Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 22, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | DEBT RESOLVE INC | |
Entity Central Index Key | 1,106,645 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
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 | 109,612,082 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 59,250 | $ 30,480 |
Accounts receivable, net | 3,704,986 | 3,463,161 |
Prepaid expenses | 15,981 | 36,893 |
Total current assets | 3,780,217 | 3,530,534 |
Total assets | 3,780,217 | 3,530,534 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 3,796,095 | 3,480,580 |
Due to shareholders | 301,366 | 242,741 |
Deferred revenue | 1,038,984 | 1,260,137 |
Due to factor | 3,090,613 | 2,442,935 |
Notes payable, current portion | 590,855 | 536,132 |
Notes payable-related party, net of unamortized discount of $3,460 and $6,105 as of June 30, 2016 and December 31, 2015, respectively | 707,261 | 789,616 |
Convertible Short-term notes, net of deferred debt discount of $53,944 and $23,410 as of June 30, 2016 and December 31, 2015, respectively | 1,804,556 | 2,034,590 |
Lines of credit, related parties | 517,678 | 548,893 |
Derivative liabilities | 164,782 | |
Total current liabilities | 12,012,190 | 11,335,624 |
Long term debt: | ||
Notes payable, related party, net of unamortized debt discount of $70,274 and $3,450 as of June 30, 2016 and December 31, 2015, respectively | 299,726 | 136,550 |
Notes payable | 75,000 | |
Convertible long-term notes, net of deferred debt discount of $230,142 and $73,244 as of June 30, 2016 and December 31, 2015, respectively | 641,358 | 251,756 |
Total liabilities | 13,028,274 | 11,723,930 |
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- shares issued and outstanding as of June 30, 2016 and December 31, 2015 | ||
Common stock, $0.001 par value, 500,000,000 shares authorized; 104,612,082 shares issued and outstanding as of June 30, 2016 and December 31, 2015 | 104,612 | 104,612 |
Additional paid in capital | 67,118,700 | 66,916,656 |
Accumulated deficit | (75,837,041) | (74,807,693) |
Stockholders' deficiency attributable to Debt Resolve, Inc. | (8,613,729) | (7,786,425) |
Non-controlling interest | (634,328) | (406,971) |
Total stockholders' deficiency | (9,248,057) | (8,193,396) |
Total liabilities and stockholders' deficiency | $ 3,780,217 | $ 3,530,534 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current liabilities: | ||
Notes payable, related party, net of unamortized debt discount | $ 3,460 | $ 6,105 |
Convertible Short-term notes, net of deferred debt discount | 53,944 | 23,410 |
Long term debt: | ||
Notes payable, related party, net of unamortized debt discount | 70,274 | 3,450 |
Convertible long-term notes, net of deferred debt discount | $ 230,142 | $ 73,244 |
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 | 0 |
Series A Convertible Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 500,000,000 | 500,000,000 |
Common stock shares issued | 104,612,082 | 104,612,082 |
Common stock shares outstanding | 104,612,082 | 104,612,082 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Condensed Consolidated Statements Of Operations | ||||
Revenues: | $ 347,830 | $ 1,439,674 | $ 1,005,474 | $ 1,909,767 |
Costs and expenses: | ||||
Payroll, payroll taxes, penalties and related expenses | 300,912 | 484,254 | 615,566 | 822,458 |
Selling and marketing expenses | 567,800 | 124,500 | 926,600 | |
General and administrative expenses | 458,585 | 109,955 | 1,200,133 | 499,762 |
Total costs and expenses | 759,497 | 1,162,009 | 1,940,199 | 2,248,820 |
(Loss) Income from operations | (411,667) | 277,665 | (934,725) | (339,053) |
Other income (expense): | ||||
Gain on change in fair value of derivative liabilities | 157,458 | 267,532 | 153,218 | 340,831 |
Gain on settlement of debt | 650,319 | 650,319 | ||
Interest expense | (197,240) | (541,225) | (448,949) | (648,801) |
Amortization of debt discounts | (52,771) | (22,404) | (83,010) | (41,976) |
Total other income (expense) | (92,553) | 354,222 | (378,741) | 300,373 |
Net loss before provision for income taxes | (504,220) | 631,887 | (1,313,466) | (38,680) |
Income tax (benefit) | ||||
Net (loss) income | (504,220) | 631,887 | (1,313,466) | (38,680) |
Net loss (income) attributable to non-controlling interest | 98,589 | (4,700) | 284,118 | 152,258 |
NET INCOME (LOSS) ATTRIBUTABLE TO DEBT RESOLVE, INC. | $ (405,631) | $ 627,187 | $ (1,029,348) | $ 113,578 |
Net income (loss) per common share -basic | $ 0 | $ 0.01 | $ (0.01) | $ 0 |
Net income (loss) per common share - diluted | $ 0 | $ 0 | $ (0.01) | $ 0 |
Weighted average number of common shares outstanding, basic | 104,612,082 | 98,187,082 | 104,612,082 | 98,187,082 |
Weighted average number of common shares outstanding, diluted | 104,612,082 | 145,692,082 | 104,612,082 | 145,692,082 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY (EQUITY) (unaudited) - 6 months ended Jun. 30, 2016 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2015 | 104,612,082 | ||||
Beginning Balance, Amount at Dec. 31, 2015 | $ 104,612 | $ 66,916,656 | $ (74,807,693) | $ (406,971) | $ (8,193,396) |
Beneficial conversion feature related to convertible notes | 16,619 | 16,619 | |||
Fair value of common stock warrants issued for services | 1,860 | 1,860 | |||
Fair value of warrant modifications | 31,346 | 31,346 | |||
Fair value of vesting options issued to employees for services | 12,219 | 12,219 | |||
Shares due to non-controlling interest as compensation | 100,000 | 100,000 | |||
Capital contributed by non-controlling interest | 56,761 | 56,761 | |||
Stock based compensation | 40,000 | 40,000 | |||
Net loss | (1,029,348) | (284,118) | (1,313,466) | ||
Ending Balance, Shares at Jun. 30, 2016 | 104,612,082 | ||||
Ending Balance, Amount at Jun. 30, 2016 | $ 104,612 | $ 67,118,700 | $ (75,837,041) | $ (634,328) | $ (9,248,057) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,313,466) | $ (38,680) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of debt discounts | 83,010 | 41,976 |
Bad debts | 230,245 | |
Stock based compensation | 154,079 | 18,205 |
Change in fair value of derivative liability | (153,218) | (340,831) |
Loss on warrant modifications | 31,346 | |
Gain on settlement of debt | (650,319) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 656,631 | (529,914) |
Prepaid expenses | 20,912 | 14,118 |
Accounts payable and accrued liabilities | 465,513 | 189,465 |
Deferred revenue | (221,153) | 687,635 |
Net cash used in operating activities | (46,101) | (608,345) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net repayments to factor | (481,023) | |
Net proceeds (repayments) from shareholders | 58,625 | (3,421) |
Contributed capital from non-controlling interest | 56,761 | |
Proceeds from short term notes | 129,723 | 12,500 |
Proceeds from short term notes, related party | 38,785 | 397,891 |
Proceeds from long term notes | 272,000 | 300,000 |
Proceeds from long term notes, related party | 70,000 | |
Net cash provided by financing activities | 74,871 | 776,970 |
Net increase in cash and cash equivalents | 28,770 | 168,625 |
Cash at beginning of period | 30,480 | 55,605 |
Cash at end of period | 59,250 | 224,230 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid during period for interest | 12,933 | 15,449 |
Cash paid during period for taxes | ||
Non-cash financing and investing transactions: | ||
Beneficial conversion feature on convertible notes | 16,619 | 30,042 |
Convertible note issued for settlement of accounts payable | 75,000 | |
Convertible note issued for settlement of compensation | 75,000 | |
Reclassification on non-recourse financing agreement to a full recourse agreement | $ 1,128,701 |
BASIS AND BUSINESS PRESENTATION
BASIS AND BUSINESS PRESENTATION | 6 Months Ended |
Jun. 30, 2016 | |
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. In February 2016, the Company, jointly with Patient Online Services, LLC, organized Payment Resolution Systems LLC, a Delaware limited liability company for the purpose of assisting Medical Groups and Hospitals in the online negotiation and settlement of delinquent accounts, with ownership interests of 51% and 49% for the Company and Patient Online Services, LLC, respectively. In May 2016, the Company, jointly with Hutton Ventures LLC, organized Student Loan Care LLC, a Delaware limited liability company for the purpose of providing document preparation services for holders of Federal Direct Student Loans, with ownership interests of 51% and 49% for the Company and Hutton Ventures LLC, respectively. The Company operates Payment Resolution Systems within Debt Resolve, Inc., whereas Progress Advocates LLC and Student Loan Care LLC operate as independent subsidiaries. Basis of Presentation These unaudited condensed financial statements have been prepared in accordance with the instructions to the Form 10-Q and Article 10 of Regulation S-X, and therefore, do not include all the information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 2016. The unaudited condensed financial statements should be read in conjunction with the consolidated December 31, 2015 financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC"). 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. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES | A summary of the significant accounting policies applied in the presentation of the accompanying unaudited condensed financial statements follows: 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 by the Department of Education and subsequent yearly re-certifications to DoE. The Company may sell its products separately or in various bundles that include multiple elements such as initial fees, monitoring, re-certification, and other services. The Company also earns revenue from collection agencies, healthcare providers 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 per settlement or through a flat monthly fee. Although other revenue models have been proposed, most revenue earned to date has been determined using these methods, and such revenue is recognized when the settlement amount of debt is collected by the client or at the beginning of the month for a flat fee. While the percent of debt collected will continue to be a revenue recognition method going forward, other payment models are also being offered to clients. Dependent upon the structure of future contracts, revenue may be derived from a combination of set up fees or flat monthly or annual fees with transaction fees upon debt settlement, fees per account loaded or fees per settlement. Payment Resolution Systems, the Company's 51% owned subsidiary, works as an extended business office to medical groups around the U.S. Revenue is earned in this business by the online negotiations and collection of group's accounts receivable and paid via a service 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 June 30, 2016 and December 31, 2015, the Company had deferred revenues of $1,038,984 and $1,260,137, respectively 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 the carrying value of accounts receivable, revenue recognition, derivative liabilities and stock compensation. Accordingly, actual results could differ from those estimates. Concentrations and Credit Risk The Company extends credit to large, mid-size and small companies for the use of its software solutions along with customers in the student loan industry. At June 30, 2016 and December 31, 2015, the Company did not have an accounts receivable concentration and no sales concentrations for the three and six months ended June 30, 2016 and 2015. 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 June 30, 2016 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 as of June 30, 2016 and 2015 are as follows: June 30, 2016 June 30, 2015 Convertible notes payable 59,271,667 41,555,000 Preferred stock - 5,950,000 Options to purchase common stock 17,742,434 15,767,434 Warrants to purchase common stock 108,225,000 85,792,934 Warrants to purchase Series A preferred stock 25,245,000 20,790,000 Totals 210,484,101 169,855,368 Reclassification Certain reclassifications have been made to prior period's data to conform to the current period's presentation. These reclassifications had no effect on reported income or losses. 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 June 30, 2016, there were outstanding stock options to purchase 17,742,434 shares of common stock, 14,592,434 shares of which were vested. Defined Contribution (401k) Plan The Company maintains a defined contribution (401k) plan for our 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 June 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges. See Note 10 for discussion of the Company's derivative liabilities. Recent accounting pronouncements There were 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. |
LIQUIDITY
LIQUIDITY | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 3 - LIQUIDITY | The accompanying unaudited condensed 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 unaudited condensed financial statements, the Company incurred a net loss of $1,029,348 for the six months ended June 30, 2016. Additionally, the Company has negative working capital (total current liabilities exceeded total current assets) of $8,231,973 as of June 30, 2016. These factors among others raise substantial doubt about the Company's ability to continue as a going concern. The Company has undertaken further steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond 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. There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all. In the event that the Company is unable to continue as a going concern, it may elect or be required to seek protection from its creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. The accompanying unaudited condensed 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 | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016 and December 31, 2015, the Company's accounts receivable was $4,747,619 and $4,063,161, net of allowance for doubtful accounts of $1,042,633 and $600,000, respectively. The Company's majority owned subsidiary, Progress Advocates LLC entered into a factoring agreement which had certain provisions that factor advances were based on either a non-recourse and recourse basis. During the first quarter of 2016, the Company agreed to modify the terms of the factoring agreement whereby the outstanding advances which were originally based upon a non-recourse basis will be reclassified to a full recourse advances. Accordingly, the Company reclassified the outstanding advances of $1,128,701 to a full recourse liability to the factor, increased the carrying value of accounts receivable by $1,128,701, net of an allowance for doubtful accounts of $212,388. 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 June 30, 2016 and December 31, 2015, the Company's outstanding obligation under the factoring agreement was $3,090,613 and $2,442,935, respectively. The Company's majority owned subsidiary, Student Loan Care LLC, entered into a similar recourse factoring agreement during the second quarter of 2016. |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Accounts payable and accrued liabilities as of June 30, 2016 and December 31, 2015 are comprised of the following: June 30, 2016 December 31, 2015 Accounts payable $ 684,136 $ 740,811 Accrued interest 2,160,704 1,912,436 Payroll and related accruals, net of advance to employees 951,255 827,263 Total $ 3,796,095 $ 3,480,580 On April 19, 2016, the Company entered into a settlement agreement with the former Chief Executive officer whereby the Company issued a convertible note for $75,000 and 2,225,000 warrants to purchase the Company's common stock at $0.10 per share for three years as part settlement of the outstanding salary due of $153,750. The remaining balance is to be paid monthly installments of $2,500 to the extent of available cash flows as determined by the Board of Directors. (See Note 7) |
NOTES PAYABLE
NOTES PAYABLE | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 6 - NOTES PAYABLE | As of June 30, 2016 and December 31, 2015, short term notes are as follows: June 30, 2016 December 31, 2015 Note payable, dated June 1, 2015 41,667 45,765 Note payable, dated July 2, 2015 12,500 12,500 Note payable, dated August 28, 2015 32,967 50,000 Note payable, dated December 17, 2015 50,000 50,000 Note payable, dated January 13, 2016 50,000 - Note payable, dated February 16, 2016 25,000 - Equitable promissory note, dated March 1, 2016 75,854 - Investor notes payable, 12% per annum 377,867 377,867 Total 665,855 536,132 Less current portion 590,855 536,132 Long term portion $ 75,000 $ - On January 13, 2016, the Company issued an unsecured note payable for $50,000 due January 1, 2017 with interest at 12% per annum, paid monthly beginning May 2016 and principal payments beginning November 2016. The outstanding balance as of June 30, 2016 is $50,000. On February 16, 2016, the Company issued an unsecured note payable for $25,000 due February 1, 2017 with interest at 12% per annum, paid monthly beginning June 2016 and principal payments beginning December 2016. The outstanding balance as of June 30, 2016 is $25,000. On March 1, 2016. The Company issued a promissory note payable for $89,240, with interest at 6% per annum, with monthly payments beginning April 15, 2016 in the amount no less than of 5% of the principal balance remaining due until the amount due plus all accrued interest is paid in full. The outstanding balance as of June 30, 2016 is $75,854. Certain note holders, representing an aggregate of $225,000 of these notes, entered into agreements in June 2016 whereby their obligations were extended for a period to September 2016 through August 2018. |
NOTES PAYABLE, RELATED PARTIES
NOTES PAYABLE, RELATED PARTIES | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 7 - NOTES PAYABLE, RELATED PARTIES | As of June 30, 2016 and December 31, 2015, notes payable, related parties are as follows: June 30, 2016 December 31, 2015 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, in default 25,000 25,000 Convertible note payable, dated February 28, 2014, net of unamortized debt discount of $-0- and $2,064, respectively, in default 200,000 197,936 Convertible note payable, dated April 24, 2014, net of unamortized debt discount of $-0- and $775, respectively 25,000 24,225 Convertible note payable, dated November 7, 2014, net of unamortized debt discount of $722 and $1,733, respectively 24,278 23,267 Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $710 and $1,532, respectively 49,290 48,468 Note payable, dated January 25, 2015 25,000 25,000 Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $1,552 and $2,701, respectively 48,448 47,299 Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $476 and $750, respectively 19,524 19,250 Note payable, dated June 18, 2015 25,000 25,000 Note payable, dated July 13, 2015 12,500 12,500 Note payable, dated August 5, 2015, in default 25,000 25,000 Note payable, dated August 19, 2015, in default 50,000 50,000 Convertible note payable, dated May 15, 2016, net of unamortized debt discount of $70,274 4,726 - Note payable, dated June 9, 2016 15,000 - Note payable, dated June 22, 2016 30,000 - Note payable, dated June 30, 2016 25,000 - Total 1,006,987 926,166 Less current portion (707,261 ) (789,616 ) Long term portion $ 299,726 $ 136,550 On May 15, 2016, the Company issued a $75,000 secured convertible note that matures on May 15, 2018 in settlement of accrued compensation. 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 $0.02 per share. Interest will also be converted into common stock at the conversion rate of $0.02 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 2,225,000 warrants to purchase the Company's common stock at $0.10 per share over three years. The Company has identified the embedded derivatives related to the convertible note dated May 15, 2016 (See Note 10). These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Notes and to fair value as of each subsequent reporting date. At inception of the May 15, 2016 note, the Company determined the aggregate fair value of $73,697 of embedded derivatives. The fair value of the embedded derivatives was determined using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 336.12%, (3) weighted average risk-free interest rate of 0.55%, (4) expected life from 2 years, and (5) estimated fair value of the Company's common stock of $0.02 per share. The determined fair value of the debt derivatives of $73,697 was charged as a debt discount of the note. In addition, the Company recognized the value attributable to the warrants, up to the remaining net proceeds of $1,303 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, a risk free interest rate of 0.91%, a dividend yield of 0%, and volatility of 336.12%. 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. On June 9, 2016, a stockholder loaned $15,000 (unsecured) to the Company due June 9, 2017 with interest at 12% per annum, paid monthly beginning October 2016 and principal payments beginning April 2017. On June 22, 2016, a stockholder and board member loaned $30,000 (unsecured) to the Company due June 22, 2017 with interest at 12% per annum, paid monthly beginning October 2016 and principal payments beginning April 2017. On June 30, 2016, a stockholder and board member loaned $25,000 (unsecured) to the Company due June 30, 2017 with interest at 12% per annum, paid monthly beginning October 2016 and principal payments beginning April 2017. For the three and six months ended June 30, 2016, the Company amortized $6,516 and $10,821 of debt discount to operations as interest expense. For the three and six months ended June 30, 2015, the Company amortized $5,362 and $10,200 of debt discount to operations as interest expense. Total unpaid accrued interest on the notes payable to related parties as of June 30, 2016 and December 31, 2015 was $258,460 and $233,856, respectively. During the six months ended June 30, 2016 and 2015, the Company recorded interest expense of $50,336 and $49,933, respectively, in connection with the notes payable to related parties. |
LINE OF CREDIT- RELATED PARTY
LINE OF CREDIT- RELATED PARTY | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016 and December 31, 2015, the outstanding balance on this loan was $366,678 and 397,893, respectively. 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 June 30, 2016 and December 31, 2015 was $128,275 and $119,239, respectively. As of June 30, 2016 and December 31, 2015, the outstanding balance on this loan was $151,000. Since the loan matured on November 24, 2009, it is currently in default. During the six months ended June 30, 2016 and 2015, the Company recorded $9,035 and $8,986, respectively, as interest expense. |
CONVERTIBLE NOTES
CONVERTIBLE NOTES | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 9 - CONVERTIBLE NOTES | Convertible notes of non-related party investors are comprised of the following: June 30, 2016 December 31, 2015 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 $4,733 and $23,410, respectively 745,267 726,590 Bridge 2015 Convertible Notes, net of unamortized debt discount of $50,589 and $73,244, respectively 274,411 251,756 Bridge 2016 Convertible Notes, net of unamortized debt discount of $12,989 59,011 - Bridge 2 (2016) Convertible Notes, net of unamortized debt discount of $174,957 25,043 - Convertible promissory notes, net of unamortized debt discount of $40,818 34,182 - Total 2,445,914 2,286,346 Less: Current portion (1,804,556 ) (2,034,590 ) Long term portion $ 641,358 $ 251,756 In 2016, the Company issued an aggregate of $72,000 in secured convertible notes that mature two years from the date of issuance (from January 2018 through February 2018). 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 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In 2016, the Company issued an aggregate of $75,000 in unsecured convertible notes that mature one year from the date of issuance (from February 2017 through June 2017) for services rendered. The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In addition, if the Company issues any of its common stock or any security convertible into its common stock at an exercise or conversion price lower than the stated conversion price, then the stated conversion price is reduced to the lower conversion price. After February 1, 2016, the Company issued an aggregate of $200,000 in secured convertible notes that mature two years from the date of issuance (from January 2018 through June 2018). 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 $0.02 per share. Interest will also be converted into common stock at the conversion rate of $0.02 per share. In connection with the issuance of the convertible notes, the Company issued an aggregate of 6,000,000 warrants to purchase the Company's common stock at $0.10 per share over three years. Until February 1, 2016 and in accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the amount of $7,124 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 of 1.25%, a dividend yield of 0%, and volatility of 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. After February 1, 2016, the Company has identified the embedded derivatives related to the notes issued after January 31, 2016. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Notes and to fair value as of each subsequent reporting date. At inception of the post January 2016 notes, the Company determined the aggregate fair value of $244,304 of embedded derivatives. The fair value of the embedded derivatives was determined using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility from 323.14% to 348.27%, (3) weighted average risk-free interest rate from of 0.40% to 0.76%, (4) expected life from 1 to 2 years, and (5) estimated fair value of the Company's common stock of $0.01 to $0.02 per share. The determined fair value of the debt derivatives of $244,304 was charged as a debt discount of the note. In addition, the Company recognized the value attributable to the warrants, up to the remaining net proceeds of $8,181 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, a risk free interest rate of 0.87% to 0.92%, a dividend yield of 0%, and volatility of 330.45% to 348.10%. 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. Certain convertible note holders, representing an aggregate of $524,500 of these notes, entered into agreements in in May and June 2016 whereby their obligations were extended from May 2018 through August 2018. The terms of the agreement included extension of previously issued warrants in connection with the debt by two years and reducing the exercise price from $0.15 per share to $0.10 per share to certain note holders. All other terms (including any amendments or earlier extensions) of the notes remain the same. The determined change in fair value of the extended and repriced warrants was determined using the Black-Scholes Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 322.74% to 329.59%, (3) weighted average risk-free interest rate of 0.43%, (4) expected life from 0.65 to 1.02 years, and (5) estimated fair value of the Company's common stock of $0.018 to 0.03 per share. The determined fair value of the change in warrants of $31,346 was charged to current period interest. For the three and six months ended June 30, 2016, the Company amortized $46,256 and $72,188 of debt discount to current period operations as interest expense. For the three and six months ended June 30, 2015, the Company amortized $17,043 and $31,776 of debt discount to current period operations as interest expense. |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 10 - DERIVATIVE LIABILITIES | As described in Note 9, the Company has identified the embedded derivatives related to the notes issued after January 31, 2016. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Notes and to fair value as of each subsequent reporting date. 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. At June 30, 2016, the fair value of the derivative liabilities of $164,782 was determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 333.89%; risk free rate: 0.59% to 0.36 to 0.58%; and expected life: 0.59 to 1.94 years. As of June 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges. The derivative liability as of June 30, 2016, in the amount of $164,782 has a level 3 classification. The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities as of June 30, 2016: Derivative Liability Balance, December 31, 2015 $ - Total (gains) losses Transfers in of Level 3 upon issuance of convertible notes payable 318,000 Mark-to-market at June 30, 2016: (153,218 ) Balance, June 30, 2016 $ 164,782 Net Gain for the period included in earnings relating to the liabilities held at June 30, 2016 $ 153,218 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 50% from February 1, 2016 to June 30, 2016. 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 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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Note 11 - STOCKHOLDERS' EQUITY | Preferred Stock At June 30, 2016 and December 31, 2015, the Company has authorized 10,000,000 shares of Series A convertible preferred stock, par value $0.001, of which none are issued and outstanding as of June 30, 2016 and December 31, 2015. The Series A convertible 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. Common stock At June 30, 2016 and December 31, 2015, the Company has authorized 500,000,000 shares of common stock, par value $0.001, of which 104,612,082 are issued and outstanding as of June 30, 2016 and December 31, 2015. |
WARRANTS AND OPTIONS
WARRANTS AND OPTIONS | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016: 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 82,550,000 4.14 $ 0.08 52,550,000 $ 0.10 0.11 to 0.20 11,075,000 1.52 0.15 11,075,000 0.15 0.21 to 0.30 14,600,000 0.56 0.25 14,600,000 0.25 Total 108,225,000 3.39 $ 0.11 78,225,000 $ 0.14 Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2015 72,385,000 0.15 Issued 38,550,000 0.06 Exercised - - Expired (2,710,000 ) (0.25 ) Outstanding at June 30, 2016 108,225,000 $ 0.11 In conjunction with the issuance of convertible notes, during the six months ended June 30, 2016, the Company issued warrants to purchase 250,000 and 8,225,000 shares of common stock with an exercise price of $0.15 and $0.10 per share expiring three years from the date of issuance, respectively. Please see Note 9. During the six months ended June 30, 2016, the Company issued 75,000 common stock warrants in connection with services provided. The warrants are exercisable for three years from the date of issuance at an exercise price of $0.15 per common share. The warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of 338.33 %, risk free rate of 1.11% and expected life of 3.00 years. The determined estimated fair value of $1,860 was charged to operations during the six months ended June 30 2016. During the six months ended June 30, 2016, the Company extended the life of previously issued warrants to purchase 5,400,000 shares of common stock by two years and reduced the exercise price from $0.15 per share to $0.10 per share in connection with the note extensions. Please see Note 9. In connection with entering into the Student Loan Care LLC joint venture with Hutton Ventures, LLC, the Company issued to Hutton Ventures LLC three five-year warrants to purchase an aggregate of 30,000,000 shares of common stock of the Company at an exercise price of $0.05 per share. The first warrant for 5,000,000 shares of Debt Resolve common stock vests and becomes exercisable upon the achievement by Student Loan Care of specific increasing revenue goals. The second warrant for 20,000,000 shares of Debt Resolve common stock vests and becomes exercisable when Student Loan Care achieves specific cumulative "operating income" goals. The third warrant for 5,000,000 shares of Debt Resolve common stock vests and becomes exercisable upon the achievement by Student Loan Care and affiliates of revenue for the year ending December 31, 2018 equal to or greater than 75% of Debt Resolve's total revenue for the year ending December 31, 2018. 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 June 30, 2016: 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 3.55 $ 0.50 1,120,000 $ 0.50 1.00 71,000 1.22 1.00 71,000 1.00 1.50 333,500 1.17 1.50 333,500 1.50 Total 2,524,500 3.42 $ 0.65 1,524,500 $ 0.74 Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2015 2,524,500 0.65 Issued - - Exercised - - Expired Outstanding at June 30, 2016 2,524,500 $ 0.65 Options The following table summarizes options outstanding and related prices for the shares of the Company's common stock issued at June 30, 2016: 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 4.67 $ 0.015 2,000,000 $ 0.015 0.02 2,400,000 6.58 0.02 250,000 0.02 0.025 250,000 6.15 0.025 250,000 0.025 0.06 3,000,000 1.92 0.06 3,000,000 0.06 0.09 250,000 2.43 0.09 250,000 0.09 0.095 500,000 2.55 0.095 500,000 0.095 0.10 650,000 1.69 0.10 650,000 0.10 0.13 500,000 0.84 0.13 500,000 0.13 0.17 4,500,000 0.77 0.17 4,500,000 0.17 0.19 1,000,000 0.10 0.19 1,000,000 0.19 0.22 175,000 0.75 0.22 175,000 0.22 5.00 1,517,434 0.15 5.00 1,517,434 5.00 Total 17,742,434 2.47 $ 0.51 14,592,434 $ 0.51 Transactions involving the Company's option issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2015 15,592,434 0.67 Issued 2,150,000 0.02 Exercised - - Expired - Outstanding at June 30, 2016 17,742,434 $ 0.51 In February 2016, the Board granted stock options to purchase 2,000,000 shares of common stock of the Company at exercise price of $0.02 with exercise period of seven years to an officer, vesting 1/3 each anniversary for three years. The grant was valued using the Black-Scholes option pricing model and had a value of $39,000 and will be charged to operations through the vesting period. In April 2016, the Board granted stock options to purchase 150,000 shares of common stock of the Company at exercise price of $0.02 with exercise period of seven years to an officer, vesting 1/3 each six month anniversary for eighteen months. The grant was valued using the Black-Scholes option pricing model and had a value of $1,650 and will be charged to operations through the vesting period. The Black-Scholes option pricing model used the following assumptions: Dividend yield: 0%; Volatility: 348.20% to 348.27%; and Risk Free rate: 1.56% to 1.72%, term: contractual terms. Total stock-based compensation expense for options for the six months ended June 30, 2016 and 2015 amounted to $7,500 and $12,220, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 13 - COMMITMENTS AND CONTINGENCIES | 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 $100,000 at June 30, 2016 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. Compensation settlement: On April 19, 2016, the Company entered into a settlement agreement with the former Chief Executive officer whereby the Company issued a convertible note for $75,000 and 2,225,000 warrants to purchase the Company's common stock at $0.10 per share for three years as part settlement of the outstanding salary due of $153,750. The remaining balance is to be paid monthly installments of $2,500 to the extent of available cash flows as determined by the Board of Directors. 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 "Defaults upon Senior Securities") 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. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 14 - RELATED PARTY TRANSACTIONS | During the six months ended June 30, 2016 and 2015, 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 and 8. Total interest expense in connection with notes payable to related parties and related party lines of credit amounted $59,371 and $58,919 for the six months ended June 30, 2016 and 2015, respectively. Progress Advocates The Company reimburses the 49% owner (non-controlling interest party) for payroll, marketing and general expenses incurred by Progress Advocates. For the six months ended June 30, 2016 and 2015, the Company reimbursed approximately $289,000 and $1,614,000 in incurred costs, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
NOTE 15 - SUBSEQUENT EVENTS | On August 17, 2016, the Company entered into an agreement with an existing noteholder to modify notes previously issued from February 1, 2016 through April 1, 2016 changing the conversion rate of $0.05 per common share to $0.02 per share and eliminating the reset (ratchet) provision. All other terms remained the same. On August 10, 2016, pursuant to the agreement to form Student Loan Care LLC, the Company issued 2,500,000 shares of its common stock, par value $0.001, to each of Jeffrey Da Pra and Nicole Da Pra, principles of Hutton Ventures LLC, as compensation. |
SIGNIFICANT ACCOUNTING POLICI22
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
Significant Accounting Policies Policies | |
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 by the Department of Education and subsequent yearly re-certifications to DoE. The Company may sell its products separately or in various bundles that include multiple elements such as initial fees, monitoring, re-certification, and other services. The Company also earns revenue from collection agencies, healthcare providers 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 per settlement or through a flat monthly fee. Although other revenue models have been proposed, most revenue earned to date has been determined using these methods, and such revenue is recognized when the settlement amount of debt is collected by the client or at the beginning of the month for a flat fee. While the percent of debt collected will continue to be a revenue recognition method going forward, other payment models are also being offered to clients. Dependent upon the structure of future contracts, revenue may be derived from a combination of set up fees or flat monthly or annual fees with transaction fees upon debt settlement, fees per account loaded or fees per settlement. Payment Resolution Systems, the Company's 51% owned subsidiary, works as an extended business office to medical groups around the U.S. Revenue is earned in this business by the online negotiations and collection of group's accounts receivable and paid via a service 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 June 30, 2016 and December 31, 2015, the Company had deferred revenues of $1,038,984 and $1,260,137, respectively |
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 the carrying value of accounts receivable, revenue recognition, derivative liabilities and stock compensation. Accordingly, actual results could differ from those estimates. |
Concentrations of Credit Risk | The Company extends credit to large, mid-size and small companies for the use of its software solutions along with customers in the student loan industry. At June 30, 2016 and December 31, 2015, the Company did not have an accounts receivable concentration and no sales concentrations for the three and six months ended June 30, 2016 and 2015. |
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 June 30, 2016 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 as of June 30, 2016 and 2015 are as follows: June 30, 2016 June 30, 2015 Convertible notes payable 59,271,667 41,555,000 Preferred stock - 5,950,000 Options to purchase common stock 17,742,434 15,767,434 Warrants to purchase common stock 108,225,000 85,792,934 Warrants to purchase Series A preferred stock 25,245,000 20,790,000 Totals 210,484,101 169,855,368 |
Reclassification | Certain reclassifications have been made to prior period's data to conform to the current period's presentation. These reclassifications had no effect on reported income or losses. |
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 June 30, 2016, there were outstanding stock options to purchase 17,742,434 shares of common stock, 14,592,434 shares of which were vested. |
Defined Contribution (401k) Plan | The Company maintains a defined contribution (401k) plan for our 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 June 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges. See Note 10 for discussion of the Company's derivative liabilities. |
Recent accounting pronouncements | There were 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 POLICI23
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Significant Accounting Policies Tables | |
Computation of basic and diluted net loss per share | Potentially dilutive securities as of June 30, 2016 and 2015 are as follows: June 30, 2016 June 30, 2015 Convertible notes payable 59,271,667 41,555,000 Preferred stock - 5,950,000 Options to purchase common stock 17,742,434 15,767,434 Warrants to purchase common stock 108,225,000 85,792,934 Warrants to purchase Series A preferred stock 25,245,000 20,790,000 Totals 210,484,101 169,855,368 |
ACCOUNTS PAYABLE AND ACCRUED 24
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Accounts Payable And Accrued Liabilities Tables | |
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities as of June 30, 2016 and December 31, 2015 are comprised of the following: June 30, 2016 December 31, 2015 Accounts payable $ 684,136 $ 740,811 Accrued interest 2,160,704 1,912,436 Payroll and related accruals, net of advance to employees 951,255 827,263 Total $ 3,796,095 $ 3,480,580 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Notes Payable Tables | |
Short term notes | As of June 30, 2016 and December 31, 2015, short term notes are as follows: June 30, 2016 December 31, 2015 Note payable, dated June 1, 2015 41,667 45,765 Note payable, dated July 2, 2015 12,500 12,500 Note payable, dated August 28, 2015 32,967 50,000 Note payable, dated December 17, 2015 50,000 50,000 Note payable, dated January 13, 2016 50,000 - Note payable, dated February 16, 2016 25,000 - Equitable promissory note, dated March 1, 2016 75,854 - Investor notes payable, 12% per annum 377,867 377,867 Total 665,855 536,132 Less current portion 590,855 536,132 Long term portion $ 75,000 $ - |
NOTES PAYABLE, RELATED PARTIES
NOTES PAYABLE, RELATED PARTIES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Notes Payable Related Parties Tables | |
Notes payable, related parties | As of June 30, 2016 and December 31, 2015, notes payable, related parties are as follows: June 30, 2016 December 31, 2015 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, in default 25,000 25,000 Convertible note payable, dated February 28, 2014, net of unamortized debt discount of $-0- and $2,064, respectively, in default 200,000 197,936 Convertible note payable, dated April 24, 2014, net of unamortized debt discount of $-0- and $775, respectively 25,000 24,225 Convertible note payable, dated November 7, 2014, net of unamortized debt discount of $722 and $1,733, respectively 24,278 23,267 Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $710 and $1,532, respectively 49,290 48,468 Note payable, dated January 25, 2015 25,000 25,000 Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $1,552 and $2,701, respectively 48,448 47,299 Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $476 and $750, respectively 19,524 19,250 Note payable, dated June 18, 2015 25,000 25,000 Note payable, dated July 13, 2015 12,500 12,500 Note payable, dated August 5, 2015, in default 25,000 25,000 Note payable, dated August 19, 2015, in default 50,000 50,000 Convertible note payable, dated May 15, 2016, net of unamortized debt discount of $70,274 4,726 - Note payable, dated June 9, 2016 15,000 - Note payable, dated June 22, 2016 30,000 - Note payable, dated June 30, 2016 25,000 - Total 1,006,987 926,166 Less current portion (707,261 ) (789,616 ) Long term portion $ 299,726 $ 136,550 |
CONVERTIBLE NOTES (Tables)
CONVERTIBLE NOTES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Convertible Notes Tables | |
Convertible notes | Convertible notes of non-related party investors are comprised of the following: June 30, 2016 December 31, 2015 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 $4,733 and $23,410, respectively 745,267 726,590 Bridge 2015 Convertible Notes, net of unamortized debt discount of $50,589 and $73,244, respectively 274,411 251,756 Bridge 2016 Convertible Notes, net of unamortized debt discount of $12,989 59,011 - Bridge 2 (2016) Convertible Notes, net of unamortized debt discount of $174,957 25,043 - Convertible promissory notes, net of unamortized debt discount of $40,818 34,182 - Total 2,445,914 2,286,346 Less: Current portion (1,804,556 ) (2,034,590 ) Long term portion $ 641,358 $ 251,756 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016: Derivative Liability Balance, December 31, 2015 $ - Total (gains) losses Transfers in of Level 3 upon issuance of convertible notes payable 318,000 Mark-to-market at June 30, 2016: (153,218 ) Balance, June 30, 2016 $ 164,782 Net Gain for the period included in earnings relating to the liabilities held at June 30, 2016 $ 153,218 |
WARRANTS AND OPTIONS (Tables)
WARRANTS AND OPTIONS (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016: 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 3.55 $ 0.50 1,120,000 $ 0.50 1.00 71,000 1.22 1.00 71,000 1.00 1.50 333,500 1.17 1.50 333,500 1.50 Total 2,524,500 3.42 $ 0.65 1,524,500 $ 0.74 |
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, 2015 2,524,500 0.65 Issued - - Exercised - - Expired Outstanding at June 30, 2016 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 June 30, 2016: 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 4.67 $ 0.015 2,000,000 $ 0.015 0.02 2,400,000 6.58 0.02 250,000 0.02 0.025 250,000 6.15 0.025 250,000 0.025 0.06 3,000,000 1.92 0.06 3,000,000 0.06 0.09 250,000 2.43 0.09 250,000 0.09 0.095 500,000 2.55 0.095 500,000 0.095 0.10 650,000 1.69 0.10 650,000 0.10 0.13 500,000 0.84 0.13 500,000 0.13 0.17 4,500,000 0.77 0.17 4,500,000 0.17 0.19 1,000,000 0.10 0.19 1,000,000 0.19 0.22 175,000 0.75 0.22 175,000 0.22 5.00 1,517,434 0.15 5.00 1,517,434 5.00 Total 17,742,434 2.47 $ 0.51 14,592,434 $ 0.51 |
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, 2015 15,592,434 0.67 Issued 2,150,000 0.02 Exercised - - Expired - Outstanding at June 30, 2016 17,742,434 $ 0.51 |
Common stock 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 June 30, 2016: 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 82,550,000 4.14 $ 0.08 52,550,000 $ 0.10 0.11 to 0.20 11,075,000 1.52 0.15 11,075,000 0.15 0.21 to 0.30 14,600,000 0.56 0.25 14,600,000 0.25 Total 108,225,000 3.39 $ 0.11 78,225,000 $ 0.14 |
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, 2015 72,385,000 0.15 Issued 38,550,000 0.06 Exercised - - Expired (2,710,000 ) (0.25 ) Outstanding at June 30, 2016 108,225,000 $ 0.11 |
SIGNIFICANT ACCOUNTING POLICI30
SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Totals | 210,484,101 | 169,855,368 |
Convertible notes payable | ||
Totals | 59,271,667 | 41,555,000 |
Preferred stock | ||
Totals | 5,950,000 | |
Options to purchase common stock | ||
Totals | 17,742,434 | 15,767,434 |
Warrants to purchase common stock | ||
Totals | 108,225,000 | 85,792,934 |
Warrants to purchase Series A preferred stock | ||
Totals | 25,245,000 | 20,790,000 |
SIGNIFICANT ACCOUNTING POLICI31
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Significant Accounting Policies Details Narrative | ||
Deferred revenue | $ 1,038,984 | $ 1,260,137 |
Accounts receivable concentration | 0 | 0 |
Sales concentrations | $ 0 | $ 0 |
Outstanding stock options to purchase | 17,742,434 | |
Outstanding stock options vested | 14,592,434 |
LIQUIDITY (Details Narrative)
LIQUIDITY (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Liquidity Details Narrative | ||||
Net loss | $ (405,631) | $ 627,187 | $ (1,029,348) | $ 113,578 |
Working capital | $ (8,231,973) | $ (8,231,973) |
ACCOUNTS RECEIVABLE AND DUE T33
ACCOUNTS RECEIVABLE AND DUE TO FACTOR (Details Narrative) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Notes to Financial Statements | ||
Accounts receivable, net | $ 4,747,619 | $ 4,063,161 |
Allowance for doubtful accounts | 1,042,633 | 600,000 |
Due to factor | $ 3,090,613 | $ 2,442,935 |
ACCOUNTS PAYABLE AND ACCRUED 34
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Accounts Payable And Accrued Liabilities Details | ||
Accounts payable | $ 684,136 | $ 740,881 |
Accrued interest | 2,160,704 | 1,912,436 |
Payroll and related accruals, net of advance to employees | 951,255 | 827,263 |
Total | $ 3,796,095 | $ 3,480,580 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Total | $ 665,855 | $ 536,132 |
Less current portion | 590,855 | 536,132 |
Long term portion | 75,000 | |
Note payable, dated June 1, 2015 [Member] | ||
Total | 41,667 | 45,765 |
Note payable, dated July 2, 2015 [Member] | ||
Total | 12,500 | 12,500 |
Note payable, dated August 28, 2015 [Member] | ||
Total | 32,967 | 50,000 |
Note payable, dated December 17, 2015 [Member] | ||
Total | 50,000 | 50,000 |
Note payable, dated January 13, 2016 [Member] | ||
Total | 50,000 | |
Note payable, dated February 16, 2016 [Member] | ||
Total | 25,000 | |
Equitable promissory note, dated March 1, 2016 [Member] | ||
Total | 75,854 | |
Investor notes payable [Member] | ||
Total | $ 377,867 | $ 377,867 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) | Jun. 30, 2016USD ($) |
Note payable, dated January 13, 2016 [Member] | |
Outstanding balance | $ 50,000 |
Note payable, dated February 16, 2016 [Member] | |
Outstanding balance | 25,000 |
Note payable, dated March 1, 2016 [Member] | |
Outstanding balance | $ 75,854 |
NOTES PAYABLE, RELATED PARTIE37
NOTES PAYABLE, RELATED PARTIES (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Total | $ 1,006,987 | $ 926,166 |
Less current portion | 707,261 | 789,616 |
Long term portion | 299,726 | 136,550 |
Convertible notes payable | ||
Total | 15,000 | 15,000 |
Note payable [Member] | ||
Total | 6,000 | 6,000 |
Note payable 1 [Member] | ||
Total | 25,000 | 25,000 |
Note payable 2 [Member] | ||
Total | 25,000 | 25,000 |
Note payable 3 [Member] | ||
Total | 5,000 | 5,000 |
Note payable 4 [Member] | ||
Total | 5,000 | 5,000 |
Note payable 5 [Member] | ||
Total | 15,000 | 15,000 |
Note payable 6 [Member] | ||
Total | 20,000 | 20,000 |
Series A Convertible note [Member] | ||
Total | 20,000 | 20,000 |
Convertible note payable 1 [Member] | ||
Total | 30,000 | 30,000 |
Convertible note payable 2 [Member] | ||
Total | 15,000 | 15,000 |
Note payable 7 [Member] | ||
Total | 6,000 | 6,000 |
Convertible note payable 3 [Member] | ||
Total | 43,000 | 43,000 |
Convertible note payable 4 [Member] | ||
Total | 50,000 | 50,000 |
Convertible note payable 5 [Member] | ||
Total | 10,000 | 10,000 |
Convertible note payable 6 [Member] | ||
Total | 3,000 | 3,000 |
Note payable 8 [Member] | ||
Total | 5,221 | 5,221 |
Note payable 9 [Member] | ||
Total | 30,000 | 30,000 |
Note payable 10 [Member] | ||
Total | 40,000 | 40,000 |
Note payable 11 [Member] | ||
Total | 5,000 | 5,000 |
Note payable 12 [Member] | ||
Total | 30,000 | 30,000 |
Note payable 13 [Member] | ||
Total | 25,000 | 25,000 |
Convertible note payable 7 [Member] | ||
Total | 200,000 | 197,936 |
Convertible note payable 8 [Member] | ||
Total | 25,000 | 24,225 |
Convertible note payable 9 [Member] | ||
Total | 24,278 | 23,267 |
Convertible note payable 10 [Member] | ||
Total | 49,290 | 48,468 |
Note payable 14 [Member] | ||
Total | 25,000 | 25,000 |
Convertible note payable 11 [Member] | ||
Total | 48,448 | 47,299 |
Convertible note payable 12 [Member] | ||
Total | 19,524 | 19,250 |
Note payable 15 [Member] | ||
Total | 25,000 | 25,000 |
Note payable 16 [Member] | ||
Total | 12,500 | 12,500 |
Note payable 17 [Member] | ||
Total | 25,000 | 25,000 |
Note payable 18 [Member] | ||
Total | 50,000 | 50,000 |
Convertible note payable 13 [Member] | ||
Total | 4,726 | |
Note payable 19 [Member] | ||
Total | 15,000 | |
Note payable 20 [Member] | ||
Total | 30,000 | |
Note payable 21 [Member] | ||
Total | $ 25,000 |
NOTES PAYABLE, RELATED PARTIE38
NOTES PAYABLE, RELATED PARTIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Unsecured loan from stockholder | $ 25,000 | $ 25,000 | |||
Interest rate | 12.00% | 12.00% | |||
Due date | June 30, 2017 | ||||
Unpaid accrued interest on notes payable to related parties | $ 258,460 | $ 258,460 | $ 233,856 | ||
Interest expense | 197,240 | $ 541,225 | 448,949 | $ 648,801 | |
Amortization of debt discounts | 52,771 | 22,404 | 83,010 | 41,976 | |
Notes payable to related parties [Member] | |||||
Interest expense | 50,336 | 49,933 | |||
Amortization of debt discounts | $ 6,516 | $ 5,362 | $ 10,821 | $ 10,200 |
LINE OF CREDIT- RELATED PARTY (
LINE OF CREDIT- RELATED PARTY (Details Narative) - USD ($) | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Unpaid accrued interest on line of credit | $ 128,275 | $ 119,239 | |
Line of credit outstanding balance | 151,000 | 151,000 | |
Interest expense | 9,035 | $ 8,986 | |
Unsecured promissory note [Member] | |||
Line of credit outstanding balance | $ 366,678 | $ 397,893 |
CONVERTIBLE NOTES (Details)
CONVERTIBLE NOTES (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
CONVERTIBLE NOTES | ||
Convertible Notes | $ 2,445,914 | $ 2,286,346 |
Less: Current portion | (1,804,556) | (2,034,590) |
Long term portion | 641,358 | 251,756 |
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 | 745,267 | 726,590 |
Bridge 2015 Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 274,411 | 251,756 |
Bridge 2016 Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 59,011 | |
Bridge 2 (2016) Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 25,043 | |
Convertible notes payable | ||
CONVERTIBLE NOTES | ||
Convertible Notes | $ 34,182 |
CONVERTIBLE NOTES (Details Narr
CONVERTIBLE NOTES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Convertible Notes Details Narrative | ||||
Amortization of the debt discount convertible notes | $ 46,256 | $ 17,043 | $ 72,188 | $ 31,776 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Derivative Liabilities Details | ||||
Beginning Balance | ||||
Total (gains) losses | ||||
Transfers in of Level 3 upon issuance of convertible notes payable | 318,000 | |||
Mark-to-market at June 30, 2016: | (153,218) | |||
Ending Balance | $ 164,782 | 164,782 | ||
Net Gain for the period included in earnings relating to the liabilities held at June 30, 2016 | $ 157,458 | $ 267,532 | $ 153,218 | $ 340,831 |
DERIVATIVE LIABILITIES (Detai43
DERIVATIVE LIABILITIES (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Derivative liabilities | $ 164,782 | |
Black Scholes Option Pricing Model [Member] | ||
Net derivative liabilities reclassified | $ 164,782 | |
Net derivative liabilities reclassified Dividend yield | 0.00% | |
Net derivative liabilities reclassified Volatility | 333.89% | |
Black Scholes Option Pricing Model [Member] | Minimum [Member] | ||
Net derivative liabilities reclassified Risk free rate | 0.59% | |
Net derivative liabilities reclassified Expected life | 7 months 2 days | |
Black Scholes Option Pricing Model [Member] | Maximum [Member] | ||
Net derivative liabilities reclassified Risk free rate | 0.36% | |
Net derivative liabilities reclassified Expected life | 1 year 11 months 9 days |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Jun. 30, 2016 | Dec. 31, 2015 |
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 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 500,000,000 | 500,000,000 |
Common stock shares issued | 104,612,082 | 104,612,082 |
Common stock shares outstanding | 104,612,082 | 104,612,082 |
WARRANTS AND OPTIONS (Details)
WARRANTS AND OPTIONS (Details) | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Number Outstanding | 17,742,434 |
0.01 to 0.10 [Member] | |
Number Outstanding | 82,550,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 4 years 1 month 21 days |
Weighted Average Exercise price | $ / shares | $ 0.08 |
Number Exercisable | 52,550,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.10 |
0.11 to 0.20 [Member] | |
Number Outstanding | 11,075,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 6 months 7 days |
Weighted Average Exercise price | $ / shares | $ 0.15 |
Number Exercisable | 11,075,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.15 |
0.21 to 0.30 [Member] | |
Number Outstanding | 14,600,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 6 months 22 days |
Weighted Average Exercise price | $ / shares | $ 0.25 |
Number Exercisable | 14,600,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.25 |
Warrants | |
Number Outstanding | 108,225,000 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 4 months 21 days |
Weighted Average Exercise price | $ / shares | $ 0.11 |
Number Exercisable | 78,225,000 |
Warrants Exercisable Weighted Average Exercise Price | $ / shares | $ 0.14 |
WARRANTS AND OPTIONS (Details 1
WARRANTS AND OPTIONS (Details 1) | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Number of Shares | |
Ending Balance | 17,742,434 |
Warrant Issuance | |
Number of Shares | |
Beginning Balance | 72,385,000 |
Issued | 38,550,000 |
Exercised | |
Expired | (2,710,000) |
Ending Balance | 108,225,000 |
Weighted Average Exercise Price | |
Beginning Balance | $ / shares | $ 0.15 |
Issued | $ / shares | 0.06 |
Exercised | $ / shares | |
Expired | $ / shares | (0.25) |
Ending Balance | $ / shares | $ 0.11 |
WARRANTS AND OPTIONS (Details 2
WARRANTS AND OPTIONS (Details 2) - $ / shares | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Number Outstanding | 17,742,434 | |
Preferred stock warrants [Member] | ||
Number Outstanding | 2,524,500 | 2,524,500 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 5 months 1 day | |
Weighted Average Exercise price | $ 0.65 | $ 0.65 |
Number Exercisable | 1,524,500 | |
Warrants Exercisable Weighted Average Exercise Price | $ 0.74 | |
0.50 Preferred stock warrants [Member] | ||
Number Outstanding | 2,120,000 | |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 6 months 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 2 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 2 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) | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Number of Shares | |
Ending Balance | 17,742,434 |
Preferred stock warrants [Member] | |
Number of Shares | |
Beginning Balance | 2,524,500 |
Issued | |
Exercised | |
Expired | |
Ending Balance | 2,524,500 |
Weighted Average Exercise Price | |
Beginning Balance | $ / shares | $ 0.65 |
Issued | $ / shares | |
Exercised | $ / shares | |
Expired | $ / shares | |
Ending Balance | $ / shares | $ 0.65 |
WARRANTS AND OPTIONS (Details 4
WARRANTS AND OPTIONS (Details 4) - $ / shares | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Number Outstanding | 17,742,434 | |
Options [Member] | ||
Number Outstanding | 17,742,434 | 15,592,434 |
Option Outstanding Options Average Remaining Contractual Life (years) | 2 years 5 months 19 days | |
Weighted Average Exercise price | $ 0.51 | $ 0.67 |
Number Exercisable | 14,592,434 | |
Options Exercisable Weighted Average Exercise price | $ 0.51 | |
0.015 | ||
Number Outstanding | 3,000,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 4 years 8 months 1 day | |
Weighted Average Exercise price | $ 0.015 | |
Number Exercisable | 2,000,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.015 | |
0.02 | ||
Number Outstanding | 2,400,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 6 years 6 months 29 days | |
Weighted Average Exercise price | $ 0.02 | |
Number Exercisable | 250,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.02 | |
0.025 | ||
Number Outstanding | 250,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 6 years 1 month 24 days | |
Weighted Average Exercise price | $ 0.025 | |
Number Exercisable | 250,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.025 | |
0.06 | ||
Number Outstanding | 3,000,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 1 year 11 months 1 day | |
Weighted Average Exercise price | $ 0.06 | |
Number Exercisable | 3,000,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.06 | |
0.09 | ||
Number Outstanding | 250,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 2 years 5 months 5 days | |
Weighted Average Exercise price | $ 0.09 | |
Number Exercisable | 250,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.09 | |
0.095 | ||
Number Outstanding | 500,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 2 years 6 months 18 days | |
Weighted Average Exercise price | $ 0.095 | |
Number Exercisable | 500,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.095 | |
0.10 | ||
Number Outstanding | 650,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 1 year 8 months 9 days | |
Weighted Average Exercise price | $ 0.10 | |
Number Exercisable | 650,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.10 | |
0.13 | ||
Number Outstanding | 500,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 10 months 2 days | |
Weighted Average Exercise price | $ 0.13 | |
Number Exercisable | 500,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.13 | |
0.17 | ||
Number Outstanding | 4,500,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 9 months 7 days | |
Weighted Average Exercise price | $ 0.17 | |
Number Exercisable | 4,500,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.17 | |
0.19 | ||
Number Outstanding | 1,000,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 1 month 6 days | |
Weighted Average Exercise price | $ 0.19 | |
Number Exercisable | 1,000,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.19 | |
0.22 | ||
Number Outstanding | 175,000 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 9 months | |
Weighted Average Exercise price | $ 0.22 | |
Number Exercisable | 175,000 | |
Options Exercisable Weighted Average Exercise price | $ 0.22 | |
5 | ||
Number Outstanding | 1,517,434 | |
Option Outstanding Options Average Remaining Contractual Life (years) | 1 month 24 days | |
Weighted Average Exercise price | $ 5 | |
Number Exercisable | 1,517,434 | |
Options Exercisable Weighted Average Exercise price | $ 5 |
WARRANTS AND OPTIONS (Details 5
WARRANTS AND OPTIONS (Details 5) | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Number of Shares | |
Ending Balance | 17,742,434 |
Options [Member] | |
Number of Shares | |
Beginning Balance | 15,592,434 |
Issued | 2,150,000 |
Exercised | |
Expired | |
Ending Balance | 17,742,434 |
Weighted Average Exercise Price | |
Beginning Balance | $ / shares | $ 0.67 |
Issued | $ / shares | 0.02 |
Exercised | $ / shares | |
Expired | $ / shares | |
Ending Balance | $ / shares | $ 0.51 |
WARRANTS AND OPTIONS (Details N
WARRANTS AND OPTIONS (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Warrants And Options Details Narrative | ||
Company issued warrants | 250,000 | |
Exercise price | $ 0.15 | |
Common stock shares | 8,225,000 | |
Common stock warrants | 75,000 | |
Estimated fair value charged | $ 1,860 | |
Stock-based compensation expense | $ 7,500 | $ 12,220 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | Jun. 30, 2016USD ($) |
Commitments And Contingencies Details Narrative | |
Accrued expenses | $ 100,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Related Party Transactions Details Narrative | ||
Interest expense in connection with notes payable to related parties and related party line of credits amount | $ 59,371 | $ 58,919 |
Incurred costs reimbursed | $ 289,000 | $ 1,614,000 |