Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Apr. 17, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | DEBT RESOLVE INC | ||
Entity Central Index Key | 1,106,645 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 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 | 121,264,809 | ||
Entity Public Float | $ 724,627 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 593,101 | $ 30,480 |
Accounts receivable, net | 3,913,945 | 954,588 |
Prepaid expenses | 33,054 | 36,893 |
Total current assets | 4,540,100 | 1,021,961 |
Long term assets: | ||
Accounts receivable, net | 3,060,190 | 2,508,573 |
Total assets | 7,600,290 | 3,530,534 |
Current liabilities: | ||
Accounts payable and accrued liabilities | 4,178,384 | 3,480,580 |
Due to shareholders | 303,721 | 242,741 |
Deferred revenue | 1,442,949 | 1,260,137 |
Due to factor | 6,162,722 | 2,442,935 |
Notes payable, current portion | 686,083 | 536,132 |
Notes payable-related party, net of unamortized discount of $47,598 and $6,105 as of December 31, 2016 and 2015, respectively | 828,123 | 789,616 |
Convertible Short-term notes, net of deferred debt discount of $39,667 and $23,410 as of December 31, 2016 and 2015, respectively | 1,433,833 | 2,034,590 |
Lines of credit, related parties | 459,337 | 548,893 |
Total current liabilities | 15,495,152 | 11,335,624 |
Long term debt: | ||
Notes payable, related party, net of unamortized debt discount of $51,370 and $3,450 as of December 31, 2016 and 2015, respectively | 278,630 | 136,550 |
Convertible long-term notes, net of deferred debt discount of $162,841 and $73,244 as of December 31, 2016 and 2015, respectively | 1,113,659 | 251,756 |
Total liabilities | 16,887,441 | 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 December 31, 2016 and 2015 | ||
Common stock, $0.001 par value, 500,000,000 shares authorized; 121,264,809 and 104,612,082 shares issued and outstanding as of December 31, 2016 and 2015, respectively | 121,265 | 104,612 |
Additional paid in capital | 67,736,961 | 66,916,656 |
Accumulated deficit | (76,585,871) | (74,807,693) |
Stockholders' deficiency attributable to Debt Resolve, Inc. | (8,727,645) | (7,786,425) |
Non-controlling interest | (559,506) | (406,971) |
Total stockholders' deficiency | (9,287,151) | (8,193,396) |
Total liabilities and stockholders' deficiency | $ 7,600,290 | $ 3,530,534 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current liabilities: | ||
Notes payable, related party, net of unamortized debt discount | $ 47,598 | $ 6,105 |
Convertible Short-term notes, net of deferred debt discount | 39,667 | 23,410 |
Long term debt: | ||
Notes payable, related party, net of unamortized debt discount | 51,370 | 3,450 |
Convertible long-term notes, net of deferred debt discount | $ 162,841 | $ 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 | 121,264,809 | 104,612,082 |
Common stock shares outstanding | 121,264,809 | 104,612,082 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Consolidated Statements Of Operations | ||
Revenues: | $ 4,434,770 | $ 5,713,905 |
Costs and expenses: | ||
Payroll, payroll taxes, penalties and related expenses | 1,798,871 | 2,076,220 |
Selling and marketing expenses | 640,395 | 2,036,727 |
General and administrative expenses | 2,473,739 | 2,014,604 |
Total costs and expenses | 4,913,005 | 6,127,551 |
Loss from operations | (478,235) | (413,646) |
Other income (expense): | ||
Gain on change in fair value of derivative liabilities | 30,317 | 381,968 |
Gain on settlement of debt | 650,319 | |
Interest expense | (1,159,019) | (1,666,238) |
Amortization of debt discounts | (259,037) | (95,427) |
Total other income (expense) | (1,387,739) | (729,379) |
Net loss before provision for income taxes | (1,865,974) | (1,143,025) |
Income tax (benefit) | ||
Net loss | (1,865,974) | (1,143,025) |
Net loss attributable to non-controlling interest | 87,796 | 364,598 |
NET LOSS ATTRIBUTABLE TO DEBT RESOLVE, INC. | $ (1,778,178) | $ (778,427) |
Net loss per common share -basic and diluted | $ (0.02) | $ (0.01) |
Weighted average number of common shares outstanding, basic and diluted | 108,273,380 | 99,782,356 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY (EQUITY) - USD ($) | Preferred stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2014 | 595,000 | 98,187,082 | ||||
Beginning Balance, Amount at Dec. 31, 2014 | $ 595 | $ 98,187 | $ 66,620,813 | $ (74,029,266) | $ (42,373) | $ (7,352,044) |
Fair value of vesting options issued to employees for services | 21,250 | 21,250 | ||||
Net reclassification of common stock equivalents issued in excess of aggregate authorized availability | (628,457) | $ (628,457) | ||||
Preferred shares issued for payment of services, Shares | 47,500 | 47,500 | ||||
Preferred shares issued for payment of services, Amount | $ 48 | 2,802 | $ 2,850 | |||
Beneficial conversion feature related to convertible notes | 96,705 | 96,705 | ||||
Fair value of common stock warrants issued for services | 100,276 | 100,276 | ||||
Fair value of preferred stock warrants issued for services | 125,978 | $ 125,978 | ||||
Common shares issued in conversion of preferred shares, Shares | (642,500) | 6,425,000 | 6,425,000 | |||
Common shares issued in conversion of preferred shares, Amount | $ (643) | $ 6,425 | (5,782) | $ 642,500 | ||
Reclassification of fair value of derivative liability to equity upon increase in authorized common shares | 583,071 | 583,071 | ||||
Net loss | (778,427) | (364,598) | (1,143,025) | |||
Ending Balance, Shares at Dec. 31, 2015 | 104,612,082 | |||||
Ending Balance, Amount at Dec. 31, 2015 | $ 104,612 | 66,916,656 | (74,807,693) | (406,971) | $ (8,193,396) | |
Common shares issued upon in conversion of notes payable and accrued interest, Shares | 2,652,727 | 2,652,727 | ||||
Common shares issued upon in conversion of notes payable and accrued interest, Amount | $ 2,653 | 80,321 | $ 82,974 | |||
Common shares issued as officer compensation, Shares | 5,000,000 | 5,000,000 | ||||
Common shares issued as officer compensation, Amount | $ 5,000 | 95,000 | $ 100,000 | |||
Common shares issued to non-controlling interest as compensation, Shares | 5,000,000 | 5,000,000 | ||||
Common shares issued to non-controlling interest as compensation, Amount | $ 5,000 | 95,000 | $ 100,000 | |||
Common shares issued in connection with note payable issuance, Shares | 4,000,000 | 4,000,000 | ||||
Common shares issued in connection with note payable issuance, Amount | $ 4,000 | 60,000 | $ 64,000 | |||
Fair value of vesting options issued to employees for services | 34,712 | 34,712 | ||||
Beneficial conversion feature related to convertible notes | 32,082 | 32,082 | ||||
Fair value of common stock warrants issued for services | 1,860 | 1,860 | ||||
Fair value of preferred stock warrants issued for services | 6,346 | 6,346 | ||||
Fair value of warrant modifications | 43,892 | 43,892 | ||||
Reclassification of fair value of derivative liability to equity upon debt modification | 327,905 | 327,905 | ||||
Fair value of debt modifications due to loan extensions | 43,187 | 43,187 | ||||
Capital withdrawal by non-controlling interest | (64,739) | (64,739) | ||||
Net loss | (1,778,178) | (87,796) | (1,865,974) | |||
Ending Balance, Shares at Dec. 31, 2016 | 121,264,809 | |||||
Ending Balance, Amount at Dec. 31, 2016 | $ 121,265 | $ 67,736,961 | $ (76,585,871) | $ (559,506) | $ (9,287,151) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,865,974) | $ (1,143,025) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of debt discounts | 259,037 | 95,427 |
Bad debts | 1,022,208 | 931,242 |
Stock based compensation | 242,918 | 250,354 |
Gain on change in fair value of derivative liability | (30,317) | (381,968) |
Loss on warrant modifications | 43,892 | |
Loss on debt modification | 43,187 | |
Gain on settlement of debt | (650,319) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (4,533,182) | (1,922,736) |
Prepaid expenses | 3,839 | (4,150) |
Accounts payable and accrued liabilities | 855,778 | 530,019 |
Deferred revenue | 182,812 | 1,234,794 |
Net cash used in operating activities | (3,775,802) | (1,060,362) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net proceeds from factor | 3,719,787 | |
Net proceeds (repayments) from shareholders | 60,980 | (3,421) |
Distributed capital to non-controlling interest | (64,739) | |
Proceeds from short term notes | 163,337 | 150,000 |
Proceeds from short term notes, related party | 105,444 | 485,393 |
Repayment of short term notes | (13,386) | (41,735) |
Proceeds from long term notes | 367,000 | 375,000 |
Proceeds from long term notes, related party | 70,000 | |
Net cash provided by financing activities | 4,338,423 | 1,035,237 |
Net (decrease) increase in cash and cash equivalents | 562,621 | (25,125) |
Cash at beginning of period | 30,480 | 55,605 |
Cash at end of period | 593,101 | 30,480 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid during period for interest | 28,051 | 24,463 |
Cash paid during period for taxes | ||
Non-cash financing and investing transactions: | ||
Beneficial conversion feature on convertible notes | 32,082 | 96,705 |
Convertible notes issued for settlement of accounts payable | 75,000 | |
Convertible note issued for settlement of compensation | 75,000 | |
Reclassification of derivative liability to equity | 327,905 | 583,071 |
Reclassification on non-recourse financing agreement to full recourse agreement | 1,128,701 | |
Common stock issued in settlement of note payable and accrued interest | 82,974 | |
Common stock issued in connection with issuance of related party notes payable | $ 64,000 |
BASIS AND BUSINESS PRESENTATION
BASIS AND BUSINESS PRESENTATION | 12 Months Ended |
Dec. 31, 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. The Company operates as one operating segment. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES | A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows: Basis of Presentation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. The non-controlling interest represents the minority owners' share of its net operating results. Revenue Recognition In recognition of the principles expressed in Accounting Standards Codification subtopic 605-10, Revenue should not be recognized until it is realized or realizable and earned, and given the element of doubt associated with collectability of an agreed settlement on past due debt, the Company postpones recognition of all contingent revenue until the client receives payment from the debtor. As is required by SAB 104, revenues are considered to have been earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the successful collection of past due debts using the Company's system and/or, for clients under a flat fee arrangement, the successful availability of the Company's system to its customers. Revenues for the preparation of student loan documentation are earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the completed, delivered and accepted student loan package. The Company may sell its products separately or in various bundles that include multiple elements such as upfront fees, monitoring and other services. The Company also earns revenue from collection agencies, 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 December 31, 2016 and 2015, the Company had deferred revenues of $1,442,949 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 CompanyÂ’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the CompanyÂ’s cash and cash equivalents in non-interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management. The Company extends credit to large, mid-size and small companies for collection services. The Company did not have a concentration in receivables in 2016 or 2015. The Company does not generally require collateral or other security to support customer receivables. Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability and the allowance for doubtful accounts is adjusted accordingly. Management determines collectability based on their experience and knowledge of the customers. As of December 31, 2016 and 2015, allowance for doubtful accounts was $1,622,208 and $600,000, respectively. The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. Cash and Cash Equivalents For purposes of the consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. Fair Values Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The carrying value of the Company's cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity. As of December 31, 2016 or 2015, the Company did not have any items that would be classified as level 1 or 2 disclosures. The Company recognized its derivative liabilities as level 3 and values its derivatives using the methods discussed in Note 10. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 10 are that of volatility and market price of the underlying common stock of the Company. Property and Equipment Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Property and equipment is fully depreciated as of December 31, 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 December 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2016 2015 Convertible notes payable 61,478,077 43,055,000 Options to purchase common stock 17,225,000 15,592,434 Warrants to purchase common stock 101,825,000 72,385,000 Warrants to purchase Series A preferred stock 25,645,000 25,245,000 Totals 206,173,077 156,277,434 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 December 31, 2016, there were outstanding stock options to purchase 17,225,000 shares of common stock, 12,075,000 shares of which were vested. Segment Information Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company's only material principal operating segment. Long-Lived Assets The Company follows Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. Defined Contribution (401k) Plan The Company maintains a defined contribution (401k) plan for 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 December 31, 2016 and 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. Income Taxes Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2016 and 2015, the Company has not recorded any unrecognized tax benefits. The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2016 and 2015. Advertising Costs The Company expenses the cost of advertising and promotional of its services when incurred. The advertising costs paid to related party were $640,395 and $2,036,531 for the years ended December 31, 2016 and 2015, respectively. All of which were used for the acquisition of leads for its majority owned subsidiary, Progress Advocates LLC. 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. |
GOING CONCERN AND MANAGEMENT'S
GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 3 - GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $1,778,178 and $778,427 for the years ended December 31, 2016 and 2015 respectively. Additionally, the Company has negative working capital (total current liabilities exceeded total current assets) of $10,955,052 as of December 31, 2016 and is in default on certain debt obligations (see Note 8). 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 consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. |
ACCOUNTS RECEIVABLE AND DUE TO
ACCOUNTS RECEIVABLE AND DUE TO FACTOR | 12 Months Ended |
Dec. 31, 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 December 31, 2016 and 2015, the Company's accounts receivable was $6,974,135 and $3,463,161, net of allowance for doubtful accounts of $1,622,208 and $600,000, respectively. The Company's majority owned subsidiaries, Progress Advocates LLC and Student Loan Care, LLC entered into factoring agreements 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 outstanding 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 agreements provide 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 agreements also provide for discount fees of 4% - 8% of the face value of any accounts receivable factored, plus additional charges for other transaction fees. The agreements may be terminated by either party at any time and will continue unless either party formally cancels. The Company's majority owned subsidiary, Student Loan Care LLC, entered into a similar recourse factoring agreement during the second quarter of 2016. This agreement provides for the Company to receive an advance of between 45% - 90% of any accounts receivable that it factors with 45% - 5% held in reserve. The average amount received was 64% and the average amount reserved was 30%. The factoring agreement also provides for discount fees of 3% - 6% of the face value of any accounts receivable factored, plus additional charges for other transaction fees. The agreement may be terminated by either party at any time and will continue unless either party formally cancels. As of December 31, 2016 and 2015, the Company's outstanding obligation under the factoring agreements was $6,162,722 and $2,442,935, respectively. |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Accounts payable and accrued liabilities as of December 31, 2016 and 2015 are comprised of the following: 2016 2015 Accounts payable $ 698,435 $ 740,881 Accrued interest 2,419,165 1,912,436 Payroll and related accruals, net of advance to employees 1,060,784 827,263 Total $ 4,178,384 $ 3,480,580 During the year ended December 31, 2015, the Company settled or wrote off old outstanding accounts payable for less than the recorded liability and recognized a $650,319 gain on old debt. 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 | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 6 - NOTES PAYABLE | As of December 31, 2016 and 2015, short term notes are as follows: 2016 2015 Note payable, dated June 1, 2015, in default 41,667 45,765 Note payable, dated July 2, 2015, in default 12,500 12,500 Note payable, dated August 28, 2015, in default 32,967 50,000 Note payable, dated December 17, 2015, in default 50,000 50,000 Note payable, dated January 13, 2016, in default 50,000 - Note payable, dated February 16, 2016, in default 25,000 - Note payable, dated July 14, 2016 47,000 - Equitable promissory note, dated March 1, 2016 49,082 - Investor notes payable, 12% per annum, in default 377,867 377,867 Total 686,083 536,132 Less current portion 686,083 536,132 Long term portion $ -0- $ -0- Notes payable On June 1, 2015, the Company issued an unsecured note payable for $50,000 due October 1, 2016 with interest at 12% per annum, paid monthly beginning June 2015 and principal payments beginning October 2015. The note is currently in default. On July 2, 2015, the Company issued an unsecured note payable for $12,500 due March 15, 2016 with interest at 10% per annum, paid monthly beginning October 2015 and principal payments beginning February 2016. The note is currently in default. On August 28, 2015, the Company issued an unsecured note payable for $50,000 due February 28, 2016 with interest at 12% per annum, due at maturity. The note is currently in default. On December 17, 2015, the Company issued an unsecured note payable for $50,000 due December 17, 2016 with interest at 12% per annum, paid monthly beginning April 2015 and principal payments beginning October 2016. The note is currently in default. 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 note is currently in default. 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 note is currently in default. On July 14, 2016, The Company issued a promissory note payable for $47,000, with interest at 12% per annum, with monthly interest payments beginning November 14, 2016 and principal repayments beginning May 14, 2017. Equitable promissory note 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. Investor notes payable Investor Note 1 On December 21, 2007, an unaffiliated investor loaned the Company $125,000 on an unsecured 18-month note with a maturity date of June 21, 2009. The note has a provision requiring repayment once the Company has raised an aggregate of $500,000 following issuance of this note. As a result, this note is currently in default as it has not been repaid and the Company reached the $500,000 threshold in September, 2008. The note carries interest at a rate of 12% per annum, with interest accruing and payable at maturity. In conjunction with the note, the Company granted to the investor a warrant to purchase 37,500 shares of common stock at an exercise price of $1.07 and an expiration date of December 21, 2012, which has passed. This note is guaranteed by a stockholder. On April 10, 2008, this investor loaned the Company an additional $198,000 on an amendment of the prior unsecured note with a maturity date of June 21, 2009 for payment of the entire balance of the first note plus the amendment ($323,000 total). In February 2010, the Company converted $65,133 principal and $74,867 accrued interest on the note to common stock. In August 2010, the Company repaid $80,000 principal through partial sale of the note. As a result, the remaining balance of the amended note is $177,867. The note carries interest at a rate of 12% per annum, with interest accruing and payable at maturity. In conjunction with the note, the Company also issued a warrant to purchase 99,000 shares of common stock at an exercise price of $2.45 and an expiration date of April 10, 2013. This warrant has a cashless exercise feature. The Company also issued 50,000 shares of common stock valued at $122,130 in order to induce the investor to forbear on the note. This note is guaranteed by a stockholder of the Company. The note was amended and maintains the provision requiring repayment of the note upon raising gross proceeds of $500,000 subsequent the issuance of the note. As of December 31, 2016 and 2015, this note is in default. Investor Note 2 On December 30, 2007, an unaffiliated investor loaned the Company $200,000 on an unsecured 18-month note with a maturity date of June 30, 2009. The note carries interest at a rate of 12% per annum, with interest accruing and payable at maturity. In conjunction with this note, the Company also issued a warrant to purchase 100,000 shares of common stock at an exercise price of $1.00 and an expiration date of December 30, 2012, which has passed. This note is guaranteed by a stockholder. In 2015, the note holder entered into an agreement whereby their obligation was extended till October 22, 2016. The terms of the agreement included a payment of accrued interest of $4,000, this note is in default. |
NOTES PAYABLE, RELATED PARTIES
NOTES PAYABLE, RELATED PARTIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 7 - NOTES PAYABLE, RELATED PARTIES | As of December 31, 2016 and 2015, notes payable, related parties are as follows: 2016 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 2016 2015 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, in default 30,000 30,000 Note payable, dated November 7, 2013 40,000 40,000 Note payable. dated December 6, 2013, in default 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 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 $-0- and $1,733, respectively 25,000 23,267 Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $-0- and $1,532, respectively, in default 50,000 48,468 Note payable, dated January 25, 2015, in default 25,000 25,000 Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $391 and $2,701, respectively 49,609 47,299 Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $199 and $750, respectively 19,801 19,250 Note payable, dated June 18, 2015, in default 25,000 25,000 Note payable, dated July 13, 2015, in default 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 $51,370 23,630 - Note payable, dated June 9, 2016 15,000 - Note payable, dated June 22, 2016 30,000 - Note payable, dated June 30, 2016 25,000 - Notes payable, dated September 28, 2016, net of unamortized debt discount of $47,008 77,992 Total 1,106,753 926,166 Less current portion (828,123 ) (789,616 ) Long term portion $ 278,630 $ 136,550 As described in Note 8 below, On July 22, 2010, investors loaned the Company an aggregate of $260,000 on three-year Series C Convertible Notes with an interest rate of 14%, of which $15,000 was a related party. See Note 8 for full details. On January 14, 2011, a stockholder loaned $6,000 (unsecured) to the Company with a due date of June 30, 2011. The loan had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 60,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,220, based on the relative fair value of the warrant. Such discount was amortized over the original term of the note. On April 14, 2011, a stockholder and Board member loaned $25,000 (unsecured) to the Company with a due date of July 31, 2011. The loan had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 250,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $8,850 that was amortized over the original term of the debt. On April 15, 2011, a stockholder and Board member loaned $25,000 (unsecured) to the Company with a due date of July 31, 2011. The note had been extended to December 31, 2011. The Company is currently in default. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 250,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The Company had recorded a deferred debt discount of $8,850 that was amortized over the original term of the debt. On January 18, 2012, a stockholder and Board member loaned $5,000 (unsecured) to the Company with a demand due date. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 50,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,495, based on the relative fair value of the warrant. Such discount was charged to operations at issuance. On January 20, 2012, a stockholder and Board member loaned $5,000 (unsecured) to the Company with a demand due date. The loan carries interest at the rate of 12% per annum. The lender received a warrant to purchase 50,000 shares of the common stock of the Company at an exercise price of $0.25 per share. The warrant has a five year exercise period. The note was recorded net of a deferred debt discount of $2,435, based on the relative fair value of the warrant. Such discount was charged to operations at issuance date. On May 21, 2012, a stockholder and Board member loaned $18,000 (unsecured) (of which $3,000 has been repaid in 2012) to the Company. The loan was due May 21, 2014 with interest at 12% per annum, and is currently in default. On May 30, 2012, a stockholder and Board member loaned $20,000 (unsecured) to the Company due March 31, 2013 with interest at 12% per annum, and is currently in default. As described in Note 8 below, from June 2009 to March 2010, investors loaned the Company an aggregate of $1,237,459 on three year Series A Convertible Notes with an interest rate of 14%, of which $20,000 was a related party note. See Note 8 for full description. On July 6, 2012, a stockholder and Board member loaned $10,000 (unsecured) to the Company due July 6, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date; therefore the note is currently in default. On July 6, 2012, a stockholder and Board member loaned $20,000 (unsecured) to the Company due July 6, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date; therefore the note is currently in default. On July 10, 2012, a stockholder and Board member loaned $15,000 (unsecured) to the Company due July 10, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date; therefore the note is currently in default. On September 14, 2012, a stockholder and Board member loaned $6,000 (unsecured) to the Company due September 14, 2014 with interest at 12% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On September 7, 2012, a stockholder and Board member loaned $43,000 (unsecured) to the Company due September 7, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date; therefore the note is currently in default. On October 4, 2012, a stockholder and Board member loaned $50,000 (unsecured) to the Company due October 4, 2014 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date; therefore the note is currently in default. On September 5, 2013, a stockholder and Board member loaned $10,000 (unsecured) to the Company due September 5, 2015 with interest at 10% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The Company did not make payment on the maturity date; therefore the note is currently in default. On September 16, 2013, a stockholder and Board member loaned $3,000 (unsecured) to the Company due September 16, 2015 with interest at 12% per annum and convertible into the Company's common stock at $0.10 per share at the holder's option. The Company determined there was no beneficial conversion feature at the time of issuance. The company did not make payment on the maturity date; therefore the note is currently in default. On September 17, 2013, a stockholder and Board member loaned $5,221 (unsecured) to the Company due September 17, 2014 with interest at 12% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On October 24, 2013, a stockholder and Board member loaned $30,000 (unsecured) to the Company due October 24, 2016 with interest at 10% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On November 7, 2013, a stockholder and board member loaned $40,000 (unsecured) to the Company due November 7, 2017 with interest at 10% per annum. On December 6, 2013, a stockholder and Board member loaned $5,000 (unsecured) to the Company due December 6, 2016 with interest at 12% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On December 18, 2013, a stockholder and Board member loaned $30,000 (unsecured) to the Company due December 18, 2018 with interest at 10% per annum. On January 9, 2014, a stockholder and Board member loaned $25,000 (unsecured) to the Company due January 9, 2016 with interest at 10% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On February 28, 2014, the Company issued a $200,000 secured convertible note that matures on February 28, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 2,000,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In 2016, the Company extended the due date till May 20, 2018 On April 24, 2014, the Company issued a $25,000 secured convertible note that matures on April 24, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In 2016, the Company extended the due date till April 18, 2018 On November 7, 2014, the Company issued a $25,000 secured convertible note that matures on November 7, 2016. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 250,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In 2016, the Company extended the due date till May 20, 2018 On December 4, 2014, the Company issued two $25,000 secured convertible notes that mature on December 4, 2016. The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 500,000 warrants to purchase the Company's common stock at $0.15 per share over three years. The Company did not make payment on the maturity date; therefore the note is currently in default. On January 25, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due April 25, 2016 with interest at 10% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On March 3, 2015, the Company issued a $50,000 secured convertible note that matures on March 3, 2017. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 750,000 warrants to purchase the Company's common stock at $0.15 per share over three years. On May 12, 2015, the Company issued a $20,000 secured convertible note that matures on May 12, 2017. The note bears interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible note, the Company issued an aggregate of 300,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the aggregate amount of $5,713 and $37,830 to additional paid in capital and a discount against the 2014 and 2015 notes, respectively. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, a risk free interest rate of 0.69% to 1.09%, a dividend yield of 0%, and volatility of 289.98% to 317.93%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense. On June 18, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due April 21, 2016 with interest at 10% per annum The Company did not make payment on the maturity date; therefore the note is currently in default. On July 13, 2015, a stockholder and Board member loaned $12,500 (unsecured) to the Company due July 12, 2016 with interest at 12% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. On August 5, 2015, a stockholder and Board member loaned $25,000 (unsecured) to the Company due January 1, 2016 with interest at 10% per annum with interest paid monthly for August and September 2015 and principal and interest payable from October through December 2015. The Company did not make payment on the maturity date; therefore the note is currently in default. On August 19, 2015, a stockholder and Board member loaned $50,000 (unsecured) to the Company due February 19, 2016 with interest at 10% per annum. The Company did not make payment on the maturity date; therefore the note is currently in default. 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. On September 28, 2016, a stockholder and board member loaned $200,000 (unsecured) to the Company due September 28, 2018 (of which $75,000 has been repaid) with interest at the lowest permissible interest rate, due at maturity. In connection with the issuance of the note, the Company issued an aggregate of 4,000,000 shares of its common stock valued at $64,000. The Company amortized the fair value of the common stock as a debt discount over the term of the note. For the years ended December 31, 2016 and 2015, the Company amortized $49,587 and $21,169 of debt discount to operations as interest expense. Total unpaid accrued interest on the notes payable to related parties as of December 31, 2016 and 2015 was $337,020 and $233,856, respectively. During the year ended December 31, 2016 and 2015, the Company recorded interest expense of $103,865 and $90,508, respectively, in connection with the notes payable to related parties. Aggregate maturities of long-term debt as of December 31: Amount Year ended December 31, 2017 $ 875,721 Year ended December 31, 2018 330,000 Total $ 1,205,721 |
LINE OF CREDIT- RELATED PARTY
LINE OF CREDIT- RELATED PARTY | 12 Months Ended |
Dec. 31, 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 December 31, 2016 and 2015, the outstanding balance on this loan was $308,337 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 December 31, 2016 and 2015 was $137,409 and $119,239, respectively. As of December 31, 2016 and 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 year ended December 31, 2016 and 2015, the Company recorded $18,170 and $18,120, respectively, as interest expense. |
CONVERTIBLE NOTES
CONVERTIBLE NOTES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 9 - CONVERTIBLE NOTES | Convertible notes of non-related party investors are comprised of the following: 2016 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 $-0- and $23,410, respectively 750,000 726,590 Bridge 2015 Convertible Notes, net of unamortized debt discount of $27,685 and $73,244, respectively 297,315 251,756 Bridge 2016 Convertible Notes, net of unamortized debt discount of $8,901 63,099 - Bridge 2 (2016) Convertible Notes, net of unamortized debt discount of $153,940 96,060 - Convertible promissory notes, net of unamortized debt discount of $11,982 33,018 - Total 2,547,492 2,286,346 Less: Current portion (1,433,833 ) (2,034,590 ) Long term portion $ 1,113,659 $ 251,756 Series A Convertible Notes From June 2009 to March 2010, unaffiliated investors loaned the Company an aggregate of $1,217,459 (excluding $20,000 related party, see Note 7) on three-year Series A Convertible Notes with an interest rate of 14%. The interest accrues and is payable at maturity, which range in dates from August 2012 to March 2013. The conversion price is set at $0.15 per share. The Notes carry a first lien security interest in all of the assets of the Company. In addition, the investors received 12,174,590 warrants to purchase the common stock of the Company at an exercise price of $1.00. On January 21, 2010, the exercise price was reduced to $0.40 due to certain provisions of the warrants. The exercise period of the warrants is five years. The notes were recorded net of a deferred debt discount of $1,143,268, based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount was amortized over the term of the notes. Certain convertible note holders, representing an aggregate of $129,500 of these notes entered, into an agreement in 2016 whereby their obligations were extended for a period of two years from the date of execution of the agreement. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $687,500 are in default. Series B Convertible Notes During year ended December 31, 2010, unaffiliated investors loaned the Company an aggregate of $275,000 on three-year Series B Convertible Notes with an interest rate of 14%. During the year ended December 31, 2010, $50,000 was repaid in cash, leaving a balance of $225,000 on these notes at December 31, 2011 and 2010. The interest accrues and is payable at maturity. The conversion price is set at $0.15 per share. The Notes carry a first lien security interest in all of the assets of the Company with the Series A notes above. In addition, at conversion, the investors will receive 900,000 warrants to purchase the common stock of the Company at an exercise price of $0.40 per share. The warrants are callable when the Company's stock trades above $0.75 per share for 10 consecutive trading days. The notes were recorded net of a deferred debt discount of $264,324, based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount was amortized over the term of the notes. Certain convertible note holders, representing an aggregate of $75,000 of these notes entered, into an agreement in 2016 whereby their obligations were extended for a period of 2 years from the date of execution of the agreement. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $150,000 are in default. Series C Convertible Notes During the year ended December 31, 2010, unaffiliated investors loaned the Company an aggregate of $260,000 (excluding $15,000 related party, see Note 6) on three-year Series C Convertible Notes with an interest rate of 14%. The interest accrues and is payable at maturity. The conversion price was set at $0.15 per share. The notes carry a first lien security interest with the Series A and B notes above in all of the assets of the Company. In addition, the investors received 2,641,670 warrants to purchase the common stock of the Company at an exercise price of $0.40 per share. The series C notes have a "ratchet" provision resetting the conversion price to $0.10 and the warrant exercise price to $0.25 on the first closing of a subsequent offering with those terms. This "ratchet" was triggered on August 12, 2010 with the completion of the minimum closing of $1,500,000 on a $3,000,000 private placement. Additionally, as a result of the delay in filing a registration statement on the aforementioned private placement", the Series C Warrants have become "cashless", along with the warrants from the aforementioned private placement. There is no further effect from this "ratchet" event. The notes were recorded net of a deferred debt discount of $215,940, based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount was amortized over the term of the notes. Certain convertible note holders, representing an aggregate of $160,000 of these notes entered, into an agreement in 2016 whereby their obligations were extended for a period of 2 years from the date of execution of the agreement. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $85,000 are in default. Series D Convertible Notes During the year ended December 31, 2011, the Company issued an aggregate of $25,000 of Series D Convertible Notes with an interest rate of 14% due three years from the date of issuance. The interest accrues and is payable at maturity. The conversion price is set at $0.12 per share. The investors have a second lien position behind the Series A, B and C notes. In addition, the investors received 250,000 warrants to purchase the common stock of the Company at an exercise price of $0.30 per share over five years. The notes were recorded net of deferred debt discount of $10,271 based on the relative fair value of the warrants under the Black-Scholes pricing model. Such discount is being amortized over the term of the notes. On July 21, 2014, the Company issued 49,379 shares of its common stock in settlement of $4,000 Series D Convertible Note payable and related accrued interest of $1,925. Certain convertible note holders, representing an aggregate of $10,000 of these notes entered, into an agreement in 2016 whereby their obligations were extended for a period of 2 years from the date of execution of the agreement. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $11,000 are in default. Additionally, one note holder has filed liens against the Company on his behalf and two of his affiliates to secure payment of the obligations. In 2014, the Company issued an aggregate of $1,050,000 (excluding $300,000 related party, see Note 7) in secured convertible notes that mature two years from the date of issuance (from January 2016 through December 2016). The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible notes, the Company issued an aggregate of 7,500,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the amount of $113,146 to additional paid in capital and a discount against the 2014 notes. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, an average risk free interest rate from 0.69% to 1.10%, a dividend yield of 0%, and volatility of 287.80% to 319.28%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense. Certain convertible note holders, representing an aggregate of $550,000 of these notes entered, into an agreement in 2016 whereby their obligations were extended for a period of 2 years from the date of execution of the agreement. In connection with the extension, the Company re-priced previously issued warrants from an exercise price of $0.15 to $0.10 and extended the maturity by two years. All other terms (including any amendments or earlier extensions) of the notes remain the same. The remaining convertible note holders representing an aggregate balance of $200,000 are in default. In 2015, the Company issued an aggregate of $325,000 in secured convertible notes that mature two years from the date of issuance (from February 2017 through December 2017). The notes bear interest at a rate of 10% and can be convertible into shares of the Company's common stock, at a conversion rate of $0.05 per share. Interest will also be converted into common stock at the conversion rate of $0.05 per share. In connection with the issuance of the convertible notes, the Company issued an aggregate of 4,500,000 warrants to purchase the Company's common stock at $0.15 per share over three years. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants and the conversion feature in the amount of $86,382 to additional paid in capital and a discount against the notes. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 3 years, an average risk free interest rate from 0.63% to 1.25%, a dividend yield of 0%, and volatility of 307.16% to 356.55%. The debt discount attributed to the value of the warrants and conversion feature issued is amortized over the note's maturity period (two years) as interest expense 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. On July 14, 2016, the Company issued a $25,000 a unsecured convertible note that mature two years from the date of issuance. 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 notes, the Company issued an aggregate of 750,000 warrants to purchase the Company's common stock at $0.10 per share over three years. In 2016, the Company issued an aggregate of $120,000 in unsecured convertible notes that mature one year from the date of issuance (from February 2017 through September 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 $0.02 per share (as amended). Interest will also be converted into common stock at the conversion rate of $0.02 per share. In addition, until amended on August 17, 2016, 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. In 2016, the Company issued an aggregate of 2,652,727 shares if its common stock in settlement of $75,000 outstanding notes and related accrued interest. 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 to August 17, 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 through August 17, 2016, the Company determined the aggregate fair value of $358,222 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 $358,222 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 $8,854 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. On October 3, 2016, the Company issued a $25,000 a unsecured convertible note that mature two years from the date of issuance. 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 notes, the Company issued an aggregate of 750,000 warrants to purchase the Company's common stock at $0.10 per share over three years. Certain convertible note holders, representing an aggregate of $909,500 of these notes, entered into agreements in 2016 whereby their obligations were extended from May 2018 through October 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 $0.10-$0.15 per share to $0.65-$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 re-priced 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 348.75%, (3) weighted average risk-free interest rate of 0.43% to 0.68%, (4) expected life from 0.65 to 1.04 years, and (5) estimated fair value of the Company's common stock of $0.011 to 0.032 per share. The determined fair value of the change in warrants of $43,892 and change in conversion rates of $43,187 was charged to current period interest. For the year ended December 31, 2016 and 2015, the Company amortized $192,458 and $74,258 of debt discount to current period operations as interest expense. Aggregate maturities of long-term debt as of December 31: Amount Year ended December 31, 2017 $ 1,473,500 Year ended December 31, 2018 1,276,500 Total $ 2,750,000 |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 10 - DERIVATIVE LIABILITIES | Excessive committed shares Beginning on April 11, 2013 through December 22, 2015, in connection with the previously issued convertible debt, stock options and warrants, the Company had the possibility of exceeding their common shares authorized when considering the number of possible shares that may be issuable to satisfy settlement provisions of these agreements after consideration of all existing instruments that could be settled in shares. This resulted in a derivative liability as a result of the Company having a potential to settle the obligation to issue these excess shares. The accounting treatment of derivative financial instruments required that the Company reclassify the derivative from equity to a liability at their fair values as of the date possible issuable shares exceeded the authorized level and at fair value as of each subsequent balance sheet date. On December 22, 2015, the Company amended the Articles of Incorporation to increase of authorized shares of common stock from 200,000,000 to 500,000,000 thereby having sufficient authorized common shares to meet any settlement provisions. The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company. During the year ended December 31, 2015, the fair value of the net derivative liabilities reclassified from equity of $628,457 was determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 306.06% to 351.47%; risk free rate: 0.01% to 1.88%; and expected life: 0.09 to 5.00 years. At December 22, 2015, the fair value of the derivative liabilities of $583,071, determined using the Black Scholes Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 333.28%; risk free rate: 0.19% to 0.99%; and expected life: 0.13 to 2.31 years, was reclassified to equity upon the increase in common share authorization. The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities in regard to excessive committed shares for the year ended December 31, 2015: Excess Share Derivative Balance, December 31, 2014 336,582 Transfers in of Level 3 upon exceeding in authorized shares 628,457 Transfers out of Level 3 upon increasing authorized shares on December 22, 2015 (583,071 ) Mark-to-market at December 22, 2015 (381,968 ) Balance, December 31, 2015 $ - Embedded derivatives As described in Note 9, the Company has identified the embedded derivatives related to the notes issued after January 31, 2016 through August 17, 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. On August 17, 2016, the Company modified the previously issued notes eliminating the embedded derivative. The Company determined the aggregate fair value of $327,905 of embedded derivatives at the date of modification. 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 346.44%, (3) weighted average risk-free interest rate from of 0.46% to 0.74%, (4) expected life from 0.46 to 1.91 years, and (5) estimated fair value of the Company's common stock of $0.0175 per share. The Company reclassified the determined fair value of the derivative of $327,905 from liability to equity on August 17, 2016. At December 31, 2016 and 2015, the Company did not have any level 3 assets or liabilities. As of December 31, 2016 and 2015, the Company did not have any derivative instruments that were designated as hedges. The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities in regard to embedded derivatives as of December 31, 2016: Derivative Liability Balance, December 31, 2015 $ - Total (gains) losses Transfers in of Level 3 upon issuance of convertible notes payable 358,222 Transfers out of Level 3 upon debt modification (327,905 ) Mark-to-market at August 17, 2016: (30,317 ) Balance, December 31, 2016 $ -0- Net Gain for the period included in earnings relating to the liabilities held at December 31, 2016 $ 30,317 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 increased by 57% for the two years ended December 31, 2016. As the stock price increased for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company's consolidated balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company's derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company's expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
Note 11 - STOCKHOLDERS' EQUITY | Preferred Stock At December 31, 2016 and 2015, the Company has authorized 10,000,000 shares of preferred stock, par value $0.001, of which none were issued and outstanding. On July 7, 2015, the Company issued 47,500 shares of its Series A Convertible Stock as payment for services rendered valued at $2,850. In October 2015, the Company issued an aggregate of 6,425,000 shares of its common stock in exchange of 642,500 shares of Series A Convertible Stock. Common stock At December 31, 2016 and 2015, the Company has authorized 500,000,000 shares of common stock, par value $0.001, of which 121,264,809 and 104,612,082 are issued and outstanding as of December 31, 2016 and 2015, respectively. On December 22, 2015, the Company filed with the State of Delaware to amend the Articles of Incorporation to increase authorized shares of common stock from 200,000,000 to 500,000,000. During the year ended December 31, 2016, the Company issued an aggregate of 2,652,727 shares of its common stock in exchange for convertible notes payable and accrued interest of $82,974. On August 9, 2016, the Company issued 5,000,000 shares of common stock as compensation to the non-controlling interest parties of Student Loan Care LLC valued at $100,000. On September 30, 2016, the Company issued 5,000,000 shares of common stock as officer compensation valued at $100,000. On December 29, 2016, the Company issued an aggregate of 4,000,000 shares in connection with the issuance of related party debt valued at $64,000. |
WARRANTS AND OPTIONS
WARRANTS AND OPTIONS | 12 Months Ended |
Dec. 31, 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 December 31, 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 86,650,000 3.59 $ 0.08 56,650,000 $ 0.10 0.11 to 0.20 8,475,000 1.15 0.15 8,475,000 0.15 0.21 to 0.30 6,700,000 0.45 0.25 6,700,000 0.25 Total 101,825,000 3.18 $ 0.10 71,825,000 $ 0.12 Transactions involving the Company's warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2014 90,861,684 $ 0.20 Issued 5,550,000 0.15 Exercised - Expired (24,026,684 ) (0.24 ) Outstanding at December 31, 2015 72,385,000 0.15 Issued 40,050,000 0.06 Exercised - - Expired (10,610,000 ) (0.25 ) Outstanding at December 31, 2016 101,825,000 $ 0.10 In conjunction with the issuance of convertible notes, during the year ended December 31, 2015, the Company issued an aggregate of warrants to purchase 5,550,000 shares of common stock with an exercise price of $0.15 per share expiring three years from the date of issuance. Please see Notes 7 and 9. On August 12, 2015, the Company repriced to $0.10 and extended for the three years an aggregate of 11,925,000 expiring warrants previously issued to Board Members. The change in fair value of the extended warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of underlying common stock of 349.90%, risk free rate of 1.88% and expected life of 3.00 years. The determined estimated fair value of $100,276 was charged to operations during the year ended December 31, 2015. In conjunction with the issuance of convertible notes, during year ended December 31, 2016, the Company issued warrants to purchase 250,000 and 9,725,000 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 year ended December 31, 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 year ended December 31 2016. 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. During the year ended December 31, 2016, the Company extended the life of previously issued warrants to purchase 8,000,000 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. Preferred stock warrants The following table summarizes warrants outstanding and related prices for the shares of the Company's Series A convertible preferred stock issued at December 31, 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 3.05 $ 0.50 1,120,000 $ 0.50 1.00 71,000 0.71 1.00 71,000 1.00 1.50 373,500 0.89 1.50 373,500 1.50 Total 2,564,500 2.67 $ 0.66 1,564,500 $ 0.76 Transactions involving the Company's preferred warrant issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2014 1,914,500 $ 0.66 Issued 705,000 0.61 Exercised - Canceled (95,000 ) 1.00 Outstanding at December 31, 2015 2,524,500 0.65 Issued 40,000 1.50 Exercised - - Canceled - - Outstanding at December 31, 2016 2,564,500 $ 0.66 On October 5, 2015, the Company issued LSH, LLC a five year warrant to purchase 500,000 shares of series A convertible stock of Debt Resolve at an exercise price of $0.50 per preferred share. The warrant is contingent upon Progress Advocates, LLC achieving operational goals, as defined. During the year ended December 31, 2015, the Company issued an aggregate 205,000 Series A convertible preferred stock warrants in connection with services provided of which 95,000 were subsequently canceled. The warrants are exercisable for three to five years from the date of issuance at an exercise prices from $0.50 to $1.50 per preferred share. The warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of underlying common stock of 306.06% to 355.95%, risk free rate of 0.59% to 1.33% and expected life of 3.00 to 5.00 years. The determined estimated fair value of $17,306 was charged to operations during the year ended December 31, 2015. During the year ended December 31, 2016, the Company issued 40,000 Series A convertible preferred stock warrants in connection with services provided. The warrants are exercisable for three years from the date of issuance at exercise prices of $1.50 per preferred share. The warrants were valued using the Black Sholes option pricing method with the following assumptions: dividend yield $-0-, volatility of underlying common stock of 343.24%, risk free rate of 0.88% and expected life of 3.00 years. The determined estimated fair value of $6,346 was charged to operations during the year ended December 31, 2016. Options The following table summarizes options outstanding and related prices for the shares of the Company's common stock issued at December 31, 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 7,000,000 4.10 $ 0.015 2,000,000 $ 0.015 0.02 400,000 6.00 0.02 250,000 0.02 0.025 250,000 5.65 0.025 250,000 0.025 0.06 3,000,000 1.42 0.06 3,000,000 0.06 0.09 250,000 1.93 0.09 250,000 0.09 0.095 500,000 2.05 0.095 500,000 0.095 0.10 650,000 1.19 0.10 650,000 0.10 0.13 500,000 0.34 0.13 500,000 0.13 0.17 4,500,000 0.27 0.17 4,500,000 0.17 0.22 175,000 0.25 0.22 175,000 0.22 Total 17,225,000 2.35 $ 0.08 12,075,000 $ 0.10 Transactions involving the Company's option issuance are summarized as follows: Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2014 17,045,434 $ 0.64 Issued 250,000 0.025 Exercised - - Expired (1,703,000 ) (1.19 ) Outstanding at December 31, 2015 15,592,434 0.67 Issued 4,150,000 0.02 Exercised -- -- Expired (2,517,434 ) (3.09 ) Outstanding at December 31, 2016 17,225,000 $ 0.08 In 2015, the Board granted stock options to purchase 250,000 shares of common stock of the Company at exercise price of $0.025 with exercise period of seven years to a new board member, fully vested at the date of issuance. The fair value of the options issued to employees and consultants were determined using the Black-Scholes option pricing method with the following assumptions: Dividend yield: 0%; Volatility: 304.56% to 350.51%; and Risk Free rate: 2.13% to 2.14%. In February 2016, the Board granted stock options to purchase 2,000,000 shares of common stock of the Company at exercise price of $0.015 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 $40,000 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. In May 2016, the Board granted stock options to purchase 2,000,000 shares of common stock of the Company at exercise price of $0.015 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 $40,000 and will be charged to operations through the vesting period. The Black-Scholes option pricing model used the following assumptions: Dividend yield: 0%; Volatility: 329.59% to 348.27%; and Risk Free rate: 1.55% to 1.72%, term: contractual terms. Total stock-based compensation expense for options for the year ended December 31, 2016 and 2015 amounted to $34,712 and $21,250, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 13 - COMMITMENTS AND CONTINGENCIES | 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 "Lawsuits from Noteholders") against Debt Resolve Inc., granting the noteholder's motion for summary judgment in part, and denying it in part, and denying Debt Resolve's cross motion for summary judgment. A stipulation with respect to damages was entered by the Court on August 29, 2016 providing that the total outstanding principal and interest due the noteholder as of July 31, 2016 is $322,152. The noteholder is seeking an award of his attorneys' fees from the Court. No decision has been rendered by the Court with respect to noteholder's attorneys' fee claim. From time to time, the Company is involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations. Payroll and Payroll taxes Due to a lack of capital, the Company has been unable to pay all of the compensation owed to its employees. In addition, in 2011, 2012 and the first quarter of 2013, the Company did not pay certain federal and state payroll tax obligations due for employees' compensation, and they have become delinquent. As a result, the Company has included in accrued expenses an amount of approximately $100,000 at December 31, 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. Employment agreement The Company entered into an employment agreement with Mr. Bellmare for a three year term commencing as of February 1, 2016, subject to automatic renewal for additional one-year periods unless written notice of non-renewal is provided by either party. Pursuant to the employment agreement, Mr. Bellmare has agreed to devote his full time to our business as Chief Operating Officer. The employment agreement provides that Mr. Bellmare is entitled to receive a base salary of $150,000, and an annual increase in such base salary based on meeting specified financial and performance milestones at the company. The employment agreement provides for termination by us upon death or disability (as defined therein) or for Cause (as defined therein). In the event the employment agreement is terminated by us within one year of a Change of Control (as defined therein) other than for Cause, Mr. Bellmare will be entitled to receive in a lump sum payment his base salary from the termination date until the one-year anniversary of such Change of Control. The employment agreement contains covenants (i) restricting the executive from engaging in any activities competitive with the business of our company during the term of the agreement and for a period of one year thereafter, and from soliciting our employees, customers and prospective customers for a period of one year after the termination of the agreement, (ii) prohibiting the executive from disclosing confidential information regarding our company and (iii) requiring that all intellectual property developed by the executive and relating to the business of our company constitutes our sole and exclusive property. On May 15, 2016, the Company appointed Mr. Bellmare as Chief Executive Officer. At that time, Mr. BellmareÂ’s employment agreement was modified to increase his base salary to $210,000, grant Mr. Bellmare an additional 3M shares of the CompanyÂ’s common stock and an option for an additional 2M shares of the CompanyÂ’s common stock. All other terms of his employment contract dated 2/1/2016 remain the same. On July 1, 2015, the Company issued Bruce Bellmare Consulting, an entity under the control of Mr. Bellmare, a warrant to acquire 4,500 Series A Convertible Preferred stock at an exercise price of $1.50 for for three years, vesting immediately at a fair value of $176. On December 1, 2015, the Company issued Mr. Bellmare a warrant to acquire 9,000 Series A Convertible Preferred stock at an exercise price of $1.50 for for three years, vesting immediately at a fair value of $2,688. On February 1, 2016, the Company issued Mr. Bellmare an option to acquire 2,000,000 shares of the CompanyÂ’s common stock at an exercise price of $0.02 for seven years, vesting over three years at anniversary at a fair value of $39,999. On May 16, 2016, the Company issued Mr. Bellmare an option to acquire 2,000,000 shares of the CompanyÂ’s common stock at an exercise price of $0.015 for seven years, with market conditions (as defined) at a fair value of $39,999. On September 30, 2016, the Company issued Mr. Bellmare 5,000,000 shares of the CompanyÂ’s common stock at a fair value of $100,000. Operating leases The Company currently occupies office space at 1133 Westchester Avenue, Suite S-223, White Plains, NY 10604, under a short term lease with an unaffiliated third party. The monthly rent is $3,500 and can be terminated with a sixty day notice. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 14 - RELATED PARTY TRANSACTIONS | During the year ended December 31, 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 $122,035 and $108,628 for the year ended December 31, 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 year ended December 31, 2016 and 2015, the Company reimbursed approximately $289,000 and $3,800,000 in incurred costs, respectively. Included in accounts payable and accrued liabilities at December 31, 2016 and 2015 is $73,807 and $81,729, respectively. |
NON CONTROLLING INTEREST
NON CONTROLLING INTEREST | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 15 - NON CONTROLLING INTEREST | In December 2014, the Company organized Progress Advocates, LLC, a Delaware limited liability company for the purpose to provide services in the student loan document preparation industry. At the time of formation, Progress Advocates, LLC did not have any significant assets or liabilities. In connection with entering into the Progress Advocates LLC joint venture with LSH, LLC (minority owner), the Company issued to LSH, LLC two five-year warrants to purchase an aggregate of 1,500,000 shares of series A convertible preferred stock of Debt Resolve at an exercise price of $0.50 per preferred share.. 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. 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. A reconciliation of the non-controlling income (loss) attributable to the Company: Net loss attributable to non-controlling interest for the year ended December 31, 2016: Progress Advocates, Inc. Student Loan Care LLC Patient Online Services, LLC Net income (loss) $ (315,007 ) $ 141,695 $ (5,863 ) Average Non-controlling interest percentage 49 % 49 % 49 % Net Income ( loss) attributable to the non-controlling interest $ (154,354 ) $ 69,431 $ (2,873 ) Net loss attributable to non-controlling interest for the year ended December 31, 2015: Progress Advocates, Inc. Net loss $ (744,077 ) Average Non-controlling interest percentage 49 % Net income (loss) attributable to the non-controlling interest $ (364,598 ) The following table summarizes the changes in non-controlling interest from January 1, 2015 to December 31, 2016: Progress Advocates Student Loan Care, LLC Patient Online Services, Inc. Total Balance, January 1, 2015 $ (42,373 ) $ - $ - $ (42,373 ) Net loss attributable to the non-controlling interest (364,598 ) - - (364,598 ) Balance, December 31, 2015 (406,971 ) - - (406,971 ) Net capital withdrawal by non-controlling interest - (64,739 ) - (64,739 ) Net income (loss) attributable to the non-controlling interest (154,354 ) 69,431 (2,873 ) (87,796 ) Balance, December 31, 2016 $ (561,325 ) $ 4,692 $ (2,873 ) $ (559,506 ) |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 16 - INCOME TAXES | The Company follows Accounting Standards Codification subtopic 740, Income Taxes ("ASC 740") which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under such method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows: 2016 2015 Income taxes using U.S. federal statutory rate 34.0 % 34.0 % State income taxes, net of federal benefit 3.8 % 3.8 % Prior period provision 0 % 0 % Stock Expirations 0 % 0 % Other (0.1 )% (0.1 )% Change in Valuation Allowance (37.7 )% (37.7 )% The significant components of the deferred tax assets (liabilities) at December 31, 2016 and 2015 are summarized as follows: 2016 2015 Deferred tax assets: Stock Based Compensation $ 1,236,475 $ 1,216,472 Net Operating Losses 12,798,602 12,251,334 Accrued payroll 311,678 218,654 Intangibles 2,733,398 2,738,614 Total deferred tax assets 17,080,153 16,425,074 Deferred tax liabilities: Beneficial Conversion Feature (85,190 ) (40,147 ) Total deferred tax liabilities (85,190 ) (40,147 ) Valuation allowance (16,994,963 ) (16,384,927 ) Net deferred tax assets $ - $ - As of December 31, 2016 and 2015, the Company had U.S. federal and state net operating loss carryforwards of approximately $33.9 million and $32.5 million, respectively, which expire at various dates from 2024 through 2036. These net operating loss carryforwards may be used to offset future taxable income and thereby reduce the Company's U.S. federal income taxes. Section 382 of the Internal Revenue Code of 1986 (the "Code") imposes an annual limit on the ability of a corporation that undergoes a greater than 50% ownership change to use its net operating loss carry forwards to reduce its tax liability. The Company may be subject to a limitation as a result of the Company's initial public offering in 2006 and other transactions related to its stock ownership. These potential limitations could affect the utilization of the carryforwards prior to their expiration. The Company has provided a full valuation allowance against its net deferred tax assets, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits of these assets will not be realized. The Company complies with the provisions of FASB ASC 740-10 in accounting for its uncertain tax positions. ASC 740-10 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely that not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Management has determined that the Company has no significant uncertain tax positions requiring recognition under ASC 740-10. The Company is subject to income tax in the U.S., and certain state jurisdictions. The Company has not been audited by the U.S. Internal Revenue Service, or any states in connection with income taxes. The periods from December 31, 2014 to December 31, 2016 remain open to examination by the U.S. Internal Revenue Service, and state tax authorities. The periods from December 31, 2006 to December 31, 2013 are subject to examination up to the net operating loss. The Company recognizes interest and penalties related to unrecognized tax benefits, if incurred, as a component of income tax expense. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 17 - SUBSEQUENT EVENTS | In accordance with ASC 855-10, Subsequent Events |
SIGNIFICANT ACCOUNTING POLICI24
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Significant Accounting Policies Policies | |
Basis of Presentation | The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All significant inter-company transactions and balances have been eliminated in consolidation. The non-controlling interest represents the minority owners' share of its net operating results. |
Estimates | The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, revenues and expenses and certain disclosures. The most significant estimates are those used in determination of the carrying value of accounts receivable, revenue recognition, derivative liabilities and stock compensation. Accordingly, actual results could differ from those estimates. |
Revenue Recognition | In recognition of the principles expressed in Accounting Standards Codification subtopic 605-10, Revenue should not be recognized until it is realized or realizable and earned, and given the element of doubt associated with collectability of an agreed settlement on past due debt, the Company postpones recognition of all contingent revenue until the client receives payment from the debtor. As is required by SAB 104, revenues are considered to have been earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the successful collection of past due debts using the Company's system and/or, for clients under a flat fee arrangement, the successful availability of the Company's system to its customers. Revenues for the preparation of student loan documentation are earned when the Company has substantially accomplished the agreed-upon deliverables to be entitled to payment by the client. For most current active clients, these deliverables consist of the completed, delivered and accepted student loan package. The Company may sell its products separately or in various bundles that include multiple elements such as upfront fees, monitoring and other services. The Company also earns revenue from collection agencies, 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 December 31, 2016 and 2015, the Company had deferred revenues of $1,442,949 and $1,260,137, respectively. |
Concentrations of Credit Risk | The CompanyÂ’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the CompanyÂ’s cash and cash equivalents in non-interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management. The Company extends credit to large, mid-size and small companies for collection services. The Company did not have a concentration in receivables in 2016 or 2015. The Company does not generally require collateral or other security to support customer receivables. Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability and the allowance for doubtful accounts is adjusted accordingly. Management determines collectability based on their experience and knowledge of the customers. As of December 31, 2016 and 2015, allowance for doubtful accounts was $1,622,208 and $600,000, respectively. The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. |
Cash and Cash Equivalents | For purposes of the consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. |
Fair Values | Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The carrying value of the Company's cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity. As of December 31, 2016 or 2015, the Company did not have any items that would be classified as level 1 or 2 disclosures. The Company recognized its derivative liabilities as level 3 and values its derivatives using the methods discussed in Note 10. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 10 are that of volatility and market price of the underlying common stock of the Company. |
Property and Equipment | Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. Property and equipment is fully depreciated as of December 31, 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 December 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2016 2015 Convertible notes payable 61,478,077 43,055,000 Options to purchase common stock 17,225,000 15,592,434 Warrants to purchase common stock 101,825,000 72,385,000 Warrants to purchase Series A preferred stock 25,645,000 25,245,000 Totals 206,173,077 156,277,434 |
Stock-based compensation | The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of December 31, 2016, there were outstanding stock options to purchase 17,225,000 shares of common stock, 12,075,000 shares of which were vested. |
Segment Information | Accounting Standards Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company's only material principal operating segment. |
Long-Lived Assets | The Company follows Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell. |
Defined Contribution (401k) Plan | The Company maintains a defined contribution (401k) plan for 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 December 31, 2016 and 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. |
Income Taxes | Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2016 and 2015, the Company has not recorded any unrecognized tax benefits. The Company classifies interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2016 and 2015. |
Advertising Costs | The Company expenses the cost of advertising and promotional of its services when incurred. The advertising costs paid to related party were $640,395 and $2,036,531 for the years ended December 31, 2016 and 2015, respectively. All of which were used for the acquisition of leads for its majority owned subsidiary, Progress Advocates LLC. |
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. |
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 POLICI25
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Significant Accounting Policies Tables | |
Computation of basic and diluted net loss per share | 2016 2015 Convertible notes payable 61,478,077 43,055,000 Options to purchase common stock 17,225,000 15,592,434 Warrants to purchase common stock 101,825,000 72,385,000 Warrants to purchase Series A preferred stock 25,645,000 25,245,000 Totals 206,173,077 156,277,434 |
ACCOUNTS PAYABLE AND ACCRUED 26
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounts Payable And Accrued Liabilities Tables | |
Accounts payable and accrued liabilities | 2016 2015 Accounts payable $ 698,435 $ 740,881 Accrued interest 2,419,165 1,912,436 Payroll and related accruals, net of advance to employees 1,060,784 827,263 Total $ 4,178,384 $ 3,480,580 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Notes Payable Tables | |
Short term notes | 2016 2015 Note payable, dated June 1, 2015, in default 41,667 45,765 Note payable, dated July 2, 2015, in default 12,500 12,500 Note payable, dated August 28, 2015, in default 32,967 50,000 Note payable, dated December 17, 2015, in default 50,000 50,000 Note payable, dated January 13, 2016, in default 50,000 - Note payable, dated February 16, 2016, in default 25,000 - Note payable, dated July 14, 2016 47,000 - Equitable promissory note, dated March 1, 2016 49,082 - Investor notes payable, 12% per annum, in default 377,867 377,867 Total 686,083 536,132 Less current portion 686,083 536,132 Long term portion $ -0- $ -0- |
NOTES PAYABLE, RELATED PARTIES
NOTES PAYABLE, RELATED PARTIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Notes Payable Related Parties Tables | |
Notes payable, related parties | 2016 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 2016 2015 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, in default 30,000 30,000 Note payable, dated November 7, 2013 40,000 40,000 Note payable. dated December 6, 2013, in default 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 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 $-0- and $1,733, respectively 25,000 23,267 Convertible notes payable, dated December 4, 2014, net of unamortized debt discount of $-0- and $1,532, respectively, in default 50,000 48,468 Note payable, dated January 25, 2015, in default 25,000 25,000 Convertible note payable, dated March 3, 2015, net of unamortized debt discount of $391 and $2,701, respectively 49,609 47,299 Convertible note payable, dated May 12, 2015, net of unamortized debt discount of $199 and $750, respectively 19,801 19,250 Note payable, dated June 18, 2015, in default 25,000 25,000 Note payable, dated July 13, 2015, in default 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 $51,370 23,630 - Note payable, dated June 9, 2016 15,000 - Note payable, dated June 22, 2016 30,000 - Note payable, dated June 30, 2016 25,000 - Notes payable, dated September 28, 2016, net of unamortized debt discount of $47,008 77,992 Total 1,106,753 926,166 Less current portion (828,123 ) (789,616 ) Long term portion $ 278,630 $ 136,550 |
Aggregate maturities of long-term debt | Amount Year ended December 31, 2017 $ 875,721 Year ended December 31, 2018 330,000 Total $ 1,205,721 |
CONVERTIBLE NOTES (Tables)
CONVERTIBLE NOTES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Convertible Notes Tables | |
Convertible notes | 2016 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 $-0- and $23,410, respectively 750,000 726,590 Bridge 2015 Convertible Notes, net of unamortized debt discount of $27,685 and $73,244, respectively 297,315 251,756 Bridge 2016 Convertible Notes, net of unamortized debt discount of $8,901 63,099 - Bridge 2 (2016) Convertible Notes, net of unamortized debt discount of $153,940 96,060 - Convertible promissory notes, net of unamortized debt discount of $11,982 33,018 - Total 2,547,492 2,286,346 Less: Current portion (1,433,833 ) (2,034,590 ) Long term portion $ 1,113,659 $ 251,756 |
Aggregate maturities of long-term debt of Convertible notes | Amount Year ended December 31, 2017 $ 1,473,500 Year ended December 31, 2018 1,276,500 Total $ 2,750,000 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Derivative Liabilities Tables | |
Summary of changes in fair value of the Company's Level 3 financial liabilities in regard to excessive committed | Excess Share Derivative Balance, December 31, 2014 336,582 Transfers in of Level 3 upon exceeding in authorized shares 628,457 Transfers out of Level 3 upon increasing authorized shares on December 22, 2015 (583,071 ) Mark-to-market at December 22, 2015 (381,968 ) Balance, December 31, 2015 $ - |
Summary of changes in fair value of the Company's Level 3 financial liabilities | Derivative Liability Balance, December 31, 2015 $ - Total (gains) losses Transfers in of Level 3 upon issuance of convertible notes payable 358,222 Transfers out of Level 3 upon debt modification (327,905 ) Mark-to-market at August 17, 2016: (30,317 ) Balance, December 31, 2016 $ -0- Net Gain for the period included in earnings relating to the liabilities held at December 31, 2016 $ 30,317 |
WARRANTS AND OPTIONS (Tables)
WARRANTS AND OPTIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Preferred stock warrants [Member] | |
Summary of warrants outstanding and related prices | 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 3.05 $ 0.50 1,120,000 $ 0.50 1.00 71,000 0.71 1.00 71,000 1.00 1.50 373,500 0.89 1.50 373,500 1.50 Total 2,564,500 2.67 $ 0.66 1,564,500 $ 0.76 |
Transactions involving the Company's warrant issuance | Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2014 1,914,500 $ 0.66 Issued 705,000 0.61 Exercised - Canceled (95,000 ) 1.00 Outstanding at December 31, 2015 2,524,500 0.65 Issued 40,000 1.50 Exercised - - Canceled - - Outstanding at December 31, 2016 2,564,500 $ 0.66 |
Options [Member] | |
Summary of warrants outstanding and related prices | 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 7,000,000 4.10 $ 0.015 2,000,000 $ 0.015 0.02 400,000 6.00 0.02 250,000 0.02 0.025 250,000 5.65 0.025 250,000 0.025 0.06 3,000,000 1.42 0.06 3,000,000 0.06 0.09 250,000 1.93 0.09 250,000 0.09 0.095 500,000 2.05 0.095 500,000 0.095 0.10 650,000 1.19 0.10 650,000 0.10 0.13 500,000 0.34 0.13 500,000 0.13 0.17 4,500,000 0.27 0.17 4,500,000 0.17 0.22 175,000 0.25 0.22 175,000 0.22 Total 17,225,000 2.35 $ 0.08 12,075,000 $ 0.10 |
Transactions involving the Company's warrant issuance | Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2014 17,045,434 $ 0.64 Issued 250,000 0.025 Exercised - - Expired (1,703,000 ) (1.19 ) Outstanding at December 31, 2015 15,592,434 0.67 Issued 4,150,000 0.02 Exercised -- -- Expired (2,517,434 ) (3.09 ) Outstanding at December 31, 2016 17,225,000 $ 0.08 |
Warrants [Member] | |
Summary of warrants outstanding and related prices | 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 86,650,000 3.59 $ 0.08 56,650,000 $ 0.10 0.11 to 0.20 8,475,000 1.15 0.15 8,475,000 0.15 0.21 to 0.30 6,700,000 0.45 0.25 6,700,000 0.25 Total 101,825,000 3.18 $ 0.10 71,825,000 $ 0.12 |
Transactions involving the Company's warrant issuance | Number of Shares Weighted Average Price Per Share Outstanding at December 31, 2014 90,861,684 $ 0.20 Issued 5,550,000 0.15 Exercised - Expired (24,026,684 ) (0.24 ) Outstanding at December 31, 2015 72,385,000 0.15 Issued 40,050,000 0.06 Exercised - - Expired (10,610,000 ) (0.25 ) Outstanding at December 31, 2016 101,825,000 $ 0.10 |
NON CONTROLLING INTEREST (Table
NON CONTROLLING INTEREST (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Non Controlling Interest Tables | |
Net loss attributable to non-controlling interest | Net loss attributable to non-controlling interest for the year ended December 31, 2016: Progress Advocates, Inc. Student Loan Care LLC Patient Online Services, LLC Net income (loss) $ (315,007 ) $ 141,695 $ (5,863 ) Average Non-controlling interest percentage 49 % 49 % 49 % Net Income ( loss) attributable to the non-controlling interest $ (154,354 ) $ 69,431 $ (2,873 ) Net loss attributable to non-controlling interest for the year ended December 31, 2015: Progress Advocates, Inc. Net loss $ (744,077 ) Average Non-controlling interest percentage 49 % Net income (loss) attributable to the non-controlling interest $ (364,598 ) |
Summarizes the changes in non-controlling interest | The following table summarizes the changes in non-controlling interest from January 1, 2015 to December 31, 2016: Progress Advocates Student Loan Care, LLC Patient Online Services, Inc. Total Balance, January 1, 2015 $ (42,373 ) $ - $ - $ (42,373 ) Net loss attributable to the non-controlling interest (364,598 ) - - (364,598 ) Balance, December 31, 2015 (406,971 ) - - (406,971 ) Net capital withdrawal by non-controlling interest - (64,739 ) - (64,739 ) Net income (loss) attributable to the non-controlling interest (154,354 ) 69,431 (2,873 ) (87,796 ) Balance, December 31, 2016 $ (561,325 ) $ 4,692 $ (2,873 ) $ (559,506 ) |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes Tables | |
Federal statutory corporate tax rate | 2016 2015 Income taxes using U.S. federal statutory rate 34.0 % 34.0 % State income taxes, net of federal benefit 3.8 % 3.8 % Prior period provision 0 % 0 % Stock Expirations 0 % 0 % Other (0.1 )% (0.1 )% Change in Valuation Allowance (37.7 )% (37.7 )% |
Components of the deferred tax assets (liabilities) | 2016 2015 Deferred tax assets: Stock Based Compensation $ 1,236,475 $ 1,216,472 Net Operating Losses 12,798,602 12,251,334 Accrued payroll 311,678 218,654 Intangibles 2,733,398 2,738,614 Total deferred tax assets 17,080,153 16,425,074 Deferred tax liabilities: Beneficial Conversion Feature (85,190 ) (40,147 ) Total deferred tax liabilities (85,190 ) (40,147 ) Valuation allowance (16,994,963 ) (16,384,927 ) Net deferred tax assets $ - $ - |
BASIS AND BUSINESS PRESENTATI34
BASIS AND BUSINESS PRESENTATION (Details Narrative) | 12 Months Ended | |||
Dec. 31, 2016 | May 31, 2016 | Feb. 28, 2016 | Dec. 31, 2014 | |
State of incorporation | State of Delaware | |||
Date of incorporation | Apr. 21, 1997 | |||
Parent Company [Member] | ||||
Ownership interests | 51.00% | 51.00% | 51.00% | |
LSH, LLC [Member] | ||||
Ownership interests | 49.00% | |||
Patient Online Services, LLC [Member] | ||||
Ownership interests | 49.00% | |||
Hutton Ventures LLC [Member] | ||||
Ownership interests | 49.00% |
SIGNIFICANT ACCOUNTING POLICI35
SIGNIFICANT ACCOUNTING POLICIES (Details) - shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Totals | 206,173,077 | 156,277,434 |
Convertible notes payable | ||
Totals | 61,478,077 | 43,055,000 |
Options to purchase common stock | ||
Totals | 17,225,000 | 15,592,434 |
Warrants to purchase common stock | ||
Totals | 101,825,000 | 72,385,000 |
Warrants to purchase Series A preferred stock | ||
Totals | 25,645,000 | 25,245,000 |
SIGNIFICANT ACCOUNTING POLICI36
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Deferred revenue | $ 1,442,949 | $ 1,260,137 |
Allowance for doubtful accounts | $ 1,622,208 | 600,000 |
Outstanding stock options to purchase common stock | 17,225,000 | |
Outstanding stock options vested | 12,075,000 | |
Advertising costs | $ 640,395 | $ 2,036,531 |
Defined Contribution description | 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 | |
Minimum [Member] | ||
Property, Plant and Equipment, Useful Life | 3 years | |
Maximum [Member] | ||
Property, Plant and Equipment, Useful Life | 5 years |
GOING CONCERN AND MANAGEMENT'37
GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Going Concern And Managements Liquidity Plans Details Narrative | ||
Net loss | $ (1,778,178) | $ (778,427) |
Working capital | $ (10,955,052) |
ACCOUNTS RECEIVABLE AND DUE T38
ACCOUNTS RECEIVABLE AND DUE TO FACTOR (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accounts receivable | $ 6,974,135 | $ 3,463,161 |
Allowance for doubtful accounts | 1,622,208 | 600,000 |
Due to factor | $ 6,162,722 | $ 2,442,935 |
Average amount receivable percentage | 50.90% | |
Average amount received percentage | 42.10% | |
Factor [Member] | ||
Allowance for doubtful accounts | $ 212,388 | |
Outstanding advances | 1,128,701 | |
Increase in carrying value of accounts receivable | $ 1,128,701 | |
Minimum [Member] | ||
Advance accounts receivable percentage | 30.00% | |
Advance accounts receivable reserve percentage | 0.00% | |
Discount fees percentage | 6.00% | |
Maximum [Member] | ||
Advance accounts receivable percentage | 96.00% | |
Advance accounts receivable reserve percentage | 62.00% | |
Discount fees percentage | 3.00% |
ACCOUNTS PAYABLE AND ACCRUED 39
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Accounts Payable And Accrued Liabilities Details | ||
Accounts payable | $ 698,435 | $ 740,881 |
Accrued interest | 2,419,165 | 1,912,436 |
Payroll and related accruals, net of advance to employees | 1,060,784 | 827,263 |
Total | $ 4,178,384 | $ 3,480,580 |
ACCOUNTS PAYABLE AND ACCRUED 40
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |
Apr. 19, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Gain on settlement of debt | $ 650,319 | ||
Accounts payable settled | 320 | ||
Convertible note | $ (1,433,833) | $ (2,034,590) | |
Common stock value, per share | $ 0.001 | $ 0.001 | |
Chief Executive Officer [Member] | |||
Convertible note | $ 75,000 | ||
Warrants to purchase common stock | 2,225,000 | ||
Common stock value, per share | $ 0.10 | ||
Outstanding salary due | $ 153,750 | $ 153,750 | |
Compensation settlement monthly installments | $ 2,500 | $ 2,500 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Total | $ 686,083 | $ 536,132 |
Less current portion | 686,083 | 536,132 |
Long term portion | 0 | 0 |
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 | |
Note payable, dated July 14, 2016 [Member] | ||
Total | 47,000 | |
Equitable promissory note, dated March 1, 2016 [Member] | ||
Total | 49,082 | |
Investor notes payable [Member] | ||
Total | $ 377,867 | $ 377,867 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accrued interest | $ 2,419,165 | $ 1,912,436 |
Investor notes payable [Member] | Investor Note Two On December 30, 2007 [Member] | ||
Unsecured note payable | $ 200,000 | |
Unsecured note payable, due date | Jun. 30, 2009 | |
Interest rate | 12.00% | |
Purchase of warrants | 100,000 | |
Warrant exercise price | $ 1 | |
Warrant expiration date | Dec. 30, 2012 | |
Accrued interest | $ 4,000 | |
Investor notes payable [Member] | Investor Note One On April 10, 2008 [Member] | ||
Unsecured note payable | $ 198,000 | |
Unsecured note payable, due date | Jun. 21, 2009 | |
Interest rate | 12.00% | |
Proceeds from issuance of common stock | $ 500,000 | |
Purchase of warrants | 99,000 | |
Warrant exercise price | $ 2.45 | |
Warrant expiration date | Apr. 10, 2013 | |
Principal amount | $ 65,133 | |
Accrued interest | 74,867 | |
Repayment of debt | 80,000 | |
Remaining balance of amended note | $ 177,867 | |
Common stock shares issued, Shares | 50,000 | |
Common stock shares issued, Amount | $ 122,130 | |
Investor notes payable [Member] | Investor Note One On December 21, 2007 [Member] | ||
Unsecured note payable | $ 125,000 | |
Unsecured note payable, due date | Jun. 21, 2009 | |
Interest rate | 12.00% | |
Proceeds from issuance of common stock | $ 500,000 | |
Purchase of warrants | 3,700 | |
Warrant exercise price | $ 1.07 | |
Warrant expiration date | Dec. 21, 2012 | |
Note payable, dated June 1, 2015 [Member] | ||
Unsecured note payable | $ 50,000 | |
Unsecured note payable, due date | Oct. 1, 2016 | |
Interest rate | 12.00% | |
Note payable, dated July 2, 2015 [Member] | ||
Unsecured note payable | $ 12,500 | |
Unsecured note payable, due date | Mar. 15, 2016 | |
Interest rate | 10.00% | |
Note payable, dated August 28, 2015 [Member] | ||
Unsecured note payable | $ 50,000 | |
Unsecured note payable, due date | Feb. 28, 2016 | |
Interest rate | 12.00% | |
Note payable, dated December 17, 2015 [Member] | ||
Unsecured note payable | $ 50,000 | |
Unsecured note payable, due date | Dec. 17, 2016 | |
Interest rate | 12.00% | |
Note payable, dated January 13, 2016 [Member] | ||
Unsecured note payable | $ 50,000 | |
Unsecured note payable, due date | Jan. 1, 2017 | |
Interest rate | 12.00% | |
Note payable, dated February 16, 2016 [Member] | ||
Unsecured note payable | $ 25,000 | |
Unsecured note payable, due date | Feb. 1, 2017 | |
Interest rate | 12.00% | |
Note payable, dated July 14, 2016 [Member] | ||
Interest rate | 12.00% | |
Promissory note payable | $ 47,000 | |
Equitable promissory note, dated March 1, 2016 [Member] | ||
Interest rate | 6.00% | |
Promissory note payable | $ 89,240 |
NOTES PAYABLE, RELATED PARTIE43
NOTES PAYABLE, RELATED PARTIES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Total | $ 1,106,753 | $ 926,166 |
Less current portion | (828,123) | (789,616) |
Long term portion | 278,630 | 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 | 25,000 | 23,267 |
Convertible note payable 10 [Member] | ||
Total | 50,000 | 48,468 |
Note payable 14 [Member] | ||
Total | 25,000 | 25,000 |
Convertible note payable 11 [Member] | ||
Total | 49,609 | 47,299 |
Convertible note payable 12 [Member] | ||
Total | 19,801 | 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 | 23,630 | |
Note payable 19 [Member] | ||
Total | 15,000 | |
Note payable 20 [Member] | ||
Total | 30,000 | |
Note payable 21 [Member] | ||
Total | 25,000 | |
Note payable 22 [Member] | ||
Total | $ 77,992 |
NOTES PAYABLE, RELATED PARTIE44
NOTES PAYABLE, RELATED PARTIES (Details) (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Convertible note payable 7 [Member] | ||
Unamortized debt discount | $ 0 | $ 2,064 |
Convertible note payable 8 [Member] | ||
Unamortized debt discount | 0 | 775 |
Convertible note payable 9 [Member] | ||
Unamortized debt discount | 0 | 1,733 |
Convertible note payable 10 [Member] | ||
Unamortized debt discount | 0 | 1,532 |
Convertible note payable 11 [Member] | ||
Unamortized debt discount | 391 | 2,701 |
Convertible note payable 12 [Member] | ||
Unamortized debt discount | 199 | $ 750 |
Convertible note payable 13 [Member] | ||
Unamortized debt discount | 51,370 | |
Note payable 22 [Member] | ||
Unamortized debt discount | $ 47,008 |
NOTES PAYABLE, RELATED PARTIE45
NOTES PAYABLE, RELATED PARTIES (Details1) | Dec. 31, 2016USD ($) |
Aggregate maturities of long-term debt | |
Year ended December 31, 2017 | $ 875,721 |
Year ended December 31, 2018 | 330,000 |
Total | $ 1,205,721 |
NOTES PAYABLE, RELATED PARTIE46
NOTES PAYABLE, RELATED PARTIES (Details Narrative) - USD ($) | Jun. 09, 2016 | May 15, 2016 | Aug. 05, 2015 | Jul. 13, 2015 | May 12, 2015 | Mar. 03, 2015 | Dec. 04, 2014 | Nov. 07, 2014 | Jan. 09, 2014 | Dec. 06, 2013 | Nov. 07, 2013 | Sep. 05, 2013 | Oct. 04, 2012 | Sep. 14, 2012 | Sep. 07, 2012 | Jul. 10, 2012 | Jul. 06, 2012 | Apr. 14, 2011 | Jan. 14, 2011 | Sep. 28, 2016 | Jun. 30, 2016 | Jun. 22, 2016 | Aug. 19, 2015 | Jun. 18, 2015 | Jan. 25, 2015 | Apr. 24, 2014 | Feb. 28, 2014 | Dec. 18, 2013 | Oct. 24, 2013 | Sep. 17, 2013 | Sep. 16, 2013 | May 30, 2012 | May 21, 2012 | Jan. 20, 2012 | Jan. 18, 2012 | Apr. 15, 2011 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | May 15, 2016 |
Proceeds from secured convertable note | $ 60,980 | $ (3,421) | ||||||||||||||||||||||||||||||||||||||
Amortization of debt discounts | 259,037 | 95,427 | ||||||||||||||||||||||||||||||||||||||
Notes payable related party | 828,123 | 789,616 | ||||||||||||||||||||||||||||||||||||||
Unpaid accrued interest on notes payable to related parties | 337,020 | 233,856 | ||||||||||||||||||||||||||||||||||||||
Interest expense | 1,159,019 | 1,666,238 | ||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | ||||||||||||||||||||||||||||||||||||||||
Proceeds from secured convertable note | $ 75,000 | $ 20,000 | $ 50,000 | $ 25,000 | $ 25,000 | $ 25,000 | $ 200,000 | |||||||||||||||||||||||||||||||||
Maturity date | May 15, 2018 | May 12, 2017 | Mar. 3, 2017 | Dec. 4, 2016 | Nov. 7, 2016 | Apr. 24, 2016 | Feb. 28, 2016 | |||||||||||||||||||||||||||||||||
Loan extended date | May 20, 2018 | Apr. 18, 2018 | May 20, 2018 | |||||||||||||||||||||||||||||||||||||
Interest rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | ||||||||||||||||||||||||||||||||
Purchase of warrants | 2,225,000 | 300,000 | 750,000 | 500,000 | 250,000 | 250,000 | 2,000,000 | 2,225,000 | ||||||||||||||||||||||||||||||||
Warrant exercise price | $ 0.10 | $ 0.15 | $ 0.15 | $ 0.15 | $ 0.15 | $ 0.15 | $ 0.15 | $ 0.10 | ||||||||||||||||||||||||||||||||
Warrant exercise period | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | |||||||||||||||||||||||||||||||||
Amortization of debt discounts | 49,587 | 21,169 | ||||||||||||||||||||||||||||||||||||||
Common stock per share at shareholder option | 0.02 | |||||||||||||||||||||||||||||||||||||||
Conversion rate | $ 0.02 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | 0.02 | ||||||||||||||||||||||||||||||||
Interest converted on conversion rate | $ 0.02 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.02 | ||||||||||||||||||||||||||||||||
Aggregate amount | $ 73,697 | |||||||||||||||||||||||||||||||||||||||
Interest expense | $ 103,865 | 90,508 | ||||||||||||||||||||||||||||||||||||||
Contractual terms | 3 years | 2 years | ||||||||||||||||||||||||||||||||||||||
Risk free interest rate | 0.91% | 0.55% | ||||||||||||||||||||||||||||||||||||||
Dividend yield | 0.00% | 0.00% | ||||||||||||||||||||||||||||||||||||||
Volatility rate | 336.12% | 336.12% | ||||||||||||||||||||||||||||||||||||||
Fair value of debt derivatives | $ 73,697 | $ 73,697 | ||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Extended Warrant [Member] | ||||||||||||||||||||||||||||||||||||||||
Aggregate amount | $ 37,830 | $ 5,713 | ||||||||||||||||||||||||||||||||||||||
Contractual terms | 3 years | |||||||||||||||||||||||||||||||||||||||
Dividend yield | 0.00% | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Extended Warrant [Member] | Minimum [Member] | ||||||||||||||||||||||||||||||||||||||||
Risk free interest rate | 0.69% | |||||||||||||||||||||||||||||||||||||||
Volatility rate | 289.98% | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Extended Warrant [Member] | Maximum [Member] | ||||||||||||||||||||||||||||||||||||||||
Risk free interest rate | 1.09% | |||||||||||||||||||||||||||||||||||||||
Volatility rate | 317.93% | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Stockholder and Board member [Member] | ||||||||||||||||||||||||||||||||||||||||
Proceeds from unsecured note payable | $ 25,000 | $ 12,500 | $ 25,000 | $ 5,000 | $ 40,000 | $ 10,000 | $ 50,000 | $ 6,000 | $ 43,000 | $ 15,000 | $ 10,000 | $ 25,000 | $ 200,000 | $ 25,000 | $ 30,000 | $ 50,000 | $ 25,000 | $ 25,000 | $ 30,000 | $ 30,000 | $ 5,221 | $ 3,000 | $ 20,000 | $ 18,000 | $ 5,000 | $ 5,000 | $ 25,000 | |||||||||||||
Maturity date | Jan. 1, 2016 | Jul. 12, 2016 | Jan. 9, 2016 | Dec. 6, 2016 | Nov. 7, 2017 | Sep. 5, 2015 | Oct. 4, 2014 | Sep. 14, 2014 | Sep. 7, 2014 | Jul. 10, 2014 | Jul. 6, 2014 | Jul. 31, 2011 | Sep. 28, 2018 | Jun. 30, 2017 | Jun. 22, 2017 | Feb. 19, 2016 | Apr. 21, 2016 | Apr. 25, 2016 | Dec. 18, 2018 | Oct. 24, 2016 | Sep. 17, 2014 | Sep. 16, 2015 | Mar. 31, 2013 | May 21, 2014 | Jul. 31, 2011 | |||||||||||||||
Loan extended date | Dec. 31, 2011 | Dec. 31, 2011 | ||||||||||||||||||||||||||||||||||||||
Interest rate | 10.00% | 12.00% | 10.00% | 12.00% | 10.00% | 10.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | 12.00% | ||||||||||||||
Purchase of warrants | 250,000 | 50,000 | 50,000 | 250,000 | ||||||||||||||||||||||||||||||||||||
Warrant exercise price | $ 0.25 | $ 0.25 | $ 0.25 | $ 0.25 | ||||||||||||||||||||||||||||||||||||
Warrant exercise period | 5 years | 5 years | 5 years | 5 years | ||||||||||||||||||||||||||||||||||||
Amortization of debt discounts | $ 8,850 | $ 2,435 | $ 2,495 | $ 8,850 | ||||||||||||||||||||||||||||||||||||
Common stock per share at shareholder option | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | $ 0.10 | ||||||||||||||||||||||||||||||||||
Common stock shares issued, shares | 4,000,000 | |||||||||||||||||||||||||||||||||||||||
Common stock shares issued, amount | $ 64,000 | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Stockholder [Member] | ||||||||||||||||||||||||||||||||||||||||
Proceeds from unsecured note payable | $ 15,000 | $ 6,000 | ||||||||||||||||||||||||||||||||||||||
Maturity date | Jun. 9, 2017 | Jun. 30, 2011 | ||||||||||||||||||||||||||||||||||||||
Loan extended date | Dec. 31, 2011 | |||||||||||||||||||||||||||||||||||||||
Interest rate | 12.00% | 12.00% | ||||||||||||||||||||||||||||||||||||||
Purchase of warrants | 60,000 | |||||||||||||||||||||||||||||||||||||||
Warrant exercise price | $ 0.25 | |||||||||||||||||||||||||||||||||||||||
Warrant exercise period | 5 years | |||||||||||||||||||||||||||||||||||||||
Amortization of debt discounts | $ 2,220 | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Stockholder and Board member One [Member] | ||||||||||||||||||||||||||||||||||||||||
Proceeds from unsecured note payable | $ 20,000 | |||||||||||||||||||||||||||||||||||||||
Maturity date | Jul. 6, 2014 | |||||||||||||||||||||||||||||||||||||||
Interest rate | 12.00% | |||||||||||||||||||||||||||||||||||||||
Common stock per share at shareholder option | $ 0.10 | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Investor On July 22, 2010 [Member] | ||||||||||||||||||||||||||||||||||||||||
Proceeds from unsecured note payable | $ 260,000 | |||||||||||||||||||||||||||||||||||||||
Interest rate | 14.00% | |||||||||||||||||||||||||||||||||||||||
Notes payable related party | $ 15,000 | |||||||||||||||||||||||||||||||||||||||
Notes payable to related parties [Member] | Investor From June 2009 to March 2010 [Member] | ||||||||||||||||||||||||||||||||||||||||
Proceeds from unsecured note payable | $ 1,237,459 | |||||||||||||||||||||||||||||||||||||||
Interest rate | 14.00% | |||||||||||||||||||||||||||||||||||||||
Notes payable related party | $ 20,000 |
LINE OF CREDIT- RELATED PARTY (
LINE OF CREDIT- RELATED PARTY (Details Narative) - USD ($) | Apr. 06, 2010 | Jan. 25, 2015 | Aug. 17, 2010 | Apr. 15, 2010 | Sep. 24, 2009 | Dec. 31, 2016 | Dec. 31, 2015 |
Unpaid accrued interest on line of credit | $ 137,409 | $ 119,239 | |||||
Line of credit outstanding balance | 151,000 | 151,000 | |||||
Interest expense | 18,170 | 18,120 | |||||
Unsecured promissory note [Member] | |||||||
Line of credit outstanding balance | $ 400,000 | $ 308,337 | $ 397,893 | ||||
Interest rate | 5.25% | ||||||
Line of credit term | 4 years | ||||||
Stockholder [Member] | |||||||
Interest rate | 12.00% | ||||||
Proceeds from unsecured note payable | $ 150,000 | ||||||
Maturity date | Nov. 24, 2009 | ||||||
Purchase of warrants | 150,000 | ||||||
Warrant exercise price | $ 0.15 | ||||||
Line Of Credit Payment Principal | $ 25,000 | $ 50,000 | |||||
Delinquent payment penalty | $ 69,000 |
CONVERTIBLE NOTES (Details)
CONVERTIBLE NOTES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
CONVERTIBLE NOTES | ||
Convertible Notes | $ 2,547,492 | $ 2,286,346 |
Less: Current portion | (1,433,833) | (2,034,590) |
Long term portion | 1,113,659 | 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 | 750,000 | 726,590 |
Bridge 2015 Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 297,315 | 251,756 |
Bridge 2016 Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 63,099 | |
Bridge 2 (2016) Convertible Notes [Member] | ||
CONVERTIBLE NOTES | ||
Convertible Notes | 96,060 | |
Convertible notes payable | ||
CONVERTIBLE NOTES | ||
Convertible Notes | $ 33,018 |
CONVERTIBLE NOTES (Details) (Pa
CONVERTIBLE NOTES (Details) (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Bridge 2014 Convertible Notes [Member] | ||
Unamortized debt discount | $ 0 | $ 23,410 |
Bridge 2015 Convertible Notes [Member] | ||
Unamortized debt discount | 27,685 | $ 73,244 |
Bridge 2016 Convertible Notes [Member] | ||
Unamortized debt discount | 8,901 | |
Bridge 2 (2016) Convertible Notes [Member] | ||
Unamortized debt discount | 153,940 | |
Convertible notes payable | ||
Unamortized debt discount | $ 11,982 |
CONVERTIBLE NOTES (Details1)
CONVERTIBLE NOTES (Details1) | Dec. 31, 2016USD ($) |
Aggregate maturities of long-term debt | |
2,017 | $ 1,473,500 |
2,018 | 1,276,500 |
Total | $ 2,750,000 |
CONVERTIBLE NOTES (Details Narr
CONVERTIBLE NOTES (Details Narrative) - USD ($) | Oct. 03, 2016 | Jul. 14, 2016 | Feb. 01, 2016 | Aug. 12, 2015 | Aug. 12, 2010 | Jan. 21, 2010 | Jun. 30, 2009 | Aug. 17, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2011 | Dec. 31, 2010 | Jul. 21, 2014 |
Debt term | 2 years | |||||||||||||
Investment Warrants, Exercise Price | $ 0.15 | $ 0.15 | ||||||||||||
Restated converted price | $ 0.10 | |||||||||||||
Common stock shares issued | 121,264,809 | 104,612,082 | ||||||||||||
Note payable and related accrued interest | $ 4,178,384 | |||||||||||||
Fair value of derivatives | $ 358,222 | |||||||||||||
Contractual terms | 3 years | |||||||||||||
Dividend yield | 0.00% | 0.00% | ||||||||||||
Additional paid in capital | $ 8,854 | |||||||||||||
Change in fair value of warrants | 100,276 | |||||||||||||
Amortization of debt discounts | $ 192,458 | 74,258 | ||||||||||||
Minimum [Member] | ||||||||||||||
Proceeds from Issuance of Private Placement | $ 1,500,000 | |||||||||||||
Contractual terms | 1 year | |||||||||||||
Risk free interest rate | 0.40% | |||||||||||||
Volatility | 323.14% | |||||||||||||
Estimated fair value of stock | $ 0.01 | |||||||||||||
Maximum [Member] | ||||||||||||||
Proceeds from Issuance of Private Placement | $ 3,000,000 | |||||||||||||
Contractual terms | 2 years | |||||||||||||
Risk free interest rate | 0.76% | |||||||||||||
Volatility | 348.27% | |||||||||||||
Estimated fair value of stock | $ 0.02 | |||||||||||||
Extended Warrant [Member] | ||||||||||||||
Extended obligations | 3 years | |||||||||||||
Contractual terms | 3 years | |||||||||||||
Risk free interest rate | 1.88% | |||||||||||||
Dividend yield | 0.00% | 0.00% | ||||||||||||
Volatility | 349.90% | |||||||||||||
Change in fair value of warrants | $ 43,892 | |||||||||||||
Change in conversion rate of warrants | $ 43,187 | |||||||||||||
Extended Warrant [Member] | Minimum [Member] | ||||||||||||||
Contractual terms | 7 months 24 days | |||||||||||||
Risk free interest rate | 0.43% | 0.87% | ||||||||||||
Volatility | 322.74% | 330.45% | ||||||||||||
Estimated fair value of stock | $ 0.011 | |||||||||||||
Extended Warrant [Member] | Maximum [Member] | ||||||||||||||
Contractual terms | 1 year 15 days | |||||||||||||
Risk free interest rate | 0.68% | 0.92% | ||||||||||||
Volatility | 348.75% | 348.10% | ||||||||||||
Estimated fair value of stock | $ 0.032 | |||||||||||||
Unsecured Convertible Notes One [Member] | ||||||||||||||
Convertible notes | $ 909,500 | |||||||||||||
Extended obligations | 2 years | |||||||||||||
Unsecured Convertible Notes One [Member] | Minimum [Member] | ||||||||||||||
Investment Warrants, Exercise Price | $ 0.10 | |||||||||||||
Unsecured Convertible Notes One [Member] | Minimum [Member] | Certain Note Holders [Member] | ||||||||||||||
Investment Warrants, Exercise Price | 0.10 | |||||||||||||
Unsecured Convertible Notes One [Member] | Maximum [Member] | ||||||||||||||
Investment Warrants, Exercise Price | 0.15 | |||||||||||||
Unsecured Convertible Notes One [Member] | Maximum [Member] | Certain Note Holders [Member] | ||||||||||||||
Investment Warrants, Exercise Price | $ 0.65 | |||||||||||||
Unsecured Convertible Notes [Member] | ||||||||||||||
Convertible notes | $ 25,000 | $ 25,000 | $ 120,000 | |||||||||||
Debt term | 2 years | 2 years | ||||||||||||
Debt interest rate | 10.00% | 10.00% | 10.00% | |||||||||||
Interest accrues and is payable dates | February 2017 through September 2017 | |||||||||||||
Debt conversion price | $ 0.02 | $ 0.02 | $ 0.02 | |||||||||||
Warrants to purchase common stock | $ 750,000 | $ 750,000 | $ 2,652,727 | |||||||||||
Investment Warrants, Exercise Price | $ 0.10 | $ 0.10 | ||||||||||||
Exercise period of the warrants | 3 years | |||||||||||||
Note payable and related accrued interest | 75,000 | |||||||||||||
Secured Convertible Notes [Member] | ||||||||||||||
Convertible notes | $ 200,000 | $ 72,000 | ||||||||||||
Debt term | 2 years | 2 years | ||||||||||||
Debt interest rate | 10.00% | 10.00% | ||||||||||||
Interest accrues and is payable dates | January 2018 through June 2018 | January 2018 through February 2018 | ||||||||||||
Debt conversion price | $ 0.02 | $ 0.05 | ||||||||||||
Warrants to purchase common stock | $ 6,000,000 | $ 250,000 | ||||||||||||
Investment Warrants, Exercise Price | $ 0.10 | $ 0.15 | ||||||||||||
Exercise period of the warrants | 3 years | |||||||||||||
Debt Instrument, Convertible, Beneficial Conversion Feature | $ 7,124 | |||||||||||||
Contractual terms | 3 years | |||||||||||||
Risk free interest rate | 1.25% | |||||||||||||
Dividend yield | 0.00% | |||||||||||||
Volatility | 356.55% | |||||||||||||
Series D Convertible Notes [Member] | ||||||||||||||
Convertible notes | $ 10,000 | $ 325,000 | $ 1,050,000 | $ 25,000 | ||||||||||
Due from Related Parties | $ 300,000 | |||||||||||||
Debt term | 2 years | 2 years | 3 years | |||||||||||
Debt interest rate | 10.00% | 10.00% | 14.00% | |||||||||||
Interest accrues and is payable dates | February 2017 through December 2017 | January 2016 through December 2016 | ||||||||||||
Debt conversion price | $ 0.05 | $ 0.05 | $ 0.12 | |||||||||||
Warrants to purchase common stock | $ 4,500,000 | $ 7,500,000 | $ 250,000 | |||||||||||
Investment Warrants, Exercise Price | $ 0.15 | $ 0.15 | $ 0.30 | |||||||||||
Exercise period of the warrants | 3 years | 5 years | ||||||||||||
Notes net of deferred debt discount | $ 10,271 | |||||||||||||
Extended obligations | 2 years | |||||||||||||
Convertible note default | $ 11,000 | |||||||||||||
Common stock shares issued | 49,379 | |||||||||||||
Debt settlement amount | $ 4,000 | |||||||||||||
Note payable and related accrued interest | $ 1,925 | |||||||||||||
Debt Instrument, Convertible, Beneficial Conversion Feature | $ 86,382 | $ 113,146 | ||||||||||||
Contractual terms | 3 years | 3 years | ||||||||||||
Dividend yield | 0.00% | 0.00% | ||||||||||||
Series D Convertible Notes [Member] | Minimum [Member] | ||||||||||||||
Risk free interest rate | 0.63% | 0.69% | ||||||||||||
Volatility | 307.16% | 287.80% | ||||||||||||
Series D Convertible Notes [Member] | Maximum [Member] | ||||||||||||||
Risk free interest rate | 1.25% | 1.10% | ||||||||||||
Volatility | 356.55% | 319.28% | ||||||||||||
Series D Convertible Notes One [Member] | ||||||||||||||
Convertible notes | $ 550,000 | |||||||||||||
Extended obligations | 2 years | |||||||||||||
Convertible note default | $ 200,000 | |||||||||||||
Series D Convertible Notes One [Member] | Minimum [Member] | ||||||||||||||
Investment Warrants, Exercise Price | $ 0.10 | |||||||||||||
Series D Convertible Notes One [Member] | Maximum [Member] | ||||||||||||||
Investment Warrants, Exercise Price | $ 0.15 | |||||||||||||
Series C Convertible Notes [Member] | ||||||||||||||
Convertible notes | $ 160,000 | $ 260,000 | ||||||||||||
Due from Related Parties | $ 15,000 | |||||||||||||
Debt term | 3 years | |||||||||||||
Debt interest rate | 14.00% | |||||||||||||
Debt conversion price | $ 0.15 | |||||||||||||
Warrants to purchase common stock | $ 2,641,670 | |||||||||||||
Investment Warrants, Exercise Price | $ 0.40 | |||||||||||||
Notes net of deferred debt discount | $ 215,940 | |||||||||||||
Extended obligations | 2 years | |||||||||||||
Convertible note default | $ 85,000 | |||||||||||||
Warrants maximum exerciseable price per share | $ 0.25 | |||||||||||||
Restated converted price | $ 0.10 | |||||||||||||
Series B Convertible Notes [Member] | ||||||||||||||
Convertible notes | $ 75,000 | $ 275,000 | ||||||||||||
Debt interest rate | 14.00% | |||||||||||||
Debt conversion price | $ 0.15 | |||||||||||||
Warrants to purchase common stock | $ 900,000 | |||||||||||||
Investment Warrants, Exercise Price | $ 0.40 | |||||||||||||
Notes net of deferred debt discount | $ 264,324 | |||||||||||||
Extended obligations | 2 years | |||||||||||||
Convertible note default | $ 150,000 | |||||||||||||
Repayment of debt | $ 50,000 | |||||||||||||
Debt balance | $ 225,000 | |||||||||||||
Warrants maximum exerciseable price per share | $ 0.75 | |||||||||||||
Restated converted price | $ 10 | |||||||||||||
Series A Convertible Notes [Member] | ||||||||||||||
Convertible notes | $ 1,217,459 | $ 129,500 | ||||||||||||
Due from Related Parties | $ 20,000 | |||||||||||||
Debt term | 3 years | |||||||||||||
Debt interest rate | 14.00% | |||||||||||||
Interest accrues and is payable dates | August 2012 to March 2013 | |||||||||||||
Debt conversion price | $ 0.15 | |||||||||||||
Warrants to purchase common stock | $ 12,174,590 | |||||||||||||
Investment Warrants, Exercise Price | $ 0.40 | $ 1 | ||||||||||||
Exercise period of the warrants | 5 years | |||||||||||||
Notes net of deferred debt discount | $ 1,143,268 | |||||||||||||
Extended obligations | 2 years | |||||||||||||
Convertible note default | $ 687,500 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Derivative Liabilities Details | |
Beginning Balance | $ 336,582 |
Transfers in of Level 3 upon exceeding in authorized shares | 628,457 |
Transfers out of Level 3 upon increasing authorized shares | (583,071) |
Mark-to-market | (381,968) |
Ending Balance |
DERIVATIVE LIABILITIES (Detai53
DERIVATIVE LIABILITIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Derivative Liabilities Details | ||
Beginning Balance | ||
Total (gains) losses | ||
Transfers in of Level 3 upon issuance of convertible notes payable | 358,222 | |
Transfers out of Level 3 upon debt modification | (327,905) | |
Mark-to-market | (30,317) | |
Ending Balance | ||
Net Gain for the period included in earnings relating to the liabilities held at end | $ 30,317 | $ 381,968 |
DERIVATIVE LIABILITIES (Detai54
DERIVATIVE LIABILITIES (Details Narrative) - USD ($) | 1 Months Ended | 8 Months Ended | 12 Months Ended | 24 Months Ended | ||
Aug. 17, 2016 | Dec. 22, 2015 | Aug. 17, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | |
Common stock shares authorized | 200,000,000 | 500,000,000 | 500,000,000 | 500,000,000 | ||
Net derivative liabilities reclassified Dividend yield | 0.00% | 0.00% | ||||
Net derivative liabilities reclassified Expected life | 3 years | |||||
Company's stock price increased | 57.00% | |||||
Minimum [Member] | ||||||
Net derivative liabilities reclassified Volatility | 323.14% | |||||
Net derivative liabilities reclassified Risk free rate | 0.40% | |||||
Net derivative liabilities reclassified Expected life | 1 year | |||||
Estimated fair value of stock per share | $ 0.01 | |||||
Maximum [Member] | ||||||
Net derivative liabilities reclassified Volatility | 348.27% | |||||
Net derivative liabilities reclassified Risk free rate | 0.76% | |||||
Net derivative liabilities reclassified Expected life | 2 years | |||||
Estimated fair value of stock per share | $ 0.02 | |||||
Black Scholes Option Pricing Model [Member] | ||||||
Net derivative liabilities reclassified | $ 327,905 | $ 583,071 | $ 628,457 | |||
Net derivative liabilities reclassified Dividend yield | 0.00% | 0.00% | 0.00% | |||
Net derivative liabilities reclassified Volatility | 346.44% | 333.28% | ||||
Estimated fair value of stock per share | $ 0.0175 | |||||
Black Scholes Option Pricing Model [Member] | Minimum [Member] | ||||||
Net derivative liabilities reclassified Volatility | 306.06% | |||||
Net derivative liabilities reclassified Risk free rate | 0.46% | 0.19% | 0.01% | |||
Net derivative liabilities reclassified Expected life | 5 months 16 days | 1 month 17 days | 1 month 2 days | |||
Black Scholes Option Pricing Model [Member] | Maximum [Member] | ||||||
Net derivative liabilities reclassified Volatility | 351.47% | |||||
Net derivative liabilities reclassified Risk free rate | 0.74% | 0.99% | 1.88% | |||
Net derivative liabilities reclassified Expected life | 1 year 10 months 28 days | 2 years 3 months 22 days | 5 years |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 22, 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 | |
Preferred shares issued for payment of services, Shares | 47,500 | ||
Preferred shares issued for payment of services, Amount | $ 2,850 | ||
Common shares issued in conversion of preferred shares, Shares | 6,425,000 | ||
Common shares issued in conversion of preferred shares, Amount | $ 642,500 | ||
Common stock par value | $ 0.001 | $ 0.001 | |
Common stock shares authorized | 500,000,000 | 500,000,000 | 200,000,000 |
Common stock shares issued | 121,264,809 | 104,612,082 | |
Common stock shares outstanding | 121,264,809 | 104,612,082 | |
Common shares issued upon in conversion of notes payable and accrued interest, Shares | 2,652,727 | ||
Common shares issued upon in conversion of notes payable and accrued interest, Amount | $ 82,974 | ||
Common shares issued as officer compensation, Shares | 5,000,000 | ||
Common shares issued as officer compensation, Amount | $ 100,000 | ||
Common shares issued in connection with note payable issuance, Shares | 4,000,000 | ||
Common shares issued in connection with note payable issuance, Amount | $ 64,000 | ||
Common shares issued to non-controlling interest as compensation, Shares | 5,000,000 | ||
Common shares issued to non-controlling interest as compensation, Amount | $ 100,000 |
WARRANTS AND OPTIONS (Details)
WARRANTS AND OPTIONS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number Outstanding | 101,825,000 | 72,385,000 |
Weighted Average Exercise price | $ 0.1 | $ 0.15 |
0.01 to 0.10 [Member] | ||
Number Outstanding | 86,650,000 | |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 7 months 2 days | |
Weighted Average Exercise price | $ 0.08 | |
Number Exercisable | 56,650,000 | |
Warrants Exercisable Weighted Average Exercise Price | $ 0.10 | |
0.11 to 0.20 [Member] | ||
Number Outstanding | 8,475,000 | |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 1 month 24 days | |
Weighted Average Exercise price | $ 0.15 | |
Number Exercisable | 8,475,000 | |
Warrants Exercisable Weighted Average Exercise Price | $ 0.15 | |
0.21 to 0.30 [Member] | ||
Number Outstanding | 6,700,000 | |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 5 months 12 days | |
Weighted Average Exercise price | $ 0.25 | |
Number Exercisable | 6,700,000 | |
Warrants Exercisable Weighted Average Exercise Price | $ 0.25 | |
Warrants [Member] | ||
Number Outstanding | 101,825,000 | |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 2 months 5 days | |
Weighted Average Exercise price | $ 0.10 | |
Number Exercisable | 71,825,000 | |
Warrants Exercisable Weighted Average Exercise Price | $ 0.12 |
WARRANTS AND OPTIONS (Details 1
WARRANTS AND OPTIONS (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Shares | ||
Beginning Balance | 72,385,000 | |
Issued | 40,050,000 | |
Exercised | ||
Expired | (10,610,000) | |
Ending Balance | 101,825,000 | 72,385,000 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.15 | |
Issued | 0.06 | |
Exercised | ||
Expired | (0.25) | |
Ending Balance | $ 0.1 | $ 0.15 |
Warrant Issuance | ||
Number of Shares | ||
Beginning Balance | 72,385,000 | 90,861,684 |
Issued | 5,550,000 | |
Exercised | ||
Expired | (24,026,684) | |
Ending Balance | 72,385,000 | |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.15 | $ 0.2 |
Issued | 0.15 | |
Exercised | ||
Expired | (0.24) | |
Ending Balance | $ 0.15 |
WARRANTS AND OPTIONS (Details 2
WARRANTS AND OPTIONS (Details 2) - $ / shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Number Outstanding | 101,825,000 | 72,385,000 | |
Weighted Average Exercise price | $ 0.1 | $ 0.15 | |
Preferred stock warrants [Member] | |||
Number Outstanding | 2,564,500 | 2,524,500 | 1,914,500 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 8 months 1 day | ||
Weighted Average Exercise price | $ 0.66 | $ 0.65 | $ 0.66 |
Number Exercisable | 1,564,500 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.76 | ||
0.50 Preferred stock warrants [Member] | |||
Number Outstanding | 2,120,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 years 18 days | ||
Weighted Average Exercise price | $ 0.5 | ||
Number Exercisable | 1,120,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.5 | ||
1.00 Preferred stock warrants [Member] | |||
Number Outstanding | 71,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 8 months 16 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 | 373,500 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 10 months 21 days | ||
Weighted Average Exercise price | $ 1.5 | ||
Number Exercisable | 373,500 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 1.5 |
WARRANTS AND OPTIONS (Details 3
WARRANTS AND OPTIONS (Details 3) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Shares | ||
Beginning Balance | 72,385,000 | |
Exercised | ||
Ending Balance | 101,825,000 | 72,385,000 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.15 | |
Exercised | ||
Canceled | 0.25 | |
Ending Balance | $ 0.1 | $ 0.15 |
Preferred stock warrants [Member] | ||
Number of Shares | ||
Beginning Balance | 2,524,500 | 1,914,500 |
Issued | 40,000 | 705,000 |
Exercised | ||
Canceled | (95,000) | |
Ending Balance | 2,564,500 | 2,524,500 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.65 | $ 0.66 |
Weighted Average Exercise Price Per Share Issued | 1.50 | 0.61 |
Exercised | ||
Canceled | 1 | |
Ending Balance | $ 0.66 | $ 0.65 |
WARRANTS AND OPTIONS (Details 4
WARRANTS AND OPTIONS (Details 4) - $ / shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Number Outstanding | 101,825,000 | 72,385,000 | |
Weighted Average Exercise price | $ 0.1 | $ 0.15 | |
Options [Member] | |||
Number Outstanding | 17,225,000 | 15,592,434 | 17,045,434 |
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 4 months 6 days | ||
Weighted Average Exercise price | $ 0.08 | $ 0.67 | $ 0.64 |
Number Exercisable | 12,075,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.1 | ||
0.015 | |||
Number Outstanding | 7,000,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 4 years 1 month 6 days | ||
Weighted Average Exercise price | $ 0.015 | ||
Number Exercisable | 2,000,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.015 | ||
0.02 | |||
Number Outstanding | 400,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 6 years | ||
Weighted Average Exercise price | $ 0.02 | ||
Number Exercisable | 250,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.02 | ||
0.025 | |||
Number Outstanding | 250,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 5 years 7 months 24 days | ||
Weighted Average Exercise price | $ 0.025 | ||
Number Exercisable | 250,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.025 | ||
0.06 | |||
Number Outstanding | 3,000,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 5 months 1 day | ||
Weighted Average Exercise price | $ 0.06 | ||
Number Exercisable | 3,000,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.06 | ||
0.09 | |||
Number Outstanding | 250,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 11 months 5 days | ||
Weighted Average Exercise price | $ 0.09 | ||
Number Exercisable | 250,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.09 | ||
0.095 | |||
Number Outstanding | 500,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 2 years 18 days | ||
Weighted Average Exercise price | $ 0.095 | ||
Number Exercisable | 500,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.095 | ||
0.10 | |||
Number Outstanding | 650,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 1 year 2 months 9 days | ||
Weighted Average Exercise price | $ 0.1 | ||
Number Exercisable | 650,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.1 | ||
0.13 | |||
Number Outstanding | 500,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 4 months 2 days | ||
Weighted Average Exercise price | $ 0.13 | ||
Number Exercisable | 500,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.13 | ||
0.17 | |||
Number Outstanding | 4,500,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 months 7 days | ||
Weighted Average Exercise price | $ 0.17 | ||
Number Exercisable | 4,500,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.17 | ||
0.22 | |||
Number Outstanding | 175,000 | ||
Warrants Outstanding Weighted Average Remaining Contractual Life (years) | 3 months | ||
Weighted Average Exercise price | $ 0.22 | ||
Number Exercisable | 175,000 | ||
Warrants Exercisable Weighted Average Exercise Price | $ 0.22 |
WARRANTS AND OPTIONS (Details 5
WARRANTS AND OPTIONS (Details 5) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Shares | ||
Beginning Balance | 72,385,000 | |
Exercised | ||
Ending Balance | 101,825,000 | 72,385,000 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.15 | |
Issued | 0.06 | |
Exercised | ||
Expired | (0.25) | |
Ending Balance | $ 0.1 | $ 0.15 |
Options [Member] | ||
Number of Shares | ||
Beginning Balance | 15,592,434 | 17,045,434 |
Issued | 4,150,000 | 250,000 |
Exercised | ||
Expired | (2,517,434) | (1,703,000) |
Ending Balance | 17,225,000 | 15,592,434 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.67 | $ 0.64 |
Issued | 0.02 | 0.025 |
Exercised | ||
Expired | (3.09) | (1.19) |
Ending Balance | $ 0.08 | $ 0.67 |
WARRANTS AND OPTIONS (Details N
WARRANTS AND OPTIONS (Details Narrative) - USD ($) | Oct. 03, 2016 | Oct. 05, 2015 | Aug. 12, 2015 | Dec. 31, 2016 | May 31, 2016 | Apr. 30, 2016 | Aug. 17, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Warrants issued for purchase of shares | 8,000,000 | 10,500,000 | |||||||
Investment Warrants, Exercise Price | $ 0.15 | $ 0.15 | |||||||
Debt term | 2 years | ||||||||
Fair value assumptions expected term | 3 years | ||||||||
Dividend yield | 0.00% | 0.00% | |||||||
Estimated fair value of warrants | $ 100,276 | ||||||||
Restated converted price | $ 0.10 | ||||||||
Compensation expense for options | $ 34,712 | $ 21,250 | |||||||
Convertible notes [Member] | |||||||||
Warrants issued for purchase of shares | 250,000 | ||||||||
Investment Warrants, Exercise Price | $ 0.15 | ||||||||
Debt term | 3 years | ||||||||
Convertible notes One [Member] | |||||||||
Warrants issued for purchase of shares | 9,725,000 | ||||||||
Investment Warrants, Exercise Price | $ 0.10 | ||||||||
Debt term | 3 years | ||||||||
Extended Warrant [Member] | |||||||||
Fair value assumptions expected term | 3 years | ||||||||
Risk free interest rate | 1.88% | ||||||||
Dividend yield | 0.00% | 0.00% | |||||||
Volatility | 349.90% | ||||||||
Estimated fair value of warrants | $ 43,892 | ||||||||
Warrants | $ 11,925,000 | ||||||||
Reprice of warrants | $ 0.10 | ||||||||
Extended obligations | 3 years | ||||||||
Warrants [Member] | |||||||||
Warrants issued for purchase of shares | 5,550,000 | ||||||||
Investment Warrants, Exercise Price | $ 0.15 | $ 0.15 | |||||||
Debt term | 3 years | 3 years | |||||||
Fair value assumptions expected term | 3 years | ||||||||
Risk free interest rate | 1.11% | ||||||||
Dividend yield | 0.00% | ||||||||
Volatility | 338.33% | ||||||||
Estimated fair value of warrants | $ 1,860 | ||||||||
Common stock warrants issued for services | 75,000 | ||||||||
Hutton Ventures LLC Two [Details Narrative] | |||||||||
Warrant for common stock vests and exercisable | 5,000,000 | ||||||||
Hutton Ventures LLC One [Details Narrative] | |||||||||
Warrant for common stock vests and exercisable | 20,000,000 | ||||||||
Hutton Ventures LLC [Member] | |||||||||
Warrants issued for purchase of shares | 30,000,000 | ||||||||
Investment Warrants, Exercise Price | $ 0.05 | ||||||||
Debt term | 5 years | ||||||||
Warrant for common stock vests and exercisable | 5,000,000 | ||||||||
Series A convertible stock [Member] | |||||||||
Warrants issued for purchase of shares | 500,000 | 40,000 | 205,000 | ||||||
Investment Warrants, Exercise Price | $ 0.50 | $ 1.50 | |||||||
Debt term | 3 years | 5 years | |||||||
Fair value assumptions expected term | 3 years | ||||||||
Risk free interest rate | 0.88% | ||||||||
Dividend yield | 0.00% | 0.00% | |||||||
Volatility | 343.24% | ||||||||
Estimated fair value of warrants | $ 6,346 | $ 17,306 | |||||||
Canceled wrrants | 95,000 | ||||||||
Minimum [Member] | |||||||||
Fair value assumptions expected term | 1 year | ||||||||
Risk free interest rate | 0.40% | ||||||||
Volatility | 323.14% | ||||||||
Minimum [Member] | Extended Warrant [Member] | |||||||||
Fair value assumptions expected term | 7 months 24 days | ||||||||
Risk free interest rate | 0.43% | 0.87% | |||||||
Volatility | 322.74% | 330.45% | |||||||
Minimum [Member] | Series A convertible stock [Member] | |||||||||
Investment Warrants, Exercise Price | $ 0.50 | ||||||||
Fair value assumptions expected term | 3 years | ||||||||
Risk free interest rate | 0.59% | ||||||||
Volatility | 306.06% | ||||||||
Maximum [Member] | |||||||||
Fair value assumptions expected term | 2 years | ||||||||
Risk free interest rate | 0.76% | ||||||||
Volatility | 348.27% | ||||||||
Maximum [Member] | Extended Warrant [Member] | |||||||||
Fair value assumptions expected term | 1 year 15 days | ||||||||
Risk free interest rate | 0.68% | 0.92% | |||||||
Volatility | 348.75% | 348.10% | |||||||
Maximum [Member] | Series A convertible stock [Member] | |||||||||
Investment Warrants, Exercise Price | $ 1.50 | ||||||||
Fair value assumptions expected term | 5 years | ||||||||
Risk free interest rate | 1.33% | ||||||||
Volatility | 355.95% | ||||||||
Officer [Member] | |||||||||
Debt term | 7 years | 7 years | 7 years | ||||||
Dividend yield | 0.00% | ||||||||
Stock options to purchase common shares | 2,000,000 | 150,000 | 2,000,000 | ||||||
Investment Options, Exercise Price | $ 0.015 | $ 0.02 | $ 0.015 | ||||||
Stock options vesting description | 1/3 each anniversary for three years | 1/3 each six month anniversary for eighteen months | 1/3 each anniversary for three years | ||||||
Estimated fair value of option | $ 40,000 | $ 1,650 | $ 40,000 | ||||||
Officer [Member] | Minimum [Member] | |||||||||
Risk free interest rate | 1.55% | ||||||||
Volatility | 329.59% | ||||||||
Officer [Member] | Maximum [Member] | |||||||||
Risk free interest rate | 1.72% | ||||||||
Volatility | 348.27% | ||||||||
Board Member [Member] | |||||||||
Warrants issued for purchase of shares | 250,000 | ||||||||
Investment Warrants, Exercise Price | $ 0.025 | ||||||||
Debt term | 7 years | ||||||||
Dividend yield | 0.00% | ||||||||
Board Member [Member] | Minimum [Member] | |||||||||
Risk free interest rate | 2.13% | ||||||||
Volatility | 304.56% | ||||||||
Board Member [Member] | Maximum [Member] | |||||||||
Risk free interest rate | 2.14% | ||||||||
Volatility | 350.51% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | May 15, 2016 | Feb. 01, 2016 | Dec. 02, 2015 | Oct. 05, 2015 | Jul. 02, 2015 | May 16, 2016 | Apr. 19, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Jul. 31, 2016 |
Total outstanding principal and interest due | $ 322,152 | ||||||||||
Accrued expenses | $ 100,000 | ||||||||||
Warrants issued for purchase of shares | 8,000,000 | 10,500,000 | |||||||||
Investment Warrants, Exercise Price | $ 0.15 | $ 0.15 | |||||||||
Debt term | 2 years | ||||||||||
Estimated fair value of warrants | $ 100,276 | ||||||||||
Common stock shares issued | 121,264,809 | 104,612,082 | |||||||||
Operating leases monthly rent | $ 3,500 | ||||||||||
Series A convertible stock [Member] | |||||||||||
Warrants issued for purchase of shares | 500,000 | 40,000 | 205,000 | ||||||||
Investment Warrants, Exercise Price | $ 0.50 | $ 1.50 | |||||||||
Debt term | 3 years | 5 years | |||||||||
Estimated fair value of warrants | $ 6,346 | $ 17,306 | |||||||||
Mr. Bellmare [Member] | |||||||||||
Common stock shares issued | 5,000,000 | ||||||||||
Common stock fair value | $ 100,000 | ||||||||||
Bruce Bellmare Consulting [Member] | Common Stock [Member] | |||||||||||
Debt term | 7 years | ||||||||||
Stock options to purchase common shares | 2,000,000 | ||||||||||
Investment Options, Exercise Price | $ 0.015 | ||||||||||
Estimated fair value of option | $ 39,999 | ||||||||||
Bruce Bellmare Consulting [Member] | Series A convertible stock [Member] | |||||||||||
Warrants issued for purchase of shares | 9,000 | ||||||||||
Investment Warrants, Exercise Price | $ 1.50 | ||||||||||
Debt term | 3 years | ||||||||||
Estimated fair value of warrants | $ 2,688 | ||||||||||
Bruce Bellmare [Member] | Series A convertible stock [Member] | |||||||||||
Warrants issued for purchase of shares | 4,500 | ||||||||||
Investment Warrants, Exercise Price | $ 1.50 | ||||||||||
Debt term | 3 years | ||||||||||
Estimated fair value of warrants | $ 176 | ||||||||||
Mr. Bellmare [Member] | |||||||||||
Base salary | $ 210,000 | $ 150,000 | |||||||||
Chief Executive Officer [Member] | |||||||||||
Warrants issued for purchase of shares | 2,225,000 | ||||||||||
Investment Warrants, Exercise Price | $ 0.10 | ||||||||||
Debt term | 3 years | ||||||||||
Issue of convertible note | $ 75,000 | ||||||||||
Outstanding salary due | 153,750 | 153,750 | |||||||||
Compensation settlement monthly installments | $ 2,500 | $ 2,500 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Related Party Transactions Details Narrative | ||
Interest expense in connection with notes payable to related parties and related party line of credits amount | $ 122,035 | $ 108,628 |
Incurred costs | 289,000 | 3,800,000 |
Accounts payable and accrued liabilities | $ 73,807 | $ 81,729 |
Payroll, marketing and general expenses reimbursemrnt percentage | 49.00% |
NON CONTROLLING INTEREST (Detai
NON CONTROLLING INTEREST (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Net Income ( loss) attributable to the non-controlling interest | $ 87,796 | $ 364,598 |
Progress Advocates, Inc [Member] | ||
Net income (loss) | $ (315,007) | $ (744,077) |
Average Non-controlling interest percentage | 49.00% | 49.00% |
Net Income ( loss) attributable to the non-controlling interest | $ (154,354) | $ (364,598) |
Student Loan Care LLC [Member] | ||
Net income (loss) | $ 141,695 | |
Average Non-controlling interest percentage | 49.00% | |
Net Income ( loss) attributable to the non-controlling interest | $ (69,431) | |
Patient Online Services, LLC [Member] | ||
Net income (loss) | $ (5,863) | |
Average Non-controlling interest percentage | 49.00% | |
Net Income ( loss) attributable to the non-controlling interest | $ 2,873 |
NON CONTROLLING INTEREST (Det66
NON CONTROLLING INTEREST (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Non controlling interest, Beginning | $ (406,971) | $ (42,373) |
Net capital withdrawal by non-controlling interest | (64,739) | (364,598) |
Net income (loss) attributable to the non-controlling interest | (87,796) | (364,598) |
Non controlling interest, Ending | (559,506) | (406,971) |
Progress Advocates, Inc [Member] | ||
Non controlling interest, Beginning | (406,971) | (42,373) |
Net capital withdrawal by non-controlling interest | (364,598) | |
Net income (loss) attributable to the non-controlling interest | 154,354 | 364,598 |
Non controlling interest, Ending | (561,325) | (406,971) |
Student Loan Care LLC [Member] | ||
Non controlling interest, Beginning | ||
Net capital withdrawal by non-controlling interest | (64,739) | |
Net income (loss) attributable to the non-controlling interest | 69,431 | |
Non controlling interest, Ending | 4,692 | |
Patient Online Services, LLC [Member] | ||
Non controlling interest, Beginning | ||
Net capital withdrawal by non-controlling interest | ||
Net income (loss) attributable to the non-controlling interest | (2,873) | |
Non controlling interest, Ending | $ (2,873) |
NON CONTROLLING INTEREST (Det67
NON CONTROLLING INTEREST (Details Narrative) - $ / shares | 1 Months Ended | 12 Months Ended | |||||
Dec. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | May 31, 2016 | Feb. 29, 2016 | Feb. 28, 2016 | |
Warrants issued for purchase of shares | 8,000,000 | 10,500,000 | |||||
Investment Warrants, Exercise Price | $ 0.15 | $ 0.15 | |||||
Debt term | 2 years | ||||||
LSH, LLC [Member] | |||||||
Warrants issued for purchase of shares | 1,500,000 | ||||||
Investment Warrants, Exercise Price | $ 0.50 | ||||||
Debt term | 5 years | ||||||
Hutton Ventures LLC [Member] | |||||||
Warrants issued for purchase of shares | 30,000,000 | ||||||
Investment Warrants, Exercise Price | $ 0.05 | ||||||
Debt term | 5 years | ||||||
Warrant for common stock vests and exercisable | 5,000,000 | ||||||
Hutton Ventures LLC One [Details Narrative] | |||||||
Warrant for common stock vests and exercisable | 20,000,000 | ||||||
Hutton Ventures LLC Two [Details Narrative] | |||||||
Warrant for common stock vests and exercisable | 5,000,000 | ||||||
Patient Online Services, LLC [Member] | |||||||
Noncontrolling Interest, Ownership Percentage by Parent | 49.00% | ||||||
Parent Company [Member] | |||||||
Noncontrolling Interest, Ownership Percentage by Parent | 51.00% | 51.00% | |||||
Hutton Ventures LLC [Member] | |||||||
Noncontrolling Interest, Ownership Percentage by Parent | 49.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes Details | ||
Income taxes using U.S. federal statutory rate | 34.00% | 34.00% |
State income taxes, net of federal benefit | 3.80% | (3.80%) |
Prior period provision | 0.00% | 0.00% |
Stock Expirations | 0.00% | 0.00% |
Other | (0.10%) | (0.10%) |
Change in Valuation Allowance | (37.70%) | (37.70%) |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
Stock Based Compensation | $ 1,236,475 | $ 1,216,472 |
Net Operating Losses | 12,798,602 | 12,251,334 |
Accrued payroll | 311,678 | 218,654 |
Intangibles | 2,733,398 | 2,738,614 |
Total deferred tax assets | 17,080,153 | 16,425,074 |
Deferred tax liabilities: | ||
Beneficial Conversion Feature | (85,190) | (40,147) |
Total deferred tax liabilities | (85,190) | (40,147) |
Valuation allowance | (16,994,963) | (16,384,927) |
Net deferred tax assets |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes Details Narrative | ||
Federal and state net operating loss carryforwards | $ 33,900,000 | $ 32,500,000 |
Expiry date net of operating loss carryforwards | From 2024 through 2036 | |
Net operating loss carry forwards description | A greater than 50% ownership change to use its net operating loss carry forwards to reduce its tax liability |