| Significant Accounting Policies | 2. Significant Accounting Policies Basis of Presentation and Use of Estimates Certain prior year information has been reclassified
to conform to current year presentation. Liquidity Revenue Recognition The Company markets and licenses products indirectly
through channel distributors, independent software vendors (“ISVs”), value-added resellers (“VARs”) (collectively
“resellers”) and directly to corporate enterprises, governmental and educational institutions and others. Its product
licenses are perpetual. The Company also separately sells intellectual property licenses, maintenance contracts (which are comprised
of license updates and customer service access), and other products and services. There are no rights of return granted to purchasers
of the Company’s software products. For the year ended December 31, 2017, software
license revenues were recognized when:
● Persuasive evidence of an arrangement exists (i.e., when the Company signs a non-cancelable license agreement wherein the customer acknowledges an unconditional obligation to pay, or upon receipt of the customer’s purchase order), and
● Delivery has occurred or services have been rendered and there are no uncertainties surrounding product acceptance (i.e., when title and risk of loss have been transferred to the customer, which generally occurs when the media containing the licensed program(s) is provided to a common carrier or, in the case of electronic delivery, when the customer is given access to the licensed programs), and
● The price to the customer is fixed or determinable, as typically evidenced in a signed non-cancelable contract, or a customer’s purchase order, and
● Collectability is probable. If collectability is not considered probable, revenue is recognized when the fee is collected. In 2017, revenue recognized on software arrangements
involving multiple deliverables is allocated to each deliverable based on vendor-specific objective evidence (“VSOE”)
or third party evidence of the fair values of each deliverable; such deliverables include licenses for software products, maintenance,
private labeling fees, or customer training. The Company limits its assessment of VSOE for each deliverable to either the price
charged when the same deliverable is sold separately or the price established by management having the relevant authority to do
so, for a deliverable not yet sold separately. If sufficient VSOE of fair value does not existed,
so as permitted the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement was deferred
until such evidence existed or until all elements were delivered. If VSOE of the fair value did not exist and the only undelivered
element was maintenance, then revenue was recognized on a ratably. If VSOE of the fair value of all undelivered elements exists
but evidence did not exist for one or more delivered elements, then revenue was recognized using the residual method. Under the
residual method, the fair value of the undelivered elements was deferred and the remaining portion of the arrangement fee was recognized
as revenue. Certain resellers (“stocking resellers”)
purchased product licenses that they held in inventory until they were resold to the ultimate end-user (an “inventory stocking
order”). At the time that a stocking reseller placed an inventory stocking order, no product licenses were shipped by the
Company to the stocking reseller rather, the stocking reseller’s inventory was credited with the number of licenses purchased
and the stocking reseller can resell (issue) any number of licenses from their inventory at any time. Upon receipt of an order
to issue one or more licenses from a stocking reseller’s inventory (a “draw down order”), the Company would ship
the licenses(s) in accordance with the draw down order’s instructions. In 2017, maintenance revenue was recognized
from service contracts ratably over the related contract period, which generally ranges from one to five years. Effective January 1, 2018, ASC 606, Revenue
from Contracts with Customers, changed the recognition of revenue standards for reporting periods beginning after December 31,
2017. For the year ended December 31, 2018, revenue
recognition was determined by
● identifying the contract, or contracts, with a customer;
● identifying the performance obligations in each contract;
● determine the transaction price;
● allocating the transaction price to the performance obligations in each contract; and
● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services When control of the promised products and services are transferred
to our customers, we recognize revenue in the amount that reflects the consideration we expect to receive in exchange for these
products and services. Product Sales All of our licenses are delivered to the customer
electronically. The Company sends the license key to the customer to download the related software from Company portal. We recognize
revenue upon delivery of these licenses. For stocking resellers who purchase licenses through inventory stocking orders with
the intent to resell to an end-user, revenue is recognized when the resellers’ accounts have been credited, at their
discretion, for the number of licenses purchased. Service Revenue Similar to 2017, 2018 maintenance revenue was
also recognized from service contracts ratably over the related contract period. In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(ASC 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the
transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for
those goods or services. In August 2015, FASB issued ASU 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of
the Effective Date, which deferred the effective date of ASU 2014-09 to reporting periods beginning after December 15, 2017, with
early adoption permitted for reporting periods beginning after December 15, 2016. Subsequently, FASB issued ASUs in 2016 containing
implementation guidance related to ASU 2014-09, including: ASU 2016-08, Revenue from Contracts with Customers (ASC 606): Principal
versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability
of the implementation guidance on principal versus agent considerations; ASU 2016-10, Revenue from Contracts with Customers (ASC
606): Identifying Performance Obligations and Licensing, which is intended to clarify two aspects of ASC 606: identifying performance
obligations and the licensing implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (ASC 606): Narrow-Scope
Improvements and Practical Expedients, which contains certain practical expedients in response to identified implementation issues.
The Company elected to adopt ASC 606 under the Modified Retrospective approach. Under the Modified Retrospective approach, only
contracts with customers for which there were remaining unsatisfied performance obligations (open contracts) at the beginning of
initial year of adoption must be restated to apply retrospectively the guidance under ASC 606. Any resulting impact for such contracts
prior to the beginning of the initial year of adoption are made as an adjustment to opening accumulated deficit for such year. On January 1, 2018, the Company adopted ASC
606 using the Modified Retrospective method. This method required retrospective application of the new accounting standard to those
contracts which were not completed as of January 1, 2018. Results for the reporting periods beginning after January 1, 2018 are
presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic
accounting under ASC 605. The change to the current revenue policy is
the timing of revenue recognition for software licenses purchased by stocking resellers. Under the guidance ASC 605, the Company
recognized revenue upon the delivery of licenses to end users when they were purchased from the stocking reseller. Under the guidance
ASC 606, license revenue is recognized upon crediting of the licenses to the stocking resellers account for draw down at their
discretion after placement of the stocking order by the stocking reseller. During the year ended December 31, 2018, this change
in revenue policy resulted in lower license revenue of $231,300 when compared to 2017. This lower license revenue had the same
impact on gross profit, income (loss) from operations and net income (loss). The Company recorded $1,391,900 to opening
accumulated deficit as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to
reversal of deferred license revenue associated with stocking orders placed in prior periods which had not been sold through to
end users as of December 31, 2017. The cumulative effect of the changes made to
our condensed consolidated balance sheet as of January 1, 2018 under current assets, deferred revenue and accumulated deficit for
the adoption ASU 2014-09, Revenue - Revenue from Contracts with Customers were as follows:
Balance Sheet
Balance at December 31, 2017 Adjustments due to ASC 606 Balance at January 1, 2018
Current Assets
Deferred COGS $ — $ 20,000 $ 20,000
Liabilities and Stockholders’ Equity
Accumulated Deficit, net of tax $ (81,849,200 ) $ 1,391,900 $ (80,457,300 )
Current Liabilities
Deferred Revenue $ 1,845,100 $ (609,700 ) $ 1,235,400
Long Term Liabilities
Deferred Revenue $ 1,409,700 $ (802,200 ) $ 607,500 All of the Company’s software licenses
are denominated in U.S. dollars. As a result of the adoption of ASU NO. 2014-09,
our 2018 revenues were subject to greater variability. Cash and Cash equivalents. Property and Equipment Shipping and Handling Software Development Costs “Costs
of Software to be Sold, Leased or Marketed,” Deferred Rent Allowance for Doubtful Accounts Allowance for doubtful accounts years ended
December 31, 2018 and 2017, amounted to $3,600 and $7,800, respectively. Income Taxes “Income Taxes,” The Company and one or more of its subsidiaries
are subject to United States federal income taxes, as well as income taxes of multiple state and foreign jurisdictions. The Company
and its subsidiaries are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities
for years prior to 2012. There are no tax examinations currently underway for any of the Company’s or its subsidiaries’
tax returns for years subsequent to 2011. The Company’s policy for deducting interest
and penalties is to treat interest as interest expense and penalties as taxes. The Company had not accrued any amount for the payment
of interest or penalties related to any uncertain tax positions at either December 31, 2018 or 2017, as its review of such positions
indicated that such potential positions were minimal. Under FASB ASC 740-10-05, “Income
Taxes,” The Tax Cuts and Jobs Act (the “Act”)
was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies
to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new
taxes on certain foreign sourced earnings. Among these new taxes on certain foreign sourced earnings, the Act created a new category
of income inclusion: the global intangible low-taxed income (“GILTI”). The objective of GILTI is to deter U.S. corporations
from transferring intangible property to non-U.S. low-tax jurisdictions by subjecting the non-U.S. income to current U.S. taxation.
The Act also adds a provision for a deduction to offset the GILTI inclusion for C corporations only, which is 50 percent (37.5
percent after 2025) of the GILTI inclusion. The GILTI deduction is subject to limitation based mainly on the taxpayer’s taxable
income. In addition to GILTI, the Act also introduced
the foreign-derived intangible income (“FDII”) category. FDII is eligible income derived in connection with property
sold or services provided by the U.S. taxpayer to a non-U.S. person. The taxpayer must establish that the property is foreign use
property, and, in the case of services, the taxpayer must provide that the services are rendered to a non-U.S. person who is located
outside of the United States. C corporations receive a deduction equal to 37.5 percent (21.875 percent after 2025) of foreign-derived
intangible income (FDII). Similar to the GILTI deduction, the FDII deduction is subject to limitation. The Act significantly changes how the U.S. taxes corporations. The
Act requires complex computations to be performed that were not previously required by U.S. tax law, significant judgments to be
made in interpretation of the provisions of the Act, estimates in calculations, and preparation and analysis of information not
previously relevant or regularly produced. As of December 31, 2018, the Company’s impact from the Act was immaterial. As the Company completes its analysis of the
Act, collects and prepares necessary data, and interprets any additional guidance set forth by the U.S. Treasury Department, the
IRS, and other standard-setting bodies, the Company may alter its assessment if it determines that the Act has a material impact
on the provision for income taxes. Fair Value of Financial Instruments The fair value of the Company’s warrants
are determined in accordance with FASB ASC 820, “Fair Value Measurement,”
● Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
● Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
● Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. As of December 31, 2018 and 2017, the Company
did not have any Warrants Liability reported. Long-Lived Assets Loss Contingencies Stock-Based Compensation Compensation – Stock Compensation. Valuation and Expense Information Under
FASB ASC 718-10 The Company recorded stock-based compensation
expense of $0 and $13,400 in the years ended December 31, 2018 and 2017, respectively. As required by FASB ASC 718-10, the Company
estimates forfeitures of employee stock-based awards and recognizes compensation cost only for those awards expected to vest. Forfeiture
rates are estimated based on an analysis of historical experience and are adjusted to actual forfeiture experience as needed. For stock options granted, the Company set
the exercise price equal to the closing fair market value of the Company’s common stock as of the grant date. No options
were issued during the years ended December 31, 2018 and 2017. The following table illustrates the non-cash
stock-based compensation expense recorded during the years ended December 31, 2018 and 2017 by income statement classification:
2018 2017
Cost of revenue $ - $ 100
Selling and marketing expense - 200
General and administrative expense - 13,000
Research and development expense - 100
$ - $ 13,400 Estimated compensation expense is based on
the estimated fair value of each option granted on the date of grant using a binomial model, using the estimated annualized forfeiture
rate based on an analysis of historical data and considered the impact of events such as work force reductions we carried out in
previous years. The expected term of our stock-based awards was based on historical award holder exercise patterns and considered
the market performance of our common stock and other items. The estimated exercise factor was based on an analysis of historical
data; historical exercise patterns; and a comparison of historical and current share prices. The approximate risk free interest
rate was based on the implied yield available on U.S. Treasury issues with remaining terms equivalent to our expected term on our
stock-based awards. The Company used the average historical volatility
of its daily closing price for a period of time equal in length to the expected option term for the option being issued. The period
of time over which historical volatility was measured ended on the last day of the quarterly reporting period during which the
stock-based award was made. The Company does not anticipate paying dividends
on its common stock for the foreseeable future. Earnings Per Share of Common Stock “Earnings Per Share,” Comprehensive Income (Loss) “Reporting Comprehensive Income,” Recent Accounting Pronouncements Effective January 1, 2018, ASC 606, Revenue
from Contracts with Customers, changed the recognition of revenue standards for reporting periods beginning after December 31,
2017. (Refer to Note 2) Future Leases In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842) Disclosure Update and Simplification In July 2016, the SEC released Disclosure Update
and Simplification, No. 33-10532 amendments to certain disclosure requirements that have become redundant, duplicative, overlapping,
outdated, or superseded, in light of other Commission disclosure requirements, U.S. GAAP, International Financial Reporting Standards
(“IFRS”), or changes in the information environment. The Commission also solicited comments on a number of disclosure
requirements that overlap with, but require information incremental to, U.S. GAAP to determine whether to retain, modify, eliminate,
or refer them to the FASB for potential incorporation into U.S. GAAP. This rule is effective November 5, 2018. As of December 31,
2018, we did not have any material change affecting our financial statements. |
