Note 1 - Organization, Basis of Presentation and Summary of Selected Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | 1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES |
|
Organization and Basis of Presentation |
|
These unaudited condensed consolidated financial statements and notes thereto, include the financial statements of VeriTeQ Corporation (“VC” or the "Company"), a Delaware corporation, and its wholly-owned subsidiary, VeriTeQ Acquisition Corporation (“VAC”), a Florida corporation. VC, VAC and VAC’s subsidiaries are referred to together as “VeriTeQ” or “the Company.” The Company’s business consists of ongoing efforts to provide implantable medical device identification. |
|
The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. These condensed consolidated interim financial statements have been prepared in accordance the instructions to Form 10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”) and therefore omit or condense certain footnotes and other information normally included in consolidated interim financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair presentation of the condensed consolidated interim financial statements have been made. Results of operations reported for interim periods may not be indicative of the results for the entire year. |
|
During the three months ended March 31, 2015 and 2014, comprehensive loss/income was equal to the net loss/income amounts presented for the respective periods in the accompanying condensed consolidated interim statements of operations. In addition, certain prior year balances have been reclassified to conform to the current presentation. |
|
Going Concern |
|
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant operating losses since its inception on December 14, 2011 and had a working capital deficit and accumulated deficit at March 31, 2015 of $7.9 million and $24.5 million, respectively. The Company’s cash position is critically deficient, and payments essential to the Company’s ability to operate are not being made in the ordinary course. Failure to raise capital in the coming days to fund the Company’s operations and failure to generate positive cash flow to fund such operations in the future will have a material adverse effect on the Company’s financial condition. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to the classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty. The auditor’s report on the Company’s financial statements for the years ended December 31, 2014 and 2013 expressed substantial doubt about the Company’s ability to continue as a going concern. |
|
The Company needs to raise additional funds immediately and continue to raise funds until it begins to generate sufficient cash through the sale of its products to fund its operations, and it may not be able to obtain the necessary financing on acceptable terms, or at all. During the three months ended March 31, 2015, the Company raised approximately $0.4 million from the issuance of convertible promissory notes (see note 4). |
|
The Company had a working capital deficit at March 31, 2015 and in order to operate its business for the next twelve months and beyond, the Company is attempting to generate sufficient cash from: (i) the sale of its equity securities; (ii) the issuance of additional promissory notes; (iii) its business operations; (iv) other investing and financing sources, including loans from related parties; and (v) other cash management initiatives, including working with the Company’s vendors and service providers to continue to allow for extended payment terms. |
|
Reverse Stock Split and Change in Par Value of Common Stock |
|
On December 18, 2014, an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse split of all of the outstanding shares of the Company’s common stock at a ratio of 1 for 1,000 (the “Reverse Stock Split”) was approved by the Company’s Stockholders. The Certificate of Amendment became effective on February 11, 2015, and at that time the Reverse Stock Split took place and each 1,000 shares of outstanding common stock of the Company was combined and automatically converted into one share of the Company’s common stock, with a par value of $0.00001 per share. In addition, the conversion and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options and convertible notes payable were proportionately adjusted at the 1:1,000 reverse split ratio consistent with the terms of such instruments. No fractional shares were issued as a result of the Reverse Stock Split, and shareholders received a cash payment in lieu of such fractional shares that they would otherwise be entitled. |
|
Also on December 18, 2014, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to (i) reduce the par value of the Company’s common stock from $0.01 per share to $0.00001 per share; and (ii) increase the number of shares of common stock that the Company is authorized to issue from 500 million to 10 billion. This amendment became effective on December 18, 2014. |
|
All share, per share and capital stock amounts for the three months ended March 31, 2014 have been restated to give effect to the Reverse Stock Split and to the change in the par value of the Company’s common stock. |
|
Use of Estimates |
|
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could be affected by those estimates. Included in these estimates are assumptions used in determining the lives of long-lived assets, in valuation models used in estimating the fair value of certain promissory notes, warrants, embedded conversion options and convertible preferred stock, stock-based compensation, royalty obligations and in determining valuation allowances for deferred tax assets. |
|
Inventory |
|
Inventory consisted of purchased finished goods at March 31, 2015 and December 31, 2014. Inventory is valued at the lower of the value using the first-in, first-out (“FIFO”) cost method, or market. |
|
Property and Equipment |
|
Property and equipment consists primarily of machinery and computer equipment and is stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful life of the related assets, generally ranging from 3 to 10 years. Depreciation expense for the three-months ended March 31, 2015 and 2014 was approximately $2,000 and $1,000, respectively. |
|
Intangible Assets |
|
The Company’s intangible assets (see note 2) are amortized on a straight-line basis over their expected economic lives ranging from 7 to 14 years. The lives were determined based upon the expected use of the asset, the ability to extend or renew patents, trademarks and other contractual provisions associated with the asset, the stability of the industry, expected changes in and replacement value of distribution networks and other factors deemed appropriate. The Company reviews its intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value of the asset exceeds the projected undiscounted cash flows, the Company is required to estimate the fair value of the asset and recognize an impairment charge to the extent that the carrying value of the asset exceeds its estimated fair value. The Company did not record any impairment charges during the three months ended March 31, 2015 and 2014. |
|
Revenue Recognition |
|
Product revenue is recognized at the time product is shipped and title has transferred, provided that a purchase order has been received or a contract has been executed, there are no uncertainties regarding customer acceptance, the sales price is fixed and determinable and collectability is deemed probable. If uncertainties regarding customer acceptance exist, the Company generally recognizes the revenue when such uncertainties are resolved. There are no significant post-contract support obligations at the time of revenue recognition. The Company’s accounting policy regarding vendor and post contract support obligations is based on the terms of the customers’ contracts and is billable upon occurrence of the post-sale support. Currently, there are no multiple element arrangements in connection with the Company’s product sales. Cost of products sold is recorded as the related revenue is recognized. |
|
Income Taxes |
|
The Company recognizes deferred tax liabilities and assets based on the temporary differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as amortization of intangible assets, deferred officers' compensation and stock-based compensation. A valuation allowance is provided against net deferred tax assets when the Company determines it is more likely than not that it will fail to generate sufficient taxable income to be able to realize the deferred tax assets. |
|
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of March 31, 2015 and December 31, 2014. |
|
Loss per Common Share and Common Share Equivalent |
|
Basic loss per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company. A reconciliation of the numerator and denominator used in determining (loss) income per share for the three months ended March 31, 2015 and 2014 is as follows: |
|
(in thousands, except share and per share amounts) | | 2015 | | | 2014 | |
Basic (loss) income per share: | | | | | | | | |
Net (loss) income | | $ | (809 | ) | | $ | 4,625 | |
Basic weighted-average shares outstanding | | | 5,233,308 | | | | 9,599 | |
(Loss) income per share - basic | | $ | (0.15 | ) | | $ | 481.82 | |
| | | | | | | | |
Numerator for diluted (loss) income per share: | | | | | | | | |
Net (loss) income | | $ | (809 | ) | | $ | 4,625 | |
Less: income associated with change in fair value of convertible note | | | - | | | | (2,432 | ) |
Net (loss) income for diluted (loss) income per share calculation | | $ | (809 | ) | | $ | 2,193 | |
| | | | | | | | |
Denominator for diluted (loss) income per share: | | | | | | | | |
Basic weighted-average shares outstanding | | | 5,233,308 | | | | 9,599 | |
Stock options | | | - | | | | 1,096 | |
Warrants | | | - | | | | 40 | |
Shares issuable upon conversion of promissory notes | | | - | | | | 2,266 | |
| | | 5,233,308 | | | | 13,001 | |
(Loss) income per share - diluted | | $ | (0.15 | ) | | $ | 168.68 | |
|
The following securities were excluded in the computation of dilutive loss per share for the three months ended March 31, 2015 and 2014 because their inclusion would have been anti-dilutive: |
|
| | 31-Mar-15 | | | 31-Mar-14 | |
Stock options | | | 2,197 | | | | 1,361 | |
Warrants | | | 2,657,952,539 | | | | 3,285 | |
Shares issuable upon conversion of preferred stock | | | 582,594,937 | | | | - | |
Shares issuable upon conversion of convertible notes payable | | | 3,253,454,688 | | | | 2,422 | |
| | | 6,494,004,361 | | | | 7,068 | |
|
Impact of Recently Issued Accounting Standards |
|
From time to time, the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”). |
|
In April of 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30);Simplifying the Presentation of Debt Issuance Costs, which is effective for fiscal years beginning after December 15, 2015. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt, consistent with debt discounts. Early adoption is permitted. The Company does not believe that adoption of this ASU will have a material impact on its consolidated financial statements. |
|
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Under ASU 2014-15, entities will be required to formally assess their ability to continue as a going concern and provide disclosures under certain circumstances. While current practice regarding such disclosures is often guided by U.S. auditing standards, the new standard explicitly requires the assessment at interim and annual periods, and provides management with its own disclosure guidance. The standard can be adopted early. The Company is currently assessing the impact that adopting these new assessment and disclosure requirements will have on its financial statements and footnote disclosures. See note 1 for the Company’s current disclosure about its ability to continue as a going concern. |
|
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those periods. Early adoption is not permitted. The FASB has proposed a one-year deferral of the effective date with the option to early adopt using the original effective date. Entities may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures. |