0001213900-22-071238 | 10-Q | XBRL Viewer

Shares issued as stock compensation (in Shares)

$ 5

287,995

288,000

50,000

Common Stock issued for dividends

19,584

(19,584)

Common Stock issued for dividends (in Shares)

3,695

(765,000)

(7,299)

Balance (in Shares) at Sep. 30, 2021

(5,419,609)

^[1]

Balance at Sep. 30, 2021

$ 520,000

$ 883

104,251,817

(72,355,291)

32,417,409

173,333

8,830,239

Balance at Jun. 30, 2021

$ 533

89,045,519

(71,686,702)

17,359,350

Balance (in Shares) at Jun. 30, 2021

5,331,190

Issuance of stock options for services

40,000

Issuance of Series F Preferred stock, net

$ 3,999,999

3,999,999

Issuance of Series F Preferred stock, net (in Shares)

1,333,333

Conversion of Series F Preferred stock to common stock

$ (3,479,999)

$ 66

3,479,933

Conversion of Series F Preferred stock to common stock (in Shares)

(1,160,000)

656,604

Sale of common stock and warrants pursuant to a registration statement on Form S-1

$ 279

11,834,443

11,834,722

Sale of common stock and warrants pursuant to a registration statement on Form S-1 (in Shares)

2,788,750

Fees incurred in connection with equity offerings

(380,657)

Shares issued as stock compensation (in Shares)

$ 5

287,995

288,000

50,000

Common Stock issued for dividends

19,584

(19,584)

Common Stock issued for dividends (in Shares)

3,695

(75,000)

(7,301)

Balance (in Shares) at Sep. 30, 2021

(641,704)

^[1]

Balance at Sep. 30, 2021

$ 520,000

$ 883

104,251,817

(72,355,291)

32,417,409

173,333

8,830,239

Balance at Dec. 31, 2021

$ 520,000

$ 917

104,725,115

(78,656,861)

26,589,171

Balance (in Shares) at Dec. 31, 2021

173,333

9,163,039

Issuance of stock options for services

669,015

Shares issued as stock compensation (in Shares)

$ 44

528,261

528,305

445,898

(225,000)

(32,934)

Balance (in Shares) at Sep. 30, 2022

(4,488,936)

Balance at Sep. 30, 2022

$ 520,000

$ 961

105,697,391

(83,178,731)

23,039,621

173,333

9,608,937

Balance at Jun. 30, 2022

$ 520,000

$ 961

105,318,990

(81,078,423)

24,761,528

Balance (in Shares) at Jun. 30, 2022

173,333

9,608,937

Issuance of stock options for services

453,401

(75,000)

(6,790)

Balance (in Shares) at Sep. 30, 2022

(2,093,518)

Balance at Sep. 30, 2022

$ 520,000

$ 961

$ 105,697,391

$ (83,178,731)

$ 23,039,621

173,333

9,608,937

[1]	Expenses in 2021 have been reclassified to conform to the 2022 presentation format.

Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash Flows from Operating Activities
Net loss	$ (4,488,936)	$ (5,419,609)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	17,171	29,208
Stock based compensation	1,197,320	288,000
Amortization of debt discount		137,855
Amortization of intangible assets	582,517	569,796
Amortization of deferred debt issuance costs		713,119
Non-cash charge for modification of warrant terms		2,881,729
Forgiveness of Paycheck Protection Plan loans and accrued interest		(349,176)
Changes in operating assets and liabilities:
Accounts receivable	(318,103)	66,671
Inventory	160,120	(145,538)
Prepaid expenses and other current assets	(40,223)	(314,563)
Accounts payable	817,094	(1,519,328)
Accrued expenses	162,380	(228,483)
Net Cash Used in Operating Activities	(1,910,660)	(3,290,319)
Cash flows from Investing Activities
Purchase of equipment and website development	(242,618)
Product development costs	(481,768)
Purchase of intangible assets	(6,008)
Net Cash Used in Investing Activities	(730,394)
Cash flows from Financing Activities
Proceeds from sale of common stock and warrants		11,834,722
Proceeds received in connection with issuance of Series E preferred stock, net		4,000,003
Proceeds received in connection with issuance of Series F preferred stock, net		3,999,999
Proceeds from exercise of common stock warrants		6,670,494
Term loan repayment		(11,095,877)
Fees paid in connection with equity offerings		(424,813)
Series C redeemable preferred stock dividends	(225,000)
Net Cash (Used in) Provided by Financing Activities	(225,000)	14,984,528
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	(2,866,054)	11,694,209
Cash, Cash Equivalents and Restricted Cash - Beginning of Year	12,254,546	4,537,546
Cash, Cash Equivalents and Restricted Cash - End of Period	9,388,492	16,231,755
Cash paid during the periods for:
Interest		1,395,611
Taxes		47,874
Non-cash investing and financing activities:
Accrued fees incurred in connection with equity offerings
Accrued Series C redeemable and Series F preferred stock dividends	32,934	266,907
Shares issued in connection with prior year accrual		80,456
Conversion of Series E preferred stock to common stock		4,000,003
Conversion of Series F preferred stock to common stock		3,479,999
Website development included in accounts payable	$ 21,255

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (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 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, income taxes, allowance for doubtful accounts, long-lived assets, and inventories, and other matters that affect the financial statements and disclosures. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid securities with an original maturity date of three months or less when purchased to be cash equivalents. Due to their short-term nature, cash equivalents are carried at cost, which approximates fair value. On September 30, 2022, and December 31, 2021, cash and cash equivalents totaled $9,328,504 and $12,044,415, respectively.

RESTRICTED CASH

On September 30, 2022, and December 31, 2021, the Company had restricted cash of $59,988 and $210,131, respectively. Restricted cash includes amounts held back by the Company’s third-party credit card processor for potential customer refunds, claims, and disputes and held as collateral for company credit cards.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents balances in large well-established financial institutions located in the United States. At times, the Company’s cash and cash equivalents balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. Cash equivalents amounted to $9,057,747 on September 30, 2022.

REVENUE RECOGNITION

The Company’s revenues consist of product sales to either end customers or distributors. The Company’s revenues are derived from contracts with customers, which are in most cases customer purchase orders. For each contract, the promise to transfer the control of the products, each of which is individually distinct, is considered to be the identified performance obligation. As part of the consideration promised in each contract, the Company evaluates the customer’s credit risk. Our contracts do not have any financing components, as payment terms are generally due Net-30 days after the invoice date. The Company’s products are almost always sold at fixed prices. In determining the transaction price, we evaluate whether the price is subject to any refunds, due to product returns or adjustments due to volume discounts, rebates, or price concessions to determine the net consideration we expect to be entitled to. The Company’s sales are recognized at a point-in-time under the core principle of recognizing revenue when control transfers to the customer, which generally occurs when the Company ships or delivers the product from its fulfillment center to our customers, when our customer accepts and has the legal title of the goods, and the Company has a present right to payment for such goods. Based on the respective contract terms, most of our contract revenues are recognized either (i) upon shipment based on free on board (FOB) shipping point, or (ii) when the product arrives at its destination. For the nine months ended September 30, 2022, and 2021, none of our sales were recognized over time.

SALES TO DISTRIBUTORS AND RESELLERS

Sales to certain distributors and resellers are made under terms allowing limited rights of return of the Company’s products held in their inventory or upon sale to their end customers. The Company maintains a reserve for unprocessed and estimated future price adjustments claims and returns as a refund liability. The reserve is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on an analysis of historical claims and returns over a period of time to appropriately account for current pricing and business trends. Similarly, sales returns and allowances are recorded based on historical return rates, as a reduction in revenue with a corresponding reduction to cost of sales for the estimated cost of inventory that is expected to be returned. These reserves were not material on the Condensed Balance Sheets on September 30, 2022, and December 31, 2021.

SHIPPING AND HANDLING

Amounts billed to customers for shipping and handling are included in revenues. The related freight charges incurred by the Company are included in the cost of goods sold and were $94,080 and $467,293, respectively, for the three and nine months ended September 30, 2022, and $149,923, and $374,484, respectively, for the three and nine months ended September 30, 2021.

ACCOUNTS RECEIVABLE - NET

For the three and nine months ended September 30, 2022, and the year ended December 31, 2021, the Company’s revenues primarily included shipments of the LogicMark products. The terms and conditions of these sales provided certain customers with trade credit terms. In addition, these sales were made to the retailers with no rights of return and are subject to the normal warranties offered to the ultimate consumer for product defects.

Accounts receivable are stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the receivable allowance for doubtful accounts as necessary whenever events or circumstances indicate the carrying value may not be recoverable. On September 30, 2022, and December 31, 2021, the Company had an allowance for doubtful accounts of $1,146 and $5,411, respectively.

INVENTORY

The Company measures inventory at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

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. The inventory is valued at the lower of cost or net realizable value with cost determined using the first-in, first-out method. As of September 30, 2022, inventory was comprised of $1,077,160 in finished goods on hand. As of December 31, 2021, inventory was comprised of $1,237,280 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 September 30, 2022, and December 31, 2021, $670,221 and $559,938 respectively, of prepayments made for inventory are included in prepaid expenses and other current assets on the balance sheet.

LONG-LIVED ASSETS

Long-lived assets, such as property and equipment, and other intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When indicators exist, the Company tests for the impairment of the definite-lived assets based on the undiscounted future cash flow the assets are expected to generate over their remaining useful lives, compared to the carrying value of the assets. If the carrying amount of the assets is determined not to be recoverable, a write-down to fair value is recorded. Management estimates future cash flows using assumptions about expected future operating performance. Management’s estimates of future cash flows may differ from actual cash flow due to, among other things, technological changes, economic conditions, or changes to the Company’s business operations.

PROPERTY AND EQUIPMENT

Property and equipment consisting of equipment, furniture and fixtures, and website and other are stated at cost. The costs of additions and improvements are generally capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful life of the respective asset as follows:

Equipment			5 years
Furniture and fixtures			3 to 5 years
Website and other			3 years

GOODWILL

Goodwill is reviewed annually in the fourth quarter, or when circumstances indicate that an impairment may have occurred. The Company first performs a qualitative assessment of goodwill impairment, which considers factors such as market conditions, performance compared to forecast, business outlook, and unusual events. If the qualitative assessment indicates a possible goodwill impairment, goodwill is then quantitatively tested for impairment. The Company may elect to bypass the qualitative assessment and proceed directly to the quantitative test. If a quantitative goodwill impairment test is required, the fair value is determined using a variety of assumptions including estimated future cash flows using applicable discount rates (income approach) and comparisons to other similar companies (market approach).

OTHER INTANGIBLE ASSETS

The Company’s intangible assets are related to the acquisition of LogicMark, LLC and are included in other intangible assets in the Company’s balance sheet on September 30, 2022 and December 31, 2021.

On September 30, 2022, Other intangible assets, net of amortization, are comprised of patents of $1,793,889; trademarks of $867,559; and customer relationships of $1,238,690. On December 31, 2021, Other intangible assets are comprised of patents of $2,072,984; trademarks of $915,619; and customer relationships of $1,488,044. The Company amortizes 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 and nine months ended September 30, 2022, the Company recorded amortization expense of $194,232 and $582,516, respectively. During the three and nine months ended September 30, 2021, the Company recorded amortization expense of $192,019 and $569,796, respectively.

As of September 30, 2022, total amortization expense estimated for the remainder of fiscal year 2022 is $194,241, and for each of the next five fiscal years, the total amortization expense is estimated to be as follows: 2023 - $776,964; 2024 - $776,964; 2025 - $776,964; 2026 - $602,648; 2027- $241,218; and later years - $531,139.

CONVERTIBLE INSTRUMENTS

The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts that feature conversion options. The accounting standards require companies to separate conversion options from their host instruments and account for them as free-standing derivatives according to certain criteria. The criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative and the host contract is not re-measured at fair value under generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded derivative would be considered a derivative. The derivative is subsequently marked to market at each reporting date based on the current fair value, with the changes in fair value reported in the results of operations.

Conversion options with variable settlement features such as provisions to adjust the conversion price upon subsequent issuances at exercise prices more favorable than that in the hybrid contract generally result in their separation from the host instrument.

The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The debt discounts under these arrangements are amortized over the earlier of (i) the term of the related debt using the straight-line method which approximates the interest rate method or (ii) conversion of the debt. The amortization of debt discount is included as interest expense included in other income and expenses in the unaudited condensed statements of operations.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company does not use derivatives to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Derivative financial instruments accounted for as liabilities are initially recorded at fair value and then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivatives, the Company uses the Black-Scholes or binomial option valuation model to value the derivatives at inception and on subsequent valuation dates. The Company accounts for conversion features that are embedded within the Company’s convertible notes payable that do not have fixed settlement provisions as a separate derivative. In addition, warrants issued by the Company that do not have fixed settlement provisions are also treated as derivatives. The classification of derivatives, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative could be required within 12 months of the unaudited condensed balance sheet date.

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. 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 ATTRIBUTABLE TO COMMON SHAREHOLDERS PER SHARE

Net loss attributable to common shareholders equals the Company’s net loss minus preferred stock dividends.

Basic net loss attributable to common shareholders per share (“Basic net loss per share”) was computed using the weighted average number of common shares outstanding. Diluted net loss applicable to common shareholders per share (“Diluted net loss per share”) includes the effect of diluted common stock equivalents. Potentially dilutive securities from the exercise of stock options to purchase 444,660 shares of common stock and warrants to purchase 4,295,380 shares of common stock as of September 30, 2022, were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Potentially dilutive securities from the exercise of stock options to purchase 40,858 shares of common stock and warrants to purchase 4,393,230 shares of common stock as of September 30, 2021, were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

RESEARCH AND DEVELOPMENT AND PRODUCT DEVELOPMENT COSTS

Research and development costs are expenditures on new market development and related engineering costs. In addition to internal resources, the Company utilizes functional consulting resources, third-party software, and hardware development firms. The Company expenses all research and development costs as incurred until technological feasibility has been established for the product. Once technological feasibility is established, development costs including software and hardware design are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. For the nine months ended September 30, 2022, the Company capitalized $481,768 of such product development costs. Amortization of these costs, which will be on a straight-line basis over three years, has not yet commenced.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting standards that have been issued or proposed by FASB (Financial Accounting Standards Board) 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 financial statements upon adoption.

Stockholders’ Equity and Redeemable Preferred Stock

9 Months Ended

Sep. 30, 2022

Stockholders’ Equity and Redeemable Preferred Stock [Abstract]

STOCKHOLDERS’ EQUITY AND REDEEMABLE PREFERRED STOCK

NOTE 6 - STOCKHOLDERS’ EQUITY AND REDEEMABLE PREFERRED STOCK

October 2021 Reverse stock split

On October 15, 2021, the Company announced that its shareholders had approved a reverse split of its common stock and Series C Redeemable Preferred at a ratio of 1 for 10. As a result of the reverse split, every 10 pre-split shares of common stock outstanding and every 10 pre-split shares of Series C Redeemable Preferred Stock outstanding were automatically exchanged for one new share of each without any action on the part of the holders. The number of outstanding common shares was reduced from approximately 88.3 million shares to approximately 8.8 million shares, and the number of outstanding Series C preferred shares was reduced from 2,000 shares to 200 shares. The reverse stock split did not affect the total number of shares of capital stock, including Series C Redeemable Preferred Stock, that the Company is authorized to issue.

September 2021 Offering

On September 15, 2021, the Company sold an aggregate of (i) 2,788,750 shares of common stock, par value of $0.0001 per share, and (ii) accompanying warrants to purchase up to an aggregate of 2,788,750 shares of Common Stock, at an exercise price of $4.95 per share, both of which include the underwriter’s full over-allotment option to purchase an additional 363,750 shares of common stock.

The Shares and the Warrants were offered and sold to the public pursuant to the Company’s registration statement on Form S-1, as amended (File No. 333-259105), filed by the Company with the Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended (Securities Act), which became effective on September 14, 2021.

The Warrants were not immediately exercisable, as the Company did not have a sufficient number of shares of Common Stock to reserve for issuance for the Warrants until the date (the “Initial Exercise Date”) that the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to affect a reverse stock split of the shares of Common Stock so that there were a sufficient number of shares of Common Stock for issuance upon exercise of the Warrants. The Warrants became exercisable on the Initial Exercise Date (the effective date of the reverse stock split) and will terminate five years after the Initial Exercise Date. The exercise price of the Warrants is subject to customary adjustments for stock dividends, stock splits and other subdivisions, combinations, and re-classifications, and was reset on the date of the Company’s reverse stock split to the lower of (i) the closing price per share of the Common Stock immediately before the reverse stock split, giving effect to the reverse stock split and (ii) the exercise price then in effect. The Warrants are also exercisable on a cashless basis under certain circumstances, any time after the Initial Exercise Date, pursuant to the formula outlined in the Warrants. On October 15, 2021, after shareholder and Board approval of the reverse stock split, the exercise price for the Warrants was adjusted to $3.956 per share, The reverse stock split and the exercise price were retroactively reported in accordance with ASC 260-10-55-12, Restatement of EPS Data.

On the Closing Date, the Company received gross proceeds of approximately $12.5 million, before deducting underwriting discounts and commissions and estimated offering expenses. The Company has been using the net proceeds from the Offering primarily for new product development, marketing and working capital.

August 2021 Offering

On August 13, 2021, the Company entered into a securities purchase agreement with institutional accredited investors providing for an aggregate investment of $3,999,999 for the issuance by the Company of (i) 1,333,333 shares of Series F Convertible Preferred Stock, par value $0.0001 per share, of the Company (the Series F Preferred Stock) convertible into shares of common stock, par value $0.0001 per share, of the Company that is issuable upon conversion of shares of Series F Preferred Stock; (ii) warrants, with a term of five and a half years exercisable after February 16, 2022, to purchase an aggregate of up to 666,667 shares of Common Stock at an exercise price of $7.80 per share. The securities issued to the investors were exempt from registration under the Securities Act of 1933, as amended, or the Securities Act, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder, based on representations made by the investors, their prior relationship with the Company, and the absence of any general solicitation. The Company used the net proceeds from this offering for working capital and liability reduction purposes. In the three months ended September 30, 2021, 1,160,000 shares of Series F preferred stock were converted into 656,604 shares of common stock. On October 15, 2021, after shareholder and Board approval of the reverse stock split, the exercise price for the Warrants was adjusted to $4.95 per share and was retroactively reported in accordance with ASC 260-10-55-12, Restatement of EPS Data. For the three months and nine months ended September 30, 2022, the Company recorded Series F Preferred Stock dividends of $6,790 and $32,934, respectively.

February 2021 Offering

On February 2, 2021, the Company closed a registered direct offering and concurrent private placement pursuant to which the Company issued (i) an aggregate of 1,476,016 shares of Series E preferred stock, convertible into up to 295,203 shares of common stock, (ii) common stock purchase warrants to purchase up to 100,000 shares of common stock at an exercise price of $12.30 per share, which were exercisable immediately and had a term of five years, and (iii) common stock purchase warrants to purchase up to 195,203 shares of common stock at an exercise price of $12.30 per share with a term of five and one-half years first exercisable nine months after issuance, for gross proceeds of $4,000,003, before deducting any offering expenses. The Company used the net proceeds from this offering for working capital and liability reduction purposes. In February 2021, 1,476,016 shares of Series E preferred stock were converted into 295,203 shares of common stock. Also in February 2021, the Company recorded a deemed dividend of $1,480,801 from the beneficial conversion feature associated with the issuance of the Series E convertible preferred stock and warrants.

January 2021 Warrant exchange

On January 8, 2021, the Company entered into a Warrant Amendment and Exercise Agreement (the “Amendment”) with holders (the “Holder”) of a common stock purchase warrant, dated April 4, 2019, previously issued by the Company (the “Original Warrant”).

In consideration for each exercise of the Original Warrant within 45 calendar days of the Amendment, in addition to the issuance of the Warrant shares, the Company agreed to deliver a new warrant to purchase shares of the Company’s common stock equal to the number of Original Warrants that the Holder exercised, at an exercise price of $15.25 per share, which represents the average Nasdaq Official Closing Price of the common stock for the five trading days immediately preceding the date of the Amendment (the “New Warrants”). The Investor held Original Warrants exercisable for up to 246,913 shares of common stock, subsequently exercised 50,000 Original Warrants within the 45 days, and received 50,000 New Warrants in addition to the Warrant shares.

Series C Redeemable Preferred Stock

In May 2017, the Company authorized Series C Redeemable Preferred Stock. Holders of Series C Redeemable Preferred Stock are entitled to receive dividends of 15% per year, payable in cash. For the three and nine months ended September 30, 2022, the Company recorded Series C Redeemable Preferred Stock dividends of $75,000 and $225,000, respectively.

The Series C Redeemable Preferred Stock may be redeemed by the Company at the Company’s option in cash at any time, in whole or in part, upon payment of the stated value of the Series C Redeemable Preferred Stock and unpaid dividends. If a “fundamental change” occurs, the Series C Redeemable Preferred Stock shall be immediately redeemed in cash equal to the stated value of the Series C Redeemable Preferred Stock, and unpaid dividends. A fundamental change includes but is not limited to any change in the ownership of at least fifty percent of the voting stock; liquidation or dissolution, or the common stock ceases to be listed on the market upon which it currently trades.

The holders of the Series C Redeemable Preferred Stock are entitled to vote on any matter submitted to the stockholders of the Company for a vote. One share of Series C Redeemable Preferred Stock carries the same voting rights as one share of common stock.

Redeemable equity security is to be classified as temporary equity if it is conditionally redeemable upon the occurrence of an event that is not solely within the control of the issuer. Upon the determination that such events are probable, the equity security would be classified as a liability. Given that the Series C Redeemable Preferred Stock contains a fundamental change provision, the security is considered conditionally redeemable. Therefore, the Company has classified the Series C Redeemable Preferred Stock as temporary equity in the balance sheets on September 30, 2022, and December 31, 2021, until such time that events occur that indicate otherwise.

Warrants

There was no warrant activity during the nine months ended September 30, 2022. The following table summarizes the Company’s warrants outstanding and exercisable on September 30, 2022, and December 31, 2021:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life In Years		Aggregate Intrinsic Value
Outstanding and Exercisable at January 1, 2021		1,569,007		$	13.30		4.10	$	10,850,158
Issued		3,897,534		$	5.26		4.77		-
Exercised		(1,002,307	)		9.07		-		-
Cancelled		(168,854	)		38.32		-		-
Outstanding and Exercisable at December 31, 2021		4,295,380		$	6.02		4.59		-
Outstanding and Exercisable at September 30, 2022		4,295,380		$	6.02		4.02	$	0.00

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI https://asc.fasb.org/topic&trid=2208762

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 13
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

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+ Details

Accounting Policies, by Policy (Policies)	9 Months Ended
Accounting Policies, by Policy (Policies)	Sep. 30, 2022
Accounting Policies [Abstract]
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS	*USE OF ESTIMATES IN THE FINANCIAL STATEMENTS* The preparation of financial statements in conformity with generally accepted accounting principles in the United States (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 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, income taxes, allowance for doubtful accounts, long-lived assets, and inventories, and other matters that affect the financial statements and disclosures. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS	*CASH AND CASH EQUIVALENTS* The Company considers all highly liquid securities with an original maturity date of three months or less when purchased to be cash equivalents. Due to their short-term nature, cash equivalents are carried at cost, which approximates fair value. On September 30, 2022, and December 31, 2021, cash and cash equivalents totaled $9,328,504 and $12,044,415, respectively.
RESTRICTED CASH	*RESTRICTED CASH* On September 30, 2022, and December 31, 2021, the Company had restricted cash of $59,988 and $210,131, respectively. Restricted cash includes amounts held back by the Company’s third-party credit card processor for potential customer refunds, claims, and disputes and held as collateral for company credit cards.
CONCENTRATIONS OF CREDIT RISK	*CONCENTRATIONS OF CREDIT RISK* Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents balances in large well-established financial institutions located in the United States. At times, the Company’s cash and cash equivalents balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. Cash equivalents amounted to $9,057,747 on September 30, 2022.
REVENUE RECOGNITION	*REVENUE RECOGNITION* The Company’s revenues consist of product sales to either end customers or distributors. The Company’s revenues are derived from contracts with customers, which are in most cases customer purchase orders. For each contract, the promise to transfer the control of the products, each of which is individually distinct, is considered to be the identified performance obligation. As part of the consideration promised in each contract, the Company evaluates the customer’s credit risk. Our contracts do not have any financing components, as payment terms are generally due Net-30 days after the invoice date. The Company’s products are almost always sold at fixed prices. In determining the transaction price, we evaluate whether the price is subject to any refunds, due to product returns or adjustments due to volume discounts, rebates, or price concessions to determine the net consideration we expect to be entitled to. The Company’s sales are recognized at a point-in-time under the core principle of recognizing revenue when control transfers to the customer, which generally occurs when the Company ships or delivers the product from its fulfillment center to our customers, when our customer accepts and has the legal title of the goods, and the Company has a present right to payment for such goods. Based on the respective contract terms, most of our contract revenues are recognized either (i) upon shipment based on free on board (FOB) shipping point, or (ii) when the product arrives at its destination. For the nine months ended September 30, 2022, and 2021, none of our sales were recognized over time.
SALES TO DISTRIBUTORS AND RESELLERS	*SALES TO DISTRIBUTORS AND RESELLERS* Sales to certain distributors and resellers are made under terms allowing limited rights of return of the Company’s products held in their inventory or upon sale to their end customers. The Company maintains a reserve for unprocessed and estimated future price adjustments claims and returns as a refund liability. The reserve is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on an analysis of historical claims and returns over a period of time to appropriately account for current pricing and business trends. Similarly, sales returns and allowances are recorded based on historical return rates, as a reduction in revenue with a corresponding reduction to cost of sales for the estimated cost of inventory that is expected to be returned. These reserves were not material on the Condensed Balance Sheets on September 30, 2022, and December 31, 2021.
SHIPPING AND HANDLING	*SHIPPING AND HANDLING* Amounts billed to customers for shipping and handling are included in revenues. The related freight charges incurred by the Company are included in the cost of goods sold and were $94,080 and $467,293, respectively, for the three and nine months ended September 30, 2022, and $149,923, and $374,484, respectively, for the three and nine months ended September 30, 2021.
ACCOUNTS RECEIVABLE	*ACCOUNTS RECEIVABLE* *- NET* For the three and nine months ended September 30, 2022, and the year ended December 31, 2021, the Company’s revenues primarily included shipments of the LogicMark products. The terms and conditions of these sales provided certain customers with trade credit terms. In addition, these sales were made to the retailers with no rights of return and are subject to the normal warranties offered to the ultimate consumer for product defects. Accounts receivable are stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the receivable allowance for doubtful accounts as necessary whenever events or circumstances indicate the carrying value may not be recoverable. On September 30, 2022, and December 31, 2021, the Company had an allowance for doubtful accounts of $1,146 and $5,411, respectively.
INVENTORY	*INVENTORY* The Company measures inventory at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. 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. The inventory is valued at the lower of cost or net realizable value with cost determined using the first-in, first-out method. As of September 30, 2022, inventory was comprised of $1,077,160 in finished goods on hand. As of December 31, 2021, inventory was comprised of $1,237,280 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 September 30, 2022, and December 31, 2021, $670,221 and $559,938 respectively, of prepayments made for inventory are included in prepaid expenses and other current assets on the balance sheet.
LONG-LIVED ASSETS	*LONG-LIVED ASSETS* Long-lived assets, such as property and equipment, and other intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When indicators exist, the Company tests for the impairment of the definite-lived assets based on the undiscounted future cash flow the assets are expected to generate over their remaining useful lives, compared to the carrying value of the assets. If the carrying amount of the assets is determined not to be recoverable, a write-down to fair value is recorded. Management estimates future cash flows using assumptions about expected future operating performance. Management’s estimates of future cash flows may differ from actual cash flow due to, among other things, technological changes, economic conditions, or changes to the Company’s business operations.
PROPERTY AND EQUIPMENT	*PROPERTY AND EQUIPMENT* Property and equipment consisting of equipment, furniture and fixtures, and website and other are stated at cost. The costs of additions and improvements are generally capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful life of the respective asset as follows: Equipment 5 years Furniture and fixtures 3 to 5 years Website and other 3 years
GOODWILL	*GOODWILL* Goodwill is reviewed annually in the fourth quarter, or when circumstances indicate that an impairment may have occurred. The Company first performs a qualitative assessment of goodwill impairment, which considers factors such as market conditions, performance compared to forecast, business outlook, and unusual events. If the qualitative assessment indicates a possible goodwill impairment, goodwill is then quantitatively tested for impairment. The Company may elect to bypass the qualitative assessment and proceed directly to the quantitative test. If a quantitative goodwill impairment test is required, the fair value is determined using a variety of assumptions including estimated future cash flows using applicable discount rates (income approach) and comparisons to other similar companies (market approach).
OTHER INTANGIBLE ASSETS	*OTHER INTANGIBLE ASSETS* The Company’s intangible assets are related to the acquisition of LogicMark, LLC and are included in other intangible assets in the Company’s balance sheet on September 30, 2022 and December 31, 2021. On September 30, 2022, Other intangible assets, net of amortization, are comprised of patents of $1,793,889; trademarks of $867,559; and customer relationships of $1,238,690. On December 31, 2021, Other intangible assets are comprised of patents of $2,072,984; trademarks of $915,619; and customer relationships of $1,488,044. The Company amortizes 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 and nine months ended September 30, 2022, the Company recorded amortization expense of $194,232 and $582,516, respectively. During the three and nine months ended September 30, 2021, the Company recorded amortization expense of $192,019 and $569,796, respectively. As of September 30, 2022, total amortization expense estimated for the remainder of fiscal year 2022 is $194,241, and for each of the next five fiscal years, the total amortization expense is estimated to be as follows: 2023 - $776,964; 2024 - $776,964; 2025 - $776,964; 2026 - $602,648; 2027- $241,218; and later years - $531,139.
CONVERTIBLE INSTRUMENTS	*CONVERTIBLE INSTRUMENTS* The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts that feature conversion options. The accounting standards require companies to separate conversion options from their host instruments and account for them as free-standing derivatives according to certain criteria. The criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract, (ii) the hybrid instrument that embodies both the embedded derivative and the host contract is not re-measured at fair value under generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded derivative would be considered a derivative. The derivative is subsequently marked to market at each reporting date based on the current fair value, with the changes in fair value reported in the results of operations. Conversion options with variable settlement features such as provisions to adjust the conversion price upon subsequent issuances at exercise prices more favorable than that in the hybrid contract generally result in their separation from the host instrument. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The debt discounts under these arrangements are amortized over the earlier of (i) the term of the related debt using the straight-line method which approximates the interest rate method or (ii) conversion of the debt. The amortization of debt discount is included as interest expense included in other income and expenses in the unaudited condensed statements of operations.
DERIVATIVE FINANCIAL INSTRUMENTS	*DERIVATIVE FINANCIAL INSTRUMENTS* The Company does not use derivatives to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Derivative financial instruments accounted for as liabilities are initially recorded at fair value and then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivatives, the Company uses the Black-Scholes or binomial option valuation model to value the derivatives at inception and on subsequent valuation dates. The Company accounts for conversion features that are embedded within the Company’s convertible notes payable that do not have fixed settlement provisions as a separate derivative. In addition, warrants issued by the Company that do not have fixed settlement provisions are also treated as derivatives. The classification of derivatives, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative could be required within 12 months of the unaudited condensed balance sheet date.
STOCK-BASED COMPENSATION	*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. 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 ATTRIBUTABLE TO COMMON SHAREHOLDERS PER SHARE	*NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS PER SHARE* Net loss attributable to common shareholders equals the Company’s net loss minus preferred stock dividends. Basic net loss attributable to common shareholders per share (“Basic net loss per share”) was computed using the weighted average number of common shares outstanding. Diluted net loss applicable to common shareholders per share (“Diluted net loss per share”) includes the effect of diluted common stock equivalents. Potentially dilutive securities from the exercise of stock options to purchase 444,660 shares of common stock and warrants to purchase 4,295,380 shares of common stock as of September 30, 2022, were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Potentially dilutive securities from the exercise of stock options to purchase 40,858 shares of common stock and warrants to purchase 4,393,230 shares of common stock as of September 30, 2021, were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.
RESEARCH AND DEVELOPMENT AND PRODUCT DEVELOPMENT COSTS	*RESEARCH AND DEVELOPMENT AND PRODUCT DEVELOPMENT COSTS* Research and development costs are expenditures on new market development and related engineering costs. In addition to internal resources, the Company utilizes functional consulting resources, third-party software, and hardware development firms. The Company expenses all research and development costs as incurred until technological feasibility has been established for the product. Once technological feasibility is established, development costs including software and hardware design are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. For the nine months ended September 30, 2022, the Company capitalized $481,768 of such product development costs. Amortization of these costs, which will be on a straight-line basis over three years, has not yet commenced.
RECENT ACCOUNTING PRONOUNCEMENTS	*RECENT ACCOUNTING PRONOUNCEMENTS* Recent accounting standards that have been issued or proposed by FASB (Financial Accounting Standards Board) 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 financial statements upon adoption.

Liquidity and Management Plans (Details) - USD ($)

3 Months Ended

9 Months Ended

Sep. 30, 2022

Sep. 30, 2021

Sep. 30, 2022

Sep. 30, 2021

Jun. 30, 2022

Dec. 31, 2021

Jun. 30, 2021

Dec. 31, 2020

Liquidity and Management Plans [Abstract]

Operating loss

$ (2,138,105)

$ (496,883)

^[1]

$ (4,546,683)

$ (1,491,445)

^[1]