Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Apr. 10, 2015 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | Energie Holdings, Inc. | ||
Entity Central Index Key | 774937 | ||
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 | $816,255 | ||
Entity Common Stock, Shares Outstanding | 56,123,858 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
Balance_Sheets
Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash and cash equivalents | $43,879 | $37,874 |
Receivables, net | 27,337 | 38,025 |
Inventory, net | 248,662 | 414,308 |
Prepaid expenses and other | 68,291 | 15,922 |
Total current assets | 388,169 | 506,129 |
Noncurrent assets: | ||
Intangible assets, net | 1,119,550 | |
Property and equipment, net | 23,421 | |
Deposits | 22,611 | 11,695 |
Total noncurrent assets | 22,611 | 1,154,666 |
Total assets | 410,780 | 1,660,795 |
Current liabilities: | ||
Accounts payable | 2,228,645 | 569,431 |
Accrued liabilities | 572,973 | 149,562 |
Debt, current portion | 2,373,307 | 3,938,496 |
Total current liabilities | 5,174,925 | 4,657,489 |
Debt, long-term portion | 2,893,214 | |
Total liabilities | 8,068,139 | 4,657,489 |
Commitments and contingencies (Note 9) | ||
Equity: | ||
Common stock, $.0001 par value; 250,000,000 shares authorized; 53,816,667 shares issued and outstanding at December 31, 2014 | 5,182 | |
Additional paid-in capital | 1,848,172 | |
Accumulated deficit | -9,510,713 | |
Members deficit (Energie, LLC) | -2,996,694 | |
Total deficit | -7,657,359 | -2,996,694 |
Total liabilities and equity | $410,780 | $1,660,795 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 53,816,667 | |
Common stock, shares outstanding | 53,816,667 |
Statements_of_Operations
Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||
Revenue | $756,385 | $1,733,373 |
Cost of revenue | 407,680 | 851,271 |
Gross profit | 348,705 | 882,102 |
Operating expenses: | ||
Research and development | 235,172 | 188,495 |
Sales and marketing | 295,643 | 452,127 |
General and administrative | 1,779,878 | 1,645,945 |
Impairment of long-lived assets | 977,400 | |
Total operating expenses | 3,288,093 | 2,286,567 |
Loss from operations | -2,938,388 | -1,404,465 |
Other income (expense): | ||
Interest expense | -760,849 | -421,787 |
Other | -13,055 | 206,783 |
Other income (expense), net | -773,904 | -215,004 |
Net loss | ($3,713,292) | ($1,619,469) |
Net loss per common share Basic and diluted | ($0.09) | ($0.05) |
Weighted average common shares outstanding Basic and diluted | 42,392,913 | 32,339,542 |
Statements_of_Cash_Flows
Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Operating Activities: | ||
Net loss | ($3,713,292) | ($1,619,469) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 198,597 | 238,053 |
Impairment of long-lived assets | 977,400 | |
Amortization of debt issuance costs | 3,334 | |
Common stock issued for services | 8,750 | |
Expense converted to debt | 774,167 | 421,787 |
Changes in operating assets and liabilities (net of Share Exchange): | ||
Accounts receivable | 10,688 | 258,587 |
Inventory | 165,646 | 12,099 |
Prepaid expenses | -66,619 | 33,045 |
Accounts payable | 840,788 | -59,419 |
Accrued liabilities | 313,214 | -10,116 |
Net cash used in operating activities | -487,327 | -725,433 |
Investing Activities: | ||
Intangible assets | -32,776 | |
Property and equipment | -250 | |
Net cash used in investing activities | -33,026 | |
Financing Activities: | ||
Proceeds from debt | 758,719 | 782,053 |
Payments of debt | -232,361 | |
Member activity | -77,917 | |
Net cash provided by financing activities | 526,358 | 704,136 |
Net change in cash | 6,005 | -21,297 |
Cash, beginning of period | 37,874 | 59,171 |
Cash, end of period | 43,879 | 37,874 |
Cash paid for: | ||
Interest | 103,712 | |
Income taxes |
Shareholders_Equity
Shareholders Equity (USD $) | Common Stock | Additional Paid-In Capital | Retained Deficit | Members' Deficit | Total |
Beginning Balance Amount at Dec. 31, 2012 | ($1,267,559) | ($1,267,559) | |||
Beginning Balance, Shares at Dec. 31, 2012 | |||||
Net loss | -1,619,469 | -1,619,469 | |||
Member activity | -109,666 | -109,666 | |||
Stock issued for services, Amount | |||||
Ending Balance, Amount at Dec. 31, 2013 | -2,996,694 | -2,996,694 | |||
Beginning Balance, Shares at Dec. 31, 2013 | |||||
Net loss | -1,045,239 | -1,045,239 | |||
Member activity | -115,512 | -115,512 | |||
Member equity reclassified as accrued interest | -110,197 | -110,197 | |||
Member equity reclassified as debt | -366,738 | -366,738 | |||
Change in capital structure, Shares | 51,400,000 | ||||
Change in capital structure, Amount | 524,604 | 1,320,000 | -6,842,660 | 4,634,380 | -363,676 |
Change in par value, Shares | |||||
Change in par value, Amount | -508,860 | 508,860 | |||
Stock issued for services, Shares | 416,667 | ||||
Stock issued for services, Amount | 42 | 8,708 | 8,750 | ||
Shares reserved for issuance, Amount at Jun. 30, 2014 | |||||
Shares reserved for issuance, Shares at Jun. 30, 2014 | 2,000,000 | ||||
Beginning Balance Amount at Jun. 30, 2014 | |||||
Consolidated Loss | -2,668,053 | -2,668,053 | |||
Ending Balance, Amount at Dec. 31, 2014 | $5,182 | $1,848,172 | ($9,510,713) | ($7,657,359) | |
Ending Balance, Shares at Dec. 31, 2014 | 53,816,667 |
1_Description_of_Business_and_
1. Description of Business and Summary of Significant Accounting Policies | 12 Months Ended | ||
Dec. 31, 2014 | |||
Accounting Policies [Abstract] | |||
1. Description of Business and Summary of Significant Accounting Policies | Note 1 – Description of Business and Summary of Significant Accounting Policies | ||
Formation of the Company | |||
On December 31, 2013, Energie Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Holdings”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with OELC, LLC, a Delaware limited liability company, and its wholly-owned subsidiary, Energie LLC (hereinafter referred to as, “Energie”). The Share Exchange Agreement was effective until July 2, 2014, upon meeting or waiving a variety of conditions subsequent. Upon effectiveness, Holdings issued 33,000,000 “restricted” shares of its common stock, representing approximately 65% of the then issued and outstanding voting securities, in exchange for all of the issued and outstanding member interests of Energie. This transaction is considered to be a capital transaction, rather than a business combination, equivalent to the issuance of ownership interests by Energie for the net assets of Holdings, accompanied by a recapitalization (the “Share Exchange”). The accounting is identical to that resulting from a reverse acquisition, except that no goodwill or other intangible is recorded. | |||
Thereafter, on January 27, 2014, Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with two of its then wholly owned subsidiaries, Energie Holdings and Alas Acquisition Company (“Alas”). The Merger Agreement effectively merged Alas with and into Holdings, with Holdings being the surviving corporation. The net effect of the Merger Agreement was to effectuate a name change from Alas Aviation Corp., to Energie Holdings, Inc. in order to provide a better understanding to investors of the Company’s entry into the LED lighting industry. The Company’s management also changed. | |||
Description of Business | |||
We are focused on acquiring and growing specialized LED lighting companies for the architecture and interior design markets for both commercial and residential applications. The lighting products include both conventional fixtures and advanced solid-state technology that can integrate with digital controls and day-lighting to create energy efficiencies and a better visual environment. Our objective is to grow, innovate, and fully capture the rapidly growing lighting market opportunities associated with solid state lighting. | |||
Energie was founded in 2001 and is engaged in the import and sale of specialized interior lighting solutions to the architecture and interior design markets in North America. Our headquarters is located in Wheat Ridge, Colorado, and we also maintain a production and assembly facility in Zeeland, Michigan. | |||
Basis of Presentation | |||
As a result of the Share Exchange, Energie is considered to be the “accounting acquirer” and, accordingly, is treated as the predecessor company. The consolidated financial statements include the results of operations and financial position of Energie for all periods, and the results of operations and financial position of Holdings as of and for the six months ended December 31, 2014. | |||
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result. | |||
Going Concern | |||
As shown in the accompanying financial statements, we had an equity deficit of $7,657,359 and a working capital deficit of $4,786,756 as of December 31, 2014, and have reported net losses of $3,713,292 and $1,619,469, respectively, for the years ended December 31, 2014 and 2013. These factors raise substantial doubt regarding our ability to continue as a going concern. | |||
Our ability to continue as a going concern is dependent on our ability to further implement our business plan, attract additional capital and, ultimately, upon our ability to develop future profitable operations. We intend to fund our business development, acquisition endeavors and operations through equity and debt financing arrangements. However, there can be no assurance that these arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time. These matters raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Additionally, current economic conditions in the United States and globally create significant challenges attaining sufficient funding | |||
Although we are past due on our required payments under our debt agreements, the lenders have not made demand for repayment of the principal and interest due. If demand for payment is made by one or multiple vendors, we would experience a liquidity issue as we do not currently have the funds available to pay off these debts. While we have entered into extensions with several of our lenders, there can be no assurances that any of the lenders will be cooperative or that if they are willing to provide extensions or forbearances, that the terms under which they may be willing to provide them will be favorable to us. | |||
Reclassifications | |||
Certain prior year amounts have been reclassified to conform with the current year presentation. Primarily, the consolidated balance sheet reclassifications relate to our factoring of accounts receivable and classifying unpaid interest as an accrued liability rather than as debt. Prior year presentation included factored accounts receivable balances in accounts receivable and an offsetting amount of debt to the factoring counterparty. Current year presentation eliminates accounts receivable balances that have been sold to the factoring counterparty, and a net receivable or liability with the factoring counterparty, representing the amount due from or due to the factoring counterparty. We have also updated the presentation of our statement of operations to include captions that better represent our operations. | |||
Summary of Significant Accounting Policies | |||
Cash and cash equivalents | |||
Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase. | |||
Accounts receivable | |||
We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to Other income (expense) in the consolidated statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. | |||
At our discretion, we may sell our accounts receivable with recourse in order to accelerate the receipt of cash. Upon the sale of selected accounts receivable, title transfers to the counterparty to the factoring agreement, we receive 85% of the face amount sold, and we remove the account receivable from our balance. We pay a commission and, if the balance is not collected by the counterparty within 30 days, a factoring fee. We are responsible for repaying the factoring counterparty for any amounts they are unable to collect. The factoring counterparty retains a reserve in the event the amount they ultimately collect is less than the amount paid to us. Depending on the volume of activity and uncollected accounts, therefore, we may have a receivable from or a liability to the factoring counterparty. | |||
Inventory | |||
Inventory is stated at the lower of cost or market, using the first-in, first-out method (“FIFO”) to determine cost. We monitor inventory cost compared to selling price in order to determine if a lower of cost or market reserve is necessary. We also estimate and maintain an inventory reserve, as needed, for such matters as obsolete inventory, shrink and scrap. | |||
Intangible assets | |||
Our intangible assets consist of the following: | |||
UL Listings – Energie has over 20 United LaboratoriesTM (“UL”) files, which include UL Listings for over 14,000 products for sale in the United States and Canada. UL is an independent safety testing laboratory. A UL Listing means that UL has tested representative samples of the product and determined that it meets UL’s requirements. These requirements are based primarily on UL’s published and nationally recognized standards for safety. UL’s testing certifies the design, construction and assembly of the certified products. UL Listings do not expire as long as the product certified is not materially changed. Ownership of a UL Listing may also be transferred between companies. Most customers in the lighting industry will only buy UL listed products. | |||
Trademarks – Energie is a registered trademark. | |||
Marketing and design – These consist of engineering and marketing materials covering the majority of our product offerings. | |||
Intangible assets are recorded at the cost to acquire the intangible, net of amortization over their estimated useful lives on a straight-line basis. We determine the useful lives of our intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. | |||
Property and equipment | |||
Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of our assets, which are reviewed periodically. | |||
Impairment of long-lived assets | |||
When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. We may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use. | |||
We have the option to perform a qualitative assessment of long-lived assets prior to completing the impairment test described above. We must assess whether it is more likely than not that the fair value of the long-lived assets is less than their carrying amount. If we conclude that this is the case, we must perform the test described above. Otherwise, we do not need to perform any further assessment. | |||
As a result of applying the above procedures, we fully impaired our long-lived assets during the year ended December 31, 2014. | |||
Warranty reserve | |||
We provide limited product warranty for one year on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale, included in Accrued liabilities on the consolidated balance sheets. | |||
Convertible debt | |||
We first evaluate our convertible debt to determine whether the conversion feature is an embedded derivative that requires bifurcation and derivative treatment. Based on our analysis, we determined derivative treatment was not required. We then evaluate whether the conversion feature is a beneficial conversion feature. Our convertible debt is treated as a liability and permits settlement in cash. Accordingly, in order to determine the value of the conversion feature, we compared the estimated fair value of the convertible debt to the fair value of debt that did not have the conversion feature. Based on this analysis, we concluded that the value of the conversion feature was immaterial. | |||
Equity | |||
As a result of the Share Exchange, Energie is considered to be the “accounting acquirer” and, accordingly, is treated as the predecessor company. Accordingly, the equity presented prior to the effective date of the Share Exchange is that of Energie, LLC. Subsequent to the effective date of the Share Exchange, July 2, 2014, the equity presented represents the equity of Energie Holdings, Inc. | |||
Revenue recognition | |||
We recognize revenue when the four revenue recognition criteria are met, as follows: | |||
• | Persuasive evidence of an arrangement exists – our customary practice is to obtain written evidence, typically in the form of a sales contract or purchase order; | ||
• | Delivery – when custody is transferred to our customers either upon shipment to or receipt at our customers’ locations, with no right of return or further obligations, such as installation; | ||
• | The price is fixed or determinable – prices are typically fixed at the time the order is placed and no price protections or variables are offered; and | ||
• | Collectability is reasonably assured – we typically work with businesses with which we have a long standing relationship, as well as monitoring and evaluating customers’ ability to pay. | ||
Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the consolidated balance sheets. | |||
Shipping and handling | |||
Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of revenues. Shipping and handling for inventory and materials purchased by us is included as a component of inventory on the consolidated balance sheets, and in cost of revenues in the consolidated statements of operations when the product is sold. | |||
Research and development costs | |||
Internal costs related to research and development efforts on existing or potential products are expensed as incurred. External costs incurred for intangible assets, such as UL listing costs and attorney fees for patents, are capitalized. | |||
Income taxes | |||
We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. Our assessment of tax positions as of December 31, 2014 and 2013, determined that there were no material uncertain tax positions. | |||
Prior to the Share Exchange, we were a limited liability company (“LLC”), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred. | |||
Concentration of credit risk | |||
Financial instruments that potentially subject us to concentrations of credit risk consist of accounts receivable and the amount due, if any, from our factoring counterparty. For the years ended December 31, 2014 one customer represented more than 14% of our revenues, and as of December 31, 2014, one customer represented 27% of our gross accounts receivable balance. | |||
Fair value of financial instruments | |||
Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and long-term debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of our long-term debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. | |||
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: | |||
Level 1 – Quoted prices in active markets for identical assets or liabilities. | |||
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. | |||
Reportable segments | |||
We have identified our operating segments, our chief operating decision maker (“CODM”), and the discrete financial information reviewed by the CODM. After evaluating this information, we have determined that we have one reportable segment. | |||
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), which now requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, additional disclosures are required. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. These requirements were previously included within auditing standards and federal securities law, but are now included within U.S. GAAP. We have evaluated our disclosures regarding our ability to continue as a going concern and concluded that we are in compliance with the disclosure requirements. | |||
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The amendment may be applied retrospectively to each prior period presented or retrospectively with the cumulate effect recognized as of the date of the initial application. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016, and early adoption is not permitted. We are currently evaluating the impact of these amendments and the transition alternatives on our consolidated financial statements. | |||
Other recent accounting pronouncements issued by the FASB and the SEC did not, or management believes will not, have a material impact on our present or future consolidated financial statements. |
2_Recapitalization
2. Recapitalization | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Accounting Policies [Abstract] | |||||||||
2. Recapitalization | Note 2 – Recapitalization | ||||||||
On July 2, 2014, we completed the Share Exchange Agreement with Energie. The impact to equity of the Share Exchange includes a) the issuance of 33,000,000 shares of Holdings’ common stock at $0.05 per share, the closing price of Holdings’ stock on December 31, 2013, the date of the Share Exchange Agreement, for total consideration effectively transferred of $1,650,000; and b) removing Holdings’ accumulated deficit and adjusting equity for the recapitalization. | |||||||||
The accompanying consolidated statements of operations include the results of the Share Exchange Agreement from the share exchange date of July 2, 2014. The pro forma effects of the acquisition on the results of operations as if the transaction had been completed on January 1, 2013, are as follows: | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Pro forma results: | |||||||||
Total net revenues | $ | 756,385 | $ | 1,733,373 | |||||
Net loss | (3,987,209 | ) | (1,803,768 | ) | |||||
Net loss per common share: | |||||||||
Basic and diluted | $ | (0.08 | ) | $ | (0.04 | ) | |||
The assets and liabilities of Holdings on the effective date of the Share Exchange Agreement were as follows: | |||||||||
Accounts payable | $ | 363,676 | |||||||
Preferred stock | — | ||||||||
Common stock | 194,604 | ||||||||
Additional paid-in capital | 91,046,859 | ||||||||
Accumulated deficit | (91,605,139 | ) | |||||||
Total stockholders’ deficit | $ | (363,676 | ) |
3_Receivables
3. Receivables | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Receivables [Abstract] | |||||||||
3. Receivables | Note 3 – Receivables | ||||||||
Receivables consist of the following: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Customer receivables | $ | 41,234 | $ | 52,916 | |||||
Less: Allowance for uncollectible accounts | (13,897 | ) | (14,891 | ) | |||||
$ | 27,337 | $ | 38,025 | ||||||
4_Inventory
4. Inventory | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | |||||||||
4. Inventory | Note 4 – Inventory | ||||||||
Inventory consists of the following: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 420,424 | $ | 418,796 | |||||
Less: Reserve | (171,762 | ) | (4,488 | ) | |||||
$ | 248,662 | $ | 414,308 | ||||||
5_Intangible_Assets
5. Intangible Assets | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||
5. Intangible Assets | Note 5 – Intangible Assets | ||||||||||||
Intangible assets consist of the following: | |||||||||||||
December 31, | Estimated | ||||||||||||
Useful Life | |||||||||||||
2014 | 2013 | (Years) | |||||||||||
UL Listings and trademarks | $ | — | $ | 1,639,840 | 15 | ||||||||
Marketing and design | — | 723,795 | 5-Mar | ||||||||||
— | 2,363,635 | ||||||||||||
Less: accumulated amortization | — | (1,244,085 | ) | ||||||||||
$ | — | $ | 1,119,550 | ||||||||||
Amortization expense for the years ended December 31, 2014 and 2013, was $179,431 and $227,267, respectively. We recorded impairment expense of $972,895 during the year ended December 31, 2014. | |||||||||||||
For the year ended December 31, 2014, we determined that the carrying value of our intangible assets was greater than their estimated fair value and recorded an impairment loss of $972,895. Fair value was estimated using discounted, estimated future cash flows, which were projected based on recent, actual results. The estimated future cash flows did not include the benefit of additional capital or acquisitions, as there can be no assurance that they will occur. |
6_Property_and_Equipment
6. Property and Equipment | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||
6. Property and Equipment | Note 6 – Property and Equipment | ||||||||||||
Property and equipment consists of the following: | |||||||||||||
December 31, | Estimated | ||||||||||||
Useful Life | |||||||||||||
2014 | 2013 | (Years) | |||||||||||
Computers and software | $ | — | $ | 210,849 | 5 | ||||||||
Office furniture and fixtures | — | 70,245 | 7 | ||||||||||
Leasehold improvements | — | 57,025 | 5 | ||||||||||
Tooling and equipment | — | 23,633 | 5 | ||||||||||
— | 361,752 | ||||||||||||
Less: accumulated depreciation | — | (338,331 | ) | ||||||||||
$ | — | $ | 23,421 | ||||||||||
Depreciation expense for the years ended December 31, 2014 and 2013, was $19,166 and $10,786, respectively. We recorded impairment expense of $4,505 during the year ended December 31, 2014. | |||||||||||||
For the year ended December 31, 2014, we determined the carrying value of our property and equipment was greater than their estimated fair value and recorded an impairment loss of $4,505. Fair value was estimated using discounted, estimated future cash flows, which were projected based on recent, actual results. The estimated future cash flows did not include the benefit of additional capital or acquisitions, as there can be no assurance that they will occur. |
7_Debt
7. Debt | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||
7. Debt | Note 7 – Debt | ||||||||||||||
Debt consists of the following: | |||||||||||||||
December 31, | |||||||||||||||
Description | Note | 2014 | 2013 | ||||||||||||
Line of credit | A | $ | 47,000 | $ | 47,000 | ||||||||||
Note payable to distribution partner | B | 580,000 | 550,347 | ||||||||||||
Investor debt | C | 267,787 | 267,787 | ||||||||||||
Related party debt | D | 3,840,749 | 2,965,863 | ||||||||||||
Other notes payable | E | 57,692 | 60,836 | ||||||||||||
Cash draw agreements | F | 255,793 | 46,663 | ||||||||||||
Convertible promissory notes | G | 217,500 | — | ||||||||||||
Total | 5,266,521 | 3,938,496 | |||||||||||||
Less: current portion | 2,373,307 | 3,938,496 | |||||||||||||
Debt, long-term portion | $ | 2,893,214 | $ | — | |||||||||||
A – Line of Credit – We utilized this bank line of credit for working capital purposes. The outstanding obligation is due on demand, has a stated initial interest rate of 10.5% that is subject to adjustment, and is guaranteed by our majority shareholder. | |||||||||||||||
B – Note Payable to Distribution Partner – Note payable to a significant European distribution partner, entered into in October 2014, bearing interest at 5% payable quarterly, with principal payable monthly through September 2019. The 2014 note payable aggregated the 2007 promissory note, accrued interest and accounts payable. The December 31, 2013, balance represents the outstanding principal balance plus 5% annual interest due on a 2007 promissory note with 5% annual interest. | |||||||||||||||
C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at December 31, 2014, and Energie at December 31, 2013. These loans are not collateralized. All have been renegotiated to have a maturity of December 31, 2014. The following summarizes the terms and balances of the investor debt: | |||||||||||||||
December 31, | |||||||||||||||
2014 | 2013 | Interest Rate | |||||||||||||
$ | 87,787 | $ | 87,787 | 24% | |||||||||||
50,000 | 50,000 | 24% | |||||||||||||
50,000 | 50,000 | 24% | |||||||||||||
25,000 | 25,000 | 8% | |||||||||||||
25,000 | 25,000 | 8% | |||||||||||||
20,000 | 20,000 | 2% | |||||||||||||
10,000 | 10,000 | 24% | |||||||||||||
$ | 267,787 | $ | 267,787 | ||||||||||||
D – Related Party Debt – The following summarizes notes payable to related parties. | |||||||||||||||
December 31, | |||||||||||||||
2014 | 2013 | Interest Rate | |||||||||||||
D1 | $ | 3,152,231 | $ | 2,413,752 | 6% | ||||||||||
D2 | 497,130 | 448,611 | 12% | ||||||||||||
D3 | 34,888 | — | 12% | ||||||||||||
D4 | 156,500 | 103,500 | 24% | ||||||||||||
Total | $ | 3,840,749 | $ | 2,965,863 | |||||||||||
D1 – Notes payable to Symbiote, Inc. (“Symbiote”), entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 notes aggregated the previous notes payable, accrued interest and accounts payable. The 2014 notes are not convertible. The previous note agreement gave Symbiote, at its option at any time after default, the right to convert any remaining balance of the notes to equity at a rate equal to the proportion of the remaining balance of the note divided by $4,000,000 enterprise value. Symbiote holds the largest ownership percentage in Holdings, is the lessor of our manufacturing facility, and the provider of our payroll services. | |||||||||||||||
We evaluated the agreement for derivatives and determined that it does not qualify for derivative treatment for financial reporting purposes, because the agreement relates to our own equity, and the debt and the equity are not closely related. We also determined this does not qualify as a beneficial conversion feature. Accordingly, the 2013 balance was reported at the carrying amount. | |||||||||||||||
D2 – Note payable to an executive vice president, entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 note aggregated the previous note payable, accrued interest and accounts payable. | |||||||||||||||
D3 – Note payable to our chief executive officer (“CEO”), entered into in December 2014, with monthly principal and interest payable through November 2015. | |||||||||||||||
D4 – Notes payable to the spouse of our CEO, due upon demand. | |||||||||||||||
E – Other Notes Payable – Represents the outstanding principal balance on two separate notes bearing interest at approximately 12% annually. Although we are past due on our required payments, the loan holders have not made demand for repayment of the principal and interest due. In the event we receive proceeds as the beneficiary of a life insurance policy covering our majority shareholder, repayment of principal and interest is due on these notes prior to using the proceeds for any other purpose. | |||||||||||||||
F – Cash draw agreements – Under these agreements, the lender advances us the principal balance and then automatically withdraws a stated amount each business day. Accordingly, there is no stated interest rate. The total remaining daily payments due under these arrangements was $332,184 as of December 31, 2014. The maturity dates of the agreements range from April to October 2015. | |||||||||||||||
G – Convertible promissory notes – Represents the outstanding principal balance on two separate convertible promissory notes with interest of 8% annually, due June 2015. At the option of the holder, the notes may be settled in cash or converted into shares of our common stock at any time beginning 180 days from the date of the notes at a price equal to 61% of the average closing bid price of our common stock during the 10 trading days immediately preceding the date of conversion. In the event we fail to pay the notes when they become due, the balance due under the notes incurs interest at the rate of 22% per annum. The notes contain additional terms and conditions normally included in instruments of this kind, including a right of first refusal wherein we have granted the holders the right to match the terms of any future financing in which we engage on the same terms and contemplated in such future financing. We estimate that the fair value of the convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. | |||||||||||||||
The future maturities of debt are as follows: | |||||||||||||||
Year ending December 31, | |||||||||||||||
2015 | $ | 2,373,307 | |||||||||||||
2016 | 1,300,211 | ||||||||||||||
2017 | 1,373,003 | ||||||||||||||
2018 | 120,000 | ||||||||||||||
2019 | 100,000 | ||||||||||||||
$ | 5,266,521 | ||||||||||||||
8_Equity
8. Equity | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
8. Equity | Note 8 – Equity |
We have authorized 5,000,000 shares of preferred stock at $0.0001 par value, with no shares issued and outstanding as of December 31, 2014. Upon issuing preferred stock, if any, the terms of each tranche of issuance may be determined by our board of directors, including dividends and voting rights. | |
In July 2014, we entered into an agreement with Dutchess Opportunity Fund, II, LP (“Dutchess”), under which Dutchess has agreed to purchase from us 5,000,000 shares of our common stock, up to $5 million, during a 36 month period commencing on the date a Registration Statement on Form S-1 was declared effective, October 29, 2014. We will sell these shares to Dutchess at a price equal to 94% of the lowest daily volume weighted-average price of our common stock during the five consecutive trading days beginning on the day we make notice to Dutchess and ending on and including the date that is four trading days after such notice. We have the right to withdraw all or any portion of any put before the closing, subject to certain limitations. As part of the agreement with Dutchess, we transferred 2,000,000 shares of our common stock for no proceeds. We will receive proceeds when we make notice to Dutchess to sell these shares. The market price of the 2,000,000 shares was $40,000, based on the trading price on the date of transfer. If we do not make notice to Dutchess, these shares will be returned to us at the end of the 36 month contractual period. As of December 31, 2014, we had not made notice to Dutchess to sell any of these shares. Accordingly, the net impact to our stockholders equity is zero. |
9_Commitments_and_Contingencie
9. Commitments and Contingencies | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||
9. Commitments and Contingencies | Note 9 – Commitments and Contingencies | ||||||
Current management discovered that the Company’s former management recorded various obligations to itself and to third parties for expenditures not deemed benefitting the Company or authorized by the Company’s sole director, as required. The amount of these unauthorized expenditures totaled $91,172, including $60,000 in management fees. These expenditures were reversed and are not part of the accompanying financial statements. While current management believes that none of the $91,172 is an obligation of ours, it is not known what representations were made to these vendors or whether we could, in fact, be eventually responsible to pay some or all of the indicated amount. | |||||||
Future minimum rental payments required under all leases that have remaining non-cancelable lease terms in excess of one year as of December 31, 2014, are as follows: | |||||||
2015 | $ | 166,545 | |||||
2016 | 168,811 | ||||||
2017 | 142,752 | ||||||
2018 | 28,890 | ||||||
$ | 506,998 | ||||||
10_Income_Taxes
10. Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
10. Income Taxes | Note 10 – Income Taxes | ||||||||
The components of the provision for income taxes are as follows: | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current tax provision | |||||||||
Federal | $ | (775,545 | ) | $ | — | ||||
State | (100,938 | ) | — | ||||||
(876,483 | ) | — | |||||||
Deferred tax provision | |||||||||
Federal | 775,545 | — | |||||||
State | 100,938 | — | |||||||
876,483 | — | ||||||||
$ | — | $ | — | ||||||
The components of net deferred tax assets and liabilities are as follows: | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current deferred tax asset (liability): | |||||||||
Inventory reserve | $ | 66,000 | $ | — | |||||
Warranty reserve | 7,109 | — | |||||||
Net operating loss carryforward | 876,483 | — | |||||||
Valuation allowance | (949,592 | ) | — | ||||||
— | — | ||||||||
Long-term deferred tax asset (liability) | |||||||||
Long-lived assets | 136,132 | — | |||||||
Valuation allowance | (136,132 | ) | — | ||||||
— | — | ||||||||
Net deferred tax asset (liability) | $ | — | $ | — | |||||
A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows: | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Income tax benefit at statutory rate | $ | (1,262,519 | ) | $ | — | ||||
State income tax, net of Federal benefit | (113,471 | ) | — | ||||||
Change from LLC to C Corp | 284,869 | — | |||||||
Other | 5,477 | — | |||||||
Valuation allowance | 1,085,644 | — | |||||||
$ | — | $ | — | ||||||
11_Net_Loss_Per_Share
11. Net Loss Per Share | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | |||||||||
11. Net Loss Per Share | Note 11 – Net Loss Per Share | ||||||||
Basic net loss per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic net loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. In a net loss position, however, potential securities are excluded, because they are considered anti-dilutive. Since Energie, the “predecessor company,” was an LLC, it did not have common shares outstanding prior to the Share Exchange on July 2, 2014. Accordingly, we have prepared the calculation of Net Loss Per Share using the weighted-average number of common shares of Holdings that were outstanding during the year ended December 31, 2014. Additionally, Holdings did not exist in 2013, so for the year ended December 31, 2013, we have used the weighted-average number of common shares of Holdings that were outstanding for the year ended December 31, 2014, so that a comparison of net loss per share may be presented. | |||||||||
The following table presents a reconciliation of the denominators used in the computation of net loss per share – basic and diluted: | |||||||||
Year ended December 31, | |||||||||
2014 | 2013 | ||||||||
Net loss available for stockholders | $ | (3,713,292 | ) | $ | (1,619,469 | ) | |||
Weighted average outstanding shares of | 42,392,913 | 32,339,542 | |||||||
common stock | |||||||||
Dilutive effect of securities | — | — | |||||||
Common stock and equivalents | 42,392,913 | 32,339,542 | |||||||
Net loss per share – Basic and diluted | $ | (0.09 | ) | $ | (0.05 | ) | |||
There are no dilutive instruments outstanding during the years ended December 31, 2014 and 2013. |
1_Description_of_Business_and_1
1. Description of Business and Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||
Dec. 31, 2014 | |||
Accounting Policies [Abstract] | |||
Formation of the Company | Formation of the Company | ||
On December 31, 2013, Energie Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Holdings”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with OELC, LLC, a Delaware limited liability company, and its wholly-owned subsidiary, Energie LLC (hereinafter referred to as, “Energie”). The Share Exchange Agreement was effective until July 2, 2014, upon meeting or waiving a variety of conditions subsequent. Upon effectiveness, Holdings issued 33,000,000 “restricted” shares of its common stock, representing approximately 65% of the then issued and outstanding voting securities, in exchange for all of the issued and outstanding member interests of Energie. This transaction is considered to be a capital transaction, rather than a business combination, equivalent to the issuance of ownership interests by Energie for the net assets of Holdings, accompanied by a recapitalization (the “Share Exchange”). The accounting is identical to that resulting from a reverse acquisition, except that no goodwill or other intangible is recorded. | |||
Thereafter, on January 27, 2014, Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with two of its then wholly owned subsidiaries, Energie Holdings and Alas Acquisition Company (“Alas”). The Merger Agreement effectively merged Alas with and into Holdings, with Holdings being the surviving corporation. The net effect of the Merger Agreement was to effectuate a name change from Alas Aviation Corp., to Energie Holdings, Inc. in order to provide a better understanding to investors of the Company’s entry into the LED lighting industry. The Company’s management also changed. | |||
Description of Business | |||
We are focused on acquiring and growing specialized LED lighting companies for the architecture and interior design markets for both commercial and residential applications. The lighting products include both conventional fixtures and advanced solid-state technology that can integrate with digital controls and day-lighting to create energy efficiencies and a better visual environment. Our objective is to grow, innovate, and fully capture the rapidly growing lighting market opportunities associated with solid state lighting. | |||
Energie was founded in 2001 and is engaged in the import and sale of specialized interior lighting solutions to the architecture and interior design markets in North America. Our headquarters is located in Wheat Ridge, Colorado, and we also maintain a production and assembly facility in Zeeland, Michigan. | |||
Basis of Presentation | Basis of Presentation | ||
As a result of the Share Exchange, Energie is considered to be the “accounting acquirer” and, accordingly, is treated as the predecessor company. The consolidated financial statements include the results of operations and financial position of Energie for all periods, and the results of operations and financial position of Holdings as of and for the six months ended December 31, 2014. | |||
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result. | |||
Going Concern | Going Concern | ||
As shown in the accompanying financial statements, we had an equity deficit of $7,657,359 and a working capital deficit of $4,786,756 as of December 31, 2014, and have reported net losses of $3,713,292 and $1,619,469, respectively, for the years ended December 31, 2014 and 2013. These factors raise substantial doubt regarding our ability to continue as a going concern. | |||
Our ability to continue as a going concern is dependent on our ability to further implement our business plan, attract additional capital and, ultimately, upon our ability to develop future profitable operations. We intend to fund our business development, acquisition endeavors and operations through equity and debt financing arrangements. However, there can be no assurance that these arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time. These matters raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Additionally, current economic conditions in the United States and globally create significant challenges attaining sufficient funding | |||
Although we are past due on our required payments under our debt agreements, the lenders have not made demand for repayment of the principal and interest due. If demand for payment is made by one or multiple vendors, we would experience a liquidity issue as we do not currently have the funds available to pay off these debts. While we have entered into extensions with several of our lenders, there can be no assurances that any of the lenders will be cooperative or that if they are willing to provide extensions or forbearances, that the terms under which they may be willing to provide them will be favorable to us. | |||
Reclassifications | Reclassifications | ||
Certain prior year amounts have been reclassified to conform with the current year presentation. Primarily, the consolidated balance sheet reclassifications relate to our factoring of accounts receivable and classifying unpaid interest as an accrued liability rather than as debt. Prior year presentation included factored accounts receivable balances in accounts receivable and an offsetting amount of debt to the factoring counterparty. Current year presentation eliminates accounts receivable balances that have been sold to the factoring counterparty, and a net receivable or liability with the factoring counterparty, representing the amount due from or due to the factoring counterparty. We have also updated the presentation of our statement of operations to include captions that better represent our operations. | |||
Cash and Cash Equivalents | Cash and cash equivalents | ||
Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase. | |||
Accounts receivable | Accounts receivable | ||
We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to Other income (expense) in the consolidated statements of operations. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. | |||
At our discretion, we may sell our accounts receivable with recourse in order to accelerate the receipt of cash. Upon the sale of selected accounts receivable, title transfers to the counterparty to the factoring agreement, we receive 85% of the face amount sold, and we remove the account receivable from our balance. We pay a commission and, if the balance is not collected by the counterparty within 30 days, a factoring fee. We are responsible for repaying the factoring counterparty for any amounts they are unable to collect. The factoring counterparty retains a reserve in the event the amount they ultimately collect is less than the amount paid to us. Depending on the volume of activity and uncollected accounts, therefore, we may have a receivable from or a liability to the factoring counterparty. | |||
Inventory | Inventory | ||
Inventory is stated at the lower of cost or market, using the first-in, first-out method (“FIFO”) to determine cost. We monitor inventory cost compared to selling price in order to determine if a lower of cost or market reserve is necessary. We also estimate and maintain an inventory reserve, as needed, for such matters as obsolete inventory, shrink and scrap. | |||
Intangible assets | Intangible assets | ||
Our intangible assets consist of the following: | |||
UL Listings – Energie has over 20 United LaboratoriesTM (“UL”) files, which include UL Listings for over 14,000 products for sale in the United States and Canada. UL is an independent safety testing laboratory. A UL Listing means that UL has tested representative samples of the product and determined that it meets UL’s requirements. These requirements are based primarily on UL’s published and nationally recognized standards for safety. UL’s testing certifies the design, construction and assembly of the certified products. UL Listings do not expire as long as the product certified is not materially changed. Ownership of a UL Listing may also be transferred between companies. Most customers in the lighting industry will only buy UL listed products. | |||
Trademarks – Energie is a registered trademark. | |||
Marketing and design – These consist of engineering and marketing materials covering the majority of our product offerings. | |||
Intangible assets are recorded at the cost to acquire the intangible, net of amortization over their estimated useful lives on a straight-line basis. We determine the useful lives of our intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, our long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. | |||
Property and equipment | Property and equipment | ||
Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of our assets, which are reviewed periodically. | |||
Impairment of long-lived assets | Impairment of long-lived assets | ||
When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. We may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use. | |||
We have the option to perform a qualitative assessment of long-lived assets prior to completing the impairment test described above. We must assess whether it is more likely than not that the fair value of the long-lived assets is less than their carrying amount. If we conclude that this is the case, we must perform the test described above. Otherwise, we do not need to perform any further assessment. | |||
As a result of applying the above procedures, we fully impaired our long-lived assets during the year ended December 31, 2014. | |||
Warranty reserve | Warranty reserve | ||
We provide limited product warranty for one year on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale, included in Accrued liabilities on the consolidated balance sheets. | |||
Convertible debt | Convertible debt | ||
We first evaluate our convertible debt to determine whether the conversion feature is an embedded derivative that requires bifurcation and derivative treatment. Based on our analysis, we determined derivative treatment was not required. We then evaluate whether the conversion feature is a beneficial conversion feature. Our convertible debt is treated as a liability and permits settlement in cash. Accordingly, in order to determine the value of the conversion feature, we compared the estimated fair value of the convertible debt to the fair value of debt that did not have the conversion feature. Based on this analysis, we concluded that the value of the conversion feature was immaterial. | |||
Equity | Equity | ||
As a result of the Share Exchange, Energie is considered to be the “accounting acquirer” and, accordingly, is treated as the predecessor company. Accordingly, the equity presented prior to the effective date of the Share Exchange is that of Energie, LLC. Subsequent to the effective date of the Share Exchange, July 2, 2014, the equity presented represents the equity of Energie Holdings, Inc. | |||
Revenue recognition | Revenue recognition | ||
We recognize revenue when the four revenue recognition criteria are met, as follows: | |||
• | Persuasive evidence of an arrangement exists – our customary practice is to obtain written evidence, typically in the form of a sales contract or purchase order; | ||
• | Delivery – when custody is transferred to our customers either upon shipment to or receipt at our customers’ locations, with no right of return or further obligations, such as installation; | ||
• | The price is fixed or determinable – prices are typically fixed at the time the order is placed and no price protections or variables are offered; and | ||
• | Collectability is reasonably assured – we typically work with businesses with which we have a long standing relationship, as well as monitoring and evaluating customers’ ability to pay. | ||
Refunds and returns, which are minimal, are recorded as a reduction of revenue. Payments received by customers prior to our satisfying the above criteria are recorded as unearned income in the consolidated balance sheets. | |||
Shipping and handling | Shipping and handling | ||
Payments by customers to us for shipping and handling costs are included in revenue on the consolidated statements of operations, while our expense is included in cost of revenues. Shipping and handling for inventory and materials purchased by us is included as a component of inventory on the consolidated balance sheets, and in cost of revenues in the consolidated statements of operations when the product is sold. | |||
Research and development costs | Research and development costs | ||
Internal costs related to research and development efforts on existing or potential products are expensed as incurred. External costs incurred for intangible assets, such as UL listing costs and attorney fees for patents, are capitalized. | |||
Income taxes | Income taxes | ||
We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. Our assessment of tax positions as of December 31, 2014 and 2013, determined that there were no material uncertain tax positions. | |||
Prior to the Share Exchange, we were a limited liability company (“LLC”), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred. | |||
Concentration of credit risk | Concentration of credit risk | ||
Financial instruments that potentially subject us to concentrations of credit risk consist of accounts receivable and the amount due, if any, from our factoring counterparty. For the years ended December 31, 2014 one customer represented more than 14% of our revenues, and as of December 31, 2014, one customer represented 27% of our gross accounts receivable balance. | |||
Fair value of financial instruments | Fair value of financial instruments | ||
Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and long-term debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of our long-term debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. | |||
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: | |||
Level 1 – Quoted prices in active markets for identical assets or liabilities. | |||
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. | |||
Reportable segments | Reportable segments | ||
We have identified our operating segments, our chief operating decision maker (“CODM”), and the discrete financial information reviewed by the CODM. After evaluating this information, we have determined that we have one reportable segment. | |||
Recently Issued Accounting Pronouncements | 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), which now requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued. If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, additional disclosures are required. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. These requirements were previously included within auditing standards and federal securities law, but are now included within U.S. GAAP. We have evaluated our disclosures regarding our ability to continue as a going concern and concluded that we are in compliance with the disclosure requirements. | |||
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The amendment may be applied retrospectively to each prior period presented or retrospectively with the cumulate effect recognized as of the date of the initial application. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2016, and early adoption is not permitted. We are currently evaluating the impact of these amendments and the transition alternatives on our consolidated financial statements. | |||
Other recent accounting pronouncements issued by the FASB and the SEC did not, or management believes will not, have a material impact on our present or future consolidated financial statements. |
2_Recapitalization_Tables
2. Recapitalization (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Accounting Policies [Abstract] | |||||||||
Recapitalization | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Pro forma results: | |||||||||
Total net revenues | $ | 756,385 | $ | 1,733,373 | |||||
Net loss | (3,987,209 | ) | (1,803,768 | ) | |||||
Net loss per common share: | |||||||||
Basic and diluted | $ | (0.08 | ) | $ | (0.04 | ) | |||
The assets and liabilities of Holdings on the effective date of the Share Exchange Agreement were as follows: | |||||||||
Accounts payable | $ | 363,676 | |||||||
Preferred stock | — | ||||||||
Common stock | 194,604 | ||||||||
Additional paid-in capital | 91,046,859 | ||||||||
Accumulated deficit | (91,605,139 | ) | |||||||
Total stockholders’ deficit | $ | (363,676 | ) |
3_Receivables_Tables
3. Receivables (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Receivables [Abstract] | |||||||||
Receivables | December 31, | ||||||||
2014 | 2013 | ||||||||
Customer receivables | $ | 41,234 | $ | 52,916 | |||||
Less: Allowance for uncollectible accounts | (13,897 | ) | (14,891 | ) | |||||
$ | 27,337 | $ | 38,025 |
4_Inventory_Tables
4. Inventory (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | |||||||||
Inventory | December 31, | ||||||||
2014 | 2013 | ||||||||
Raw materials | $ | 420,424 | $ | 418,796 | |||||
Less: Reserve | (171,762 | ) | (4,488 | ) | |||||
$ | 248,662 | $ | 414,308 |
5_Intangible_Assets_Tables
5. Intangible Assets (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||
Intangible Assets | December 31, | Estimated | |||||||||||
Useful Life | |||||||||||||
2014 | 2013 | (Years) | |||||||||||
UL Listings and trademarks | $ | — | $ | 1,639,840 | 15 | ||||||||
Marketing and design | — | 723,795 | 5-Mar | ||||||||||
— | 2,363,635 | ||||||||||||
Less: accumulated amortization | — | (1,244,085 | ) | ||||||||||
$ | — | $ | 1,119,550 |
6_Property_and_Equipment_Table
6. Property and Equipment (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||
Property and Equipment | December 31, | Estimated | |||||||||||
Useful Life | |||||||||||||
2014 | 2013 | (Years) | |||||||||||
Computers and software | $ | — | $ | 210,849 | 5 | ||||||||
Office furniture and fixtures | — | 70,245 | 7 | ||||||||||
Leasehold improvements | — | 57,025 | 5 | ||||||||||
Tooling and equipment | — | 23,633 | 5 | ||||||||||
— | 361,752 | ||||||||||||
Less: accumulated depreciation | — | (338,331 | ) | ||||||||||
$ | — | $ | 23,421 |
7_Debt_Tables
7. Debt (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | |||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||
Debt | December 31, | ||||||||||||||
Description | Note | 2014 | 2013 | ||||||||||||
Line of credit | A | $ | 47,000 | $ | 47,000 | ||||||||||
Note payable to distribution partner | B | 580,000 | 550,347 | ||||||||||||
Investor debt | C | 267,787 | 267,787 | ||||||||||||
Related party debt | D | 3,840,749 | 2,965,863 | ||||||||||||
Other notes payable | E | 57,692 | 60,836 | ||||||||||||
Cash draw agreements | F | 255,793 | 46,663 | ||||||||||||
Convertible promissory notes | G | 217,500 | — | ||||||||||||
Total | 5,266,521 | 3,938,496 | |||||||||||||
Less: current portion | 2,373,307 | 3,938,496 | |||||||||||||
Debt, long-term portion | $ | 2,893,214 | $ | — | |||||||||||
Investor Debt | December 31, | ||||||||||||||
2014 | 2013 | Interest Rate | |||||||||||||
$ | 87,787 | $ | 87,787 | 24% | |||||||||||
50,000 | 50,000 | 24% | |||||||||||||
50,000 | 50,000 | 24% | |||||||||||||
25,000 | 25,000 | 8% | |||||||||||||
25,000 | 25,000 | 8% | |||||||||||||
20,000 | 20,000 | 2% | |||||||||||||
10,000 | 10,000 | 24% | |||||||||||||
$ | 267,787 | $ | 267,787 | ||||||||||||
Related Party Debt | December 31, | ||||||||||||||
2014 | 2013 | Interest Rate | |||||||||||||
D1 | $ | 3,152,231 | $ | 2,413,752 | 6% | ||||||||||
D2 | 497,130 | 448,611 | 12% | ||||||||||||
D3 | 34,888 | — | 12% | ||||||||||||
D4 | 156,500 | 103,500 | 24% | ||||||||||||
Total | $ | 3,840,749 | $ | 2,965,863 | |||||||||||
Future Maturities of Debt | Year ending December 31, | ||||||||||||||
2015 | $ | 2,373,307 | |||||||||||||
2016 | 1,300,211 | ||||||||||||||
2017 | 1,373,003 | ||||||||||||||
2018 | 120,000 | ||||||||||||||
2019 | 100,000 | ||||||||||||||
$ | 5,266,521 |
9_Commitments_and_Contingencie1
9. Commitments and Contingencies (Tables) | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||
Commitments and Contingencies | 2015 | $ | 166,545 | ||||
2016 | 168,811 | ||||||
2017 | 142,752 | ||||||
2018 | 28,890 | ||||||
$ | 506,998 |
10_Income_Taxes_Tables
10. Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Components of the Provision for Income Taxes | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Current tax provision | |||||||||
Federal | $ | (775,545 | ) | $ | — | ||||
State | (100,938 | ) | — | ||||||
(876,483 | ) | — | |||||||
Deferred tax provision | |||||||||
Federal | 775,545 | — | |||||||
State | 100,938 | — | |||||||
876,483 | — | ||||||||
$ | — | $ | — | ||||||
Components of Net Deferred Tax Assets and Liabilities | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Current deferred tax asset (liability): | |||||||||
Inventory reserve | $ | 66,000 | $ | — | |||||
Warranty reserve | 7,109 | — | |||||||
Net operating loss carryforward | 876,483 | — | |||||||
Valuation allowance | (949,592 | ) | — | ||||||
— | — | ||||||||
Long-term deferred tax asset (liability) | |||||||||
Long-lived assets | 136,132 | — | |||||||
Valuation allowance | (136,132 | ) | — | ||||||
— | — | ||||||||
Net deferred tax asset (liability) | $ | — | $ | — | |||||
Reconciliation of Income Tax Provision | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Income tax benefit at statutory rate | $ | (1,262,519 | ) | $ | — | ||||
State income tax, net of Federal benefit | (113,471 | ) | — | ||||||
Change from LLC to C Corp | 284,869 | — | |||||||
Other | 5,477 | — | |||||||
Valuation allowance | 1,085,644 | — | |||||||
$ | — | $ | — |
11_Net_Loss_Per_Share_Tables
11. Net Loss Per Share (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Net Loss Per Share | Year ended December 31, | ||||||||
2014 | 2013 | ||||||||
Net loss available for stockholders | $ | (3,713,292 | ) | $ | (1,619,469 | ) | |||
Weighted average outstanding shares of | 42,392,913 | 32,339,542 | |||||||
common stock | |||||||||
Dilutive effect of securities | — | — | |||||||
Common stock and equivalents | 42,392,913 | 32,339,542 | |||||||
Net loss per share – Basic and diluted | $ | (0.09 | ) | $ | (0.05 | ) |
1_Description_of_Business_and_2
1. Description of Business and Summary of Significant Accounting Policies (Details Narrative) (USD $) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Accounting Policies [Abstract] | ||||
Restricted Shares Issued in Share Exchange Agreement | 33,000,000 | |||
Equity Deficit | ($7,657,359) | ($2,996,694) | ($1,267,559) | |
Working Capital Deficit | 4,786,756 | |||
Net Income Loss | ($1,045,239) | ($3,713,292) | ($1,619,469) |
2_Recapitalization_Recapitaliz
2. Recapitalization - Recapitalization (Details) (USD $) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Net loss | ($1,045,239) | ($3,713,292) | ($1,619,469) | |
Net loss per common share - Basic and diluted | ($0.09) | ($0.05) | ||
Accounts payable | 2,228,645 | 569,431 | ||
Common stock | 5,182 | |||
Additional paid-in capital | 1,848,172 | |||
Accumulated deficit | -9,510,713 | |||
Total stockholders deficit | -7,657,359 | -2,996,694 | -1,267,559 | |
Pro Forma [Member] | ||||
Total net revenues | 756,385 | 1,733,373 | ||
Net loss | -3,987,209 | -1,803,768 | ||
Net loss per common share - Basic and diluted | ($0.08) | ($0.04) | ||
Accounts payable | 363,676 | |||
Preferred stock | ||||
Common stock | 194,604 | |||
Additional paid-in capital | 91,046,859 | |||
Accumulated deficit | -91,605,139 | |||
Total stockholders deficit | ($363,676) |
2_Recapitalization_Details_Nar
2. Recapitalization (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Accounting Policies [Abstract] | |
Stock Issued in Share Exchange, Shares | 33,000,000 |
Stock Issued in Share Exchange, Price Per Share | $0.05 |
Stock Issued in Share Exchange, Consideration Received | $1,650,000 |
3_Receivables_Receivables_Deta
3. Receivables - Receivables (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Receivables [Abstract] | ||
Customer receivables | $41,234 | $52,916 |
Less: Allowance for uncollectible accounts | -13,897 | -14,891 |
Receivables, Net | $27,337 | $38,025 |
4_Inventory_Inventory_Details
4. Inventory - Inventory (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Inventory Disclosure [Abstract] | ||
Raw materials | $420,424 | $418,796 |
Less: Reserve | -171,762 | -4,488 |
Inventory, Net | $248,662 | $414,308 |
5_Intangible_Assets_Intangible
5. Intangible Assets - Intangible Assets (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Intangible Assets, Gross | $2,363,635 | |
Less: accumulated amortization | -1,244,085 | |
Intangible Assets, Net | 1,119,550 | |
UL Listings and Trademarks | ||
Intangible Assets, Gross | 1,639,840 | |
Estimated Useful Life | 15 years | |
Marketing and Design | ||
Intangible Assets, Gross | $723,795 | |
Estimated Useful Life | 5 years |
5_Intangible_Assets_Details_Na
5. Intangible Assets (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Amortization Expense | $179,431 | $227,267 | $972,895 |
Impairment Loss | ($972,895) |
6_Property_and_Equipment_Prope
6. Property and Equipment - Property and Equipment (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property and Equipment, Gross | $361,752 | |
Less: accumulated depreciation | -338,331 | |
Property and Equipment, Net | 23,421 | |
Computers and Software | ||
Property and Equipment, Gross | 210,849 | |
Estimated Useful Life | 5 years | |
Office Furniture and Fixtures | ||
Property and Equipment, Gross | 70,245 | |
Estimated Useful Life | 7 years | |
Leasehold Improvements | ||
Property and Equipment, Gross | 57,025 | |
Estimated Useful Life | 5 years | |
Tooling and Equipment | ||
Property and Equipment, Gross | $23,633 | |
Estimated Useful Life | 5 years |
6_Property_and_Equipment_Detai
6. Property and Equipment (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation Expense | $19,166 | $10,786 |
Impairment Expense | $4,505 |
7_Debt_Debt_Details
7. Debt - Debt (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 | ||
Debt Disclosure [Abstract] | ||||
Line of credit | $47,000 | [1] | $47,000 | [1] |
Note payable to distribution partner | 580,000 | [2] | 550,347 | [2] |
Investor debt | 267,787 | [3] | 267,787 | [3] |
Related party debt | 3,840,749 | [4] | 2,965,863 | [4] |
Other notes payable | 57,692 | [5] | 60,836 | [5] |
Cash draw agreements | 255,793 | [6] | 46,663 | [6] |
Convertible promissory notes | 217,500 | [7] | [7] | |
Total | 5,266,521 | 3,938,496 | ||
Less: current portion | 2,373,307 | 3,938,496 | ||
Debt, long-term portion | $2,893,214 | |||
[1] | A - Line of Credit - We utilized this bank line of credit for working capital purposes. The outstanding obligation is due on demand, has a stated initial interest rate of 10.5% that is subject to adjustment, and is guaranteed by our majority shareholder. | |||
[2] | B - Note Payable to Distribution Partner - Note payable to a significant European distribution partner, entered into in October 2014, bearing interest at 5% payable quarterly, with principal payable monthly through September 2019. The 2014 note payable aggregated the 2007 promissory note, accrued interest and accounts payable. The December 31, 2013, balance represents the outstanding principal balance plus 5% annual interest due on a 2007 promissory note with 5% annual interest. | |||
[3] | C - Investor Debt - Notes payable to lenders having an ownership interest in Holdings at December 31, 2014, and Energie at December 31, 2013. These loans are not collateralized. All have been renegotiated to have a maturity of December 31, 2014. | |||
[4] | D - Related Party Debt - The following summarizes notes payable to related parties. D1 - Notes payable to Symbiote, Inc. (Symbiote), entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 notes aggregated the previous notes payable, accrued interest and accounts payable. The 2014 notes are not convertible. The previous note agreement gave Symbiote, at its option at any time after default, the right to convert any remaining balance of the notes to equity at a rate equal to the proportion of the remaining balance of the note divided by $4,000,000 enterprise value. Symbiote holds the largest ownership percentage in Holdings, is the lessor of our manufacturing facility, and the provider of our payroll services. We evaluated the agreement for derivatives and determined that it does not qualify for derivative treatment for financial reporting purposes, because the agreement relates to our own equity, and the debt and the equity are not closely related. We also determined this does not qualify as a beneficial conversion feature. Accordingly, the 2013 balance was reported at the carrying amount. D2 - Note payable to an executive vice president, entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 note aggregated the previous note payable, accrued interest and accounts payable. D3 - Note payable to our chief executive officer (CEO), entered into in December 2014, with monthly principal and interest payable through November 2015. D4 - Notes payable to the spouse of our CEO, due upon demand. | |||
[5] | E - Other Notes Payable - Represents the outstanding principal balance on two separate notes bearing interest at approximately 12% annually. Although we are past due on our required payments, the loan holders have not made demand for repayment of the principal and interest due. In the event we receive proceeds as the beneficiary of a life insurance policy covering our majority shareholder, repayment of principal and interest is due on these notes prior to using the proceeds for any other purpose. | |||
[6] | F - Cash draw agreements - Under these agreements, the lender advances us the principal balance and then automatically withdraws a stated amount each business day. Accordingly, there is no stated interest rate. The total remaining daily payments due under these arrangements was $332,184 as of December 31, 2014. The maturity dates of the agreements range from April to October 2015. | |||
[7] | G - Convertible promissory notes - Represents the outstanding principal balance on two separate convertible promissory notes with interest of 8% annually, due June 2015. At the option of the holder, the notes may be settled in cash or converted into shares of our common stock at any time beginning 180 days from the date of the notes at a price equal to 61% of the average closing bid price of our common stock during the 10 trading days immediately preceding the date of conversion. In the event we fail to pay the notes when they become due, the balance due under the notes incurs interest at the rate of 22% per annum. The notes contain additional terms and conditions normally included in instruments of this kind, including a right of first refusal wherein we have granted the holders the right to match the terms of any future financing in which we engage on the same terms and contemplated in such future financing. We estimate that the fair value of the convertible debt approximates the face value, so no value has been assigned to the beneficial conversion feature. |
7_Debt_Investor_Debt_Details
7. Debt - Investor Debt (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Investor Debt Balances | $5,266,521 | $3,938,496 |
Investor Debt 1 | ||
Investor Debt Balances | 87,787 | 87,787 |
Investor Debt, Interest Rate | 24.00% | |
Investor Debt 2 | ||
Investor Debt Balances | 50,000 | 50,000 |
Investor Debt, Interest Rate | 24.00% | |
Investor Debt 3 | ||
Investor Debt Balances | 50,000 | 50,000 |
Investor Debt, Interest Rate | 24.00% | |
Investor Debt 4 | ||
Investor Debt Balances | 25,000 | 25,000 |
Investor Debt, Interest Rate | 8.00% | |
Investor Debt 5 | ||
Investor Debt Balances | 25,000 | 25,000 |
Investor Debt, Interest Rate | 8.00% | |
Investor Debt 6 | ||
Investor Debt Balances | 20,000 | 20,000 |
Investor Debt, Interest Rate | 2.00% | |
Investor Debt 7 | ||
Investor Debt Balances | 10,000 | 10,000 |
Investor Debt, Interest Rate | 24.00% | |
Investor Debt Total | ||
Investor Debt Balances | $267,787 | $267,787 |
7_Debt_Related_Party_Debt_Deta
7. Debt - Related Party Debt (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | |||
D1 | ||||
Related Party Debt | $3,152,231 | [1] | $2,413,752 | [1] |
Related Party Debt, Interest Rate | 6.00% | [1] | ||
D2 | ||||
Related Party Debt | 497,130 | [2] | 448,611 | [2] |
Related Party Debt, Interest Rate | 12.00% | [2] | ||
D3 | ||||
Related Party Debt | 34,888 | [3] | [3] | |
Related Party Debt, Interest Rate | 12.00% | [3] | ||
D4 | ||||
Related Party Debt | 156,500 | [4] | 103,500 | [4] |
Related Party Debt, Interest Rate | 24.00% | [4] | ||
Related Party Total | ||||
Related Party Debt | $3,840,749 | $2,965,863 | ||
[1] | D1 - Notes payable to Symbiote, Inc. (Symbiote), entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 notes aggregated the previous notes payable, accrued interest and accounts payable. The 2014 notes are not convertible. The previous note agreement gave Symbiote, at its option at any time after default, the right to convert any remaining balance of the notes to equity at a rate equal to the proportion of the remaining balance of the note divided by $4,000,000 enterprise value. Symbiote holds the largest ownership percentage in Holdings, is the lessor of our manufacturing facility, and the provider of our payroll services. We evaluated the agreement for derivatives and determined that it does not qualify for derivative treatment for financial reporting purposes, because the agreement relates to our own equity, and the debt and the equity are not closely related. We also determined this does not qualify as a beneficial conversion feature. Accordingly, the 2013 balance was reported at the carrying amount. | |||
[2] | D2 - Note payable to an executive vice president, entered into in December 2014, with monthly principal and interest payable through November 2017. The 2014 note aggregated the previous note payable, accrued interest and accounts payable. | |||
[3] | D3 - Note payable to our chief executive officer (CEO), entered into in December 2014, with monthly principal and interest payable through November 2015. | |||
[4] | D4 - Notes payable to the spouse of our CEO, due upon demand. |
7_Debt_Future_Maturities_of_De
7. Debt - Future Maturities of Debt (Details) (USD $) | Dec. 31, 2014 |
Debt Disclosure [Abstract] | |
2015 | $2,373,307 |
2016 | 1,300,211 |
2017 | 1,373,003 |
2018 | 120,000 |
2019 | 100,000 |
Total | $5,266,521 |
8_Equity_Details_Narrative
8. Equity (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Equity [Abstract] | |
Preferred Stock, Shares Authorized | 5,000,000 |
Preferred Stock, Par Value | $0.00 |
Common Stock, Purchase Agreement, Shares | 5,000,000 |
Shares Issued for no proceeds | 2,000,000 |
Market Price of Shares Transferred | $40,000 |
9_Commitments_and_Contingencie2
9. Commitments and Contingencies - Commitments and Contingencies (Details) (USD $) | Dec. 31, 2014 |
Commitments and Contingencies Disclosure [Abstract] | |
2015 | $166,545 |
2016 | 168,811 |
2017 | 142,752 |
2018 | 28,890 |
Total | $506,998 |
9_Commitments_and_Contingencie3
9. Commitments and Contingencies (Details Narrative) (USD $) | Dec. 31, 2014 |
Unauthorized Expenditures | |
Unauthorized Expenditures | $91,172 |
Unauthorized Management Fees | |
Unauthorized Expenditures | $60,000 |
10_Income_Taxes_Components_of_
10. Income Taxes - Components of the Provision for Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Current tax provision | ||
Federal | ($775,545) | |
State | -100,938 | |
Total Current | -876,483 | |
Deferred tax provision | ||
Federal | 775,545 | |
State | 100,938 | |
Total Deferred | 876,483 | |
Total |
10_Income_Taxes_Components_of_1
10. Income Taxes - Components of Net Deferred Tax Assets and Liabilities (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current deferred tax asset (liability): | ||
Inventory reserve | $66,000 | |
Warranty reserve | 7,109 | |
Net operating loss carryforward | 876,483 | |
Valuation allowance | -949,592 | |
Total current | ||
Long-term deferred tax asset (liability) | ||
Long-lived assets | 136,132 | |
Valuation allowance | -136,132 | |
Total long-term | ||
Net deferred tax asset (liability) |
10_Income_Taxes_Reconciliation
10. Income Taxes - Reconciliation of Income Tax Provision (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit at statutory rate | ($1,262,519) | |
State income tax, net of Federal benefit | -113,471 | |
Change from LLC to C Corp | $284,869 | |
Other | 547700.00% | |
Valuation allowance | 108564400.00% | |
Income Tax Reconciliation |
11_Net_Loss_Per_Share_Net_Loss
11. Net Loss Per Share - Net Loss Per Share (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Earnings Per Share [Abstract] | ||
Net loss available for stockholders | ($3,713,292) | ($1,619,469) |
Weighted average outstanding shares of common stock | 42,392,913 | 32,339,542 |
Dilutive effect of securities | ||
Common stock and equivalents | $42,392,913 | $32,339,542 |
Net loss per share - Basic and diluted | ($0.09) | ($0.05) |