Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 11-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | Energie Holdings, Inc. | |
Entity Central Index Key | 774937 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
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 Common Stock, Shares Outstanding | 59,505,676 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
Balance_Sheets_Unaudited
Balance Sheets (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $2,643 | $43,879 |
Accounts receivable, net | 16,695 | 27,337 |
Inventory, net | 249,281 | 248,662 |
Prepaid expenses and other | 52,788 | 68,291 |
Total current assets | 321,407 | 388,169 |
Noncurrent assets: | ||
Other assets | 33,929 | 22,611 |
Total noncurrent assets | 33,929 | 22,611 |
Total assets | 355,336 | 410,780 |
Current liabilities: | ||
Accounts payable | 2,606,362 | 2,228,645 |
Accrued liabilities | 682,593 | 572,973 |
Debt, current portion | 2,741,275 | 2,373,307 |
Total current liabilities | 6,030,230 | 5,174,925 |
Debt, long-term portion | 2,574,750 | 2,893,214 |
Total liabilities | 8,604,980 | 8,068,139 |
Commitments and contingencies (Note 6) | ||
Equity: | ||
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2015 or December 31, 2014 | ||
Common stock, $.0001 par value; 250,000,000 shares authorized; 56,124,359 shares issued and outstanding at March 31, 2015 | 5,412 | 5,182 |
Additional paid-in capital | 1,867,942 | 1,848,172 |
Accumulated deficit | -10,122,998 | -9,510,713 |
Total deficit | -8,249,644 | -7,657,359 |
Total liabilities and equity | $355,336 | $410,780 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
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 | 56,124,359 | |
Common stock, shares outstanding | 56,124,359 | |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Sales revenue | $202,395 | $164,609 |
Cost of goods sold | -98,006 | -76,823 |
Gross profit | 104,389 | 87,786 |
Operating expenses: | ||
Research and development | 56,870 | 46,558 |
Sales and marketing | 43,470 | 37,114 |
General and administrative | 405,705 | 502,112 |
Total operating expenses | 506,045 | 585,784 |
Loss from operations | -401,656 | -497,998 |
Other income (expense): | ||
Interest expense | -200,360 | -87,570 |
Other | -10,269 | 33,245 |
Other income (expense), net | -210,629 | 54,325 |
Net loss | ($612,285) | ($552,323) |
Net loss per common share Basic and diluted | ($0.01) | ($0.02) |
Weighted average common shares outstanding: Basic and diluted | 54,560,257 | 32,339,542 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Operating Activities: | ||
Net loss | ($612,285) | ($552,323) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 42,254 | |
Amortization of debt issuance costs | -6,332 | |
Common stock issued for services | 5,000 | |
Expense converted to debt | 87,570 | |
Changes in operating assets and liabilities (net of Share Exchange): | ||
Accounts receivable | 10,642 | -38,665 |
Inventory | -619 | 9,962 |
Prepaid expenses and other | 10,517 | 7,005 |
Accounts payable | 377,717 | 252,105 |
Accrued liabilities | 109,620 | 10,217 |
Net cash used in operating activities | -105,740 | -181,875 |
Investing Activities: | ||
Intangible assets | -5,928 | |
Financing Activities: | ||
Proceeds from debt | 280,250 | 246,994 |
Payments of debt | -215,746 | |
Member activity | -86,649 | |
Net cash provided by financing activities | 64,504 | 160,345 |
Net change in cash | -41,236 | -27,458 |
Cash, beginning of period | 43,879 | 37,874 |
Cash, end of period | 2,643 | 10,416 |
Cash paid for: Interest | 77,685 | |
Debt converted to common stock | $15,000 |
1_Description_of_Business_and_
1. Description of Business and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2015 | |
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”, “Energie” 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 not effective until July 2, 2014, due to a variety of conditions subsequent that needed to be met which were met or waived. 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. | |
Énergie 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 condensed 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 three months ended March 31, 2015 and as of December 31, 2014. | |
The accompanying condensed consolidated balance sheet as of December 31, 2014, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the period ended December 31, 2014. | |
Going Concern | |
As shown in the accompanying financial statements, we had an equity deficit of $8,249,644 and a working capital deficit of $5,708,823 as of March 31, 2015, and have reported net losses of $612,285 and $552,323 for the three months ended March 31, 2015 and 2014, respectively. 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 condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. | |
Reclassifications | |
Certain prior year amounts have been reclassified to conform with the current year presentation. | |
Recently Issued Accounting Pronouncements | |
In January 2015, the FASB issued ASU No. 2015-01 (ASU 2015-01), Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the concept of extraordinary items from U.S. GAAP. The FASB released the new guidance as part of its simplification initiative, which, as explained in the ASU, is intended to identify, evaluate and improve areas of U.S. GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. We do not expect the impact of the adoption of ASU 2015-01 to be material to our consolidated financial statements. | |
In February 2015, the FASB issued ASU No. 2015-02 (ASU 2015-02), Consolidation (Topic 810) – Amendments to the Consolidation Analysis. ASU 2015-02 focuses on the consolidation evaluation for reporting organizations (public and private companies and not-for-profit organizations) that are required to evaluate whether they should consolidate certain legal entities. We do not expect the impact of the adoption of ASU 2015-02 to be material to our consolidated financial statements. |
2_Recapitalization
2. Recapitalization | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Business Combinations [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 condensed 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, 2014 are as follows: | |||||
Three months ended | |||||
31-Mar-14 | |||||
Pro forma results: | |||||
Total net revenues | $ | 164,609 | |||
Net loss | (725,748 | ) | |||
Net loss per common share: | |||||
Basic and diluted | $ | (0.01 | ) | ||
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_Accounts_receivable
3. Accounts receivable | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Receivables [Abstract] | |||||||||
3. Accounts receivable | Note 3 — Accounts receivable | ||||||||
The following is a summary of accounts receivable: | |||||||||
31-Mar-15 | |||||||||
31-Dec-14 | |||||||||
Customer receivables | $ | 29,575 | $ | 41,234 | |||||
Less: Allowance for uncollectible accounts | (12,880 | ) | (13,897 | ) | |||||
$ | 16,695 | $ | 27,337 | ||||||
4_Inventory
4. Inventory | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Inventory Disclosure [Abstract] | |||||||||
4. Inventory | Note 4 — Inventory | ||||||||
The following is a summary of inventory: | |||||||||
31-Mar-15 | |||||||||
31-Dec-14 | |||||||||
Raw materials | $ | 362,962 | $ | 420,424 | |||||
Less: reserve | (113,681 | ) | (171,762 | ) | |||||
$ | 249,281 | $ | 248,662 | ||||||
5_Debt
5. Debt | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||
5. Debt | Note 5 — Debt | ||||||||||||||
Debt is comprised of the following: | |||||||||||||||
Description | Note | March 31, | December 31, | ||||||||||||
2015 | 2014 | ||||||||||||||
Line of credit | A | $ | 47,000 | $ | 47,000 | ||||||||||
Note payable to distribution partner | B | 560,000 | 580,000 | ||||||||||||
Investor debt | C | 267,787 | 267,787 | ||||||||||||
Related party debt | D | 3,982,499 | 3,840,749 | ||||||||||||
Other notes payable | E | 55,286 | 57,692 | ||||||||||||
Cash draw notes | F | 200,953 | 255,793 | ||||||||||||
Convertible promissory notes | G | 202,500 | 217,500 | ||||||||||||
Total | 5,316,025 | 5,266,521 | |||||||||||||
Less: current portion | 2,741,275 | 2,373,307 | |||||||||||||
Debt, long-term portion | $ | 2,574,750 | $ | 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. | |||||||||||||||
C – Investor Debt – Notes payable to lenders having an ownership interest in Holdings at March 31, 2015 and December 31, 2014. These loans are not collateralized. The following summarizes the terms and balances of the investor debt: | |||||||||||||||
31-Mar-15 | 31-Dec-14 | 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 Parties Debt – The following summarizes notes payable to related parties: | |||||||||||||||
31-Mar-15 | 31-Dec-14 | Interest Rate | |||||||||||||
D1 | $ | 3,254,231 | $ | 3,152,231 | 6% | ||||||||||
D2 | 519,380 | 497,130 | 12% | ||||||||||||
D3 | 34,888 | 34,888 | 12% | ||||||||||||
D4 | 174,000 | 156,500 | 24% | ||||||||||||
Total | $ | 3,982,499 | $ | 3,840,749 | |||||||||||
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. | |||||||||||||||
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. 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 $251,189 as of March 31, 2015. The maturity dates of the agreements range from April to October 2015. | |||||||||||||||
G – Convertible promissory notes – Represents the outstanding principal balance on separate convertible promissory notes to two entities with interest of 8% annually, due at various dates ranging from May through December 2015. At the option of the holders, 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 conversion feature is minimal, so no value has been assigned to the beneficial conversion feature. During the quarter ended March 31, 2015, one of the lenders converted $15,000 of principal into 2,307,692 shares of common stock. |
6_Contingencies
6. Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
6. Contingencies | Note 6 — 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. |
7_Subsequent_Events
7. Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
7. Subsequent Events | Note 7 — Subsequent Events |
There are no events subsequent to March 31, 2015 and up to the date of this filing that would require disclosure. | |
8_Net_Loss_Per_Share
8. Net Loss Per Share | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Per Share [Abstract] | |||||||||
8. Net Loss Per Share | Note 8 — 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. 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 three months ended March 31, 2015. Additionally, Holdings did not exist in 2013, so we have used the weighted-average number of common shares of Holdings that were outstanding for the three months ended March 31, 2015, 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: | |||||||||
Three months ended March 31, | |||||||||
2015 | 2014 | ||||||||
Net loss | $ | (612,285 | ) | $ | (552,323 | ) | |||
Weighted average outstanding shares of common stock | 54,560,257 | 32,339,542 | |||||||
Dilutive effect of stock options and warrants | — | — | |||||||
Common stock and equivalents | 54,560,257 | 32,339,542 | |||||||
Net loss per share – Basic and diluted | $ | (0.01 | ) | $ | (0.02 | ) | |||
There are no dilutive instruments outstanding during the three months ended March 31, 2015. |
1_Description_of_Business_and_1
1. Description of Business and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Accounting Policies [Abstract] | |
Formation of the Company | Formation of the Company |
On December 31, 2013, Energie Holdings, Inc. (“we,” “us,” “our,” the “Company”, “Energie” 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 not effective until July 2, 2014, due to a variety of conditions subsequent that needed to be met which were met or waived. 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 | 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. | |
Énergie 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 condensed 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 three months ended March 31, 2015 and as of December 31, 2014. | |
The accompanying condensed consolidated balance sheet as of December 31, 2014, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the period ended December 31, 2014. | |
Going Concern | Going Concern |
As shown in the accompanying financial statements, we had an equity deficit of $8,249,644 and a working capital deficit of $5,708,823 as of March 31, 2015, and have reported net losses of $612,285 and $552,323 for the three months ended March 31, 2015 and 2014, respectively. 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 condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. | |
Reclassifications | Reclassifications |
Certain prior year amounts have been reclassified to conform with the current year presentation. | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements |
In January 2015, the FASB issued ASU No. 2015-01 (ASU 2015-01), Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the concept of extraordinary items from U.S. GAAP. The FASB released the new guidance as part of its simplification initiative, which, as explained in the ASU, is intended to identify, evaluate and improve areas of U.S. GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements. We do not expect the impact of the adoption of ASU 2015-01 to be material to our consolidated financial statements. | |
In February 2015, the FASB issued ASU No. 2015-02 (ASU 2015-02), Consolidation (Topic 810) – Amendments to the Consolidation Analysis. ASU 2015-02 focuses on the consolidation evaluation for reporting organizations (public and private companies and not-for-profit organizations) that are required to evaluate whether they should consolidate certain legal entities. We do not expect the impact of the adoption of ASU 2015-02 to be material to our consolidated financial statements. |
2_Recapitalization_Tables
2. Recapitalization (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Business Combinations [Abstract] | |||||
Recapitalization | Three months ended | ||||
31-Mar-14 | |||||
Pro forma results: | |||||
Total net revenues | $ | 164,609 | |||
Net loss | (725,748 | ) | |||
Net loss per common share: | |||||
Basic and diluted | $ | (0.01 | ) | ||
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_Accounts_receivable_Tables
3. Accounts receivable (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Receivables [Abstract] | |||||||||
Accounts Receivable | 31-Mar-15 | ||||||||
31-Dec-14 | |||||||||
Customer receivables | $ | 29,575 | $ | 41,234 | |||||
Less: Allowance for uncollectible accounts | (12,880 | ) | (13,897 | ) | |||||
$ | 16,695 | $ | 27,337 |
4_Inventory_Tables
4. Inventory (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Inventory Disclosure [Abstract] | |||||||||
Inventory | 31-Mar-15 | ||||||||
31-Dec-14 | |||||||||
Raw materials | $ | 362,962 | $ | 420,424 | |||||
Less: reserve | (113,681 | ) | (171,762 | ) | |||||
$ | 249,281 | $ | 248,662 |
5_Debt_Tables
5. Debt (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2015 | |||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||
Debt | Description | Note | March 31, | December 31, | |||||||||||
2015 | 2014 | ||||||||||||||
Line of credit | A | $ | 47,000 | $ | 47,000 | ||||||||||
Note payable to distribution partner | B | 560,000 | 580,000 | ||||||||||||
Investor debt | C | 267,787 | 267,787 | ||||||||||||
Related party debt | D | 3,982,499 | 3,840,749 | ||||||||||||
Other notes payable | E | 55,286 | 57,692 | ||||||||||||
Cash draw notes | F | 200,953 | 255,793 | ||||||||||||
Convertible promissory notes | G | 202,500 | 217,500 | ||||||||||||
Total | 5,316,025 | 5,266,521 | |||||||||||||
Less: current portion | 2,741,275 | 2,373,307 | |||||||||||||
Debt, long-term portion | $ | 2,574,750 | $ | 2,893,214 | |||||||||||
Investor Debt | |||||||||||||||
31-Mar-15 | 31-Dec-14 | 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 Parties Debt | 31-Mar-15 | 31-Dec-14 | Interest Rate | ||||||||||||
D1 | $ | 3,254,231 | $ | 3,152,231 | 6% | ||||||||||
D2 | 519,380 | 497,130 | 12% | ||||||||||||
D3 | 34,888 | 34,888 | 12% | ||||||||||||
D4 | 174,000 | 156,500 | 24% | ||||||||||||
Total | $ | 3,982,499 | $ | 3,840,749 |
8_Net_Loss_Per_Share_Tables
8. Net Loss Per Share (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Net Loss Per Share | Three months ended March 31, | ||||||||
2015 | 2014 | ||||||||
Net loss | $ | (612,285 | ) | $ | (552,323 | ) | |||
Weighted average outstanding shares of common stock | 54,560,257 | 32,339,542 | |||||||
Dilutive effect of stock options and warrants | — | — | |||||||
Common stock and equivalents | 54,560,257 | 32,339,542 | |||||||
Net loss per share – Basic and diluted | $ | (0.01 | ) | $ | (0.02 | ) |
1_Description_of_Business_and_2
1. Description of Business and Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||||
Restricted Shares Issued in Share Exchange Agreement | 33,000,000 | |||
Equity Deficit | ($8,249,644) | ($7,657,359) | ||
Working Capital Deficit | 5,708,823 | |||
Net Income Loss | ($612,285) | ($552,323) |
2_Recapitalization_Recapitaliz
2. Recapitalization - Recapitalization (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Net loss | ($612,285) | ($552,323) | |
Net loss per common share - Basic and diluted | ($0.01) | ($0.02) | |
Accounts payable | 2,606,362 | 2,228,645 | |
Preferred stock | |||
Common stock | 5,412 | 5,182 | |
Additional paid-in capital | 1,867,942 | 1,848,172 | |
Accumulated deficit | -10,122,998 | -9,510,713 | |
Total stockholders deficit | -8,249,644 | -7,657,359 | |
Pro Forma [Member] | |||
Total net revenues | 164,609 | ||
Net loss | -725,748 | ||
Net loss per common share - Basic and diluted | ($0.01) | ||
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 | |
Business Combinations [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_Accounts_receivable_Accounts
3. Accounts receivable - Accounts Receivable (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Receivables [Abstract] | ||
Customer receivables | $29,575 | $41,234 |
Less: Allowance for uncollectible accounts | -12,880 | -13,897 |
Receivables, Net | $16,695 | $27,337 |
4_Inventory_Inventory_Details
4. Inventory - Inventory (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw materials | $362,962 | $420,424 |
Less: Reserve | -113,681 | -171,762 |
Inventory, Net | $249,281 | $248,662 |
5_Debt_Debt_Details
5. Debt - Debt (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | ||
Debt Disclosure [Abstract] | ||||
Line of credit | $47,000 | [1] | $47,000 | [1] |
Note payable to distribution partner | 560,000 | [2] | 580,000 | [2] |
Investor debt | 267,787 | [3] | 267,787 | [3] |
Related party debt | 3,982,499 | [4] | 3,840,749 | [4] |
Other notes payable | 55,286 | [5] | 57,692 | [5] |
Cash draw agreements | 200,953 | [6] | 255,793 | [6] |
Convertible promissory notes | 202,500 | [7] | 217,500 | [7] |
Total | 5,316,025 | 5,266,521 | ||
Less: current portion | 2,741,275 | 2,373,307 | ||
Debt, long-term portion | $2,574,750 | $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. | |||
[3] | C - Investor Debt - Notes payable to lenders having an ownership interest in Holdings at March 31, 2015 and December 31, 2014. These loans are not collateralized. | |||
[4] | D - Related Parties Debt - The following summarizes notes payable to related parties: | |||
[5] | E - Other Notes Payable - Represents the outstanding principal balance on two separate notes bearing interest at approximately 12% annually. 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 $251,189 as of March 31, 2015. The maturity dates of the agreements range from April to October 2015. | |||
[7] | G - Convertible promissory notes - Represents the outstanding principal balance on separate convertible promissory notes to two entities with interest of 8% annually, due at various dates ranging from May through December 2015. At the option of the holders, 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 conversion feature is minimal, so no value has been assigned to the beneficial conversion feature. During the quarter ended March 31, 2015, one of the lenders converted $15,000 of principal into 2,307,692 shares of common stock. |
5_Debt_Investor_Debt_Details
5. Debt - Investor Debt (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Investor Debt Balances | $5,316,025 | $5,266,521 |
Investor 1 [Member] | ||
Investor Debt Balances | 87,787 | 87,787 |
Investor Debt, Interest Rate | 24.00% | |
Investor 2 [Member] | ||
Investor Debt Balances | 50,000 | 50,000 |
Investor Debt, Interest Rate | 24.00% | |
Investor 3 [Member] | ||
Investor Debt Balances | 50,000 | 50,000 |
Investor Debt, Interest Rate | 24.00% | |
Investor 4 [Member] | ||
Investor Debt Balances | 25,000 | 25,000 |
Investor Debt, Interest Rate | 8.00% | |
Investor 5 [Member] | ||
Investor Debt Balances | 25,000 | 25,000 |
Investor Debt, Interest Rate | 8.00% | |
Investor 6 [Member] | ||
Investor Debt Balances | 20,000 | 20,000 |
Investor Debt, Interest Rate | 2.00% | |
Investor 7 [Member] | ||
Investor Debt Balances | 10,000 | 10,000 |
Investor Debt, Interest Rate | 24.00% | |
Investor Debt Total [Member] | ||
Investor Debt Balances | $267,787 | $267,787 |
5_Debt_Related_Parties_Debt_De
5. Debt - Related Parties Debt (Details) (USD $) | 3 Months Ended | |||
Mar. 31, 2015 | Dec. 31, 2014 | |||
D 1 [Member] | ||||
Related Party Debt | $3,254,231 | [1] | $3,152,231 | [1] |
Related Party Debt, Interest Rate | 6.00% | |||
D 2 [Member] | ||||
Related Party Debt | 519,380 | [2] | 497,130 | [2] |
Related Party Debt, Interest Rate | 12.00% | |||
D 3 [Member] | ||||
Related Party Debt | 34,888 | [3] | 34,888 | [3] |
Related Party Debt, Interest Rate | 12.00% | |||
D 4 [Member] | ||||
Related Party Debt | 174,000 | [4] | 156,500 | [4] |
Related Party Debt, Interest Rate | 24.00% | |||
Related Party Debt Total [Member] | ||||
Related Party Debt | $3,982,499 | $3,840,749 | ||
[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. | |||
[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. |
6_Contingencies_Details_Narrat
6. Contingencies (Details Narrative) (USD $) | Mar. 31, 2015 |
Unauthorized Expenditures | |
Unauthorized Expenditures | $91,172 |
Unauthorized Management Fees | |
Unauthorized Expenditures | $60,000 |
8_Net_Loss_Per_Share_Net_Loss_
8. Net Loss Per Share - Net Loss Per Share (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Earnings Per Share [Abstract] | ||
Net loss | ($612,285) | ($552,323) |
Weighted average outstanding shares of common stock | 54,560,257 | 32,339,542 |
Dilutive effect of stock options and warrants | ||
Common stock and equivalents | $54,560,257 | $32,339,542 |
Net loss per share b Basic and diluted | ($0.01) | ($0.02) |