Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 27, 2015 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | HealthWarehouse.com, Inc. | ||
Entity Central Index Key | 754813 | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $2,968,000 | ||
Entity Common Stock, Shares Outstanding | 37,570,383 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash | $506,019 | $67,744 |
Restricted cash | 195,088 | |
Accounts receivable, net | 100,886 | 307,211 |
Inventories | 144,236 | 277,300 |
Prepaid expenses and other current assets | 60,202 | 59,143 |
Total current assets | 1,006,431 | 711,398 |
Property and equipment, net | 511,286 | 624,634 |
Web development costs, net | 142,541 | 83,780 |
Total assets | 1,660,258 | 1,419,812 |
Current liabilities: | ||
Accounts payable - trade | 2,542,938 | 3,310,000 |
Accounts payable - related parties | 84,314 | 83,691 |
Accrued expenses and other current liabilities | 680,506 | 621,052 |
Deferred revenue | 7,009 | 95,792 |
Current portion of equipment lease payable | 64,101 | 56,323 |
Notes payable, net of debt discount of $58,367 as of December 31, 2014 | 791,633 | |
Note payable and other advances - related parties | 73,095 | 78,095 |
Redeemable preferred stock - Series C; par value $0.001 per share; 10,000 designated Series C: 10,000 issued and outstanding as of December 31, 2014 and December 31, 2013 (aggregate liquidation preference of $1,000,000) | 1,000,000 | 1,000,000 |
Total current liabilities | 5,243,596 | 5,244,953 |
Long term liabilities: | ||
Notes payable and other advances, net of debt discount of $269,998 as of December 31, 2013 | 430,002 | |
Long term portion of equipment lease payable | 46,143 | 109,964 |
Total long term liabilities | 46,143 | 539,966 |
Total liabilities | 5,289,739 | 5,784,919 |
Preferred stock - par value $0.001 per share; authorized 1,000,000 shares; issued and outstanding as of December 31, 2014 and December 31, 2013 as follows: | ||
Convertible preferred stock - Series A - 200,000 shares designated Series A; 44,443 shares available to be issued; no shares issued and outstanding | ||
Convertible preferred stock - Series B - 625,000 shares designated Series B; 451,879 and 422,315 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively (aggregate liquidation preference of $4,569,175 and $4,270,257 as of December 31, 2014 and December 31, 2013, respectively) | 452 | 422 |
Common stock - par value $0.001 per share; 100,000,000 shares authorized, 38,749,595 and 27,708,303 shares issued and 37,570,383 and 26,529,091 shares outstanding as of December 31, 2014 and December 31, 2013, respectively | 38,751 | 27,708 |
Additional paid-in capital | 29,966,039 | 27,166,147 |
Employee advances | -2,143 | -9,001 |
Treasury stock, at cost, 1,179,212 shares as of December 31, 2014 and December 31, 2013 | -3,419,715 | -3,419,715 |
Accumulated deficit | -30,212,865 | -28,130,668 |
Total stockholders' deficiency | -3,629,481 | -4,365,107 |
Total liabilities and stockholders' deficiency | $1,660,258 | $1,419,812 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current liabilities: | ||
Current portion of notes payable, net of debt discount | $58,367 | |
Redeemable preferred stock Series C, par value | 0.001 | 0.001 |
Redeemable preferred stock Series C, shares designated | 10,000 | 10,000 |
Redeemable preferred stock Series C, shares issued | 10,000 | 10,000 |
Redeemable preferred stock Series C, shares outstanding | 10,000 | 10,000 |
Redeemable preferred stock Series C, aggregate liquidation preference | 1,000,000 | 1,000,000 |
Long term liabilities: | ||
Noncurrent portion of notes payable, net of debt discount | 269,998 | |
Stockholders' deficiency: | ||
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, authorized | 1,000,000 | 1,000,000 |
Series A Convertible preferred stock, shares designated | 200,000 | 200,000 |
Series A Convertible preferred stock, shares available to be issued | 44,443 | 44,443 |
Series A Convertible preferred stock, shares issued | 0 | 0 |
Series A Convertible preferred stock, shares outstanding | 0 | 0 |
Series B Convertible preferred stock, shares designated | 625,000 | 625,000 |
Series B Convertible preferred stock, shares issued | 451,879 | 422,315 |
Series B Convertible preferred stock, shares outstanding | 451,879 | 422,315 |
Series B Convertible preferred stock, aggregate liquidation preference | $4,569,175 | $4,270,257 |
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 38,749,595 | 27,708,303 |
Common stock, shares outstanding | 37,570,383 | 26,529,091 |
Treasury stock, shares | 1,179,212 | 1,179,212 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Consolidated Statements Of Operations | ||
Net sales | $6,129,660 | $10,233,112 |
Cost of sales | 2,492,382 | 5,111,737 |
Gross profit | 3,637,278 | 5,121,375 |
Operating expenses: | ||
Selling, general and administrative expenses | 5,370,727 | 7,554,954 |
Loss from operations | -1,733,449 | -2,433,579 |
Other income (expense): | ||
Gain on settlement of payables | 281,911 | |
Loss on extinguishment of debt | -2,792,900 | |
Interest expense | -331,741 | -263,413 |
Total other expense | -49,830 | -3,056,313 |
Net loss | -1,783,279 | -5,489,892 |
Series B convertible contractual dividends | -298,918 | -279,380 |
Series B convertible deemed dividends | -1,532,722 | |
Loss attributable to common stockholders | ($2,082,197) | ($7,301,994) |
Per share data: | ||
Net loss - basic and diluted | ($0.06) | ($0.23) |
Series B convertible contractual dividends | ($0.01) | ($0.01) |
Series B convertible deemed dividends | ($0.07) | |
Net loss attributable to common stockholders - basic and diluted | ($0.07) | ($0.31) |
Weighted average number of common shares outstanding - basic and diluted | 30,036,885 | 23,401,575 |
CONSOLIDATED_STATEMENT_OF_CHAN
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) (USD $) | Convertible Series B Preferred Stock | Common Stock | Additional Paid-In Capital | Employee Advances | Treasury Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2012 | $395 | $13,031 | $16,460,385 | ($18,858) | ($3,419,715) | ($20,828,674) | ($7,793,436) |
Beginning Balance, Shares at Dec. 31, 2012 | 394,685 | 13,030,397 | 1,179,212 | ||||
Stock-based compensation | 558,286 | 558,286 | |||||
Warrants issued to 2012 private placement investors | 487,200 | 487,200 | |||||
Issuance of Series B preferred stock as payment-in-kind for dividend, Amount | 27 | 261,057 | 261,084 | ||||
Issuance of Series B preferred stock as payment-in-kind for dividend, Shares | 27,630 | ||||||
Cashless exercise of warrants into common stock, Amount | 10,342 | -10,342 | |||||
Cashless exercise of warrants into common stock, Shares | 10,342,931 | ||||||
Contractual dividends on Series B convertible preferred stock | -279,380 | -279,380 | |||||
Beneficial conversion feature and deemed dividend on Series B convertible preferred stock | 1,532,722 | -1,532,722 | |||||
Warrants issued as debt discount in connection with notes payable | 403,300 | 403,300 | |||||
Conversion of notes and accounts payable into common stock and warrants, Amount | 833 | 3,625,067 | 3,625,900 | ||||
Conversion of notes and accounts payable into common stock and warrants, Shares | 833,000 | ||||||
Issuance of common stock and warrants for cash, Amount | 3,502 | 3,498,473 | 3,501,975 | ||||
Issuance of common stock and warrants for cash, Shares | 3,501,975 | ||||||
Imputed value of services contributed | 350,000 | 350,000 | |||||
Change in fair value of collateral securing employee advances | 9,857 | 9,857 | |||||
Net loss | -5,489,892 | -5,489,892 | |||||
Ending Balance, Amount at Dec. 31, 2013 | 422 | 27,708 | 27,166,147 | -9,001 | -3,419,715 | -28,130,668 | -4,365,107 |
Ending Balance, Shares at Dec. 31, 2013 | 422,315 | 27,708,303 | 1,179,212 | ||||
Stock-based compensation | 830,518 | 830,518 | |||||
Shares issued as pursuant to employment agreement, Amount | 21 | 10,625 | 10,646 | ||||
Shares issued as pursuant to employment agreement, Shares | 21,289 | ||||||
Warrants issued to 2012 private placement investors | |||||||
Issuance of Series B preferred stock as payment-in-kind for dividend, Amount | 30 | 279,350 | 279,380 | ||||
Issuance of Series B preferred stock as payment-in-kind for dividend, Shares | 29,564 | ||||||
Contractual dividends on Series B convertible preferred stock | -298,918 | -298,918 | |||||
Warrants issued as debt discount in connection with notes payable | 36,000 | 36,000 | |||||
Issuance of common stock and warrants for cash, Amount | 11,022 | 1,526,733 | 1,537,755 | ||||
Issuance of common stock and warrants for cash, Shares | 11,020,003 | ||||||
Imputed value of services contributed | 116,666 | 116,666 | |||||
Change in fair value of collateral securing employee advances | 6,858 | 6,858 | |||||
Net loss | -1,783,279 | -1,783,279 | |||||
Ending Balance, Amount at Dec. 31, 2014 | $452 | $38,751 | $29,966,039 | ($2,143) | ($3,419,715) | ($30,212,865) | ($3,629,481) |
Ending Balance, Shares at Dec. 31, 2014 | 451,879 | 38,749,595 | 1,179,212 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities | ||
Net loss | ($1,783,279) | ($5,489,892) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Provision for doubtful accounts | 44,535 | |
Provision for employee advance reserve | 6,858 | 9,857 |
Depreciation and amortization | 172,167 | 158,029 |
Stock-based compensation | 841,164 | 558,286 |
Warrants issued to 2012 private placement investors | 487,200 | |
Gain on settlement of accounts payable | -281,911 | |
Loss on extinguishment of debt | 2,792,900 | |
Imputed value of services contributed | 116,666 | 350,000 |
Amortization of debt discount | 247,631 | 177,665 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 206,325 | -261,894 |
Inventories | 133,064 | 118,284 |
Prepaid expenses and other current assets | -1,059 | -6,851 |
Accounts payable - trade | -485,151 | 336,226 |
Accounts payable - related parties | 623 | 57,758 |
Accrued expenses and other current liabilities | 39,916 | -452,676 |
Deferred revenue | -88,783 | 95,792 |
Net cash used in operating activities | -875,769 | -1,024,781 |
Cash flows from investing activities | ||
Change in restricted cash | -195,088 | 850,002 |
Capital expenditures | -2,964 | |
Website development costs | -114,616 | -98,423 |
Net cash provided by (used in) investing activities | -312,668 | 751,579 |
Cash flows from financing activities | ||
Principal payments on equipment leases payable | -56,043 | -49,122 |
Proceeds from issuance of notes payable | 150,000 | 700,000 |
Repayment of notes payable | -2,000,000 | |
Repayment of notes payable - related party | -5,000 | -4,000 |
Repayment of convertible notes payable | -1,000,000 | |
Net proceeds from the sale of common stock | 1,537,755 | 2,651,973 |
Proceeds from notes payable and other advances - related parties | 56,000 | |
Repayment of notes payable and other advances - related parties | -13,905 | |
Net cash provided by financing activities | 1,626,712 | 340,946 |
Net increase in cash | 438,275 | 67,744 |
Cash - beginning of period | 67,744 | |
Cash - end of period | 506,019 | 67,744 |
Cash paid for: | ||
Interest | 86,692 | 433,792 |
Taxes | 924 | |
Non-cash investing and financing activities: | ||
Issuance of Series B preferred stock for settlement of accrued dividends | 279,380 | 261,084 |
Cashless exercise of warrants into common stock | 10,342 | |
Warrants issued as debt discount in connection with notes payable | 36,000 | 403,300 |
Accrual of contractual dividends on Series B convertible preferred stock | 298,918 | 279,380 |
Deemed dividends on Series B convertible preferred stock | 1,532,722 | |
Common stock and warrants issued in exchange of notes and accounts payable | 3,625,900 | |
Conversion of Accounts Payable to Notes Payable | $40,000 |
Organization_and_Basis_of_Pres
Organization and Basis of Presentation | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
1. Organization and Basis of Presentation | HealthWarehouse.com, Inc., a Delaware company incorporated in 1998, (the “Company”) is a U.S. licensed virtual retail pharmacy (“VRP”) and healthcare e-commerce company that sells brand name and generic prescription drugs as well as over-the-counter (“OTC”) medical products. The Company’s objective is to be viewed by individual healthcare product consumers as a low-cost, reliable and hassle-free provider of prescription drugs and OTC medical products. The Company is presently licensed as a mail-order pharmacy for sales to 50 states in the United States and the District of Columbia. |
Going_Concern_and_Managements_
Going Concern and Management's Liquidity Plans | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
2. Going Concern and Management's Liquidity Plans | Since inception, the Company has financed its operations primarily through debt and equity financings and advances from related parties. As of December 31, 2014, the Company had a working capital deficiency of $4,237,165 and an accumulated deficit of $30,212,865. During the years ended December 31, 2014 and 2013, the Company incurred net losses of $1,783,279 and $5,489,892, respectively and used cash in operating activities of $875,769 and $1,024,781, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. |
Subsequent to December 31, 2014, the Company continues to incur net losses and use cash in operating activities. Funds from the Company’s private placement offering completed during 2014 have improved the Company’s current cash position and working capital constraints; however, the funds are not sufficient to satisfy its current obligations. | |
On February 13, 2013, the Company received a Notice of Redemption related to its Series C Redeemable Preferred Stock aggregating $1,000,000 (see Note 9). As a result of receiving the Notice of Redemption, the Company must now apply all of its assets to redemption of the Series C Preferred Stock and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders (the Company is not permitted to utilize toward the redemption those assets required to pay its debts as they come due and those assets required to continue as a going concern). | |
The Company recognizes it will need to raise additional capital in order to fund operations, meet its payment obligations and execute its business plan. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, attempt to extend note repayments, attempt to negotiate the preferred stock redemption and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. If the Company is unable to obtain financing on a timely basis, the Company could be forced to sell its assets, discontinue its operation and /or seek reorganization under the U.S. bankruptcy code. | |
Accordingly, the accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
3. Summary of Significant Accounting Policies | Principles of Consolidation | ||||||||
The consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, ION Belgium NV and Pagosa Health LLC, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation. | |||||||||
On June 4, 2013, the Company formed a wholly-owned subsidiary called Pagosa Health LLC (“Pagosa”). On January 14, 2014, the Company closed the Pagosa location and decided to focus on its core consumer prescription business. The entity was dissolved in 2014. See Note 10. | |||||||||
Use of Estimates | |||||||||
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets, the valuation of equity instruments and debt discounts. | |||||||||
Cash | |||||||||
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2014 and 2013, the Company does not have any cash equivalents. | |||||||||
Restricted Cash | |||||||||
Restricted cash represents cash held by the Company’s credit card processor as a reserve to cover potential future refunds. | |||||||||
Allowance for Doubtful Accounts Receivable | |||||||||
Accounts receivable are shown net of an allowance for doubtful accounts of $47,233 and $250,828 as of December 31, 2014 and 2013, respectively. The Company’s management has established an allowance for doubtful accounts sufficient to cover probable and reasonably estimable losses. The nature of the business is that the majority of the payments are made before the product is sent. If the financial conditions of customers were to materially deteriorate, an increase in the allowance amount could be required. The allowance for doubtful accounts considers a number of factors, including collection experience, current economic trends, estimates of forecasted write-offs, aging of the accounts receivable, and other factors. | |||||||||
Inventories | |||||||||
Inventories consist of finished goods and is stated at the lower of cost (using the first-in, first-out method) or market. As part of the valuation process, inventory reserves are established to state excess and slow-moving inventory at their estimated net realizable value. The valuation process for excess or slow-moving inventory contains uncertainty because management must use judgment to estimate when the inventory will be sold and the quantities and prices at which the inventory will be sold in the normal course of business. Inventory reserves are periodically reviewed, reflecting current risks, trends and changes in industry conditions. When preparing these estimates, management considers historical results, inventory levels and current operating trends. In the event the estimates differ from actual results, inventory-related reserves may be adjusted and could materially impact the results of operations. | |||||||||
Property and Equipment | |||||||||
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations as incurred. Gains or losses on disposal of property and equipment are reflected in the statements of operations in the period of disposal. | |||||||||
Impairment of Long-Lived Assets | |||||||||
The Company reviews the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or asset group is expected to generate. If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value. As of December 31, 2014, the Company has not recognized any such impairment. | |||||||||
Website Development Costs | |||||||||
The Company capitalizes costs associated with the development of its website. During the years ended December 31, 2014 and 2013, the Company capitalized $114,616 and $98,423, respectively, of website development costs. The Company is amortizing the website development costs on a three year straight-line basis and incurred amortization expense of $55,855 and $14,643 during the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014, unamortized website development costs totaled $142,541. Estimated future amortization expense related to website development costs is $71,013 in 2015, $56,370 in 2016 and $15,158 in 2017. | |||||||||
Shipping and Handling Costs | |||||||||
The Company policy is to provide free standard shipping and handling for most orders shipped during the year. Shipping and handling costs incurred are recognized in selling, general and administrative expenses. Such amounts aggregated $511,636 and $775,083 for the years ended December 31, 2014 and 2013 respectively. | |||||||||
In certain circumstances, shipping and handling costs are charged to the customer and recognized in revenues. The amounts recognized in revenues for the years ended December 31, 2014 and 2013 were $162,221 and $254,067, respectively. | |||||||||
Fair Value of Financial Instruments | |||||||||
Fair value is 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. These fair value measurements apply to all financial instruments that are measured and reported on a fair value basis. | |||||||||
Based on the observability of the inputs used in the valuation techniques, financial instruments are categorized according to the fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: | |||||||||
Level 1 - Observable inputs such as quoted prices in active markets. | |||||||||
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. | |||||||||
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. | |||||||||
The carrying value of items included in working capital approximates fair value because of the relatively short maturity of these instruments. The convertible debt and notes payable approximate fair value because the terms are substantially similar to comparable debt in the marketplace. | |||||||||
Income Taxes | |||||||||
Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. | |||||||||
U.S. GAAP prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. | |||||||||
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of December 31, 2014 and 2013. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date. | |||||||||
The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2014 and 2013. | |||||||||
Debt Discounts | |||||||||
The Company records, as a discount to notes and convertible notes, the relative fair value of warrants issued in connection with the issuances and the intrinsic value of any conversion options based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest date of redemption. | |||||||||
Revenue Recognition | |||||||||
Revenues for the sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is reasonably assured. The Company defers revenue when cash has been received from the customer but delivery has not yet occurred. Such amounts are reflected as deferred revenues in the accompanying consolidated financial statements. | |||||||||
Advertising | |||||||||
The Company expenses all advertising costs as incurred. Advertising expense for the years ended December 31, 2014 and 2013 was $103,536 and $1,867, respectively. | |||||||||
Sales Taxes | |||||||||
The Company accounts for sales taxes imposed on its goods and services on a net basis in the statement of operations. | |||||||||
Net Earnings (Loss) Per Share of Common Stock | |||||||||
Basic net earnings (loss) per share is computed by dividing net earnings (loss) attributable to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted net earnings (loss) per share reflects the potential dilution that could occur if securities or other instruments to issue Common Stock were exercised or converted into Common Stock. Potentially dilutive securities are excluded from the computation of diluted net earnings (loss) per share if their inclusion would be anti-dilutive and consist of the following: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Options | 3,944,557 | 2,543,150 | |||||||
Warrants | 9,339,044 | 2,342,846 | |||||||
Series B Convertible Preferred Stock | 5,146,902 | 3,472,953 | |||||||
Total potentially dilutive shares | 18,430,503 | 8,358,949 | |||||||
Stock-Based Compensation | |||||||||
Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award. For employees and directors, the award is measured on the grant date. For non-employees, the award is measured on the grant date and is then remeasured at each vesting date and financial reporting date. The Company recognizes the estimated fair value of the award as compensation cost over the requisite service period of the award, which is generally the option vesting term. The Company generally issues new shares of Common Stock to satisfy option and warrant exercises. | |||||||||
Preferred Stock | |||||||||
Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ deficiency. | |||||||||
Convertible Instruments | |||||||||
U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. | |||||||||
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying Common Stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. | |||||||||
Common Stock Warrants and Other Derivative Financial Instruments | |||||||||
The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its Common Stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. | |||||||||
The Company evaluated its free standing warrants to purchase Common Stock to assess their proper classification in the balance sheet as of December 31, 2014 and 2013 using the applicable classification criteria enumerated under U.S. GAAP and determined that the Common Stock purchase warrants contain fixed settlement provisions. | |||||||||
Recently Issued Accounting Pronouncements | |||||||||
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitiy’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. Adoption of this pronouncement is not expected to have a material impact on its consolidated financial statements. | |||||||||
The FASB has issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's consolidated financial position and results of operations. | |||||||||
The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supercedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's consolidated financial position and results of operations. |
Property_and_Equipment
Property and Equipment | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Notes to Financial Statements | ||||||||||
4. Property and Equipment | Property and equipment consist of the following: | |||||||||
December 31, | Estimated | |||||||||
2014 | 2013 | Useful Life | ||||||||
Computer Software | $ | 230,299 | $ | 230,299 | 5 years | |||||
Equipment | 544,108 | 544,108 | 15 years | |||||||
Office Furniture and Equipment | 95,754 | 95,754 | 7 years | |||||||
Computer Hardware | 30,710 | 27,746 | 5 years | |||||||
Leasehold Improvements | 303,318 | 303,318 | (a) | |||||||
Total | 1,204,189 | 1,201,225 | ||||||||
Less: accumulated depreciation | (692,903 | ) | (576,591 | ) | ||||||
Property and Equipment, Net | $ | 511,286 | $ | 624,634 | ||||||
(a) Lesser of useful life or initial term of lease | ||||||||||
Depreciation expense for the above assets for the years ended December 31, 2014 and 2013 was $116,312 and $143,387, respectively. |
Accrued_Expenses_and_Other_Cur
Accrued Expenses and Other Current Liabilities | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Notes to Financial Statements | ||||||||||
5. Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following: | |||||||||
December 31, | ||||||||||
2014 | 2013 | |||||||||
Deferred Rent | $ | 36,053 | $ | 46,254 | ||||||
Advertising | 109,930 | 75,000 | ||||||||
Salaries and Benefits | 82,222 | 132,048 | ||||||||
Customer Payables | 635 | 39,618 | ||||||||
Dividend Payable | 298,918 | 279,380 | ||||||||
Accrued Interest | 48,868 | 45,616 | ||||||||
Accrued Rent | 46,604 | - | ||||||||
Other | 57,276 | 3,136 | ||||||||
Total | $ | 680,506 | $ | 621,052 | ||||||
Convertible_Notes_Payable
Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
6. Convertible Notes Payable | On February 1, 2013, the Company repaid the outstanding principal balance of $1,000,000 of convertible notes plus outstanding accrued interest of $163,861. The convertible notes bore interest at a rate of 7% per annum compounded annually and were due on December 31, 2012. |
Notes_Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
7. Notes Payable | On January 15, 2013, the Company failed to make required payments aggregating $2,000,000 in principal and approximately $193,000 of accrued interest due on certain note agreements dated September 2, 2011. Accordingly, the Company was in default of its obligations under the loan documents. On February 1, 2013, the Company repaid the notes with an outstanding principal balance of $2,000,000 plus outstanding accrued interest of $199,260. The Company recorded amortization of debt discount associated with the notes payable of $44,363 for the year ended December 31, 2013, using the effective interest method. |
The Company is a party to a Loan and Security Agreement (the “Loan Agreement”) with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed an aggregate of $750,000 from the Lender (the “Loan”), including $150,000 and $600,000 during the years ended December 31, 2014 and 2013, respectively. The Loan is evidenced by a promissory note (the “Senior Note”) in the face amount of $750,000 (as amended). The Senior Note bears interest on the unpaid principal balance of the Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (7.50% as of December 31, 2014). Under the terms of the Loan Agreement, the Company has agreed to make monthly payments of accrued interest on the first day of every month. The principal amount and all unpaid accrued interest on the Senior Note is payable on March 1, 2015, or earlier in the event of default or a sale or liquidation of the Company. See Note 14. The Loan may be prepaid in whole or in part at any time by the Company without penalty. The Senior Note contains financial covenants which require the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation (“EBITDAS”). | |
In connection with the Loan Agreement, the Company granted the Lender five-year warrants to purchase an aggregate of 1,125,000 shares of Common Stock at an exercise price of $0.35 per share, of which 225,000 and 900,000 warrants were issued during the years ended December 31, 2014 and 2013, respectively. The warrants contain customary anti-dilution provisions. The warrants had an aggregate relative fair value of $402,500, of which $36,000 and $366,500 were recorded as debt discounts during the years ended December 31, 2014 and 2013, respectively, and will be amortized using the effective interest method over the term of the Senior Note. The Company amortized $229,231 and $130,235 of the debt discount as interest expense during the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 and 2013, the remaining unamoritized debt discount was $43,034 and $236,265, respectively. Including the value of warrants issued in connection with Senior Note and subsequent amendments, the Senior Note had an effective interest rate of 40% per annum. | |
The Company granted the Lender a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to repay the Loan, including a Deposit Account Control Agreement, which grants the Lender a security interest in certain bank accounts. The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Lender’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. Upon the occurrence of an event of default, the Lender has the right to impose interest at a rate equal to five percent (5.0%) per annum above the otherwise applicable interest rate (the “Default Rate”). The repayment of the Loan may be accelerated prior to the maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties. | |
On March 13, 2013, the Company converted an advance from a related party of $40,000 to a notes payable with a maturity date of December 31, 2013. The principal balance of the note is due at maturity, with no interest. The Company made principal payments of $5,000 and $4,000 during the years ended December 31, 2014 and 2013, respectively. The Company is in discussions with the related party to implement a repayment plan. Imputed interest expense on this note was de minimis. | |
On August 15, 2013, a related party advanced $56,000 to the Company. Subsequently, $7,000 of that advance was repaid to the related party and the Company issued a promissory note for the principal balance of $49,000 (the “Original Note”). The Original Note bears interest at a rate of 10% per annum. The Original Note had a maturity date of November 7, 2013. Through November 21, 2013, the Company repaid $6,905 of the principal of the Original Note and a replacement note was issued for the remaining principal balance of $42,095 (the “Replacement Note”). The Replacement Note waives any existing default under the Original Note and had a maturity date of May 31, 2014. All other terms of the Replacement Note and Original Note are the same. Interest expense on this note was $3,252 and $1,366 during the years ended December 31, 2014 and 2013, respectively. The Company is in discussions with the related party to negotiate a repayment plan. | |
On October 30, 2013, the Company issued a note payable with a principal amount of $100,000 to a lender. The note bears interest on the unpaid principal balance until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (as of December 31, 2014, the Prime Rate was 3.25% per annum). Under the terms of the note, the Company has agreed to make monthly payments of accrued interest on the first day of every month, beginning on December 1, 2013. The principal amount and all unpaid accrued interest is payable on November 1, 2015 but the Company’s obligations are unsecured and are subordinate to its obligations pursuant to the Senior Note described above. The Loan may be prepaid in whole or in part at any time by the Company without penalty. In consideration of the note payable, the Company issued to the lender a five-year warrant to purchase 150,000 shares of Common Stock at an exercise price of $0.35 per share. The warrant contains customary anti-dilution provisions. The warrant had a relative fair value of $36,800 that the Company has recorded as a debt discount which will be amortized using the effective interest method over the term of the October Note. The Company amortized $18,400 and $3,067 of the debt discount as interest expense during the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014 and 2013, the remaining unamortized debt discount was $15,333 and $33,733, respectively. Including the value of the warrant, the note had an effective interest rate of 26% per annum |
Equipment_Lease_Payable
Equipment Lease Payable | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
8. Equipment Lease Payable | Future minimum lease payments, by year and in the aggregate, under equipment leases, which includes capital leases, as of December 31, 2014, are as follows: | ||||
For year ending December 31, | Lease Payments | ||||
2015 | $ | 76,086 | |||
2016 | 48,696 | ||||
Total | $ | 124,782 | |||
Less: Amount representing interest | (14,538 | ) | |||
Present value of future lease payments | $ | 110,244 | |||
Less: Current portion | (64,101 | ) | |||
Long term portion | $ | 46,143 | |||
As of December 31, 2014, the equipment has a gross and net book value of $305,641 and $240,720, respectively. Depreciation of assets held under capital leases in the amount of $20,377 is included in depreciation expense for both years ended December 31, 2014 and 2013. |
Stockholders_Deficiency
Stockholders' Deficiency | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||
9. Stockholders' Deficiency | The Company is authorized to issue up to 100,000,000 shares of Common Stock with a par value of $0.001 per share and 1,000,000 shares of preferred stock with a par value of $0.001 per share. Following the approval of the Board of Directors and stockholders of record as of August 25, 2014, the Company filed a Certificate of Amendment with the Secretary of State of Delaware on October 17, 2014, which increased the number of authorized shares of common stock of the Company from 50,000,000 to 100,000,000. | ||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||
During the year ended December 31, 2013, pursuant to a private placement offering of units that commenced on October 4, 2012 (the “Private Placement”), the Company received an aggregate of $3,501,975 of proceeds related to the sale of 3,501,975 units at a price of $1.00 per unit. The aggregate amount includes $500,000, which was received from an officer, and $850,002, which was received during the fourth quarter of 2012 and classified as restricted cash as of December 31, 2012. Each unit consists of (i) one share of the Company’s Common Stock and (ii) a five-year warrant to purchase three shares of the Company’s Common Stock at an exercise price of $0.25 per share, such that warrants to purchase an aggregate of 10,505,925 shares of Common Stock were issued. Substantially all of the proceeds from the sale of the units were used by the Company to satisfy all of its obligations under certain convertible notes and notes (see Notes 6 and 7). In connection with the Private Placement, an officer has entered into repurchase agreements with certain purchasers of units, pursuant to which he has agreed to repurchase, subject to certain conditions, one-half of these holder’s units at a purchase price of $1.00 per unit if the closing price of the Common Stock is less than $0.25 on five consecutive trading days at any time within one year of February 1, 2013. Cape Bear, which holds a substantial equity position in the Company, also entered into repurchase agreements with certain purchasers, other than the officer, that are substantially similar to the officer’s agreements, except that Cape Bear’s obligations are secured by a lien over certain real estate. | |||||||||||||||||||||||
On March 13, 2013, the Company exchanged $761,000 of notes payable and other advances – related parties and $72,000 of accounts payable to two related parties into an aggregate of 833,000 units at a price of $1.00 per unit. Each unit consists of (i) one share of the Company’s Common Stock, and (ii) a five-year warrant to purchase two and three-quarters shares of the Company’s Common Stock at an exercise price of $0.25 per share (such that warrants to purchase an aggregate of 2,290,750 shares of Common Stock were issued). The $3,625,900 aggregate fair value of the securities issued ($2,639,700 related to the warrants and $986,200 related to the Common Stock) was credited to equity at conversion. The Company recorded a $2,792,900 extinguishment loss which represents the incremental fair value of the securities issued as compared to the carrying value of the liabilities. | |||||||||||||||||||||||
On January 15, 2014, the Company issued 21,289 shares of Common Stock to an employee in accordance with an employment agreement. The fair value of the shares was $10,646 based on the closing price on the date of issuance which was recorded as stock based compensation expense during the year ended December 31, 2014. | |||||||||||||||||||||||
During the year ended December 31, 2014, pursuant to a private placement offering of units that commenced on July 25, 2014 (the “2014 Private Placement”), the Company received an aggregate of $1,653,000 of gross proceeds (net of expenses of $115,245) related to the sale of 11,020,003 units at a price of $0.15 per unit. Each unit consists of (i) one share of the Company’s common stock and (ii) a five-year warrant to purchase one-half share of the Company’s common stock at an exercise price of $0.30 per share, such that warrants to purchase an aggregate of 5,509,998 shares of common stock were issued. The aggregate fair value of the warrants as of the issuance date was $1,096,202. The Company evaluated these warrants to assess their proper classification using the applicable criteria enumerated by U.S. GAAP and determined that such warrants met the criteria for equity classification. Proceeds from the sale of the units are to be used to fund the Company’s initiatives in the areas of marketing, website improvement and development, inventory and for general working capital purposes. | |||||||||||||||||||||||
During the year ended December 31, 2014, the Company granted certain options and warrants which, upon settlement, may have exceeded the limit on the authorized number of shares of common stock. The Company follows a sequencing policy for which in the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to the Company’s inability to demonstrate it has sufficient authorized shares, shares will be allocated on the basis of earliest issuance date of potentially dilutive instruments with the earliest grants receiving first allocation of shares. The Company evaluated such instruments and determined that the fair value of such instruments at the date of issuance and the change in fair value was determined to have a de minimus impact on the Company’s consolidated financial statements. Subsequent to such issuance and prior to December 31, 2014, the Company obtained stockholder approval to increase the number of authorized shares of common stock of the Company from 50,000,000 to 100,000,000. | |||||||||||||||||||||||
Preferred Stock | |||||||||||||||||||||||
Series A Preferred Stock | |||||||||||||||||||||||
The Company has designated 200,000 of the 1,000,000 authorized shares of preferred stock as Series A Convertible Preferred Stock (“Series A Preferred Stock”). The Series A Preferred Stock is non-voting, has a liquidation preference equal to its purchase price, and does not pay dividends. The holders can call for the conversion of the Series A Preferred Stock at any time and are entitled to half a share of the Company’s Common Stock for each share of Series A Preferred Stock converted. As of December 31, 2013, 44,443 shares of Series A Preferred Stock are available to be issued. There is no Series A Preferred Stock outstanding as of December 31, 2014 or 2013. | |||||||||||||||||||||||
Series B Preferred Stock | |||||||||||||||||||||||
The Company has designated 625,000 of the 1,000,000 authorized shares of preferred stock as Series B Convertible Preferred Stock (“Series B Preferred Stock”). The Series B Preferred Stock has voting rights equal to one vote for each common share equivalent, has a liquidation preference equal to its purchase price, and receives preferred dividends equal to 7% of all outstanding shares in either cash or payment-in-kind. The holders can call for the conversion of the Series B Preferred Stock at any time and are entitled to five shares of the Company’s Common Stock for each share of Series B Preferred Stock converted. In addition, the Series B Preferred Stock is subject to weighted average anti-dilution protection whereby if shares of Common Stock are sold below the current conversion price, the conversion price is reduced pursuant to a pre-defined formula. As of December 31, 2014 and 2013, Series B holders were entitled to convert into 11.39 and 8.22 shares, respectively, of the Company’s Common Stock for each share of Series B Preferred Stock due to the anti-dilution provision. The anti-dilution provision represents a contingent beneficial conversion feature. As of December 31, 2014, an incremental 2,887,507 shares of Common Stock are issuable at conversion of the Series B Convertible Preferred Stock as compared to the original terms. Using the commitment date Common Stock price in effect, the commitment date value of the incremental shares is $7,288,068. However, recognition of beneficial conversion features is limited to the aggregate gross proceeds allocated to the preferred stock of $3,199,689 (422,315 shares of Series B Convertible Preferred Stock times $9.45 per share less the proceeds allocated to the warrants of $791,188) less the $1,666,967 beneficial conversion feature already recognized on the original 365,265 shares of Series B Preferred Stock (prior to the issuance of additional shares as payment-in-kind in lieu of cash dividends). Due to these limitations, a beneficial conversion feature of only $1,532,722 was recorded for the year ended December 31, 2013. | |||||||||||||||||||||||
As of December 31, 2014 and 2013, the Company had accrued contractual dividends of $298,918 and $279,380, respectively, related to the Series B Preferred Stock. On January 1, 2015, and 2014, the Company issued 31,633 and 29,564 shares of Series B convertible preferred stock valued at approximately $299,000 and $279,000, respectively, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding on each date, to the Series B convertible preferred stock owners as payment in kind for dividends. | |||||||||||||||||||||||
Series C Preferred Stock | |||||||||||||||||||||||
On October 17, 2011, the Company filed a Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware fixing the rights, preferences and restrictions of a newly formed class of Series C Preferred Stock. The Certificate of Designation designates 10,000 shares of the Company's preferred stock as Series C Preferred Stock to be issued at an original issue price of $100 per share. The Series C Preferred Stock has voting rights equal to one vote for each share held, has a liquidation preference equal to its purchase price, and has certain redemption rights available at the option of the holder. The holder could make a mandatory redemption request at any time on or after January 15, 2013. The Series C Preferred Stock is non- convertible and does not pay dividends. | |||||||||||||||||||||||
On October 17, 2011, the Company received net cash proceeds of $1,000,000 for the sale of 10,000 shares of Series C Preferred Stock to a greater than 10% stockholder of the Company. Since certain of the Company’s preferred shares contain redemption rights which are not solely within the Company’s control, these issuances of preferred stock were initially presented as temporary equity. In connection with the issuance, the investor received five-year immediately exercisable warrants to purchase 270,000 shares of the Company’s Common Stock at an exercise price of $2.90 per share and which had a relative fair value of $526,522 on the date of grant. The $526,522 relative fair value was recorded as a discount against the Series C Preferred Stock and was initially amortized as deemed dividends over the period through January 15, 2013. | |||||||||||||||||||||||
On February 13, 2013, the Company received a Notice of Redemption of Series C Preferred Stock. As a result of the Convertible Notes coming due and not being paid on December 31, 2012, the Company accelerated the accretion rate of the deemed dividend on the Redeemable Preferred Stock – Series C and reclassified the Redeemable Preferred Stock – Series C from temporary equity to current liabilities. | |||||||||||||||||||||||
Incentive Compensation / Stock Option Plans | |||||||||||||||||||||||
The 2009 Incentive Compensation Plan (the “2009 Plan”) was approved on May 15, 2009 and June 4, 2009, and the increase in the total number of shares of Common Stock issuable pursuant to the 2009 Plan to 2,881,425 was approved on October 4, 2010 and September 20, 2011 by the Board of Directors and Stockholders, respectively. | |||||||||||||||||||||||
The 2009 Plan imposes individual limitations on the amount of certain awards. Under these limitations during any fiscal year of the Company, the number of options, stock appreciation rights, shares of restricted stock, shares of deferred stock, performance shares and other stock based-awards granted to any one participant under the 2009 Plan may not exceed 250,000 shares, subject to adjustment in certain circumstances. The maximum amount that may be paid out as performance units in any 12-month performance period is an aggregate value of $2,000,000, and the maximum amount that may be paid out as performance units in any performance period greater than 12 months is an aggregate value of $4,000,000. The maximum term of each option or stock appreciation right, the times at which each option or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised options or stock appreciation rights at or following termination of employment generally are fixed by the board of directors or committee of the Company’s board of directors designated to administer the 2009 Plan (the “Committee”), except that no option or stock appreciation right may have a term exceeding ten years. The exercise price per share subject to an option and the grant price of a stock appreciation rights are determined by the Committee, but in the case of an incentive stock option (ISO) must not be less than the fair market value of a share of Common Stock on the date of grant. | |||||||||||||||||||||||
Following the approval of the Board of Directors and stockholders of record as of August 25, 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”) which made a total of 6,000,000 shares of common stock authorized and available for issuance pursuant to awards granted under the 2014 Plan. | |||||||||||||||||||||||
The 2014 Plan limit imposes individual limitations on the amount of certain awards. Under these limitations during any fiscal year of the Company, the number of options, stock appreciation rights, shares of restricted stock, shares of deferred stock, performance shares and other stock based-awards granted to any one participant under the 2014 Plan may not exceed 1,500,000 shares, subject to adjustment in certain circumstances. The maximum number of shares that may be awarded that are not subject to performance targets is an aggregate of 1,200,000 shares. The maximum term of each option or stock appreciation right, the times at which each option or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised options or stock appreciation rights at or following termination of employment generally are fixed by the Committee designated to administer the 2014 Plan, except that no option or stock appreciation right may have a term exceeding ten years. The exercise price per share subject to an option and the grant price of a stock appreciation rights are determined by the Committee, but in the case of an incentive stock option (ISO) must not be less than the fair market value of a share of Common Stock on the date of grant. | |||||||||||||||||||||||
Stock Options | |||||||||||||||||||||||
Grants | |||||||||||||||||||||||
On February 15, 2013 and December 23, 2013, the Company granted options to employees to purchase an aggregate of 430,500 shares of Common Stock under the 2009 Plan at an exercise price ranging from $0.53 to $1.60 per share for an aggregate grant date value of $425,824. The options vest over a three year period and have a term of ten years. | |||||||||||||||||||||||
On June 19, 2013 and October 30, 2013, the Company granted options to certain directors to purchase 505,000 shares of Common Stock under the 2009 Plan at an exercise price ranging from $0.30 to $1.45 per share for a grant date value of $198,820. The options vest over a one to three year period and have a term of ten years. | |||||||||||||||||||||||
On August 27, 2014 and October 23, 2014, the Company granted options to directors of the Company to purchase an aggregate of 1,687,857 shares of common stock under the 2009 Plan and 2014 Plan at an exercise price of between $0.12 to $0.16 per share for an aggregate grant date value of $266,472. The options have a vesting period ranging from immediate to three months and have a term of ten years. | |||||||||||||||||||||||
On October 23, 2014, the Company granted options to an employee of the Company to purchase an aggregate of 250,000 shares of common stock under the 2009 Plan at an exercise price of $0.18 per share for an aggregate grant date value of $35,825. The options have a vesting period of one year and have a term of five years. | |||||||||||||||||||||||
Valuation and Amortization | |||||||||||||||||||||||
Option valuation models require the input of highly subjective assumptions. The fair value of the stock-based payment awards is estimated utilizing the Black-Scholes option model. The volatility component of this calculation is derived from the historical trading prices of the Company’s own Common Stock. The Company accounts for the expected life of options in accordance with the “simplified” method which enables the use of the simplified method for “plain vanilla” share options as defined in Staff Accounting Bulletin No. 107. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. | |||||||||||||||||||||||
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. The Company estimated forfeitures related to option grants at a weighted average annual rate of 4% per year for options granted during the years ended December 31, 2014 and 2013. | |||||||||||||||||||||||
In applying the Black-Scholes option pricing model to stock options granted, the Company used the following weighted average assumptions: | |||||||||||||||||||||||
For Year Ended | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 0.97% to 2.29% | 1.13% to 2.03% | |||||||||||||||||||||
Dividend yield | 0.00% | 0.00% | |||||||||||||||||||||
Expected volatility | 190% to 191.0% | 162.0% to 175.0% | |||||||||||||||||||||
Expected life in years | 3.0 to 10.0 | 5.5 to 6.0 | |||||||||||||||||||||
The weighted average fair value of the stock options granted during the years ended December 31, 2014 and 2013 was $0.16 and $0.91 per share, respectively. | |||||||||||||||||||||||
Stock-based compensation expense related to stock options was recorded in the consolidated statements of operations as a component of selling, general and administrative expenses and totaled $698,015 and $558,286 for the years ended December 31, 2014 and 2013, respectively. | |||||||||||||||||||||||
As of December 31, 2014, stock-based compensation expense related to stock options of $1,135,635 remains unamortized, including $244,066 which is being amortized over the weighted average remaining period of 1.1 years. The remaining $891,569 is related to a performance based option where vesting is currently deemed to be improbable and no amount is being amortized. | |||||||||||||||||||||||
Summary | |||||||||||||||||||||||
A summary of the stock option activity during the years ended December 31, 2014 and 2013 is presented below: | |||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Options | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2013 | 2,183,899 | $ | 2.76 | ||||||||||||||||||||
Granted | 935,500 | 0.91 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | (576,249 | ) | 3.96 | ||||||||||||||||||||
Outstanding, December 31, 2013 | 2,543,150 | $ | 2.37 | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,543,150 | $ | 2.37 | ||||||||||||||||||||
Granted | 1,937,857 | 0.13 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | (536,450 | ) | 2.37 | ||||||||||||||||||||
Outstanding, December 31, 2014 | 3,944,557 | $ | 1.27 | 7.4 | $ - | ||||||||||||||||||
Exercisable, December 31, 2014 | 3,135,876 | $ | 1.11 | 8.0 | $ - | ||||||||||||||||||
The following table presents information related to stock options at December 31, 2014: | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Options | Price | In Years | Options | ||||||||||||||||||
$ | 0.12 - $2.20 | $ | 0.36 | 2,870,807 | $ | 0.26 | 9.2 | 2,339,126 | |||||||||||||||
$ | 2.21 - $3.80 | 3.23 | 757,750 | 2.95 | 3 | 507,750 | |||||||||||||||||
$ | 3.81 - $6.99 | 4.88 | 316,000 | 4.73 | 7 | 289,000 | |||||||||||||||||
$ | 0.12 - $6.99 | $ | 1.27 | 3,944,557 | $ | 1.11 | 8 | 3,135,876 | |||||||||||||||
Warrants | |||||||||||||||||||||||
Valuation | |||||||||||||||||||||||
In applying the Black-Scholes option pricing model to stock warrants granted, the Company used the following weighted average assumptions: | |||||||||||||||||||||||
Grants | |||||||||||||||||||||||
For Year Ended | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 1.52% to 2.52% | 0.74% to 2.84% | |||||||||||||||||||||
Dividend yield | 0.00% | 0.00% | |||||||||||||||||||||
Expected volatility | 171% to 192% | 146% to 173.0% | |||||||||||||||||||||
Expected life in years | 5.0 to 8.5 | 5.0 to 9.5 | |||||||||||||||||||||
On February 15, 2013, the Company granted vested five-year warrants to purchase an aggregate of 408,345 shares of Common Stock at an exercise price of $1.00 per share to investors who purchased shares in private placements at $4.50 per share during 2012. The warrants had an issuance date fair value of $487,200 which was expensed immediately. | |||||||||||||||||||||||
On August 25, 2014 and October 23, 2014, the Company granted vested five-year warrants to purchase an aggregate of 661,200 shares of Common Stock at an exercise price of $0.15 per share to a consultant related to services provided related to the 2014 Private Placement. The warrants had an issuance date fair value of $132,893 which was treated as a cost of capital. | |||||||||||||||||||||||
On August 25, 2014, the Company granted vested five-year warrants to purchase an aggregate of 600,000 shares of Common Stock at an exercise price of $0.25 per share to a consultant related to investor relations services to be provided. The warrants had an issuance date fair value of $133,225 which was expensed immediately as stock based compensation. | |||||||||||||||||||||||
The weighted average fair value of the stock warrants granted during the years ended December 31, 2014 and 2013, respectively, was $0.20 and $1.34 per share. | |||||||||||||||||||||||
Exercise | |||||||||||||||||||||||
During the year ended December 31, 2013, the Company issued an aggregate of 10,342,931 shares of Common Stock to several holders of warrants who elected to exercise warrants to purchase 12,505,023 shares of Common Stock on a "cashless" basis under the terms of the warrants. The warrants had exercise prices of $0.25 per share (11,346,675 gross shares), $0.35 per share (750,000 gross shares), and $1.00 per share (408,348 gross shares). | |||||||||||||||||||||||
The aggregate intrinsic value of the warrants exercised was $16,983,736 for the year ended December 31, 2013. | |||||||||||||||||||||||
A stock-based compensation benefit related to the mark-to-market adjustment for consultant warrants for the year ended December 31, 2014 was recorded in the consolidated statements of operations as a component of selling, general and administrative expenses and totaled $722. During the years ended December 31, 2014 and 2013, the Company recorded aggregate stock-based compensation expense of $132,503 and $490,420, respectively, related to warrants. As of December 31, 2014, stock-based compensation expense related to warrants of $577,523 remains unamortized, including $683 which is being amortized over the weighted average remaining period of 0.8 years. The remaining $576,840 is related to a performance based warrant where vesting is currently deemed to be improbable and no amount is being amortized. | |||||||||||||||||||||||
A summary of the stock warrant activity during the years ended December 31, 2014 and 2013, respectively, is presented below: | |||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | ||||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Warrants | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2013 | 592,846 | $ | 3.01 | ||||||||||||||||||||
Granted | 14,255,023 | $ | 0.28 | ||||||||||||||||||||
Exercised | (12,505,023 | ) | $ | 0.28 | |||||||||||||||||||
Forfeited | - | $ | - | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,342,846 | $ | 0.94 | ||||||||||||||||||||
Granted | 6,996,198 | $ | 0.28 | ||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | - | - | |||||||||||||||||||||
Outstanding, December 31, 2014 | 9,339,044 | $ | 0.45 | 4.2 | $ - | ||||||||||||||||||
Exercisable, December 31, 2014 | 9,079,044 | $ | 0.38 | 4.3 | $ - | ||||||||||||||||||
The following table presents information related to stock warrants at December 31, 2014: | |||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Warrants | Price | In Years | Warrants | ||||||||||||||||||
$ | 0.15 - $0.35 | $ | 0.28 | 8,746,198 | $ | 0.28 | 4.4 | 8,746,198 | |||||||||||||||
$ | 0.36 - $3.00 | 2.91 | 562,846 | 2.91 | 1.7 | 312,846 | |||||||||||||||||
$ | 3.01 - $4.95 | 4.95 | 30,000 | 4.95 | 2.8 | 20,000 | |||||||||||||||||
$ | 0.15 - $4.05 | 0.45 | 9,339,044 | $ | 0.38 | 4.3 | 9,079,044 | ||||||||||||||||
Services Contributed | |||||||||||||||||||||||
Effective January 1, 2013, the Company’s Chief Executive Officer of the Company waived payment for services contributed during 2013. On April 28, 2014, the Compensation Committee approved the payment of an annual salary of $150,000 to the Company’s Chief Executive Officer, effective May 1, 2014. As a result, the Company imputed the value of the services contributed and recorded salary expense $116,666 and $350,000 for years ended December 31, 2014 and 2013, respectively, with a corresponding credit to stockholders’ deficiency. | |||||||||||||||||||||||
Commitments_and_Contingent_Lia
Commitments and Contingent Liabilities | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
10. Commitments and Contingent Liabilities | Operating Leases | ||||
The Company is a party to a lease agreement for approximately 62,600 square feet of office and storage space (as amended). The amended monthly lease rate of $9,224 was in effect from January 2012 through December 2013. The monthly lease rate increases to $10,671 for years 2014 and 2015 and to $11,975 in year 2016. The Company accounts for rent expense using the straight line method of accounting, deferring the difference between actual rent due and the straight line amount. The lease expires on January 1, 2017. Deferred rent payable of $36,053 and $46,254 as of December 31, 2014 and 2013, respectively, has been included in accrued expenses and other current liabilities on the consolidated balance sheets. | |||||
On March 13, 2013, the Company gave notice of early termination for a lease agreement for a corporate apartment dated May 31, 2011. Accordingly, the lease expired on March 31, 2013. The Company did not incur any penalties related to the early termination of the lease agreement. | |||||
On June 7, 2013, Pagosa signed a three year lease for $1,000 per month to house an office, pharmacy as well as inventory and is located in Lawrenceburg, IN. On July 8, 2013, the parties agreed to extend the lease for two additional years, such that the new termination date is now June 7, 2018. On January 14, 2014, the Company closed Pagosa and vacated the Lawrenceburg facility. The Company is currently in discussions with the landlord regarding termination of the lease related to the building. The present value of the remaining lease payments of $46,604 was expensed during the year ended December 31, 2014, and is reflected as a component of accrued expenses and other liabilities on the consolidated balance sheet as of December 31, 2014. | |||||
On December 15, 2014, the Company entered into a sublease agreement for 34,106 square feet of warehouse space at the Company’s corporate headquarters in Florence, Kentucky. The initial term of the sublease expires on June 14, 2015 with rent of $9,948 per month. After the expiration of the initial term, the tenant may extend the term of the sublease agreement on a month to month basis. | |||||
Future minimum payments, by year and in the aggregate, under operating leases as of December 31, 2014 are as follows: | |||||
For year ending December 31, | Amount | ||||
2015 | $ | 140,052 | |||
2016 | 155,700 | ||||
2017 | 12,000 | ||||
2018 | 5,000 | ||||
Total future minimum lease payments | $ | 312,752 | |||
During the years ended December 31, 2014 and 2013, the Company recorded aggregate rent expense of $250,576 and $174,661, respectively. | |||||
Litigation | |||||
In the ordinary course of business, we may become subject to lawsuits and other claims and proceedings that might arise from litigation matters or regulatory audits. Such matters are subject to uncertainty and outcomes are often not predictable with assurance. Our management does not presently expect that any such matters will have a material adverse effect on the Company’s consolidated financial condition or consolidated results of operations. We are not currently involved in any pending or threatened material litigation or other material legal proceedings nor have we been made aware of any penalties from regulatory audits, except as described below. | |||||
On February 9, 2012, two of our former stockholders, Rock Castle Holdings, LLC and Jason Smith (collectively “Plaintiffs”), filed suit against us in the Hamilton County, Ohio Court of Common Pleas, alleging that we had breached the terms of certain incentive options we granted to the Plaintiffs in connection with our now-terminated oral consulting arrangements with the Plaintiffs, by among other things, refusing Plaintiffs’ purported exercise of options to purchase 233,332 shares of our Common Stock at an exercise price of $2.00 per share in December 2011. Plaintiffs requested that, among other things, the court require us to permit the exercise of the 233,332 options. Plaintiffs also provided an expert report indicating damages of $2.086 million. On December 1, 2014, the Company executed a settlement agreement with the Plaintiff for $150,000 to be paid in unequal monthly installments through June 10, 2015. The settlement amount was included in Selling, General and Administrative expense for the year ended December 31, 2014 and the unpaid balance of $135,000 was included in accounts payable as of December 31, 2014. | |||||
On October 9, 2012, American Express Travel Related Services Company, Inc. brought legal action against the Company in the Boone County, Kentucky Circuit Court. The action seeks to recover the unpaid balance on a credit card account in the amount of $87,029, plus interest and costs. The litigation was resolved on July 10, 2013 by a negotiated settlement. The remaining balance of $2,029 is accrued in the accompanying consolidated balance sheet as of December 31, 2014 and was repaid in full in January 2015. | |||||
On March 20, 2013, a complaint was filed in the Delaware Court of Chancery by two of our shareholders, HWH Lending, LLC and Milfam I L.P., seeking to compel the holding of an annual meeting of stockholders for the election of directors under Delaware law. We filed an answer to the complaint on April 12, 2013. On May 13, 2013, we publicly announced that the Board of Directors had set the date for our next annual meeting of stockholders as August 15, 2013 at 11:00 a.m. Eastern time. In lieu of further litigation, on July 18, 2013, the parties submitted to the court a proposed order, subsequently entered by the Court, confirming August 15, 2013 as the annual meeting date and establishing certain procedures related to the annual meeting. In accordance with the Court order, our annual meeting of stockholders was held on August 15, 2013 at which time Lalit Dhadphale, Youssef Bennani, Joseph Savarino, and Ambassador Ned Siegel each received a plurality of the total votes cast at the annual meeting and each was elected as a director by our stockholders. On September 24, 2013, this action was dismissed without prejudice by a joint stipulation of dismissal. | |||||
The Company was a party to a putative stockholder derivative action that was filed in the Court of Chancery of the State of Delaware on May 7, 2013 against certain directors and our chief executive officer and against us, as a nominal defendant. The complaint alleged claims for breach of fiduciary duty, entrenchment and corporate waste arising out of the alleged failure to conduct annual meetings, SEC filing obligations, advances to a former employee and a $500,000 secured loan to us which the entire board of directors approved. The derivative complaint sought unspecified compensatory damages and other relief. On January 8, 2014, in a stipulation and order of dismissal, the action was dismissed with prejudice to plaintiff, with each party bearing its own attorneys' fees and costs. | |||||
On May 15, 2013, a former consultant filed suit in Boone County, Kentucky Circuit Court alleging breach of contract and unjust enrichment for unpaid consulting fees and expenses of approximately $55,000. On September 29, 2014, the Company executed a settlement agreement with the former consultant for $25,000 which was payable in monthly installments through March 1, 2015. | |||||
On October 11, 2013, two of our former directors sent a letter demanding repayment of legal fees and expenses ($80,766 of previously incurred expenses plus future expenses) pursuant to certain Company indemnification and advancement provisions. On November 13, 2013, following the receipt of the Special Committee report, we agreed to indemnify the two former directors for their reasonable legal fees and expenses up to $85,000 less any amount paid to the directors under our directors’ and officers’ insurance policy. On November 14, 2013, the former directors filed a verified complaint and a motion for expedited proceedings for advancement in the Delaware Court of Chancery. In a stipulation and order dated December 23, 2013, these proceedings were concluded, and the Company agreed to pay the former directors’ reasonable attorneys’ fees and expenses, which included (i) $87,500 in connection with certain claims and demands and (ii) $27,500 incurred in the Delaware action. Such amounts have been repaid in full as of the date of this report. | |||||
Settlement Agreement | |||||
On February 22, 2013, the Company entered into a settlement agreement with a counterparty for amounts owed related to the return of expired goods and inventory and the Company wrote down the accounts receivable to the settlement amount as of December 31, 2012. On February 28, 2013, the Company received $50,000 in connection with the agreement in complete satisfaction of all outstanding and past due accounts receivable from the counterparty, such that there was no balance due to the Company as of December 31, 2013. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
11. Concentrations | The Company maintains deposits in financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in these financial institutions in excess of the amount insured by the FDIC. |
During the year ended December 31, 2014, two vendors represented 68% and 14% of total inventory purchases. During the year ended December 31, 2013, two vendors represented 61% and 14% of total inventory purchases, respectively. | |
One vendor represented 36% and 26% of the accounts payable balance as of December 31, 2014 and 2013, respectively. |
Related_Party_Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
12. Related Party Transactions | Effective September 4, 2014, the Company entered into a Consulting Agreement with a stockholder to provide consulting services related to business development and marketing activities for the Company and other duties as agreed to by management. The Company is required to pay the related party a monthly fee of $10,000 plus expense reimbursement. Subsequent to the effective date, the related party agreed to defer the payment of the monthly fee for a period of four months beginning with the November 4, 2014 payment. The deferred fees will be payable on the earlier of the termination date and the second anniversary of the effective date. The Consulting Agreement has an initial term of one year and can be automatically renewed for a one year period unless terminated by either party. The Agreement may be terminated by the Company by providing a sixty day notice prior to the first anniversary of the effective date. During the year ended December 31, 2014, the Company incurred consulting and other expenses of $21,110 and paid the related party such amount. |
Beginning July 1, 2013, a director is to be paid $3,000 per month and is entitled to expense reimbursements as compensation for serving on the Company’s Board committees. The director served on an Independent Committee (See Footnote 10 – Litigation) starting in July 2013 and concluding in November 2013. As a result, the director earned $12,000 during the year ended December 31, 2013. | |
Between June 2009 and April 2012, an employee who is the son of the managing member of a limited liability company that beneficially owns over 5% of the Company’s Common Stock received advances from the Company in various forms which totaled $391,469 including interest. Principal repayments towards the outstanding advances aggregating $235,000 have been made through September 30, 2014. In April 2012, this employee voluntarily resigned from the Company. The individual agreed to repay the remaining balance with interest based on prime rate on the first business day of the calendar quarter. The amount has been included in Stockholders’ Deficiency as the Company has determined to exercise its rights through a pledge agreement for 42,860 shares as collateral. At December 31, 2014 and 2013, the Company estimated the value of the collateral at $2,143 and $9,001, respectively. | |
From March 2011 to April 2013, a wife of a director served as the agent for the Company's D&O insurance. During year ended December 31, 2013, the Company recorded insurance premium expense of $24,329. |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
13. Income Taxes | The income tax provision (benefit) for the years ended December 31, 2014 and 2013 was as follows: | ||||||||
For The Year Ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Federal: | |||||||||
Current | $ | - | $ | - | |||||
Deferred | (387,752 | ) | (625,702 | ) | |||||
State and local: | |||||||||
Current | - | - | |||||||
Deferred | (161,244 | ) | (36,806 | ) | |||||
(548,996 | ) | (662,508 | ) | ||||||
Change in valuation allowance | 548,996 | 662,508 | |||||||
Income tax provision (benefit) | $ | - | $ | - | |||||
The effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2014 and 2013 are as follows: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Deferred tax assets: | |||||||||
Net operating loss carryforwards | $ | 5,315,823 | $ | 4,966,018 | |||||
Stock-based compensation | 722,782 | 466,078 | |||||||
Inventory reserves | 6,090 | 10,949 | |||||||
Allowance for bad debt | 17,948 | 89,899 | |||||||
Deferred Rent | 14,108 | - | |||||||
Contingent Liability | 1,910 | - | |||||||
Charitable contribution carryforwards | 5,772 | 5,630 | |||||||
Accruals | 31,007 | 27,352 | |||||||
Total deferred tax assets | 6,115,440 | 5,565,926 | |||||||
Valuation allowance | (6,088,174 | ) | (5,539,178 | ) | |||||
Deferred tax assets, net of valuation allowance | 27,266 | 26,748 | |||||||
Deferred tax liabilities: | |||||||||
Property and equipment | (27,266 | ) | (26,748 | ) | |||||
Net deferred tax assets | $ | - | $ | - | |||||
Change in valuation allowance | $ | 548,996 | $ | 666,508 | |||||
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the history of losses, management believes that it is more likely than not that future benefits of deferred tax assets will not be realized and has established a full valuation allowance for the years ended December 31, 2014 and 2013. | |||||||||
The Company is in the process of filing its federal and state tax returns for the years ended December 31, 2014, 2013, and 2012. The Net operating losses (“NOLs”) for these years will not be available to reduce future taxable income until the returns are filed. Assuming these returns are filed, as of December 31, 2014 and 2013, the Company has approximately $14,736,276 and $13,770,000, respectively, of federal NOLs that may be available to offset future taxable income. The federal net operating loss carryforwards, if not utilized, will expire from 2027 to 2034. As of December 31, 2014 and 2013, the Company has approximately $7,637,237 and $3,585,000 of state net operating loss carryforwards available to offset future taxable income. The state NOLs, if not utilized, will expire beginning in 2031. | |||||||||
In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards could be limited in the event of a change in ownership. Based upon a study that analyzed the Company’s stock ownership, a change of ownership was deemed to have occurred in 2011. This change of ownership created an annual limitation of approximately $2,116,000 on the usage of the Company’s losses which are available through 2031. A full Section 382 analysis has not been prepared since 2011 and any NOLs arising since 2011 could be subject to limitation under Section 382. | |||||||||
For the years ended December 31, 2014 and 2013, the expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with the actual tax expense (benefit) as follows: | |||||||||
For The Year Ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
US federal statutory rate | (34.0 | %) | (34.0 | %) | |||||
State tax rate, net of federal benefit | (4.0 | %) | (2.0 | %) | |||||
Permanent differences | |||||||||
- Stock based compensation | 4.8 | % | 3.2 | % | |||||
- Debt extinquishment | 0 | % | 18.3 | % | |||||
- Other | 2.4 | % | 2.5 | % | |||||
Change in valuation allowance | 30.8 | % | 12 | % | |||||
Income tax provision (benefit) | 0 | % | 0 | % |
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
14. Subsequent Events | The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements, except as disclosed. |
Notes Payable | |
Effective March 1, 2015, a lender agreed to extend the maturity date of the Senior Note from March 1, 2015 to September 1, 2015. As part of the extension, financial covenants were set which require the Company to meet certain minimum targets for EBITDAS for the calendar quarters ending on March 31 and June 30, 2015. In consideration of the Lender extending the maturity date of the Senior Note, the Company granted the lender a five-year warrant to purchase 500,000 shares of Common Stock at an exercise price of $0.10 per share. The warrant contains customary anti-dilution provisions. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Summary Of Significant Accounting Policies Policies | |||||||||
Principles of Consolidation | The consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, ION Belgium NV and Pagosa Health LLC, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation. | ||||||||
On June 4, 2013, the Company formed a wholly-owned subsidiary called Pagosa Health LLC (“Pagosa”). On January 14, 2014, the Company closed the Pagosa location and decided to focus on its core consumer prescription business. The entity was dissolved in 2014. See Note 10. | |||||||||
Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets, the valuation of equity instruments and debt discounts. | ||||||||
Cash | The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2014 and 2013, the Company does not have any cash equivalents. | ||||||||
Restricted Cash | Restricted cash represents cash held by the Company’s credit card processor as a reserve to cover potential future refunds. | ||||||||
Allowance for Doubtful Accounts Receivable | Accounts receivable are shown net of an allowance for doubtful accounts of $47,233 and $250,828 as of December 31, 2014 and 2013, respectively. The Company’s management has established an allowance for doubtful accounts sufficient to cover probable and reasonably estimable losses. The nature of the business is that the majority of the payments are made before the product is sent. If the financial conditions of customers were to materially deteriorate, an increase in the allowance amount could be required. The allowance for doubtful accounts considers a number of factors, including collection experience, current economic trends, estimates of forecasted write-offs, aging of the accounts receivable, and other factors. | ||||||||
Inventories | Inventories consist of finished goods and is stated at the lower of cost (using the first-in, first-out method) or market. As part of the valuation process, inventory reserves are established to state excess and slow-moving inventory at their estimated net realizable value. The valuation process for excess or slow-moving inventory contains uncertainty because management must use judgment to estimate when the inventory will be sold and the quantities and prices at which the inventory will be sold in the normal course of business. Inventory reserves are periodically reviewed, reflecting current risks, trends and changes in industry conditions. When preparing these estimates, management considers historical results, inventory levels and current operating trends. In the event the estimates differ from actual results, inventory-related reserves may be adjusted and could materially impact the results of operations. | ||||||||
Property and Equipment | Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations as incurred. Gains or losses on disposal of property and equipment are reflected in the statements of operations in the period of disposal. | ||||||||
Impairment of Long-Lived Assets | The Company reviews the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or asset group is expected to generate. If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value. As of December 31, 2014, the Company has not recognized any such impairment. | ||||||||
Website Development Costs | The Company capitalizes costs associated with the development of its website. During the years ended December 31, 2014 and 2013, the Company capitalized $114,616 and $98,423, respectively, of website development costs. The Company is amortizing the website development costs on a three year straight-line basis and incurred amortization expense of $55,855 and $14,643 during the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014, unamortized website development costs totaled $142,541. Estimated future amortization expense related to website development costs is $71,013 in 2015, $56,370 in 2016 and $15,158 in 2017. | ||||||||
Shipping and Handling Costs | The Company policy is to provide free standard shipping and handling for most orders shipped during the year. Shipping and handling costs incurred are recognized in selling, general and administrative expenses. Such amounts aggregated $511,636 and $775,083 for the years ended December 31, 2014 and 2013 respectively. | ||||||||
In certain circumstances, shipping and handling costs are charged to the customer and recognized in revenues. The amounts recognized in revenues for the years ended December 31, 2014 and 2013 were $162,221 and $254,067, respectively. | |||||||||
Fair Value of Financial Instruments | Fair value is 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. These fair value measurements apply to all financial instruments that are measured and reported on a fair value basis. | ||||||||
Based on the observability of the inputs used in the valuation techniques, financial instruments are categorized according to the fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: | |||||||||
Level 1 - Observable inputs such as quoted prices in active markets. | |||||||||
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. | |||||||||
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. | |||||||||
The carrying value of items included in working capital approximates fair value because of the relatively short maturity of these instruments. The convertible debt and notes payable approximate fair value because the terms are substantially similar to comparable debt in the marketplace. | |||||||||
Income Taxes | Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. | ||||||||
U.S. GAAP prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. | |||||||||
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements as of December 31, 2014 and 2013. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date. | |||||||||
The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2014 and 2013. | |||||||||
Debt Discounts | The Company records, as a discount to notes and convertible notes, the relative fair value of warrants issued in connection with the issuances and the intrinsic value of any conversion options based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest date of redemption. | ||||||||
Revenue Recognition | Revenues for the sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is reasonably assured. The Company defers revenue when cash has been received from the customer but delivery has not yet occurred. Such amounts are reflected as deferred revenues in the accompanying consolidated financial statements. | ||||||||
Advertising | The Company expenses all advertising costs as incurred. Advertising expense for the years ended December 31, 2014 and 2013 was $103,536 and $1,867, respectively. | ||||||||
Sales Taxes | The Company accounts for sales taxes imposed on its goods and services on a net basis in the statement of operations. | ||||||||
Net Earnings (Loss) Per Share of Common Stock | Basic net earnings (loss) per share is computed by dividing net earnings (loss) attributable to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted net earnings (loss) per share reflects the potential dilution that could occur if securities or other instruments to issue Common Stock were exercised or converted into Common Stock. Potentially dilutive securities are excluded from the computation of diluted net earnings (loss) per share if their inclusion would be anti-dilutive and consist of the following: | ||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Options | 3,944,557 | 2,543,150 | |||||||
Warrants | 9,339,044 | 2,342,846 | |||||||
Series B Convertible Preferred Stock | 5,146,902 | 3,472,953 | |||||||
Total potentially dilutive shares | 18,430,503 | 8,358,949 | |||||||
Stock-Based Compensation | Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award. For employees and directors, the award is measured on the grant date. For non-employees, the award is measured on the grant date and is then remeasured at each vesting date and financial reporting date. The Company recognizes the estimated fair value of the award as compensation cost over the requisite service period of the award, which is generally the option vesting term. The Company generally issues new shares of Common Stock to satisfy option and warrant exercises. | ||||||||
Preferred Stock | Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ deficiency. | ||||||||
Convertible Instruments | U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP. | ||||||||
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying Common Stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying Common Stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares. | |||||||||
Common Stock Warrants and Other Derivative Financial Instruments | The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its Common Stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. | ||||||||
The Company evaluated its free standing warrants to purchase Common Stock to assess their proper classification in the balance sheet as of December 31, 2014 and 2013 using the applicable classification criteria enumerated under U.S. GAAP and determined that the Common Stock purchase warrants contain fixed settlement provisions. | |||||||||
Recently Issued Accounting Pronouncements | In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitiy’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. Adoption of this pronouncement is not expected to have a material impact on its consolidated financial statements. | ||||||||
The FASB has issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's consolidated financial position and results of operations. | |||||||||
The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supercedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's consolidated financial position and results of operations. |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Summary Of Significant Accounting Policies Tables | |||||||||
Schedule of Potentially Dilutive Securities | Potentially dilutive securities are excluded from the computation of diluted net earnings (loss) per share if their inclusion would be anti-dilutive and consist of the following: | ||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Options | 3,944,557 | 2,543,150 | |||||||
Warrants | 9,339,044 | 2,342,846 | |||||||
Series B Convertible Preferred Stock | 5,146,902 | 3,472,953 | |||||||
Total potentially dilutive shares | 18,430,503 | 8,358,949 |
Property_and_Equipment_Tables
Property and Equipment (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Property And Equipment Tables | ||||||||||
Summary of property and equipment | Property and equipment consist of the following: | |||||||||
December 31, | Estimated | |||||||||
2014 | 2013 | Useful Life | ||||||||
Computer Software | $ | 230,299 | $ | 230,299 | 5 years | |||||
Equipment | 544,108 | 544,108 | 15 years | |||||||
Office Furniture and Equipment | 95,754 | 95,754 | 7 years | |||||||
Computer Hardware | 30,710 | 27,746 | 5 years | |||||||
Leasehold Improvements | 303,318 | 303,318 | (a) | |||||||
Total | 1,204,189 | 1,201,225 | ||||||||
Less: accumulated depreciation | (692,903 | ) | (576,591 | ) | ||||||
Property and Equipment, Net | $ | 511,286 | $ | 624,634 | ||||||
(a) Lesser of useful life or initial term of lease |
Accrued_Expenses_and_Other_Cur1
Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Accrued Expenses And Other Current Liabilities Tables | ||||||||||
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities consisted of the following: | |||||||||
December 31, | ||||||||||
2014 | 2013 | |||||||||
Deferred Rent | $ | 36,053 | $ | 46,254 | ||||||
Advertising | 109,930 | 75,000 | ||||||||
Salaries and Benefits | 82,222 | 132,048 | ||||||||
Customer Payables | 635 | 39,618 | ||||||||
Dividend Payable | 298,918 | 279,380 | ||||||||
Accrued Interest | 48,868 | 45,616 | ||||||||
Accrued Rent | 46,604 | - | ||||||||
Other | 57,276 | 3,136 | ||||||||
Total | $ | 680,506 | $ | 621,052 | ||||||
Equipment_Lease_Payable_Tables
Equipment Lease Payable (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Equipment Lease Payable Tables | |||||
Summary of future minimum lease payments | Future minimum lease payments, by year and in the aggregate, under equipment leases, which includes capital leases, as of December 31, 2014, are as follows: | ||||
For year ending December 31, | Lease Payments | ||||
2015 | $ | 76,086 | |||
2016 | 48,696 | ||||
Total | $ | 124,782 | |||
Less: Amount representing interest | (14,538 | ) | |||
Present value of future lease payments | $ | 110,244 | |||
Less: Current portion | (64,101 | ) | |||
Long term portion | $ | 46,143 |
Stockholders_Deficiency_Tables
Stockholders' Deficiency (Tables) | 12 Months Ended | ||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||
Stockholders Deficiency Tables | |||||||||||||||||||||||
Schedule of Stock Options Granted | In applying the Black-Scholes option pricing model to stock options granted, the Company used the following weighted average assumptions: | ||||||||||||||||||||||
For Year Ended | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 0.97% to 2.29% | 1.13% to 2.03% | |||||||||||||||||||||
Dividend yield | 0.00% | 0.00% | |||||||||||||||||||||
Expected volatility | 190% to 191.0% | 162.0% to 175.0% | |||||||||||||||||||||
Expected life in years | 3.0 to 10.0 | 5.5 to 6.0 | |||||||||||||||||||||
Summary of Stock Option Activity | A summary of the stock option activity during the years ended December 31, 2014 and 2013 is presented below: | ||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Options | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2013 | 2,183,899 | $ | 2.76 | ||||||||||||||||||||
Granted | 935,500 | 0.91 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | (576,249 | ) | 3.96 | ||||||||||||||||||||
Outstanding, December 31, 2013 | 2,543,150 | $ | 2.37 | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,543,150 | $ | 2.37 | ||||||||||||||||||||
Granted | 1,937,857 | 0.13 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | (536,450 | ) | 2.37 | ||||||||||||||||||||
Outstanding, December 31, 2014 | 3,944,557 | $ | 1.27 | 7.4 | $ - | ||||||||||||||||||
Exercisable, December 31, 2014 | 3,135,876 | $ | 1.11 | 8.0 | $ - | ||||||||||||||||||
Summary of Stock Option Outstanding and Exercisable | The following table presents information related to stock options at December 31, 2014: | ||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Options | Price | In Years | Options | ||||||||||||||||||
$ | 0.12 - $2.20 | $ | 0.36 | 2,870,807 | $ | 0.26 | 9.2 | 2,339,126 | |||||||||||||||
$ | 2.21 - $3.80 | 3.23 | 757,750 | 2.95 | 3 | 507,750 | |||||||||||||||||
$ | 3.81 - $6.99 | 4.88 | 316,000 | 4.73 | 7 | 289,000 | |||||||||||||||||
$ | 0.12 - $6.99 | $ | 1.27 | 3,944,557 | $ | 1.11 | 8 | 3,135,876 | |||||||||||||||
Schedule of Stock Warrants Granted | In applying the Black-Scholes option pricing model to stock warrants granted, the Company used the following weighted average assumptions: | ||||||||||||||||||||||
Grants | |||||||||||||||||||||||
For Year Ended | |||||||||||||||||||||||
December 31, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
Risk free interest rate | 1.52% to 2.52% | 0.74% to 2.84% | |||||||||||||||||||||
Dividend yield | 0.00% | 0.00% | |||||||||||||||||||||
Expected volatility | 171% to 192% | 146% to 173.0% | |||||||||||||||||||||
Expected life in years | 5.0 to 8.5 | 5.0 to 9.5 | |||||||||||||||||||||
Summary of Stock Warrant Activity | A summary of the stock warrant activity during the years ended December 31, 2014 and 2013, respectively, is presented below: | ||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | ||||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Warrants | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2013 | 592,846 | $ | 3.01 | ||||||||||||||||||||
Granted | 14,255,023 | $ | 0.28 | ||||||||||||||||||||
Exercised | (12,505,023 | ) | $ | 0.28 | |||||||||||||||||||
Forfeited | - | $ | - | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,342,846 | $ | 0.94 | ||||||||||||||||||||
Granted | 6,996,198 | $ | 0.28 | ||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | - | - | |||||||||||||||||||||
Outstanding, December 31, 2014 | 9,339,044 | $ | 0.45 | 4.2 | $ - | ||||||||||||||||||
Exercisable, December 31, 2014 | 9,079,044 | $ | 0.38 | 4.3 | $ - | ||||||||||||||||||
Summary of Stock Warrants Outstanding and Exercisable | The following table presents information related to stock warrants at December 31, 2014: | ||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Warrants | Price | In Years | Warrants | ||||||||||||||||||
$ | 0.15 - $0.35 | $ | 0.28 | 8,746,198 | $ | 0.28 | 4.4 | 8,746,198 | |||||||||||||||
$ | 0.36 - $3.00 | 2.91 | 562,846 | 2.91 | 1.7 | 312,846 | |||||||||||||||||
$ | 3.01 - $4.95 | 4.95 | 30,000 | 4.95 | 2.8 | 20,000 | |||||||||||||||||
$ | 0.15 - $4.05 | 0.45 | 9,339,044 | $ | 0.38 | 4.3 | 9,079,044 |
Commitments_and_Contingent_Lia1
Commitments and Contingent Liabilities (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments And Contingent Liabilities Tables | |||||
Summary of future minimum payments under operating leases | Future minimum payments, by year and in the aggregate, under operating leases as of December 31, 2014 are as follows: | ||||
For year ending December 31, | Amount | ||||
2015 | $ | 140,052 | |||
2016 | 155,700 | ||||
2017 | 12,000 | ||||
2018 | 5,000 | ||||
Total future minimum lease payments | $ | 312,752 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Taxes Tables | |||||||||
Summary of income tax provision (benefit) | The income tax provision (benefit) for the years ended December 31, 2014 and 2013 was as follows: | ||||||||
For The Year Ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Federal: | |||||||||
Current | $ | - | $ | - | |||||
Deferred | (387,752 | ) | (625,702 | ) | |||||
State and local: | |||||||||
Current | - | - | |||||||
Deferred | (161,244 | ) | (36,806 | ) | |||||
(548,996 | ) | (662,508 | ) | ||||||
Change in valuation allowance | 548,996 | 662,508 | |||||||
Income tax provision (benefit) | $ | - | $ | - | |||||
Summary of significant portions of the deferred tax assets and liabilities | The effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2014 and 2013 are as follows: | ||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Deferred tax assets: | |||||||||
Net operating loss carryforwards | $ | 5,315,823 | $ | 4,966,018 | |||||
Stock-based compensation | 722,782 | 466,078 | |||||||
Inventory reserves | 6,090 | 10,949 | |||||||
Allowance for bad debt | 17,948 | 89,899 | |||||||
Deferred Rent | 14,108 | - | |||||||
Contingent Liability | 1,910 | - | |||||||
Charitable contribution carryforwards | 5,772 | 5,630 | |||||||
Accruals | 31,007 | 27,352 | |||||||
Total deferred tax assets | 6,115,440 | 5,565,926 | |||||||
Valuation allowance | (6,088,174 | ) | (5,539,178 | ) | |||||
Deferred tax assets, net of valuation allowance | 27,266 | 26,748 | |||||||
Deferred tax liabilities: | |||||||||
Property and equipment | (27,266 | ) | (26,748 | ) | |||||
Net deferred tax assets | $ | - | $ | - | |||||
Change in valuation allowance | $ | 548,996 | $ | 666,508 | |||||
Summary of tax expense (benefit) based on the statutory rate | For the years ended December 31, 2014 and 2013, the expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with the actual tax expense (benefit) as follows: | ||||||||
For The Year Ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
US federal statutory rate | (34.0 | %) | (34.0 | %) | |||||
State tax rate, net of federal benefit | (4.0 | %) | (2.0 | %) | |||||
Permanent differences | |||||||||
- Stock based compensation | 4.8 | % | 3.2 | % | |||||
- Debt extinquishment | 0 | % | 18.3 | % | |||||
- Other | 2.4 | % | 2.5 | % | |||||
Change in valuation allowance | 30.8 | % | 12 | % | |||||
Income tax provision (benefit) | 0 | % | 0 | % |
Going_Concern_and_Managements_1
Going Concern and Management's Liquidity Plans (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Going Concern And Managements Liquidity Plans Details Narrative | ||
Working Capital Deficiency | $4,237,165 | |
Accumulated deficit | 30,212,865 | 28,130,668 |
Net Losses | 1,783,279 | 5,489,892 |
Net Cash Used in Operating Activities | $875,769 | $1,024,781 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Summary Of Significant Accounting Policies Details | ||
Options | $3,944,557 | $2,543,150 |
Warrants | 9,339,044 | 2,342,846 |
Series B Convertible Preferred Stock | 5,146,902 | 3,472,953 |
Total potentially dilutive shares | $18,430,503 | $8,358,949 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary Of Significant Accounting Policies Details Narrative | ||
Cash equivalents | $0 | $0 |
Allowance for doubtful accounts | 47,233 | 250,828 |
Website development costs | 114,616 | 98,423 |
Estimated future amortization expense related to website development costs in 2015 | 71,013 | |
Estimated future amortization expense related to website development costs in 2016 | 56,370 | |
Estimated future amortization expense related to website development costs in 2017 | 15,158 | |
Amortization expense | 55,855 | 14,643 |
Unamortized website development costs | 142,541 | 83,780 |
Shipping and handling costs | 511,636 | 775,083 |
Amounts recognized in revenues | 162,221 | 254,067 |
Interest or penalties | 0 | 0 |
Advertising expense | $103,536 | $1,867 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property and Equipment, Gross | $1,204,189 | $1,201,225 |
Less: accumulated depreciation | -692,903 | -576,591 |
Property and Equipment, Net | 511,286 | 624,634 |
Computer Software [Member] | ||
Estimates Useful Life | 5 years | |
Property and Equipment, Gross | 230,299 | 230,299 |
Equipment [Member] | ||
Estimates Useful Life | 15 years | |
Property and Equipment, Gross | 544,108 | 544,108 |
Office Furniture and Equipment [Member] | ||
Estimates Useful Life | 7 years | |
Property and Equipment, Gross | 95,754 | 95,754 |
Computer Hardware [Member] | ||
Estimates Useful Life | 5 years | |
Property and Equipment, Gross | 30,710 | 27,746 |
Leasehold Improvements [Member] | ||
Property and Equipment, Gross | $303,318 | $303,318 |
Property_and_Equipment_Details1
Property and Equipment (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $116,312 | $143,387 |
Accrued_Expenses_and_Other_Cur2
Accrued Expenses and Other Current Liabilities (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Accrued Expenses And Other Current Liabilities Details | ||
Deferred rent | $36,053 | $46,254 |
Advertising | 109,930 | 75,000 |
Salaries and benefits | 82,222 | 132,048 |
Customer payables | 635 | 39,618 |
Dividends payable | 298,918 | 279,380 |
Accrued interest | 48,868 | 45,616 |
Accrued Rent | 46,604 | |
Other | 57,276 | 3,136 |
Total | $680,506 | $621,052 |
Notes_Payable_Details_Narrativ
Notes Payable (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Debt discount unamortized | $44,363 | |
Interest rate of Senior Note | 7.50% | |
Aggregate number of warrants issued | 1,125,000 | |
Warrants issued ixercise price | $0.35 | $0.35 |
Warrants issued | 225,000 | 900,000 |
Fair value related to warrants | 402,500 | |
Fair value related to warrants as debt discount | 36,000 | 366,500 |
Debt discount as interest expense amortized | 229,231 | 130,235 |
Debt discount as interest expense unamortized | 43,034 | 236,265 |
Principal payments made to related party | 5,000 | 4,000 |
Interest expense | 3,252 | 1,366 |
Borrowing amount of loan | 150,000 | 600,000 |
Total borrowing amount of loan | 750,000 | |
Lender [Member] | ||
Interest rate of Senior Note | 3.25% | |
Warrant Related Note [Member] | ||
Debt discount unamortized | 15,333 | 33,733 |
Amortization of the debt discount as interest expense | $18,400 | $3,067 |
Equipment_Lease_Payable_Detail
Equipment Lease Payable (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Equipment Lease Payable Details | ||
2015 | $76,086 | |
2016 | 48,696 | |
Total | 124,782 | |
Less: amount representing interest | -14,538 | |
Present value of future lease payments | 110,244 | |
Less: Current portion | -64,101 | -56,323 |
Long term portion | $46,143 | $109,964 |
Equipment_Lease_Payable_Detail1
Equipment Lease Payable (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Equipment Lease Payable Details Narrative | ||
Gross Book value of equiment | $305,641 | |
Net Book value of equiment | 240,720 | |
Depreciation of assets held under capital leases | $20,377 | $20,377 |
Stockholders_Deficiency_Detail
Stockholders' Deficiency (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Risk free interest rate | 0.97% | 1.13% |
Expected volatility | 190.00% | 162.00% |
Expected life in years | 3 years | 5 years 6 months |
Maximum [Member] | ||
Risk free interest rate | 2.29% | 2.03% |
Expected volatility | 191.00% | 175.00% |
Expected life in years | 10 years | 6 years |
Stockholders_Deficiency_Detail1
Stockholders' Deficiency (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Number of options, outstanding | ||
Outstanding, beginning of period (in shares) | 2,543,150 | 2,183,899 |
Granted | 1,937,857 | 935,500 |
Exercised | ||
Forfeited | -536,450 | -576,249 |
Outstanding, end of period (in shares) | 3,944,557 | 2,543,150 |
Exercisable, December 31, 2014 | 3,135,876 | |
Options, weighted average exercise price | ||
Outstanding, beginning of period (in dollars per share) | $2.37 | $2.76 |
Granted | $0.13 | $0.91 |
Exercised | ||
Forfeited | $2.37 | $3.96 |
Outstanding, end of period (in dollars per share) | $1.27 | $2.37 |
Exercisable, December 31, 2014 | $1.11 | |
Weighted Average Remaining Life In Years | ||
Weighted Average Remaining Life (in years) Outstanding | 7 years 4 months 24 days | |
Weighted Average Remaining Life (in years) Exercisable | 8 years | |
Aggregate Intrinsic Value | ||
Aggregate Intrinsic Value Outstanding | ||
Aggregate Intrinsic Value Exercisable |
Stockholders_Deficiency_Detail2
Stockholders' Deficiency (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Weighted Average Exercise Price Outstanding | $1.27 | $2.37 | $2.76 |
Number Outstanding | 3,944,557 | 2,543,150 | 2,183,899 |
Number Exercisable | 3,135,876 | ||
$0.12 - $2.20 | |||
Weighted Average Exercise Price Outstanding | $0.36 | ||
Number Outstanding | 2,870,807 | ||
Weighted Average Exercise Price Exercisable | $0.26 | ||
Weighted Average Remaining Years of Contractual Life | 9 years 2 months 12 days | ||
Number Exercisable | 2,339,126 | ||
$2.21 - $3.80 | |||
Weighted Average Exercise Price Outstanding | $3.23 | ||
Number Outstanding | 757,750 | ||
Weighted Average Exercise Price Exercisable | $2.95 | ||
Weighted Average Remaining Years of Contractual Life | 3 years | ||
Number Exercisable | 507,750 | ||
$3.81 - $6.99 | |||
Weighted Average Exercise Price Outstanding | $4.88 | ||
Number Outstanding | 316,000 | ||
Weighted Average Exercise Price Exercisable | $4.73 | ||
Weighted Average Remaining Years of Contractual Life | 7 years | ||
Number Exercisable | 289,000 | ||
$0.12 - $6.69 | |||
Weighted Average Exercise Price Outstanding | $1.27 | ||
Number Outstanding | 3,944,557 | ||
Weighted Average Exercise Price Exercisable | $1.11 | ||
Weighted Average Remaining Years of Contractual Life | 8 years | ||
Number Exercisable | 3,135,876 |
Stockholders_Deficiency_Detail3
Stockholders' Deficiency (Details 3) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Dividend yield | 0.00% | 0.00% |
Warrant [Member] | ||
Dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Risk free interest rate | 0.97% | 1.13% |
Expected volatility | 190.00% | 162.00% |
Expected life in years | 3 years | 5 years 6 months |
Minimum [Member] | Warrant [Member] | ||
Risk free interest rate | 1.52% | 0.74% |
Expected volatility | 171.00% | 146.00% |
Expected life in years | 5 years | 5 years |
Maximum [Member] | ||
Risk free interest rate | 2.29% | 2.03% |
Expected volatility | 191.00% | 175.00% |
Expected life in years | 10 years | 6 years |
Maximum [Member] | Warrant [Member] | ||
Risk free interest rate | 2.52% | 2.84% |
Expected volatility | 192.00% | 173.00% |
Expected life in years | 8 years 6 months | 9 years 6 months |
Stockholders_Deficiency_Detail4
Stockholders' Deficiency (Details 4) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Number of warrants, outstanding | ||
Outstanding, beginning of period (in shares) | 2,543,150 | 2,183,899 |
Granted | 1,937,857 | 935,500 |
Exercised | ||
Forfeited | -536,450 | -576,249 |
Outstanding, end of period (in shares) | 3,944,557 | 2,543,150 |
Exercisable, December 31, 2014 | 3,135,876 | |
Weighted average exercise price | ||
Outstanding, beginning of period (in dollars per share) | $2.37 | $2.76 |
Granted | $0.13 | $0.91 |
Exercised | ||
Forfeited | $2.37 | $3.96 |
Outstanding, end of period (in dollars per share) | $1.27 | $2.37 |
Exercisable, December 31, 2014 | $1.11 | |
Weighted Average Remaining Life In Years | ||
Weighted Average Remaining Life (in years) Outstanding | 7 years 4 months 24 days | |
Weighted Average Remaining Life (in years) Exercisable | 8 years | |
Aggregate Intrinsic Value | ||
Aggregate Intrinsic Value Outstanding | ||
Aggregate Intrinsic Value Exercisable | ||
Warrant [Member] | ||
Number of warrants, outstanding | ||
Outstanding, beginning of period (in shares) | 2,342,846 | 592,846 |
Granted | 6,996,198 | 14,255,023 |
Exercised | -12,505,023 | |
Forfeited | ||
Outstanding, end of period (in shares) | 9,339,044 | 2,342,846 |
Exercisable, December 31, 2014 | 9,079,044 | |
Weighted average exercise price | ||
Outstanding, beginning of period (in dollars per share) | $0.94 | $3.01 |
Granted | $0.28 | $0.28 |
Exercised | $0.28 | |
Forfeited | ||
Outstanding, end of period (in dollars per share) | $0.45 | $0.94 |
Exercisable, December 31, 2014 | $0.38 | $0.66 |
Weighted Average Remaining Life In Years | ||
Weighted Average Remaining Life (in years) Outstanding | 4 years 2 months 12 days | |
Weighted Average Remaining Life (in years) Exercisable | 4 years 3 months 18 days | |
Aggregate Intrinsic Value | ||
Aggregate Intrinsic Value Outstanding | ||
Aggregate Intrinsic Value Exercisable |
Stockholders_Deficiency_Detail5
Stockholders' Deficiency (Details 5) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Weighted Average Exercise Price Outstanding | $1.27 | $2.37 | $2.76 |
Number Outstanding | 3,944,557 | 2,543,150 | 2,183,899 |
Number Exercisable | 3,135,876 | ||
Warrant [Member] | |||
Weighted Average Exercise Price Outstanding | $0.45 | $0.94 | $3.01 |
Number Outstanding | 9,339,044 | 2,342,846 | 592,846 |
Number Exercisable | 9,079,044 | ||
$0.15 - $0.35 | Warrant [Member] | |||
Weighted Average Exercise Price Outstanding | $0.28 | ||
Number Outstanding | 8,746,198 | ||
Weighted Average Exercise Price Exercisable | $0.28 | ||
Weighted Average Remaining Years of Contractual Life | 4 years 4 months 24 days | ||
Number Exercisable | 8,746,198 | ||
$0.36 - $3.00 | Warrant [Member] | |||
Weighted Average Exercise Price Outstanding | $2.91 | ||
Number Outstanding | 562,846 | ||
Weighted Average Exercise Price Exercisable | $2.91 | ||
Weighted Average Remaining Years of Contractual Life | 1 year 8 months 12 days | ||
Number Exercisable | 312,846 | ||
$3.01 - $4.95 | Warrant [Member] | |||
Weighted Average Exercise Price Outstanding | $4.95 | ||
Number Outstanding | 30,000 | ||
Weighted Average Exercise Price Exercisable | $4.95 | ||
Weighted Average Remaining Years of Contractual Life | 2 years 9 months 18 days | ||
Number Exercisable | 20,000 | ||
$0.15 - $4.05 | Warrant [Member] | |||
Weighted Average Exercise Price Outstanding | $0.45 | ||
Number Outstanding | 9,339,044 | ||
Weighted Average Exercise Price Exercisable | $0.38 | ||
Weighted Average Remaining Years of Contractual Life | 4 years 3 months 18 days | ||
Number Exercisable | 9,079,044 |
Stockholders_Deficiency_Detail6
Stockholders' Deficiency (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Proceeds related to private placement offering, value | $3,501,975 | |
Proceeds related to private placement offering, units | 3,501,975 | |
Proceeds related to private placement offering, per unit | $1 | |
Amount received from officer | 500,000 | |
Amount classified as restricted cash | 850,002 | |
Aggregate intrinsic value of exercised | 0 | |
Weighted Average annual rate of option forfeiture | 4.00% | 4.00% |
Weighted average fair value of the stock granted | $0.16 | $0.91 |
Selling, general and administrative expenses | 5,370,727 | 7,554,954 |
Stock-based compensation expense related to stock options/ warrants, unamortized | 1,135,635 | |
Stock-based compensation expense related to stock options/warrants, to be amortized | 244,066 | |
Weighted average remaining period | 1 year 1 month 6 days | |
Common Stock to three holders of warrants | 1,465,578 | |
Common Stock to three holders of warrants, exercised | 2,353,744 | |
Common Stock to several holders of warrants | 10,342,931 | |
Common Stock to several holders of warrants, exercised | 12,505,023 | |
Stock-based compensation expense related for consultant warrants | -722 | -17,718 |
Recorded salary expense | 116,666 | 350,000 |
Stock-based compensation expense related to stock options/ warrants | 698,015 | 558,286 |
Warrant [Member] | ||
Aggregate intrinsic value of exercised | 16,983,736 | |
Weighted average fair value of the stock granted | $0.20 | $1.34 |
Selling, general and administrative expenses | 722 | |
Stock-based compensation expense related to stock options/ warrants, unamortized | 577,523 | |
Stock-based compensation expense related to stock options/warrants, to be amortized | 683 | |
Weighted average remaining period | 9 months 18 days | |
Grant date value performance based warrant, unamortized | 576,840 | |
Stock-based compensation expense related to stock options/ warrants | 132,503 | 490,420 |
Series B Preferred Stock [Member] | ||
Share issued upon conversion | 11.39 | 8.22 |
Beneficial Conversion Feature Related to Incremental Shares | 2,887,507 | |
Beneficial Conversion Feature Related to Incremental Value | 7,288,068 | 1,532,722 |
Accrued contractual dividends | 298,918 | 279,380 |
Series A Preferred Stock [Member] | ||
Series A Preferred Stock are available to be issued | 44,443 | |
Stock Option [Member] | ||
Fair value of shares issued as compensation | 10,646 | |
Private Placement [Member] | ||
Gross proceeds received | 1,653,000 | 3,501,975 |
Net of expenses recorded | $115,245 | |
Total Units sold | 11,020,003 | 3,501,975 |
Total Units sold, per share | $0.15 | $1 |
Commitments_and_Contingent_Lia2
Commitments and Contingent Liabilities (Details 1) (USD $) | Dec. 31, 2014 |
Commitments And Contingent Liabilities Details 1 | |
2015 | $140,052 |
2016 | 155,700 |
2017 | 12,000 |
2018 | 5,000 |
Total future minimum lease payments | $312,752 |
Commitments_and_Contingent_Lia3
Commitments and Contingent Liabilities (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Commitments And Contingent Liabilities Details Narrative | ||
Deferred rent payable | $36,053 | $46,254 |
Lease payments | 46,604 | |
Rent Expense | 250,576 | 174,661 |
Unpaid balance | $135,000 |
Concentrations_Details_Narrati
Concentrations (Details Narrative) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Vendor 1 [Member] | ||
Concentration Inventory Purchases Percentage | 68.00% | 61.00% |
Concentration Accounts Payable Percentage | 36.00% | 26.00% |
Vendor 2 [Member] | ||
Concentration Inventory Purchases Percentage | 14.00% | 14.00% |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Related Party Transactions Details Narrative | ||
Consulting and other expenses | $21,110 | |
Director earned | 12,000 | |
Estimated the value of collateral | 2,143 | 9,001 |
Recorded insurance premium expense | $24,329 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Federal: | ||
Current | ||
Deferred | -387,752 | -625,702 |
State and local: | ||
Current | ||
Deferred | -161,244 | -36,806 |
Income tax total | -548,996 | -662,508 |
Change in valuation allowance | 548,996 | 662,508 |
Income tax provision (benefit) |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Deferred tax assets: | ||
Net operating loss carryforwards | $5,315,823 | $4,966,018 |
Stock-based compensation | 722,782 | 466,078 |
Inventory reserves | 6,090 | 10,949 |
Allowance for bad debt | 17,948 | 89,899 |
Deferred Rent | 14,108 | |
Contingent Liability | 1,910 | |
Charitable contribution carryforwards | 5,772 | 5,630 |
Accruals | 31,007 | 27,352 |
Total deferred tax assets | 6,115,440 | 5,565,926 |
Valuation allowance | -6,088,174 | -5,539,178 |
Deferred tax assets, net of valuation allowance | 27,266 | 26,748 |
Deferred tax liabilities: | ||
Property and equipment | -27,266 | -26,748 |
Net deferred tax assets | ||
Change in valuation allowance | $548,996 | $666,508 |
Income_Taxes_Details_2
Income Taxes (Details 2) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details 2 | ||
US federal statutory rate | -34.00% | -34.00% |
State tax rate, net of federal benefit | -4.00% | -2.00% |
Permanent differences | ||
Stock based compensation | 4.80% | 3.20% |
Debt extinquishment | 0.00% | 18.30% |
Other | 2.40% | 2.50% |
Change in valuation allowance | 30.80% | 12.00% |
Income tax provision (benefit) | 0.00% | 0.00% |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details Narrative | ||
Federal net operating loss carry forwards | $14,736,276 | $13,770,000 |
State net operating loss carry forwards | $7,637,237 | $3,585,000 |
Federal net operating loss carry forwards expiry period | 2027 to 2034 | |
State net operating loss carry forwards expiry period | 2031 |