Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 16, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | QUOTEMEDIA INC | ||
Entity Central Index Key | 1,101,433 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
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 | 90,477,798 | ||
Entity Public Float | $ 2,115,339 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 451,151 | $ 271,700 |
Accounts receivable, net | 344,512 | 433,889 |
Prepaid expenses | 89,884 | 74,949 |
Other current assets | 149,379 | 103,345 |
Total current assets | 1,034,926 | 883,883 |
Deposits | 16,551 | 15,555 |
Property and equipment, net | 1,420,946 | 1,372,940 |
Goodwill | 110,000 | 110,000 |
Intangible assets | 64,657 | 70,594 |
Total assets | 2,647,080 | 2,452,972 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 1,565,972 | 1,499,827 |
Deferred revenue | 706,819 | 549,233 |
Current portion of amounts due to related parties | 44,212 | |
Total current liabilities | 2,272,791 | 2,093,272 |
Long-term portion of amounts due to related parties | 10,903,439 | |
Commitments (Note 9) | ||
Mezzanine equity: | ||
Series A Redeemable Convertible Preferred stock, 550,000 shares designated, 127,685 shares issued | 3,082,211 | |
Stockholders’ deficit: | ||
Preferred stock, 10,000,000 shares authorized, 550,000 shares designated | ||
Common stock, $0.001 par value, 150,000,000 shares authorized, 90,477,798 shares issued and outstanding | 90,479 | 90,479 |
Additional paid-in capital | 18,727,661 | 9,382,824 |
Accumulated deficit | (21,526,062) | (20,017,042) |
Total stockholders’ equity (deficit) | (2,707,922) | (10,543,739) |
Total liabilities and stockholders’ equity (deficit) | $ 2,647,080 | $ 2,452,972 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Stockholders' deficit: | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares designated | 550,000 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 90,477,798 | 90,477,798 |
Common stock, shares outstanding | 90,477,798 | 90,477,798 |
Series A Redeemable Convertible Preferred Stock [Member] | ||
Mezzanine equity: | ||
Convertible Preferred stock designated | 550,000 | 0 |
Convertible Preferred stock issued | 127,685 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements Of Operations | ||
LICENSING FEES | $ 9,491,738 | $ 8,870,155 |
COST OF REVENUE | 5,212,541 | 5,073,340 |
GROSS PROFIT | 4,279,197 | 3,796,815 |
OPERATING EXPENSES | ||
Sales and marketing | 1,584,479 | 1,507,706 |
General and administrative | 2,014,119 | 1,966,713 |
Software development | 1,029,822 | 935,786 |
Total | 4,628,420 | 4,410,205 |
OPERATING LOSS | (349,223) | (613,390) |
OTHER EXPENSES | ||
Foreign exchange loss | (92,946) | (50,516) |
Interest expense - related party | (1,063,769) | (1,014,379) |
Total | (1,156,715) | (1,064,895) |
LOSS BEFORE INCOME TAXES | (1,505,938) | (1,678,285) |
Income tax expense | (3,082) | (3,018) |
NET LOSS | $ (1,509,020) | $ (1,681,303) |
LOSS PER SHARE | ||
Basic and diluted loss per share | $ (0.02) | $ (0.02) |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||
Basic and diluted | 90,477,798 | 90,477,798 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT - USD ($) | Series A Redeemable Convertible Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning Balance, Shares at Dec. 31, 2015 | 90,477,798 | ||||
Beginning Balance, Amount at Dec. 31, 2015 | $ 90,479 | $ 9,301,338 | $ (18,335,739) | $ (8,943,922) | |
Stock-based compensation | 81,486 | 81,486 | |||
Net loss | (1,681,303) | (1,681,303) | |||
Ending Balance, Shares at Dec. 31, 2016 | 90,477,798 | ||||
Ending Balance, Amount at Dec. 31, 2016 | $ 90,479 | 9,382,824 | (20,017,042) | (10,543,739) | |
Stock-based compensation | 100,731 | 100,731 | |||
Series A Redeemable Convertible Preferred Stock issued, Shares | 127,685 | ||||
Series A Redeemable Convertible Preferred Stock issued, Amount | $ 3,082,211 | ||||
Debt forgiven | 9,244,106 | 9,244,106 | |||
Net loss | (1,509,020) | (1,509,020) | |||
Ending Balance, Shares at Dec. 31, 2017 | 127,685 | 90,477,798 | |||
Ending Balance, Amount at Dec. 31, 2017 | $ 3,082,211 | $ 90,479 | $ 18,727,661 | $ (21,526,062) | $ (2,707,922) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
OPERATING ACTIVITIES | ||
Net loss | $ (1,509,020) | $ (1,681,303) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 837,284 | 861,216 |
Bad debt expense | 45,957 | 93,741 |
Stock-based compensation expense | 100,731 | 81,486 |
Changes in assets and liabilities: | ||
Accounts receivable | 43,420 | (108,532) |
Prepaid expenses | (14,935) | 7,336 |
Other current assets | (46,034) | (56,058) |
Deposits | (996) | 3,416 |
Accounts payable and amounts due to related parties | 1,444,811 | 1,700,809 |
Deferred revenue | 157,586 | (57,791) |
Net cash provided by operating activities | 1,058,804 | 844,320 |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (89,454) | (134,403) |
Capitalized application software | (789,899) | (690,051) |
Net cash used in investing activities | (879,353) | (824,454) |
Net increase in cash | 179,451 | 19,866 |
Cash, beginning of year | 271,700 | 251,834 |
Cash, end of year | $ 451,151 | $ 271,700 |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 1. SIGNIFICANT ACCOUNTING POLICIES | a) Nature of operations We are a software developer and distributor of financial market data and related services to a global marketplace. We specialize in the collection, aggregation, and delivery of both delayed and real-time financial data content via the Internet. We develop and license software components that deliver dynamic content to banks, brokerage firms, financial institutions, mutual fund companies, online information and financial portals, media outlets, public companies, and corporate intranets. b) Basis of consolidation The consolidated financial statements include the operations of QuoteMedia, Ltd., a wholly owned subsidiary of QuoteMedia, Inc. All intercompany transactions and balances have been eliminated. c) Foreign currency translation and transactions The U.S. dollar is the functional currency of all our company's operations. Foreign currency asset and liability amounts are remeasured into U.S. dollars at end-of-period exchange rates, except for equipment and intangible assets, which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Because the U.S. dollar is the functional currency, exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in income in the period in which they occur. d) Cash and cash equivalents Cash equivalents include money market investments that have an original maturity of three months or less and are redeemable on demand. We maintain our accounts primarily at one financial institution. At times throughout the year, our cash and cash equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. e) Allowance for doubtful accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of the Companys customers to make required payments. The Company determines the allowance by reviewing the age of the receivables and assessing the anticipated ability of customers to pay. No collateral is required for any of the receivables and the Company does not usually apply financing charges to outstanding accounts receivable balances. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The allowance for doubtful accounts was $120,000 at December 31, 2017 and 2016. Bad debt expenses for the years ended December 31, 2017 and 2016 were $45,957 and $93,741 respectively. f) Property and equipment Fixed assets are recorded at cost less accumulated depreciation. Furniture and equipment are depreciated using the straight-line method over their estimated useful lives of five years. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or useful lives, whichever is shorter. Retirements, sales, and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with the resulting gain or loss reflected in income. Capitalized software costs include costs incurred in connection with the internal development of software. These costs relate to software used by subscribers to access, manage and analyze information in the Companys databases. Capitalized costs associated with internally developed software are amortized over three years which is their estimated economic life. Depreciable and amortizable assets are evaluated for impairment upon a significant change in the operating environment. In these circumstances, if an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on discounted future cash flows. Useful lives are periodically evaluated to determine whether events or circumstances have occurred which indicate the need for revision. There were no impairments recorded for the years ended December 31, 2017 and 2016. g) Earnings per share Basic earnings per share are computed by dividing income by the weighted average number of shares outstanding during the year. Diluted earnings per share takes into account shares outstanding (computed under basic earnings per share) and potentially dilutive common shares (such as stock options outstanding). The effect of a stock split or reverse split is applied retroactively to preceding periods. For the years ended 2017 and 2016 all common stock equivalents were anti-dilutive. h) Stock-based compensation FASB ASC 718, Stock Compensation On December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc., pursuant to which, among other things, the Company will issue to Mr. Shworan (a) a warrant to purchase up to 1,250 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share (the Preferred Stock Warrant), (b) a warrant to purchase up to 382,243 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share (the Liquidity Preferred Stock Warrant), and (c) a warrant to purchase up to 4,000,000 shares of common stock at an exercise price equal to $0.10 per share (which warrant has specific performance vesting thresholds) (the Common Stock Warrant). In addition, provided that Mr. Shworan is employed by or otherwise providing services to the Company or its subsidiaries on each of January 1, 2018 and 2019, the Company will issue to Mr. Shworan warrants to purchase up to 15,000 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share. The Black-Scholes valuation model was used to calculate the value of Common Stock Warrants granted to Mr. Shworan. The fair value per warrant was calculated at $0.03, and the total fair value of the warrants was calculated at $120,000. The warrants vest according to a schedule based on meeting certain gross profit targets. Compensation expense for an award with a performance condition shall be based on the probable outcome of that performance condition. A probability was assigned to meeting each performance condition and applied to the fair value of the warrants. After applying the probability of meeting the performance conditions, the total fair value of the warrants was calculated at $84,750, which will be expensed evenly over 5 years. The Preferred Stock Warrants were determined to have a fair value of $24 per share, calculated as the liquidation value of $25 per Series A Redeemable Convertible Preferred Stock share less the $1 exercise price. Therefore, a total of $30,000 of stock based compensation expense was recognized in December 2017 related to the 1,250 warrants granted to Mr. Shworan. The Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event as defined in the Companys Certificate of Designation of Series A Redeemable Convertible Preferred Stock. The probability of the liquidity event performance condition is not currently determinable or probable, therefore, no compensation expense has been recognized as of December 31, 2017. The probability will be re-evaluated each reporting period. As at December 31, 2017, there was $9,173,832 in unrecognized stock-based compensation expense related to these Liquidity Preferred Stock Warrants. Since the Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event which is currently not determinable or probable, we are also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized. The estimated stock-based compensation expense related to the Companys stock-based awards was comprised as follows: Years ended December 31, 2017 2016 Sales and marketing $ 55,181 $ 21,504 General and administrative 44,800 59,982 Development 750 - Stock-based compensation expense $ 100,731 $ 81,486 At December 31, 2017 there was $211,987 of unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock which is expected to be recognized over a weighted-average period of 3.83 years. We calculate the fair value of stock options and warrants granted to purchase common stock under the provisions of FASB ASC 718 using the Black-Scholes valuation model with the following assumptions: 2017 2016 Expected dividend yield - - Expected stock price volatility 219 % 243 % Risk-free interest rate 4 % 4 % Expected life of options (years) 9.0 5.0 Weighted average fair value of options and warrants granted $ 0.03 $ 0.04 Expected volatility is based on the historical volatility of the Companys share price in the period prior to option grant equivalent to the expected life of the options. The expected term is determined under the simplified method as allowed under the provisions of the Securities and Exchange Commissions Staff Accounting Bulletins No. 107 and No. 110, and represents the period of time that options granted are expected to be outstanding. We believe that it is appropriate to use this simplified method as there is not sufficient historical exercise data to provide a reasonable basis upon which to estimate an expected term. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. i) Income taxes Income taxes are provided in accordance with FASB ASC 740, Income Taxes Deferred tax assets are reduced by a valuation allowance, when, in the opinion of management, it is likely that some portion of the deferred tax asset will not be realized. Deferred taxes are adjusted for the effects of changes in tax laws and rates. Interest and penalties, if applicable, would be recorded in operations. In 2017, the Company recorded Canadian income tax expense of $3,082. In 2016 the Company recorded Canadian income tax expense of $3,018 (see Note 6). j) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities as of the year end and the reported amount of revenues and expenses during the year. Such estimates include (i) fair values used to test goodwill and capitalized development costs for impairment; (ii) the amount of allowance for doubtful accounts, (iii) the capitalization of software development costs. Actual results and outcomes may differ from managements estimates and assumptions. k) Software development expenses Software development expenses consist primarily of costs associated with the design, programming, and testing of our software applications during the preliminary project stage. Software development expenses also include costs incurred to maintain our software applications. The Company expensed $1,029,822 and $935,786 in software development costs during the years ended December 31, 2017 and 2016, respectively (see Note 3). l) Revenue recognition Revenue is recognized over contractual periods as services are performed and when collection of the amount due is reasonably assured. Amounts recognized as revenue are determined based upon contractually agreed-upon fee schedules with our customers. The Company accounts for subscription revenues received in advance of services being performed by deferring such amounts until the related services are performed. The Company considers the following factors when determining if collection of a fee is reasonably assured: customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If these factors do not indicate collection is reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash. m) Financial instruments Financial instruments consist principally of cash, accounts receivable, accounts payable and notes payable. We believe that the fair value of financial instruments approximates the recorded book value of those instruments due to the short-term nature of the instruments, or stated interest rates that approximate market interest rates. n) Accounting Pronouncements Accounting Pronouncements Not Yet Adopted In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill by eliminating step 2 from the goodwill impairment test. Under the new ASU, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized for the amount by which the carrying amount exceeds its fair value. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company believes that this pronouncement will have no impact on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the classification of certain cash receipts and payments in the statement of cash flows in order to eliminate diversity in practice. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the potential impact that adoption will have on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU is intended to improve the reporting of leasing transactions to provide users of financial statements with more decision-useful information. This ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, using a modified retrospective approach. Early adoption is permitted. The Company is evaluating the potential impact that adoption will have on its consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU No. 2014-09, which creates Topic 606, Revenue from Contracts with Customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance. On January 1, 2018, we adopted the guidance in ASC 606 and all the related amendments and applied the new revenue standard to all contracts using the modified retrospective method. The impact of the new revenue standard was not material and there was no adjustment required to the opening balance of retained earnings. We expect the impact of the adoption of the new revenue standard to be immaterial to our net income on an ongoing basis. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Companys consolidated financial statements upon adoption. |
LIQUIDITY
LIQUIDITY | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 2. LIQUIDITY | The Company has an accumulated deficit of $21,526,062 as of December 31, 2017, and for the year ended December 31, 2017 had a net loss of $1,509,020. As a result, there are concerns about the liquidity of our company at December 31, 2017. The following discussion addresses those concerns. Net cash of $1,058,804 was provided by operating activities, and although we have a working capital deficit of $1,237,865 as of December 31, 2017, current liabilities include $706,819 in deferred revenue and the expected costs necessary to realize the deferred revenue in 2018 are minimal. Substantially all of the $1,063,769 in interest expense incurred in 2017 relates to related party debt. The Debt Exchange and Debt Forgiveness Agreements and Compensation Agreement effective December 28, 2017 extinguished all related party debt and eliminate substantially all of our interest expense going forward. (See Notes 5 and Note 7). Implementation of our business plan may require additional financing. Additional financings may come from future equity or debt offerings that could result in dilution to our stockholders. Although the Company must ultimately achieve profitable operations, based on the factors discussed above, management believes that our cash on hand and cash to be generated from operations will be sufficient to fund operations through April 2019. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 3. PROPERTY AND EQUIPMENT | As of December 31, 2017 2016 Computer equipment $ 1,043,346 $ 955,681 Office furniture and equipment 70,904 69,115 Leasehold improvements 58,464 58,464 Capitalized application software 7,648,494 7,050,550 Total property and equipment 8,821,208 8,133,810 Less: accumulated depreciation (7,400,262 ) (6,760,870 ) Property and equipment, net $ 1,420,946 $ 1,372,940 Property and Equipment are recorded at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the assets estimated useful lives as follows: Computer equipment 5 years Office Furniture and equipment 5 years Leasehold improvements Term of lease Capitalized application software 3 years For the years ended December 31, 2017 and 2016, the Company capitalized $789,899 and $690,051 of costs, respectively, related to upgrades and enhancements made to existing software applications. Software applications are used by our subscribers to access, manage and analyze information in our databases. For the years ended December 31, 2017 and 2016, amortization expenses associated with the internally developed application software was $724,451 and $757,864 respectively. At December 31, 2017, the remaining book value of the capitalized application software was $1,149,032. Depreciation expense for equipment and leaseholds for the years ended December 31, 2017 and 2016 was $106,896 and $97,415 respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 4. INTANGIBLE ASSETS | As of December 31, 2017 2016 Amortized intangible assets: Purchase option for office building $ 10,000 $ 10,000 Software licenses 108,085 108,085 Domain names 10,652 10,652 128,737 128,737 Less: accumulated amortization (64,080 ) (58,143 ) Amortized intangible assets, net 64,657 70,594 Unamortized intangible assets: Goodwill associated with purchase of business unit business unit 110,000 110,000 Total intangible assets, net $ 174,657 $ 180,594 Amortization for amortized intangible assets is calculated on a straight-line basis over the assets estimated useful lives. The useful life of the purchase option is 5 years which is the term of the option. The useful life of the software licenses and domain names is estimated to be 20 years. Amortization expense for amortized intangible assets was $5,937 for the years ended December 31, 2017 and 2016. We evaluate goodwill for impairment on an annual basis in accordance with Financial Accounting Standards Board (FASB) ASC 350-20, Goodwill The estimated amortization expense of definite-lived intangible assets is as follows: For year ending December 31, 2018 $ 5,937 For year ending December 31, 2019 5,937 For year ending December 31, 2020 5,937 For year ending December 31, 2021 5,937 For year ending December 31, 2022 5,937 For years thereafter 34,972 Total $ 64,657 |
RELATED PARTIES
RELATED PARTIES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 5. RELATED PARTIES | The following table summarizes amounts due to related parties at December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Current Long-term Current Long-term Purchase of business unit $ - $ - $ - $ 182,183 Computer hosting services - - - 137,931 Office rent - - 7,365 1,113,079 Other - - 36,847 17,276 Loan - - - 997,072 Lead generation services - - - 1,416,574 Due to Management - - - 7,039,324 Total stock-based compensation $ - $ - $ 44,212 $ 10,903,439 On December 28, 2017, the Company entered into Debt Exchange and Debt Forgiveness Agreements with Bravenet Web Services, Inc. (Bravenet), and Harrison Avenue Holdings Ltd. (Harrison). David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet and Harrison. Also effective December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan. As a result of these agreements and transactions, all of our related party debt was eliminated. See Note 7 for additional disclosures. The Company had a loan agreement with Bravenet for which interest was accrued at 10% on the outstanding loan balance. On December 28, 2017, the outstanding loan balance due to Bravenet of $1,079,975 was settled as part of the Debt Exchange and Debt Forgiveness Agreements disclosed in Note 7. On September 29, 2006, QuoteMedia, Ltd. purchased the Bravenet business unit that was responsible for providing the Company customer promotion and lead generation services. The $110,000 purchase price due to Bravenet was accrued in amounts due to related parties and interest was accrued at 10% on the outstanding balance. On December 28, 2017, the outstanding balance due to Bravenet for the unpaid purchase price of $208,083 was settled as part of the Debt Exchange and Debt Forgiveness Agreements disclosed in Note 7. Bravenet provided computer hosting and maintenance services to the Company for approximately $6,250 per month. Interest was accrued at 10% on the outstanding balance. On December 28, 2017, the balance due to Bravenet for unpaid computer hosting and maintenance services of $223,565 was settled as part of the Debt Exchange and Debt Forgiveness Agreements disclosed in Note 7. The Company entered into a five-year office lease with 410734 B.C. Ltd. effective May 1, 2016 for $7,365 per month, which replaced the Companys office lease with Harrison that expired April 30, 2016. At December 31, 2017, there were no amounts due to 410734 B.C. Ltd. David M. Shworan is a control person of both Harrison and 410734 B.C. Ltd. Interest was accrued at 10% on the unpaid office rent. On December 28, 2017, the balance due to Harrison for unpaid office rent of $2,268,995 was settled as part of the Debt Exchange and Debt Forgiveness Agreements disclosed in Note 7. From January 1, 2005 to November 30, 2006, Bravenet provided customer promotion and lead generation services to the Company. Interest was accrued at 10% on the outstanding balance. On December 28, 2017, the balance due to Bravenet for customer promotion and lead generation services of $1,551,975 was settled as part of the Debt Exchange and Debt Forgiveness Agreements disclosed in Note 7. On December 28, 2017, as part of the employment agreement with the David M. Shworan, the Company settled the $8,024,232 that had been accrued as an allowance for unpaid compensation. The outstanding allowance balance included interest accrued at 10%. See Note 7 for additional disclosures. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 6. INCOME TAXES | We account for income taxes according to the provisions of FASB ASC 740, Income Taxes, Reconciliations of income taxes computed at the statutory federal rate to income tax expense (benefit) for the years ended December 31, 2017 and 2016 are as follows: 2017 2016 Tax provision (benefit) at the statutory rate of 34% $ (512,019 ) $ (571,643 ) State income taxes, net of federal income tax (46,082 ) (51,448 ) Stock-based compensation 34,249 27,705 Change in federal NOL (1,332 ) 13,693 Expiration of state NOL - 10,181 Federal Rate Change 1,389,456 - Debt Exchange 3,087,572 - Change in valuation allowance and other (3,962,025 ) 571,512 Canadian income tax expense (benefit) 3,082 3,018 Income tax expense (benefit) $ 3,082 $ 3,018 In 2017, the Company recorded Canadian income tax expense of $3,082. The Company does not have any material Canadian deferred tax assets or deferred tax liabilities. As of December 31, 2017, we had net operating loss carryforwards for federal and state income tax reporting purposes amounting to approximately $11,748,000 and $2,943,000 which expire in varying amounts through the year 2037. The components of our deferred tax asset (liabilities) at December 31, 2017 and 2016 are as follows: 2017 2016 Tax effect of net operating loss carryforward $ 2,558,000 $ 3,574,000 Accrued liabilities - 3,369,000 Property & equipment (5,000 ) (8,000 ) Capitalized software (277,000 ) (402,000 ) Other 29,000 45,000 Less valuation allowance (2,305,000 ) (6,578,000 ) Net deferred tax asset $ - $ - A valuation allowance has been recognized to offset the entire effect of the Companys net deferred tax asset as the realization of this deferred tax benefit is uncertain. The valuation allowance decreased $4,273,000 for the year ended December 31, 2017. This is primarily due to the federal statutory rate decreasing to 21% and a debt exchange that occurred between the Company and related parties. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years (2014-2017) in these jurisdictions. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Companys financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded. |
STOCKHOLDERS_ DEFICIT
STOCKHOLDERS’ DEFICIT | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 7. STOCKHOLDERS’ DEFICIT | a) Preferred shares We are authorized to issue up to 10,000,000 non-designated preferred shares at the Board of Directors discretion. On December 28, 2017, a total of 550,000 shares of the Companys Preferred Stock were designated as Series A Redeemable Convertible Preferred Stock. The Series A Redeemable Convertible Preferred Stock has no dividend or voting rights. Holders of Series A Redeemable Convertible Preferred Stock shall have the right to convert their shares into shares of common stock at the rate of 83.33 shares of common stock for one share of Series A Redeemable Convertible Preferred Stock, at any time following the date the closing price of a share of common stock on a securities exchange or actively traded over-the-counter market has exceeded $0.30 for ninety (90) consecutive trading days. The conversion rights are subject to the availability of authorized but unissued shares of common stock. In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment is made to any holders of any shares of common stock, the holders of shares of Series A Redeemable Convertible Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Companys capital stock whether such assets are capital, surplus, or earnings, an amount equal to $25.00 per share of Series A Redeemable Convertible Preferred Stock. As part of the Debt Exchange and Debt Forgiveness Agreements and Compensation Agreement effective December 28, 2017, we issued 127,685 shares of Series A Redeemable Convertible Preferred Stock - see Notes 7 (c) to (e) below. b) Common stock No shares of common stock were issued during the years ended December 31, 2017 and 2016. c) Debt Exchange On December 28, 2017, the Company entered into a Debt Exchange Agreement with Bravenet Web Services, Inc. (Bravenet), and Harrison Avenue Holdings Ltd. (Harrison). The President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, is a control person of Bravenet and Harrison. Bravenet and Harrison agreed to exchange an aggregate of $3,192,116 of indebtedness of the Company held by Bravenet and Harrison in exchange for the following: (i) 127,685 shares of Series A Redeemable Convertible Preferred Stock. The Series A Redeemable Convertible Preferred Stock has a redeemable value of $25 and is convertible into 83.33 shares of common stock if common stock trades above $0.30 for 90 consecutive trading days. In accordance with ASC 470-20-35-3, a contingent beneficial conversion feature shall not be recognized in earnings until the contingency is resolved. Therefore, the beneficial conversion feature was not recognized, and only the intrinsic value of $25 was used to determine the $3,192,125 total fair value of the Series A Redeemable Convertible Preferred Stock issued. (ii) Warrants to purchase up to 4,000,000 shares of common stock at an exercise price equal to $0.10 per share. The Black-Scholes valuation model was used to calculate the value of common stock warrants granted to Bravenet and Harrison. The fair value per warrant was calculated at $0.03, and the total fair value of the warrants was calculated at $120,000. In accordance with ASC 470-20-25-2, a relative fair value allocation was applied to the difference between the fair value of the Series A Redeemable Convertible Preferred Stock and common stock warrants and the $3,192,116 of indebtedness for which they were exchanged. The adjusted fair value for the Series A Redeemable Convertible Preferred Stock and common stock warrants was $3,082,211 and $109,905, respectively. Redemption Rights In accordance with the Debt Exchange Agreement, Bravenet and Harrison may redeem a limited amount of Series A Redeemable Convertible Preferred Stock if the following criteria are met: (i) If the cash balance of the Company as reported at the end of each fiscal quarter in 2018 exceeds $350,000, up to an aggregate of 600 Series A Redeemable Convertible Preferred Stock may be redeemed at the liquidation value of $25 per share. (ii) If the cash balance of the Company as reported at the end of each fiscal quarter in 2019 exceeds $375,000, up to an aggregate of 800 Series A Redeemable Convertible Preferred Stock may be redeemed at the liquidation value of $25 per share. (iii) If the cash balance of the Company as reported at the end of each fiscal quarter in 2020 and in subsequent years exceeds $400,000, up to an aggregate of 1,000 Series A Redeemable Convertible Preferred Stock may be redeemed at the liquidation value of $25 per share. In accordance with ASC 480-10-S99, because a limited amount of Series A Redeemable Convertible Preferred Stock held by Bravenet and Harrison may be redeemed if the above criteria are met, it was classified as mezzanine equity and not permanent equity. d) Debt Forgiveness On December 28, 2017, the Company also entered into a Debt Forgiveness Agreement with Bravenet and Harrison, pursuant to which Bravenet and Harrison agreed to forgive an aggregate of $1,157,752 of indebtedness of the Company held by Bravenet and Harrison in exchange for $1. In accordance to ASC 470-50-40-2, the extinguishment of debt between related entities should be treated as a capital transaction; therefore it was recorded as a contribution to Paid-in Capital. We incurred $47,781 of professional fees associated with Debt Exchange and Forgiveness transactions. These issuance costs were treated as reduction to paid-in capital as the issuance costs were not part of normal operations and were a function of capital transactions. e) Compensation Agreement On December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary, pursuant to which, among other things, the Company will issue to Mr. Shworan the following: (i) Warrants to purchase up to 1,250 shares of Series A Preferred Stock at an exercise price equal to $1.00 per share. A total of $30,000 of stock-based compensation expense was recognized in December 2017 related to the warrants granted to Mr. Shworan. See Note 1 (h). (ii) Warrants to purchase up to 382,243 shares of Series A Preferred Stock at an exercise price equal to $1.00 per share (the Liquidity Preferred Stock Warrant). The Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event as defined in the Companys Certificate of Designation of Series A Redeemable Convertible Preferred Stock. The probability of the liquidity event performance condition is not currently determinable or probable, therefore no compensation expense has been recognized as of December 31, 2017. The probability will be re-evaluated each reporting period. See Note 1 (h). (iii) Warrants to purchase up to 4,000,000 shares of common stock at an exercise price equal to $0.10 per share, subject to specific performance vesting thresholds. The Black-Scholes valuation model was used to calculate the value of common stock warrants granted to Mr. Shworan. The warrants vest according to a schedule based on meeting certain gross profit targets. A probability was assigned to meeting each performance condition and applied to the fair value of the warrants. After applying the probability of meeting the performance condition, the total fair value of the warrants was calculated at $84,750 which will be expensed evenly over 5 years. See Note 1 (h). Also, as part of the Compensation Agreement, Mr. Shworan acknowledged and agreed that he has received from the Company all compensation to which he is entitled for services provided to the Company through the December 28, 2017 transaction date. As of December 28, 2017, the Company had accrued an allowance of $8,024,232 for potential compensation due to Mr. Shworan. In accordance to ASC 470-50-40-2, the extinguishment of debt between related entities should be treated as a capital transaction; therefore it was recorded as a contribution to Paid-in Capital. e) Stock Options and Warrants We have stock option plans whereby shares of our common stock may be issued pursuant to the exercise of stock options granted to employees, officers, directors, advisors, and our independent contractors. The exercise price of the common stock underlying an option will be determined by the Board of Directors or compensation committee and may be equal to, greater than, or less than the market value of our common stock at the date of grant but in no event less than 50% of such market value. The options generally vest in one to four years unless, at the discretion of the Board of Directors, alternative vesting methods are allowed. The term of each option is determined at the time of grant and may extend to a maximum of ten years. At December 31, 2017, there are a total of 17,500,000 options authorized for issuance under our stock option plans. There are 15,000,000 and 2,500,000 shares of common stock authorized for issuance pursuant to the Companys 2003 and 1999 Equity Incentive Compensation Plans respectively. Options may also be granted outside our stock option plan. Options granted outside the plan generally contain terms that are more restrictive in nature and have a maximum expiration term of ten years. We may grant an unlimited number of options outside our stock option plan at the discretion of the Board of Directors. The following table represents common stock option and warrant activity for the years ended December 31, 2017 and 2016: Common Stock Options and Warrants Weighted- Average Exercise Price Outstanding at January 1, 2016 13,372,803 $ 0.04 Warrants granted 3,000,000 $ 0.04 Outstanding at December 31, 2016 16,372,803 $ 0.04 Options granted 500,000 $ 0.04 Warrants granted 9,500,000 $ 0.03 Outstanding at December 31, 2017 26,372,803 $ 0.04 The following table summarizes our non-vested common stock option and warrant activity for the years ended December 31, 2017 and 2016: Common Stock Options and Warrants Weighted- Average Grant Date Fair Value Outstanding at January 1, 2016 1,878,319 $ 0.06 Granted during the period 3,000,000 $ 0.04 Vested during the period (1,570,004 ) $ 0.04 Outstanding at December 31, 2016 3,308,315 $ 0.05 Granted during the period 10,000,000 $ 0.03 Vested during the period (5,683,315 ) $ 0.03 Outstanding at December 31, 2017 7,625,000 $ 0.04 Common Stock Options and Warrants Outstanding Common Stock Options and Warrants Exercisable Weighted Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average December 31, Contractual Exercise December 31, Exercise 2017 Life (Years) Price 2017 Price $ 0.03-0.07 26,372,803 11.37 $ 0.04 18,747,803 $ 0.04 As of December 31, 2017 all common stock options and warrants have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant. There was no cash received from the exercise of stock options or warrants for the years ended December 31, 2017 or 2016. The outstanding common stock options and warrants had no intrinsic value as of December 31, 2017. The intrinsic value of stock options and warrants are calculated as the amount by which the market price of our common stock exceeds the exercise price of the common stock option or warrant. The following table represents preferred stock warrant activity for the year ended December 31, 2017: Weighted- Average Warrants Exercise Price Outstanding at January 1, 2017 - - Warrants granted 383,493 $ 1.00 Outstanding at December 31, 2017 383,493 $ 1.00 The following table summarizes our non-vested preferred stock warrant activity for the year ended December 31, 2017: Weighted- Average Warrants Exercise Price Outstanding at January 1, 2017 - - Granted during the period 383,493 $ 1.00 Vested during the period (1,250 ) $ 1.00 Outstanding at December 31, 2017 382,243 $ 1.00 As of December 31, 2017, a total of 383,493 Preferred Stock Warrants were outstanding with a weighted average remaining contractual life of 20.0 years. As of December 31, 2017, 1,250 Preferred Stock Warrants were exercisable with a weighted average remaining contractual life of 20.0 years. There was no cash received from the exercise of Preferred Stock Warrants for the years ended December 31, 2017 or 2016. At December 31, 2017 the aggregate intrinsic value of the Preferred Stock Warrants outstanding was $9,203,832. The aggregate intrinsic value of the Preferred Stock Warrants exercisable was $30,000. The intrinsic value of our Preferred Stock Warrants is calculated as the amount by which the liquidation value of our Series A Redeemable Convertible Preferred Stock ($25) exceeds the exercise price of the warrant ($1). |
LOSS PER SHARE
LOSS PER SHARE | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 8. LOSS PER SHARE | Basic earnings per share is calculated by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income or loss applicable to common stockholders, adjusted to exclude potentially dilutive securities, by the weighted average number of common shares outstanding during the period, plus any additional common shares that would have been outstanding if potentially dilutive common shares had been exercised, using the treasury stock method. Due to the net loss incurred for the years ended 2017 and 2016, the diluted loss per share is the same as basic, because any potentially dilutive securities would reduce the loss per share. The following tables summarize the components of the loss per share: 2017 2016 Numerator: Net loss $ (1,509,020 ) $ (1,681,303 ) Denominator: Weighted average shares outstanding basic and diluted 90,477,798 90,477,798 Loss per share - basic and diluted $ (0.02 ) $ (0.02 ) Stock options and warrants excluded from the calculation of dilutive loss per share because they were anti-dilutive 16,372,803 16,372,803 |
COMMITMENTS
COMMITMENTS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 9. COMMITMENTS | Rent expense for all operating leases was $283,065 and $266,967 for the years ended December 31, 2017 and 2016, respectively. We have office lease commitments totaling $844,103 over the next five years, which include $310,551 in 2018, $315,434 in 2019, $185,095 in 2020, $33,023 in 2021, and $0 in 2022. |
SUPPLEMENTARY CASH FLOW INFORMA
SUPPLEMENTARY CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 10. SUPPLEMENTARY CASH FLOW INFORMATION | 2017 2016 Cash paid for Interest $ 1,261 $ 1,214 Cash received for Interest $ - $ 46 Cash paid for taxes - - The non-cash amounts related to the Debt Exchange and Forgiveness Agreements transactions effective December 28, 2017 are noted below (see Notes 5 and Note 7): 2017 2016 Total related party debt forgiven $ 9,181,983 - Total related party debt converted into preferred shares & warrants 3,192,115 - Legal fees associated with debt exchange & forgiveness transactions (47,781 ) - Total non-cash transactions debt exchange & forgiveness transactions $ 12,326,317 - |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 11. SUBSEQUENT EVENTS | The Company has evaluated events up to the filing date of these consolidated financial statements and determined that no subsequent event activity required disclosure. |
SIGNIFICANT ACCOUNTING POLICI18
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies Policies | |
Nature of operations | We are a software developer and distributor of financial market data and related services to a global marketplace. We specialize in the collection, aggregation, and delivery of both delayed and real-time financial data content via the Internet. We develop and license software components that deliver dynamic content to banks, brokerage firms, financial institutions, mutual fund companies, online information and financial portals, media outlets, public companies, and corporate intranets. |
Basis of consolidation | The consolidated financial statements include the operations of QuoteMedia, Ltd., a wholly owned subsidiary of QuoteMedia, Inc. All intercompany transactions and balances have been eliminated. |
Foreign currency translation and transactions | The U.S. dollar is the functional currency of all our company's operations. Foreign currency asset and liability amounts are remeasured into U.S. dollars at end-of-period exchange rates, except for equipment and intangible assets, which are remeasured at historical rates. Foreign currency income and expenses are remeasured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Because the U.S. dollar is the functional currency, exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in income in the period in which they occur. |
Cash and cash equivalents | Cash equivalents include money market investments that have an original maturity of three months or less and are redeemable on demand. We maintain our accounts primarily at one financial institution. At times throughout the year, our cash and cash equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation. |
Allowances for doubtful accounts | We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of the Companys customers to make required payments. The Company determines the allowance by reviewing the age of the receivables and assessing the anticipated ability of customers to pay. No collateral is required for any of the receivables and the Company does not usually apply financing charges to outstanding accounts receivable balances. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The allowance for doubtful accounts was $120,000 at December 31, 2017 and 2016. Bad debt expenses for the years ended December 31, 2017 and 2016 were $45,957 and $93,741 respectively. |
Property and equipment | Fixed assets are recorded at cost less accumulated depreciation. Furniture and equipment are depreciated using the straight-line method over their estimated useful lives of five years. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or useful lives, whichever is shorter. Retirements, sales, and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with the resulting gain or loss reflected in income. Capitalized software costs include costs incurred in connection with the internal development of software. These costs relate to software used by subscribers to access, manage and analyze information in the Companys databases. Capitalized costs associated with internally developed software are amortized over three years which is their estimated economic life. Depreciable and amortizable assets are evaluated for impairment upon a significant change in the operating environment. In these circumstances, if an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on discounted future cash flows. Useful lives are periodically evaluated to determine whether events or circumstances have occurred which indicate the need for revision. There were no impairments recorded for the years ended December 31, 2017 and 2016. |
Earnings per share | Basic earnings per share are computed by dividing income by the weighted average number of shares outstanding during the year. Diluted earnings per share takes into account shares outstanding (computed under basic earnings per share) and potentially dilutive common shares (such as stock options outstanding). The effect of a stock split or reverse split is applied retroactively to preceding periods. For the years ended 2017 and 2016 all common stock equivalents were anti-dilutive. |
Stock-based compensation | FASB ASC 718, Stock Compensation On December 28, 2017, the Company entered into a Compensation Agreement with David M. Shworan, the President and Chief Executive Officer of QuoteMedia, Ltd., a wholly owned subsidiary of Quotemedia, Inc., pursuant to which, among other things, the Company will issue to Mr. Shworan (a) a warrant to purchase up to 1,250 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share (the Preferred Stock Warrant), (b) a warrant to purchase up to 382,243 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share (the Liquidity Preferred Stock Warrant), and (c) a warrant to purchase up to 4,000,000 shares of common stock at an exercise price equal to $0.10 per share (which warrant has specific performance vesting thresholds) (the Common Stock Warrant). In addition, provided that Mr. Shworan is employed by or otherwise providing services to the Company or its subsidiaries on each of January 1, 2018 and 2019, the Company will issue to Mr. Shworan warrants to purchase up to 15,000 shares of Series A Redeemable Convertible Preferred Stock at an exercise price equal to $1.00 per share. The Black-Scholes valuation model was used to calculate the value of Common Stock Warrants granted to Mr. Shworan. The fair value per warrant was calculated at $0.03, and the total fair value of the warrants was calculated at $120,000. The warrants vest according to a schedule based on meeting certain gross profit targets. Compensation expense for an award with a performance condition shall be based on the probable outcome of that performance condition. A probability was assigned to meeting each performance condition and applied to the fair value of the warrants. After applying the probability of meeting the performance conditions, the total fair value of the warrants was calculated at $84,750, which will be expensed evenly over 5 years. The Preferred Stock Warrants were determined to have a fair value of $24 per share, calculated as the liquidation value of $25 per Series A Redeemable Convertible Preferred Stock share less the $1 exercise price. Therefore, a total of $30,000 of stock based compensation expense was recognized in December 2017 related to the 1,250 warrants granted to Mr. Shworan. The Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event as defined in the Companys Certificate of Designation of Series A Redeemable Convertible Preferred Stock. The probability of the liquidity event performance condition is not currently determinable or probable, therefore, no compensation expense has been recognized as of December 31, 2017. The probability will be re-evaluated each reporting period. As at December 31, 2017, there was $9,173,832 in unrecognized stock-based compensation expense related to these Liquidity Preferred Stock Warrants. Since the Liquidity Preferred Stock Warrants only vest and become exercisable on the consummation of a Liquidity Event which is currently not determinable or probable, we are also unable to determine the weighted-average period over which the unrecognized compensation cost will be recognized. The estimated stock-based compensation expense related to the Companys stock-based awards was comprised as follows: Years ended December 31, 2017 2016 Sales and marketing $ 55,181 $ 21,504 General and administrative 44,800 59,982 Development 750 - Stock-based compensation expense $ 100,731 $ 81,486 At December 31, 2017 there was $211,987 of unrecognized compensation cost related to non-vested options and warrants granted to purchase common stock which is expected to be recognized over a weighted-average period of 3.83 years. We calculate the fair value of stock options and warrants granted to purchase common stock under the provisions of FASB ASC 718 using the Black-Scholes valuation model with the following assumptions: 2017 2016 Expected dividend yield - - Expected stock price volatility 219 % 243 % Risk-free interest rate 4 % 4 % Expected life of options (years) 9.0 5.0 Weighted average fair value of options and warrants granted $ 0.03 $ 0.04 Expected volatility is based on the historical volatility of the Companys share price in the period prior to option grant equivalent to the expected life of the options. The expected term is determined under the simplified method as allowed under the provisions of the Securities and Exchange Commissions Staff Accounting Bulletins No. 107 and No. 110, and represents the period of time that options granted are expected to be outstanding. We believe that it is appropriate to use this simplified method as there is not sufficient historical exercise data to provide a reasonable basis upon which to estimate an expected term. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. |
Income taxes | Income taxes are provided in accordance with FASB ASC 740, Income Taxes Deferred tax assets are reduced by a valuation allowance, when, in the opinion of management, it is likely that some portion of the deferred tax asset will not be realized. Deferred taxes are adjusted for the effects of changes in tax laws and rates. Interest and penalties, if applicable, would be recorded in operations. In 2017, the Company recorded Canadian income tax expense of $3,082. In 2016 the Company recorded Canadian income tax expense of $3,018 (see Note 6). |
Use of estimates | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities as of the year end and the reported amount of revenues and expenses during the year. Such estimates include (i) fair values used to test goodwill and capitalized development costs for impairment; (ii) the amount of allowance for doubtful accounts, (iii) the capitalization of software development costs. Actual results and outcomes may differ from managements estimates and assumptions. |
Software development expenses | Software development expenses consist primarily of costs associated with the design, programming, and testing of our software applications during the preliminary project stage. Software development expenses also include costs incurred to maintain our software applications. The Company expensed $1,029,822 and $935,786 in software development costs during the years ended December 31, 2017 and 2016, respectively (see Note 3). |
Revenue recognition | Revenue is recognized over contractual periods as services are performed and when collection of the amount due is reasonably assured. Amounts recognized as revenue are determined based upon contractually agreed-upon fee schedules with our customers. The Company accounts for subscription revenues received in advance of services being performed by deferring such amounts until the related services are performed. The Company considers the following factors when determining if collection of a fee is reasonably assured: customer creditworthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If these factors do not indicate collection is reasonably assured, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash. |
Financial instruments | Financial instruments consist principally of cash, accounts receivable, accounts payable and notes payable. We believe that the fair value of financial instruments approximates the recorded book value of those instruments due to the short-term nature of the instruments, or stated interest rates that approximate market interest rates. |
Accounting Pronouncements | Accounting Pronouncements Not Yet Adopted In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill by eliminating step 2 from the goodwill impairment test. Under the new ASU, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized for the amount by which the carrying amount exceeds its fair value. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company believes that this pronouncement will have no impact on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the classification of certain cash receipts and payments in the statement of cash flows in order to eliminate diversity in practice. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the potential impact that adoption will have on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU is intended to improve the reporting of leasing transactions to provide users of financial statements with more decision-useful information. This ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, using a modified retrospective approach. Early adoption is permitted. The Company is evaluating the potential impact that adoption will have on its consolidated financial statements and related disclosures. In May 2014, the FASB issued ASU No. 2014-09, which creates Topic 606, Revenue from Contracts with Customers. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance. On January 1, 2018, we adopted the guidance in ASC 606 and all the related amendments and applied the new revenue standard to all contracts using the modified retrospective method. The impact of the new revenue standard was not material and there was no adjustment required to the opening balance of retained earnings. We expect the impact of the adoption of the new revenue standard to be immaterial to our net income on an ongoing basis. Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Companys consolidated financial statements upon adoption. |
SIGNIFICANT ACCOUNTING POLICI19
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies Tables | |
Total estimated stock-based compensation expense | Years ended December 31, 2017 2016 Sales and marketing $ 55,181 $ 21,504 General and administrative 44,800 59,982 Development 750 - Stock-based compensation expense $ 100,731 $ 81,486 |
Fair value of stock options granted under the provisions | 2017 2016 Expected dividend yield - - Expected stock price volatility 219 % 243 % Risk-free interest rate 4 % 4 % Expected life of options (years) 9.0 5.0 Weighted average fair value of options and warrants granted $ 0.03 $ 0.04 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property And Equipment Tables | |
Property And Equipment | As of December 31, 2017 2016 Computer equipment $ 1,043,346 $ 955,681 Office furniture and equipment 70,904 69,115 Leasehold improvements 58,464 58,464 Capitalized application software 7,648,494 7,050,550 Total property and equipment 8,821,208 8,133,810 Less: accumulated depreciation (7,400,262 ) (6,760,870 ) Property and equipment, net $ 1,420,946 $ 1,372,940 |
Estimated useful lives of assets | Depreciation is calculated on a straight-line basis over the assets estimated useful lives as follows: Computer equipment 5 years Office Furniture and equipment 5 years Leasehold improvements Term of lease Capitalized application software 3 years |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Intangible Assets Tables | |
Amortized intangible assets | As of December 31, 2017 2016 Amortized intangible assets: Purchase option for office building $ 10,000 $ 10,000 Software licenses 108,085 108,085 Domain names 10,652 10,652 128,737 128,737 Less: accumulated amortization (64,080 ) (58,143 ) Amortized intangible assets, net 64,657 70,594 Unamortized intangible assets: Goodwill associated with purchase of business unit business unit 110,000 110,000 Total intangible assets, net $ 174,657 $ 180,594 |
Estimated amortization expense of definite-lived intangible assets | For year ending December 31, 2018 $ 5,937 For year ending December 31, 2019 5,937 For year ending December 31, 2020 5,937 For year ending December 31, 2021 5,937 For year ending December 31, 2022 5,937 For years thereafter 34,972 Total $ 64,657 |
RELATED PARTIES (Tables)
RELATED PARTIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Related Parties Tables | |
Amounts due to related parties | December 31, 2017 December 31, 2016 Current Long-term Current Long-term Purchase of business unit $ - $ - $ - $ 182,183 Computer hosting services - - - 137,931 Office rent - - 7,365 1,113,079 Other - - 36,847 17,276 Loan - - - 997,072 Lead generation services - - - 1,416,574 Due to Management - - - 7,039,324 Total stock-based compensation $ - $ - $ 44,212 $ 10,903,439 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes Tables | |
Reconciliations of income taxes | 2017 2016 Tax provision (benefit) at the statutory rate of 34% $ (512,019 ) $ (571,643 ) State income taxes, net of federal income tax (46,082 ) (51,448 ) Stock-based compensation 34,249 27,705 Change in federal NOL (1,332 ) 13,693 Expiration of state NOL - 10,181 Federal Rate Change 1,389,456 - Debt Exchange 3,087,572 - Change in valuation allowance and other (3,962,025 ) 571,512 Canadian income tax expense (benefit) 3,082 3,018 Income tax expense (benefit) $ 3,082 $ 3,018 |
Components of deferred tax asset | 2017 2016 Tax effect of net operating loss carryforward $ 2,558,000 $ 3,574,000 Accrued liabilities - 3,369,000 Property & equipment (5,000 ) (8,000 ) Capitalized software (277,000 ) (402,000 ) Other 29,000 45,000 Less valuation allowance (2,305,000 ) (6,578,000 ) Net deferred tax asset $ - $ - |
STOCKHOLDERS_ DEFICIT (Tables)
STOCKHOLDERS’ DEFICIT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders Deficit Tables | |
Stock option and warrant activity | Common Stock Options and Warrants Weighted- Average Exercise Price Outstanding at January 1, 2016 13,372,803 $ 0.04 Warrants granted 3,000,000 $ 0.04 Outstanding at December 31, 2016 16,372,803 $ 0.04 Options granted 500,000 $ 0.04 Warrants granted 9,500,000 $ 0.03 Outstanding at December 31, 2017 26,372,803 $ 0.04 |
Non-vested stock option and warrant activity | Common Stock Options and Warrants Weighted- Average Grant Date Fair Value Outstanding at January 1, 2016 1,878,319 $ 0.06 Granted during the period 3,000,000 $ 0.04 Vested during the period (1,570,004 ) $ 0.04 Outstanding at December 31, 2016 3,308,315 $ 0.05 Granted during the period 10,000,000 $ 0.03 Vested during the period (5,683,315 ) $ 0.03 Outstanding at December 31, 2017 7,625,000 $ 0.04 |
Options and Warrants | Common Stock Options and Warrants Outstanding Common Stock Options and Warrants Exercisable Weighted Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average December 31, Contractual Exercise December 31, Exercise 2017 Life (Years) Price 2017 Price $ 0.03-0.07 26,372,803 11.37 $ 0.04 18,747,803 $ 0.04 |
Preferred stock warrant activity | Weighted- Average Warrants Exercise Price Outstanding at January 1, 2017 - - Warrants granted 383,493 $ 1.00 Outstanding at December 31, 2017 383,493 $ 1.00 |
Non-vested stock option and warrant | Weighted- Average Warrants Exercise Price Outstanding at January 1, 2017 - - Granted during the period 383,493 $ 1.00 Vested during the period (1,250 ) $ 1.00 Outstanding at December 31, 2017 382,243 $ 1.00 |
LOSS PER SHARE (Tables)
LOSS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Loss Per Share Tables | |
Components of loss per share | 2017 2016 Numerator: Net loss $ (1,509,020 ) $ (1,681,303 ) Denominator: Weighted average shares outstanding basic and diluted 90,477,798 90,477,798 Loss per share - basic and diluted $ (0.02 ) $ (0.02 ) Stock options and warrants excluded from the calculation of dilutive loss per share because they were anti-dilutive 16,372,803 16,372,803 |
SUPPLEMENTARY CASH FLOW INFOR26
SUPPLEMENTARY CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Supplementary Cash Flow Information Tables | |
Cash paid for taxes | 2017 2016 Cash paid for Interest $ 1,261 $ 1,214 Cash received for Interest $ - $ 46 Cash paid for taxes - - |
Non-cash amounts related to the Debt Exchange | 2017 2016 Total related party debt forgiven $ 9,181,983 - Total related party debt converted into preferred shares & warrants 3,192,115 - Legal fees associated with debt exchange & forgiveness transactions (47,781 ) - Total non-cash transactions debt exchange & forgiveness transactions $ 12,326,317 - |
SIGNIFICANT ACCOUNTING POLICI27
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Sales and marketing | $ 1,584,479 | $ 1,507,706 |
General and administrative | 2,014,119 | 1,966,713 |
Stock-based compensation expense | 100,731 | 81,486 |
Compensation Agreement [Member] | ||
Sales and marketing | 55,181 | 21,504 |
General and administrative | 44,800 | 59,982 |
Development | 750 | |
Stock-based compensation expense | $ 100,731 | $ 81,486 |
SIGNIFICANT ACCOUNTING POLICI28
SIGNIFICANT ACCOUNTING POLICIES (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Significant Accounting Policies Details 1 | ||
Expected dividend yield | ||
Expected stock price volatility | 219.00% | 243.00% |
Risk-free interest rate | 4.00% | 4.00% |
Expected life of options (years) | 9 years | 5 years |
Weighted average fair value of options and warrants granted | $ 0.03 | $ 0.04 |
SIGNIFICANT ACCOUNTING POLICI29
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | Dec. 28, 2017 | Dec. 28, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Allowance for doubtful accounts | $ 120,000 | $ 120,000 | ||
Bad debt expense | 45,957 | 93,741 | ||
Unrecognized compensation cost | $ 211,987 | |||
Nonvested share-based payments weighted-average period | 3 years 9 months 29 days | |||
Canadian income tax expense | $ 3,082 | 3,018 | ||
Software development costs | $ 1,029,822 | $ 935,786 | ||
Exercise price | $ 0.10 | |||
Fair value of warrants | $ 120,000 | |||
Office furniture and equipment | ||||
Estimated useful lives | 5 years | |||
Preferred Stock Warrants [Member] | ||||
Fair value per warrant | $ 24 | |||
Series A Redeemable Convertible Preferred Stock [Member] | ||||
Fair value of warrants | 3,082,211 | |||
Liquidation value per share | $ 25 | $ 25 | ||
Series A Redeemable Convertible Preferred Stock [Member] | Minimum [Member] | ||||
Exercise price | $ 1 | |||
Liquidity Preferred Stock Warrant [Member] | ||||
Unrecognized stock-based compensation expense | $ 9,173,832 | |||
David M. Shworan [Member] | ||||
Fair value per warrant | $ 0.03 | |||
Fair value of warrants | $ 120,000 | |||
Stock based compensation expense | 30,000 | |||
David M. Shworan [Member] | Compensation Agreement [Member] | ||||
Exercise price | $ 1 | |||
Stock based compensation expense | $ 30,000 | |||
David M. Shworan [Member] | CommonStockWarrant [Member] | Compensation Agreement [Member] | ||||
Fair value of warrants | $ 84,750 | |||
David M. Shworan [Member] | Series A Redeemable Convertible Preferred Stock [Member] | ||||
Warrant to purchase shares | 15,000 | |||
Exercise price | $ 1 | |||
David M. Shworan [Member] | Series A Redeemable Convertible Preferred Stock [Member] | CommonStockWarrant [Member] | Compensation Agreement [Member] | ||||
Warrant to purchase shares | 4,000,000 | |||
Exercise price | $ 0.10 | |||
David M. Shworan [Member] | Liquidity Preferred Stock Warrant [Member] | Series A Redeemable Convertible Preferred Stock [Member] | Compensation Agreement [Member] | ||||
Warrant to purchase shares | 382,243 | |||
Exercise price | $ 1 | $ 1 | ||
David M. Shworan [Member] | Preferred Stock Warrant [Member] | Series A Redeemable Convertible Preferred Stock [Member] | Compensation Agreement [Member] | ||||
Warrant to purchase shares | 1,250 | |||
Exercise price | $ 1 |
LIQUIDITY (Details Narrative)
LIQUIDITY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Liquidity Details Narrative | ||
Accumulated deficit | $ (21,526,062) | $ (20,017,042) |
Net loss | (1,509,020) | (1,681,303) |
Cash flow from operating activities | 1,058,804 | 844,320 |
Working capital deficit | (1,237,865) | |
Deferred revenue | 706,819 | 549,233 |
Interest expense - related party | $ (1,063,769) | $ (1,014,379) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Total property and equipment | $ 8,821,208 | $ 8,133,810 |
Less: accumulated depreciation | (7,400,262) | (6,760,870) |
Property and equipment, net | 1,420,946 | 1,372,940 |
Computer equipment | ||
Total property and equipment | 1,043,346 | 955,681 |
Office furniture and equipment | ||
Total property and equipment | 70,904 | 69,115 |
Leasehold improvements | ||
Total property and equipment | 58,464 | 58,464 |
Capitalized application software | ||
Total property and equipment | $ 7,648,494 | $ 7,050,550 |
PROPERTY AND EQUIPMENT (Detai32
PROPERTY AND EQUIPMENT (Details 1) | 12 Months Ended |
Dec. 31, 2017 | |
Computer equipment | |
Estimated useful lives | 5 years |
Office furniture and equipment | |
Estimated useful lives | 5 years |
Leasehold improvements | |
Estimated useful lives | Term of lease |
Capitalized application software | |
Estimated useful lives | 3 years |
PROPERTY AND EQUIPMENT (Detai33
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property And Equipment Details Narrative | ||
Capitalized application software | $ (789,899) | $ (690,051) |
Amortization expenses | 724,451 | 757,864 |
Remaining book value of capitalized application software | 1,149,032 | |
Depreciation expense for equipment and leaseholds | $ 106,896 | $ 97,415 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Amortized intangible assets: | ||
Purchase option for office building | $ 10,000 | $ 10,000 |
Software licenses | 108,085 | 108,085 |
Domain names | 10,652 | 10,652 |
Amortized intangible assets, gross | 128,737 | 128,737 |
Less: accumulated amortization | (64,080) | (58,143) |
Amortized intangible assets, net | 64,657 | 70,594 |
Unamortized intangible assets: | ||
Goodwill associated with purchase of business unit | 110,000 | 110,000 |
Total intangible assets, net | $ 174,657 | $ 180,594 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) | Dec. 31, 2017USD ($) |
Intangible Assets Details 1 | |
For year ending December 31, 2018 | $ 5,937 |
For year ending December 31, 2019 | 5,937 |
For year ending December 31, 2020 | 5,937 |
For year ending December 31, 2021 | 5,937 |
For year ending December 31, 2022 | 5,937 |
For years thereafter | 34,972 |
Total | $ 64,657 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Amortization expense for intangible assets | $ 5,937 | $ 5,937 |
Purchase option [Member] | ||
Estimated useful life | 5 years | |
Software licenses [Member] | ||
Estimated useful life | 20 years | |
Domain names [Member] | ||
Estimated useful life | 20 years |
RELATED PARTIES (Details)
RELATED PARTIES (Details) - USD ($) | Dec. 31, 2017 | Dec. 28, 2017 | Dec. 31, 2016 |
Due to related parties, Current | $ 44,212 | ||
Due to related parties, Long-term | 10,903,439 | ||
Purchase of Business Unit [Member] | |||
Due to related parties, Current | |||
Due to related parties, Long-term | $ 208,083 | 182,183 | |
Computer Hosting Services [Member] | |||
Due to related parties, Current | |||
Due to related parties, Long-term | 223,565 | 137,931 | |
Office Rent [Member] | |||
Due to related parties, Current | 7,365 | ||
Due to related parties, Long-term | 2,268,995 | 1,113,079 | |
Other [Member] | |||
Due to related parties, Current | 36,847 | ||
Due to related parties, Long-term | 17,276 | ||
Loan [Member] | |||
Due to related parties, Current | |||
Due to related parties, Long-term | 1,079,975 | 997,072 | |
Lead Generation Services [Member] | |||
Due to related parties, Current | |||
Due to related parties, Long-term | $ 1,551,975 | 1,416,574 | |
Due to Management [Member] | |||
Due to related parties, Current | |||
Due to related parties, Long-term | $ 7,039,324 |
RELATED PARTIES (Details Narrat
RELATED PARTIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 28, 2017 | Dec. 31, 2016 | |
Due to related parties, Long-term | $ 10,903,439 | ||
Bravenet [Member] | |||
Related parties periodic payment | $ 6,250 | ||
Frequency of periodic payment | Monthly | ||
Employment Agreement [Member] | |||
Accrued interest rate | 10.00% | ||
Due to related parties, Long-term | $ 8,024,232 | ||
Office Rent [Member] | |||
Accrued interest rate | 10.00% | ||
Due to related parties, Long-term | $ 2,268,995 | 1,113,079 | |
Office Rent [Member] | 410734 B.C. Ltd [Member] | |||
Related parties periodic payment | $ 7,365 | ||
Frequency of periodic payment | Monthly | ||
Purchase of Business Unit [Member] | |||
Accrued interest rate | 10.00% | ||
Accrued amount due to related parties | $ 110,000 | ||
Due to related parties, Long-term | $ 208,083 | 182,183 | |
Loan [Member] | |||
Accrued interest rate | 10.00% | ||
Due to related parties, Long-term | $ 1,079,975 | 997,072 | |
Computer Hosting Services [Member] | |||
Accrued interest rate | 10.00% | ||
Due to related parties, Long-term | $ 223,565 | 137,931 | |
Lead Generation Services [Member] | |||
Accrued interest rate | 10.00% | ||
Due to related parties, Long-term | $ 1,551,975 | $ 1,416,574 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details | ||
Tax provision (benefit) at the statutory rate of 34% | $ (512,019) | $ (571,643) |
State income taxes, net of federal income tax | (46,082) | (51,448) |
Stock-based compensation | 34,249 | 27,705 |
Change in federal NOL | (1,332) | 13,693 |
Expiration of state NOL | 10,181 | |
Federal Rate Change | 1,389,456 | |
Debt Exchange | 3,087,572 | |
Change in valuation allowance and other | (3,962,025) | 571,512 |
Canadian income tax expense (benefit) | 3,082 | 3,018 |
Income tax expense (benefit) | $ 3,082 | $ 3,018 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Taxes Details 1 | ||
Tax effect of net operating loss carryforward | $ 2,558,000 | $ 3,574,000 |
Accrued liabilities | 3,369,000 | |
Property & equipment | (5,000) | (8,000) |
Capitalized software | (277,000) | (402,000) |
Other | 29,000 | 45,000 |
Less valuation allowance | (2,305,000) | (6,578,000) |
Net deferred tax asset |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details Narrative | ||
Canadian income tax expense (benefit) | $ 3,082 | $ 3,018 |
Net operating loss carryforwards for federal income tax | 11,748,000 | |
Net operating loss carryforwards for state income tax | $ 2,943,000 | |
Operating loss carryforwards expiration period | 2,037 | |
Decreased in valuation allowance | $ 4,273,000 | |
Federal statutory tax rate | 21.00% |
STOCKHOLDERS' DEFICIT (Details)
STOCKHOLDERS' DEFICIT (Details) - Stock Option And Warrant - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Common Stock Options and Warrants | ||
Outstanding - Opening Balance | 16,372,803 | 13,372,803 |
Options granted | 500,000 | |
Warrants granted | 9,500,000 | 3,000,000 |
Outstanding - Ending Balance | 26,372,803 | 16,372,803 |
Weighted-Average Exercise Price | ||
Weighted-Average Exercise Price Outstanding - Opening Balance | $ 0.04 | $ 0.04 |
Options granted | 0.04 | |
Warrants granted | 0.03 | 0.04 |
Weighted-Average Exercise Price Outstanding - Ending Balance | $ 0.04 | $ 0.04 |
STOCKHOLDERS' DEFICIT (Details
STOCKHOLDERS' DEFICIT (Details 1) - Stock Option And Warrant - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Common Stock Options and Warrants | ||
Outstanding - Opening Balance | 3,308,315 | 1,878,319 |
Granted during the period | 10,000,000 | 3,000,000 |
Vested during the period | (5,683,315) | (1,570,004) |
Outstanding - Ending Balance | 7,625,000 | 3,308,315 |
Weighted- Average Grant Date Fair Value | ||
Weighted-Average Exercise Price Outstanding - Opening Balance | $ 0.05 | $ 0.06 |
Granted during the period | 0.03 | 0.04 |
Vested during the period | 0.03 | 0.04 |
Weighted-Average Exercise Price Outstanding - Ending Balance | $ 0.04 | $ 0.05 |
STOCKHOLDERS' DEFICIT (Detail44
STOCKHOLDERS' DEFICIT (Details 2) - 0.03-0.07 [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Number Outstanding | 26,372,803 |
Weighted Average Remaining Contractual Life | 11 years 4 months 123 days |
Weighted-Average Exercise Price | $ / shares | $ 0.04 |
Number Exercisable | 18,747,803 |
STOCKHOLDERS' DEFICIT (Detail45
STOCKHOLDERS' DEFICIT (Details 3) - Preferred stock warrant [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Warrants | |
Outstanding - Opening Balance | shares | |
Warrants granted | shares | 383,493 |
Outstanding - Ending Balance | shares | 383,493 |
Weighted-Average Exercise Price | |
Weighted-Average Exercise Price Outstanding - Opening Balance | $ / shares | |
Warrants granted | $ / shares | 1 |
Weighted-Average Exercise Price Outstanding - Ending Balance | $ / shares | $ 1 |
STOCKHOLDERS' DEFICIT (Detail46
STOCKHOLDERS' DEFICIT (Details 4) - Non-vested preferred stock warrant [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Warrants | |
Outstanding - Opening Balance | shares | |
Granted during the period | shares | 383,493 |
Vested during the period | shares | (1,250) |
Outstanding - Ending Balance | shares | 382,243 |
Weighted-Average Exercise Price | |
Weighted-Average Exercise Price Outstanding - Opening Balance | $ / shares | |
Granted during the period | $ / shares | 1 |
Vested during the period | $ / shares | 1 |
Weighted-Average Exercise Price Outstanding - Ending Balance | $ / shares | $ 1 |
STOCKHOLDERS' DEFICIT (Detail47
STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($) | Dec. 28, 2017 | Dec. 28, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||||
Preferred stock, shares designated | 550,000 | 0 | |||||
Warrants issued to purchase of common stock | 4,000,000 | ||||||
Warrants exercise price | $ 0.10 | ||||||
Fair value of warrants | $ 120,000 | ||||||
Professional fees associated with debt exchange & forgiveness transactions | 47,781 | ||||||
Due to related parties, Long-term | $ 10,903,439 | ||||||
Employment Agreement [Member] | |||||||
Due to related parties, Long-term | $ 8,024,232 | 8,024,232 | |||||
David M. Shworan [Member] | |||||||
Fair value of warrants | $ 120,000 | ||||||
Stock based compensation expense | $ 30,000 | ||||||
1999 Equity incentive compensation plan [Member] | |||||||
Options authorized | 2,500,000 | ||||||
2003 Equity incentive compensation plan [Member] | |||||||
Options authorized | 15,000,000 | ||||||
Compensation Agreement [Member] | |||||||
Conversion price, Description | The exercise price of the common stock underlying an option will be determined by the Board of Directors or compensation committee and may be equal to, greater than, or less than the market value of our common stock at the date of grant but in no event less than 50% of such market value | ||||||
Options authorized | 17,500,000 | ||||||
Compensation Agreement [Member] | Maximum [Member] | |||||||
Warrant extend term | 10 years | ||||||
Compensation Agreement [Member] | David M. Shworan [Member] | |||||||
Warrants issued to purchase of common stock | 1,250 | ||||||
Warrants exercise price | $ 1 | ||||||
Stock based compensation expense | $ 30,000 | ||||||
Series A Redeemable Convertible Preferred Stock [Member] | |||||||
Preferred stock, shares designated | 550,000 | 550,000 | |||||
Conversion of Stock, Description | the right to convert their shares into shares of common stock at the rate of 83.33 shares of common stock for one share of Series A Redeemable Convertible Preferred Stock, | ||||||
Price per share | $ 25 | $ 25 | |||||
Convertible Preferred stock issued | 127,685 | 127,685 | 127,685 | 0 | |||
Conversion price, Description | the closing price of a share of common stock on a securities exchange or actively traded over-the-counter market has exceeded $0.30 for ninety (90) consecutive trading days. | ||||||
Aggregate indebtedness value | $ 3,192,116 | $ 3,192,116 | |||||
Redeemable value | 25 | 25 | |||||
Intrinsic value | 25 | ||||||
Total fair value | 3,192,125 | 3,192,125 | |||||
Fair value of warrants | 3,082,211 | ||||||
Liquidation value | $ 25 | $ 25 | |||||
Series A Redeemable Convertible Preferred Stock [Member] | Subsequent Event [Member] | |||||||
Redeemable convertible preferred stock liquidation value per share | $ 25 | $ 25 | $ 25 | ||||
Proceeds from issuance of redeemable convertible preferred stock | $ 400,000 | $ 375,000 | $ 350,000 | ||||
Aggregate share of redeemable convertible preferred stock | 1,000 | 800 | 600 | ||||
Series A Redeemable Convertible Preferred Stock [Member] | David M. Shworan [Member] | |||||||
Warrants exercise price | $ 1 | ||||||
Series A Redeemable Convertible Preferred Stock [Member] | Compensation Agreement [Member] | David M. Shworan [Member] | Liquidity Preferred Stock Warrant [Member] | |||||||
Warrants issued to purchase of common stock | 382,243 | ||||||
Warrants exercise price | $ 1 | $ 1 | |||||
CommonStockWarrant [Member] | Compensation Agreement [Member] | David M. Shworan [Member] | |||||||
Warrants issued to purchase of common stock | 4,000,000 | ||||||
Warrants exercise price | $ 0.10 | ||||||
Fair value of warrants | $ 84,750 | ||||||
Common stock warrants [Member] | |||||||
Aggregate indebtedness value | $ 3,192,116 | 3,192,116 | |||||
Fair value of warrants | $ 109,905 | ||||||
Warrant [Member] | |||||||
Fair value per warrant | $ 0.03 | $ 0.03 | |||||
Stock Option And Warrant | |||||||
Granted | 10,000,000 | 3,000,000 | |||||
Aggregate intrinsic value of preferred stock warrants outstanding | $ 9,203,832 | ||||||
Aggregate intrinsic value of preferred stock warrants exercisable | $ 30,000 | ||||||
Stock Option And Warrant | Series A Redeemable Convertible Preferred Stock [Member] | |||||||
Warrants exercise price | $ 1 | ||||||
Liquidation value | $ 25 | ||||||
Warrant [Member] | |||||||
Granted | 383,493 | ||||||
Warrants exercisable | 1,250 | ||||||
Weighted average remaining contractual life | 20 years | ||||||
Harrison [Member] | Bravenet [Member] | Debt Forgiveness Agreement [Member] | |||||||
Aggregate indebtedness value | $ 1,157,752 | $ 1,157,752 | |||||
Amount received in exchange for debt forgiveness | 1 | ||||||
Harrison [Member] | Bravenet [Member] | Debt Exchange Agreement [Member] | |||||||
Aggregate indebtedness value | $ 3,192,116 | $ 3,192,116 |
LOSS PER SHARE (Details)
LOSS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Numerator: | ||
Net loss | $ (1,509,020) | $ (1,681,303) |
Denominator: | ||
Weighted average shares outstanding - basic and diluted | 90,477,798 | 90,477,798 |
Loss per share - basic and diluted | $ (0.02) | $ (0.02) |
Stock options and warrants excluded from the calculation of dilutive loss per share because they were anti-dilutive | 16,372,803 | 16,372,803 |
COMMITMENTS (Details Narrative)
COMMITMENTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments Details Narrative | ||
Rent expense of operating lease | $ 283,065 | $ 266,967 |
Office lease, 2018 | 310,551 | |
Office lease, 2019 | 315,434 | |
Office lease, 2020 | 185,095 | |
Office lease, 2021 | 33,023 | |
Office lease, 2022 | 0 | |
Office lease commitments total | $ 844,103 |
SUPPLEMENTARY CASH FLOW INFOR50
SUPPLEMENTARY CASH FLOW INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Supplementary Cash Flow Information | ||
Cash paid for Interest | $ 1,261 | $ 1,214 |
Cash received for Interest | 46 | |
Cash paid for taxes |
SUPPLEMENTARY CASH FLOW INFOR51
SUPPLEMENTARY CASH FLOW INFORMATION (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Supplementary Cash Flow Information Details 1 | ||
Total related party debt forgiven | $ 9,181,983 | |
Total related party debt converted into preferred shares & warrants | 3,192,115 | |
Legal fees associated with debt exchange & forgiveness transactions | (47,781) | |
Total non-cash transactions – debt exchange & forgiveness transactions | $ 12,326,317 |