Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Jul. 31, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'TELKONET INC | ' |
Entity Central Index Key | '0001094084 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
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 | ' | 125,035,612 |
Document Fiscal Period Focus | 'Q2 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
ASSETS | ' | ' |
Cash and cash equivalents | $1,097,859 | $572,672 |
Restricted cash on deposit | 63,000 | 382,000 |
Accounts receivable, net | 1,494,148 | 1,659,756 |
Inventories | 870,809 | 939,382 |
Prepaid expenses | 113,877 | 171,216 |
Total current assets | 3,639,693 | 3,725,026 |
Property and equipment, net | 149,959 | 44,638 |
Goodwill | 5,796,430 | 5,796,430 |
Intangible assets, net | 1,137,777 | 1,258,617 |
Deposits | 34,238 | 34,238 |
Total other assets | 6,968,445 | 7,089,285 |
Total Assets | 10,758,097 | 10,858,949 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' |
Accounts payable | 1,994,817 | 1,843,589 |
Notes payable - current | 272,482 | 265,985 |
Accrued liabilities and expenses | 1,667,333 | 1,997,157 |
Deferred revenues | 288,488 | 111,291 |
Customer deposits | 541,868 | 77,405 |
Total current liabilities | 4,764,988 | 4,295,427 |
Deferred lease liability | 148,117 | 130,920 |
Notes payable - long term | 256,750 | 394,502 |
Deferred income taxes | 437,899 | 335,275 |
Total long-term liabilities | 842,766 | 860,697 |
Redeemable preferred stock: 15,000,000 shares authorized, par value $.001 per share Series A; 215 shares issued, 185 shares outstanding at June 30, 2014 and December 31, 2013, respectively, preference in liquidation of $1,266,539 and $1,229,832 as of June 30, 2014 and December 31, 2013, respectively | 1,237,349 | 1,165,625 |
Commitments and contingencies | ' | ' |
Stockholders' Equity | ' | ' |
Series B preferred stock; 538 shares issued, 55 shares outstanding at June 30, 2014 and December 31, 2013, preference in liquidation of $360,925 and $350,005 as of June 30, 2014 and December 31, 2013, respectively | 349,023 | 324,063 |
Common stock, par value $.001 per share; 190,000,000 shares authorized; 125,035,612 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 125,035 | 125,035 |
Additional paid-in-capital | 125,946,906 | 126,036,949 |
Accumulated deficit | -122,507,970 | -121,948,847 |
Total stockholders' equity | 3,912,994 | 4,537,200 |
Total Liabilities and Stockholders' Equity | $10,758,097 | $10,858,949 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Redeemable preferred stock shares authorized | 15,000,000 | 15,000,000 |
Redeemable preferred stock par value (in Dollars per share) | $0.00 | $0.00 |
Common stock, par value (in Dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 190,000,000 | 190,000,000 |
Common stock, shares outstanding | 125,035,612 | 125,035,612 |
Common stock, shares issued | 125,035,612 | 125,035,612 |
Series A Preferred Stock | ' | ' |
Preferred Stock shares issued | 215 | 215 |
Preferred Stock shares outstanding | 185 | 185 |
Preferred Stock liquidiation preference | $1,266,539 | $1,229,832 |
Series B Preferred Stock | ' | ' |
Preferred Stock shares issued | 538 | 538 |
Preferred Stock shares outstanding | 55 | 55 |
Preferred Stock liquidiation preference | $360,925 | $350,005 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Revenues, net: | ' | ' | ' | ' |
Product | $3,419,956 | $2,659,751 | $5,129,600 | $4,825,251 |
Recurring | 933,392 | 935,745 | 1,856,365 | 1,897,879 |
Total Net Revenue | 4,353,348 | 3,595,496 | 6,985,965 | 6,723,130 |
Product | 1,978,291 | 1,848,081 | 3,326,318 | 3,277,627 |
Recurring | 263,083 | 270,517 | 517,385 | 536,680 |
Total Cost of Sales | 2,241,374 | 2,118,598 | 3,843,703 | 3,814,307 |
Gross Profit | 2,111,974 | 1,476,898 | 3,142,262 | 2,908,823 |
Operating Expenses: | ' | ' | ' | ' |
Research and development | 318,815 | 287,291 | 615,505 | 589,433 |
Selling, general and administrative | 1,445,627 | 1,806,351 | 2,828,346 | 3,266,944 |
Depreciation and amortization | 69,525 | 64,729 | 136,186 | 128,847 |
Total Operating Expenses | 1,833,967 | 2,158,371 | 3,580,037 | 3,985,224 |
Income (Loss) from Operations | 278,007 | -681,473 | -437,775 | -1,076,401 |
Interest income (expense), net | -7,610 | 18,061 | -18,724 | 1,423 |
Gain on sale of product line | 0 | 41,902 | 0 | 41,902 |
Total Other Income (Expense) | -7,610 | 59,963 | -18,724 | 43,325 |
Income (Loss) Before Provision for Income Taxes | 270,397 | -621,510 | -456,499 | -1,033,076 |
Provision for Income Taxes | 51,312 | 0 | 102,624 | 280 |
Net Income (Loss) | 219,085 | -621,510 | -559,123 | -1,033,356 |
Accretion of preferred dividends and discount | -35,963 | -127,989 | -71,724 | -300,886 |
Net income (loss) attributable to common stockholders | $183,122 | ($749,499) | ($630,847) | ($1,334,242) |
Net income (loss) attributable to common stockholders per common share - basic | $0 | $0 | ($0.01) | ($0.01) |
Net income (loss) attributable to common stockholders per common share - diluted | $0 | $0 | ($0.01) | ($0.01) |
Weighted Average Common Shares Outstanding - basic | 125,035,612 | 108,179,079 | 125,035,612 | 108,141,250 |
Weighted Average Common Shares Outstanding - diluted | 127,412,878 | 108,179,079 | 125,035,612 | 108,141,250 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (USD $) | Series B Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, value at Dec. 31, 2013 | $324,063 | $125,035 | $126,036,949 | ($121,948,847) | $4,537,200 |
Beginning balance, shares at Dec. 31, 2013 | 55 | 125,035,612 | ' | ' | ' |
Stock-based compensation expense related to employee stock options | ' | ' | 6,641 | ' | 6,641 |
Accretion of redeemable preferred stock discount | 14,040 | ' | -49,056 | ' | -35,016 |
Accretion of redeemable preferred stock dividends | 10,920 | ' | -47,628 | ' | -36,708 |
Net loss | ' | ' | ' | -559,123 | -559,123 |
Ending balance, value at Jun. 30, 2014 | $349,023 | $125,035 | $125,946,906 | ($122,507,970) | $3,912,994 |
Ending balance, shares at Jun. 30, 2014 | 55 | 125,035,612 | ' | ' | ' |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Cash Flows from Operating Activities: | ' | ' |
Net loss | ($559,123) | ($1,033,356) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ' | ' |
Gain on sale of product line | 0 | -41,902 |
Stock-based compensation expense | 6,641 | 85,519 |
Depreciation | 15,346 | 8,007 |
Amortization | 120,840 | 120,840 |
Provision for doubtful accounts | 5,787 | 64,543 |
Deferred income taxes | 102,624 | 0 |
Changes in assets and liabilities: | ' | ' |
Accounts receivable | 159,821 | 560,471 |
Inventories | 68,573 | -258,874 |
Prepaid expenses | 57,339 | 77,057 |
Accounts payable | 151,228 | -12,692 |
Accrued liabilities and expenses | -329,824 | -286,880 |
Deferred revenue | 177,197 | 321,100 |
Customer deposits | 464,463 | 406,981 |
Deferred lease liability | 17,197 | -547 |
Net Cash Provided By Operating Activities | 458,109 | 10,267 |
Cash Flows From Investing Activities: | ' | ' |
Purchase of property and equipment | -120,667 | -18,633 |
Change in restricted cash | 319,000 | -382,000 |
Net Cash Provided By (Used In) Investing Activities | 198,333 | -400,633 |
Cash Flows From Financing Activities: | ' | ' |
Payments on note payable | -131,255 | -58,276 |
Net Cash Used In Financing Activities | -131,255 | -58,276 |
Net increase (decrease) in cash and cash equivalents | 525,187 | -448,642 |
Cash and cash equivalents at the beginning of the period | 572,672 | 1,163,758 |
Cash and cash equivalents at the end of the period | 1,097,859 | 715,116 |
Supplemental Disclosures of Cash Flow Information: | ' | ' |
Cash paid during the period for interest expense | 19,297 | 9,194 |
Non-cash transactions: | ' | ' |
Accretion of discount on redeemable preferred stock | 49,056 | 216,264 |
Accretion of dividends on redeemable preferred stock | 47,628 | 84,622 |
Conversion of preferred stock to common stock | $0 | $50,000 |
A_BASIS_OF_PRESENTATION_AND_SI
A. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
NOTE A - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
A summary of the significant accounting policies applied in the preparation of the accompanying condensed consolidated financial statements follows. | |||||||||
General | |||||||||
The accompanying unaudited condensed consolidated financial statements of Telkonet, Inc. (the “Company”) have been prepared in accordance with Rule S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. | |||||||||
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the six months ended June 30, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2013 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC. | |||||||||
Business and Basis of Presentation | |||||||||
The Company formed in 1999 and incorporated under the laws of the state of Utah is made up of two synergistic business divisions, EcoSmart Energy Management Technology and EthoStream High Speed Internet Access (HSIA) Network. | |||||||||
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Telkonet Communications, Inc., and EthoStream, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. | |||||||||
Going Concern | |||||||||
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company reported a net loss of $559,123 for the six months ended June 30, 2014, and has an accumulated deficit of $122,507,970 and total current liabilities in excess of current assets of $1,125,295 as of June 30, 2014. | |||||||||
Our ability to continue as a going concern is subject to our ability to consistently generate a profit and positive operating cash flows and/or obtain necessary funding from outside sources, including by the sale of our securities or assets, or obtaining loans from financial institutions, where possible. We may also experience net operating losses in the future and the uncertainty regarding contingent liabilities cast doubt on our ability to satisfy such liabilities and the Company cannot make any representations for the remainder of fiscal 2014 and beyond. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. | |||||||||
Anticipated cash flows from operations may be insufficient to satisfy the Company’s ongoing capital requirements for at least the next 12 months. In May 2013, the Company entered into a Revolving Credit Facility (the “Agreement”) with Bridge Bank, NA (the “Bank”), the principal not to exceed $2,000,000. This credit facility was available for working capital and other lawful business purposes. As of March 31, 2014 and December 31, 2013, the Company was in violation of a financial performance covenant. Although the Company’s violation of the financial performance covenant constituted a default under the Agreement, the Bank did not pursue any remedies under the default provisions of the Agreement. On May 31, 2014, the Bank and the Company mutually agreed to terminate the Agreement and the remaining balance, $50,000, was paid in full. | |||||||||
Management intends to review the options for raising capital including, but not limited to, through asset-based financing, private placements, and/or disposition of assets. Management believes that if it is able to obtain this financing, the Company will be able to generate additional revenues that will allow the Company to continue as a going concern. There can be no assurance that the Company will be successful in obtaining additional funding or generate sufficient additional revenues. | |||||||||
Restricted Cash on Deposit | |||||||||
During 2012, the Company was awarded a contract with a bonding requirement. The Company satisfied this requirement during the year ended December 31, 2013 with cash collateral supported by an irrevocable standby letter of credit in the amount of $382,000 which was to expire September 30, 2014, or sooner if the Company satisfied all obligations under the arrangement. The amount is presented as restricted cash on deposit on the consolidated balance sheet as of December 31, 2013. In March 2014, the Company satisfied all obligations related to the bonding requirement and the cash was released. | |||||||||
During 2014, the Company was again awarded a contract with a bonding requirement. The Company satisfied this requirement during the three and six months ended June 30, 2014 with cash collateral supported by an irrevocable standby letter of credit in the amount of $63,000 which is to expire December 31, 2014, or sooner if the Company satisfies all obligations under the arrangement. The amount is presented as restricted cash on deposit on the consolidated balance sheet as of June 30, 2014. | |||||||||
Income (Loss) per Common Share | |||||||||
The Company computes net income (loss) per share under ASC 260-10, “Earnings Per Share”. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding of common stock. Diluted income (loss) per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the year. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants. As a result of the losses for the six months ended June 30, 2014 and 2013, there were 11,295,139 and 11,402,512 shares of common stock underlying options and warrants excluded, respectively, as their inclusion would have been anti-dilutive. | |||||||||
Estimates | |||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. | |||||||||
Income Taxes | |||||||||
The Company accounts for income taxes in accordance with ASC 740-10 “Income Taxes.” Under this method, deferred income taxes (when required) are provided based on the difference between the financial reporting and income tax bases of assets and liabilities and net operating losses at the statutory rates enacted for future periods. The Company has a policy of establishing a valuation allowance when it is more likely than not that the Company will not realize the benefits of its deferred income tax assets in the future. | |||||||||
The Company adopted ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on derecognition, classification, treatment of interest and penalties, accounting in interim periods and disclosure and transition related to the uncertainty in these income tax positions. | |||||||||
Revenue Recognition | |||||||||
For revenue from product sales, we recognize revenue in accordance with ASC 605-10, “Revenue Recognition” and ASC Topic 13 guidelines that require that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The guidelines also address the accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. | |||||||||
Multiple-Element Arrangements (“MEAs”): The Company accounts for contracts that have both product and installation under the MEAs guidance in ASC 605. The Company believes the volume of these contracts will continue to increase. Arrangements under such contracts may include multiple deliverables, a combination of equipment and services. The deliverables included in the MEAs are separated into more than one unit of accounting when (i) the delivered equipment has value to the customer on a stand-alone basis, and (ii) delivery of the undelivered service element(s) is probable and substantially in our control. Arrangement consideration is then allocated to each unit, delivered or undelivered, based on the relative selling price of each unit of accounting based first on vendor-specific objective evidence (“VSOE”) if it exists, second on third-party evidence (“TPE”) if it exists and on estimated selling price (“ESP”) if neither VSOE or TPE exist. | |||||||||
· | VSOE – Based on its pricing and discounting practices for the specific product or service when sold separately, considering geographical, customer, and other economic or marketing variables, as well as renewal rates or stand-alone prices for the service element(s). | ||||||||
· | TPE – If we cannot establish VSOE of selling price for a specific product or service included in a multiple-element arrangement, we use third-party evidence of selling price. We determine TPE based on sales of comparable amount of similar product or service offered by multiple third parties considering the degree of customization and similarity of product or service sold. | ||||||||
· | ESP – The estimated selling price represents the price at which we would sell a product or service if it were sold on a stand-alone basis. When neither VSOE nor TPE exists for all elements, we determine ESP for the arrangement element based on sales, cost and margin analysis, as well as other inputs based on our pricing practices. Adjustments for other market and Company-specific factors are made as deemed necessary in determining ESP. | ||||||||
When MEAs include an element of customer training, it is not essential to the functionality, efficiency or effectiveness of the MEA. Therefore the Company has concluded that this obligation is inconsequential and perfunctory. As such, for MEAs that include training, customer acceptance of said training is not deemed necessary in order to record the related revenue, but is recorded when the installation deliverable is fulfilled. Historically, training revenues have not been significant. | |||||||||
We provide call center support services to properties installed by us and also to properties installed by other providers. In addition, we provide the property with the portal to access the Internet. We receive monthly service fees from such properties for our services and Internet access. We recognize the service fee ratably over the term of the contract. The prices for these services are fixed and determinable prior to delivery of the service. The fair value of these services is known due to objective and reliable evidence from standalone executed contracts. We report such revenues as recurring revenues. | |||||||||
Guarantees and Product Warranties | |||||||||
The Company records a liability for potential warranty claims in cost of sales at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. The products sold are generally covered by a warranty for a period of one year. In the event the Company determines that its current or future product repair and replacement costs exceed its estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. For the six months ended June 30, 2014 and the year ended December 31, 2013, the Company experienced returns of approximately 1% to 4% of materials included in the cost of sales. As of June 30, 2014 and December 31, 2013, the Company recorded warranty liabilities in the amount of $62,943 and $77,943, respectively. | |||||||||
Product warranties for the six months ended June 30, 2014 and the year ended December 31, 2013 are as follows: | |||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Beginning balance | $ | 77,943 | $ | 69,743 | |||||
Warranty claims incurred | (18,419 | ) | (9,106 | ) | |||||
Provision charged to expense | 3,419 | 17,306 | |||||||
Ending balance | $ | 62,943 | $ | 77,943 | |||||
Lease Abandonment | |||||||||
On July 15, 2011, the Company executed a sublease agreement for approximately 12,000 square feet of commercial office space in Germantown, Maryland. Because we no longer have access to this subleased space, we recorded a charge of $59,937 in accrued liabilities and expenses related to this abandonment during 2011. On June 27, 2012 the subtenant exercised the option to extend the expiration of the term of the sublease from January 31, 2013 to December 31, 2015 and we recorded an additional charge of $132,174. The remaining liability at June 30, 2014 was $68,494 and at December 31, 2013 was $91,981. | |||||||||
B_NEW_ACCOUNTING_PRONOUNCEMENT
B. NEW ACCOUNTING PRONOUNCEMENTS | 6 Months Ended |
Jun. 30, 2014 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
NOTE B - NEW ACCOUNTING PRONOUNCEMENTS | ' |
In July 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force), which applies to the presentation of unrecognized tax benefits as a liability on the balance sheet when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose. This ASU was effective for reporting periods beginning after December 15, 2013. The Company applied this guidance in the current year and did not have a material impact on the Company's statement of operations, financial position or cash flows. | |
In June 2014, the FASB issued ASU No. 2014-12, Compensation-Stock Compensation (Topic 718). Under ASU No. 2014-12 an award with a performance target generally requires an employee to render service until the performance target is achieved. In some cases, however, the terms of an award may provide that the performance target could be achieved after an employee completes the requisite service period. That is, the employee would be eligible to vest in the award regardless of whether the employee is rendering service on the date the performance target is achieved. This ASU will be effective for reporting periods beginning after December 15, 2015. The Company does not believe this guidance will have a material impact on the Company's future statement of operations, financial position or cash flows. | |
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2017. |
C_INTANGIBLE_ASSETS_AND_GOODWI
C. INTANGIBLE ASSETS AND GOODWILL | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||||||
NOTE C - INTANGIBLE ASSETS AND GOODWILL | ' | ||||||||||||||||||||
Total identifiable intangible assets acquired and their carrying values at June 30, 2014 are: | |||||||||||||||||||||
Cost | Accumulated | Accumulated Impairment | Carrying Value | Weighted Average | |||||||||||||||||
Amortization | Amortization Period | ||||||||||||||||||||
(Years) | |||||||||||||||||||||
Amortized Identifiable Intangible Assets: | |||||||||||||||||||||
Subscriber lists – EthoStream | $ | 2,900,000 | $ | (1,762,223 | ) | $ | – | $ | 1,137,777 | 12 | |||||||||||
Total Amortized Identifiable Intangible Assets | 2,900,000 | (1,762,223 | ) | – | 1,137,777 | ||||||||||||||||
Goodwill – EthoStream | 8,796,430 | – | -3,000,000 | 5,796,430 | |||||||||||||||||
Total Goodwill | 8,796,430 | – | -3,000,000 | 5,796,430 | |||||||||||||||||
Total | $ | 11,696,430 | $ | (1,762,223 | ) | $ | -3,000,000 | $ | 6,934,207 | ||||||||||||
Total identifiable intangible assets acquired and their carrying values at December 31, 2013 are: | |||||||||||||||||||||
Cost | Accumulated | Accumulated Impairment | Carrying Value | Weighted Average | |||||||||||||||||
Amortization | Amortization Period | ||||||||||||||||||||
(Years) | |||||||||||||||||||||
Amortized Identifiable Intangible Assets: | |||||||||||||||||||||
Subscriber lists – EthoStream | $ | 2,900,000 | $ | (1,641,383 | ) | $ | – | $ | 1,258,617 | 12 | |||||||||||
Total Amortized Identifiable Intangible Assets | 2,900,000 | (1,641,383 | ) | – | 1,258,617 | ||||||||||||||||
Goodwill – EthoStream | 8,796,430 | – | -3,000,000 | 5,796,430 | |||||||||||||||||
Goodwill – SSI | 5,874,016 | – | -5,874,016 | - | |||||||||||||||||
Total Goodwill | 14,670,446 | -8,874,016 | 5,796,430 | ||||||||||||||||||
Total | $ | 17,570,446 | $ | (1,641,383 | ) | $ | -8,874,016 | $ | 7,055,047 | ||||||||||||
Total amortization expense charged to operations for each of the three and six months ended June 30, 2014 and 2013 was $60,420 and 120,840, respectively. | |||||||||||||||||||||
Estimated future amortization expense as of June 30, 2014 is as follows: | |||||||||||||||||||||
Remainder of 2014 | $ | 120,840 | |||||||||||||||||||
2015 | 241,680 | ||||||||||||||||||||
2016 | 241,680 | ||||||||||||||||||||
2017 | 241,680 | ||||||||||||||||||||
2018 | 241,680 | ||||||||||||||||||||
2019 | 50,217 | ||||||||||||||||||||
Total | $ | 1,137,777 | |||||||||||||||||||
The Company does not amortize goodwill. The Company recorded goodwill in the amount of $14,670,446 as a result of the acquisitions of EthoStream and SSI during the year ended December 31, 2007. The Company evaluates goodwill for impairment based on the fair value of the reporting units to which this goodwill relates at least once a year. We utilize a discounted cash flow valuation methodology (income approach) to determine the fair value of the reporting unit. Since acquisition, the Company has written off $3,000,000 and $5,874,016 of goodwill for Ethostream and Smart Systems International, respectively. |
D_ACCOUNTS_RECEIVABLE
D. ACCOUNTS RECEIVABLE | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Accounts Receivable Additional Disclosures [Abstract] | ' | ||||||||
NOTE D - ACCOUNTS RECEIVABLE | ' | ||||||||
Components of accounts receivable as of June 30, 2014 and December 31, 2013 are as follows: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Accounts receivable | $ | 1,522,673 | $ | 1,816,722 | |||||
Allowance for doubtful accounts | (28,525 | ) | (156,966 | ) | |||||
Accounts receivable, net | $ | 1,494,148 | $ | 1,659,756 | |||||
E_INVENTORIES
E. INVENTORIES | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
NOTE E - INVENTORY | ' | ||||||||
Components of inventories as of June 30, 2014 and December 31, 2013 are as follows: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Merchandise purchased for resale | $ | 1,079,359 | $ | 997,332 | |||||
Reserve for obsolescence | (208,550 | ) | (57,950 | ) | |||||
Inventory, net | $ | 870,809 | $ | 939,382 | |||||
F_ACCRUED_LIABILITIES_AND_EXPE
F. ACCRUED LIABILITIES AND EXPENSES | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Additional Other Liabilities Disclosure [Abstract] | ' | ||||||||
NOTE F - ACCRUED LIABILITIES AND EXPENSES | ' | ||||||||
Accrued liabilities and expenses at June 30, 2014 and December 31, 2013 are as follows: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Accrued liabilities and expenses | $ | 426,838 | $ | 405,073 | |||||
Accrued payroll and payroll taxes | 427,755 | 430,871 | |||||||
Accrued sales taxes, penalties, and interest | 747,582 | 1,080,482 | |||||||
Accrued interest | 2,215 | 2,788 | |||||||
Product warranties | 62,943 | 77,943 | |||||||
Total | $ | 1,667,333 | $ | 1,997,157 | |||||
G_LONG_TERM_DEBT
G. LONG TERM DEBT | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Debt Disclosure [Abstract] | ' | ||||
NOTE G - LONG TERM DEBT | ' | ||||
Business Loan | |||||
On September 11, 2009, the Company entered into a Loan Agreement in the aggregate principal amount of $300,000 with the Wisconsin Department of Commerce (the “Department”). The outstanding principal balance bears interest at the annual rate of 2%. Payment of interest and principal is to be made in the following manner: (a) payment of any and all interest that accrues from the date of disbursement commenced on January 1, 2010 and continued on the first day of each consecutive month thereafter through and including December 31, 2010; (b) commencing on January 1, 2011 and continuing on the first day of each consecutive month thereafter through and including November 1, 2016, the Company is required to pay equal monthly installments of $4,426; followed by a final installment on December 1, 2016 which shall include all remaining principal, accrued interest and other amounts owed by the Company to the Department under the Loan Agreement. The Company may prepay amounts outstanding under the Loan Agreement in whole or in part at any time without penalty. The Loan Agreement is secured by substantially all of the Company’s assets and the proceeds from this loan were used for the working capital requirements of the Company. The Loan Agreement contains covenants which required, among other things, that the Company keep and maintain 75 existing full-time positions and create and fill 35 additional full-time positions in Milwaukee, Wisconsin by December 31, 2012. On June 18, 2012, the Department agreed to permanently waive all penalties associated with the Company’s noncompliance with this covenant. The outstanding borrowings under the agreement as of June 30, 2014 and December 31, 2013 were $129,347 and $154,463, respectively. | |||||
Promissory Note | |||||
On March 4, 2011, the Company sold all its Series 5 PLC product line assets to Wisconsin-based Dynamic Ratings, Inc. (“Purchaser”) under an Asset Purchase Agreement (“APA”). Per the APA, the Company signed an unsecured Promissory Note (the “Note”) due to Purchaser in the aggregate principal amount of $700,000. The outstanding principal balance bears interest at the annual rate of 6% and was originally due on March 31, 2014. The Note may be prepaid in whole or in part, withoutpenalty at any time. The Note contains certain earn-out provisions that encompass both the Company’s and Purchaser’s revenue volumes. Amounts earned under the earn-out provisions were applied against the Note on June 30, 2012 and June 30, 2013. For the three and six months ended June 30, 2013, the non-cash reduction of principal calculated under these provisions and applied to the Note was $41,902. Payments not made when due, by maturity acceleration or otherwise, shall bear interestat the rate of 12% per annum from the date due until fully paid. Effective April 30, 2013, Purchaser approved an amendment to certain terms of the Note. Telkonet commenced a monthly payment of principal and interest of $20,000 to be applied against the outstanding balance starting May 1, 2013. The interest rate remains unchanged at 6% and the maturity date was extended to January 1, 2016. The outstanding principal balance of the Note as of June 30, 2014 and December 31, 2013 was $399,885 and $506,024, respectively. | |||||
Revolving Credit Facility | |||||
On May 31, 2013, the Company entered into a Revolving Credit Facility (the “Agreement”) with Bridge Bank, NA, (the “Bank”) in a principal amount not to exceed $2,000,000. The Agreement was subject to a borrowing base that was equal to the sum of 80% of the Company’s eligible accounts receivable and 25% of the eligible inventory. On August 1, 2013 the Agreement was modified to include the eligible receivables and the eligible inventory of Ethostream. The Agreement was available for working capital and other lawful general corporate purposes. As of December 31, 2013 and March 31, 2014, the Company was in violation of a financial performance covenant. Although the Company’s violation of the financial performance covenant constituted a default under the Agreement, the Bank did not pursue any remedies under the default provisions of the Agreement. On May 31, 2014, the Company and the Bank mutually agreed to terminate the Agreement and the Company paid the remaining outstanding principal balance of $50,000. | |||||
Aggregate annual future maturities of long-term debt as of June 30, 2014 are as follows: | |||||
Years ended December 31, | Amount | ||||
2014 (remainder of) | $ | 134,744 | |||
2015 | 280,295 | ||||
2016 | 114,193 | ||||
529,232 | |||||
Less: Current portion | (272,482 | ) | |||
Notes payable long term | $ | 256,750 | |||
H_REDEEMABLE_PREFERRED_STOCK
H. REDEEMABLE PREFERRED STOCK | 6 Months Ended |
Jun. 30, 2014 | |
Preferred Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | ' |
NOTE H - REDEEMABLE PREFERRED STOCK | ' |
Series A | |
The Company has designated 215 shares of preferred stock as Series A Preferred Stock (“Series A”). Each share of Series A is convertible, at the option of the holder thereof, at any time, into shares of our Common Stock at a conversion price of $0.363 per share. In the event of a change of control (as defined in the purchase agreement with respect to the Series A), or at the holder’s option, on November 19, 2014 and for a period of 180 days thereafter, provided that at least 50% of the shares of Series A issued on the Series A Original Issue Date, November 16, 2009, remain outstanding as of November 19, 2014, and the holders of at least a majority of the then outstanding shares of Series A provide written notice requesting redemption of all shares of Series A, we are required to redeem the Series A for the purchase price of $5,000 per share, plus any accrued but unpaid dividends. The aggregate redemption price payable to holders of shares of Series A would be payable by the Company in three equal annual installments with the first of these three installments due within 60 days of the requisite holders’ written notice requesting redemption. The Series A accrues dividends at an annual rate of 8% of the original purchase price, payable only when, as, and if declared by the Board of Directors of Telkonet. | |
On November 16, 2009, the Company sold 215 shares of Series A with attached warrants to purchase an aggregate of 1,628,800 shares of the Company’s common stock at $0.33 per share. The Series A shares were sold at a price per share of $5,000 and each Series A share is convertible into approximately 13,774 shares of common stock at a conversion price of $0.363 per share. The Company received $1,075,000 from the sale of the Series A shares. Since the Series A may ultimately be redeemable at the option of the holder, the carrying value of the preferred stock, net of discount and including accumulated dividends, has been classified as redeemable preferred stock on the condensed consolidated balance sheets. | |
A portion of the proceeds were allocated to the warrants based on their relative fair value, which totaled $287,106 using the Black Scholes option pricing model. Further, the Company attributed a beneficial conversion feature of $70,922 to the Series A preferred shares based upon the difference between the effective conversion price of those shares and the closing price of the Company’s common stock on the date of issuance. The assumptions used in the Black-Scholes model were as follows: (1) dividend yield of 0%; (2) expected volatility of 123%, (3) weighted average risk-free interest rate of 2.2%, (4) expected life of 5 years, and (5) fair value of Telkonet common stock of $0.24 per share. The expected term of the warrants represents the estimated period of time until exercise and is based on historical experience of similar awards and giving consideration to the contractual terms. The amounts attributable to the warrants and beneficial conversion feature, aggregating $358,028, were recorded as a discount and deducted from the face value of the preferred stock. The discount is being amortized over the period from issuance to November 19, 2014 (the initial redemption date) as a charge to additional paid-in capital (since there is a deficit in retained earnings) and an increase to the net loss attributable to common stockholders. | |
The charge to additional paid in capital for amortization of Series A discount and costs for the three months ended June 30, 2014 and 2013 was $17,508 and for the six months ended June 30, 2014 and 2013 was $35,016, respectively. | |
For the three and six months ended June 30, 2014 and 2013, we have accrued dividends for Series A in the amount of $18,454 and $(1,817) and $36,707 and $16,436 and cumulative accrued dividends of $341,539 and $267,512, respectively. The accrued dividends have been charged to additional paid-in capital (since there is a deficit in retained earnings) and an increase to the net loss attributable to common stockholders and the net unpaid accrued dividends been added to the carrying value of the preferred stock. | |
Series B | |
The Company has designated 538 shares of preferred stock as Series B Preferred Stock (“Series B”). Each share of Series B is convertible, at the option of the holder thereof, at any time, into shares of our Common Stock at a conversion price of $0.13 per share. As a result of the Series B conversions during the year ended December 31, 2013, the outstanding Series B shares will not become redeemable at the option of the holders. The Series B accrues dividends at an annual rate of 8% of the original purchase price, payable only when, as, and if declared by our Board of Directors. | |
On August 4, 2010, the Company sold 267 shares of Series B with attached warrants to purchase an aggregate of 5,134,626 shares of the Company’s common stock at $0.13 per share. The Series B shares were sold at a price per share of $5,000 and each Series B share is convertible into approximately 38,461 shares of common stock at a conversion price of $0.13 per share. The Company received $1,335,000 from the sale of the Series B shares. Up and until the quarter ended September 30, 2013, the Series B were redeemable at the option of the holder, the carrying value of the preferred stock, net of discount and including accumulated dividends, had been classified as redeemable preferred stock on the consolidated balance sheets. During the year ended December 31, 2013, shareholders converted 167 redeemable preferred shares issued on August 4, 2010, to, in aggregate, 6,423,072 shares of common stock. | |
A portion of the proceeds was allocated to the warrants based on their relative fair value, which totaled $394,350 using the Black-Scholes option pricing model. Further, the Company attributed a beneficial conversion feature of $394,350 to the Series B preferred shares based upon the difference between the effective conversion price of those shares and the closing price of the Company’s common stock on the date of issuance. The assumptions used in the Black-Scholes model were as follows: (1) dividend yield of 0%; (2) expected volatility of 123%, (3) weighted average risk-free interest rate of 1.76%, (4) expected term of approximately 4 years, and (5) estimated fair value of Telkonet common stock of $0.109 per share. The expected term of the warrants represents the estimated period of time until exercise and is based on historical experience of similar awards and giving consideration to the contractual terms. The amounts attributable to the warrants and beneficial conversion feature, aggregating $788,700, were recorded as a discount and deducted from the face value of the preferred stock. The discount is being amortized over the period from issuance to November 19, 2014 (the initial redemption date) as a charge to additional paid-in capital (since there is a deficit in retained earnings). During the year ended December 31, 2013, a portion of the discount of approximately $123,100 was accelerated and recognized immediately as a charge to additional paid-in capital and accretion of preferred stock discounts and an increase to the net loss attributable to common stockholders for the 167 redeemable preferred shares converted to common stock. | |
On April 8, 2011, the Company sold 271 additional shares of Series B with attached warrants to purchase an aggregate of 5,211,542 shares of the Company’s common stock at $0.13 per share. The Series B shares were sold at a price per share of $5,000 and each Series B share is convertible into approximately 38,461 shares of common stock at a conversion price of $0.13 per share. The Company received $1,355,000 from the sale of the Series B shares. During the year ended December 31, 2013, all 271 of the redeemable preferred shares issued on April 8, 2011, were converted to, in aggregate, 10,423,067 shares of common stock. | |
As a result of the Series B conversions during the year ended December 31, 2013, fewer than 50% of the Series B shares issued on the Series B Original Issuance Date, August 4, 2010, remain outstanding, and the balance of the outstanding Series B shares will not become redeemable at the option of the holders. The redemption feature at the option of the holders is eliminated, thereby, resulting in the reclassification of $324,063 from temporary equity, which was classified as “redeemable preferred stock” in the Company’s condensed consolidated balance sheets, to permanent equity. | |
A portion of the proceeds were allocated to the warrants based on their relative fair value, which totaled $427,895 using the Black-Scholes option pricing model. Further, the Company attributed a beneficial conversion feature of $427,895 to the Series B shares based upon the difference between the effective conversion price of those shares and the closing price of the Company’s common stock on the date of issuance. The assumptions used in the Black-Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 129%, (3) weighted average risk-free interest rate of 0.26%, (4) expected life of approximately 3.5 years, and (5) estimated fair value of Telkonet common stock of $0.12 per share. The expected term of the warrants represents the estimated period of time until exercise and is based on historical experience of similar awards and giving consideration to the contractual terms. The amounts attributable to the warrants and beneficial conversion feature, aggregating $855,790, have been recorded as a discount and deducted from the face value of the Series B shares. The discount is being amortized over the period from issuance to November 19, 2014 (the initial redemption date) as a charge to additional paid-in capital (since there is a deficit in retained earnings). During the year ended December 31, 2013, the remaining discount of approximately $261,300 was accelerated and recognized immediately as a charge to additional paid-in capital and accretion of preferred stock discounts upon the 271 redeemable preferred stock conversions to common stock. | |
The charge to additional paid in capital for amortization of Series B discount and costs for the three and six months ended June 30, 2014 and 2013 was $7,020 and $92,760 and $14,040 and $181,248, respectively. | |
For the three and six months ended June 30, 2014 and 2013, we have accrued dividends for Series B in the amount of $5,490 and $19,538 and $10,920 and $68,186, respectively, and cumulative accrued dividends of $85,925 and $488,019 as of June 30 2014 and 2013, respectively. The accrued dividends have been charged to additional paid-in capital (since there is a deficit in retained earnings) and the net unpaid accrued dividends been added to the carrying value of the preferred stock. During the year ended December 31, 2013, accrued dividends in the amount of $491,878 were written down and credited back to additional paid-in capital upon the redeemable preferred share conversions to common stock. | |
Preferred stock carries certain preference rights as detailed in the Company’s Amended Articles of Incorporation related to both the payment of dividends and as to payments upon liquidation in preference to any other class or series of capital stock of the Company. Liquidation preference of the preferred stock is based on the following order: first, Series B with a preference value of $360,925 and second, Series A with a preference value of $1,266,539. Both series of preferred stock are equal in their dividend preference over common stock. |
I_CAPITAL_STOCK
I. CAPITAL STOCK | 6 Months Ended |
Jun. 30, 2014 | |
Stockholders' Equity Note [Abstract] | ' |
NOTE I - CAPITAL STOCK | ' |
The Company has authorized 15,000,000 shares of preferred stock (designated and undesignated), with a par value of $.001 per share. The Company has designated 215 shares as Series A preferred stock and 538 shares as Series B preferred stock. At both June 30, 2014 and December 31, 2013, there were 185 shares of Series A and 55 shares of Series B outstanding. | |
The Company has authorized 190,000,000 shares of common stock with a par value of $.001 per share. As of both June 30, 2014 and December 31, 2013 the Company had 125,035,612 common shares issued and outstanding. |
J_STOCK_OPTIONS_AND_WARRANTS
J. STOCK OPTIONS AND WARRANTS | 6 Months Ended | ||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ' | ||||||||||||||||||||||
NOTE J - STOCK OPTIONS AND WARRANTS | ' | ||||||||||||||||||||||
Employee Stock Options | |||||||||||||||||||||||
The Company maintains an equity incentive plan, (the “Plan”). The Plan was established in 2010 as an incentive plan for officers, employees, non-employee directors, prospective employees and other key persons. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a better alignment of their interests with those of the Company and its stockholders. | |||||||||||||||||||||||
The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under the Plan. | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Exercise Prices | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Outstanding | Remaining | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||||
Contractual Life | |||||||||||||||||||||||
(Years) | |||||||||||||||||||||||
$ | 0.01 - $0.15 | 175,000 | 3.32 | $ | 0.14 | 175,000 | $ | 0.14 | |||||||||||||||
$ | 0.16 - $0.99 | 1,620,225 | 8.42 | 0.18 | 1,235,225 | 0.18 | |||||||||||||||||
$ | 1.00 - $5.99 | 140,000 | 1.95 | 3.29 | 140,000 | 3.29 | |||||||||||||||||
1,935,225 | 7.49 | $ | 0.41 | 1,550,225 | $ | 0.46 | |||||||||||||||||
Transactions involving stock options issued to employees are summarized as follows: | |||||||||||||||||||||||
Number of | Weighted Average | ||||||||||||||||||||||
Shares | Price Per Share | ||||||||||||||||||||||
Outstanding at January 1, 2013 | 1,280,642 | $ | 0.62 | ||||||||||||||||||||
Granted | 504,583 | 0.18 | |||||||||||||||||||||
Exercised | – | – | |||||||||||||||||||||
Cancelled or expired | (50,000 | ) | 2.69 | ||||||||||||||||||||
Outstanding at December 31, 2013 | 1,735,225 | $ | 0.43 | ||||||||||||||||||||
Granted | 200,000 | 0.19 | |||||||||||||||||||||
Exercised | – | – | |||||||||||||||||||||
Cancelled or expired | – | – | |||||||||||||||||||||
Outstanding at June 30, 2014 | 1,935,225 | $ | 0.41 | ||||||||||||||||||||
The expected life of awards granted represents the period of time that they are expected to be outstanding. We determine the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures. We estimate the volatility of our common stock based on the calculated historical volatility of our own common stock using the trailing 24 months of share price data prior to the date of the award. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation for those awards that are expected to vest. In accordance with ASC 718-10, we adjust share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. | |||||||||||||||||||||||
There were 200,000 and 504,583 options granted and no options exercised during the six months ended June 30, 2014 and 2013, respectively. Total stock-based compensation expense in connection with options granted to employees recognized in the condensed consolidated statements of operations for the three and months ended June 30, 2014 and 2013 was $4,617 and $83,496 and $6,641 and $85,519 respectively. | |||||||||||||||||||||||
Warrants | |||||||||||||||||||||||
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company. | |||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Exercise Prices | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Outstanding | Remaining | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||||
Contractual Life | |||||||||||||||||||||||
(Years) | |||||||||||||||||||||||
$ | 0.13 | 7,230,778 | 1.62 | $ | 0.13 | 7,230,778 | $ | 0.13 | |||||||||||||||
0.33 | 1,628,800 | 0.39 | 0.33 | 1,628,800 | 0.33 | ||||||||||||||||||
3 | 500,336 | 1.11 | 3 | 500,336 | 3 | ||||||||||||||||||
9,359,914 | 1.38 | $ | 0.32 | 9,359,914 | $ | 0.32 | |||||||||||||||||
Transactions involving warrants are summarized as follows: | |||||||||||||||||||||||
Number of | Weighted Average | ||||||||||||||||||||||
Shares | Price Per Share | ||||||||||||||||||||||
Outstanding at January 1, 2013 | 10,830,416 | $ | 0.45 | ||||||||||||||||||||
Issued | – | – | |||||||||||||||||||||
Exercised | (86,472 | ) | 0.13 | ||||||||||||||||||||
Canceled or expired | (1,384,030 | ) | 1.36 | ||||||||||||||||||||
Outstanding at December 31, 2013 | 9,359,914 | 0.32 | |||||||||||||||||||||
Issued | – | – | |||||||||||||||||||||
Exercised | – | – | |||||||||||||||||||||
Canceled or expired | – | – | |||||||||||||||||||||
Outstanding at June 30, 2014 | 9,359,914 | $ | 0.32 | ||||||||||||||||||||
There were no warrants granted, exercised, cancelled or forfeited during the three and six month periods ended June 30, 2014 and 2013. |
K_RELATED_PARTY_TRANSACTIONS
K. RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
NOTE K. RELATED PARTY TRANSACTIONS | ' |
In connection with a customer contract that required bonding, William H. Davis, the Company’s Board Chairman and Jason L. Tienor, the Company’s Chief Executive Officer and President, each signed a General Indemnity Agreement dated July 5, 2013 and July 8, 2013, pledged certain personal property on behalf of the Company. The General Indemnity Agreement indemnifies the surety company for certain losses incurred by the surety company for the benefit of the Company. As consideration for the assumption of the Indemnification Obligations by Messrs. Davis and Tienor, the Company agreed to compensate each in the amount of $29,000, grossed up to accommodate their 2013 and 2014 federal income tax liability associated with the payments. The amounts owed to Messrs. Davis and Tienor as of June 30, 2014 were $4,490 and $6,600 and are in accounts payable and accrued expense on the accompanying condensed consolidated balance sheet. | |
On July 17, 2014, Messer’s Davis and Tienor each signed a General Indemnity Agreement pledging personal property on behalf of the Company for another customer contract that required bonding. The Company agreed to compensate each in the amount of $9,000, grossed up to accommodate their 2014 federal income tax liability associated with the payments. | |
From time to time the Company may receive advances from certain of its officers in the form of salary deferment, cash advances to meet short term working capital needs. These advances may not have formal repayment terms or arrangements. As of June 30, 2014 and 2013, there were no such arrangements. |
L_COMMITMENTS_AND_CONTINGENCIE
L. COMMITMENTS AND CONTINGENCIES | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||||
NOTE L - COMMITMENTS AND CONTINGENCIES | ' | ||||||||
Office Lease Obligations | |||||||||
In October 2013, the Company entered into a lease agreement for 6,362 square feet of commercial office space in Waukesha, Wisconsin for its corporate headquarters. The Waukesha lease expires in April 2021. | |||||||||
The Company presently leases approximately 14,000 square feet of office space in Milwaukee, Wisconsin for its operations facility. The Milwaukee lease expires in March 2020. | |||||||||
The Company presently leases 16,416 square feet of commercial office space in Germantown, Maryland. The lease commitments expire in December 2015. On July 15, 2011, Telkonet executed a sublease agreement for 11,626 square feet of the office space in Germantown, Maryland. The subtenant received one month rent abatement and had the option to extend the sublease from January 31, 2013 to December 31, 2015. On June 27, 2012 the subtenant exercised the option to extend the expiration of the term of the sublease from January 31, 2013 to December 31, 2015. | |||||||||
Commitments for minimum rentals under non-cancelable leases at June 30, 2014 are as follows: | |||||||||
2014 (remainder of) | $ | 244,206 | |||||||
2015 | 494,806 | ||||||||
2016 | 245,274 | ||||||||
2017 | 251,740 | ||||||||
2018 | 258,381 | ||||||||
2019 and thereafter | 422,182 | ||||||||
Total | $ | 1,916,589 | |||||||
Expected rent payments to be received under the sublease agreement at June 30, 2014 are as follows: | |||||||||
2014 (remainder of) | $ | 68,269 | |||||||
2015 | 138,919 | ||||||||
Total | $ | 207,188 | |||||||
Rental expenses charged to operations for the three and six months ended June 30, 2014 and 2013 were $154,576 and $129,320, and $310,151 and $267,295, respectively. Rental income received for the three and six months ended June 30, 2014 and 2013 was $33,925 and $32,332, and $67,227 and $64,664, respectively. | |||||||||
Litigation | |||||||||
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. | |||||||||
Linksmart Wireless Technology, LLC v. T-Mobile USA, Inc. | |||||||||
On July 1, 2008, Linksmart Wireless Technology, LLC, or Linksmart, filed a civil lawsuit in the Eastern District of Texas against EthoStream, LLC, our wholly-owned subsidiary and 22 other defendants (Linksmart Wireless Technology, LLC v. T-Mobile USA, Inc., et al, U.S. District Court, for the Eastern District of Texas, Marshall Division, No. 2:08-cv-00264). This lawsuit alleged that the defendants’ services infringe a wireless network security patent held by Linksmart. | |||||||||
Defendant Ramada Worldwide, Inc. provided us with notice of the suit and demanded that we defend and indemnify it pursuant to a vendor direct supplier agreement between EthoStream and WWC Supplier Services, Inc., a Ramada affiliate. After a review of that agreement, it was determined that EthoStream owes the duty to defend and indemnify with respect to services provided by Telkonet to Ramada and it has assumed Ramada’s defense. | |||||||||
On October 1, 2013, the Company entered into a settlement agreement with Linksmart. The Company has agreed to pay $115,000, payable in twelve installments of $9,583 due on the first of each month beginning October 1, 2013. The balance remaining at June 30, 2014 and December 31, 2013 was $28,550 and $86,250 recorded in accounts payable on the accompanying condensed consolidated balance sheet. | |||||||||
Eric Sprangers v. Telkonet, Inc. and Ethostream, LLC | |||||||||
On or about April 23, 2014, Eric Sprangers filed a complaint against Telkonet, Inc. and Ethostream, LLC (the “Companies”) in the United States District Court for the Eastern District of Wisconsin. The Complaint, filed by Sprangers on behalf of himself and a putative class of allegedly similarly situated employees of the Companies, claims that the Companies failed to pay him and the putative class members overtime compensation in violation of the federal Fair Labor Standards Act (“FLSA”). Among other things, the complaint seeks payment to the putative class members of back overtime, liquidated damages and penalties as provided in the FLSA, and an award of costs and attorneys’ fees. On or about May 22, 2014, the Companies filed an answer to the complaint in which the Companies deny that they failed to pay overtime compensation in violation of the FLSA. On July 25, 2014, Sprangers accepted a July 11, 2014 Rule 68 offer of judgment that was made by the Companies in the amount of $10,000, plus an additional amount for attorneys’ fees, costs and expenses to be determined by the Court. Issuance by the Court of an order of judgment consistent with the accepted offer is pending. | |||||||||
Sales Tax | |||||||||
During 2012, the Company engaged a sales tax consultant to assist in determining the extent of its potential sales tax exposure. Based upon this analysis, management determined the Company had probable exposure for certain unpaid obligations, including interest and penalty, of approximately $1,100,000 including and prior to the year ended December 31, 2011. The Company has approximately $750,000 and $1,100,000 accrued for this exposure as of June 30, 2014 and December 31, 2013, respectively. | |||||||||
The Company continues to manage the liability by establishing voluntary disclosure agreements (VDAs) with the applicable states, which establishes a maximum look-back period and payment arrangements. However, if the aforementioned methods prove unsuccessful and the Company is examined or challenged by taxing authorities, there exists possible exposure of an additional $320,000, not including any applicable interest and penalties. | |||||||||
Prior to 2014, the Company successfully executed and paid in full VDAs in nineteen states totaling approximately $286,000 and is current with the subsequent filing requirements. | |||||||||
During the six months ended June 30, 2014, the Company successfully executed and paid in full VDAs in eight states totaling approximately $103,000 and is current with the subsequent filing requirements. In addition, the Company executed VDAs with three other states and has established payment plans with these states. | |||||||||
The following table sets forth the change in the sales tax accrual as of June 30, 2014 and December 31, 2013: | |||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Balance, beginning of year | $ | 1,080,482 | $ | 1,188,133 | |||||
Collections | 196,302 | 409,782 | |||||||
Provisions | (235,962 | ) | (138,352 | ) | |||||
Interest and penalties | – | 7,342 | |||||||
Payments | (293,240 | ) | (386,423 | ) | |||||
Balance, end of period | $ | 747,582 | $ | 1,080,482 | |||||
M_BUSINESS_CONCENTRATION
M. BUSINESS CONCENTRATION | 6 Months Ended |
Jun. 30, 2014 | |
M. Business Concentration | ' |
NOTE M - BUSINESS CONCENTRATION | ' |
For the six months ended June 30, 2014 and 2013, no single customer represented 10% or more of total net revenues. | |
Purchases from two major suppliers approximated $1,767,000, or 75% of purchases, and $1,235,000, or 62% of purchases, for the six months ended June 30, 2014 and 2013, respectively. Total due to these suppliers, net of deposits, was approximately $701,000 as of June 30, 2014, and $455,000 as of June 30, 2013. |
A_SUMMARY_OF_ACCOUNTING_POLICI
A. SUMMARY OF ACCOUNTING POLICIES (Policies) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
General | ' | ||||||||
General | |||||||||
The accompanying unaudited condensed consolidated financial statements of Telkonet, Inc. (the “Company”) have been prepared in accordance with Rule S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. | |||||||||
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the six months ended June 30, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2013 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC. | |||||||||
Business and Basis of Presentation | ' | ||||||||
Business and Basis of Presentation | |||||||||
The Company formed in 1999 and incorporated under the laws of the state of Utah is made up of two synergistic business divisions, EcoSmart Energy Management Technology and EthoStream High Speed Internet Access (HSIA) Network. | |||||||||
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Telkonet Communications, Inc., and EthoStream, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. | |||||||||
Going Concern | ' | ||||||||
Going Concern | |||||||||
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company reported a net loss of $559,123 for the six months ended June 30, 2014, and has an accumulated deficit of $122,507,970 and total current liabilities in excess of current assets of $1,125,295 as of June 30, 2014. | |||||||||
Our ability to continue as a going concern is subject to our ability to consistently generate a profit and positive operating cash flows and/or obtain necessary funding from outside sources, including by the sale of our securities or assets, or obtaining loans from financial institutions, where possible. We may also experience net operating losses in the future and the uncertainty regarding contingent liabilities cast doubt on our ability to satisfy such liabilities and the Company cannot make any representations for the remainder of fiscal 2014 and beyond. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. | |||||||||
Anticipated cash flows from operations may be insufficient to satisfy the Company’s ongoing capital requirements for at least the next 12 months. In May 2013, the Company entered into a Revolving Credit Facility (the “Agreement”) with Bridge Bank, NA (the “Bank”), the principal not to exceed $2,000,000. This credit facility was available for working capital and other lawful business purposes. As of March 31, 2014 and December 31, 2013, the Company was in violation of a financial performance covenant. Although the Company’s violation of the financial performance covenant constituted a default under the Agreement, the Bank did not pursue any remedies under the default provisions of the Agreement. On May 31, 2014, the Bank and the Company mutually agreed to terminate the Agreement and the remaining balance, $50,000, was paid in full. | |||||||||
Management intends to review the options for raising capital including, but not limited to, through asset-based financing, private placements, and/or disposition of assets. Management believes that if it is able to obtain this financing, the Company will be able to generate additional revenues that will allow the Company to continue as a going concern. There can be no assurance that the Company will be successful in obtaining additional funding or generate sufficient additional revenues. | |||||||||
Restricted Cash on Deposit | ' | ||||||||
Restricted Cash on Deposit | |||||||||
During 2012, the Company was awarded a contract with a bonding requirement. The Company satisfied this requirement during the year ended December 31, 2013 with cash collateral supported by an irrevocable standby letter of credit in the amount of $382,000 which was to expire September 30, 2014, or sooner if the Company satisfied all obligations under the arrangement. The amount is presented as restricted cash on deposit on the consolidated balance sheet as of December 31, 2013. In March 2014, the Company satisfied all obligations related to the bonding requirement and the cash was released. | |||||||||
During 2014, the Company was again awarded a contract with a bonding requirement. The Company satisfied this requirement during the three and six months ended June 30, 2014 with cash collateral supported by an irrevocable standby letter of credit in the amount of $63,000 which is to expire December 31, 2014, or sooner if the Company satisfies all obligations under the arrangement. The amount is presented as restricted cash on deposit on the consolidated balance sheet as of June 30, 2014. | |||||||||
Income (Loss) per Common Share | ' | ||||||||
Income (Loss) per Common Share | |||||||||
The Company computes net income (loss) per share under ASC 260-10, “Earnings Per Share”. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding of common stock. Diluted income (loss) per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the year. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants. As a result of the losses for the six months ended June 30, 2014 and 2013, there were 11,295,139 and 11,402,512 shares of common stock underlying options and warrants excluded, respectively, as their inclusion would have been anti-dilutive. | |||||||||
Estimates | ' | ||||||||
Estimates | |||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. | |||||||||
Income Taxes | ' | ||||||||
Income Taxes | |||||||||
The Company accounts for income taxes in accordance with ASC 740-10 “Income Taxes.” Under this method, deferred income taxes (when required) are provided based on the difference between the financial reporting and income tax bases of assets and liabilities and net operating losses at the statutory rates enacted for future periods. The Company has a policy of establishing a valuation allowance when it is more likely than not that the Company will not realize the benefits of its deferred income tax assets in the future. | |||||||||
The Company adopted ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on derecognition, classification, treatment of interest and penalties, accounting in interim periods and disclosure and transition related to the uncertainty in these income tax positions. | |||||||||
Revenue Recognition | ' | ||||||||
Revenue Recognition | |||||||||
For revenue from product sales, we recognize revenue in accordance with ASC 605-10, “Revenue Recognition” and ASC Topic 13 guidelines that require that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The guidelines also address the accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. | |||||||||
Multiple-Element Arrangements (“MEAs”): The Company accounts for contracts that have both product and installation under the MEAs guidance in ASC 605. The Company believes the volume of these contracts will continue to increase. Arrangements under such contracts may include multiple deliverables, a combination of equipment and services. The deliverables included in the MEAs are separated into more than one unit of accounting when (i) the delivered equipment has value to the customer on a stand-alone basis, and (ii) delivery of the undelivered service element(s) is probable and substantially in our control. Arrangement consideration is then allocated to each unit, delivered or undelivered, based on the relative selling price of each unit of accounting based first on vendor-specific objective evidence (“VSOE”) if it exists, second on third-party evidence (“TPE”) if it exists and on estimated selling price (“ESP”) if neither VSOE or TPE exist. | |||||||||
· | VSOE – Based on its pricing and discounting practices for the specific product or service when sold separately, considering geographical, customer, and other economic or marketing variables, as well as renewal rates or stand-alone prices for the service element(s). | ||||||||
· | TPE – If we cannot establish VSOE of selling price for a specific product or service included in a multiple-element arrangement, we use third-party evidence of selling price. We determine TPE based on sales of comparable amount of similar product or service offered by multiple third parties considering the degree of customization and similarity of product or service sold. | ||||||||
· | ESP – The estimated selling price represents the price at which we would sell a product or service if it were sold on a stand-alone basis. When neither VSOE nor TPE exists for all elements, we determine ESP for the arrangement element based on sales, cost and margin analysis, as well as other inputs based on our pricing practices. Adjustments for other market and Company-specific factors are made as deemed necessary in determining ESP. | ||||||||
When MEAs include an element of customer training, it is not essential to the functionality, efficiency or effectiveness of the MEA. Therefore the Company has concluded that this obligation is inconsequential and perfunctory. As such, for MEAs that include training, customer acceptance of said training is not deemed necessary in order to record the related revenue, but is recorded when the installation deliverable is fulfilled. Historically, training revenues have not been significant. | |||||||||
We provide call center support services to properties installed by us and also to properties installed by other providers. In addition, we provide the property with the portal to access the Internet. We receive monthly service fees from such properties for our services and Internet access. We recognize the service fee ratably over the term of the contract. The prices for these services are fixed and determinable prior to delivery of the service. The fair value of these services is known due to objective and reliable evidence from standalone executed contracts. We report such revenues as recurring revenues. | |||||||||
Guarantees and Product Warranties | ' | ||||||||
Guarantees and Product Warranties | |||||||||
The Company records a liability for potential warranty claims in cost of sales at the time of sale. The amount of the liability is based on the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, new product introductions and other factors. The products sold are generally covered by a warranty for a period of one year. In the event the Company determines that its current or future product repair and replacement costs exceed its estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. For the six months ended June 30, 2014 and the year ended December 31, 2013, the Company experienced returns of approximately 1% to 4% of materials included in the cost of sales. As of June 30, 2014 and December 31, 2013, the Company recorded warranty liabilities in the amount of $62,943 and $77,943, respectively. | |||||||||
Product warranties for the six months ended June 30, 2014 and the year ended December 31, 2013 are as follows: | |||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Beginning balance | $ | 77,943 | $ | 69,743 | |||||
Warranty claims incurred | (18,419 | ) | (9,106 | ) | |||||
Provision charged to expense | 3,419 | 17,306 | |||||||
Ending balance | $ | 62,943 | $ | 77,943 | |||||
Lease Abandonment | ' | ||||||||
Lease Abandonment | |||||||||
On July 15, 2011, the Company executed a sublease agreement for approximately 12,000 square feet of commercial office space in Germantown, Maryland. Because we no longer have access to this subleased space, we recorded a charge of $59,937 in accrued liabilities and expenses related to this abandonment during 2011. On June 27, 2012 the subtenant exercised the option to extend the expiration of the term of the sublease from January 31, 2013 to December 31, 2015 and we recorded an additional charge of $132,174. The remaining liability at June 30, 2014 was $68,494 and at December 31, 2013 was $91,981. |
A_SUMMARY_OF_ACCOUNTING_POLICI1
A. SUMMARY OF ACCOUNTING POLICIES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
Product warranties | ' | ||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Beginning balance | $ | 77,943 | $ | 69,743 | |||||
Warranty claims incurred | (18,419 | ) | (9,106 | ) | |||||
Provision charged to expense | 3,419 | 17,306 | |||||||
Ending balance | $ | 62,943 | $ | 77,943 |
C_INTANGIBLE_ASSETS_AND_GOODWI1
C. INTANGIBLE ASSETS AND GOODWILL (Tables) | 6 Months Ended | ||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||||||
Carrying value of intangible assets | ' | ||||||||||||||||||||
Total identifiable intangible assets acquired and their carrying values at June 30, 2014 are: | |||||||||||||||||||||
Cost | Accumulated | Accumulated Impairment | Carrying Value | Weighted Average | |||||||||||||||||
Amortization | Amortization Period | ||||||||||||||||||||
(Years) | |||||||||||||||||||||
Amortized Identifiable Intangible Assets: | |||||||||||||||||||||
Subscriber lists – EthoStream | $ | 2,900,000 | $ | (1,762,223 | ) | $ | – | $ | 1,137,777 | 12 | |||||||||||
Total Amortized Identifiable Intangible Assets | 2,900,000 | (1,762,223 | ) | – | 1,137,777 | ||||||||||||||||
Goodwill – EthoStream | 8,796,430 | – | -3,000,000 | 5,796,430 | |||||||||||||||||
Total Goodwill | 8,796,430 | – | -3,000,000 | 5,796,430 | |||||||||||||||||
Total | $ | 11,696,430 | $ | (1,762,223 | ) | $ | -3,000,000 | $ | 6,934,207 | ||||||||||||
Total identifiable intangible assets acquired and their carrying values at December 31, 2013 are: | |||||||||||||||||||||
Cost | Accumulated | Accumulated Impairment | Carrying Value | Weighted Average | |||||||||||||||||
Amortization | Amortization Period | ||||||||||||||||||||
(Years) | |||||||||||||||||||||
Amortized Identifiable Intangible Assets: | |||||||||||||||||||||
Subscriber lists – EthoStream | $ | 2,900,000 | $ | (1,641,383 | ) | $ | – | $ | 1,258,617 | 12 | |||||||||||
Total Amortized Identifiable Intangible Assets | 2,900,000 | (1,641,383 | ) | – | 1,258,617 | ||||||||||||||||
Goodwill – EthoStream | 8,796,430 | – | -3,000,000 | 5,796,430 | |||||||||||||||||
Goodwill – SSI | 5,874,016 | – | -5,874,016 | - | |||||||||||||||||
Total Goodwill | 14,670,446 | -8,874,016 | 5,796,430 | ||||||||||||||||||
Total | $ | 17,570,446 | $ | (1,641,383 | ) | $ | -8,874,016 | $ | 7,055,047 | ||||||||||||
Estimated amortization expense | ' | ||||||||||||||||||||
Remainder of 2014 | $ | 120,840 | |||||||||||||||||||
2015 | 241,680 | ||||||||||||||||||||
2016 | 241,680 | ||||||||||||||||||||
2017 | 241,680 | ||||||||||||||||||||
2018 | 241,680 | ||||||||||||||||||||
2019 | 50,217 | ||||||||||||||||||||
Total | $ | 1,137,777 |
D_ACCOUNTS_RECEIVABLE_Tables
D. ACCOUNTS RECEIVABLE (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Accounts Receivable Additional Disclosures [Abstract] | ' | ||||||||
Accounts Receivable | ' | ||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Accounts receivable | $ | 1,522,673 | $ | 1,816,722 | |||||
Allowance for doubtful accounts | (28,525 | ) | (156,966 | ) | |||||
Accounts receivable, net | $ | 1,494,148 | $ | 1,659,756 |
E_INVENTORIES_Tables
E. INVENTORIES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventory | ' | ||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Merchandise purchased for resale | $ | 1,079,359 | $ | 997,332 | |||||
Reserve for obsolescence | (208,550 | ) | (57,950 | ) | |||||
Inventory, net | $ | 870,809 | $ | 939,382 |
F_ACCRUED_LIABILITIES_AND_EXPE1
F. ACCRUED LIABILITIES AND EXPENSES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Additional Other Liabilities Disclosure [Abstract] | ' | ||||||||
Accrued Liabilities and Expenses | ' | ||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Accrued liabilities and expenses | $ | 426,838 | $ | 405,073 | |||||
Accrued payroll and payroll taxes | 427,755 | 430,871 | |||||||
Accrued sales taxes, penalties, and interest | 747,582 | 1,080,482 | |||||||
Accrued interest | 2,215 | 2,788 | |||||||
Product warranties | 62,943 | 77,943 | |||||||
Total | $ | 1,667,333 | $ | 1,997,157 |
G_LONG_TERM_DEBT_Tables
G. LONG TERM DEBT (Tables) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Debt Disclosure [Abstract] | ' | ||||
Aggregate annual future maturities of long-term debt | ' | ||||
Years ended December 31, | Amount | ||||
2014 (remainder of) | $ | 134,744 | |||
2015 | 280,295 | ||||
2016 | 114,193 | ||||
529,232 | |||||
Less: Current portion | (272,482 | ) | |||
Notes payable long term | $ | 256,750 |
J_STOCK_OPTIONS_AND_WARRANTS_T
J. STOCK OPTIONS AND WARRANTS (Tables) | 6 Months Ended | ||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ' | ||||||||||||||||||||||
Options outstanding and exercisable | ' | ||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Exercise Prices | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Outstanding | Remaining | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||||
Contractual Life | |||||||||||||||||||||||
(Years) | |||||||||||||||||||||||
$ | 0.01 - $0.15 | 175,000 | 3.32 | $ | 0.14 | 175,000 | $ | 0.14 | |||||||||||||||
$ | 0.16 - $0.99 | 1,620,225 | 8.42 | 0.18 | 1,235,225 | 0.18 | |||||||||||||||||
$ | 1.00 - $5.99 | 140,000 | 1.95 | 3.29 | 140,000 | 3.29 | |||||||||||||||||
1,935,225 | 7.49 | $ | 0.41 | 1,550,225 | $ | 0.46 | |||||||||||||||||
Option activity | ' | ||||||||||||||||||||||
Number of | Weighted Average | ||||||||||||||||||||||
Shares | Price Per Share | ||||||||||||||||||||||
Outstanding at January 1, 2013 | 1,280,642 | $ | 0.62 | ||||||||||||||||||||
Granted | 504,583 | 0.18 | |||||||||||||||||||||
Exercised | – | – | |||||||||||||||||||||
Cancelled or expired | (50,000 | ) | 2.69 | ||||||||||||||||||||
Outstanding at December 31, 2013 | 1,735,225 | $ | 0.43 | ||||||||||||||||||||
Granted | 200,000 | 0.19 | |||||||||||||||||||||
Exercised | – | – | |||||||||||||||||||||
Cancelled or expired | – | – | |||||||||||||||||||||
Outstanding at June 30, 2014 | 1,935,225 | $ | 0.41 | ||||||||||||||||||||
Warrants outstanding and exercisable | ' | ||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Exercise Prices | Number | Weighted Average | Weighted Average | Number | Weighted Average | ||||||||||||||||||
Outstanding | Remaining | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||||
Contractual Life | |||||||||||||||||||||||
(Years) | |||||||||||||||||||||||
$ | 0.13 | 7,230,778 | 1.62 | $ | 0.13 | 7,230,778 | $ | 0.13 | |||||||||||||||
0.33 | 1,628,800 | 0.39 | 0.33 | 1,628,800 | 0.33 | ||||||||||||||||||
3 | 500,336 | 1.11 | 3 | 500,336 | 3 | ||||||||||||||||||
9,359,914 | 1.38 | $ | 0.32 | 9,359,914 | $ | 0.32 | |||||||||||||||||
Warrant activity | ' | ||||||||||||||||||||||
Number of | Weighted Average | ||||||||||||||||||||||
Shares | Price Per Share | ||||||||||||||||||||||
Outstanding at January 1, 2013 | 10,830,416 | $ | 0.45 | ||||||||||||||||||||
Issued | – | – | |||||||||||||||||||||
Exercised | (86,472 | ) | 0.13 | ||||||||||||||||||||
Canceled or expired | (1,384,030 | ) | 1.36 | ||||||||||||||||||||
Outstanding at December 31, 2013 | 9,359,914 | 0.32 | |||||||||||||||||||||
Issued | – | – | |||||||||||||||||||||
Exercised | – | – | |||||||||||||||||||||
Canceled or expired | – | – | |||||||||||||||||||||
Outstanding at June 30, 2014 | 9,359,914 | $ | 0.32 |
L_COMMITMENTS_AND_CONTINGENCIE1
L. COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||||
Office Lease Obligations | ' | ||||||||
2014 (remainder of) | $ | 244,206 | |||||||
2015 | 494,806 | ||||||||
2016 | 245,274 | ||||||||
2017 | 251,740 | ||||||||
2018 | 258,381 | ||||||||
2019 and thereafter | 422,182 | ||||||||
Total | $ | 1,916,589 | |||||||
Expected rent payments receivable | ' | ||||||||
2014 (remainder of) | $ | 68,269 | |||||||
2015 | 138,919 | ||||||||
Total | $ | 207,188 | |||||||
Sales tax accrual | ' | ||||||||
30-Jun-14 | 31-Dec-13 | ||||||||
Balance, beginning of year | $ | 1,080,482 | $ | 1,188,133 | |||||
Collections | 196,302 | 409,782 | |||||||
Provisions | (235,962 | ) | (138,352 | ) | |||||
Interest and penalties | – | 7,342 | |||||||
Payments | (293,240 | ) | (386,423 | ) | |||||
Balance, end of period | $ | 747,582 | $ | 1,080,482 |
A_SIGNIFICANT_ACCOUNTING_POLIC
A. SIGNIFICANT ACCOUNTING POLICIES (Details-Product warranties) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Product warranties | ' | ' |
Beginning balance | $77,943 | $69,743 |
Warranty claims incurred | -18,419 | -9,106 |
Provision charged to expense | 3,419 | 17,306 |
Ending balance | $62,943 | $77,943 |
A_SUMMARY_OF_ACCOUNTING_POLICI2
A. SUMMARY OF ACCOUNTING POLICIES (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ' | ' | ' | ' | ' |
Net loss | $219,085 | ($621,510) | ($559,123) | ($1,033,356) | ' |
Accumulated deficit | 122,507,970 | ' | 122,507,970 | ' | 121,948,847 |
Working capital | -1,125,295 | ' | -1,125,295 | ' | ' |
Restricted cash on deposit | 63,000 | ' | 63,000 | ' | 382,000 |
Shares of common stock underlying options and warrants | ' | ' | 11,295,139 | 11,402,512 | ' |
Lease commitment | $68,494 | ' | $68,494 | ' | $91,981 |
C_INTANGIBLE_ASSETS_AND_GOODWI2
C. INTANGIBLE ASSETS AND GOODWILL (Details-Intangible assets) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Indefinite-lived Intangible Assets [Line Items] | ' | ' |
Intangible assets cost | $11,696,430 | $17,570,446 |
Accumulated Amortization | -1,762,223 | -1,641,383 |
Impairment | -3,000,000 | -8,874,016 |
Carrying Value | 6,934,207 | 7,055,047 |
Subscriber lists EthoStream | ' | ' |
Indefinite-lived Intangible Assets [Line Items] | ' | ' |
Intangible assets cost | 2,900,000 | 2,900,000 |
Accumulated Amortization | -1,762,223 | -1,641,383 |
Impairment | 0 | 0 |
Carrying Value | 1,137,777 | 1,258,617 |
Weighted Average Amortization Period | '12 years | '12 years |
Total Amortized Identifiable Intangible Assets | ' | ' |
Indefinite-lived Intangible Assets [Line Items] | ' | ' |
Intangible assets cost | 2,900,000 | 2,900,000 |
Accumulated Amortization | -1,762,223 | -1,641,383 |
Impairment | 0 | 0 |
Carrying Value | 1,137,777 | 1,258,617 |
Goodwill EthoStream | ' | ' |
Indefinite-lived Intangible Assets [Line Items] | ' | ' |
Intangible assets cost | 8,796,430 | 8,796,430 |
Accumulated Amortization | 0 | 0 |
Impairment | -3,000,000 | -3,000,000 |
Carrying Value | 5,796,430 | 5,796,430 |
Total Goodwill | ' | ' |
Indefinite-lived Intangible Assets [Line Items] | ' | ' |
Intangible assets cost | 8,796,430 | 14,670,446 |
Accumulated Amortization | 0 | ' |
Impairment | -3,000,000 | -8,874,016 |
Carrying Value | 5,796,430 | 5,796,430 |
Goodwill SSI | ' | ' |
Indefinite-lived Intangible Assets [Line Items] | ' | ' |
Intangible assets cost | ' | 5,874,016 |
Accumulated Amortization | ' | 0 |
Impairment | ' | -5,874,016 |
Carrying Value | ' | $0 |
C_INTANGIBLE_ASSETS_AND_GOODWI3
C. INTANGIBLE ASSETS AND GOODWILL (Details-Amortization) (USD $) | Jun. 30, 2014 |
Estimated amortization expense | ' |
Remainder of 2014 | $120,840 |
2015 | 241,680 |
2016 | 241,680 |
2017 | 241,680 |
2018 | 241,680 |
2019 | 50,217 |
Total | $1,137,777 |
C_INTANGIBLE_ASSETS_AND_GOODWI4
C. INTANGIBLE ASSETS AND GOODWILL (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' | ' | ' |
Total amortization expense charged to operations | $60,420 | $60,420 | $120,840 | $120,840 |
D_ACCOUNTS_RECEIVABLE_Details
D. ACCOUNTS RECEIVABLE (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Components of accounts receivable | ' | ' |
Accounts receivable | $1,522,673 | $1,816,722 |
Allowance for doubtful accounts | -28,525 | -156,966 |
Accounts receivable, net | $1,494,148 | $1,659,756 |
E_INVENTORY_Details
E. INVENTORY (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Components of inventories | ' | ' |
Merchandise purchased for resale | $1,079,359 | $997,332 |
Reserve for obsolescence | -208,550 | -57,950 |
Inventory, net | $870,809 | $939,382 |
F_ACCRUED_LIABILITIES_AND_EXPE2
F. ACCRUED LIABILITIES AND EXPENSES (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Accrued liabilities and expenses | ' | ' | ' |
Accrued liabilities and expenses | $426,838 | $405,073 | ' |
Accrued payroll and payroll taxes | 427,755 | 430,871 | ' |
Accrued sales taxes, penalties, and interest | 747,582 | 1,080,482 | ' |
Accrued interest | 2,215 | 2,788 | ' |
Product warranties | 62,943 | 77,943 | 69,743 |
Total accrued liabilities and expenses | $1,667,333 | $1,997,157 | ' |
G_LONG_TERM_DEBT_Details
G. LONG TERM DEBT (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Debt Disclosure [Abstract] | ' | ' |
2014 (Remainder of) | $134,744 | ' |
2015 | 280,295 | ' |
2016 | 114,193 | ' |
Total | 529,232 | ' |
Less: Current portion | -272,482 | -265,985 |
Total Long term portion | $256,750 | $394,502 |
G_LONG_TERM_DEBT_Details_Narra
G. LONG TERM DEBT (Details Narrative) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Business Loan [Member] | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Long-term debt balance outstanding | $129,347 | $154,463 |
Promissory Note | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Long-term debt balance outstanding | $399,885 | $506,024 |
H_REDEEMABLE_PREFERRED_STOCK_D
H. REDEEMABLE PREFERRED STOCK (Details Narative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Series A Preferred Stock | ' | ' | ' | ' |
Amortization of discount and costs | $17,508 | $17,508 | $35,016 | $35,016 |
Accrued dividends | 18,454 | -1,817 | 36,707 | 16,436 |
Cumulative accrued dividends | 341,539 | 267,512 | 341,539 | 267,512 |
Series B Preferred Stock | ' | ' | ' | ' |
Amortization of discount and costs | 7,020 | 14,040 | 92,760 | 181,248 |
Accrued dividends | 5,490 | 19,538 | 10,920 | 68,186 |
Cumulative accrued dividends | $85,925 | $488,019 | $85,925 | $488,019 |
J_STOCK_OPTIONS_AND_WARRANTS_D
J. STOCK OPTIONS AND WARRANTS (Details-Options outstanding and exercisable) (USD $) | 6 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
$0.01 - $0.15 | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' |
Options Outstanding | 175,000 | ' | ' |
Options Outstanding Weighted Average Remaining Contractual Life (Years) | '3 years 3 months 26 days | ' | ' |
Options Outstanding Weighted Average Exercise Price | $0.14 | ' | ' |
Options Exercisable | 175,000 | ' | ' |
Options Exercisable Weighted Average Exercise Price | $0.14 | ' | ' |
$0.16 - $0.99 | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' |
Options Outstanding | 1,620,225 | ' | ' |
Options Outstanding Weighted Average Remaining Contractual Life (Years) | '8 years 5 months 1 day | ' | ' |
Options Outstanding Weighted Average Exercise Price | $0.18 | ' | ' |
Options Exercisable | 1,235,225 | ' | ' |
Options Exercisable Weighted Average Exercise Price | $0.18 | ' | ' |
$1.00 - $5.99 | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' |
Options Outstanding | 140,000 | ' | ' |
Options Outstanding Weighted Average Remaining Contractual Life (Years) | '1 year 11 months 12 days | ' | ' |
Options Outstanding Weighted Average Exercise Price | $3.29 | ' | ' |
Options Exercisable | 140,000 | ' | ' |
Options Exercisable Weighted Average Exercise Price | $3.29 | ' | ' |
Equity Option [Member] | ' | ' | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' | ' | ' |
Options Outstanding | 1,935,225 | 1,735,225 | 1,280,642 |
Options Outstanding Weighted Average Remaining Contractual Life (Years) | '7 years 5 months 27 days | ' | ' |
Options Outstanding Weighted Average Exercise Price | $0.41 | $0.43 | $0.62 |
Options Exercisable | 1,550,225 | ' | ' |
Options Exercisable Weighted Average Exercise Price | $0.46 | ' | ' |
J_STOCK_OPTIONS_AND_WARRANTS_D1
J. STOCK OPTIONS AND WARRANTS (Details-Option activity) (Equity Option [Member], USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Equity Option [Member] | ' | ' |
Number of shares | ' | ' |
Shares outstanding - beginning balance | 1,735,225 | 1,280,642 |
Number of shares - granted | 200,000 | 504,583 |
Number of shares - exercised | 0 | 0 |
Number of shares - cancelled or expired | 0 | -50,000 |
Shares outstanding - ending balance | 1,935,225 | 1,735,225 |
Weighted Average Price Per Share | ' | ' |
Weighted average price per share - beginning balance | $0.43 | $0.62 |
Weighted average price per share - granted | $0.19 | $0.18 |
Weighted average price per share - exercised | ' | ' |
Weighted average price per share - cancelled or expired | ' | $2.69 |
Weighted average price per share - ending balance | $0.41 | $0.43 |
J_STOCK_OPTIONS_AND_WARRANTS_D2
J. STOCK OPTIONS AND WARRANTS (Details-Warrants outstanding and exercisable) (Warrant, USD $) | 6 Months Ended | ||
Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Warrants Outstanding, Number Outstanding | 9,359,914 | 9,359,914 | 10,830,416 |
Warrants Outstanding, Weighted Average Remaining Contractual Life (Years) | '1 year 4 months 17 days | ' | ' |
Weighted Average Exercise Price | $0.32 | $0.32 | $0.32 |
Warrants Exercisable, Number Exercisable | 9,359,914 | ' | ' |
Warrants Exercisable, Weighted Average Exercise Price | $0.32 | ' | ' |
$0.13 | ' | ' | ' |
Warrants Outstanding, Number Outstanding | 7,230,778 | ' | ' |
Warrants Outstanding, Weighted Average Remaining Contractual Life (Years) | '1 year 7 months 13 days | ' | ' |
Weighted Average Exercise Price | $0.13 | ' | ' |
Warrants Exercisable, Number Exercisable | 7,230,778 | ' | ' |
Warrants Exercisable, Weighted Average Exercise Price | $0.13 | ' | ' |
$0.33 | ' | ' | ' |
Warrants Outstanding, Number Outstanding | 1,628,800 | ' | ' |
Warrants Outstanding, Weighted Average Remaining Contractual Life (Years) | '4 months 21 days | ' | ' |
Weighted Average Exercise Price | $0.33 | ' | ' |
Warrants Exercisable, Number Exercisable | 1,628,800 | ' | ' |
Warrants Exercisable, Weighted Average Exercise Price | $0.33 | ' | ' |
$3.00 | ' | ' | ' |
Warrants Outstanding, Number Outstanding | 500,336 | ' | ' |
Warrants Outstanding, Weighted Average Remaining Contractual Life (Years) | '1 year 1 month 10 days | ' | ' |
Weighted Average Exercise Price | $3 | ' | ' |
Warrants Exercisable, Number Exercisable | 500,336 | ' | ' |
Warrants Exercisable, Weighted Average Exercise Price | $3 | ' | ' |
J_STOCK_OPTIONS_AND_WARRANTS_D3
J. STOCK OPTIONS AND WARRANTS (Details-Warrant activity) (Warrant, USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Warrant | ' | ' |
Number of shares - beginning balance | 9,359,914 | 10,830,416 |
Number of shares - issued | 0 | 0 |
Number of shares - exercised | 0 | -86,472 |
Number of shares - cancelled or expired | 0 | -1,384,030 |
Number of shares - ending balance | 9,359,914 | 9,359,914 |
Weighted average price per share - beginning balance | $0.32 | $0.32 |
Weighted average price per share - issued | ' | ' |
Weighted average price per share - exercised | ' | $0.13 |
Weighted average price per share - cancelled or expired | ' | $1.36 |
Weighted average price per share - beginning balance | $0.32 | $0.32 |
J_STOCK_OPTIONS_AND_WARRANTS_D4
J. STOCK OPTIONS AND WARRANTS (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Equity Option [Member] | Equity Option [Member] | |||
Options granted | ' | ' | 200,000 | 504,583 |
Stock-based compensation expense with options granted | $4,617 | $6,641 | $83,496 | $85,519 |
L_COMMITMENTS_AND_CONTINGENCIE2
L. COMMITMENTS AND CONTINGENCIES (Details-leases) (Office Lease Obligations [Member], USD $) | Jun. 30, 2014 |
Office Lease Obligations [Member] | ' |
2014 (remainder of) | $244,206 |
2015 | 494,806 |
2016 | 245,274 |
2017 | 251,740 |
2018 | 258,381 |
2019 and thereafter | 422,182 |
Total | $1,916,589 |
L_COMMITMENTS_AND_CONTINGENCIE3
L. COMMITMENTS AND CONTINGENCIES (Details-Rent revenue) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 (remainder of) | $68,269 |
2015 | 138,919 |
Total | $207,188 |
L_COMMITMENTS_AND_CONTINGENCIE4
L. COMMITMENTS AND CONTINGENCIES (Details-Sales tax accrual) (USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Change in the sales tax accrual | ' | ' |
Balance, beginning of year | $1,080,482 | $1,188,133 |
Collections | 196,302 | 409,782 |
Provisions | -235,962 | -138,352 |
Interest and penalties | 0 | 7,342 |
Payments | -293,240 | -386,423 |
Balance, end of period | $747,582 | $1,080,482 |
L_COMMITMENTS_AND_CONTINGENCIE5
L. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' | ' | ' | ' | ' |
Rental expenses | $154,576 | $129,320 | $310,151 | $267,295 | ' |
Rental income received | 33,925 | 67,227 | 32,332 | 64,664 | ' |
Setllement agreement balance with Linksmart | $28,550 | ' | $28,550 | ' | $86,250 |
M_BUSINESS_CONCENTRATION_Detai
M. BUSINESS CONCENTRATION (Details Narrative) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Supplier Concentration Risk [Member] | ' | ' |
Concentration risk percentage | 75.00% | 62.00% |
Purchases from major suppliers | $1,767,000 | $1,235,000 |
Supplier Concentration Risk [Member] | ' | ' |
Due to suppliers | $701,000 | $455,000 |