Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Apr. 14, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | DEBT RESOLVE INC | ||
Entity Central Index Key | 1,106,645 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
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 | 104,612,082 | ||
Entity Public Float | $ 1,550,532 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 30,480 | $ 55,605 |
Accounts receivable, net | 3,463,161 | 28,732 |
Prepaid expenses | 36,893 | 32,743 |
Total current assets | 3,530,534 | 117,080 |
Total assets | 3,530,534 | 117,080 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 3,480,580 | 3,388,245 |
Due to shareholders | 242,741 | 458,796 |
Deferred revenue | 1,260,137 | $ 25,343 |
Due to factor | 2,442,935 | |
Notes payable, current portion | 536,132 | $ 427,867 |
Notes payable-related party, net of unamortized discount of $6,105 and $-0- as of December 31, 2015 and 2014, respectively | 789,616 | 298,221 |
Convertible Short-term notes, net of deferred debt discount of $23,410 and $-0- as of December 31, 2015 and 2014, respectively | 2,034,590 | 228,500 |
Lines of credit, related parties | $ 548,893 | 151,000 |
Derivative liabilities | 336,582 | |
Total current liabilities | $ 11,335,624 | 5,314,554 |
Long term debt: | ||
Notes payable, related party, net of unamortized debt discount of $3,450 and $25,011 as of December 31, 2015 and 2014, respectively | 136,550 | 404,989 |
Convertible long-term notes, net of deferred debt discount of $73,244 and $79,919 as of December 31, 2015 and 2014, respectively | 251,756 | 1,749,581 |
Total liabilities | $ 11,723,930 | 7,469,124 |
Stockholders' deficiency: | ||
Preferred stock, $0.001 par value; 10,000,000 shares authorized Series A Convertible Preferred stock, $0.001 par value; 5,000,000 shares designated; -0- and 595,000 shares issued and outstanding as of December 31, 2015 and 2014, respectively | 595 | |
Common stock, $0.001 par value, 500,000,000 and 200,000,000 shares authorized; 104,612,082 and 98,187,082 shares issued and outstanding as of December 31, 2015 and 2014, respectively | $ 104,612 | 98,187 |
Additional paid in capital | 66,916,656 | 66,620,813 |
Accumulated deficit | (74,807,693) | (74,029,266) |
Stockholders' deficiency attributable to Debt Resolve, Inc. | (7,786,425) | (7,309,671) |
Non-controlling interest | (406,971) | (42,373) |
Total stockholders' deficiency | (8,193,396) | (7,352,044) |
Total liabilities and stockholders' deficiency | $ 3,530,534 | $ 117,080 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current liabilities: | ||
Notes payable, related party, net of unamortized debt discount | $ 6,105 | $ 0 |
Convertible Short-term notes, net of deferred debt discount | 23,410 | 0 |
Long term debt: | ||
Notes payable, related party, net of unamortized debt discount | 3,450 | 25,011 |
Convertible long-term notes, net of deferred debt discount | $ 73,244 | $ 79,919 |
Stockholders' deficiency: | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Series A Convertible Preferred stock par value | $ 0.001 | $ 0.001 |
Series A Convertible Preferred stock shares designated | 5,000,000 | 5,000,000 |
Series A Convertible Preferred stock shares issued | 0 | 595,000 |
Series A Convertible Preferred stock shares outstanding | 0 | 595,000 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 500,000,000 | 200,000,000 |
Common stock shares issued | 104,612,082 | 98,187,082 |
Common stock shares outstanding | 104,612,082 | 98,187,082 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statements Of Operations | ||
Revenues: | $ 5,713,905 | $ 155,976 |
Costs and expenses: | ||
Payroll, payroll taxes, penalties and related expenses | 2,076,220 | 603,828 |
Selling and marketing expenses | 2,036,727 | 47,905 |
General and administrative expenses | 2,014,604 | 673,812 |
Total operating expenses | 6,127,551 | 1,325,545 |
Loss from operations | (413,646) | (1,169,569) |
Other income: | ||
Gain on change in fair value of derivative liabilities | 381,968 | 743,924 |
Gain on settlement of debt | 650,319 | 320 |
Financing expenses | (1,666,238) | (379,829) |
Amortization of debt discounts | (95,427) | (46,331) |
Total other income (expense) | (729,379) | 318,084 |
Net loss before provision for income taxes | $ (1,143,025) | $ (851,485) |
Income tax (benefit) | ||
Net loss | $ (1,143,025) | $ (851,485) |
Net loss attributable to non-controlling interest | 364,598 | 42,373 |
NET LOSS ATTRIBUTABLE TO DEBT RESOLVE, INC. | $ (778,427) | $ (809,112) |
Net loss per common share -basic and diluted | $ (0.01) | $ (0.01) |
Weighted average number of common shares outstanding, basic and diluted | 99,782,356 | 98,159,754 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY (EQUITY) - USD ($) | Preferred stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2013 | 98,137,703 | |||||
Beginning Balance, Amount at Dec. 31, 2013 | $ 98,138 | $ 66,834,457 | $ (73,220,154) | $ (6,287,559) | ||
Fair value of vesting options issued to employees for services | 17,500 | 17,500 | ||||
Net reclassification of common stock equivalents issued in excess of aggregate authorized availability | (703,566) | (703,566) | ||||
Common shares issued in settlement of convertible note payable and accrued interest, Shares | 49,379 | |||||
Common shares issued in settlement of convertible note payable and accrued interest, Amount | $ 49 | 5,876 | 5,925 | |||
Preferred shares issued for payment of services, Shares | 595,000 | |||||
Preferred shares issued for payment of services, Amount | $ 595 | 177,905 | 178,500 | |||
Beneficial conversion feature related to convertible notes | 150,976 | 150,976 | ||||
Fair value of preferred stock warrants issued for services | 137,665 | 137,665 | ||||
Net loss | $ (809,112) | $ (42,373) | (851,485) | |||
Ending Balance, Shares at Dec. 31, 2014 | 595,000 | 98,187,082 | ||||
Ending Balance, Amount at Dec. 31, 2014 | $ 595 | $ 98,187 | 66,620,813 | $ (74,029,266) | $ (42,373) | (7,352,044) |
Fair value of vesting options issued to employees for services | 21,250 | 21,250 | ||||
Net reclassification of common stock equivalents issued in excess of aggregate authorized availability | (628,457) | (628,457) | ||||
Preferred shares issued for payment of services, Shares | 47,500 | |||||
Preferred shares issued for payment of services, Amount | $ 48 | 2,802 | 2,850 | |||
Beneficial conversion feature related to convertible notes | 96,705 | 96,705 | ||||
Fair value of common stock warrants issued for services | 100,276 | 100,276 | ||||
Fair value of preferred stock warrants issued for services | 125,978 | $ 125,978 | ||||
Common shares issued in conversion of preferred shares, Shares | (642,500) | 6,425,000 | ||||
Common shares issued in conversion of preferred shares, Amount | $ (643) | $ 6,425 | (5,782) | |||
Reclassification of fair value of derivative liability to equity upon increase in authorized common shares | 583,071 | $ 583,071 | ||||
Net loss | $ (778,427) | $ (364,598) | (1,143,025) | |||
Ending Balance, Shares at Dec. 31, 2015 | 104,612,082 | |||||
Ending Balance, Amount at Dec. 31, 2015 | $ 104,612 | $ 66,916,656 | $ (74,807,693) | $ (406,971) | $ (8,193,396) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,143,025) | $ (851,485) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of debt discounts | 95,427 | $ 46,331 |
Bad debts | 931,242 | |
Stock based compensation | 250,354 | $ 333,665 |
Gain on change in fair value of derivative liability | (381,968) | (743,924) |
Gain on settlement of debt | (650,319) | (320) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,922,736) | (168) |
Prepaid expenses | $ (4,150) | 15,641 |
Security deposit | 1,000 | |
Accounts payable and accrued liabilities | $ 530,029 | 228,843 |
Due to shareholders | (3,421) | 3,467 |
Deferred revenue | 1,234,974 | 25,343 |
Net cash used in operating activities | $ (1,063,783) | $ (941,607) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from short term notes | $ 150,000 | |
Proceeds from short term notes, related party | 485,393 | |
Repayment of short term notes | (41,735) | $ (75,000) |
Proceeds from long term notes | 375,000 | 750,000 |
Proceeds from long term notes, related party | $ 70,000 | 325,000 |
Repayments of long term notes, related party | (10,000) | |
Net cash provided by financing activities | $ 1,038,658 | 990,000 |
Net (decrease) increase in cash and cash equivalents | (25,125) | 48,393 |
Cash at beginning of period | 55,605 | 7,212 |
Cash at end of period | 30,480 | 55,605 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid during period for interest | $ 24,463 | $ 25,657 |
Cash paid during period for taxes | ||
Non-cash financing and investing transactions: | ||
Beneficial conversion feature on convertible notes | $ 96,705 | $ 150,976 |
Common shares issued in settlement of note payable and accrued interest | $ 5,925 | |
Reclassification of derivative liability to equity | $ 583,071 |
BASIS AND BUSINESS PRESENTATION
BASIS AND BUSINESS PRESENTATION | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 1 - BASIS AND BUSINESS PRESENTATION | Debt Resolve, Inc. (the "Company") was incorporated under the laws of the State of Delaware on April 21, 1997. The Company offers its service as a Software-as-a-Service (SaaS) model, enabling clients to introduce this collection or payment software option with no modifications to their existing collections computer systems. Its products capitalize on using the Internet as a tool for communication, resolution, settlement and payment of delinquent or defaulted consumer debt and as part of a complete accounts receivable management solution for consumer creditors. In December 2014, the Company, jointly with LSH, LLC, organized Progress Advocates LLC, a Delaware limited liability company for the purpose to provide services in the student loan document preparation industry with ownership interests of 51% and 49% for the Company and LSH, LLC, respectively. The Company operates as one operating segment. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES | A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows: Basis of Presentation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. The non-controlling interest represents the minority owners' share of its net operating results. Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, revenues and expenses and certain disclosures. The most significant estimates are those used in determination of derivative liabilities and stock compensation. Accordingly, actual results could differ from those estimates. Revenue Recognition In recognition of the principles expressed in Accounting Standards Codification subtopic 605-10, Revenue should not be recognized until it is realized or realizable and earned, and given the element of doubt associated with collectability of an agreed settlement on past due debt, the Company postpones recognition of all contingent revenue until the client receives payment from the debtor. As is required by SAB 104, revenues are considered to have been earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the successful collection of past due debts using the Company's system and/or, for clients under a flat fee arrangement, the successful availability of the Company's system to its customers. Revenues for the preparation of student loan documentation are earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the completed, delivered and accepted student loan package. The Company may sell its products separately or in various bundles that include multiple elements such as upfront fees, monitoring and other services. The Company also earns revenue from collection agencies, collection law firms and lenders that implemented our online system. The Company's current contracts provide for revenue based on a percentage of the amount of debt collected, a fee for accounts loaded into the Debt Resolve Service or through a flat monthly fee. Revenues for set-up fees, percentage contingent collection fees, fixed settlement fees, monthly fees, etc. are accounted for as Multiple-Element Arrangements under ASC 605-10 which incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arrangements ("ASC 605-25"). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The Company defers any revenue for which the product or service has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. At December 31, 2015 and 2014, the Company had deferred revenues of $1,260,137 and $25,343, respectively. Concentrations of Credit Risk The Company's consolidated financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the Company's cash and cash equivalents in interest-bearing accounts does not exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management. Accounts Receivable and Sales Concentration The Company extends credit to large, mid-size and small companies for collection services. At December 31, 2014, one client represented receivables of $10,000 (35%). The Company did not have a concentration in receivables in 2015. The Company does not generally require collateral or other security to support customer receivables. Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability and the allowance for doubtful accounts is adjusted accordingly. Management determines collectability based on their experience and knowledge of the customers. As of December 31, 2015 and 2014, allowance for doubtful accounts was $600,000 and $-0-, respectively. The Company did not have a revenue concentration for the year ended December 31, 2015 and three clients accounting for 17%, 38% and 20% of total revenue for the year ended December 31, 2014. Cash and Cash Equivalents For purposes of the consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. Fair Values Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The carrying value of the Company's cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity. As of December 31, 2015 or 2014, the Company did not have any items that would be classified as level 1 or 2 disclosures. The Company recognized its derivative liabilities as level 3 and values its derivatives using the methods discussed in Note 10. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 10 are that of volatility and market price of the underlying common stock of the Company. Property and Equipment Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Property and equipment is fully depreciated as of December 31, 2015 and 2014. Net Loss per Common Share, basic and diluted The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share ("ASC 260-10"). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the "treasury stock" and/or "if converted" methods as applicable. The computation of basic and diluted income (loss) per share as of December 31, 2015 and 2014 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2015 2014 Convertible notes payable 43,055,000 35,155,000 Preferred stock - 5,950,000 Options to purchase common stock 15,592,434 17,045,434 Warrants to purchase common stock 72,385,000 90,861,684 Warrants to purchase Series A preferred stock 25,245,000 19,145,000 Totals 156,277,434 168,157,118 Stock Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of December 31, 2015, there were outstanding stock options to purchase 15,592,434 shares of common stock, 13,592,434 shares of which were vested. (see Note 13) Segment Information Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company's only material principal operating segment. Long-Lived Assets The Company follows Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Defined Contribution (401k) Plan The Company maintains a defined contribution (401k) plan for its employees. The plan provides for a company match in the amount of 100% of the first 3% of pre-tax salary contributed and 50% of the next 3% of pre-tax salary contributed. Due to the severe cash limitations that the Company has experienced, the match was suspended from mid-2008 to the present and will only be re-instated when business conditions warrant. Derivative Liability The Company accounts for derivatives in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At December 31, 2015 and 2014, the Company did not have any derivative instruments that were designated as hedges. At December 31, 2014 and through December 22, 2015, the Company had the possibility of exceeding their common shares authorized when considering the number of possible shares that may be issuable to satisfy settlement provisions for all existing instruments that could be settled in shares. Income Taxes Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2015 and 2014, the Company has not recorded any unrecognized tax benefits. The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2015 and 2014. Advertising Costs The Company expenses the cost of advertising and promotion of its services when incurred. The advertising costs paid to related party were $2,036,531 and $45,000 for the years ended December 31, 2015 and 2014, respectively. All of which were used for the acquisition of leads for its majority owned subsidiary, Progress Advocates LLC. Reclassification Recent accounting pronouncements In November 2015, the FASB issued (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes. In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance. The FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-01 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The Company has not yet determined the effect of the adoption of this standard on the Company's consolidated financial position and results of operations. There were other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows. |
GOING CONCERN AND MANAGEMENT'S
GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 3 - GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $778,427 and $809,112 for the years ended December 31, 2015 and 2014 respectively. Additionally, the Company has negative working capital (total current liabilities exceeded total current assets) of $7,805,090 as of December 31, 2015 and is in default on certain debt obligations (see Note 6). These factors among others raise substantial doubt about the Company's ability to continue as a going concern. While distributions from the Company's majority owned joint venture have improved liquidity, the Company continues to raise additional funds through private debt offerings to meet short term needs. In addition, the Company is undertaking further steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond and to address its lack of liquidity by raising additional funds, either in the form of debt or equity or some combination thereof. However, there can be no assurance that the Company can successfully accomplish these steps and or business plans, and it is uncertain that the Company will achieve a profitable level of operations and be able to obtain additional financing. The Company's continued existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. |
ACCOUNTS RECEIVABLE AND DUE TO
ACCOUNTS RECEIVABLE AND DUE TO FACTOR | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 4 - ACCOUNTS RECEIVABLE AND DUE TO FACTOR | Accounts receivable are receivables generated from sales to customers and progress billings on performance type contracts. Amounts included in accounts receivable are deemed to be collectible within the Company's operating cycle. Management provides an allowance for doubtful accounts based on the Company's historical losses, specific customer circumstances, and general economic conditions. Periodically, management reviews accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables when all attempts to collect have been exhausted and the prospects for recovery are remote. As of December 31, 2015 and 2014, the Company's accounts receivable was $3,463,161 and $28,732, net of allowance for doubtful accounts of $600,000 and $-0-, respectively. The Company's majority owned subsidiary, Progress Advocates LLC entered into a factoring agreement on a recourse basis. The recourse agreement provides for the Company to receive an advance of between 30% - 96% of any accounts receivable that it factors with 62% - 0% held in reserve. The average amount received from these recourse agreements was 50.9% and the average amount reserved was 42.1%. The factoring agreement also provides for discount fees of 4% - 8% of the face value of any accounts receivable factored, plus additional charges for other transaction fees. The agreement may be terminated by either party at any time and will continue unless either party formally cancels. As of December 31, 2015 and 2014, the Company's outstanding obligation under the factoring agreement was $2,442,935 and $-0-, respectively. |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Accounts payable and accrued liabilities as of December 31, 2015 and 2014 are comprised of the following: 2015 2014 Accounts payable $ 740,881 $ 1,025,919 Accrued interest 1,912,436 1,473,686 Payroll and related accruals, net of advance to employees 827,263 888,640 Total $ 3,480,580 $ 3,388,245 During the year ended December 31, 2014, the Company settled an accounts payable of $320 for $-0- resulting in a gain on settlement of debt of $320. During the year ended December 31, 2015, the Company settled or wrote off old outstanding accounts payable for less than the recorded liability and recognized a $650,319 gain on old debt. |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 6 - NOTES PAYABLE | As of December 31, 2015 and 2014, notes payable are as follows: 2015 2014 Bank loans $ - $ 50,000 Note payable, dated June 1, 2015 45,765 - Note payable, dated July 2, 2015 12,500 - Note payable, dated August 28, 2015 50,000 - Note payable, dated December 17, 2015 50,000 - Investor notes payable, 12% per annum 377,867 377,867 Total 536,132 427,867 Less current portion 536,132 427,867 Long term portion $ -0- $ -0- Bank loans On October 7, 2011, a bank loan (unsecured) was issued in the amount of $237,500 at a 6.25% interest rate, with monthly payments of $6,250 matured on December 1, 2014, and guaranteed by a director. During the years ended December 31, 2015 and 2014, the Company repaid $50,000, and $75,000, respectively. The outstanding balance on the bank loan as of December 31, 2015 and 2014 is $-0- and $50,000, respectively. Notes payable On June 1, 2015, the Company issued an unsecured note payable for $50,000 due October 1, 2016 with interest at 12% per annum, paid monthly beginning June 2015 and principal payments beginning October 2015. The outstanding balance as of December 31, 2015 is $45,765. On July 2, 2015, the Company issued an unsecured note payable for $12,500 due March 15, 2016 with interest at 10% per annum, paid monthly beginning October 2015 and principal payments beginning February 2016. On August 28, 2015, the Company issued an unsecured note payable for $50,000 due February 28, 2016 with interest at 12% per annum, due at maturity. On December 17, 2015, the Company issued an unsecured note payable for $50,000 due December 17, 2016 with interest at 12% per annum, paid monthly beginning April 2015 and principal payments beginning October 2016. Investor notes payable Investor Note 1 On December 21, 2007, an unaffiliated investor loaned the Company $125,000 on an unsecured 18-month note with a maturity date of June 21, 2009. The note has a provision requiring repayment once the Company has raised an aggregate of $500,000 following issuance of this note. As a result, this note is currently in default as it has not been repaid and the Company reached the $500,000 threshold in September, 2008. The note carries interest at a rate of 12% per annum, with interest accruing and payable at maturity. In conjunction with the note, the Company granted to the investor a warrant to purchase 37,500 shares of common stock at an exercise price of $1.07 and an expiration date of December 21, 2012, which has passed. This note is guaranteed by a stockholder. On April 10, 2008, this investor loaned the Company an additional $198,000 on an amendment of the prior unsecured note with a maturity date of June 21, 2009 for payment of the entire balance of the first note plus the amendment ($323,000 total). In February 2010, the Company converted $65,133 principal and $74,867 accrued interest on the note to common stock. In August 2010, the Company repaid $80,000 principal through partial sale of the note. As a result, the remaining balance of the amended note is $177,867. The note carries interest at a rate of 12% per annum, with interest accruing and payable at maturity. In conjunction with the note, the Company also issued a warrant to purchase 99,000 shares of common stock at an exercise price of $2.45 and an expiration date of April 10, 2013. This warrant has a cashless exercise feature. The Company also issued 50,000 shares of common stock valued at $122,130 in order to induce the investor to forbear on the note. This note is guaranteed by a stockholder of the Company. The note was amended and maintains the provision requiring repayment of the note upon raising gross proceeds of $500,000 subsequent the issuance of the note. As of December 31, 2015 and 2014, this note is in default. Investor Note 2 On December 30, 2007, an unaffiliated investor loaned the Company $200,000 on an unsecured 18-month note with a maturity date of June 30, 2009. The note carries interest at a rate of 12% per annum, with interest accruing and payable at maturity. In conjunction with this note, the Company also issued a warrant to purchase 100,000 shares of common stock at an exercise price of $1.00 and an expiration date of December 30, 2012, which has passed. This note is guaranteed by a stockholder. In 2015, the note holder entered into an agreement whereby their obligation was extended till October 22, 2016. The terms of the agreement included a payment of accrued interest of $4,000. |
NOTES PAYABLE, RELATED PARTIES
NOTES PAYABLE, RELATED PARTIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 7 - NOTES PAYABLE, RELATED PARTIES | As of December 31, 2015 and 2014, notes payable, related parties are as follows: 2015 2014 Convertible note payable dated July 22, 2010, in default $ 15,000 $ 15,000 Note payable dated January 14, 2011, in default 6,000 6,000 Note payable dated April 14, 2011, in default 25,000 25,000 Note payable dated April 15, 2011, in default 25,000 25,000 Note payable dated January 18, 2012, in default 5,000 5,000 Note payable dated January 20, 2012, in default 5,000 5,000 Note payable dated May 21, 2012, in default 15,000 15,000 Note payable dated May 30, 2012, in default 20,000 20,000 Series A Convertible note, in default 20,000 20,000 Convertible notes payable, dated July 6, 2012, in default 30,000 30,000 Convertible note payable, dated July 10, 2012, in default 15,000 15,000 Note payable, dated September 14, 2012, in default 6,000 6,000 Convertible note payable, dated September 7, 2012, in default 43,000 43,000 Convertible note payable, dated October 4, 2012, in default 50,000 50,000 Convertible note payable, dated September 5, 2013, in default 10,000 10,000 Convertible note payable, dated September 16, 2013, in default 3,000 3,000 Note payable dated September 17, 2013, in default 5,221 5,221 Note payable, dated October 24, 2013 30,000 30,000 Note payable, dated November 7, 2013 40,000 40,000 Note payable. dated December 6, 2013 5,000 5,000 Note payable, dated December 18, 2013 30,000 30,000 Note payable, dated January 9, 2014 25,000 25,000 Convertible note payable, dated February 28, 2014, net of unamortized debt discount of $2,064 and $14,833, respectively 197,936 185,167 Convertible note payable, dated April 24, 2014, net of unamortized debt discount of $775 and $3,235, respectively 24,225 21,765 Convertible note payable, dated November 7, 2014, net of unamortized debt discount of $1,733 and $3,761, respectively 23,267 21,239 Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $1,532 and $3,182, respectively 48,468 46,818 Note payable, dated January 25, 2015 25,000 - Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $2,701 47,299 - Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $750 19,250 - Note payable, dated June 18, 2015 25,000 - Note payable, dated July 13, 2015 12,500 - Note payable, dated August 5, 2015 25,000 - Note payable, dated August 19, 2015 50,000 Total 926,166 703,210 Less current portion (789,616 ) (298,221 ) Long term portion $ 136,550 $ 404,989 As described in Note 8 below, On July 22, 2010, investors loaned the Company an aggregate of $260,000 on three-year Series C Convertible Notes with an interest rate of 14%, of which $15,000 was a related party. See Note 8 for full details. On January 14, 2011, a stockholder loaned $6,000 (unsecured) to the Company with a due date of June 30, 2011. The loan had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 60,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,220, based on the relative fair value of the warrant. Such discount was amortized over the original term of the note. On April 14, 2011, a stockholder and Board member loaned $25,000 (unsecured) to the Company with a due date of July 31, 2011. The loan had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 250,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $8,850 that was amortized over the original term of the debt. On April 15, 2011, a stockholder and Board member loaned $25,000 (unsecured) to the Company with a due date of July 31, 2011. The note had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 250,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $8,850 that was amortized over the original term of the debt. On May 27, 2011, a stockholder and Board member loaned an additional $15,000 (unsecured) (of which $5,000 has been repaid in 2011 and remainder of $10,000 repaid in 2014) to the Company with a due date of September 30, 2011. The note had been extended to December 31, 2011. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 150,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $5,610 that was amortized over the original term of the debt. On January 18, 2012, a stockholder and Board member loaned $5,000 (unsecured) to the Company with a demand due date. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 50,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,495, based on the relative fair value of the warrant. Such discount was charged to operations at issuance. On January 20, 2012, a stockholder and Board member loaned $5,000 (unsecured) to the Company with a demand due date. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 50,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,435, based on the relative fair value of the warrant. Such discount was charged to operations at issuance date. On May 21, 2012, a stockholder and Board member loaned $18,000 (unsecured) (of which $3,000 has been repaid in 2012) to the Company. The loan was due May 21, 2014 with interest at 12% per annum, and is currently in default. On May 30, 2012, a stockholder and Board member loaned $20,000 (unsecured) to the Company due March 31, 2013 with interest at 12% per annum, and is currently in default. As described in Note 8 below, from June 2009 to March 2010, investors loaned the Company an aggregate of $1,237,459 on three year Series A Convertible Notes with an interest rate of 14%, of which $20,000 was a related party note. See Note 8 for full description. On July 6, 2012, a stockholder and Board member loaned $10,000 (unsecured) to the Company due July 6, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default. On July 6, 2012, a stockholder and Board member loaned $20,000 (unsecured) to the Company due July 6, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default. On July 10, 2012, a stockholder and Board member loaned $15,000 (unsecured) to the Company due July 10, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default. On September 14, 2012, a stockholder and Board member loaned $6,000 (unsecured) to the Company due September 14, 2014 with interest at 12% per annum. The Company did not make payment on the maturity date, therefore the note is currently in default. On September 7, 2012, a stockholder and Board member loaned $43,000 (unsecured) to the Company due September 7, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default. On October 4, 2012, a stockholder and Board member loaned $50,000 (unsecured) to the Company due October 4, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date, therefore the note is currently in default. On September 5, 2013, a stockholder and Board member loaned $10,000 (unsecured) to the Company due September 5, 2015 with interest at 10% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The company did not make payment on the maturity date, therefore the note is currently in default. On September 16, 2013, a stockholder and Board member loaned $3,000 (unsecured) to the Company due September 16, 2015 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The company did not make payment on the maturity date, therefore the note is currently in default. On September 17, 2013, a stockholder and Board member loaned $5,221 (unsecured) to the Company due September 17, 2014 with interest at 12% per annum. The company did not make payment on the maturity date, therefore the note is currently in default. On October 24, 2013, a stockholder and Board member loaned $30,000 (unsecured) to the Company due October 24, 2016 with interest at 10% per annum. On November 7, 2013, a stockholder and board member loaned $40,000 (unsecured) to the Company due November 7, 2017 with interest at 10% per annum. On December 6, 2013, a stockholder and Board member loaned $5,000 (unsecured) to the Company due December 6, 2016 with interest at 12% per annum. On December 18, 2013, a stockholder and Board member loaned $30,000 (unsecured) to the Company due December 18, 2018 with interest at 10% per annum. On January 9, 2014, a stockholder and Board member loaned $25,000 (unsecured) to the Company due January 9, 2016 with interest at 10% per annum. On February 28, 2014, the Company issued a $200,000 secured convertible note that matures on February 28, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 2,000,000 warrants to purchase the Company's common stock at $0.15 per share over three years. On April 24, 2014, the Company issued a $25,000 secured convertible note that matures on April 24, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years. On November 7, 2014, the Company issued a $25,000 secured convertible note that matures on November 7, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years. On December 4, 2014, the Company issued two $25,000 secured convertible notes that mature on December 4, 2016. The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 500,000 warrants to purchase the Company's common stock at $0.15 per share over three years. On January 25, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due April 25, 2016 with interest at 10% per annum. On June 18, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due April 21, 2016 with interest at 10% per annum On July 13, 2015, a stockholder and Board member loaned $12,500 (unsecured) to the Company due July 12, 2016 with interest at 12% per annum. On August 5, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due January 1, 2016 with interest at 10% per annum with interest paid monthly for August and September 2015 and principal and interest payable from October through December 2015. On August 19, 2015, a stockholder and Board member loaned $50,000 (unsecured) to the Company due February 19, 2016 with interest at 10% per annum. On March 3, 2015, the Company issued a $50,000 secured convertible note that matures on March 3, 2017. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 750,000 warrants to purchase the Company's common stock at $0.15 per share over three years. On May 12, 2015, the Company issued a $20,000 secured convertible note that matures on May 12, 2017. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 300,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the aggregate amount of $5,713 and $37,830 to additional paid in capital and a discount against the 2014 and 2015 notes, respectively. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, a risk free interest rate of 0.69% to 1.09%, a dividend yield of 0%, and volatility of 289.98.76% to 317.93%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense. For the years ended December 31, 2015 and 2014, the Company amortized $21,169 and $12,819 of debt discount to operations as interest expense. Total unpaid accrued interest on the notes payable to related parties as of December 31, 2015 and 2014 was $233,856 and $143,526, respectively. During the year ended December 31, 2014 and 2013, the Company recorded interest expense of $90,508 and $69,738, respectively, in connection with the notes payable to related parties. Aggregate maturities of long-term debt as of December 31: Amount Year ended December 31, 2016 $ 795,721 Year ended December 31, 2017 110,000 Year ended December 31, 2018 and thereafter 30,000 Total $ 935,721 |
LINE OF CREDIT- RELATED PARTY
LINE OF CREDIT- RELATED PARTY | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 8 - LINE OF CREDIT- RELATED PARTY | On January 25, 2015, the Company issued an unsecured promissory note to certain members of the Company's board of directors who provided the Company a line of credit up to $400,000 for working capital over a term of four years with an annualized interest rate of 5.25%. The promissory note is due 30 days upon written demand however, the Company is obligated to make monthly payments of principal and interest necessary to meet the minimal monthly principal and interest payments required by the bank on loans the lenders obtained to provide the financing. As of December 31, 2015, the outstanding balance on this loan was $397,893. On September 24, 2009, the Company entered into an unsecured short term loan with a stockholder for $150,000 to be used to discharge the bridge loans of another investor. Borrowings under the loan bear interest at 12% per annum, with interest accrued and payable on maturity. The Note was due on November 24, 2009 and is still outstanding. In conjunction with this line of credit, the Company also issued a warrant to purchase 150,000 shares of common stock at an exercise price of $0.15 per share with an expiration date of September 24, 2014. On April 6, 2010, a partial repayment of $25,000 of principal was paid. Also, as a result of the delinquent repayment of the note, a penalty of $69,000 was incurred on April 15, 2010. On August 17, 2010, a partial payment of $50,000 of principal was made on the line of credit. Unpaid accrued interest on this loan as of December 31, 2015 and 2014 was $119,239 and $101,119, respectively. As of December 31, 2015 and 2014, the outstanding balance on this loan was $151,000. Since the loan matured on November 24, 2009, it is currently in default. During the year ended December 31, 2015 and 2014, the Company recorded $18,120 and $18,120, respectively, as interest expense. |
CONVERTIBLE NOTES
CONVERTIBLE NOTES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 9 - CONVERTIBLE NOTES | Convertible notes of non-related party investors are comprised of the following: 2015 2014 Series A Convertible Notes $ 817,000 $ 817,000 Series B Convertible Notes 225,000 225,000 Series C Convertible Notes 245,000 245,000 Series D Convertible Notes 21,000 21,000 Bridge 2014 Convertible Notes, net of unamortized debt discount of $23,410 and $79,919, respectively 726,590 670,081 Bridge 2015 Convertible Notes, net of unamortized debt discount of $73,244 251,756 - Total 2,286,346 1,978,081 Less: Current portion (2,034,590 ) (228,500 ) Long term portion $ 251,756 $ 1,749,581 Series A Convertible Notes From June 2009 to March 2010, unaffiliated investors loaned the Company an aggregate of $1,217,459 (excluding $20,000 related party, see Note 7) on three-year Series A Convertible Notes with an interest rate of 14%. The interest accrues and is payable at maturity, which range in dates from August 2012 to March 2013. The conversion price is set at $0.15 per share. The Notes carry a first lien security interest in all of the assets of the Company. In addition, the investors received 12,174,590 warrants to purchase the common stock of the Company at an exercise price of $1.00. On January 21, 2010, the exercise price was reduced to $0.40 due to certain provisions of the warrants. The exercise period of the warrants is five years. The notes were recorded net of a deferred debt discount of $1,143,268, based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount was amortized over the term of the notes. Certain convertible note holders, representing an aggregate of $734,500 of these notes entered, into an agreement in December 2014 through February 2015 whereby their obligations were extended for a period of 18 months from the date of execution of the agreement. The terms of the agreement included a payment of accrued interest of $500 for every $25,000 of outstanding principal. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $82,500 are in default. Series B Convertible Notes During year ended December 31, 2010, unaffiliated investors loaned the Company an aggregate of $275,000 on three-year Series B Convertible Notes with an interest rate of 14%. During the year ended December 31, 2010, $50,000 was repaid in cash, leaving a balance of $225,000 on these notes at December 31, 2011 and 2010. The interest accrues and is payable at maturity. The conversion price is set at $0.15 per share. The Notes carry a first lien security interest in all of the assets of the Company with the Series A notes above. In addition, at conversion, the investors will receive 900,000 warrants to purchase the common stock of the Company at an exercise price of $0.40 per share. The warrants are callable when the Company's stock trades above $0.75 per share for 10 consecutive trading days. The notes were recorded net of a deferred debt discount of $264,324, based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount was amortized over the term of the notes. Certain convertible note holders, representing an aggregate of $175,000 of these notes entered, into an agreement in December 2014 through March 2015 whereby their obligations were extended for a period of 18 months from the date of execution of the agreement. The terms of the agreement included a payment of accrued interest of $500 for every $25,000 of outstanding principal. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $50,000 are in default. Series C Convertible Notes During the year ended December 31, 2010, unaffiliated investors loaned the Company an aggregate of $260,000 (excluding $15,000 related party, see Note 6) on three-year Series C Convertible Notes with an interest rate of 14%. The interest accrues and is payable at maturity. The conversion price was set at $0.15 per share. The notes carry a first lien security interest with the Series A and B notes above in all of the assets of the Company. In addition, the investors received 2,641,670 warrants to purchase the common stock of the Company at an exercise price of $0.40 per share. The series C notes have a "ratchet" provision resetting the conversion price to $0.10 and the warrant exercise price to $0.25 on the first closing of a subsequent offering with those terms. This "ratchet" was triggered on August 12, 2010 with the completion of the minimum closing of $1,500,000 on a $3,000,000 private placement. Additionally, as a result of the delay in filing a registration statement on the aforementioned private placement", the Series C Warrants have become "cashless", along with the warrants from the aforementioned private placement. There is no further effect from this "ratchet" event. The notes were recorded net of a deferred debt discount of $215,940, based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount was amortized over the term of the notes. Certain convertible note holders, representing an aggregate of $155,000 of these notes entered, into an agreement in December 2014 through February 2015 whereby their obligations were extended for a period of 18 months from the date of execution of the agreement. The terms of the agreement included a payment of accrued interest of $500 for every $25,000 of outstanding principal. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $90,000 are in default. Series D Convertible Notes During the year ended December 31, 2011, the Company issued an aggregate of $25,000 of Series D Convertible Notes with an interest rate of 14% due three years from the date of issuance. The interest accrues and is payable at maturity. The conversion price is set at $0.12 per share. The investors have a second lien position behind the Series A, B and C notes. In addition, the investors received 250,000 warrants to purchase the common stock of the Company at an exercise price of $0.30 per share over five years. The notes were recorded net of deferred debt discount of $10,271 based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount is being amortized over the term of the notes. During the year ended December 31, 2014 and 2013, the Company recorded amortization of the debt discount relating to these notes of $285 and $3,424, respectively. On July 21, 2014, the Company issued 49,379 shares of its common stock in settlement of $4,000 Series D Convertible Note payable and related accrued interest of $1,925. Certain convertible note holders, representing an aggregate of $15,000 of these notes entered, into an agreement in December 2014 through February 2015 whereby their obligations were extended for a period of 18 months from the date of execution of the agreement. The terms of the agreement included a payment of accrued interest of $500 for every $25,000 of outstanding principal. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $6,000 are in default. Additionally, one note holder has filed liens against the Company on his behalf and two of his affiliates to secure payment of the obligations. In 2014, the Company issued an aggregate of $1,050,000 (excluding $300,000 related party, see Note 7) in secured convertible notes that mature two years from the date of issuance (from January 2016 through December 2016). The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible notes, the Company issued an aggregate of 7,500,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the amount of $113,146 to additional paid in capital and a discount against the 2014 notes. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, an average risk free interest rate from 0.69% to 1.10%, a dividend yield of 0%, and volatility of 287.80% to 319.28%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense. In 2015, the Company issued an aggregate of $325,000 in secured convertible notes that mature two years from the date of issuance (from February 2017 through December 2017). The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible notes, the Company issued an aggregate of 4,500,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the amount of $86,382 to additional paid in capital and a discount against the notes. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, an average risk free interest rate from 0.63% to 1.25%, a dividend yield of 0%, and volatility of 307.16% to 356.55%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense. For the year ended December 31, 2015 and 2014, the Company amortized $74,258 and $33,227 of debt discount to current period operations as interest expense. Aggregate maturities of long-term debt as of December 31: Amount Year ended December 31, 2016 $ 2,058,000 Year ended December 31, 2017 325,000 Total $ 2,383,000 |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 10 - DERIVATIVE LIABILITIES | Excessive committed shares Beginning on April 11, 2013 through December 22, 2015, in connection with the previously issued convertible debt, stock options and warrants, the Company had the possibility of exceeding their common shares authorized when considering the number of possible shares that may be issuable to satisfy settlement provisions of these agreements after consideration of all existing instruments that could be settled in shares. This resulted in a derivative liability as a result of the Company having a potential to settle the obligation to issue these excess shares. The accounting treatment of derivative financial instruments required that the Company reclassify the derivative from equity to a liability at their fair values as of the date possible issuable shares exceeded the authorized level and at fair value as of each subsequent balance sheet date. On December 22, 2015, the Company amended the Articles of Incorporation to increase of authorized shares of common stock from 200,000,000 to 500,000,000 thereby having sufficient authorized common shares to meet any settlement provisions. The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company. During the year ended December 31, 2015, the fair value of the net derivative liabilities reclassified from equity of $628,457 was determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 306.06% to 351.47%; risk free rate: 0.01% to 1.88%; and expected life: 0.09 to 5.00 years. During the year ended December 31, 2014, the fair value of the net derivative liabilities reclassified from equity of $703,566 was determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 289.46% to 305.91%; risk free rate: 0.14% to 2.14%; and expected life: 2.00 to 5.00 years. At December 22, 2015, the fair value of the derivative liabilities of $583,071, determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 333.28%; risk free rate: 0.19% to 0.99%; and expected life: 0.13 to 2.31 years, was reclassified to equity upon the increase in common share authorization. At December 31, 2014, the fair value of the derivative liabilities of $336,582 was determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 308.55%; risk free rate: 0.67% to 1.10%; and expected life: 2.08 to 3.29 years. As of December 31, 2015 and 2014, the Company did not have any derivative instruments that were designated as hedges. The derivative liability as of December 31, 2014, in the amount of $336,582 has a level 3 classification. At December 31, 2015, the Company did not have any level 3 classifications. The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities as of two years ended December 31, 2015: Excess Share Derivative Balance, December 31, 2013 $ 376,940 Transfers in of Level 3 upon exceeding in authorized shares 703,566 Mark-to-market at December 31, 2014 (743,924 ) Balance, December 31, 2014 336,582 Transfers in of Level 3 upon exceeding in authorized shares 628,457 Transfers out of Level 3 upon increasing authorized shares (583,071 ) Mark-to-market at December 31, 2015 (381,968 ) Balance, December 31, 2015 $ - Fluctuations in the Company's stock price are a primary driver for the changes in the derivative valuations during each reporting period. The Company's stock price decreased by 33% from December 31, 2013 to December 22, 2015. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases, therefore decreasing the liability on the Company's consolidated balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company's derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company's expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 11 - STOCKHOLDERS' EQUITY | Preferred Stock At December 31, 2015 and 2014, the Company has authorized 10,000,000 shares of preferred stock, par value $0.001, of which -0- and 595,000- are issued and outstanding as of December 31, 2014 and 2013, respectively. On May 2, 2014, the Company's board of directors designated 5,000,000 shares of its preferred stock as Series A Convertible Stock ("Series A") with a $0.001 par value. The Series A preferred stock which has rank senior to common and all other preferred stock of the corporation and equal or junior to any preferred stock that may be issued in regard to liquidation; not entitled to dividends and is convertible, at the holders' option, at 10 shares of common stock for each share of Series A preferred stock. On July 10, 2014, the Company issued an aggregate of 595,000 shares of its Series A Convertible Stock as payment for services rendered valued at $178,500. The Series A Convertible Stock was valued based on the underlying fair value of the Company's common stock. On July 7, 2015, the Company issued 47,500 shares of its Series A Convertible Stock as payment for services rendered valued at $2,850. In October 2015, the Company issued an aggregate of 6,425,000 shares of its common stock in exchange of 642,500 shares of Series A Convertible Stock. Common stock At December 31, 2015 and 2014, the Company has authorized 500,000,000 and 200,000,000 shares of common stock, par value $0.001, of which 104,612,082 and 98,187,082 are issued and outstanding as of December 31, 2015 and 2014, respectively. On December 22, 2015, the Company filed with the State of Delaware to amend the Articles of Incorporation to increase authorized shares of common stock from 200,000,000 to 500,000,000. |
WARRANTS AND OPTIONS
WARRANTS AND OPTIONS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 12 - WARRANTS AND OPTIONS | Common stock warrants The following table summarizes warrants outstanding and related prices for the shares of the Company's common stock issued to shareholders at December 31, 2015: Exercise Price Number Outstanding Warrants Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise price Number Exercisable Warrants Exercisable Weighted Average Exercise Price $ 0.01 to 0.10 38,925,000 3.00 $ 0.10 38,925,000 $ 0.10 0.11 to 0.20 16,150,000 1.74 0.15 16,150,000 0.15 0.21 to 0.30 17,310,000 0.95 0.25 17,310,000 0.25 Total 72,385,000 2.23 $ 0.15 72,385,000 $ 0.15 Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2013 91,736,274 $ 0.22 Issued 10,500,000 0.15 Exercised - Expired (11,374,590 ) (0.35 ) Outstanding at December 31, 2014 90,861,684 0.20 Issued 5,550,000 0.15 Exercised - - Expired (24,026,684 ) (0.24 ) Outstanding at December 31, 2015 72,385,000 $ 0.15 In conjunction with the issuance of convertible notes, during the year ended December 31, 2014, the Company issued an aggregate of warrants to purchase 10,500,000 shares of common stock with an exercise price of $0.15 per share expiring three years from the date of issuance. Please see Notes 7 and 9. In conjunction with the issuance of convertible notes, during the year ended December 31, 2015, the Company issued an aggregate of warrants to purchase 5,550,000 shares of common stock with an exercise price of $0.15 per share expiring three years from the date of issuance. Please see Notes 7 and 9. On August 12, 2015, the Company repriced to $0.10 and extended for the three years an aggregate of 11,925,000 expiring warrants previously issued to Board Members. The change in fair value of the extended warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of underlying common stock of 349.90%, risk free rate of 1.88% and expected life of 3.00 years. The determined estimated fair value of $100,276 was charged to operations during the year ended December 31, 2015. Preferred stock warrants The following table summarizes warrants outstanding and related prices for the shares of the Company's Series A convertible preferred stock issued at December 31, 2015: Exercise Price Number Outstanding Warrants Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise price Number Exercisable Warrants Exercisable Weighted Average Exercise Price $ 0.50 2,120,000 4.05 $ 0.50 1,120,000 $ 0.50 1.00 71,000 1.72 1.00 71,000 1.00 1.50 333,500 1.67 1.50 333,500 1.50 Total 2,524,500 3.66 $ 0.65 1,524,500 $ 0.75 Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2013 - $ - Issued 1,914,500 0.66 Exercised Expired Outstanding at December 31, 2014 1,914,500 0.66 Issued 705,000 0.61 Exercised - - Canceled (95,000 ) 1.00 Outstanding at December 31, 2015 2,524,500 $ 0.65 In 2014, the Company issued an aggregate 414,500 preferred stock warrants in connection with services provided. The warrants are exercisable for three to five years from the date of issuance at an exercise prices from $0.50 to $1.50 per preferred share. The warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 287.80% to 319.28%, risk free rate of 0.77% to 1.67% and expected life of 3.00 to 5.00 years. The determined estimated fair value of $107,732 was charged to operations during the year ended December 31, 2014. In connection with entering into the Progress Advocates LLC joint venture with LSH, LLC, the Company issued to LSH, LLC two five-year warrants to purchase an aggregate of 1,500,000 shares of series A convertible preferred stock of Debt Resolve at an exercise price of $0.50 per preferred share. The first warrant for 1,000,000 shares of Debt Resolve preferred stock vests and becomes exercisable 25% upon issuance and the balance upon the achievement by Progress Advocates of specific increasing revenue goals. The second warrant for 500,000 shares of Debt Resolve preferred stock vests and becomes exercisable when Progress Advocates achieves at least $1,000,000 in cumulative "operating income." The vested warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 290.46% to 350.93%, risk free rate of 1.43% to 1.54% and expected life of 4.27 to 5.00 years. The determined estimated fair value of $108,672 and $29,933 was recorded as compensation in majority owned subsidiary during the years ended December 31, 2015 and 2014. On October 5, 2015, the Company issued LSH, LLC a five year warrant to purchase 500,000 shares of series A convertible stock of Debt Resolve at an exercise price of $0.50 per preferred share. The warrant is contingent upon Progress Advocates, LLC achieving operational goals, as defined. During the year ended December 31, 2015, the Company issued an aggregate 205,000 Series A convertible preferred stock warrants in connection with services provided of which 95,000 were subsequently canceled. The warrants are exercisable for three to five years from the date of issuance at an exercise prices from $0.50 to $1.50 per preferred share. The warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of underlying common stock of 306.06% to 355.95%, risk free rate of 0.59% to 1.33% and expected life of 3.00 to 5.00 years. The determined estimated fair value of $17,306 was charged to operations during the year ended December 31, 2015. Options The following table summarizes options outstanding and related prices for the shares of the Company's common stock issued at December 31, 2015: Exercise Price Number Outstanding Option Outstanding Options Average Remaining Contractual Life (years) Weighted Average Exercise price Number Exercisable Options Exercisable Weighted Average Exercise price $ 0.015 3,000,000 5.17 $ 0.015 1,000,000 $ 0.015 0.02 250,000 5.10 0.02 250,000 0.02 0.025 250,000 6.65 0.025 250,000 0.025 0.06 3,000,000 2.42 0.06 3,000,000 0.06 0.09 250,000 2.93 0.09 250,000 0.09 0.095 500,000 3.05 0.095 500,000 0.095 0.10 650,000 2.19 0.10 650,000 0.10 0.13 500,000 1.34 0.13 500,000 0.13 0.17 4,500,000 1.27 0.17 4,500,000 0.17 0.19 1,000,000 0.60 0.19 1,000,000 0.19 0.22 175,000 1.25 0.22 175,000 0.22 5.00 1,517,434 0.65 5.00 1,517,434 5.00 Total 15,592,434 2.35 $ 0.67 13,592,434 $ 0.67 Transactions involving the Company's option issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2013 14,198,434 $ 0.86 Issued 3,250,000 0.015 Exercised - - Expired (403,000 ) (3.14 ) Outstanding at December 31, 2014 17,045,434 0.64 Issued 250,000 0.025 Exercised -- -- Expired (1,703,000 ) (1.19 ) Outstanding at December 31, 2015 15,592,434 $ 0.67 In 2014, the Board granted stock options to purchase 3,000,000 shares of common stock of the Company at exercise price of $0.015 with exercise period of seven years to an officer employee, vesting 1/3 each year for three years. In 2014, the Board granted stock options to purchase 250,000 shares of common stock of the Company at exercise price of $0.02 with exercise period of seven years to a consultant, fully vested at the date of issuance. In 2015, the Board granted stock options to purchase 250,000 shares of common stock of the Company at exercise price of $0.025 with exercise period of seven years to a new board member, fully vested at the date of issuance. The fair value of the options issued to employees and consultants were determined using the Black-Scholes option pricing method with the following assumptions: Dividend yield: 0%; Volatility: 304.56% to 350.51%; and Risk Free rate: 2.13% to 2.14%. Total stock-based compensation expense for options for the years ended December 31, 2015 and 2014 amounted to $21,250 and $17,500, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 13 - COMMITMENTS AND CONTINGENCIES | Litigation: On July 17, 2008, Dreier LLP, a law firm, filed a complaint in the Supreme Court of New York, County of New York, seeking damages of $311,023 plus interest for legal services allegedly rendered to us. The complaint was answered on August 14, 2008 raising various affirmative defenses. On December 16, 2008, Dreier LLP filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. A settlement was reached on September 30, 2014 requiring the Company to pay $22,500 of installment payments. Installment payments totaling $15,000 were made during 2014. The remaining installment payments, totaling $7,500, were made in 2015. The full amount of the original dispute, less the $15,000 of installment payments made during 2014, is included in the Company's accounts payable at December 31, 2014. The remaining balance was paid in 2015. From time to time, the Company is involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations. Payroll and Payroll taxes Due to a lack of capital, the Company has been unable to pay all of the compensation owed to its employees. In addition, in 2011, 2012 and the first quarter of 2013, the Company did not pay certain federal and state payroll tax obligations due for employees' compensation, and they have become delinquent. As a result, the Company has included in accrued expenses an amount of approximately $99,861 that represents an estimate that could be expected upon settlement of these payroll taxes with the respective taxing authorities. In April, 2015, an agreement was reached with the IRS that details an agreed upon amount owed and a 17 month payment plan for same. In addition, the Company has contacted the state involved and anticipates settlement discussions in the near future. Employment agreement On March 1, 2014, the Company appointed Stanley E. Freimuth as Chief Executive Officer of the Company with an initial term of three years and monthly compensation of $17,500. In addition, Mr. Freimuth received 5,000,000 shares of the Company's common stock for which was exchanged for 500,000 shares of series A convertible preferred stock issued per board resolution, options to purchase 3,000,000 shares of the common stock exercisable at $0.015 per share for 7 years, vesting over three years on anniversary, and a $25,000 sign on bonus. Lawsuits from Noteholders On July 20, 2015, the Company received a complaint concerning a promissory note dated December 21, 2007 that matured on June 21, 2009 (See Note 17 – Subsequent Events). New York State Attorney General Subpoena In December, the Company and Progress Advocates, its majority owned subsidiary, received a subpoena requesting documents regarding the operations of Progress Advocates. This request was one of several requests sent to companies operating in the Federal Student Loan document preparation space in New York State. We have provided the requested information and will continue to respond to all requests for more information. We are confident that our compliance with payments aligned to the consumer's receipt of benefit and our responsible marketing will be accurately conveyed by these information exchanges. Operating leases The Company currently occupies office space at 1133 Westchester Avenue, Suite S-223, White Plains, NY 10604, under a short term lease with an unaffiliated third party. The monthly rent is $3,500 and can be terminated with a sixty day notice. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 14 - RELATED PARTY TRANSACTIONS | During the year ended December 31, 2015 and 2014, certain Company directors personally guarantee the Company's notes payable and its' bank loan (Note 8). Also, certain directors and officers made short-term or longer term loans as discussed in Note 7. Total interest expense in connection with notes payable to related parties and related party line of credits amounted $108,628 and $87,858 for the year ended December 31, 2015 and 2014, respectively (Note 7 and Note 8). Progressive Advocates The Company reimburses the 49% owner (non-controlling interest party) for payroll, marketing and general expenses incurred by Progressive Advocates. For the year ended December 31, 2015 and 2014, the Company reimbursed approximately $3.8 million and $-0- in incurred costs, respectively. |
NON CONTROLLING INTEREST
NON CONTROLLING INTEREST | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 15 - NON CONTROLLING INTEREST | In December 2014, the Company organized Progress Advocates, LLC, a Delaware limited liability company for the purpose to provide services in the student loan document preparation industry. At the time of formation, Progress Advocates, LLC did not have any significant assets or liabilities. In connection with entering into the Progress Advocates LLC joint venture with LSH, LLC (minority owner), the Company issued to LSH, LLC two five-year warrants to purchase an aggregate of 1,500,000 shares of series A convertible preferred stock of Debt Resolve at an exercise price of $0.50 per preferred share (Note 11). A reconciliation of the non-controlling loss attributable to the Company: Net loss attributable to non-controlling interest for the year ended December 31, 2015: 2015 Net loss $ 744,077 Average Non-controlling interest percentage 49 % Net loss attributable to the non-controlling interest $ 364,598 Net loss attributable to non-controlling interest for the year ended December 31, 2014: 2014 Net loss $ 86,476 Average Non-controlling interest percentage 49 % Net loss attributable to the non-controlling interest $ 42,373 The following table summarizes the changes in non-controlling interest from December 31, 2013 to December 31, 2015: Balance, December 31, 2013 $ – Transfer (to) from the non-controlling interest as a result of change in ownership – Net loss attributable to the non-controlling interest (42,373 ) Balance, December 31, 2014 (42,373 ) Transfer (to) from the non-controlling interest as a result of change in ownership – Net loss attributable to the non-controlling interest (364,598 ) Balance, December 31, 2015 $ (406,971 ) |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 16 - INCOME TAXES | The Company follows Accounting Standards Codification subtopic 740, Income Taxes ("ASC 740") which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under such method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows: 2015 2014 Income taxes using U.S. federal statutory rate 34.0 % 34.0 % State income taxes, net of federal benefit 3.8 (3.8 )% Prior period provision 0 % 0 % Stock Expirations 0 % (61.1 )% Other (0.1 )% (0.1 )% Change in Valuation Allowance (37.7 )% (31.0 )% The significant components of the deferred tax assets (liabilities) at December 31, 2015 and 2014, are summarized as follows: 2015 2014 Deferred tax assets: Stock Based Compensation $ 1,216,472 $ 1,121,839 Net Operating Losses 12,251,334 12,640,130 Accrued payroll 218,654 241,854 Intangibles 2,738,614 2,752,414 Other - 39 Total deferred tax assets 16,425,074 16,886,257 Deferred tax liabilities: Beneficial Conversion Feature (40,147 ) (1,975 ) Total deferred tax liabilities (40,147 ) (1,975 ) Valuation allowance (16,384,927 ) (16,884,552 ) Net deferred tax assets $ - $ - As of December 31, 2015 and 2014, the Company had U.S. federal and state net operating loss carryforwards of approximately $32.5 million and $32.68 million, respectively, which expire at various dates from 2024 through 2035. These net operating loss carryforwards may be used to offset future taxable income and thereby reduce the Company's U.S. federal income taxes. Section 382 of the Internal Revenue Code of 1986 (the "Code") imposes an annual limit on the ability of a corporation that undergoes a greater than 50% ownership change to use its net operating loss carry forwards to reduce its tax liability. The Company may be subject to a limitation as a result of the Company's initial public offering in 2006 and other transactions related to its stock ownership. These potential limitations could affect the utilization of the carryforwards prior to their expiration. The Company has provided a full valuation allowance against its net deferred tax assets, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits of these assets will not be realized. The Company complies with the provisions of FASB ASC 740-10 in accounting for its uncertain tax positions. ASC 740-10 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely that not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Management has determined that the Company has no significant uncertain tax positions requiring recognition under ASC 740-10. The Company is subject to income tax in the U.S., and certain state jurisdictions. The Company has not been audited by the U.S. Internal Revenue Service, or any states in connection with income taxes. The periods from December 31, 2013 to December 31, 2015 remain open to examination by the U.S. Internal Revenue Service, and state tax authorities. The periods from December 31, 2005 to December 31, 2012 are subject to examination up to the net operating loss. The Company recognizes interest and penalties related to unrecognized tax benefits, if incurred, as a component of income tax expense. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 17 - SUBSEQUENT EVENTS | Debt: In January 2016, the Company issued a convertible note of $25,000 due two years from the date of issuance with interest, due at maturity, of 10% per annum. In January, 2016, the Company issued a promissory note of $50,000 due 12 months from the date of issuance with interest due commencing at month 4 at 12% per annum. In February, 2016, the Company issued a promissory note of $25,000 due 12 months from the date of issuance with interest due commencing at month 4 at 12% per annum. In February 2016, the Company issued a convertible note of $47,000 due two years from the date of issuance with interest, due at maturity, of 10% per annum. In April, 2016, the Company issued an aggregate of $100,000 in convertible notes due two years from the date of issuance with interest, due at maturity, of 10% per annum. Litigation: On April 11, 2016, a Decision was entered in the matter of a noteholder's claim (as described in Part 1, Item 3 under "Legal Proceedings -Lawsuits from Noteholders") against Debt Resolve Inc., granting the noteholder's motion for summary judgment in part, and denying it in part, and denying Debt Resolve's cross motion for summary judgment. No damages have been determined against Debt Resolve on the noteholder's claims as of yet and Debt Resolve is evaluating its alternatives, including an appeal of the Court's Decision. |
SIGNIFICANT ACCOUNTING POLICI24
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Significant Accounting Policies Policies | |
Basis of Presentation | The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. The non-controlling interest represents the minority owners' share of its net operating results. |
Estimates | The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, revenues and expenses and certain disclosures. The most significant estimates are those used in determination of derivative liabilities and stock compensation. Accordingly, actual results could differ from those estimates. |
Revenue Recognition | In recognition of the principles expressed in Accounting Standards Codification subtopic 605-10, Revenue should not be recognized until it is realized or realizable and earned, and given the element of doubt associated with collectability of an agreed settlement on past due debt, the Company postpones recognition of all contingent revenue until the client receives payment from the debtor. As is required by SAB 104, revenues are considered to have been earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the successful collection of past due debts using the Company's system and/or, for clients under a flat fee arrangement, the successful availability of the Company's system to its customers. Revenues for the preparation of student loan documentation are earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the completed, delivered and accepted student loan package. The Company may sell its products separately or in various bundles that include multiple elements such as upfront fees, monitoring and other services. The Company also earns revenue from collection agencies, collection law firms and lenders that implemented our online system. The Company's current contracts provide for revenue based on a percentage of the amount of debt collected, a fee for accounts loaded into the Debt Resolve Service or through a flat monthly fee. Revenues for set-up fees, percentage contingent collection fees, fixed settlement fees, monthly fees, etc. are accounted for as Multiple-Element Arrangements under ASC 605-10 which incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arrangements ("ASC 605-25"). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The Company defers any revenue for which the product or service has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. At December 31, 2015 and 2014, the Company had deferred revenues of $1,260,137 and $25,343, respectively. |
Concentrations of Credit Risk | The Company's consolidated financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the Company's cash and cash equivalents in interest-bearing accounts does not exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management. |
Accounts Receivable and Sales Concentration | The Company extends credit to large, mid-size and small companies for collection services. At December 31, 2014, one client represented receivables of $10,000 (35%). The Company did not have a concentration in receivables in 2015. The Company does not generally require collateral or other security to support customer receivables. Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability and the allowance for doubtful accounts is adjusted accordingly. Management determines collectability based on their experience and knowledge of the customers. As of December 31, 2015 and 2014, allowance for doubtful accounts was $600,000 and $-0-, respectively. The Company did not have a revenue concentration for the year ended December 31, 2015 and three clients accounting for 17%, 38% and 20% of total revenue for the year ended December 31, 2014. |
Cash and Cash Equivalents | For purposes of the consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. |
Fair Values | Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The carrying value of the Company's cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity. As of December 31, 2015 or 2014, the Company did not have any items that would be classified as level 1 or 2 disclosures. The Company recognized its derivative liabilities as level 3 and values its derivatives using the methods discussed in Note 10. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 10 are that of volatility and market price of the underlying common stock of the Company. |
Property and Equipment | Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Property and equipment is fully depreciated as of December 31, 2015 and 2014. |
Net Loss per Common Share, basic and diluted | The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share ("ASC 260-10"). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the "treasury stock" and/or "if converted" methods as applicable. The computation of basic and diluted income (loss) per share as of December 31, 2015 and 2014 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2015 2014 Convertible notes payable 43,055,000 35,155,000 Preferred stock - 5,950,000 Options to purchase common stock 15,592,434 17,045,434 Warrants to purchase common stock 72,385,000 90,861,684 Warrants to purchase Series A preferred stock 25,245,000 19,145,000 Totals 156,277,434 168,157,118 |
Stock-based compensation | The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of December 31, 2015, there were outstanding stock options to purchase 15,592,434 shares of common stock, 13,592,434 shares of which were vested. (see Note 13) |
Segment Information | Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company's only material principal operating segment. |
Long-Lived Assets | The Company follows Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. |
Defined Contribution (401k) Plan | The Company maintains a defined contribution (401k) plan for its employees. The plan provides for a company match in the amount of 100% of the first 3% of pre-tax salary contributed and 50% of the next 3% of pre-tax salary contributed. Due to the severe cash limitations that the Company has experienced, the match was suspended from mid-2008 to the present and will only be re-instated when business conditions warrant. |
Derivative Liability | The Company accounts for derivatives in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At December 31, 2015 and 2014, the Company did not have any derivative instruments that were designated as hedges. At December 31, 2014 and through December 22, 2015, the Company had the possibility of exceeding their common shares authorized when considering the number of possible shares that may be issuable to satisfy settlement provisions for all existing instruments that could be settled in shares. |
Income Taxes | Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2015 and 2014, the Company has not recorded any unrecognized tax benefits. The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2015 and 2014. |
Advertising Costs | The Company expenses the cost of advertising and promotion of its services when incurred. The advertising costs paid to related party were $2,036,531 and $45,000 for the years ended December 31, 2015 and 2014, respectively. All of which were used for the acquisition of leads for its majority owned subsidiary, Progress Advocates LLC. |
Reclassification | The Company has reclassified the presentation of cost of revenue to conform to current period presentation. The reclassification has no effect on the Company's consolidated financial position or the consolidated results of operations as previously reported. |
Recent accounting pronouncements | In November 2015, the FASB issued (ASU) 2015-17, Balance Sheet Classification of Deferred Taxes. In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance. The FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-01 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The Company has not yet determined the effect of the adoption of this standard on the Company's consolidated financial position and results of operations. There were other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows. |
SIGNIFICANT ACCOUNTING POLICI25
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Significant Accounting Policies Tables | |
Computation of basic and diluted net loss per share | Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2015 2014 Convertible notes payable 43,055,000 35,155,000 Preferred stock - 5,950,000 Options to purchase common stock 15,592,434 17,045,434 Warrants to purchase common stock 72,385,000 90,861,684 Warrants to purchase Series A preferred stock 25,245,000 19,145,000 Totals 156,277,434 168,157,118 |
ACCOUNTS PAYABLE AND ACCRUED 26
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accounts Payable And Accrued Liabilities Tables | |
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities as of December 31, 2015 and 2014 are comprised of the following: 2015 2014 Accounts payable $ 740,881 $ 1,025,919 Accrued interest 1,912,436 1,473,686 Payroll and related accruals, net of advance to employees 827,263 888,640 Total $ 3,480,580 $ 3,388,245 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes Payable Tables | |
Short term notes | As of December 31, 2015 and 2014, notes payable are as follows: 2015 2014 Bank loans $ - $ 50,000 Note payable, dated June 1, 2015 45,765 - Note payable, dated July 2, 2015 12,500 - Note payable, dated August 28, 2015 50,000 - Note payable, dated December 17, 2015 50,000 - Investor notes payable, 12% per annum 377,867 377,867 Total 536,132 427,867 Less current portion 536,132 427,867 Long term portion $ -0- $ -0- |
NOTES PAYABLE, RELATED PARTIES
NOTES PAYABLE, RELATED PARTIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes Payable Related Parties Tables | |
Notes payable, related parties | As of December 31, 2015 and 2014, notes payable, related parties are as follows: 2015 2014 Convertible note payable dated July 22, 2010, in default $ 15,000 $ 15,000 Note payable dated January 14, 2011, in default 6,000 6,000 Note payable dated April 14, 2011, in default 25,000 25,000 Note payable dated April 15, 2011, in default 25,000 25,000 Note payable dated January 18, 2012, in default 5,000 5,000 Note payable dated January 20, 2012, in default 5,000 5,000 Note payable dated May 21, 2012, in default 15,000 15,000 Note payable dated May 30, 2012, in default 20,000 20,000 Series A Convertible note, in default 20,000 20,000 Convertible notes payable, dated July 6, 2012, in default 30,000 30,000 Convertible note payable, dated July 10, 2012, in default 15,000 15,000 Note payable, dated September 14, 2012, in default 6,000 6,000 Convertible note payable, dated September 7, 2012, in default 43,000 43,000 Convertible note payable, dated October 4, 2012, in default 50,000 50,000 Convertible note payable, dated September 5, 2013, in default 10,000 10,000 Convertible note payable, dated September 16, 2013, in default 3,000 3,000 Note payable dated September 17, 2013, in default 5,221 5,221 Note payable, dated October 24, 2013 30,000 30,000 Note payable, dated November 7, 2013 40,000 40,000 Note payable. dated December 6, 2013 5,000 5,000 Note payable, dated December 18, 2013 30,000 30,000 Note payable, dated January 9, 2014 25,000 25,000 Convertible note payable, dated February 28, 2014, net of unamortized debt discount of $2,064 and $14,833, respectively 197,936 185,167 Convertible note payable, dated April 24, 2014, net of unamortized debt discount of $775 and $3,235, respectively 24,225 21,765 Convertible note payable, dated November 7, 2014, net of unamortized debt discount of $1,733 and $3,761, respectively 23,267 21,239 Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $1,532 and $3,182, respectively 48,468 46,818 Note payable, dated January 25, 2015 25,000 - Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $2,701 47,299 - Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $750 19,250 - Note payable, dated June 18, 2015 25,000 - Note payable, dated July 13, 2015 12,500 - Note payable, dated August 5, 2015 25,000 - Note payable, dated August 19, 2015 50,000 Total 926,166 703,210 Less current portion (789,616 ) (298,221 ) Long term portion $ 136,550 $ 404,989 |
Aggregate maturities of long-term debt | Aggregate maturities of long-term debt as of December 31: Amount Year ended December 31, 2016 $ 795,721 Year ended December 31, 2017 110,000 Year ended December 31, 2018 and thereafter 30,000 Total $ 935,721 |
CONVERTIBLE NOTES (Tables)
CONVERTIBLE NOTES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Convertible Notes Tables | |
Convertible notes | Convertible notes of non-related party investors are comprised of the following: 2015 2014 Series A Convertible Notes $ 817,000 $ 817,000 Series B Convertible Notes 225,000 225,000 Series C Convertible Notes 245,000 245,000 Series D Convertible Notes 21,000 21,000 Bridge 2014 Convertible Notes, net of unamortized debt discount of $23,410 and $79,919, respectively 726,590 670,081 Bridge 2015 Convertible Notes, net of unamortized debt discount of $73,244 251,756 - Total 2,286,346 1,978,081 Less: Current portion (2,034,590 ) (228,500 ) Long term portion $ 251,756 $ 1,749,581 |
Aggregate maturities of long-term debt of Convertible notes | Aggregate maturities of long-term debt as of December 31: Amount Year ended December 31, 2016 $ 2,058,000 Year ended December 31, 2017 325,000 Total $ 2,383,000 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Derivative Liabilities Tables | |
Summary of changes in fair value of the Company's Level 3 financial liabilities | The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities as of two years ended December 31, 2015: Excess Share Derivative Balance, December 31, 2013 $ 376,940 Transfers in of Level 3 upon exceeding in authorized shares 703,566 Mark-to-market at December 31, 2014 (743,924 ) Balance, December 31, 2014 336,582 Transfers in of Level 3 upon exceeding in authorized shares 628,457 Transfers out of Level 3 upon increasing authorized shares (583,071 ) Mark-to-market at December 31, 2015 (381,968 ) Balance, December 31, 2015 $ - |
WARRANTS AND OPTIONS (Tables)
WARRANTS AND OPTIONS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Preferred stock warrants [Member] | |
Summary of warrants outstanding and related prices | The following table summarizes warrants outstanding and related prices for the shares of the Company's Series A convertible preferred stock issued at December 31, 2015: Exercise Price Number Outstanding Warrants Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise price Number Exercisable Warrants Exercisable Weighted Average Exercise Price $ 0.50 2,120,000 4.05 $ 0.50 1,120,000 $ 0.50 1.00 71,000 1.72 1.00 71,000 1.00 1.50 333,500 1.67 1.50 333,500 1.50 Total 2,524,500 3.66 $ 0.65 1,524,500 $ 0.75 |
Transactions involving the Company's warrant issuance | Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2013 - $ - Issued 1,914,500 0.66 Exercised Expired Outstanding at December 31, 2014 1,914,500 0.66 Issued 705,000 0.61 Exercised - - Canceled (95,000 ) 1.00 Outstanding at December 31, 2015 2,524,500 $ 0.65 |
Options [Member] | |
Summary of warrants outstanding and related prices | The following table summarizes options outstanding and related prices for the shares of the Company's common stock issued at December 31, 2015: Exercise Price Number Outstanding Option Outstanding Options Average Remaining Contractual Life (years) Weighted Average Exercise price Number Exercisable Options Exercisable Weighted Average Exercise price $ 0.015 3,000,000 5.17 $ 0.015 1,000,000 $ 0.015 0.02 250,000 5.10 0.02 250,000 0.02 0.025 250,000 6.65 0.025 250,000 0.025 0.06 3,000,000 2.42 0.06 3,000,000 0.06 0.09 250,000 2.93 0.09 250,000 0.09 0.095 500,000 3.05 0.095 500,000 0.095 0.10 650,000 2.19 0.10 650,000 0.10 0.13 500,000 1.34 0.13 500,000 0.13 0.17 4,500,000 1.27 0.17 4,500,000 0.17 0.19 1,000,000 0.60 0.19 1,000,000 0.19 0.22 175,000 1.25 0.22 175,000 0.22 5.00 1,517,434 0.65 5.00 1,517,434 5.00 Total 15,592,434 2.35 $ 0.67 13,592,434 $ 0.67 |
Transactions involving the Company's warrant issuance | Transactions involving the Company's option issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2013 14,198,434 $ 0.86 Issued 3,250,000 0.015 Exercised - - Expired (403,000 ) (3.14 ) Outstanding at December 31, 2014 17,045,434 0.64 Issued 250,000 0.025 Exercised -- -- Expired (1,703,000 ) (1.19 ) Outstanding at December 31, 2015 15,592,434 $ 0.67 |
Warrants | |
Summary of warrants outstanding and related prices | The following table summarizes warrants outstanding and related prices for the shares of the Company's common stock issued to shareholders at December 31, 2015: Exercise Price Number Outstanding Warrants Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise price Number Exercisable Warrants Exercisable Weighted Average Exercise Price $ 0.01 to 0.10 38,925,000 3.00 $ 0.10 38,925,000 $ 0.10 0.11 to 0.20 16,150,000 1.74 0.15 16,150,000 0.15 0.21 to 0.30 17,310,000 0.95 0.25 17,310,000 0.25 Total 72,385,000 2.23 $ 0.15 72,385,000 $ 0.15 |
Transactions involving the Company's warrant issuance | Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2013 91,736,274 $ 0.22 Issued 10,500,000 0.15 Exercised - Expired (11,374,590 ) (0.35 ) Outstanding at December 31, 2014 90,861,684 0.20 Issued 5,550,000 0.15 Exercised - - Expired (24,026,684 ) (0.24 ) Outstanding at December 31, 2015 72,385,000 $ 0.15 |
NON CONTROLLING INTEREST (Table
NON CONTROLLING INTEREST (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Non Controlling Interest Tables | |
Net loss attributable to non-controlling interest | Net loss attributable to non-controlling interest for the year ended December 31, 2015: 2015 Net loss $ 744,077 Average Non-controlling interest percentage 49 % Net loss attributable to the non-controlling interest $ 364,598 Net loss attributable to non-controlling interest for the year ended December 31, 2014: 2014 Net loss $ 86,476 Average Non-controlling interest percentage 49 % Net loss attributable to the non-controlling interest $ 42,373 |
Summarizes the changes in non-controlling interest | The following table summarizes the changes in non-controlling interest from December 31, 2013 to December 31, 2015: Balance, December 31, 2013 $ – Transfer (to) from the non-controlling interest as a result of change in ownership – Net loss attributable to the non-controlling interest (42,373 ) Balance, December 31, 2014 (42,373 ) Transfer (to) from the non-controlling interest as a result of change in ownership – Net loss attributable to the non-controlling interest (364,598 ) Balance, December 31, 2015 $ (406,971 ) |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes Tables | |
Federal statutory corporate tax rate | The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows: 2015 2014 Income taxes using U.S. federal statutory rate 34.0 % 34.0 % State income taxes, net of federal benefit 3.8 (3.8 )% Prior period provision 0 % 0 % Stock Expirations 0 % (61.1 )% Other (0.1 )% (0.1 )% Change in Valuation Allowance (37.7 )% (31.0 )% |
Components of the deferred tax assets (liabilities) | The significant components of the deferred tax assets (liabilities) at December 31, 2015 and 2014, are summarized as follows: 2015 2014 Deferred tax assets: Stock Based Compensation $ 1,216,472 $ 1,121,839 Net Operating Losses 12,251,334 12,640,130 Accrued payroll 218,654 241,854 Intangibles 2,738,614 2,752,414 Other - 39 Total deferred tax assets 16,425,074 16,886,257 Deferred tax liabilities: Beneficial Conversion Feature (40,147 ) (1,975 ) Total deferred tax liabilities (40,147 ) (1,975 ) Valuation allowance (16,384,927 ) (16,884,552 ) Net deferred tax assets $ - $ - |
SIGNIFICANT ACCOUNTING POLICI34
SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Totals | 156,277,434 | 168,157,118 |
Convertible notes payable | ||
Totals | 43,055,000 | 35,155,000 |
Preferred stock | ||
Totals | 5,950,000 | |
Options to purchase common stock | ||
Totals | 15,592,434 | 17,045,434 |
Warrants to purchase common stock | ||
Totals | 72,385,000 | 90,861,684 |
Warrants to purchase Series A preferred stock | ||
Totals | 25,245,000 | 19,145,000 |
SIGNIFICANT ACCOUNTING POLICI35
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Deferred revenue | $ 1,260,137 | $ 25,343 |
Company extends credit to large, mid-size and small companies for collection services | One client represented receivables of $10,000 (35%) | |
Allowance for doubtful accounts | $ 600,000 | $ 0 |
Outstanding stock options to purchase | 15,592,434 | |
Outstanding stock options vested | 13,592,434 | |
Advertising costs | $ 2,036,531 | $ 45,000 |
Client [Member] | ||
Percentage of revenue concentration during period | 17.00% | |
Client One [Member] | ||
Percentage of revenue concentration during period | 38.00% | |
Client Two [Member] | ||
Percentage of revenue concentration during period | 20.00% |
GOING CONCERN AND MANAGEMENT'36
GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Going Concern And Managements Liquidity Plans Details Narrative | ||
Net loss | $ (778,427) | $ (809,112) |
Working capital | $ (7,805,090) |
ACCOUNTS RECEIVABLE AND DUE T37
ACCOUNTS RECEIVABLE AND DUE TO FACTOR (Details Narrative) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Notes to Financial Statements | ||
Accounts receivable, net | $ 3,463,161 | $ 28,732 |
Allowance for doubtful accounts | 600,000 | $ 0 |
Due to factor | $ 2,442,935 |
ACCOUNTS PAYABLE AND ACCRUED 38
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Accounts Payable And Accrued Liabilities Details | ||
Accounts payable and accrued expense | $ 740,881 | $ 1,025,919 |
Accrued interest | 1,912,436 | 1,473,686 |
Payroll and related accruals, net of advance to employees | 827,263 | 888,640 |
Total | $ 3,480,580 | $ 3,388,245 |
ACCOUNTS PAYABLE AND ACCRUED 39
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accounts Payable And Accrued Liabilities Details Narrative | ||
Accounts payable settled | $ 320 | |
Gain on settlement of debt | $ 650,319 | $ 320 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Total | $ 536,132 | $ 427,867 |
Less current portion | 536,132 | 427,867 |
Long term portion (only bank loan) | $ 0 | 0 |
Bank loans [Member] | ||
Total | $ 50,000 | |
Note payable, dated June 1, 2015 [Member] | ||
Total | $ 45,765 | |
Note payable, dated July 2, 2015 [Member] | ||
Total | 12,500 | |
Note payable, dated August 28, 2015 [Member] | ||
Total | 50,000 | |
Note payable, dated December 17, 2015 [Member] | ||
Total | 50,000 | |
Investor notes payable [Member] | ||
Total | $ 377,867 | $ 377,867 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Notes Payable Details Narrative | ||
Company repaid bank loan | $ 50,000 | $ 75,000 |
Outstanding balance of bank loan | 0 | $ 50,000 |
Outstanding balance | $ 45,765 |
NOTES PAYABLE, RELATED PARTIE42
NOTES PAYABLE, RELATED PARTIES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Notes Payable | $ 926,166 | $ 703,210 |
Less current portion | (789,616) | (298,221) |
Long term portion | 136,550 | 404,989 |
Convertible note payable dated July 22, 2010 [Member] | ||
Notes Payable | 15,000 | 15,000 |
Note payable dated January 14, 2011 [Member] | ||
Notes Payable | 6,000 | 6,000 |
Note payable dated April 14, 2011 [Member] | ||
Notes Payable | 25,000 | 25,000 |
Note payable dated April 15, 2011 [Member] | ||
Notes Payable | 25,000 | 25,000 |
Note payable dated January 18, 2012 [Member] | ||
Notes Payable | 5,000 | 5,000 |
Note payable dated January 20, 2012 [Member] | ||
Notes Payable | 5,000 | 5,000 |
Note payable dated May 21, 2012 [Member] | ||
Notes Payable | 15,000 | 15,000 |
Note payable dated May 30, 2012 [Member] | ||
Notes Payable | 20,000 | 20,000 |
Series A Convertible note [Member] | ||
Notes Payable | 20,000 | 20,000 |
Convertible notes payable, dated July 6, 2012 [Member] | ||
Notes Payable | 30,000 | 30,000 |
Convertible note payable, dated July 10, 2012 [Member] | ||
Notes Payable | 15,000 | 15,000 |
Note payable, dated September 14, 2012 [Member] | ||
Notes Payable | 6,000 | 6,000 |
Convertible note payable, dated September 7, 2012 [Member] | ||
Notes Payable | 43,000 | 43,000 |
Convertible note payable, dated October 4, 2012 [Member] | ||
Notes Payable | 50,000 | 50,000 |
Convertible note payable, dated September 5, 2013 [Member] | ||
Notes Payable | 10,000 | 10,000 |
Convertible note payable, dated September 16, 2013 [Member] | ||
Notes Payable | 3,000 | 3,000 |
Note payable dated September 17, 2013 [Member] | ||
Notes Payable | 5,221 | 5,221 |
Note payable, dated October 24, 2013 [Member] | ||
Notes Payable | 30,000 | 30,000 |
Note payable, dated November 7, 2013 [Member] | ||
Notes Payable | 40,000 | 40,000 |
Note payable. dated December 6, 2013 [Member] | ||
Notes Payable | 5,000 | 5,000 |
Note payable, dated December 18, 2013 [Member] | ||
Notes Payable | 30,000 | 30,000 |
Note payable, dated January 9, 2014 [Member] | ||
Notes Payable | 25,000 | 25,000 |
Convertible note payable, dated February 28, 2014 [Member] | ||
Notes Payable | 197,936 | 185,167 |
Convertible note payable, dated April 24, 2014 [Member] | ||
Notes Payable | 24,225 | 21,765 |
Convertible note payable, dated November 7, 2014 [Member] | ||
Notes Payable | 23,267 | 21,239 |
Convertible notes payable, dated December 4, 2014 [Member] | ||
Notes Payable | 48,468 | $ 46,818 |
Note payable, dated January 25, 2015 [Member] | ||
Notes Payable | 25,000 | |
Convertible note payable, dated March 3, 2015 [Member] | ||
Notes Payable | 47,299 | |
Convertible note payable, dated May 12, 2015 [Member] | ||
Notes Payable | 19,250 | |
Note payable, dated June 18, 2015 [Member] | ||
Notes Payable | 25,000 | |
Note payable, dated July 13, 2015 [Member] | ||
Notes Payable | 12,500 | |
Note payable, dated August 5, 2015 [Member] | ||
Notes Payable | 25,000 | |
Note payable, dated August 19, 2015 [Member] | ||
Notes Payable | $ 50,000 |
NOTES PAYABLE, RELATED PARTIE43
NOTES PAYABLE, RELATED PARTIES (Details1) | Dec. 31, 2015USD ($) |
Aggregate maturities of long-term debt | |
Year ended December 31, 2016 | $ 795,721 |
Year ended December 31, 2017 | 110,000 |
Year ended December 31, 2018 and thereafter | 30,000 |
Total | $ 935,721 |
NOTES PAYABLE, RELATED PARTIE44
NOTES PAYABLE, RELATED PARTIES (Details Narrtive) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Notes Payable Related Parties Details Narrtive | ||
Amortized debt discount | $ 21,169 | $ 12,819 |
Unpaid accrued interest | 233,856 | 143,526 |
Interest expense, related parties | $ 90,508 | $ 69,738 |
LINE OF CREDIT- RELATED PARTY (
LINE OF CREDIT- RELATED PARTY (Details Narative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Unpaid accrued interest on line of credit | $ 119,239 | $ 101,119 |
Line of credit outstanding balance | 151,000 | 151,000 |
Interest expense | 18,120 | $ 18,120 |
Unsecured promissory note [Member] | ||
Line of credit outstanding balance | $ 397,893 |
CONVERTIBLE NOTES (Details)
CONVERTIBLE NOTES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
CONVERTIBLE NOTES | ||
Convertible Notes | $ 2,286,346 | $ 1,978,081 |
Less: Current portion | (2,034,590) | (228,500) |
Long term portion | 251,756 | 1,749,581 |
Series A Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 817,000 | 817,000 |
Series B Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 225,000 | 225,000 |
Series C Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 245,000 | 245,000 |
Series D Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 21,000 | 21,000 |
Bridge 2014 Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 726,590 | $ 670,081 |
Bridge 2015 Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | $ 251,756 |
CONVERTIBLE NOTES (Details1)
CONVERTIBLE NOTES (Details1) | Dec. 31, 2015USD ($) |
Aggregate maturities of long-term debt | |
2,016 | $ 2,058,000 |
2,017 | 325,000 |
Total | $ 2,383,000 |
CONVERTIBLE NOTES (Details Narr
CONVERTIBLE NOTES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Amortization of the debt discount convertible notes | $ 74,258 | $ 33,227 | |
Series D Convertible Notes [Member] | |||
Amortization of the debt discount convertible notes | $ 285 | $ 3,424 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Derivative Liabilities Details | ||
Beginning Balance | $ 336,582 | $ 376,940 |
Transfers in of Level 3 upon exceeding in authorized shares | 628,457 | 703,566 |
Transfers out of Level 3 upon increasing authorized shares | (583,071) | |
Mark-to-market | $ (381,968) | (743,924) |
Ending Balance | $ 336,582 |
DERIVATIVE LIABILITIES (Detai50
DERIVATIVE LIABILITIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Derivative liabilities | $ 336,582 | $ 376,940 | |
Black Scholes Option Pricing Model [Member] | |||
Net derivative liabilities reclassified | $ 628,457 | $ 703,566 | |
Net derivative liabilities reclassified Dividend yield | 0.00% | 0.00% | |
Derivative liabilities | $ 336,582 | ||
Dividend yield | 0.00% | ||
Volatility | 308.55% | ||
Black Scholes Option Pricing Model [Member] | Minimum [Member] | |||
Net derivative liabilities reclassified Volatility | 306.06% | 289.46% | |
Net derivative liabilities reclassified Risk free rate | 0.01% | 0.14% | |
Net derivative liabilities reclassified Expected life | 1 month 2 days | 2 years | |
Risk free rate | 0.67% | ||
Expected life | 2 years 29 days | ||
Black Scholes Option Pricing Model [Member] | Maximum [Member] | |||
Net derivative liabilities reclassified Volatility | 351.47% | 305.91% | |
Net derivative liabilities reclassified Risk free rate | 1.88% | 2.14% | |
Net derivative liabilities reclassified Expected life | 5 years | 5 years | |
Risk free rate | 1.10% | ||
Expected life | 3 years 3 months 15 days |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Stockholders Equity Details Narrative | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 0 | 595,000 |
Preferred stock shares outstanding | 0 | 595,000 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 500,000,000 | 200,000,000 |
Common stock shares issued | 104,612,082 | 98,187,082 |
Common stock shares outstanding | 104,612,082 | 98,187,082 |
WARRANTS AND OPTIONS (Details)
WARRANTS AND OPTIONS (Details) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Number Outstanding | 15,592,434 |
0.01 to 0.10 [Member] | |
Number Outstanding | 38,925,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years |
Weighted Average Exercise price | $ / shares | $ 0.10 |
Number Exercisable | 38,925,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.10 |
0.11 to 0.20 [Member] | |
Number Outstanding | 16,150,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 8 months 27 days |
Weighted Average Exercise price | $ / shares | $ 0.15 |
Number Exercisable | 16,150,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.15 |
0.21 to 0.30 [Member] | |
Number Outstanding | 17,310,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 11 months 12 days |
Weighted Average Exercise price | $ / shares | $ 0.25 |
Number Exercisable | 17,310,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.25 |
Warrants | |
Number Outstanding | 72,385,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 2 months 23 days |
Weighted Average Exercise price | $ / shares | $ 0.15 |
Number Exercisable | 72,385,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.15 |
WARRANTS AND OPTIONS (Details 1
WARRANTS AND OPTIONS (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Shares | ||
Ending Balance | 15,592,434 | |
Warrant Issuance | ||
Number of Shares | ||
Beginning Balance | 90,861,684 | 91,736,274 |
Issued | 5,550,000 | 10,500,000 |
Exercised | ||
Expired | (24,026,684) | (11,374,590) |
Ending Balance | 72,385,000 | 90,861,684 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.2 | $ 0.22 |
Issued | $ 0.15 | $ 0.15 |
Exercised | ||
Expired | $ (0.24) | $ (0.35) |
Ending Balance | $ 0.15 | $ 0.2 |
WARRANTS AND OPTIONS (Details 2
WARRANTS AND OPTIONS (Details 2) - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Number Outstanding | 15,592,434 | ||
Preferred stock warrants [Member] | |||
Number Outstanding | 2,524,500 | 1,914,500 | |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 7 months 28 days | ||
Weighted Average Exercise price | $ 0.65 | $ 0.66 | |
Number Exercisable | 1,524,500 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.75 | ||
0.50 Preferred stock warrants [Member] | |||
Number Outstanding | 2,120,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 4 years 18 days | ||
Weighted Average Exercise price | $ 0.50 | ||
Number Exercisable | 1,120,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.50 | ||
1.00 Preferred stock warrants [Member] | |||
Number Outstanding | 71,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 8 months 19 days | ||
Weighted Average Exercise price | $ 1 | ||
Number Exercisable | 71,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 1 | ||
1.50 Preferred stock warrants [Member] | |||
Number Outstanding | 333,500 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 8 months 1 day | ||
Weighted Average Exercise price | $ 1.50 | ||
Number Exercisable | 333,500 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 1.50 |
WARRANTS AND OPTIONS (Details 3
WARRANTS AND OPTIONS (Details 3) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Shares | ||
Ending Balance | 15,592,434 | |
Preferred stock warrants [Member] | ||
Number of Shares | ||
Beginning Balance | 1,914,500 | |
Issued | 705,000 | 1,914,500 |
Exercised | ||
Expired | (95,000) | |
Ending Balance | 2,524,500 | 1,914,500 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.66 | |
Issued | $ 0.61 | $ 0.66 |
Exercised | ||
Expired | $ 1 | |
Ending Balance | $ 0.65 | $ 0.66 |
WARRANTS AND OPTIONS (Details 4
WARRANTS AND OPTIONS (Details 4) - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Number Outstanding | 15,592,434 | ||
Options [Member] | |||
Number Outstanding | 15,592,434 | 17,045,434 | 14,198,434 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 4 months 6 days | ||
Weighted Average Exercise price | $ 0.67 | $ 0.64 | $ 0.86 |
Number Exercisable | 13,592,434 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.67 | ||
0.015 | |||
Number Outstanding | 3,000,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 5 years 2 months 1 day | ||
Weighted Average Exercise price | $ 0.015 | ||
Number Exercisable | 1,000,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.015 | ||
0.02 | |||
Number Outstanding | 250,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 5 years 1 month 6 days | ||
Weighted Average Exercise price | $ 0.02 | ||
Number Exercisable | 250,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.02 | ||
0.025 | |||
Number Outstanding | 250,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 6 years 7 months 24 days | ||
Weighted Average Exercise price | $ 0.025 | ||
Number Exercisable | 250,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.025 | ||
0.06 | |||
Number Outstanding | 3,000,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 5 months 1 day | ||
Weighted Average Exercise price | $ 0.06 | ||
Number Exercisable | 3,000,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.06 | ||
0.09 | |||
Number Outstanding | 250,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 11 months 5 days | ||
Weighted Average Exercise price | $ 0.09 | ||
Number Exercisable | 250,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.09 | ||
0.095 | |||
Number Outstanding | 500,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 18 days | ||
Weighted Average Exercise price | $ 0.095 | ||
Number Exercisable | 500,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.095 | ||
0.10 | |||
Number Outstanding | 650,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 2 months 9 days | ||
Weighted Average Exercise price | $ 0.10 | ||
Number Exercisable | 650,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.10 | ||
0.13 | |||
Number Outstanding | 500,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 4 months 2 days | ||
Weighted Average Exercise price | $ 0.13 | ||
Number Exercisable | 500,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.13 | ||
0.17 | |||
Number Outstanding | 4,500,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 3 months 7 days | ||
Weighted Average Exercise price | $ 0.17 | ||
Number Exercisable | 4,500,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.17 | ||
0.19 | |||
Number Outstanding | 1,000,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 7 months 6 days | ||
Weighted Average Exercise price | $ 0.19 | ||
Number Exercisable | 1,000,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.19 | ||
0.22 | |||
Number Outstanding | 175,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 3 months | ||
Weighted Average Exercise price | $ 0.22 | ||
Number Exercisable | 175,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.22 | ||
5 | |||
Number Outstanding | 1,517,434 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 7 months 24 days | ||
Weighted Average Exercise price | $ 5 | ||
Number Exercisable | 1,517,434 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 5 |
WARRANTS AND OPTIONS (Details 5
WARRANTS AND OPTIONS (Details 5) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Shares | ||
Ending Balance | 15,592,434 | |
Options [Member] | ||
Number of Shares | ||
Beginning Balance | 17,045,434 | 14,198,434 |
Issued | 250,000 | 3,250,000 |
Exercised | ||
Expired | (1,703,000) | (403,000) |
Ending Balance | 15,592,434 | 17,045,434 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.64 | $ 0.86 |
Issued | $ 0.025 | $ 0.015 |
Exercised | ||
Expired | $ (1.19) | $ (3.14) |
Ending Balance | $ 0.67 | $ 0.64 |
WARRANTS AND OPTIONS (Details N
WARRANTS AND OPTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Warrants And Options Details Narrative | ||
Company issued warrants | 5,550,000 | 10,500,000 |
Exercise price | $ 0.15 | $ 0.15 |
Estimated fair value charged | $ 100,276 | |
Estimated fair value recorded as compensation | $ 108,672 | $ 29,933 |
Convertible preferred stock issued for Series A | 205,000 | |
Compensation expense for options | $ 21,250 | $ 17,500 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Related Party Transactions Details Narrative | ||
Interest expense in connection with notes payable to related parties and related party line of credits amount | $ 108,628 | $ 87,858 |
Incurred costs | $ 3,800,000 | $ 0 |
NON CONTROLLING INTEREST (Detai
NON CONTROLLING INTEREST (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Non Controlling Interest Details | ||
Net loss | $ 744,077 | $ 86,476 |
Average Non-controlling interest percentage | 49.00% | 49.00% |
Net loss attributable to the non-controlling interest | $ 364,598 | $ 42,373 |
NON CONTROLLING INTEREST (Det61
NON CONTROLLING INTEREST (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Non Controlling Interest Details 1 | ||
Non controlling interest, Beginning | $ (42,373) | |
Transfer (to) from the non-controlling interest as a result of change in ownership | ||
Net loss attributable to the non-controlling interest | $ (364,598) | $ (42,373) |
Non controlling interest, Ending | $ (406,971) | $ (42,373) |
INCOME TAXES (Details)
INCOME TAXES (Details) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details | ||
Income taxes using U.S. federal statutory rate | 34.00% | 34.00% |
State income taxes, net of federal benefit | 3.80% | (3.80%) |
Prior period provision | 0.00% | 0.00% |
Stock Expirations | 0.00% | (61.10%) |
Other | (0.10%) | (0.10%) |
Change in Valuation Allowance | (37.70%) | (31.00%) |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets: | ||
Stock Based Compensation | $ 1,216,472 | $ 1,121,839 |
Net Operating Losses | 12,251,334 | 12,640,130 |
Accrued payroll | 218,654 | 241,854 |
Intangibles | $ 2,738,614 | 2,752,414 |
Other | 39 | |
Total deferred tax assets | $ 16,425,074 | 16,886,257 |
Deferred tax liabilities: | ||
Beneficial Conversion Feature | (40,147) | (1,975) |
Total deferred tax liabilities | (40,147) | (1,975) |
Valuation allowance | $ (16,384,927) | $ (16,884,552) |
Net deferred tax assets |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details Narrative | ||
Federal and state net operating loss carryforwards | $ 32,500,000 | $ 32,680,000 |
Expiry date net of operating loss carryforwards | From 2024 through 2035 |