766,190 | 766,190 |
Weighted Average Grant Date Fair Value | ' | ' |
Nonvested options, beginning balance | $0.06 | $0.10 |
Granted | ' | $0.06 |
Vested | ' | $0.07 |
Forfeited/cancelled | ' | $0.27 |
Nonvested options, ending balance | $0.06 | $0.06 |
Stock Option [Member] | ' | ' |
Number of Options | ' | ' |
Nonvested options, beginning balance | 2,916,190 | 2,087,070 |
Granted | ' | 2,266,190 |
Forfeited/cancelled | -650,000 | -1,437,070 |
Nonvested options, ending balance | 2,266,190 | 2,916,190 |
Vested or Expected to Vest | 1,500,000 | 610,000 |
Exercisable | 1,500,000 | 610,000 |
Weighted Average Grant Date Fair Value | ' | ' |
Nonvested options, beginning balance | $0.11 | $0.42 |
Granted | ' | $0.06 |
Forfeited/cancelled | ' | $0.30 |
Nonvested options, ending balance | $0.06 | $0.11 |
Vested or Expected to Vest | $0.08 | $0.27 |
Excercisable | $0.08 | $0.27 |
Weighted Average Grant Date Fair Value [Abstract] | ' | ' |
Outstanding, weighted average remaining contractual life | '2 years 9 months 4 days | '2 years 11 months 19 days |
Vested or Expected to Vest, weighted average remaining contractual life | '2 years 11 months 12 days | ' |
Exercisable, weighted average remaining contractual life | '2 years 11 months 12 days | ' |
Outstanding, aggregate intrinsic value | $32,486 | $39,049 |
Warrant [Member] | ' | ' |
Number of Options | ' | ' |
Nonvested options, beginning balance | 6,739,528 | 1,551,000 |
Granted | 150,000 | 6,229,528 |
Forfeited/cancelled | -3,564,764 | -1,041,000 |
Nonvested options, ending balance | 3,324,764 | 6,739,528 |
Vested or Expected to Vest | 260,000 | 610,000 |
Exercisable | 260,000 | 610,000 |
Weighted Average Grant Date Fair Value | ' | ' |
Nonvested options, beginning balance | $0.05 | $0.29 |
Granted | $0.10 | $0.03 |
Forfeited/cancelled | $0.04 | $0.29 |
Nonvested options, ending balance | $0.04 | $0.05 |
Vested or Expected to Vest | $0.11 | $0.27 |
Excercisable | $0.11 | $0.27 |
Weighted Average Grant Date Fair Value [Abstract] | ' | ' |
Outstanding, weighted average remaining contractual life | '1 year 4 months 17 days | '2 years 2 months 9 days |
Vested or Expected to Vest, weighted average remaining contractual life | '2 years 7 days | '9 months 22 days |
Exercisable, weighted average remaining contractual life | '2 years 7 days | '9 months 22 days |
Outstanding, aggregate intrinsic value | ' | $259,892 |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Income tax benefit | ' | ' |
Change in valuation allowance | $831,000 | $745,000 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Deferred tax benefit: | ' | ' |
Deferred tax benefit | $765,000 | $686,000 |
Federal | 66,000 | 59,000 |
State | 831,000 | 745,000 |
Increase in valuation allowance | -831,000 | -745,000 |
Net income tax benefit | ' | ' |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details 2 | ' | ' |
U.S. Federal tax benefit at statutory rate | ($766,000) | ($751,000) |
State income taxes, net of federal tax benefit | -66,000 | -65,000 |
Permanent differences | 1,000 | 3,000 |
Income tax losses allocated to partners | ' | 68,000 |
Increase in valuation allowance | 831,000 | 745,000 |
Net income tax benefit | ' | ' |
INCOME_TAXES_Details_3
INCOME TAXES (Details 3) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred tax assets: | ' | ' |
Allowance for doubtful accounts | $56,000 | $8,000 |
Accrued settlement costs | ' | 248,000 |
Accrued compensation | ' | 48,000 |
Stock-based compensation | 107,000 | 44,000 |
Deferred salaries | 88,000 | ' |
Net operating loss carryforwards | 1,325,000 | 397,000 |
Total net deferred tax assets | 1,576,000 | 745,000 |
Less: valuation allowance | -1,576,000 | -745,000 |
Net deferred tax asset | ' | ' |