Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 11, 2013 | |
SantaBarbaraConcoursdEleganceMember | ' | ' |
Entity Registrant Name | 'Stratus Media Group, Inc | ' |
Entity Central Index Key | '0001053691 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 425,699,585 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
CONSOLIDATED_BALANCE_SHEETS_US
CONSOLIDATED BALANCE SHEETS (USD $) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current assets | ' | ' |
Cash and equivalents | $255,596 | $312,093 |
Receivable from former officer and director, net of reserves | 53,013 | 71,946 |
Prepaid expenses and deposits | 2,901,438 | 77,599 |
Total current assets | 3,210,047 | 461,638 |
Property and equipment, net | 24,461 | 49,038 |
Goodwill | 0 | 1,935,621 |
Total assets | 3,234,508 | 2,446,297 |
Current liabilities | ' | ' |
Accounts payable | 1,540,706 | 1,203,382 |
Deferred salary | 1,425,365 | 1,152,933 |
Accrued interest | 207,593 | 213,260 |
Accrued preferred stock dividends | 0 | 733,840 |
Other accrued expenses and other liabilities | 2,350,011 | 1,683,508 |
Payable to officer and former officer | 211,358 | 211,358 |
Rent liability for facilities no longer occupied | 1,260,644 | 1,260,645 |
Notes payable | 2,575,002 | 4,004,103 |
Derivative liability | 0 | 10,389,607 |
Total current liabilities | 9,570,679 | 20,852,636 |
Shareholders' deficit | ' | ' |
Common stock, $0.001 par value: 1,000,000,000 shares authorized; 420,966,252 and 89,083,677 shares issued and outstanding | 420,966 | 89,084 |
Additional paid-in capital | 53,256,628 | 38,240,853 |
Accumulated deficit | -59,966,621 | -56,717,225 |
Total Stratus Stockholders' deficit | -6,289,027 | -18,387,260 |
Non-Controlling deficit | -47,144 | -19,079 |
Total shareholders' deficit | -6,336,171 | -18,406,339 |
Total liabilities and shareholders' deficit | 3,234,508 | 2,446,297 |
Series C Preferred Stock [Member] | ' | ' |
Shareholders' deficit | ' | ' |
Preferred stock | 0 | 0 |
Series D Preferred Stock [Member] | ' | ' |
Shareholders' deficit | ' | ' |
Preferred stock | 0 | 19 |
Series E Preferred Stock [Member] | ' | ' |
Shareholders' deficit | ' | ' |
Preferred stock | $0 | $9 |
CONSOLIDATED_BALANCE_SHEETS_US1
CONSOLIDATED BALANCE SHEETS (USD $) (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Common stock par value (in Dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 420,966,252 | 89,083,677 |
Common stock, shares outstanding | 420,966,252 | 89,083,677 |
Series C Preferred Stock [Member] | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 1,000,000 | 1,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Series D Preferred Stock [Member] | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 500,000 | 500,000 |
Preferred stock shares issued | 0 | 18,999 |
Preferred stock shares outstanding | 0 | 18,999 |
Series E Preferred Stock [Member] | ' | ' |
Preferred stock par value | $0.00 | $0.00 |
Preferred stock shares authorized | 10,000 | 10,000 |
Preferred stock shares issued | 0 | 9,450 |
Preferred stock shares outstanding | 0 | 9,450 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Revenues | $0 | $143,334 | $71,667 | $374,542 |
Cost of revenues | 0 | 850 | 0 | 235,803 |
Gross profit | 0 | 142,484 | 71,667 | 138,739 |
Operating expenses | ' | ' | ' | ' |
General and administrative | 339,597 | 1,055,527 | 1,766,561 | 3,818,022 |
Impairment of intangible assets | 0 | 197,500 | 1,935,621 | 197,500 |
Warrants, options and stock | 631,367 | 1,877,144 | 4,238,650 | 2,311,297 |
Fair value of common stock exchanged for warrants | 0 | 0 | 3,069,792 | 0 |
Legal and professional services | 576,709 | 428,708 | 1,010,415 | 2,003,398 |
Depreciation and amortization | 7,479 | 9,855 | 24,577 | 29,613 |
Total operating expenses | 1,555,152 | 3,568,734 | 12,045,616 | 8,359,830 |
Loss from operations | -1,555,152 | -3,426,250 | -11,973,949 | -8,221,091 |
Other (income)/expenses | ' | ' | ' | ' |
(Gain)/loss on adjustments to fair value of derivative liability | 0 | -2,022,790 | -8,980,077 | 13,845,208 |
Gain on extinguishment of derivative liability | 0 | 0 | -1,409,530 | 0 |
Other (income)/expense | -51,444 | -133,770 | -54,498 | 626,926 |
Interest expense | 35,203 | 52,313 | 152,788 | 104,431 |
Total other (income)/expenses | -16,241 | -2,104,247 | -10,291,317 | 14,576,565 |
Net loss | -1,538,911 | -1,322,003 | -1,682,632 | -22,797,656 |
Net loss/(income) attributed to non-controlling interests | 13,634 | -84 | 28,065 | 5,951 |
Net loss attributed to Stratus Media Group | -1,525,277 | -1,322,087 | -1,654,567 | -22,791,705 |
Preferred dividends | $0 | $119,744 | $171,625 | $365,417 |
Net loss attributable to Stratus Media Group common shareholders | ($1,525,277) | ($1,441,831) | ($1,826,192) | ($23,157,122) |
Basic and diluted loss per share | $0 | ($0.02) | ($0.01) | ($0.26) |
Basic weighted average shares outstanding | 414,401,939 | 89,748,496 | 264,660,276 | 89,220,298 |
Fully-diluted weighted average shares outstanding | 414,401,939 | 117,915,163 | 264,660,276 | 117,386,965 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($1,682,632) | ($22,797,656) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 24,577 | 29,613 |
Impairment of intangible assets | 1,935,621 | 197,500 |
(Gain)/loss on adjustment to fair value of derivative liabilities | -8,980,077 | 13,845,208 |
Gain on extinguishment of derivative liability | -1,409,530 | 0 |
Warrant, option and stock expense | 4,238,650 | 1,363,054 |
Fair value of common stock exchanged for warrants | 3,069,792 | 0 |
Amortization of stock issued for services | 294,813 | 948,243 |
Note issued for services | 50,000 | 0 |
Stock issued for services | 262,813 | 221,000 |
Increase / (decrease) in: | ' | ' |
Receivable from former officer and director | -18,933 | 538,515 |
Prepaid expenses and deposit | 0 | -16,793 |
Accounts payable | 337,324 | 182,709 |
Deferred salary | 272,432 | 1,225,441 |
Accrued interest | -5,667 | 33,232 |
Rent liability for facilities no longer occupied | 0 | 452,041 |
Other accrued expenses and liabilities | 426,820 | 965,040 |
Net cash used in operating activities | -1,183,997 | -2,812,853 |
Cash flows from financing activities: | ' | ' |
Proceeds on notes payable | 700,000 | 2,871,316 |
Proceeds from issuance of common stock | 427,500 | 0 |
Net cash provided by financing activities | 1,127,500 | 2,871,316 |
(Decrease)/Increase in cash and equivalents | -56,497 | 58,463 |
Cash and equivalents, beginning of period | 312,093 | 98,449 |
Cash and equivalents, end of period | 255,596 | 156,912 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid during the period for interest | 0 | 0 |
Cash paid during the period for income taxes | $0 | $0 |
1_Business
1. Business | 9 Months Ended |
Sep. 30, 2013 | |
Business Combinations [Abstract] | ' |
NOTE 1 - Business | ' |
On March 14, 2008, pursuant to an Agreement and Plan of Merger dated August 20, 2007 between Feris International, Inc. (“Feris”) and Pro Sports & Entertainment, Inc. (“PSEI”), Feris issued 49,500,000 shares of its common stock for all issued and outstanding shares of PSEI, resulting in PSEI becoming a wholly-owned subsidiary of Feris and the surviving entity for accounting purposes (“Reverse Merger”). In July 2008, Feris’ corporate name was changed to Stratus Media Group, Inc. (“Company,” “Stratus,” or “SMDI”). PSEI, a California corporation, was organized on November 23, 1998. PSEI acquired the business of Stratus White, LLC (“Stratus White”) in August 2005. | |
In June 2011, the Company acquired shares of Series A Convertible Preferred Stock of ProElite, Inc., a New Jersey corporation (“ProElite” or “PEI”), that organized and promoted mixed martial arts (“MMA”) matches. These holdings of Series A Convertible Preferred Stock provide the Company voting rights on an as-converted basis equivalent to a 95% ownership in ProElite. | |
Stratus has suspended development of its past businesses, including ProElite, and, contingent on sufficient capital, is seeking acquisitions. Effective September 30, 2013, Stratus entered into an Agreement and Plan of Merger with Canterbury Acquisition LLC, a wholly owned subsidiary of the Company, Hygeia Acquisition, Inc., a wholly-owned subsidiary of the Company, Canterbury Laboratories, LLC (“Canterbury”), Hygeia Therapeutics, Inc. (“Hygeia”) and Yael Schwartz, Ph.D., as Holder Representative, pursuant to which Stratus will acquire all of the capital stock of Canterbury and Hygeia (the “Mergers”) with Canterbury and Hygeia becoming wholly-owned subsidiaries of Stratus. The consideration for the Mergers will be the issuance by Stratus of an aggregate of 115,011,563 restricted shares of Stratus common stock to be issued to the stakeholders of Canterbury and Hygeia. Closing of the Mergers occurred on November 18, 2013 and is subject to rescission if Stratus has not raised $7.5 million or more in gross financing proceeds by January 15, 2014. | |
Canterbury and Hygeia (the “Canterbury Group”) are related companies engaged in the development of cosmeceuticals that revitalize hormonally-aged skin and hair in women over the age of 45. Cosmeceuticals are the latest addition to the health industry and are sometimes described as cosmetic products with “drug-like benefits.” Generally, cosmeceuticals are products sold over-the-counter, without the regulatory requirement of FDA approval. The Canterbury Group has an exclusive license with Yale University to develop and market 23 synthetic estrogenic ingredients for the treatment of aging skin and four classes of anti-androgenic ingredients for hair loss, excess facial hair, seborrhea and acne. The license from Yale covers 24 patent-protected compounds under U.S. Patent 7,015,211“Estradiol 15-α-Carboxylic Acid Esters as Locally Active Estrogens,” U.S. Patent 6,476,012“Estradiol 16-alpha Carboxylic Acid Esters as Locally Active Estrogens” and U.S. Patent 8,552,061 “Locally active "soft" antiandrogens (“Yale License”). | |
Hygeia is a Delaware Corporation, based in Holden, Massachusetts was incorporated in November 2005 and was formerly known as Orcas Therapeutics, Inc. Canterbury is a Delaware Limited Liability Company that was formed in October 2011 and began operations in February 22, 2012. Initially, the Canterbury was a wholly-owned subsidiary of Hygeia and shareholders of Hygeia currently own 94% of Canterbury. |
2_Going_Concern
2. Going Concern | 9 Months Ended |
Sep. 30, 2013 | |
GoingConcernAbstract | ' |
NOTE 2 - Going Concern | ' |
The Company has suffered losses from operations and, without additional capital, currently lacks liquidity to meet its current obligations. The Company had net losses for the nine months ended September 30, 2013 and 2012 of $1,826,192 and $23,157,122, respectively. As of September 30, 2013, the Company had negative working capital of $6,361,637 and an accumulated deficit of $59,966,621. The Company had a total of $1,825,002 of promissory notes that were in default as of September 30, 2013. Unless additional financing is obtained, the Company may not be able to continue as a going concern. In the nine months ended September 30, 2013, the Company raised $700,000 through the issuance of two promissory notes and $427,500 through the sale of common stock. For the year ended December 31, 2012, the Company raised $870,000 through issuance of preferred stock, $143,829 through the issuance of common stock and received $3,483,103 through issuance of promissory notes. The Company is seeking additional capital in connection with current and potential acquisitions. However, due to the current economic environment and the Company’s current financial condition, there can be no assurance that adequate capital will be available when needed and on acceptable terms. | |
The financial statements were prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result if the Company is unable to continue as a going concern. |
3_Basis_of_Presentation_and_Si
3. Basis of Presentation and Significant Accounting Policies | 9 Months Ended | ||
Sep. 30, 2013 | |||
Accounting Policies [Abstract] | ' | ||
NOTE 3 - Basis of Presentation and Significant Accounting Policies | ' | ||
Basis of Presentation | |||
The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The balance sheets at September 30, 2013 and December 31, 2012 and the income statements for the three months and nine months ended September 30, 2013 and 2012 consolidate the accounts of PEI reflecting the acquisition (see Note 16). All significant intercompany balances were eliminated in consolidation. | |||
Basic and Diluted Earnings Per Share (“EPS”) | |||
Basic EPS is computed by dividing the income/(loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares were converted into common stock. Dilution is computed by applying the if-converted method for the outstanding convertible preferred shares. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). | |||
For purposes of calculating EPS, the number of common shares did not include 28,166,667 shares of common stock issuable upon conversion by the holders of Series E Preferred on September 30, 2012. These conversion shares were not included in the EPS calculation because they were antidilutive given the losses by the Company for the three and nine months ending September 30, 2012. As of June 30, 2013 the Series E Preferred had been extinguished and the basic and fully-diluted shares are the same from that point forward. | |||
Non-controlling Interest | |||
The Company follows Accounting Standards Codification (“ASC”) Topic 810 “Consolidation,” which governs the accounting for and reporting of Non-Controlling Interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The net income (loss) attributed to the NCI is separately designated in the accompanying statements of operations and other comprehensive income (loss). Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to attribute its share of losses even if that attribution results in a deficit NCI balance. | |||
Use of Estimates | |||
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may differ from such estimates and assumptions. | |||
Derivative Liabilities | |||
On May 24, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with eight investors (collectively, the “Investors”) pursuant to which the Company sold 8,700 shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (“Original Series E”), the terms of which are set forth in the Certificate of Designations of Series E Preferred Stock (the “Certificate”), for $1,000 per share, or $8,700,000. In October 2012, the Company sold 1,000 shares of Series E for $1,000,000 (“New Series E”). The Original Series E and New Series E together are referred to herein as “Series E”. | |||
These Series E contained “full ratchet-down” liquidity protection, which provided that if the Company issues securities for less than the existing conversion price for the Series E Preferred Stock or the strike price of the Series E warrants, then the conversion price for Series E Preferred Stock will be lowered to that lower price. Also, the strike price for Series E warrants would be decreased to that lower price and the number of Series E warrants would be increased such that the product of the original strike price times the original quantity equals the lower strike price times the higher quantity. | |||
Subsequent to the issuance of this Series E, the Company determined that the warrants for these financings included certain embedded derivative features as set forth in ASC Topic 815 “Derivatives and Hedging,” (“ASC 815”) and that this conversion feature of the Series E was not an embedded derivative because this feature was clearly and closely related to the host (Series E) as defined in ASC 815. These derivative liabilities were initially recorded at their estimated Fair Value (“FV”) on the date of issuance and were subsequently adjusted each quarter to reflect the estimated FV at the end of each period, with any decrease or increase in the estimated FV of the derivative liability for each period being recorded as other income or expense. Since the value of the embedded derivative feature for the related warrants was higher than the value of both Series E transactions, there was no beneficial conversion feature recorded for either transaction, and the excess of the value of the embedded derivative feature over the value of the transaction was recorded in each period on the Statement of Operations as a separate line item. | |||
The FV of these derivative liabilities was calculated using the Black Scholes pricing model that was based on the closing price of the common stock, the strike price of the underlying instrument, the risk-free interest rate for the applicable remaining life of the underlying instrument (i.e., the U.S. treasury rate for that period) and the historical volatility of the Company’s common stock. These FV results were extremely sensitive to all these input variables, particularly the closing price of the company’s common stock and the volatility of the Company’s common stock. Accordingly, the FV of these derivative liabilities was subject to significant changes. | |||
The Series E and related warrants were extinguished in May 2013 when the Series E and related warrants were exchanged for common stock. | |||
Allowance for Uncollectible Receivables | |||
Accounts receivable are recorded at their face amount, less an allowance for doubtful accounts. We review the status of our uncollected receivables on a regular basis. In determining the need for an allowance for uncollectible receivables, we consider our customers financial stability, past payment history and other factors that bear on the ultimate collection of such amounts. | |||
Cash Equivalents | |||
We consider all highly liquid investments purchased with maturities of three months or less to be cash equivalents. | |||
Fair Value of Financial Instruments | |||
Our financial instruments include cash and equivalents, receivables, accounts payable and accrued liabilities. The carrying amounts of financial instruments approximate FV due to their short maturities. | |||
Property and Equipment | |||
Property and equipment are stated at cost less accumulated depreciation. We record depreciation using the straight-line method over the following estimated useful lives: | |||
Equipment | 3 – 5 years | ||
Furniture and fixtures | 5 years | ||
Software | 3 years | ||
Leasehold improvements | Lesser of lease term or life of improvements | ||
Goodwill and Intangible Assets | |||
Intangible assets consisted of goodwill related to ProElite that we acquired in June 2011 but suspended development of this business in June 2013. Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. We apply ASC Topic 350 “Goodwill and Other Intangible Assets,” which requires allocating goodwill to each reporting unit and testing for impairment using a two-step approach. | |||
The Company reviewed the value of intangible assets and related goodwill as part of its annual reporting process, which occurs in February or March of each year. In between valuations, the Company conducted additional tests to determine if circumstances warranted additional testing for impairment. The Company decided to suspend development of its ProElite business as of June 30, 2013 and the goodwill was considered to be fully impaired at that time. However, except for the termination of certain employees of ProElite, the Company has not taken any actions that it believes would materially impair the ability of the Company to resume development of this business should it elect to do so in the future. | |||
To review the value of intangible assets and related goodwill as of December 31, 2012, the Company followed ASC Topic 350 “Intangibles-Goodwill and Other” and first examined the facts and circumstances for each event or business to determine if it was more likely than not that an impairment had occurred. If this examination suggested it was more likely that impairment had occurred, the Company then compared discounted cash flow forecasts related to the asset with the stated value of the asset on the balance sheet. The objective was to determine the value of each asset to an industry participant who is a willing buyer not under compulsion to buy and the Company is a willing seller not under compulsion to sell. | |||
The events were forecasted based on the assumption they are standalone entities and adjusted for historical performance and the facts and circumstances surrounding the event and the macroeconomic conditions that affect the event. | |||
These forecasts were discounted at a range of discount rates determined by taking the risk-free interest rate at the time of valuation, plus premiums for equity risk to small companies in general, for factors specific to the Company and the business for a total discount rate of 35%. Terminal values were determined by taking cash flows in year five of the forecast, then applying an annual growth of 4% and discounting that stream of cash flows by the discount rate used for that section of the business. | |||
As of December 31, 2012, the Company determined that the FV of its ProElite MMA business for accounting purposes was $2,400,000, which was 124% of the goodwill on the balance sheet as of December 31, 2012. We engaged an outside service provider to assist in this determination. The service provider computed future projected cash flows using information we provided, including estimated future results of the events and operations. We then compared the estimated FV of the reporting unit to the carrying value of the reporting unit and determined that no impairment had occurred as of December 31, 2012. | |||
Income Taxes | |||
The Company utilizes ASC Topic 740 “Accounting for Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. | |||
As of December 31, 2012, the Company had a deferred tax asset that was fully reserved and a net operating loss carryforward of $40,240,679 for Federal purposes and $36,995,229 for state tax purposes. The Company will continue to monitor all available evidence and reassess the potential realization of its deferred tax assets. If the Company improves its results of operations, or if circumstances otherwise change, and given the changes in stock ownership of the Company, it is possible that the Company may realize only a portion of its valuation allowance in the future. Any such realization would result in recording a tax benefit that would increase net income in the period the valuation is released. However, under U.S. tax codes, changes in ownership of the Company can reduce or eliminate the ability of the Company to use these tax-loss carryforwards in the future. As of September 30, 2013, the Company had a net operating loss carryforward of approximately $41,000,000 for Federal tax purposes and approximately $38,000,000 for state tax purposes. | |||
Stock-Based Compensation | |||
We follow ASC Topic 718 “Share Based Payment,” using the modified prospective transition method. New awards and awards modified, repurchased or cancelled after January 1, 2006 trigger compensation expense based on the FV of the stock option as determined by the Black-Scholes option pricing model. We amortize stock-based compensation for such awards on a straight-line method over the related service period of the awards taking into account the effects of the employees’ expected exercise and post-vesting employment termination behavior. | |||
We account for equity instruments issued to non-employees in accordance with ASC Topic 718 and EITF Issue No. 96-18. The FV of each option granted is estimated as of the grant date using the Black-Scholes option pricing model. | |||
Advertising | |||
We expense the cost of advertising as incurred. Such amounts have not historically been significant. | |||
Reclassifications | |||
Certain prior year amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the net loss or the shareholder’s deficit. | |||
Recent Accounting Pronouncements | |||
On July 27, 2012, the FASB issued ASC 2012-02 “Intangibles-Goodwill and Other (Topic 350)” Testing Indefinite-Lived Intangible Assets for Impairment. The ASC provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the FV of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASC is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this pronouncement did not have a material impact on our financial statements. |
4_Litigation
4. Litigation | 9 Months Ended |
Sep. 30, 2013 | |
Warrants and options | ' |
NOTE 4 - Litigation | ' |
In January 2013, the Company signed a term sheet (“Term Sheet”) with an outside financial firm (“Financial Firm”) to have that firm acquire certain portions of the Company’s liabilities to creditors, employees and former employees (“Creditors”) . The Financial Firm entered into agreements in July 2013 with such Creditors to acquire $1,865,386 in liabilities (“Liability Settlement”) of the Company and filed a complaint on July 29, 2013 with the Second Judicial Circuit, Leon County, Florida seeking a judgment against the Company for the Liability Settlement. A court order based on this complaint was issued on October 7, 2013. Based on conditions agreed to in the Term Sheet, the Company will settle that judgment by issuing common stock to the Financial Firm. Under an exemption from registration in the SEC regulations, common stock issued pursuant to this court order is tradable without restrictions. This common stock will be issued in tranches such that the Financial Firm will not own more than 9.99% of outstanding shares at any time and will be priced at 80% of average closing bids during such period of time in which the dollar trading volume of the stock is three times the Liability Settlement (“Settlement Period”). The Financial Firm will sell the shares to generate proceeds to pay the Creditors. | |
If the court order had been issued on September 30, 2013 and using the stock price of $0.108 as of that date, the Financial Firm would have received approximately 20,500,000 shares of common stock for the Liability Settlement and the Company would record a loss of approximately $373,000 based on the excess of the value of the shares issued over the value of the liabilities acquired by the Financial Firm. If the bid price drops during the Settlement Period, the Company is obligated to issue additional shares to ensure the Financial Firm has sufficient stock to cover the Liability Settlement. Until the Financial Firm repays all the creditors, the Company will have a liability on its balance sheet for the value of the number of shares of stock owed to the Financial Firm. This liability will be adjusted on a quarterly basis for changes in the market price of the Company’s stock, which will produce gains and losses in the period that such adjustment is made. For example, if the current bid price fell during the Settlement Period to an price of $0.05, the Company would issue approximately 26,000,000 additional shares to the Financial Firm for total shares issued of 46,500,000 and the Company would record an additional loss of $1,295,000 for these shares. The selling activities of the Financial Firm could put downward pressure on the stock price. The Financial Firm held a promissory note for $50,000 that was converted into 833,333 shares of common stock on October 3, 2013 and received a fee of 150,000 shares of common stock on October 7, 2013. An initial tranche of 20,000,000 shares was issued to the Financial Firm on November 15, 2013. | |
In July 2013, the Company received notice that a complaint for property damage had been filed by the Truck Insurance Exchange against the Company for $393,592 related to water damage incurred by a printing company on the ground floor of the Company’s former office space in Los Angeles. This damage is alleged to have occurred in connection with a water leak in the Company’s former office in February 2013. The Company has filed an answer to this complaint that includes, but not be limited to, the defense of culpability of the building’s management in this leak. The Company has a dispute with its insurance carrier at that time regarding coverage for this incident and the Company intends to pursue this dispute to ensure that it had proper insurance coverage at that time. The $300,000 accrued for this issue as of December 31, 2012 was increased to $393,592 in the Company’s financial statements as of June 30, 2013. |
5_Prepaid_Expenses
5. Prepaid Expenses | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
5. Prepaid Expenses | ' |
In July 2013, the Company entered into an agreement with Maxim Group LLC to provide general financial advisory and investment banking services to the Company for three years on a non-exclusive basis. Under this agreement, Maxim received common stock equal to 4.99% of the outstanding common stock of the Company as of that date, or 21,025,000 shares of common stock. These shares were valued at $0.15, which was the closing price of the Company’s common stock on the date of the agreement, for a total expense of $3,153,750. This expense is being recognized ratably over the life of the three-year term of the agreement at $262,813 per quarter. As of September 30, 2013, $2,890,938 remained in prepaid expenses. |
6_Receivable_From_Former_Chair
6. Receivable From Former Chairman and Chief Executive Officer | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
6. Receivable From Former Chairman and Chief Executive Officer | ' | ||||||||
Pursuant to an investigation directed by the Company’s Board of Directors (“Board”) in March 2012, it was determined that Paul Feller, the Company’s former chairman and Chief Executive Officer (“CEO”), received $640,000 in December 2010 in connection with a sale of the Company’s common stock he arranged with outside investors and he caused 2,540,000 shares of common stock to be issued directly by the Company while Mr. Feller kept the cash proceeds (the “European Transactions”). Accordingly, the Company recorded a gross receivable of $640,000 from Mr. Feller in connection with the European Transactions. Mr. Feller resigned from the Company on June 28, 2012. During 2012, it was determined that Mr. Feller kept in his possession a vintage automobile that the Company paid $38,100 for, increasing his receivable to $678,100. | |||||||||
As of December 31, 2012, this receivable of $678,100 was increased by $71,946, which is the value of 378,661 shares owed by Mr. Feller to the Company at the $0.19 closing price of common stock on December 31, 2012, along with $4,622 of personal expenses for Mr. Feller paid with Company funds. This receivable of $754,668 was presented net of the offset of $538,515 of the receivable related to stock issuance (see below), $30,540 of approved business expenses and $113,667 in deferred salary. As of September 30, 2013, this receivable was reduced to $53,013, which is the value of the 378,661 shares owed by Mr. Feller to the Company at the $0.140 closing price of the Company’s shares as of September 30, 2013. | |||||||||
These impacts are summarized as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Gross receivable | |||||||||
Sale of Company common stock, net proceeds retained by Mr. Feller | $ | 640,000 | $ | 640,000 | |||||
Value of 378,661 shares of common stock owed by Mr. Feller to the Company, valued at December 31, 2012 price of $0.19 and at September 30, 2013 price of $0.14 | 53,013 | 71,946 | |||||||
Vintage automobile retained by Mr. Feller | 38,100 | 38,100 | |||||||
Other | 4,622 | 4,622 | |||||||
Total | 735,735 | 754,668 | |||||||
Offsets to receivable | |||||||||
Deferred salary | (113,667 | ) | (113,667 | ) | |||||
Expense reports submitted and approved | (30,540 | ) | (30,540 | ) | |||||
Write off receivable based on stock offsets (see below) | (538,515 | ) | (538,515 | ) | |||||
Net receivable | $ | 53,013 | $ | 71,946 | |||||
Pursuant to a Separation and Release Agreement dated June 28, 2012 and signed by Mr. Feller on August 9, 2012 (“Separation Agreement”), Mr. Feller agreed to waive his rights to any deferred salary prior to October 1, 2011. Accordingly, the amount of deferred salary eligible for an offset to the gross receivable was reduced from $398,790 at December 31, 2011 to $113,667 at December 31, 2012, which is $125,000 in deferred salary between October 1, 2011 and June 28, 2012, less $11,333 paid in salary during that period. In addition, Mr. Feller did not submit expense reports to support the $133,770 of expenses in the time provided for in the Separation Agreement, so that amount was removed as an offset to his receivable as of December 31, 2012. | |||||||||
This offset of the $538,515 receivable from Mr. Feller resulted from the decision by the Company to treat 2,161,339 shares of stock owed to Mr. Feller from 2008 and 2009 that were approved by the Board but never issued, as having been satisfied when he had the Company issue 2,540,000 shares of stock in connection with the European Transactions. | |||||||||
The 2,161,339 shares were due to Mr. Feller as payment for $2,768,652 in accrued salary, interest, vacation and rental payments for 2008, 2009 and prior years, and repayment of $729,439 of outstanding loans made by Mr. Feller to the Company in those periods. The Company is satisfied that it properly recorded and disclosed the 2008 and 2009 transactions in its financial reports filed with the SEC and the only adjustment needed was to reduce shares outstanding as of December 31 2012 by these 2,161,339 shares. The Company has accrued the employer taxes on this taxable income as of December 31, 2012. While Mr. Feller was owed 2,161,339 shares from 2008 and 2009, he had the Company issue 2,540,000 shares related to the European Transactions, leaving a balance due to the Company of 378,661 shares, which are valued at December 31, 2012 for $71,946, based on the closing price of the Company’s common stock on that date. | |||||||||
As of September 30, 2013, the Company recorded an accrued expense of $312,500 pursuant to Mr. Feller’s consulting agreement that provides for $62,500 per quarter through June 30, 2014, subject to certain conditions, and has not recorded an allowance for doubtful accounts for this receivable given the accrued expense of a higher value. The Company has informed Mr. Feller that it reserves all rights with regards to this consulting agreement given the events that led to his resignation on June 28, 2012. In the event that the Company determines that Mr. Feller’s consulting agreement is not valid, the Company will reverse the accrual for $312,500 for his consulting agreement as of September 30, 2013 and will fully reserve the receivable from Mr. Feller. | |||||||||
7_Property_and_Equipment
7. Property and Equipment | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
NOTE 7 - Property and Equipment | ' | ||||||||
Property and equipment were as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Computers and peripherals | $ | 97,660 | $ | 97,660 | |||||
Office machines | 49,370 | 49,370 | |||||||
Furniture and fixtures | 73,905 | 73,905 | |||||||
220,935 | 220,935 | ||||||||
Less accumulated depreciation | (196,474 | ) | (171,897 | ) | |||||
Property and equipment, net | $ | 24,461 | $ | 49,038 | |||||
For the three months ended September 30, 2013 and 2012, depreciation expense was $7,479 and $9,855, respectively. For the nine months ended September 30, 2013 and 2012, depreciation expense was $24,577 and $29,613, respectively. |
8_Goodwill
8. Goodwill | 9 Months Ended |
Sep. 30, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' |
NOTE 8 - Goodwill and Intangible assets | ' |
Goodwill was $0 at June 30, 2013 and $1,935,621 at December 31, 2012. In accordance with ASC Topic 350, “Intangibles-Goodwill and Other,” the Company’s goodwill and intangible assets were considered to have indefinite lives and were therefore not amortized, but rather were subject to annual impairment tests. The Company’s annual impairment testing date was December 31, but the Company monitored the facts and circumstances for all intangible properties to determine whether an impairment existed. Given the Company’s decision as of June 30, 2013 to suspend development of its MMA business, the goodwill for ProElite was considered to be fully impaired as of that date. | |
9_Deferred_Salary
9. Deferred Salary | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
Note 9. Deferred Salary | ' |
Capital constraints necessitated that the Company reduce staff since February 16, 2012 and the Company has not been able to pay employees on a regular basis, resulting in unpaid salaries of $1,425,365 and $1,152,933 as of September 30, 2013 and December 31, 2012, respectively. | |
10_Other_accrued_expenses_and_
10. Other accrued expenses and other liabilities | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Accrued Expenses And Other Liabilities | ' | ||||||||
NOTE 10 - Other accrued expenses and other liabilities | ' | ||||||||
Other accrued expenses and other liabilities consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Payroll related | $ | 505,893 | $ | 329,191 | |||||
Estimated damage liability that may not be covered by insurance | 393,592 | 300,000 | |||||||
Estimated settlement with vendor in Europe | 400,000 | 300,000 | |||||||
Professional fees | 120,000 | 160,773 | |||||||
Accrued board fees | 584,761 | 349,948 | |||||||
Consultant fees | 321,277 | 133,777 | |||||||
Other | 24,488 | 109,819 | |||||||
$ | 2,350,011 | $ | 1,683,508 | ||||||
The estimated damage liability that may not be covered by insurance was increased to the amount of the legal complaint disclosed in footnote 4 that is related to this amount. The estimated settlement with vendor in Europe increased based on a negotiated settlement for $400,000. Consultant fees increased by the $187,500 accrued under the consulting contract for Paul Feller discussed in footnote 6. | |||||||||
11_Payable_to_Officer_and_Form
11. Payable to Officer and Former Officer | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Working Capital | ' | ||||||||
NOTE 11 - Payable to Officer and Former Officer | ' | ||||||||
The amounts payable to an officer and a former officer pursuant to their employment agreements: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Officer pursuant to employment agreement | $ | 156,358 | $ | 156,358 | |||||
Promissory note to former officer | 55,000 | 55,000 | |||||||
$ | 211,358 | $ | 211,358 | ||||||
In connection with the 2010 employment agreement for its then Senior Vice President and Chief Operating Officer, the Company owes this former officer $55,000, which is the remaining portion of a promissory note assumed by the Company in connection with this employment agreement. In connection with the 2010 employment agreement for the Company’s Chief Financial Officer, the Company owes this officer $156,358 for unpaid amounts consisting of consulting fees prior to employment, expenses, salary increases and signing bonus. |
12_Notes_payable
12. Notes payable | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes Payable [Abstract] | ' | ||||||||
NOTE 12 - Notes payable | ' | ||||||||
Notes payable were as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Notes payable from ProElite to various individuals dated October 20, 2011 with maturity of July 20, 2012, plus interest at 8%, convertible into common stock of ProElite at noteholder's election. Secured by the assets of ProElite. These notes are currently in default. | $ | 1,083,000 | $ | 1,063,000 | |||||
Note payable to a shareholder with original maturity of May 24, 2012, plus interest at 0.19%, that was secured by the assets of ProElite. This note was converted into common stock in May 2013. | – | 1,000,000 | |||||||
Note payable from ProElite to one party dated October 19, 2012 with original maturity of October 19, 2013. Bears interest at 7% and was secured by the assets of ProElite. This note was converted into common stock in May 2013. | – | 500,000 | |||||||
Note payable by the Company to a shareholder dated August 9, 2013. Bears interest at 7% and matures on August 9, 2013. Contains mandatory conversion into security or securities totalling $10 million or more at the lesser of 50% of the selling price of such securities or the equivalent of $0.04 per share of common stock. This note is secured by the assets of the Company | 500,000 | – | |||||||
Note payable to the Company's outside law firm and represents the corporate and litigation fees due as of June 30, 2012. This note bears interest at 3% and was due December 31, 2012. This note is currently in default. | 467,002 | 486,104 | |||||||
Notes payable to three holders dated May 11, 2012 with original maturity of the earlier of November 11, 2012 and was secured by the assets of the Company. This note was converted into common stock in May 2013. | – | 350,000 | |||||||
Notes payable to 11 investors dated July 9, 2012 with maturity date on the earlier of a $2 million capital raise by the company, or February 6, 2013 and bears interest at 8%. This note is currently in default. | 275,000 | 275,000 | |||||||
Notes payable to one holder dated April 4, 2012 with original maturity on October 4, 2012 that was changed to January 4, 2013. This note was converted into common stock in May 2013. | – | 249,999 | |||||||
Notes payable to one holder dated March 5, 2013 with maturity on the earlier of September 5, 2013 or receipt by the Company of $200,000 in net proceeds from a private placement of Company securities. This note does not bear interest and is not secured. This note is currently in default. | 200,000 | – | |||||||
Note payable to a shareholder dated January 14, 2005, with original maturity of May 14, 2005, plus interest at 10%. Unsecured. This note was written off in June 2013. | – | 70,000 | |||||||
Note payable to a financing firm dated April 3, 2013 with maturity on December 31, 2014. Unsecured and non-interest bearing. Convertible into common stock at $0.06 per share for a maximum of 833,333 shares | 50,000 | – | |||||||
Note payable to a shareholder dated February 1, 2005 with original maturity of June 1, 2005, plus interest at 10%. Unsecured. This note was written off in June 2013. | – | 10,000 | |||||||
$ | 2,575,002 | $ | 4,004,103 | ||||||
The notes of $70,000 and $10,000 outstanding as of December 31, 2012 were written off in June 2013 since there have been no actions taken to collect on these notes and the statute of limitations for collecting on these notes has passed. The gain of $80,000 for the writeoff of these notes was reflected in other income for the nine months ended September 30, 2013. |
13_Derivative_Liabilities
13. Derivative Liabilities | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||
13. Derivative Liabilities | ' | ||||
On May 24, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with eight investors (collectively, the “Investors”) pursuant to which the Company sold 8,700 shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (“Original Series E”), the terms of which are set forth in the Certificate of Designations of Series E Preferred Stock (the “Certificate”), for $1,000 per share, or $8,700,000. In October 2012, the Company sold 1,000 shares of Series E for $1,000,000 (“New Series E”). The Original Series E and New Series E together are referred to herein as “Series E”. | |||||
These Series E contained “full ratchet-down” liquidity protection that provided that if the Company issues securities for less than the existing conversion price for the Series E Preferred Stock or the strike price of the Series E warrants, then the conversion price for Series E Preferred Stock will be lowered to that lower price. Also, the strike price for Series E warrants were decreased to that lower price and the number of Series E warrants will be increased such that the product of the original strike price times the original quantity equaled the lower strike price times the higher quantity. | |||||
Subsequent to the issuance of this Series E, the Company determined that the warrants for these financings included certain embedded derivative features as set forth in ASC Topic 815 and that this conversion feature of the Series E was not an embedded derivative because this feature was clearly and closely related to the host (Series E) as defined in ASC 815. These derivative liabilities were initially recorded at their estimated FV on the date of issuance and were subsequently adjusted each quarter to reflect the estimated fair value at the end of each period, with any decrease or increase in the estimated FV of the derivative liability for each period being recorded as other income or expense. Since the value of the embedded derivative feature for the related warrants was higher than the value of both Series E transactions, there was no beneficial conversion feature recorded for either transaction, and the excess of the value of the embedded derivative feature over the value of the transaction was recorded in each period on the Statement of Operations as a separate line item. | |||||
The FV of these derivative liabilities was calculated using the Black Scholes pricing model that was based on the closing price of the common stock, the strike price of the underlying instrument, the risk-free interest rate for the applicable remaining life of the underlying instrument (i.e., the U.S. treasury rate for that period) and the historical volatility of the Company’s common stock. These FV results were extremely sensitive to all these input variables, particularly the closing price of the company’s common stock and the volatility of the Company’s common stock. Accordingly, the FV of these derivative liabilities were subject to significant changes. On March 31, 2013, the FV of these derivative liabilities was $10,626,457. As of May 6, 2013, the Series E and related warrants were converted into common stock and extinguished. The Company valued the derivative liability on this date as $1,409,530 and recorded a gain of $9,216,927 on the decrease in FV for the derivative security, then recorded a gain of $1,409,530 on extinguishment of the derivative liability. | |||||
The following assumptions were used to calculate the Black Scholes values of this derivative liability as of March 31, 2013 and as of May 6, 2013. The fair value of the underlying common stock was based on the sale of 13,916,665 shares of common stock at $0.03 by the Company during the three months ended June 30, 2013. | |||||
Estimated fair value of underlying common stock | $0.03 | ||||
Remaining life in years | 3.05 - 3.15 | ||||
Risk-free interest rate | 0.35% - 0.38% | ||||
Expected volatility | 141% - 142% | ||||
Dividend yield | – |
14_Shareholders_Deficit
14. Shareholders' Deficit | 9 Months Ended | ||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||
Shareholders Deficit | ' | ||||||||||||||||||||||||||||
NOTE 14 - Shareholders' Deficit | ' | ||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||
Following a majority vote of shareholders to approve, an information statement was distributed to shareholders of record as of June 30, 2013. After the appropriate waiting period after such mailing, the authorized number of shares was increased from 500,000,000 to 1,000,000,000 in August 2013. During the nine months ended September 30, 2013, the Company issued a total of 331,549,242 shares of Common Stock, resulting in an increase in outstanding shares from 89,083,677 shares as of December 31, 2012 to 420,966,252 shares as of September 30, 2013: | |||||||||||||||||||||||||||||
Number of | |||||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||||
Outstanding shares as of December 31, 2012 | 89,083,677 | ||||||||||||||||||||||||||||
Exchange of Series E Preferred for common stock | 157,499,999 | ||||||||||||||||||||||||||||
Exchange of Series E Preferred warrants for common stock | 102,326,388 | ||||||||||||||||||||||||||||
Exchange of certain debts for common stock | 34,999,984 | ||||||||||||||||||||||||||||
Shares issued for financial advisory agreement | 21,025,000 | ||||||||||||||||||||||||||||
Sales of common stock | 13,916,665 | ||||||||||||||||||||||||||||
Conversion of Series D Preferred into common stock | 1,413,850 | ||||||||||||||||||||||||||||
Other | 700,689 | ||||||||||||||||||||||||||||
Outstanding shares as of September 30, 2013 | 420,966,252 | ||||||||||||||||||||||||||||
Series C 10% Preferred Stock | |||||||||||||||||||||||||||||
There were no shares of Series C 10% Preferred Stock outstanding as of September 30, 2013 or December 31, 2012. | |||||||||||||||||||||||||||||
Series D 10% Preferred Stock | |||||||||||||||||||||||||||||
As of September 30, 2013 and December 31, 2012, 0 and 18,999 shares of Series D were outstanding, respectively. Each share of Series D sold for $30, could be converted at any time into 60 shares of common stock and had voting rights equal to 60 shares of common stock. In connection with the issuance of Series D, the Company issued warrants to purchase 179,970 shares of common stock. The warrants have a life of five years to purchase a share of common stock for $1.00 per share. The Series D had liquidation preference over common stock at a liquidation value equal to its par value of $30 and paid a cumulative dividend of 10% per year. Given the losses recorded by the Company, the stock equivalents related to the Series D are not included in the calculation of earnings per share since the effect of such inclusion would be antidilutive. During the nine months ended September 30, 2013, 18,999 shares of Series D were converted into a total of 1,413,850 shares of common stock: 1,139,940 shares for direct conversion of the Series D into common stock, 252,797 shares for dividends and 21,113 for the price protection feature. | |||||||||||||||||||||||||||||
Series E 5% Preferred Stock | |||||||||||||||||||||||||||||
As of September 30, 2013 and December 31, 2012, there were 0 and 9,450 shares of Series E were outstanding, respectively. On May 6, 2013 all shares of Series E were exchanged for 157,499,999 shares of common stock and were extinguished, thereby removing the “overhang” created by the terms of the Series E that provided for the conversion price into common stock to be reduced to the price of any subsequent financing done at a lower price. | |||||||||||||||||||||||||||||
In October 2012, the Company raised $870,000 through the issuance of 1,000 shares of Series E 5% Preferred Stock (“Series E”) and common stock and warrants to purchase shares of common stock at $0.65 to $1.00. On May 24, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with eight investors (collectively, the “Investors”) pursuant to which the Company sold 8,700 shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (“Original Series E”), the terms of which are set forth in the Certificate of Designations of Series E Preferred Stock (the “Certificate”), for $1,000 per share, or $8,700,000. In October 2012, the Company sold 1,000 shares of Series E for $1,000,000 (“New Series E”). The Original Series E and New Series E together are referred to herein as “Series E”. | |||||||||||||||||||||||||||||
In connection with the sale of the Series E, the Company also agreed to issue to the Investors (a) warrants (“A Warrants”) to purchase up to one additional share of Common Stock for each share of Common Stock issuable upon conversion of the Preferred Shares, and (b) warrants (“B Warrants”) to purchase up to 0.50 additional shares of Common Stock for each share of Common Stock issuable upon conversion of the Preferred Shares. The Warrants were exercisable for five years commencing on the date of first issuance. For the Original Series E, exercise price of the A Warrant was $0.65 per share and the B Warrant had an exercise price of $1.00 per share, subject in each case to full ratchet anti-dilution protection. | |||||||||||||||||||||||||||||
The Original Series E were adjusted pursuant to the full ratchet anti-dilution protection when $249,999 of notes were issued on April 4, 2012 that contained a $0.30 conversion feature, so that the Original Series E now has a conversion price of $0.30 and an exercise price of $0.30 for the warrants. The New Series E were issued with a conversion and exercise price of $0.30 for the warrants. The impact of this ratchet-down provision in April 2012 increased the number of shares that would be issued upon conversion on that date from 21,125,000 shares of common stock to 28,166,667 and to increased the number of shares that would be issued upon full exercise of the warrants on that date from 37,975,000 shares of common stock to 94,966,667. All of the Series E have been converted into the Company’s common stock. | |||||||||||||||||||||||||||||
Stock Options | |||||||||||||||||||||||||||||
On March 27, 2013 the Board approved an option to the Company’s CEO to purchase 25,000,000 shares of common stock at $0.03 and an option to the Company’s Secretary to purchase 6,000,000 shares of common stock at $0.03. These options have a five-year life and vested in the three months ended June 30, 2013, resulting in Black Scholes option expense of $824,600 for this quarter. The Black Scholes expense for these March 27, 2013 options was calculated using the following assumptions. The fair value of the underlying common stock was based on the sale of 13,916,665 shares of common stock at $0.03 by the Company during the three months ended June 30, 2013. | |||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.03 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.35% | ||||||||||||||||||||||||||||
Expected volatility | 141% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
During 2012, the Company cancelled 4,660,994 options for employees whose employment had been terminated and granted 2,300,000 options to Jerold Rubinstein, the Company’s new Chairman of the Board and CEO on June 28, 2012, pursuant to an employment contract, 450,000 options to a director and 300,000 options to an officer. These options have a strike price of $0.35 - $0.38, which were the closing prices of the Company’s common stock on the day of grant and a five-year life. Mr. Rubinstein’s options vest monthly over a 12-month period unless the employment contract is terminated for any reason, at which time the options vest in full. The director’s options vest ratably over a 36-month period, and the officer’s options vest one third at grant, one third after the first year and one third after the second year. The Black Scholes value of these options was $706,250 which is being amortized over the respective vesting periods. The Black Scholes expense for these 2012 options was calculated using the following assumptions. The fair value of the underlying common stock was determined by closing price on the Bulletin Board stock exchange. | |||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.35 - $0.38 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.69% - 0.80% | ||||||||||||||||||||||||||||
Expected volatility | 80% - 89% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
The following table sets forth the activity of our stock options to purchase common stock: | |||||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||||||||||
Average | Weighted | Average | Weighted | ||||||||||||||||||||||||||
Range of | Remaining | Average | Remaining | Average | |||||||||||||||||||||||||
Options | Exercise | Life in | Exercise | Options | Life in | Exercise | |||||||||||||||||||||||
Outstanding | Prices | Years | Price | Exercisable | Years | Price | |||||||||||||||||||||||
As of December 31, 2011 | 12,169,852 | $0.14 - $1.50 | 3.2 | $0.49 | 8,757,684 | 3.2 | $0.40 | ||||||||||||||||||||||
Cancelled | (7,276,329) | - | - | - | (4,660,994) | - | - | ||||||||||||||||||||||
Exercised | - | - | - | - | - | - | - | ||||||||||||||||||||||
Granted | 3,050,000 | $0.35 - $0.38 | 4.5 | $0.36 | 1,634,333 | 4.5 | $0.36 | ||||||||||||||||||||||
As of December 31, 2012 | 7,943,523 | $0.35 -$0.54 | 3.3 | $0.46 | 5,731,023 | 2.9 | $0.48 | ||||||||||||||||||||||
Cancelled | - | - | - | - | - | - | - | ||||||||||||||||||||||
Exercised | - | - | - | - | - | - | - | ||||||||||||||||||||||
Granted | 31,000,000 | $0.03 | 4.5 | $0.03 | 31,000,000 | 4.5 | $0.03 | ||||||||||||||||||||||
As of September 30, 2013 | 38,943,523 | $0.03 -$0.54 | 4.1 | $0.12 | 36,731,023 | 4.1 | $0.11 | ||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||||||
On March 27, 2013 the Board approved warrants to three financial advisors to purchase 17,391,667 shares of common stock at $0.03. These warrants have a five-year life and vested during the three months ended June 30, 2013, resulting in Black Scholes warrant expense of $462,618 for this quarter. The Black Scholes expense for these March 27, 2013 warrants was calculated using the following assumptions. The fair value of the underlying common stock was based on the sale of 13,916,665 shares of common stock at $0.03 by the Company during the three months ended June 30, 2013. | |||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.03 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.35% | ||||||||||||||||||||||||||||
Expected volatility | 141% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
In May 2013 Series E warrants, along with related warrants with similar terms, were exchanged for 102,326,388 shares of common stock and these warrants were extinguished, thereby removing the “overhang” created by the full-ratchet provisions of these warrants that would have increased the number of warrants outstanding and reduced the strike price of these warrants to the price of any subsequent financing done at a lower price. This exchange of common stock for the Series E warrants resulted in a fair value charge of $3,069,792 in the three and six months ended June 30, 2013. These 102,326,388 shares of common stock were valued at $0.03 per share, which was the price at which the Company sold 13,916,665 shares during three months ended June 30, 2013, resulting in the charge for $3,069,792. | |||||||||||||||||||||||||||||
During 2012, the Company issued warrants to purchase 5,000,000 shares of common stock at $0.30 in connection with the sale of 1,000 shares of Series E. The Original Series E were adjusted pursuant to the full ratchet anti-dilution protection when $249,999 of notes were issued on April 4, 2012 that contained a $0.30 conversion feature, so that the Original Series E now has an exercise price of $0.30 for the warrants. The New Series E was issued with an exercise price of $0.30 for the warrants. The Company also issued six five-year warrants to purchase 13,530,000 shares at $0.38 to $0.75 in connection with consulting and advisory contracts. The Black Scholes value of these warrants is $4,133,690, which is being recognized over the 12 months of the contracts. The Black Scholes expense for these 2012 warrants was calculated using the following assumptions. The fair value of the underlying common stock was determined by closing price on the Bulletin Board stock exchange. | |||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.38 - $0.75 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.74% - 1.80% | ||||||||||||||||||||||||||||
Expected volatility | 84% - 132% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
A summary of the warrants: | |||||||||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||||||||
Warrants | Range of Exercise Prices | Weighted Average Remaining Life in Years | Weighted Average Exercise Price | Warrants Exercisable | Weighted Average Remaining Life in Years | Weighted Average Exercise Price | |||||||||||||||||||||||
Outstanding | |||||||||||||||||||||||||||||
As of December 31, 2011 | 59,530,245 | $0.65 - $2.00 | 3.5 | $2.00 | 59,530,245 | 3.5 | $2.00 | ||||||||||||||||||||||
Exercised | – | – | – | – | – | – | – | ||||||||||||||||||||||
Ratchet-down impact | 56,991,667 | $0.30 | – | $0.30 | 56,991,667 | – | $0.30 | ||||||||||||||||||||||
Granted | 15,763,330 | $0.30 - $0.75 | 4.6 | $0.38 | 10,388,330 | 4.6 | – | ||||||||||||||||||||||
As of December 31, 2012 | 132,285,242 | $0.30 - $2.00 | 3.5 | $0.40 | 126,910,242 | 3.5 | $0.38 | ||||||||||||||||||||||
Cancelled | (97,869,997 | ) | $0.30 | 2.7 | $0.30 | (93,994,997 | ) | 2.7 | $0.30 | ||||||||||||||||||||
Exercised | – | – | – | – | – | – | – | ||||||||||||||||||||||
Granted | 17,391,667 | $0.03 | 4.5 | $0.03 | 17,391,667 | 4.5 | $0.03 | ||||||||||||||||||||||
As of September 30, 2013 | 51,806,912 | $0.03 - $2.00 | 3.5 | $0.44 | 50,306,912 | 3.5 | $0.44 | ||||||||||||||||||||||
15_Commitments_and_contingenci
15. Commitments and contingencies | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||||||||||||||||
NOTE 15 - Commitments and contingencies | ' | ||||||||||||||||||||
Office Space Rental | |||||||||||||||||||||
On May 1, 2009, we entered into a lease for 1,800 square feet of office space in Santa Barbara, California for use as our executive offices. This lease was amended on July 21, 2009 and expires on December 31, 2013 with a three-year renewal term available at an initial rent plus common area charges of $5,767 per month. This property was vacated in August 2012 and the Company has recorded a liability of $139,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. The Company is in negotiations to settle the unpaid rent for a lower amount, but there can be no assurance of success in doing so. | |||||||||||||||||||||
On August 1, 2011, we entered into a lease for 7,000 square feet of office space in Los Angeles, California. The lease continues through November 30, 2014. Initially, the lease had a fixed monthly rent of $19,326 and was subject to annual increases of 3%. The Company was not required to pay a fixed monthly rent for months two through five. Prior to this, the Company was leasing the same office space on a month-to-month basis. This property was vacated in April 2012 and the Company recorded a liability of $892,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. The Company is in negotiations to settle the unpaid rent for a lower amount, but there can be no assurance of success in doing so. | |||||||||||||||||||||
On November 1, 2011, we entered into a lease for 3,000 square feet of office space in Santa Barbara, California for use by our operating units. This lease expires on October 31, 2014 with two additional three-year renewal terms available. The initial rent plus common area charges were $7,157 per month. This property was vacated in June 2012 and the Company recorded a liability of $229,000 to cover unpaid rent and the present value of rents due for the remainder of the lease term. In January 2013, the landlord for this property has obtained a judgment against the Company for $74,486. The Company is in negotiations to settle the unpaid rent for a lower amount, but there can be no assurance of success in doing so. | |||||||||||||||||||||
From May 2012 to May 2013, the Company was in a month-to-month lease for office space for three people in Los Angeles, California. Rent for this facility was $2,300 per month. Given reductions in staff, the Company is now operating with a “virtual office.” The Company believes this virtual office structure is adequate for our current needs and suitable additional or substitute space will be available as needed. | |||||||||||||||||||||
Contractual Obligations | |||||||||||||||||||||
Set forth below is information concerning our known contractual obligations as of September 30, 2013 that are fixed and determinable by year starting with the year ending December 31, 2013. | |||||||||||||||||||||
Beyond | |||||||||||||||||||||
Total | 2013 | 2014 | 2015 | 2015 | |||||||||||||||||
Notes payable | $ | 2,575,002 | $ | 2,575,002 | $ | – | $ | – | $ | – | |||||||||||
Deferred Salary | 1,425,365 | 1,425,365 | – | – | – | ||||||||||||||||
Rent obligations | 1,260,644 | 677,737 | 339,958 | 242,949 | – | ||||||||||||||||
Accrued board fees | 584,761 | 584,761 | – | – | |||||||||||||||||
Consulting agreement | 375,000 | 250,000 | 125,000 | – | – | ||||||||||||||||
Employee contracts: other | 211,358 | 211,358 | – | – | – | ||||||||||||||||
Accrued interest | 207,593 | 207,593 | – | – | – | ||||||||||||||||
Total | $ | 6,639,723 | $ | 5,931,816 | $ | 464,958 | $ | 242,949 | $ | – | |||||||||||
Employment Agreements | |||||||||||||||||||||
Effective June 28, 2012, Jerold Rubinstein was elected by the Board as Chairman of the Board, CEO and a director of the Company’s subsidiaries. The Board of Directors of PEI also elected him as Chairman of the Board and CEO of PEI. Under the terms of an employment agreement dated June 28, 2012, Mr. Rubinstein will receive an annual salary of $250,000 per year. Mr. Rubinstein continues to serve on the Board and receive $50,000 annually for such services, along with $100,000 annually as Chairman of the Board. The term of this agreement is six months with an automatic six month extension unless the Company provides written notice of non-renewal 30 days prior to the end of the initial six-month term. This executive was granted options to purchase 2,300,000 shares of the Company’s common stock at $0.35 per share, which was the closing price of the Company’s common stock on the day of option grant. These options vest monthly over a 12-month period. In the event the Company does not renew the second six month period, the executive resigns or the Company terminates the executive’s employment without cause, all options will immediately vest and the executive will receive all unpaid salary for the full 12 month period. In March 2013, Mr. Rubinstein received an option grant to purchase 25,000,000 shares at $0.03 with a five-year life and vesting occurring in the three months ended June 30, 2013. Mr. Rubinstein’s contract expired on June 28, 2013 and he is currently working without a contract. As of September 30, 2013, Mr. Rubinstein is owed unpaid salary of $166,667 and unpaid board fees of $175,000. | |||||||||||||||||||||
On August 8, 2011, the Company entered into any employment contract with Timothy Boris as the Company’s General Counsel and Vice President of Legal Affairs at an annual salary of $180,000. In December 2011 received options to purchase 300,000 shares of common stock at $0.54 that had 100,000 shares vested upon grant, 100,000 shares vested at the end of year one and 100,000 shares vest at the end of year two. This contract expired on August 8, 2012 and was renewed under the same terms until August 8, 2013. In August 2012 Mr. Boris received options to purchase 300,000 shares of common stock at $0.38 that had 100,000 shares vest upon grant, 100,000 shares vest at the end of year one and 100,000 shares vest at the end of year two. Both of these option grants have a five-year life. In March 2013, Mr. Boris received an option grant to purchase 6,000,000 shares at $0.03 with a five-year life and vesting occurring in the three months ended June 30, 2013. Mr. Boris’s contract expired on August 8, 2013 and he is currently working without a contract. As of September 30, 2013, Mr. Boris is owed unpaid salary of $120,000. | |||||||||||||||||||||
On November 1, 2010, the Company entered into an employment agreement with John Moynahan, who provided accounting and financial services to the Company as a consultant pursuant to a consulting agreement dated November 14, 2007. Under the agreement, Mr. Moynahan was to receive an annual salary of $220,000 for the first year of the contract, subject to an annual increase of the Consumer Price Index plus 2%, and will be eligible for a $50,000 bonus in the first year of this contract. Under this agreement, Mr. Moynahan received a grant of 300,000 shares and a five-year stock option grant to purchase 1,560,000 shares of common stock at $2.00 per share, with 1,040,000 shares that vested upon the signing of the agreement and 520,000 shares that vested on September 1, 2011. The strike price on these options was adjusted to $0.54 in December 2011 by the Board. After a review of this contract during 2012, the Company determined that the non-salary amounts due to Mr. Moynahan were $156,358 as of December 31, 2012. Mr. Moynahan’s contract expired on August 1, 2012 and he is currently working without a contract. As of September 30, 2013, Mr. Moynahan is owed the $156,358 under his employment contract and $146,667 in unpaid salary. | |||||||||||||||||||||
On February 22, 2010, the Company entered into an employment contract with William Kelly, the Company’s former Senior Vice President and Chief Operating Officer of ProElite, and the Chief Operating Officer of the Company whose employment was terminated in March 2013. In connection with Mr. Kelly’s employment, the Company assumed a promissory note of $231,525 formerly owed to Mr. Kelly by ProElite, Inc. and agreed to pay the promissory note with $121,525 payable to Mr. Kelly upon the closing of the acquisition of ProElite by the Company, $55,000 due 90 days after the closing of the acquisition, and $55,000 due 180 days after the closing of the acquisition. In 2011, $176,525 of these amounts were paid to Mr. Kelly. As of September 30, 2013, Mr. Kelly was owed $55,000 under this contract. | |||||||||||||||||||||
Consulting Agreement | |||||||||||||||||||||
On June 28, 2012, Paul Feller, the Company’s former Chairman of the Board and CEO, resigned from all positions with the Company and its subsidiaries, including PEI. In connection therewith, pursuant to a Separation and Release Agreement, the Company and Mr. Feller entered into a new Consulting Agreement for a term of two years at an annual compensation of $250,000, subject to the Company raising at least $2,000,000 in funding. Under the Consulting Agreement, Mr. Feller agreed to provide services in the area of business development, fund-raising and the evaluation of asset/event acquisitions to be done at the discretion of the Board of Directors. The Company has informed Mr. Feller that it reserves all rights with regards to this consulting agreement, given the events that led to his resignation on June 28, 2012. |
16_Segment_Information
16. Segment Information | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||||||||||
Segment Information | ' | ||||||||||||||||||||||||||||||||||||||||
NOTE 16 - Segment Information | ' | ||||||||||||||||||||||||||||||||||||||||
In 2012 and through June 30, 2013, ProElite, Stratus White and other events were considered operating segments pursuant to ASC Topic 280 “Segment Reporting” since each was budgeted separately and tracked separately to provide the chief operating decision maker information to assess and manage ProElite, Stratus White and other events. | |||||||||||||||||||||||||||||||||||||||||
The characteristics of the Stratus Reward program and ProElite were different than the other events, so that operating segment was considered a reporting segment. The events share similar economic characteristics and were aggregated into a reporting segment pursuant to paragraph 17 of ASC Topic 280. All of the events provide entertainment and the logistics and production processes and methods for each event were similar: sponsorship sales, ticket and concession sales, security, stages, public address systems and the like. While the demographic characteristics of the audience could vary by event, all events catered to consumer entertainment. Subsequent to December 31, 2012, the Company decided to suspend development of all business activities other than ProElite and effective June 30, 2013, the Company decided to suspend development of its ProElite business. | |||||||||||||||||||||||||||||||||||||||||
A summary of results by segments was as follows: | |||||||||||||||||||||||||||||||||||||||||
As of/for the Nine Months Ended September 30, 2013 | As of/for the Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||||||||||||
Stratus | Other | Stratus | Other | ||||||||||||||||||||||||||||||||||||||
Rewards | ProElite | Events | Other | Total | Rewards | ProElite | Events | Other | Total | ||||||||||||||||||||||||||||||||
Revenues | $ | – | $ | 72 | $ | – | $ | – | $ | 72 | $ | – | $ | 375 | $ | – | $ | – | $ | 375 | |||||||||||||||||||||
Cost of sales | – | – | – | – | – | – | 236 | – | – | 236 | |||||||||||||||||||||||||||||||
Gross margin | – | 72 | – | – | 72 | – | 139 | – | – | 139 | |||||||||||||||||||||||||||||||
Deprec. & Amort. | – | – | – | 25 | 25 | – | 2 | – | 28 | 30 | |||||||||||||||||||||||||||||||
Segment profit | – | 72 | – | (25 | ) | 47 | – | 137 | – | (28 | ) | 109 | |||||||||||||||||||||||||||||
Operating expenses | 85 | 192 | – | 11,744 | 12,021 | 263 | 803 | – | 7,265 | 8,331 | |||||||||||||||||||||||||||||||
Other expenses | – | 60 | – | 38 | 98 | – | 68 | – | 663 | 730 | |||||||||||||||||||||||||||||||
Impact of derivative securities | – | – | – | (10,390 | ) | (10,390 | ) | – | – | – | 13,845 | 13,845 | |||||||||||||||||||||||||||||
Net loss | (85 | ) | (180 | ) | – | (1,417 | ) | (1,682 | ) | (263 | ) | (734 | ) | – | (21,802 | ) | (22,798 | ) | |||||||||||||||||||||||
Net loss attributable to non-controlling interests | 28 | 28 | 6 | 6 | |||||||||||||||||||||||||||||||||||||
Preferred dividends | 172 | 172 | 365 | 365 | |||||||||||||||||||||||||||||||||||||
Net loss attributable to common shareholders | $ | (85 | ) | $ | (180 | ) | $ | – | $ | (1,561 | ) | $ | (1,826 | ) | $ | (263 | ) | $ | (734 | ) | $ | – | $ | (22,161 | ) | $ | (23,157 | ) | |||||||||||||
Assets | $ | – | $ | 230 | $ | – | $ | 3,005 | $ | 3,235 | $ | 1,073 | $ | 119 | $ | – | $ | 2,752 | $ | 3,944 | |||||||||||||||||||||
Liabilities | $ | 122 | $ | 2,779 | $ | – | $ | 6,671 | $ | 9,572 | $ | 300 | $ | 2,271 | $ | – | $ | 37,144 | $ | 39,715 |
17_ProElite_Inc
17. ProElite, Inc. | 9 Months Ended |
Sep. 30, 2013 | |
Proelite Inc. | ' |
NOTE 17 - ProElite, Inc. | ' |
Effective October 21, 2009, the Company entered into a Strategic Investment Agreement with ProElite, Inc. (“PEI”) pursuant to which PEI sold to the Company shares of PEI’s Series A Preferred Stock (the “Preferred Shares”). The transaction closed on June 14, 2011. The Preferred Shares are convertible into the Common Stock of PEI. The amount of shares of Common Stock issuable upon conversion on a cumulative basis is equal to 95% of the sum of (a) the issued and outstanding shares of PEI as of the closing plus (b) any shares of PEI Common Stock issued after the closing upon exercise or conversion of any derivative securities of PEI outstanding as of the closing, subject to any adjustment for stock splits, stock dividends, recapitalizations etc. and, in all cases, after giving effect to the shares issuable upon conversion of the Preferred Shares. The purchase price of the Preferred Shares was $2,000,000 which was used by PEI for payment of outstanding liabilities of PEI, general working capital and other corporate purposes and repayment of all amounts due under a note of PEI with respect to advances made to PEI by the Company of $100,000. At the close, all of the previous directors of PEI resigned and the board of directors of PEI consisted of two designees of the Company and one designee of PEI. The Company’s CEO at that time became PEI’s CEO. | |
The Company has consolidated the balance sheet of PEI as of September 30, 2013 and December 31, 2012. The results of operations of PEI for three and nine months ending September 30, 2013 and 2012 have been consolidated into the Company’s results of operations. |
18_Restatement_of_financial_st
18. Restatement of financial statements | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Accounting Changes and Error Corrections [Abstract] | ' | ||||||||||||
18. Restatement of financial statements | ' | ||||||||||||
On May 24, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with eight investors (collectively, the “Investors”) pursuant to which the Company sold 8,700 shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (“Original Series E”), the terms of which are set forth in the Certificate of Designations of Series E Preferred Stock (the “Certificate”), for $1,000 per share, or $8,700,000. In October 2012, the Company sold 1,000 shares of Series E for $1,000,000 (“New Series E”). The Original Series E and New Series E together are referred to herein as “Series E”. | |||||||||||||
These Series E contained “full ratchet-down” liquidity protection that provides that if the Company issues securities for less than the existing conversion price for the Series E Preferred Stock or the strike price of the Series E warrants, then the conversion price for Series E Preferred Stock will be lowered to that lower price. Also, the strike price for Series E warrants will be decreased to that lower price and the number of Series E warrants will be increased such that the product of the original strike price times the original quantity equals the lower strike price times the higher quantity. | |||||||||||||
In preparing the financial statements for 2012, the Company determined that the warrants for these financings included certain embedded derivative features as set forth in ASC Topic 815 “Derivatives and Hedging” and that this conversion feature of the Series E was not an embedded derivative because this feature was clearly and closely related to the host (Series E) as defined in ASC 815. These derivative liabilities were initially recorded at their estimated FV on the date of issuance and were subsequently adjusted each quarter to reflect the estimated FV at the end of each period, with any decrease or increase in the estimated fair value of the derivative liability for each period being recorded as other income or expense. Since the value of the embedded derivative feature for the related warrants was higher than the value of both Series E issuances, there was no beneficial conversion feature recorded for either transaction, and the excess of the value of the embedded derivative feature over the value of the transaction was recorded in each period on the Statement of Operations. | |||||||||||||
As the result of this determination, the Company had incorrectly accounted for the derivative liabilities embedded in the Series E and related warrants. The consolidated balance sheet as of June 30, 2012 and the related consolidated statements of operations for the three months then ended were restated to reflect the correct treatment. | |||||||||||||
The following table presents the effect of the restatement adjustment on the accompanying consolidated statement of operations for the three months ended September 30, 2012: | |||||||||||||
Three Months Ended September 30, 2012 | |||||||||||||
Consolidated Statement of Operations | As Previously Reported | Restated | Net Adjustment | ||||||||||
for Three Months Ended September 30, 2012 | |||||||||||||
Loss from operations | $ | (3,426,250 | ) | $ | (3,426,250 | ) | $ | – | |||||
Other (income)/expenses | |||||||||||||
Fair value of derivative liabilities in excess of proceeds | – | – | – | ||||||||||
Adjustments to fair value of derivative securities | – | (2,022,790 | ) | (2,022,790 | ) | ||||||||
Other (income)/expenses | (133,770 | ) | (133,770 | ) | – | ||||||||
Interest expense | 172,057 | 52,313 | (119,744 | ) | |||||||||
Total other (income)/expenses | 38,287 | (2,104,247 | ) | (2,142,534 | ) | ||||||||
Net loss | (3,464,537 | ) | (1,322,003 | ) | 2,142,534 | ||||||||
Preferred dividends | – | 119,744 | 119,744 | ||||||||||
Net loss atttributable to common shareholders | $ | (3,464,537 | ) | $ | (1,441,747 | ) | $ | 2,022,790 | |||||
Basic and diluted loss attributable to common shareholders per share | $ | (0.04 | ) | $ | (0.02 | ) | $ | 0.02 | |||||
Basic weighted average shares outstanding | 89,748,496 | 89,748,496 | – | ||||||||||
Fully-diluted weighted average shares outstanding | 89,748,496 | 117,915,163 | 28,166,667 | ||||||||||
The following table presents the effect of the restatement adjustment on the accompanying consolidated statement of operations for the nine months ended September 30, 2012: | |||||||||||||
Nine Months Ended September 30, 2012 | |||||||||||||
Consolidated Statement of Operations | As Previously Reported | Restated | Net Adjustment | ||||||||||
for Nine Months Ended September 30, 2012 | |||||||||||||
Loss from operations | $ | (8,221,091 | ) | $ | (8,221,091 | ) | $ | – | |||||
Other (income)/expenses | |||||||||||||
Fair value of derivative liabilities in excess of proceeds | – | – | – | ||||||||||
Adjustments to fair value of derivative securities | – | 13,845,208 | 13,845,208 | ||||||||||
Other (income)/expenses | 626,926 | 626,926 | – | ||||||||||
Interest expense | 469,848 | 104,431 | (365,417 | ) | |||||||||
Total other (income)/expenses | 1,096,774 | 14,576,565 | 13,479,791 | ||||||||||
Net loss | (9,317,865 | ) | (22,797,656 | ) | (13,479,791 | ) | |||||||
Preferred dividends | – | 365,417 | 365,417 | ||||||||||
Net loss attributable to common shareholders | $ | (9,317,865 | ) | $ | (23,163,073 | ) | $ | (13,845,208 | ) | ||||
Basic and diluted loss attributable to common shareholders per share | $ | (0.10 | ) | $ | (0.26 | ) | $ | (0.16 | ) | ||||
Basic weighted average shares outstanding | 89,220,298 | 89,220,298 | – | ||||||||||
Fully-diluted weighted average shares outstanding | 89,220,298 | 117,386,965 | 28,166,667 | ||||||||||
The FV of these derivative liabilities was calculated using the Black Scholes pricing model that is based on the closing price of the common stock, the strike price of the underlying instrument, the risk-free interest rate for the applicable remaining life of the underlying instrument (i.e., the U.S. treasury rate for that period) and the historical volatility of the Company’s common stock. |
19_Subsequent_Events
19. Subsequent Events | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Subsequent Events [Abstract] | ' | ||||||||||||||||||||
NOTE 19 - Subsequent Events | ' | ||||||||||||||||||||
Effective September 30, 2013, Stratus entered into a Merger Agreement with Canterbury Acquisition LLC, a wholly owned subsidiary of the Company (“Canterbury Merger Sub”), Hygeia Acquisition, Inc., a wholly owned subsidiary of the Company (“Hygeia Merger Sub”), Canterbury Laboratories, LLC (“Canterbury”), Hygeia Therapeutics, Inc. (“Hygeia”) and Yael Schwartz, Ph.D., as Holder Representative, pursuant to which Stratus will acquire all of the capital stock of Canterbury and Hygeia (the “Mergers”) with Canterbury and Hygeia becoming wholly owned subsidiaries of Stratus. The consideration for the Mergers will be the issuance by Stratus of an aggregate of 115,011,563 restricted shares of Stratus common stock to be issued to the stakeholders of Canterbury and Hygeia. | |||||||||||||||||||||
The Mergers were closed on November 18, 2013, resulting in a value of $4,933,996 for the 115,011,563 shares to be issued for the Mergers based on the closing market price of $0.0429 on that date. An independent valuation firm has been engaged by the Company to value the assets being acquired through the Merger. While this valuation has not been finalized, a valuation has been performed by the Company which indicates that the entire fair value of $4,933,996 for the Mergers will be allocated to the Yale License with no goodwill. The Company expects that the independent valuation will verify this allocation, although there can be no certainty that this will be the case. The Mergers are subject to rescission if Stratus has not raised $7.5 million or more in gross financing proceeds by January 15, 2014. | |||||||||||||||||||||
The Mergers are part of the Company’s plan to enter new businesses through acquisitions. If the Mergers had occurred on January 1, 2013, the combined statement of operations for the nine months ended September 30, 2013 would be as follows: | |||||||||||||||||||||
Nine Months Ended September 30, 2013 (unaudited) | |||||||||||||||||||||
Stratus Media | Hygeia/Canterbury | Pro Forma | Pro Forma Stratus, Canterbury | ||||||||||||||||||
Group, Inc. | Combined | Adjustments | & Hygeia | ||||||||||||||||||
Revenues | $ | 71,667 | $ | 127,167 | $ | – | $ | 198,834 | |||||||||||||
Cost of revenues | – | 89,387 | – | 89,387 | |||||||||||||||||
Gross profit | 71,667 | 37,780 | – | 109,447 | |||||||||||||||||
Operating expenses | 12,045,616 | 594,059 | 695,486 | (a) | 13,335,161 | ||||||||||||||||
Loss from operations | (11,973,949 | ) | (556,279 | ) | (695,486 | ) | (13,225,714 | ) | |||||||||||||
Other (income)/expenses | (10,291,317 | ) | 20,267 | – | (10,271,050 | ) | |||||||||||||||
Net loss attributed to non-controlling interests | 28,065 | – | – | 28,065 | |||||||||||||||||
Preferred dividends | 171,625 | – | – | 171,625 | |||||||||||||||||
Net loss attributable to Stratus Media Group common shareholders | $ | (1,826,192 | ) | $ | (576,546 | ) | $ | (695,486 | ) | $ | (3,098,224 | ) | |||||||||
Basic and diluted earnings per share | $ | (0.01 | ) | $ | (0.01 | ) | |||||||||||||||
Basic and fully-diluted weighted average shares outstanding | 264,660,276 | 115,011,563 | (b) | 379,671,839 | |||||||||||||||||
__________________________ | |||||||||||||||||||||
(a) | Represents $340,007 for additional salaries and related taxes that would be due under employment contracts for two officers for nine months ended September 30, 2013 and $355,479 amortization of the $4,993,996 value for Yale License that is amortized over the remaining average 132 month life of the patents. | ||||||||||||||||||||
(b) | Represents shares issued for Mergers with Canterbury and Hygeia. | ||||||||||||||||||||
If the Mergers had occurred on January 1, 2012, the combined statement of operations for the nine months ended September 30, 2012 would be as follows: | |||||||||||||||||||||
Nine Months Ended September 30, 2012 (unaudited) | |||||||||||||||||||||
Pro Forma | |||||||||||||||||||||
Stratus Media | Hygeia/Canterbury | Pro Forma | Stratus, Canterbury | ||||||||||||||||||
Group, Inc. | Combined | Adjustments | & Hygeia | ||||||||||||||||||
Revenues | $ | 374,542 | $ | 80,245 | $ | – | $ | 454,787 | |||||||||||||
Cost of revenues | 235,803 | 38,505 | – | 274,308 | |||||||||||||||||
Gross profit | 138,739 | 41,740 | – | 180,479 | |||||||||||||||||
Operating expenses | 8,359,830 | 196,070 | 702,547 | (a) | 9,258,447 | ||||||||||||||||
Loss from operations | (8,221,091 | ) | (154,330 | ) | (702,547 | ) | (9,077,968 | ) | |||||||||||||
Other (income)/expenses | 14,576,565 | – | – | 14,576,565 | |||||||||||||||||
Net loss attributed to non-controlling interests | 5,951 | – | – | 5,951 | |||||||||||||||||
Preferred dividends | 365,417 | – | – | 365,417 | |||||||||||||||||
Net loss attributable to Stratus Media Group common shareholders | $ | (23,157,122 | ) | $ | (154,330 | ) | $ | (702,547 | ) | $ | (24,013,999 | ) | |||||||||
Basic and diluted earnings per share | $ | (0.01 | ) | $ | (0.12 | ) | |||||||||||||||
Basic and fully-diluted weighted average shares outstanding | 89,220,298 | 115,011,563 | (b) | 204,231,861 | |||||||||||||||||
__________________________ | |||||||||||||||||||||
(a) | Represents $347,068 for additional salaries and related taxes that would be due under employment contracts for two officers for nine months ended September 30, 2013 and $355,479 amortization of the $4,993,996 value for Yale License that is amortized over the remaining average 132 month life of the patent. | ||||||||||||||||||||
(b) | Represents shares issued for Mergers with Canterbury and Hygeia. | ||||||||||||||||||||
On October 4, 2013, the Company and Histogen, Inc. (“Histogen”) executed a non-binding letter of intent pursuant to which the Company agreed to acquire all of the capital stock of Histogen for 350,000,000 pre-reverse split shares of the Company’s common stock. Discussions regarding this potential acquisition have halted and the Company does not intend to further pursue this potential acquisition. | |||||||||||||||||||||
In connection with the acquisition of Canterbury/Hygeia and the ongoing efforts to convert the Company’s liabilities into common stock, the Company intends to conduct private placements of its securities (the “Private Placements”) requiring the issuance of additional shares of common stock and/or securities convertible into or exercisable for common shares. On October 31, 2013, the Company filed a preliminary Information Statement on Form 14C to notify stockholders that stockholders holding a majority of the voting power of the common stock of the Company have executed a written consent in lieu of a meeting to approve an amendment to our articles of incorporation to approve a reverse split of the Company’s outstanding common stock at a ratio of between 1-for-50 and 1-for-100, based on the decision of the Company’s board of directors given the facts and circumstances in effect at that time. Based on the number of shares of common stock outstanding as of the record date of October 15, 2013, there will be a reduction in the number of outstanding common shares to a range of approximately 4,223,000 shares to 8,446,000 shares, depending on the stock split ratio determined by the board as mentioned above, before giving effect to the issuance of common shares from the Canterbury/Hygeia acquisitions, any additional acquisitions and the Private Placements. | |||||||||||||||||||||
On November 1, 2013, the Company filed a Report on Form 8-K to report that effective November 1, 2013, Sol J. Barer, Ph.D. and Isaac Blech were elected by the Company’s board of directors (the “Board”) as new directors. Dr. Barer was also named Chairman of the Board and Mr. Blech was named Vice Chairman of the Board. Dr. Barer and Mr. Blech have also been appointed to serve on the Company’s Audit and Compensation Committees. Their compensation as board members has not yet been determined. Also effective November 1, 2013, Jerold Rubinstein resigned as Chairman of the Board but remains as Chairman of the Board’s Audit Committee and Chief Executive Officer. | |||||||||||||||||||||
In January 2013, the Company signed a term sheet (“Term Sheet”) with an outside financial firm (“Financial Firm”) to have the Financial Firm acquire certain portions of the Company’s liabilities to creditors, employees and former employees (“Creditors”) in exchange for common stock. The Financial Firm entered into agreements in July 2013 with such Creditors to acquire $1,865,386 of liabilities and filed a complaint on July 29, 2013 with the Second Judicial Circuit, Leon County, Florida seeking a judgment against the Company for this amount. A court order based on this complaint was issued on October 7, 2013, resulting in the transfer of these $1,865,386 million of liabilities to the Financial Firm (see Footnote 4 for additional information). Subsequent to September 30, 2013, the Company entered into agreement with holders of $225,000 of promissory notes to extinguish those notes in exchange for the issuance of 3,750,000 shares of common stock. | |||||||||||||||||||||
If the transfer of $1,865,386 of liabilities to the Financial Firm and the exchange of 3,750,000 shares of common stock for $225,000 of promissory notes had occurred on September 30, 2013, the following would be the pro forma change in the Consolidated Balance Sheets and Consolidated Statements of Operations: | |||||||||||||||||||||
Pro Forma Impact of | |||||||||||||||||||||
Reduction | Pro Forma | ||||||||||||||||||||
As Reported for | Transfer of | of Rent | Note | Adjusted for | |||||||||||||||||
September 30, 2013 | Liabilities | Accrual | Conversion | September 30, 2013 | |||||||||||||||||
Current liabilities | |||||||||||||||||||||
Accounts payable | $ | 1,540,706 | $ | (764,172 | ) | $ | – | $ | – | $ | 776,534 | ||||||||||
Deferred salary | 1,425,365 | (1,000,514 | ) | – | – | 424,851 | |||||||||||||||
Accrued interest | 207,593 | – | – | – | 207,593 | ||||||||||||||||
Other accrued expenses and liabilities | 2,350,011 | – | – | – | 2,350,011 | ||||||||||||||||
Payable to officer and former officer | 211,358 | – | – | – | 211,358 | ||||||||||||||||
Rent liability for facilities no longer occupied | 1,260,644 | (100,700 | ) | (38,449 | ) | – | 1,121,495 | ||||||||||||||
Notes payable | 2,575,002 | – | – | (225,000 | ) | 2,350,002 | |||||||||||||||
Total current liabilities | $ | 9,570,679 | $ | (1,865,386 | ) | $ | (38,449 | ) | $ | (225,000 | ) | $ | 7,441,844 | ||||||||
Shareholder's deficit | |||||||||||||||||||||
Common stock | 420,966 | 20,727 | – | 3,750 | 445,443 | ||||||||||||||||
Additional paid-in capital | 53,237,549 | 2,217,736 | – | 401,250 | 55,856,535 | ||||||||||||||||
Accumulated Deficit | (59,966,621 | ) | (373,077 | ) | 38,449 | (180,000 | ) | (60,481,249 | ) | ||||||||||||
Total Stratus shareholder's deficit | (6,308,106 | ) | 1,865,386 | 38,449 | 225,000 | (4,179,271 | ) | ||||||||||||||
Non-controlling interest deficit | (28,065 | ) | – | – | – | (28,065 | ) | ||||||||||||||
Total shareholder's deficit | (6,336,171 | ) | 1,865,386 | 38,449 | 225,000 | (4,207,336 | ) | ||||||||||||||
Total liabilities and shareholder's deficit | $ | 3,234,508 | $ | – | $ | – | $ | – | $ | 3,234,508 | |||||||||||
Pro Forma Impact of | Pro Forma | ||||||||||||||||||||
As Reported for | Reduction | Adjusted for | |||||||||||||||||||
3 Months Ended | Transfer of | of Rent | Note | 3 Months Ended | |||||||||||||||||
September 30, 2013 | Liabilities | Accrual | Conversion | September 30, 2013 | |||||||||||||||||
Loss from operations | $ | (1,555,152 | ) | $ | – | $ | – | $ | – | $ | (1,555,152 | ) | |||||||||
Other (income)/expenses | |||||||||||||||||||||
Other (income)/expenses | (51,444 | ) | 373,077 | (38,449 | ) | 180,000 | 463,184 | ||||||||||||||
Interest expense | 35,203 | – | – | – | 35,203 | ||||||||||||||||
Total other (income)/expenses | (16,241 | ) | 373,077 | (38,449 | ) | 180,000 | 498,387 | ||||||||||||||
Net loss/(income) | (1,538,911 | ) | (373,077 | ) | 38,449 | (180,000 | ) | (2,053,539 | ) | ||||||||||||
Net loss attributed to non-controlling interests | 13,634 | – | – | – | 13,634 | ||||||||||||||||
Net loss attributed to Stratus Media Group common shareholders | $ | (1,525,277 | ) | $ | (373,077 | ) | $ | 38,449 | $ | -180,000 | $ | (2,039,905 | ) | ||||||||
Pro Forma Impact of | Pro Forma | ||||||||||||||||||||
As Reported for | Reduction | Adjusted for | |||||||||||||||||||
9 Months Ended | Transfer of | of Rent | Note | 9 Months Ended | |||||||||||||||||
September 30, 2013 | Liabilities | Accrual | Conversion | September 30, 2013 | |||||||||||||||||
Loss from operations | $ | (11,973,949 | ) | $ | – | $ | – | $ | – | $ | (11,973,949 | ) | |||||||||
Other (income)/expenses | |||||||||||||||||||||
(Gain)/loss on adjustments to fair value of derivative liability | (8,980,077 | ) | – | – | – | (8,980,077 | ) | ||||||||||||||
Gain on extinguishment of derivative liability | (1,409,530 | ) | – | – | – | (1,409,530 | ) | ||||||||||||||
Other (income)/expenses | (54,498 | ) | 373,077 | (38,449 | ) | 180,000 | 460,130 | ||||||||||||||
Interest expense | 152,788 | – | – | – | 152,788 | ||||||||||||||||
Total other (income)/expenses | (10,291,317 | ) | 373,077 | (38,449 | ) | 180,000 | (9,776,689 | ) | |||||||||||||
Net income/(loss) | (1,682,632 | ) | (373,077 | ) | 38,449 | -180,000 | (2,197,260 | ) | |||||||||||||
Net loss attributed to non-controlling interests | 28,065 | – | – | – | 28,065 | ||||||||||||||||
Net income/(loss) attributed to Stratus Media Group | (1,654,567 | ) | (373,077 | ) | 38,449 | -180,000 | (2,169,195 | ) | |||||||||||||
Preferred dividends | 171,625 | – | – | – | 171,625 | ||||||||||||||||
Net income/(loss) attributable to Stratus Media Group common shareholders | $ | (1,826,193 | ) | $ | (373,077 | ) | $ | 38,449 | $ | (180,000 | ) | $ | (2,340,821 | ) | |||||||
With regard to the rent liability for facilities no longer occupied, the landlord for one lease agreed to accept $100,700 in full settlement of a liability that was recorded at $139,149 on the Company’s balance sheet, resulting in an additional reduction of rent liability for facilities no longer occupied of $38,449. | |||||||||||||||||||||
3_Basis_of_Presentation_and_Si1
3. Basis of Presentation and Significant Accounting Policies (Policies) | 9 Months Ended | ||
Sep. 30, 2013 | |||
FreedomBowlMember | ' | ||
Basis of Presentation | ' | ||
The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The balance sheets at September 30, 2013 and December 31, 2012 and the income statements for the three months and nine months ended September 30, 2013 and 2012 consolidate the accounts of PEI reflecting the acquisition (see Note 16). All significant intercompany balances were eliminated in consolidation. | |||
Basic and Diluted Earnings Per Share | ' | ||
Basic EPS is computed by dividing the income/(loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares were converted into common stock. Dilution is computed by applying the if-converted method for the outstanding convertible preferred shares. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). | |||
For purposes of calculating EPS, the number of common shares did not include 28,166,667 shares of common stock issuable upon conversion by the holders of Series E Preferred on September 30, 2012. These conversion shares were not included in the EPS calculation because they were antidilutive given the losses by the Company for the three and nine months ending September 30, 2012. As of June 30, 2013 the Series E Preferred had been extinguished and the basic and fully-diluted shares are the same from that point forward. | |||
Noncontrolling Interest | ' | ||
The Company follows Accounting Standards Codification (“ASC”) Topic 810 “Consolidation,” which governs the accounting for and reporting of Non-Controlling Interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The net income (loss) attributed to the NCI is separately designated in the accompanying statements of operations and other comprehensive income (loss). Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity. The excess attributable to the NCI is attributed to those interests. The NCI shall continue to attribute its share of losses even if that attribution results in a deficit NCI balance. | |||
Use of Estimates | ' | ||
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may differ from such estimates and assumptions. | |||
Deriviative liabilities | ' | ||
On May 24, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with eight investors (collectively, the “Investors”) pursuant to which the Company sold 8,700 shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (“Original Series E”), the terms of which are set forth in the Certificate of Designations of Series E Preferred Stock (the “Certificate”), for $1,000 per share, or $8,700,000. In October 2012, the Company sold 1,000 shares of Series E for $1,000,000 (“New Series E”). The Original Series E and New Series E together are referred to herein as “Series E”. | |||
These Series E contained “full ratchet-down” liquidity protection, which provided that if the Company issues securities for less than the existing conversion price for the Series E Preferred Stock or the strike price of the Series E warrants, then the conversion price for Series E Preferred Stock will be lowered to that lower price. Also, the strike price for Series E warrants would be decreased to that lower price and the number of Series E warrants would be increased such that the product of the original strike price times the original quantity equals the lower strike price times the higher quantity. | |||
Subsequent to the issuance of this Series E, the Company determined that the warrants for these financings included certain embedded derivative features as set forth in ASC Topic 815 “Derivatives and Hedging,” (“ASC 815”) and that this conversion feature of the Series E was not an embedded derivative because this feature was clearly and closely related to the host (Series E) as defined in ASC 815. These derivative liabilities were initially recorded at their estimated Fair Value (“FV”) on the date of issuance and were subsequently adjusted each quarter to reflect the estimated FV at the end of each period, with any decrease or increase in the estimated FV of the derivative liability for each period being recorded as other income or expense. Since the value of the embedded derivative feature for the related warrants was higher than the value of both Series E transactions, there was no beneficial conversion feature recorded for either transaction, and the excess of the value of the embedded derivative feature over the value of the transaction was recorded in each period on the Statement of Operations as a separate line item. | |||
The FV of these derivative liabilities was calculated using the Black Scholes pricing model that was based on the closing price of the common stock, the strike price of the underlying instrument, the risk-free interest rate for the applicable remaining life of the underlying instrument (i.e., the U.S. treasury rate for that period) and the historical volatility of the Company’s common stock. These FV results were extremely sensitive to all these input variables, particularly the closing price of the company’s common stock and the volatility of the Company’s common stock. Accordingly, the FV of these derivative liabilities was subject to significant changes. | |||
The Series E and related warrants were extinguished in May 2013 when the Series E and related warrants were exchanged for common stock. | |||
Allowance for uncollectible receivables | ' | ||
Accounts receivable are recorded at their face amount, less an allowance for doubtful accounts. We review the status of our uncollected receivables on a regular basis. In determining the need for an allowance for uncollectible receivables, we consider our customers financial stability, past payment history and other factors that bear on the ultimate collection of such amounts. | |||
Cash Equivalents | ' | ||
We consider all highly liquid investments purchased with maturities of three months or less to be cash equivalents. | |||
Fair Value of Financial Instruments | ' | ||
Our financial instruments include cash and equivalents, receivables, accounts payable and accrued liabilities. The carrying amounts of financial instruments approximate FV due to their short maturities. | |||
Property and Equipment | ' | ||
Property and equipment are stated at cost less accumulated depreciation. We record depreciation using the straight-line method over the following estimated useful lives: | |||
Equipment | 3 – 5 years | ||
Furniture and fixtures | 5 years | ||
Software | 3 years | ||
Leasehold improvements | Lesser of lease term or life of improvements | ||
Goodwill and Intangible Assets | ' | ||
Intangible assets consisted of goodwill related to ProElite that we acquired in June 2011 but suspended development of this business in June 2013. Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. We apply ASC Topic 350 “Goodwill and Other Intangible Assets,” which requires allocating goodwill to each reporting unit and testing for impairment using a two-step approach. | |||
The Company reviewed the value of intangible assets and related goodwill as part of its annual reporting process, which occurs in February or March of each year. In between valuations, the Company conducted additional tests to determine if circumstances warranted additional testing for impairment. The Company decided to suspend development of its ProElite business as of June 30, 2013 and the goodwill was considered to be fully impaired at that time. However, except for the termination of certain employees of ProElite, the Company has not taken any actions that it believes would materially impair the ability of the Company to resume development of this business should it elect to do so in the future. | |||
To review the value of intangible assets and related goodwill as of December 31, 2012, the Company followed ASC Topic 350 “Intangibles-Goodwill and Other” and first examined the facts and circumstances for each event or business to determine if it was more likely than not that an impairment had occurred. If this examination suggested it was more likely that impairment had occurred, the Company then compared discounted cash flow forecasts related to the asset with the stated value of the asset on the balance sheet. The objective was to determine the value of each asset to an industry participant who is a willing buyer not under compulsion to buy and the Company is a willing seller not under compulsion to sell. | |||
The events were forecasted based on the assumption they are standalone entities and adjusted for historical performance and the facts and circumstances surrounding the event and the macroeconomic conditions that affect the event. | |||
These forecasts were discounted at a range of discount rates determined by taking the risk-free interest rate at the time of valuation, plus premiums for equity risk to small companies in general, for factors specific to the Company and the business for a total discount rate of 35%. Terminal values were determined by taking cash flows in year five of the forecast, then applying an annual growth of 4% and discounting that stream of cash flows by the discount rate used for that section of the business. | |||
As of December 31, 2012, the Company determined that the FV of its ProElite MMA business for accounting purposes was $2,400,000, which was 124% of the goodwill on the balance sheet as of December 31, 2012. We engaged an outside service provider to assist in this determination. The service provider computed future projected cash flows using information we provided, including estimated future results of the events and operations. We then compared the estimated FV of the reporting unit to the carrying value of the reporting unit and determined that no impairment had occurred as of December 31, 2012. | |||
Stock-Based Compensation | ' | ||
We follow ASC Topic 718 “Share Based Payment,” using the modified prospective transition method. New awards and awards modified, repurchased or cancelled after January 1, 2006 trigger compensation expense based on the FV of the stock option as determined by the Black-Scholes option pricing model. We amortize stock-based compensation for such awards on a straight-line method over the related service period of the awards taking into account the effects of the employees’ expected exercise and post-vesting employment termination behavior. | |||
We account for equity instruments issued to non-employees in accordance with ASC Topic 718 and EITF Issue No. 96-18. The FV of each option granted is estimated as of the grant date using the Black-Scholes option pricing model. | |||
Income Taxes | ' | ||
The Company utilizes ASC Topic 740 “Accounting for Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. | |||
As of December 31, 2012, the Company had a deferred tax asset that was fully reserved and a net operating loss carryforward of $40,240,679 for Federal purposes and $36,995,229 for state tax purposes. The Company will continue to monitor all available evidence and reassess the potential realization of its deferred tax assets. If the Company improves its results of operations, or if circumstances otherwise change, and given the changes in stock ownership of the Company, it is possible that the Company may realize only a portion of its valuation allowance in the future. Any such realization would result in recording a tax benefit that would increase net income in the period the valuation is released. However, under U.S. tax codes, changes in ownership of the Company can reduce or eliminate the ability of the Company to use these tax-loss carryforwards in the future. As of September 30, 2013, the Company had a net operating loss carryforward of approximately $41,000,000 for Federal tax purposes and approximately $38,000,000 for state tax purposes. | |||
Advertising | ' | ||
We expense the cost of advertising as incurred. Such amounts have not historically been significant. | |||
Reclassifications | ' | ||
Certain prior year amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no effect on the net loss or the shareholder’s deficit. | |||
Recent Accounting Pronouncements | ' | ||
On July 27, 2012, the FASB issued ASC 2012-02 “Intangibles-Goodwill and Other (Topic 350)” Testing Indefinite-Lived Intangible Assets for Impairment. The ASC provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required. However, if an entity concludes otherwise, it would be required to determine the FV of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASC is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The adoption of this pronouncement did not have a material impact on our financial statements. |
3_Basis_of_Presentation_and_Si2
3. Basis of Presentation and Significant Accounting Policies (Tables) | 9 Months Ended | ||
Sep. 30, 2013 | |||
BasisOfPresentationAndSignificantAccountingPoliciesTablesAbstract | ' | ||
Property and Equipment | ' | ||
Equipment | 3 – 5 years | ||
Furniture and fixtures | 5 years | ||
Software | 3 years | ||
Leasehold improvements | Lesser of lease term or life of improvements |
6_Receivable_from_Former_Offic
6. Receivable from Former Officer and Director (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Receivable From Former Officer And Director Tables | ' | ||||||||
Receivable | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Gross receivable | |||||||||
Sale of Company common stock, net proceeds retained by Mr. Feller | $ | 640,000 | $ | 640,000 | |||||
Value of 378,661 shares of common stock owed by Mr. Feller to the Company, valued at December 31, 2012 price of $0.19 and at September 30, 2013 price of $0.14 | 53,013 | 71,946 | |||||||
Vintage automobile retained by Mr. Feller | 38,100 | 38,100 | |||||||
Other | 4,622 | 4,622 | |||||||
Total | 735,735 | 754,668 | |||||||
Offsets to receivable | |||||||||
Deferred salary | (113,667 | ) | (113,667 | ) | |||||
Expense reports submitted and approved | (30,540 | ) | (30,540 | ) | |||||
Write off receivable based on stock offsets (see below) | (538,515 | ) | (538,515 | ) | |||||
Net receivable | $ | 53,013 | $ | 71,946 |
7_Property_and_Equipment_Table
7. Property and Equipment (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property And Equipment Tables | ' | ||||||||
Property and Equipment | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Computers and peripherals | $ | 97,660 | $ | 97,660 | |||||
Office machines | 49,370 | 49,370 | |||||||
Furniture and fixtures | 73,905 | 73,905 | |||||||
220,935 | 220,935 | ||||||||
Less accumulated depreciation | (196,474 | ) | (171,897 | ) | |||||
Property and equipment, net | $ | 24,461 | $ | 49,038 |
10_Other_accrued_expenses_and_1
10. Other accrued expenses and other liabilities (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Accrued Expenses And Other Liabilities Tables | ' | ||||||||
Other accrued expenses and other liabilities | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Payroll related | $ | 505,893 | $ | 329,191 | |||||
Estimated damage liability that may not be covered by insurance | 393,592 | 300,000 | |||||||
Estimated settlement with vendor in Europe | 400,000 | 300,000 | |||||||
Professional fees | 120,000 | 160,773 | |||||||
Accrued board fees | 584,761 | 349,948 | |||||||
Consultant fees | 321,277 | 133,777 | |||||||
Other | 24,488 | 109,819 | |||||||
$ | 2,350,011 | $ | 1,683,508 |
11_Payable_to_Officer_and_Form1
11. Payable to Officer and Former Officer (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Payable To Officer And Former Officer Tables | ' | ||||||||
Loans payable to officers and a director | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Officer pursuant to employment agreement | $ | 156,358 | $ | 156,358 | |||||
Promissory note to former officer | 55,000 | 55,000 | |||||||
$ | 211,358 | $ | 211,358 |
12_Notes_payable_Tables
12. Notes payable (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes Payable Tables | ' | ||||||||
Debt Disclosure | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Notes payable from ProElite to various individuals dated October 20, 2011 with maturity of July 20, 2012, plus interest at 8%, convertible into common stock of ProElite at noteholder's election. Secured by the assets of ProElite. These notes are currently in default. | $ | 1,083,000 | $ | 1,063,000 | |||||
Note payable to a shareholder with original maturity of May 24, 2012, plus interest at 0.19%, that was secured by the assets of ProElite. This note was converted into common stock in May 2013. | – | 1,000,000 | |||||||
Note payable from ProElite to one party dated October 19, 2012 with original maturity of October 19, 2013. Bears interest at 7% and was secured by the assets of ProElite. This note was converted into common stock in May 2013. | – | 500,000 | |||||||
Note payable by the Company to a shareholder dated August 9, 2013. Bears interest at 7% and matures on August 9, 2013. Contains mandatory conversion into security or securities totalling $10 million or more at the lesser of 50% of the selling price of such securities or the equivalent of $0.04 per share of common stock. This note is secured by the assets of the Company | 500,000 | – | |||||||
Note payable to the Company's outside law firm and represents the corporate and litigation fees due as of June 30, 2012. This note bears interest at 3% and was due December 31, 2012. This note is currently in default. | 467,002 | 486,104 | |||||||
Notes payable to three holders dated May 11, 2012 with original maturity of the earlier of November 11, 2012 and was secured by the assets of the Company. This note was converted into common stock in May 2013. | – | 350,000 | |||||||
Notes payable to 11 investors dated July 9, 2012 with maturity date on the earlier of a $2 million capital raise by the company, or February 6, 2013 and bears interest at 8%. This note is currently in default. | 275,000 | 275,000 | |||||||
Notes payable to one holder dated April 4, 2012 with original maturity on October 4, 2012 that was changed to January 4, 2013. This note was converted into common stock in May 2013. | – | 249,999 | |||||||
Notes payable to one holder dated March 5, 2013 with maturity on the earlier of September 5, 2013 or receipt by the Company of $200,000 in net proceeds from a private placement of Company securities. This note does not bear interest and is not secured. This note is currently in default. | 200,000 | – | |||||||
Note payable to a shareholder dated January 14, 2005, with original maturity of May 14, 2005, plus interest at 10%. Unsecured. This note was written off in June 2013. | – | 70,000 | |||||||
Note payable to a financing firm dated April 3, 2013 with maturity on December 31, 2014. Unsecured and non-interest bearing. Convertible into common stock at $0.06 per share for a maximum of 833,333 shares | 50,000 | – | |||||||
Note payable to a shareholder dated February 1, 2005 with original maturity of June 1, 2005, plus interest at 10%. Unsecured. This note was written off in June 2013. | – | 10,000 | |||||||
$ | 2,575,002 | $ | 4,004,103 |
13_Derivative_Liabilities_Tabl
13. Derivative Liabilities (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
DerivativeLiabilitiesTablesAbstract | ' | ||||
Fair value assumptions schedule | ' | ||||
Estimated fair value of underlying common stock | $0.03 | ||||
Remaining life in years | 3.05 - 3.15 | ||||
Risk-free interest rate | 0.35% - 0.38% | ||||
Expected volatility | 141% - 142% | ||||
Dividend yield | – |
14_Shareholders_Equity_Tables
14. Shareholders' Equity (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||
Shareholders Equity Tables | ' | ||||||||||||||||||||||||||||
Common stock outstanding | ' | ||||||||||||||||||||||||||||
Number of | |||||||||||||||||||||||||||||
Shares | |||||||||||||||||||||||||||||
Outstanding shares as of December 31, 2012 | 89,083,677 | ||||||||||||||||||||||||||||
Exchange of Series E Preferred for common stock | 157,499,999 | ||||||||||||||||||||||||||||
Exchange of Series E Preferred warrants for common stock | 102,326,388 | ||||||||||||||||||||||||||||
Exchange of certain debts for common stock | 34,999,984 | ||||||||||||||||||||||||||||
Shares issued for financial advisory agreement | 21,025,000 | ||||||||||||||||||||||||||||
Sales of common stock | 13,916,665 | ||||||||||||||||||||||||||||
Conversion of Series D Preferred into common stock | 1,413,850 | ||||||||||||||||||||||||||||
Other | 700,689 | ||||||||||||||||||||||||||||
Outstanding shares as of September 30, 2013 | 420,966,252 | ||||||||||||||||||||||||||||
Stock Options- Assumptions | ' | ||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.03 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.35% | ||||||||||||||||||||||||||||
Expected volatility | 141% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.35 - $0.38 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.69% - 0.80% | ||||||||||||||||||||||||||||
Expected volatility | 80% - 89% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
Stock Options - Activity | ' | ||||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||||||||||
Average | Weighted | Average | Weighted | ||||||||||||||||||||||||||
Range of | Remaining | Average | Remaining | Average | |||||||||||||||||||||||||
Options | Exercise | Life in | Exercise | Options | Life in | Exercise | |||||||||||||||||||||||
Outstanding | Prices | Years | Price | Exercisable | Years | Price | |||||||||||||||||||||||
As of December 31, 2011 | 12,169,852 | $0.14 - $1.50 | 3.2 | $0.49 | 8,757,684 | 3.2 | $0.40 | ||||||||||||||||||||||
Cancelled | (7,276,329) | - | - | - | (4,660,994) | - | - | ||||||||||||||||||||||
Exercised | - | - | - | - | - | - | - | ||||||||||||||||||||||
Granted | 3,050,000 | $0.35 - $0.38 | 4.5 | $0.36 | 1,634,333 | 4.5 | $0.36 | ||||||||||||||||||||||
As of December 31, 2012 | 7,943,523 | $0.35 -$0.54 | 3.3 | $0.46 | 5,731,023 | 2.9 | $0.48 | ||||||||||||||||||||||
Cancelled | - | - | - | - | - | - | - | ||||||||||||||||||||||
Exercised | - | - | - | - | - | - | - | ||||||||||||||||||||||
Granted | 31,000,000 | $0.03 | 4.5 | $0.03 | 31,000,000 | 4.5 | $0.03 | ||||||||||||||||||||||
As of September 30, 2013 | 38,943,523 | $0.03 -$0.54 | 4.1 | $0.12 | 36,731,023 | 4.1 | $0.11 | ||||||||||||||||||||||
Warrants -Assumptions | ' | ||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.03 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.35% | ||||||||||||||||||||||||||||
Expected volatility | 141% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
Estimated fair value of underlying common stock | $0.38 - $0.75 | ||||||||||||||||||||||||||||
Remaining life | 5 | ||||||||||||||||||||||||||||
Risk-free interest rate | 0.74% - 1.80% | ||||||||||||||||||||||||||||
Expected volatility | 84% - 132% | ||||||||||||||||||||||||||||
Dividend yield | – | ||||||||||||||||||||||||||||
Warrants - Summary | ' | ||||||||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||||||||
Warrants | Range of Exercise Prices | Weighted Average Remaining Life in Years | Weighted Average Exercise Price | Warrants Exercisable | Weighted Average Remaining Life in Years | Weighted Average Exercise Price | |||||||||||||||||||||||
Outstanding | |||||||||||||||||||||||||||||
As of December 31, 2011 | 59,530,245 | $0.65 - $2.00 | 3.5 | $2.00 | 59,530,245 | 3.5 | $2.00 | ||||||||||||||||||||||
Exercised | – | – | – | – | – | – | – | ||||||||||||||||||||||
Ratchet-down impact | 56,991,667 | $0.30 | – | $0.30 | 56,991,667 | – | $0.30 | ||||||||||||||||||||||
Granted | 15,763,330 | $0.30 - $0.75 | 4.6 | $0.38 | 10,388,330 | 4.6 | – | ||||||||||||||||||||||
As of December 31, 2012 | 132,285,242 | $0.30 - $2.00 | 3.5 | $0.40 | 126,910,242 | 3.5 | $0.38 | ||||||||||||||||||||||
Cancelled | (97,869,997 | ) | $0.30 | 2.7 | $0.30 | (93,994,997 | ) | 2.7 | $0.30 | ||||||||||||||||||||
Exercised | – | – | – | – | – | – | – | ||||||||||||||||||||||
Granted | 17,391,667 | $0.03 | 4.5 | $0.03 | 17,391,667 | 4.5 | $0.03 | ||||||||||||||||||||||
As of September 30, 2013 | 51,806,912 | $0.03 - $2.00 | 3.5 | $0.44 | 50,306,912 | 3.5 | $0.44 |
15_Commitments_and_contingenci1
15. Commitments and contingencies (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Office machines | ' | ||||||||||||||||||||
Contractual obligations | ' | ||||||||||||||||||||
Beyond | |||||||||||||||||||||
Total | 2013 | 2014 | 2015 | 2015 | |||||||||||||||||
Notes payable | $ | 2,575,002 | $ | 2,575,002 | $ | – | $ | – | $ | – | |||||||||||
Deferred Salary | 1,425,365 | 1,425,365 | – | – | – | ||||||||||||||||
Rent obligations | 1,260,644 | 677,737 | 339,958 | 242,949 | – | ||||||||||||||||
Accrued board fees | 584,761 | 584,761 | – | – | |||||||||||||||||
Consulting agreement | 375,000 | 250,000 | 125,000 | – | – | ||||||||||||||||
Employee contracts: other | 211,358 | 211,358 | – | – | – | ||||||||||||||||
Accrued interest | 207,593 | 207,593 | – | – | – | ||||||||||||||||
Total | $ | 6,639,723 | $ | 5,931,816 | $ | 464,958 | $ | 242,949 | $ | – |
16_Segment_Information_Tables
16. Segment Information (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||||||||||
Segment Information Tables | ' | ||||||||||||||||||||||||||||||||||||||||
Segment Information | ' | ||||||||||||||||||||||||||||||||||||||||
As of/for the Nine Months Ended September 30, 2013 | As of/for the Nine Months Ended September 30, 2012 | ||||||||||||||||||||||||||||||||||||||||
Stratus | Other | Stratus | Other | ||||||||||||||||||||||||||||||||||||||
Rewards | ProElite | Events | Other | Total | Rewards | ProElite | Events | Other | Total | ||||||||||||||||||||||||||||||||
Revenues | $ | – | $ | 72 | $ | – | $ | – | $ | 72 | $ | – | $ | 375 | $ | – | $ | – | $ | 375 | |||||||||||||||||||||
Cost of sales | – | – | – | – | – | – | 236 | – | – | 236 | |||||||||||||||||||||||||||||||
Gross margin | – | 72 | – | – | 72 | – | 139 | – | – | 139 | |||||||||||||||||||||||||||||||
Deprec. & Amort | – | – | – | 25 | 25 | – | 2 | – | 28 | 30 | |||||||||||||||||||||||||||||||
Segment profit | – | 72 | – | (25 | ) | 47 | – | 137 | – | (28 | ) | 109 | |||||||||||||||||||||||||||||
Operating expenses | 85 | 192 | – | 11,744 | 12,021 | 263 | 803 | – | 7,265 | 8,331 | |||||||||||||||||||||||||||||||
Other expenses | – | 60 | – | 38 | 98 | – | 68 | – | 663 | 730 | |||||||||||||||||||||||||||||||
Impact of derivative securities | – | – | – | (10,390 | ) | (10,390 | ) | – | – | – | 13,845 | 13,845 | |||||||||||||||||||||||||||||
Net loss | (85 | ) | (180 | ) | – | (1,417 | ) | (1,682 | ) | (263 | ) | (734 | ) | – | (21,802 | ) | (22,798 | ) | |||||||||||||||||||||||
Net loss attributable to non-controlling interests | 28 | 28 | 6 | 6 | |||||||||||||||||||||||||||||||||||||
Preferred dividends | 172 | 172 | 365 | 365 | |||||||||||||||||||||||||||||||||||||
Net loss attributable to common shareholders | $ | (85 | ) | $ | (180 | ) | $ | – | $ | (1,561 | ) | $ | (1,826 | ) | $ | (263 | ) | $ | (734 | ) | $ | – | $ | (22,161 | ) | $ | (23,157 | ) | |||||||||||||
Assets | $ | – | $ | 230 | $ | – | $ | 3,005 | $ | 3,235 | $ | 1,073 | $ | 119 | $ | – | $ | 2,752 | $ | 3,944 | |||||||||||||||||||||
Liabilities | $ | 122 | $ | 2,779 | $ | – | $ | 6,671 | $ | 9,572 | $ | 300 | $ | 2,271 | $ | – | $ | 37,144 | $ | 39,715 |
18_Restatement_of_financial_st1
18. Restatement of financial statements (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Accounting Changes and Error Corrections [Abstract] | ' | ||||||||||||
Schedule of Restatement Impact on Balance Sheet | ' | ||||||||||||
Three Months Ended September 30, 2012 | |||||||||||||
Consolidated Statement of Operations | As Previously Reported | Restated | Net Adjustment | ||||||||||
for Three Months Ended September 30, 2012 | |||||||||||||
Loss from operations | $ | (3,426,250 | ) | $ | (3,426,250 | ) | $ | – | |||||
Other (income)/expenses | |||||||||||||
Fair value of derivative liabilities in excess of proceeds | – | – | – | ||||||||||
Adjustments to fair value of derivative securities | – | (2,022,790 | ) | (2,022,790 | ) | ||||||||
Other (income)/expenses | (133,770 | ) | (133,770 | ) | – | ||||||||
Interest expense | 172,057 | 52,313 | (119,744 | ) | |||||||||
Total other (income)/expenses | 38,287 | (2,104,247 | ) | (2,142,534 | ) | ||||||||
Net loss | (3,464,537 | ) | (1,322,003 | ) | 2,142,534 | ||||||||
Preferred dividends | – | 119,744 | 119,744 | ||||||||||
Net loss atttributable to common shareholders | $ | (3,464,537 | ) | $ | (1,441,747 | ) | $ | 2,022,790 | |||||
Basic and diluted loss attributable to common shareholders per share | $ | (0.04 | ) | $ | (0.02 | ) | $ | 0.02 | |||||
Basic weighted average shares outstanding | 89,748,496 | 89,748,496 | – | ||||||||||
Fully-diluted weighted average shares outstanding | 89,748,496 | 117,915,163 | 28,166,667 | ||||||||||
The following table presents the effect of the restatement adjustment on the accompanying consolidated statement of operations for the nine months ended September 30, 2012: | |||||||||||||
Nine Months Ended September 30, 2012 | |||||||||||||
Consolidated Statement of Operations | As Previously Reported | Restated | Net Adjustment | ||||||||||
for Nine Months Ended September 30, 2012 | |||||||||||||
Loss from operations | $ | (8,221,091 | ) | $ | (8,221,091 | ) | $ | – | |||||
Other (income)/expenses | |||||||||||||
Fair value of derivative liabilities in excess of proceeds | – | – | – | ||||||||||
Adjustments to fair value of derivative securities | – | 13,845,208 | 13,845,208 | ||||||||||
Other (income)/expenses | 626,926 | 626,926 | – | ||||||||||
Interest expense | 469,848 | 104,431 | (365,417 | ) | |||||||||
Total other (income)/expenses | 1,096,774 | 14,576,565 | 13,479,791 | ||||||||||
Net loss | (9,317,865 | ) | (22,797,656 | ) | (13,479,791 | ) | |||||||
Preferred dividends | – | 365,417 | 365,417 | ||||||||||
Net loss attributable to common shareholders | $ | (9,317,865 | ) | $ | (23,163,073 | ) | $ | (13,845,208 | ) | ||||
Basic and diluted loss attributable to common shareholders per share | $ | (0.10 | ) | $ | (0.26 | ) | $ | (0.16 | ) | ||||
Basic weighted average shares outstanding | 89,220,298 | 89,220,298 | – | ||||||||||
Fully-diluted weighted average shares outstanding | 89,220,298 | 117,386,965 | 28,166,667 |
2_Going_Concern_Details_Narrat
2. Going Concern (Details Narrative) (USD $) | Sep. 30, 2013 |
GoingConcernDetailsNarrativeAbstract | ' |
Working Capital | ($6,361,637) |
3_Basis_of_Presentation_and_Si3
3. Basis of Presentation and Significant Accounting Policies (Details) | 9 Months Ended |
Sep. 30, 2013 | |
Equipment | MinimumMember | ' |
Property and Equipment | ' |
Estimated useful Life | '3 years |
Equipment | MaximumMember | ' |
Property and Equipment | ' |
Estimated useful Life | '5 years |
Furniture And Fixtures | ' |
Property and Equipment | ' |
Estimated useful Life | '5 years |
Software | ' |
Property and Equipment | ' |
Estimated useful Life | '3 years |
LeaseholdImprovementsMember | ' |
Property and Equipment | ' |
Estimated useful Life, description | 'Lesser of lease term or life of improvements |
3_Basis_of_Presentation_and_Si4
3. Basis of Presentation and Significant Accounting Policies (Details Narrative) | 9 Months Ended |
Sep. 30, 2013 | |
BasisOfPresentationAndSignificantAccountingPoliciesDetailsNarrativeAbstract | ' |
Antidilutive shares | 28,166,667 |
6_Receivable_from_Former_Offic1
6. Receivable from Former Officer and Director (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Gross receivable | ' | ' |
Sale of Company common stock, proceeds retained by Mr. Feller | $640,000 | $640,000 |
Value of 378,661 shares of common stock owed by Mr. Feller to the Company, valued at December 31, 2012 price of $0.19 and at September 30, 2013 price of $0.14 | 53,013 | 71,946 |
Vintage automobile retained by Mr. Feller | 38,100 | 38,100 |
Other | 4,622 | 4,622 |
Gross receivable | 735,735 | 754,668 |
Deferred salary | -113,667 | -113,667 |
Expense reports submitted and approved | -30,540 | -30,540 |
Write off receivable based on stock offsets (see below) | -538,515 | -538,515 |
Net receivable | $53,013 | $71,946 |
6_Receivable_From_Former_Chair1
6. Receivable From Former Chairman and Chief Executive Officer (Details Narrative) (USD $) | Sep. 30, 2013 |
Receivable From Former Chairman And Chief Executive Officer Details Narrative | ' |
Accrued expense pursuant to Mr. Feller's consulting agreement | $53,013 |
7_Property_and_Equipment_Detai
7. Property and Equipment (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Property and Equipment | ' | ' |
Computers and peripherals | $97,660 | $97,660 |
Office machines | 49,370 | 49,370 |
Furniture and fixtures | 73,905 | 73,905 |
Property and Equipment Gross | 220,935 | 220,935 |
Less accumulated depreciation | -196,474 | -171,897 |
Property and Equipment Net | $24,461 | $49,038 |
7_Property_and_Equipment_Detai1
7. Property and Equipment (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Property And Equipment Details Narrative | ' | ' | ' | ' |
Depreciation | $7,479 | $9,855 | $24,577 | $29,613 |
9_Deferred_salary_Details_Narr
9. Deferred salary (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
DeferredSalaryDetailsNarrativeAbstract | ' | ' |
Unpaid salaries | $1,425,365 | $1,152,933 |
10_Other_accrued_expenses_and_2
10. Other accrued expenses and other liabilities (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Accounts Payable and Accrued Liabilities | ' | ' |
Payroll related | $505,893 | $329,191 |
Estimated damage liability that may not be covered by insurance | 393,592 | 300,000 |
Estimate settlement with vendor in Europe | 400,000 | 300,000 |
Professional fees | 120,000 | 160,773 |
Accrued board fees | 584,761 | 349,948 |
Consultant fees | 321,277 | 133,777 |
Other | 24,488 | 109,819 |
Total Accounts Payable and Accrued Liabilities | $2,350,011 | $1,683,508 |
11_Payable_to_Officer_and_Form2
11. Payable to Officer and Former Officer (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Payable To Officer And Former Officer Details | ' | ' |
Officer pursuant to employment agreement | $156,358 | $156,358 |
Promissory note to former officer | 55,000 | 55,000 |
Total Payable to Officer and Former Officer | $211,358 | $211,358 |
12_Notes_payable_Details
12. Notes payable (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Notes Payable | ' | ' |
Notes Payable | $2,575,002 | $4,004,103 |
ProElite, Inc. to individuals | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 1,083,000 | ' |
ShareholderMember | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 0 | 1,000,000 |
ProElite to one party | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 0 | 500,000 |
Note Payable August 9 | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 500,000 | ' |
Outside law firm | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 467,002 | 486,104 |
ThreeHoldersMember | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 0 | 350,000 |
11 Investors | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 275,000 | 275,000 |
OneHolderMember | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 0 | 0 |
One Holder Dated March 2013 | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 200,000 | 249,999 |
Shareholder Dated January 2005 | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 50,000 | 70,000 |
Shareholder Dated February 2005 | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 0 | 10,000 |
Shareholder Dated February 2005 | ' | ' |
Notes Payable | ' | ' |
Notes Payable | 0 | ' |
ProElite, Inc. | ' | ' |
Notes Payable | ' | ' |
Notes Payable | ' | 1,063,000 |
Shareholder Dated April, 2013 | ' | ' |
Notes Payable | ' | ' |
Notes Payable | ' | $0 |
13_Derivative_Liabilities_Deta
13. Derivative Liabilities (Details 1) (Derivative Liabilities, USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Derivative Liabilities | ' |
Estimated fair value of underlying common stock | $0.03 |
Remaining life, min | '3 years 18 days |
Remaining life, max | '3 years 1 month 24 days |
Risk-free interest rate, min | 0.35% |
Risk-free interest rate, max | 0.38% |
Expected volatility, min | 141.00% |
Expected volatility, max | 142.00% |
14_Common_Stock_Outstanding_De
14. Common Stock Outstanding (Details) | 3 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | |
Common Stock Outstanding Details | ' | ' |
Outstanding shares as of December 31, 2012 | 89,083,677 | 89,083,677 |
Exchange of Series E Preferred for common stock | 157,499,999 | ' |
Exchange of Series E Preferred warrants for common stock | 102,326,388 | ' |
Exchange of certain debts for common stock | 34,999,984 | ' |
Shares issued for financial advisory agreement | 21,025,000 | ' |
Sales of common stock | 13,916,665 | ' |
Conversion of Series D Preferred into common stock | 1,413,850 | ' |
Other | 700,689 | ' |
Outstanding shares as of September 30, 2013 | 420,966,252 | 89,083,677 |
14_Options_Outstanding_and_Exe
14. Options Outstanding and Exercisable (Details) (Options, USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Options | ' | ' |
Options Outstanding | ' | ' |
Beginning Balance | 7,943,523 | 12,169,852 |
Cancelled | 0 | -7,276,329 |
Exercised | 0 | 0 |
Granted | 31,000,000 | 3,050,000 |
Ending Balance | 38,943,523 | 7,943,523 |
Range of Exercise Prices | ' | ' |
Beginning Balance Minimum | $0.35 | $0.14 |
Beginning Balance Maximum | $0.54 | $1.50 |
Cancelled | ' | ' |
Exercised | ' | ' |
Granted, Minimum | $0.03 | $0.35 |
Granted, Maximum | ' | $0.38 |
Ending Balance Minimum | $0.03 | $0.35 |
Ending Balance Maximum | $0.54 | $0.54 |
Beginning Balance | '3 years 2 months 12 days | '3 years 2 months 12 days |
Cancelled | '0 years | '0 years |
Exercised | '0 years | '0 years |
Granted | '4 years 8 months 12 days | '4 years 6 months |
Ending Balance | '4 years 4 months 24 days | '3 years 3 months 18 days |
Weighted Average Exercise Price | ' | ' |
Beginning Balance | $0.46 | $0.49 |
Cancelled | ' | ' |
Exercised | ' | ' |
Granted | $0.03 | $0.36 |
Ending Balance | $0.12 | $0.46 |
Options Exercisable | ' | ' |
Beginning Balance | 5,731,023 | 8,757,684 |
Cancelled | ' | -4,660,994 |
Granted | 31,000,000 | 1,634,333 |
Ending Balance | 36,731,023 | 5,731,023 |
Weighted Average Remaining Life in Years | ' | ' |
Beginning Balance | '2 years 10 months 24 days | '3 years 2 months 12 days |
Cancelled | '0 years | '0 years |
Exercised | '0 years | '0 years |
Granted | '4 years 8 months 12 days | '4 years 6 months |
Ending Balance | '4 years 4 months 24 days | '2 years 10 months 24 days |
Weighted Average Exercise Price | ' | ' |
Beginning Balance | $0.48 | $0.40 |
Granted | $0.03 | $0.36 |
Ending Balance | $0.11 | $0.48 |
14_Warrants_Outstanding_Detail
14. Warrants Outstanding (Details) (Warrants, USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Warrants | ' | ' |
Warrants Outstanding | ' | ' |
Beginning Balance | 132,285,242 | 59,530,245 |
Exercised | 0 | 0 |
Ratchet-down impact | ' | 56,991,667 |
Granted | 17,391,667 | 15,763,330 |
Ending Balance | 51,806,912 | 132,285,242 |
Range of Exercise Prices | ' | ' |
Beginning Balance Minimum | $0.30 | $0.65 |
Beginning Balance Maximum | $2 | $2 |
Exercised | ' | ' |
Ratchet-down impact | ' | 0.3 |
GrantedMinimum | ' | $0.30 |
GrantedMaximum | ' | $0.75 |
Ending Balance Minimum | $0.30 | $0.30 |
Ending Balance Maximum | $2 | $2 |
Weighted Average Remaining Life in Years | ' | ' |
Beginning Balance | '3 years 6 months | '3 years 6 months |
Exercised | '0 years | '0 years |
Granted | '0 years | '4 years 6 months |
Ending Balance | '4 years 3 months 18 days | '3 years 6 months |
Weighted Average Exercise Price | ' | ' |
Exercised | ' | ' |
Ratchet-down impact | ' | $0.30 |
Granted | ' | $0.38 |
Warrants Exercisable | ' | ' |
Beginning Balance | 126,910,242 | 59,530,245 |
Exercised | 0 | 0 |
Ratchet-down impact | ' | 56,991,667 |
Granted | 17,391,667 | 10,388,330 |
Cancelled | -93,994,997 | ' |
Ending Balance | 50,306,912 | 126,910,242 |
Weighted Average Remaining Life in Years | ' | ' |
Beginning Balance | '3 years 6 months | '3 years 6 months |
Exercised | '0 years | '0 years |
Granted | '0 years | '4 years 7 months 6 days |
Ending Balance | '3 years 2 months 12 days | '3 years 6 months |
Weighted Average Exercise Price | ' | ' |
Beginning Balance | $0.38 | $2 |
Exercised | ' | ' |
Ratchet-down impact | ' | $0.30 |
Granted | ' | ' |
Ending Balance | $0.38 | $0.38 |
15_Commitments_and_contingenci2
15. Commitments and contingencies (Details) (USD $) | Sep. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 |
Notes payable | Deferred salary | Rent obligations | Accrued board fees | Consulting agreement | Employee contracts: other | Accrued interest | ||
Contractual Obligation | ' | ' | ' | ' | ' | ' | ' | ' |
Total | $6,639,723 | $2,575,002 | $1,425,365 | $1,260,644 | $584,761 | $375,000 | $211,358 | $207,593 |
2013 | 5,931,816 | 2,575,002 | 1,425,365 | 677,737 | 584,761 | 250,000 | 211,358 | 207,593 |
2014 | 464,958 | 0 | 0 | 339,958 | 0 | 125,000 | 0 | 0 |
2015 | 242,949 | 0 | 0 | 242,949 | 0 | 0 | 0 | 0 |
Beyond 2015 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
16_Segment_Information_Details
16. Segment Information (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Segment Information | ' | ' | ' | ' | ' |
Revenues | $0 | $143,334 | $71,667 | $374,542 | ' |
Cost of sales | 0 | 850 | 0 | 235,803 | ' |
Gross margin | 0 | 142,484 | 71,667 | 138,739 | ' |
Deprec. & Amort | 7,479 | 9,855 | 24,577 | 29,613 | ' |
Segment profit | -1,555,152 | -3,426,250 | -11,973,949 | -8,221,091 | ' |
Operating expenses | 1,555,152 | 3,568,734 | 12,045,616 | 8,359,830 | ' |
Net loss | -1,538,911 | -1,322,003 | -1,682,632 | -22,797,656 | ' |
Net loss attributable to common shareholders | 13,634 | -84 | 28,065 | 5,951 | ' |
Preferred dividends | $0 | $119,744 | $171,625 | $365,417 | ' |
Net loss attributable to common shareholders | -1,525,277 | -1,441,831 | -1,826,192 | -23,157,122 | ' |
Assets | 3,234,508 | ' | 3,234,508 | ' | 2,446,297 |
Liabilities | 9,570,679 | ' | 9,570,679 | ' | 20,852,636 |
Stratus Rewards [Member] | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' | ' |
Cost of sales | ' | ' | ' | ' | ' |
Gross margin | ' | ' | ' | ' | ' |
Deprec. & Amort | ' | ' | ' | ' | ' |
Segment profit | ' | ' | ' | ' | ' |
Operating expenses | ' | ' | 85 | 263 | ' |
Other expenses | ' | ' | ' | ' | ' |
Adjustments to fair value of derivative securities | ' | ' | ' | ' | ' |
Net loss | ' | ' | -85 | -263 | ' |
Net loss attributable to common shareholders | ' | ' | -85 | -263 | ' |
Assets | ' | ' | ' | 1,073 | ' |
Liabilities | 122 | ' | 122 | 300 | ' |
ProElite [Member] | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenues | ' | ' | 72 | 375 | ' |
Cost of sales | ' | ' | ' | 236 | ' |
Gross margin | ' | ' | 72 | 139 | ' |
Deprec. & Amort | ' | ' | ' | 2 | ' |
Segment profit | ' | ' | 72 | 137 | ' |
Operating expenses | ' | ' | 192 | 803 | ' |
Other expenses | ' | ' | 60 | 68 | ' |
Adjustments to fair value of derivative securities | ' | ' | ' | ' | ' |
Net loss | ' | ' | -180 | -734 | ' |
Net loss attributable to common shareholders | ' | ' | -180 | -734 | ' |
Assets | 230 | ' | 230 | 119 | ' |
Liabilities | 2,779 | ' | 2,779 | 2,271 | ' |
Other Events [Member] | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' | ' |
Cost of sales | ' | ' | ' | ' | ' |
Gross margin | ' | ' | ' | ' | ' |
Deprec. & Amort | ' | ' | ' | ' | ' |
Segment profit | ' | ' | ' | ' | ' |
Operating expenses | ' | ' | ' | ' | ' |
Other expenses | ' | ' | ' | ' | ' |
Adjustments to fair value of derivative securities | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | ' | ' |
Net loss attributable to common shareholders | ' | ' | ' | ' | ' |
Preferred dividends | ' | ' | ' | ' | ' |
Net loss attributable to common shareholders | ' | ' | ' | ' | ' |
Assets | ' | ' | ' | ' | ' |
Liabilities | ' | ' | ' | ' | ' |
Other [Member] | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' | ' |
Cost of sales | ' | ' | ' | ' | ' |
Gross margin | ' | ' | ' | ' | ' |
Deprec. & Amort | ' | ' | 25 | 28 | ' |
Segment profit | ' | ' | -25 | -28 | ' |
Operating expenses | ' | ' | 11,744 | 7,265 | ' |
Other expenses | ' | ' | 38 | 663 | ' |
Adjustments to fair value of derivative securities | ' | ' | -10,390 | 13,845 | ' |
Net loss | ' | ' | -1,417 | -21,802 | ' |
Net loss attributable to common shareholders | ' | ' | 28 | 6 | ' |
Preferred dividends | ' | ' | $172 | $365 | ' |
Net loss attributable to common shareholders | ' | ' | -1,561 | -22,161 | ' |
Assets | 3,005 | ' | 3,005 | 2,752 | ' |
Liabilities | 6,671 | ' | 6,671 | 37,144 | ' |
Total | ' | ' | ' | ' | ' |
Segment Information | ' | ' | ' | ' | ' |
Revenues | ' | ' | 72 | 375 | ' |
Cost of sales | ' | ' | ' | 236 | ' |
Gross margin | ' | ' | 72 | 139 | ' |
Deprec. & Amort | ' | ' | 25 | 30 | ' |
Segment profit | ' | ' | 47 | 109 | ' |
Operating expenses | ' | ' | 12,021 | 8,331 | ' |
Other expenses | ' | ' | 98 | 730 | ' |
Adjustments to fair value of derivative securities | ' | ' | -10,390 | 13,845 | ' |
Net loss | ' | ' | -1,682 | -22,798 | ' |
Net loss attributable to common shareholders | ' | ' | 28 | 6 | ' |
Preferred dividends | ' | ' | $172 | $365 | ' |
Net loss attributable to common shareholders | ' | ' | -1,826 | -23,157 | ' |
Assets | 3,235 | ' | 3,235 | 3,944 | ' |
Liabilities | $9,572 | ' | $9,572 | $39,715 | ' |
18_Restatement_of_financial_st2
18. Restatement of financial statements (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | |
As Previously Reported | As Previously Reported | Restated | Restated | Net Adjustment | Net Adjustment | |||||
Consolidated Statement of Operations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss from operations | ($1,555,152) | ($3,426,250) | ($11,973,949) | ($8,221,091) | ($3,426,250) | ($8,221,091) | ($3,426,250) | ($8,221,091) | ' | ' |
Other (income)/expenses | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of derivative liabilities in excess of proceeds | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Adjustments to fair value of derivative securities | ' | ' | ' | ' | ' | ' | -2,022,790 | 13,845,208 | -2,022,790 | 13,845,208 |
Other (income)/expenses | ' | ' | ' | ' | -133,770 | 626,926 | -133,770 | 626,926 | ' | ' |
Interest expense | ' | ' | ' | ' | 172,057 | 469,848 | 52,313 | 104,431 | -119,744 | -365,417 |
Total other (income)/expenses | 16,241 | 2,104,247 | 10,291,317 | -14,576,565 | 38,287 | 1,096,774 | -2,104,247 | 14,576,565 | -2,142,534 | 13,479,791 |
Net loss | -1,538,911 | -1,322,003 | -1,682,632 | -22,797,656 | -3,464,537 | -9,317,865 | -1,322,003 | -22,797,656 | 2,142,534 | -13,479,791 |
Net loss attributed to non-controlling interests | -13,634 | 84 | -28,065 | -5,951 | ' | ' | ' | ' | ' | ' |
Preferred dividends | $0 | $119,744 | $171,625 | $365,417 | ' | ' | $119,744 | $365,417 | $119,744 | $365,417 |
Net loss attributable to common shareholders | ($1,525,277) | ($1,441,831) | ($1,826,192) | ($23,157,122) | ($3,464,537) | ($9,317,865) | ($1,441,747) | ($23,163,073) | $2,022,790 | ($13,845,208) |
Basic and diluted loss attributable to common shareholders per share | $0 | ($0.02) | ($0.01) | ($0.26) | ($0.04) | ($0.10) | ($0.02) | ($0.26) | ($0.02) | ($0.16) |
Basic weighted average shares outstanding | ' | ' | ' | ' | 89,748,496 | 89,220,298 | 89,748,496 | 89,220,298 | ' | ' |
Fully-diluted weighted average shares outstanding | 414,401,939 | 117,915,163 | 264,660,276 | 117,386,965 | 89,748,496 | 89,220,298 | 117,915,163 | 117,386,965 | 28,166,667 | 28,166,667 |