NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note
1 – Organization and Basis of Presentation
Organization
and Principal Business Activities
Nxt-ID, Inc. (“Nxt-ID” or the
“Company”) was incorporated in the State of Delaware on February 8, 2012. The Company is a security technology company
and operates its business in one segment – hardware and software security systems and applications. The Company is engaged
in the development of proprietary products and solutions that serve multiple end markets, including the security, healthcare, financial
technology and the Internet of Things (“IoT”) markets. The Company evaluates the performance of its business on, among
other things, profit and loss from operations. With extensive experience in access control, biometric and behavior-metric identity
verification, security and privacy, encryption and data protection, payments, miniaturization, and sensor technologies, the Company
develops and markets solutions for payment, IoT and healthcare applications.
The
Company’s wholly-owned subsidiary, LogicMark LLC (“LogicMark”), manufactures and distributes non-monitored and
monitored personal emergency response systems sold through the United States Department of Veterans Affairs, healthcare durable
medical equipment dealers and distributors and monitored security dealers and distributors.
The
Company’s former wholly-owned subsidiary, Fit Pay, Inc., had a proprietary technology platform that delivers payment,
credential management, authentication and other secure services to the IoT ecosystem. The platform uses tokenization, a
payment security technology that replaces cardholders’ account information with a unique digital identifier, to
transact highly secure contactless payment and authentication services. On September 21, 2018, the Company announced
that its board of directors approved a plan to separate the Company’s financial technology business from our healthcare
business into an independent publicly traded company. The Company originally planned to distribute shares of PartX, Inc., a
newly created company and wholly-owned subsidiary of the Company (“PartX”), to our stockholders through the
execution of a spin-off. As a result, the Company reclassified its financial technology business to discontinued operations
for all periods reported. The Company’s financial technology business was comprised of its Fit Pay subsidiary and the
intellectual property developed by the Company, including the Flye Smartcard and the Wocket. On April 29, 2019, a
Registration Statement on Form 10 was filed by PartX with the SEC in connection with the planned spin-off of our payments,
authentication and credential management business. On August 19, 2019, the
Company’s subsidiary, PartX notified the SEC that it was withdrawing the Registration Statement on Form 10. With the
approval of the Company’s board of directors, and upon similar terms and conditions to those set forth in that loan
agreement, the Company entered into a non-binding letter of intent for the sale of its Fit Pay subsidiary, excluding
certain assets on August 6, 2019. In connection with the letter of intent, the Company was advanced $500,000 of non-interest
bearing working capital for Fit Pay. On September 9, 2019, the Company completed the sale of its Fit Pay subsidiary to Garmin
International, Inc. for $3.32 million in cash.
Basis
of Presentation
The accompanying unaudited condensed consolidated
financial statements as of March 31, 2020, and for the three months ended March 31, 2020 and 2019 have been prepared in accordance
with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial
information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC and on the same basis as the
Company prepares its annual audited consolidated financial statements. The unaudited condensed consolidated balance sheet as of
March 31, 2020 and the condensed consolidated statements of operations, changes in equity and cash flows for the three months ended
March 31, 2020 and March 31, 2019 are unaudited, but include all adjustments, consisting only of normal recurring adjustments,
which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the
periods presented. The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected
for the year ending December 31, 2020, or for any future interim period. The condensed consolidated balance sheet at December 31,
2019 has been derived from audited consolidated financial statements. However, it does not include all of the information and notes
required by U.S. GAAP for complete consolidated financial statements. The accompanying condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019 and the notes thereto
included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 30, 2020.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note
2 – Liquidity
The Company generated operating
income of $1,039,406 and net income of $438,064 during the three months ended March 31, 2020. As of March 31, 2020, the
Company had cash and stockholders’ equity of $1,438,885 and $7,284,280, respectively. At March 31, 2020, the Company had a
working capital deficiency of $2,003,038.
Given the Company’s cash
position at March 31, 2020 and its projected cash flow from operations, the Company believes that it will have sufficient
capital to sustain operations for a period of one year following the date of this filing. The Company may also raise funds
through equity or debt offerings to increase its working capital and to accelerate the execution of its long-term strategic
plan to develop and commercialize its core products and to fulfill its product development commitments.
As described in Note 7, the
coronavirus could significantly impact the Company’s business, which would require the Company to raise funds to
assist with its working capital needs.
Note
3 – Summary Of Significant Accounting Policies
Use
of estimates in the financial statements
The preparation of condensed 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 reporting period. The Company’s management evaluates
these significant estimates and assumptions including those related to the fair value of acquired assets and liabilities, stock
based compensation, derivative instruments, income taxes, accounts receivable and inventories, right-of-use assets and other matters
that affect the condensed consolidated financial statements and disclosures. Actual results could differ from those estimates.
Principles
of consolidation
The condensed consolidated financial statements
include the accounts of Nxt-ID and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in
consolidation.
Revenue
Recognition
The Company’s revenues consist of
product sales to either end customers or to distributors and its sales are recognized at a point-in-time under the core principle
of recognizing revenue when control of the product transfers to the customer. The Company recognizes revenue when it ships or delivers
the product from its fulfillment center to its customer, when the customer accepts and has legal title of the product, and the
Company has a present right to payment for the product. For the three months ended March 31, 2020 and 2019, the Company had no
sales recognized over time. The Company invoices its customers at the same time that the Company’s performance obligation
is satisfied. The Company generally receives customer orders with a specified delivery date and orders typically fluctuate from
month-to-month based on customer demand and general business conditions.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
The Company offers standard product warranty
coverage which provides assurance that the Company’s products will conform to the contractually agreed-upon specifications
for a limited period from the date of shipment. The Company’s warranty liabilities and related expense have not been material
and were not material in the accompanying condensed consolidated financial statements as of March 31, 2020 and December 31, 2019,
and for the three months ended March 31, 2020 and 2019.
Accounts
Receivable
Accounts receivable is stated at net realizable
value. The Company regularly reviews accounts receivable balances and adjusts the receivable reserves as necessary whenever events
or circumstances indicate the carrying value may not be recoverable. At March 31, 2020 and December 31, 2019, the Company had an
allowance for doubtful accounts of $126,733.
Inventory
The Company performs regular reviews of
inventory quantities on hand and evaluates the realizable value of its inventories. The Company adjusts the carrying value of the
inventory as necessary with estimated valuation reserves for excess, obsolete, and slow-moving inventory by comparing the individual
inventory parts to forecasted product demand or production requirements. As of March 31, 2020, inventory was comprised of $203,481
in raw materials and $746,302 in finished goods on hand. Inventory at December 31, 2019 was comprised of $167,357 in raw materials
and $1,135,922 in finished goods on hand. The Company is required to prepay for certain inventory with certain vendors until credit
terms can be established. As of March 31, 2020 and December 31, 2019, the Company had prepaid inventory of $197,731 and $201,496,
respectively. These prepayments were made primarily for finished goods inventory, and prepaid inventory is included in prepaid
expenses and other current assets on the condensed consolidated balance sheets.
Other
Intangible Assets
At March 31, 2020, the other intangible
assets relating to the acquisition of LogicMark are comprised of patents of $2,726,529; trademarks of $1,025,866; and customer
relationships of $2,060,037. At December 31, 2019, the other intangible assets relating to the acquisition of LogicMark are comprised
of patents of $2,818,434; trademarks of $1,041,370; and customer relationships of $2,140,473. The Company will continue amortizing
these intangible assets using the straight-line method over their estimated useful lives which for the patents, trademarks and
customer relationships are 11 years; 20 years; and 10 years, respectively. During the three months ended March 31, 2020 and 2019,
the Company had amortization expense of $187,845 and $187,845, respectively, related to the LogicMark intangible assets.
As of March 31, 2020, total amortization
expense estimated for the remainder of fiscal year 2020 is approximately $574,000, and for each of the next five fiscal years,
2021 through 2025, the total amortization expense is estimated to be as follows: 2021 - $762,000; 2022 - $762,000; 2023 - $762,000;
2024 - $762,000; and 2025 - $762,000.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Stock-Based
Compensation
The Company accounts for share-based awards
exchanged for employee services at the estimated grant date fair value of the award. The Company accounts for equity instruments
issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject to
periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation
charges are amortized over the vesting period or as earned. Stock-based compensation is recorded in the same component of operating
expenses as if it were paid in cash. The Company generally issues new shares of common stock to satisfy conversion and warrant
exercises.
Net
Loss per Share
Basic loss per share was computed
using the weighted average number of shares of common stock outstanding. Diluted loss per share includes the effect of
diluted common stock equivalents. Potentially dilutive securities from the exercise of stock options to purchase 114,288
shares of common stock and warrants to purchase 6,973,221 shares of common stock as of March 31, 2020 were excluded from the
computation of diluted net loss per share because the exercise price of the common stock equivalents was greater than the
average market price of the common shares for the three month period ended March 31, 2020. As of March 31,
2019, potentially dilutive securities from the exercise of warrants to purchase 4,782,448 shares of common stock were
excluded from the computation of diluted net loss per share because the effect of their inclusion would have been
anti-dilutive.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Recent
Accounting Pronouncements
In August 2018, the Financial Accounting
Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-13, which eliminates,
adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework
project. Adoption of this guidance is required for fiscal years and interim periods within those fiscal years, beginning after
December 15, 2019. This ASU was adopted and did not have a material impact on the Company’s condensed consolidated financial
statements.
Other recent accounting standards that
have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note
4 – Discontinued Operations
The
following table presents the financial results of the financial technology product line classified as discontinued operations (See
Note 1) in the condensed consolidated statements of operations as of March 31, 2019:
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
|
|
|
Net sales
|
|
$
|
221,476
|
|
Cost of sales
|
|
|
62,981
|
|
Gross profit
|
|
|
158,495
|
|
Operating expenses
|
|
|
1,162,358
|
|
Interest expense
|
|
|
1,711
|
|
Loss from discontinued operations
|
|
$
|
(1,005,574
|
)
|
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note
5 – Debt refinancing
On
May 24, 2018, LogicMark, a wholly owned subsidiary of Nxt-ID, entered into a Senior Secured Credit Agreement (the “Credit
Agreement”) with the lenders thereto and Sagard Holdings Manager LP, as administrative agent and collateral agent for the
lenders party to the Credit Agreement (collectively, the “Lender”), whereby the Lender extended a term loan (the “Term
Loan”) to LogicMark in the principal amount of $16,000,000. The original maturity date of the Term Loan was May 24, 2023.
The Term Loan Facility with Sagard Holdings Manager LP was repaid on May 3, 2019 with Term Loan proceeds received from CrowdOut
Capital LLC (see below). The outstanding principal amount of the Term Loan bore interest at a rate of LIBOR, adjusted monthly,
plus 9.5% per annum. The Company incurred $1,253,970 in deferred debt issue costs related to the Term Loan. During the three months
ended March 31, 2019, the Company amortized $62,698 of the deferred debt issue costs which is included in interest expense in the
condensed consolidated statement of operations.
On May 24, 2018
the Company recorded a debt discount of $705,541. The debt discount was attributable to the aggregate fair value of the warrants
that were issued to the Lender in connection with the Term Loan Facility with Sagard Holdings Manager LP. The debt discount was
amortized using the effective interest method over the five-year term of the Term Loan. During the three months ended March 31,
2019, the Company recorded $35,277 of debt discount amortization related to the Sagard Warrants. The debt discount amortization
is included as part of interest expense in the condensed consolidated statement of operations.
On May 3, 2019, LogicMark completed the
closing of a $16,500,000 senior secured term loan with the lenders thereto and CrowdOut Capital LLC, as administrative agent. The
Company used the proceeds from the term loan to repay LogicMark’s existing term loan facility with Sagard Holdings Manager
LP and to pay other costs related to the refinancing. The maturity date of the term loan with CrowdOut Capital LLC is May 3, 2022
and requires the Company to make minimum principal payments over the three-year term amortized over 96 months. During the three
months ended March 31, 2020, the Company made scheduled principal repayments totaling $515,625. In addition, the Company prepaid
an additional $150,000 of the term loan with CrowdOut Capital LLC in March 2020 with cash flow generated from operations. The
outstanding principal amount of the Term Loan bears interest at a rate of LIBOR, adjusted monthly, plus 11.0% per annum (approximately
13.0% as of March 31, 2020). The Company incurred $412,500 in original issue discount for closing related fees charged by the Lender.
During the three months ended March 31, 2020, the Company amortized $28,672 of the original issue discount which is included in
interest expense in the condensed consolidated statement of operations. At March 31, 2020 the unamortized balance of the original
issue discount was $215,398. The Company also incurred $1,831,989 in deferred debt issue costs related to the term loan. The
deferred debt issue costs include an exit fee of $1,072,500 which is equivalent to 6.5% of the term loan amount borrowed from CrowdOut
Capital. The exit fee is due to CrowdOut Capital upon the earlier of final repayment of the term loan facility or the maturity
date. The liability for the exit fee is included as part of other long-term liabilities in the Company’s condensed consolidated
balance sheet. During the three months ended March 31, 2020, the Company amortized $148,317, respectively of the deferred debt
issue costs which is included in interest expense in the condensed consolidated statements of operations. At March 31, 2020 the
unamortized balance of deferred debt issue costs was $1,114,248.
Debt Maturity
The maturity of the Company’s term
debt is as follows:
2020 (remainder)
|
|
$
|
1,546,875
|
|
2021
|
|
|
2,062,500
|
|
2022
|
|
|
9,033,377
|
|
Total term debt
|
|
$
|
12,642,752
|
|
The
Credit Agreement contains customary financial covenants. As of March 31, 2020, the Company was in compliance with such covenants.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note
6 – Stockholders’ Equity
January 2019 At-the-Market Offering
On January 8,
2019, the Company entered into a sales agreement with A.G.P./Alliance Global Partners (“A.G.P.”) for an at-the-market
offering, pursuant to which the Company could sell, at its option, shares of its common stock, par value $0.0001 per share, having
an aggregate offering price of up to $15 million to or through A.G.P., as sales agent. The Company was obligated to pay A.G.P.
commissions for its services in acting as the Company’s sales agent in the sale of its common stock pursuant to the sales
agreement. A.G.P. was entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds from the sale of the Company’s
common stock on the Company’s behalf pursuant to the sales agreement. The Company also agreed to reimburse A.G.P. for its
reasonable out-of-pocket expenses, including the fees and disbursements of counsel to A.G.P., incurred in connection with the offering,
in an amount not to exceed $35,000. During the three months ended March 31, 2019, the Company received $1,282,810 in net proceeds
from the sale of 1,084,227 shares of its common stock under the sales agreement with A.G.P. The sales agreement with A.G.P. was
terminated on October 10, 2019.
2013 Long-Term Stock Incentive Plan
On January 4, 2013, a majority of the Company’s
stockholders approved by written consent the Company’s 2013 Long-Term Stock Incentive Plan (“LTIP”). The maximum
aggregate number of shares of common stock that may be issued under the LTIP, including stock awards, stock issued to directors
for serving on the Company’s board of directors, and stock appreciation rights, is limited to 10% of the shares of common
stock outstanding on the first business or trading day of any fiscal year, which is 592,223 shares of common stock at January 1,
2020.
On March 31, 2020, the Company issued an
aggregate of 114,288 stock options to purchase shares of common stock under the LTIP to four (4) non-employee directors for serving
on the Company’s board. The exercise price of these stock options is $0.35 and stock options were fully vested at the issuance
date. The aggregate fair value of the stock options issued to the directors was $40,000.
2017 Stock Incentive Plan
On August 24, 2017, a majority of the Company’s
stockholders approved at the 2017 Annual Stockholders’ Meeting the 2017 Stock Incentive Plan (“2017 SIP”). The
aggregate maximum number of shares of common stock (including shares underlying options) that may be issued under the 2017 SIP
pursuant to awards of restricted shares or options will be limited to 10% of the outstanding shares of common stock, which calculation
shall be made on the first (1st) business day of each new fiscal year; provided that for fiscal year 2017, 1,500,000
shares of common stock may be delivered to participants under the 2017 SIP. Thereafter, the 10% provision shall govern the 2017
SIP. The number of shares of common stock that are the subject of awards under the 2017 SIP which are forfeited or terminated,
are settled in cash in lieu of shares of common stock or are settled in a manner such that all or some of such shares covered by
an award are not issued to a participant or are exchanged for awards that do not involve shares of common stock will again immediately
become available to be issued pursuant to awards granted under the 2017 SIP. If shares of common stock are withheld from payment
of an award to satisfy tax obligations with respect to the award, those shares of common stock will be treated as shares that have
been issued under the 2017 SIP and will not again be available for issuance under the 2017 SIP.
In addition, during the three months ended
March 31, 2020, the Company issued 279,287 shares of common stock with an aggregate fair value of $116,628 to certain employees
related to the Company’s 2017 and 2018 management incentive plans.
During the three months ended March 31,
2020, the Company accrued $40,000 of management and employee bonus expense.
Warrants
As of March 31, 2020, the Company had outstanding
warrants to purchase an aggregate of 6,973,221 shares of common stock with a weighted average exercise price and remaining life
of $2.83 and 3.28 years, respectively. At March 31, 2020, the warrants had no aggregate intrinsic value.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
Note
7 – Commitments and Contingencies
Legal
Matters
On February 24, 2020, Michael J. Orlando,
a former executive officer and director of the Company, as Shareholder Representative, and the other stockholders of Fit Pay (collectively,
the “Fit Pay Shareholders”), filed a lawsuit in the United States District Court for the Southern District of New York
against the Company, CrowdOut Capital, LLC, and Garmin International, Inc. (the “Complaint”) alleging
the Company breached certain contractual obligations under a merger agreement, dated May 23, 2017, between Fit Pay and the
Company (the “Merger Agreement”), regarding certain future, contingent earnout payments allegedly that could be owed
to the Fit Pay Shareholders from future revenues (the “Earnout Payments”). The Company previously disclosed the Merger
Agreement in a Current Report on Form 8-K filed with the Securities and Exchange Commission on May 30, 2017. The Complaint seeks
monetary damages from the defendants. The Company believes that these claims are without merit and plans to vigorously defend the
action.
From time to time, the Company may be
involved in various claims and legal actions arising in the ordinary course of our business. Other than as described above, there
is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of our
subsidiaries, threatened against or affecting our company, or any of our subsidiaries in which an adverse decision could have
a material adverse effect upon our business, operating results, or financial condition.
Commitments
The Company leases office space and a fulfillment
center in the U.S., which are classified as operating leases expiring at various dates. The Company determines if an arrangement
qualifies as a lease at the lease inception. The Company adopted Topic 842 effective January 1, 2019. Operating lease liabilities
are recorded based on the present value of the future lease payments over the lease term, assessed as of the commencement date.
The Company’s real estate leases, which are for office space and a fulfillment center, generally have a lease term between
3 and 5 years. The Company also leases a copier with a lease term of 5 years. The Company’s leases are comprised of fixed
lease payments and also include executory costs such as common area maintenance, as well as property insurance and property taxes.
As a practical expedient under Topic 842, the Company has elected to account for the lease and non-lease components as a single
lease component for its real estate leases. Lease payments, which may include lease components, non-lease components and non-components,
are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts
or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract. Any actual costs in excess
of such amounts are expensed as incurred as variable lease cost.
The Company’s lease agreements generally
do not specify an implicit borrowing rate, and as such, the Company utilizes its incremental borrowing rate by lease term, in order
to calculate the present value of the future lease payments. The discount rate represents a risk-adjusted rate on a secured basis,
and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with
the lease term. On January 1, 2019, the discount rate used on existing leases at adoption was determined based on the remaining
lease term using available data as of that date. The Company did not have new or renewed leases commencing in 2020.
Certain of the Company’s lease agreements,
primarily related to real estate, include options for the Company to either renew (extend) or early terminate the lease. Leases
with renewal options allow the Company to extend the lease term typically between 1 and 3 years. Renewal options are reviewed at
lease commencement to determine if such options are reasonably certain of being exercised, which could impact the lease term. When
determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but
not limited to, significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or
specific characteristics unique to the particular lease that would make it reasonably certain that the Company would exercise such
option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being
exercised by the Company (and thus not included in the Company’s ROU asset and lease liability) unless there is an economic,
financial or business reason to do so.
Nxt-ID, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
For the three months ended March 31, 2020,
total operating lease cost was $37,919 and is recorded in cost of sales and selling, general and administrative expenses, dependent
on the nature of the leased asset. The operating lease cost is recognized on a straight-line basis over the lease term. The following
summarizes (i) the future minimum undiscounted lease payments under non-cancelable lease for the remainder of 2020 as well as each
of the next five years and thereafter, incorporating the practical expedient to account for lease and non-lease components as a
single lease component for our existing real estate leases, (ii) a reconciliation of the undiscounted lease payments to the present
value of the lease liabilities recognized, and (iii) the lease-related account balances on the Company’s condensed consolidated
balance sheet, as of March 31, 2020:
Year Ending December 31,
|
|
|
|
|
|
|
|
2020 (excluding the three months ended March 31, 2020)
|
|
$
|
50,242
|
|
2021
|
|
|
18,186
|
|
2022
|
|
|
18,185
|
|
2023
|
|
|
12,124
|
|
Total future minimum lease payments
|
|
$
|
98,737
|
|
Less imputed interest
|
|
|
(12,203
|
)
|
Total present value of future minimum lease payments
|
|
$
|
86,534
|
|
As of March 31, 2020
|
|
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
$
|
85,576
|
|
|
|
|
|
|
Other accrued expenses
|
|
$
|
48,431
|
|
Other long-term liabilities
|
|
$
|
38,103
|
|
|
|
$
|
86,534
|
|
As of March 31, 2020
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term
|
|
|
0.93 years
|
|
Weighted Average Discount Rate
|
|
|
11.74
|
%
|
Coronavirus – COVID-19
In early 2020, the coronavirus that causes
COVID-19 was reported to have surfaced in China. The Company’s primary supply chain is located in China and other Asian-based
locations. To date, the Company’s supply chain has not experienced any significant disruptions. The global spread of this
virus has caused significant business disruption around the world including the United States, the primary area in which the Company
operates and sells its products. The business disruption is currently expected to be temporary, however there is considerable uncertainty
around the duration of the business disruption. Therefore, while the Company expects this matter to negatively impact the Company’s
financial condition, results of operations, or cash flows, the extent of the financial impact and duration cannot be reasonably
estimated at this time.
Note
8 – Subsequent Events
The Company evaluates events that have
occurred after the balance sheet date but before the financial statements are issued.
On each of May 6 and May 8, 2020, Nxt-ID Inc.
and LogicMark, LLC, a wholly owned subsidiary of the Company (the “Borrowers”), respectively, received loans from Bank
of America, NA in the aggregate amount of $346,390, pursuant to the Paycheck Protection Program (the “PPP”) under Division
A, Title I of the Coronavirus Aid, Relief, and Economic Security Act, which was enacted on March 27, 2020.
The Loans, which are in the form of PPP promissory
notes and agreements, dated May 1, 2020 (the “Note Agreements”), mature on May 6 and May 8, 2022, respectively, and
bear interest at a rate of 1.00% fixed per annum, payable monthly commencing on November 6 and November 8, 2020, respectively.
The Loans may be prepaid by the Borrowers at any time prior to maturity with no prepayment penalties. The Borrowers intend to
use the proceeds from the Loans for payroll, payroll taxes, and group healthcare benefits. Under the terms of the Note Agreements,
certain amounts of the Loans may be forgiven if they are used for qualifying expenses, as described in the Note Agreements.