Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 14, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'MobileSmith, Inc. | ' |
Entity Central Index Key | '0001113513 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 19,827,542 |
Document Fiscal Period Focus | 'Q2 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Current assets | ' | ' |
Cash and cash equivalents | $1,126,311 | $223,514 |
Restricted cash | 112,538 | 131,757 |
Trade Accounts Receivable, Net of Allowance for Doubtful Accounts of $7,500 and Zero, Respectively | 47,284 | 48,885 |
Prepaid expenses and other current assets | 55,532 | 97,957 |
Total current assets | 1,341,665 | 502,113 |
Property and equipment, net | 130,377 | 140,383 |
Capitalized software, net | 563,114 | 636,061 |
Intangible assets, net | 130,248 | 138,992 |
Other assets | 67,329 | 15,370 |
Total Other Assets | 891,068 | 930,806 |
TOTAL ASSETS | 2,232,733 | 1,432,919 |
Current liabilities | ' | ' |
Trade Accounts Payable | 52,569 | 58,901 |
Accrued Expenses | 79,809 | 267,425 |
Accrued interest | 309,213 | 290,560 |
Notes payable, Current | 27,206 | 5,026,113 |
Deferred revenue | 211,374 | 163,868 |
Total current liabilities | 680,171 | 5,806,867 |
Long-term liabilities: | ' | ' |
Bank Lloan | 5,000,000 | 0 |
Convertible Notes Payable, Related Parties, Net of Discount | 23,358,874 | 23,512,836 |
Convertible Notes Payable, Net of Discount | 680,640 | 730,770 |
Capital Lease Obligations | 129,126 | 142,986 |
Deferred Rent | 62,764 | 25,314 |
Total long-term liabilities | 29,231,404 | 24,411,906 |
Total liabilities | 29,911,575 | 30,218,773 |
Stockholders' deficit: | ' | ' |
Preferred Stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2014 and December 31, 2013 | 0 | 0 |
Common Stock, $0.001 par value, 45,000,000 shares authorized,19,827,542 shares issued and outstanding at June 30, 2014 and December 31, 2013 | 19,828 | 19,828 |
Additional paid-in capital | 97,429,605 | 93,059,983 |
Accumulated deficit | -125,128,275 | -121,865,665 |
Total stockholders' deficit | -27,678,842 | -28,785,854 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $2,232,733 | $1,432,919 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Allowance for Doubtful Accounts | $7,500 | $0 |
Stockholders' equity: | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized | 45,000,000 | 45,000,000 |
Common stock, issued | 19,827,542 | 19,827,542 |
Common stock, outstanding | 19,827,542 | 19,827,542 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
REVENUES: | ' | ' | ' | ' |
Total revenues | $194,783 | $60,753 | $382,728 | $125,208 |
COST OF REVENUES | 124,682 | 127,347 | 260,269 | 275,227 |
GROSS PROFIT (LOSS) | 70,101 | -66,594 | 122,459 | -150,019 |
OPERATING EXPENSES: | ' | ' | ' | ' |
Sales and marketing | 235,627 | 265,141 | 455,784 | 552,453 |
Research and development | 261,737 | 222,386 | 530,614 | 390,216 |
General and administrative | 347,402 | 346,528 | 682,569 | 764,509 |
Impairment of Long Lived Assets, Net | 16,296 | 38,936 | 16,296 | 38,936 |
Gain on Legal Settlements | 0 | -5,235 | 0 | -5,235 |
Total operating expenses | 861,062 | 867,756 | 1,685,263 | 1,740,879 |
LOSS FROM OPERATIONS | -790,961 | -934,350 | -1,562,804 | -1,890,898 |
OTHER INCOME (EXPENSE): | ' | ' | ' | ' |
Other Income | 633 | 0 | 1,889 | 0 |
Interest expense, net | -1,095,243 | -509,360 | -1,921,685 | -981,698 |
Gain on Reversal of a Liability | 169,861 | 0 | 169,861 | 0 |
Gain (Loss) On Debt Extinguishment | 50,129 | -21,793,055 | 50,129 | -21,793,055 |
Total other expense | -874,620 | -22,302,415 | -1,699,806 | -22,774,753 |
LOSS FROM CONTINUING OPERATIONS | -1,665,581 | -23,236,765 | -3,262,610 | -24,665,651 |
Income (loss) from discontinued operations | 0 | -919 | 0 | 163 |
Impairment of Assets of Discontinued Operations | 0 | -14,654 | 0 | -14,654 |
NET LOSS | ($1,665,581) | ($23,252,338) | ($3,262,610) | ($24,680,142) |
NET LOSS PER COMMON SHARE: | ' | ' | ' | ' |
Basic and fully diluted from continuing operations | ($0.08) | ($1.27) | ($0.16) | ($1.34) |
Basic and fully diluted from discontinued operations | $0 | $0 | $0 | $0 |
WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE: | ' | ' | ' | ' |
Basic and fully diluted | 19,827,542 | 18,352,542 | 19,827,542 | 18,352,542 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($3,262,610) | ($24,680,142) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 83,383 | 72,394 |
Amortization of Debt Discount | 722,605 | 1,030 |
Share Based Compensation | 53,056 | 24,098 |
Impairment of Long Lived Assets | 16,296 | 53,590 |
(Gain) Loss on debt extinguishment | -50,129 | 21,793,055 |
Changes in assets and liabilities: | ' | ' |
Accounts Receivable | 1,601 | -23,061 |
Contracts Receivable | 0 | -8,792 |
Prepaid Expenses and Other Current Assets | -9,535 | 24,732 |
Accounts Payable | -6,332 | -124,986 |
Deferred revenue | 47,506 | 29,570 |
Accrued and other expenses | -131,513 | 235,620 |
Net cash used in operating activities | -2,535,672 | -2,602,892 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Payments to Acquire Property, Plant and Equipment | -7,983 | -19,222 |
Investment in Internally Developed Software | 0 | -177,184 |
Net cash used in investing activities | -7,983 | -196,406 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Restricted cash used to pay interest expense | 144,219 | 83,899 |
Deposit of Cash to Restricted Account | -125,000 | -202,886 |
Repayment of Bank Loan | -5,000,000 | 0 |
Proceeds from Bank Loan | 5,000,000 | 0 |
Proceeds from Issuance of Long Term Debt | 3,440,000 | 3,025,000 |
Repayments of debt borrowings | -12,767 | -32,686 |
Net cash provided by financing activities | 3,446,452 | 2,873,327 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 902,797 | 74,029 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 223,514 | 58,458 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 1,126,311 | 132,487 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid during the period for: Interest | 1,166,219 | 927,058 |
The Company Recorded Debt Discount Associated with Beneficial Conversion Feature | $4,316,567 | $0 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, amount at Dec. 31, 2013 | $19,828 | $93,059,983 | ($121,865,665) | ($28,785,854) |
Beginning Balance, shares at Dec. 31, 2013 | 19,827,542 | ' | ' | ' |
Share-based compensation, amount | ' | 53,056 | ' | 53,056 |
Beneficial Conversion Feature Recorded as a Result of Issuance of June 27, 2013 Debt Modification and Subsequent Issuance of Convertible Debt | ' | 2,695,714 | ' | 2,695,714 |
Extinguishment of related party debt resulting from May 12, 2014 debt modification | ' | 1,620,852 | ' | 1,620,852 |
Net loss | ' | ' | -3,262,610 | -3,262,610 |
Ending Balance, amount at Jun. 30, 2014 | $19,828 | $97,429,605 | ($125,128,275) | ($27,678,842) |
Ending Balance, shares at Jun. 30, 2014 | 19,827,542 | ' | ' | ' |
1_DESCRIPTION_OF_BUSINESS_AND_
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended | |
Jun. 30, 2014 | ||
Accounting Policies [Abstract] | ' | |
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | ' | |
MobileSmith, Inc. (referred to herein as the “Company,” “us,” “we,” or “our”) was incorporated as Smart Online, Inc. in the State of Delaware in 1993. The Company changed its name to MobileSmith, Inc. effective July 1, 2013. The Company develops and markets software products and services tailored to users of mobile devices. The Company’s flagship product is the MobileSmith® Platform (the “Platform”). The Platform is an innovative, patents pending mobile app development platform that enables organizations to rapidly create, deploy, and manage custom, native smartphone and tablet apps deliverable across iOS and Android mobile platforms. | ||
These condensed consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, which was created to explore the concept of a consumer targeted mobile app development platform. The Company from time to time may create additional wholly-owned subsidiaries in order to test various new services as a part of our research and development process. The subsidiary did not have material activity. | ||
The Company’s principal products and services include: | ||
● | Subscription to its Software as a Service (“SaaS”) cloud based mobile app development platform to customers who design and build their own apps; | |
● | Dedicated internal and secure mobile development platform for the U.S. Department of Defence and related contractors | |
● | Custom mobile application design and development services; | |
● | Mobile application marketing services; and | |
● | Mobile strategy implementation consulting. | |
The Company prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its audited annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its financial position, results of operations, cash flows and stockholders’ deficit as of June 30, 2014. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These consolidated financial statements and accompanying notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as amended, on file with the SEC (the “Annual Report”). | ||
There have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report. | ||
The accompanying consolidated 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. During the six months ended June 30, 2014 and 2013, the Company incurred net losses as well as negative cash flows. These factors indicate that the Company may be unable to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | ||
In May 2014, the FASB issued ASU 2014-9 “Revenue from Contracts with Customers (Topic 606).” This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company will adopt this standard in fiscal year 2017. |
2_DEBT
2. DEBT | 6 Months Ended | |||||||||||
Jun. 30, 2014 | ||||||||||||
Debt Disclosure [Abstract] | ' | |||||||||||
2. DEBT | ' | |||||||||||
The table below summarises the Company’s debt at June 30, 2014 and December 31, 2013: | ||||||||||||
Debt Description | June 30, | December 31, | ||||||||||
2014 | 2013 | Maturity | Rate | |||||||||
Bank Loan | $ | 5,000,000 | $ | 5,000,000 | June, 2016 | 3.85 | % | |||||
Capital lease obligations - Noteholder lease | 122,899 | 132,321 | August, 2019 | 8 | % | |||||||
Capital lease obligations - Office furniture | 33,433 | 36,778 | September, 2016 | 9.8 | % | |||||||
Convertible notes - related parties, net of discount of $5,515,357 and $1,921,394, respectively | 23,358,874 | 23,512,836 | November, 2016 | 8 | % | |||||||
Convertible notes, net of discount of $50,129 and zero, respectively | 680,640 | 730,770 | November, 2016 | 8 | % | |||||||
Total debt | 29,195,846 | 29,412,705 | ||||||||||
Less: current portion of long term debt | ||||||||||||
Capital lease obligations | 27,206 | 26,113 | ||||||||||
Bank Loan | - | 5,000,000 | ||||||||||
Total current portion of long term debt | 27,206 | 5,026,113 | ||||||||||
Debt - long term | $ | 29,168,640 | $ | 24,386,592 | ||||||||
On May 12, 2014, the Company entered into the Seventh Amendment to Convertible Secured Subordinated Note Purchase Agreement (the “Seventh Amendment”) and the Fifth Amendment to Convertible Secured Subordinated Promissory Notes (the “Fifth Amendment”), with the holders of a majority of the aggregate outstanding principal amount of the Notes issued by the Company under the Note Purchase Agreement (collectively, the “Noteholders”). The Seventh Amendment and the Fifth Amendment applied to all $28,205,000 in principal amount of Notes outstanding as of May 12, 2014 and will apply to any future Notes sold by the Company. As amended, the Notes have the following terms: | ||||||||||||
● | a maturity date of the earlier of (i) November 14, 2016, (ii) a Change of Control (as defined in the Note Purchase Agreement), or (iii) when, upon or after the occurrence of an Event of Default (as defined in the Note Purchase Agreement) such amounts are declared due and payable by a Noteholder or made automatically due and payable in accordance with the terms of the Note Purchase Agreement; | |||||||||||
● | an interest rate of 8% per year; | |||||||||||
● | a total borrowing commitment of $33.3 million; | |||||||||||
● | a conversion price that is fixed at $1.43; and | |||||||||||
● | optional conversion upon Noteholder request, provided that, if at the time of any such request, the Company does not have a sufficient number of shares of common stock authorized to allow for such conversion as well as the issuance of the maximum amount of common stock permitted under the Company’s 2004 Equity Compensation Plan, the Noteholder may request that the Company call a special meeting of its stockholders specifically for the purpose of increasing the number of shares of common stock authorized to cover the remaining portion of the Notes outstanding as well as the maximum issuances permitted under the 2004 Equity Compensation Plan. | |||||||||||
The modification of the aggregate principal balance of Notes issued prior to the most recent prior modification dated June 28, 2013, or $23,075,000, was accounted for as debt extinguishment in accordance with provisions of ASC 470 “Debt”. The fair value of the new debt was determined to be $21,404,018. The difference between the carrying value of the debt balance prior to the modification and the fair value of the new debt was recorded as debt discount in the amount of $1,670,982 and will be charged to interest expense over the remaining life of the debt. $22,344,231 of the modified $23,075,000 balance was related party debt and $730,769 was non-related party debt. For the related party portion of the debt, the Company recorded a capital contribution in the amount of $1,620,852 with a charge to Additional Paid-in Capital; the non-related party debt modification resulted in a $50,129 gain on extinguishment of debt. | ||||||||||||
The modification of the aggregate principal balance of Notes issued subsequent to June 28, 2013, but prior to the May 12, 2014 modification, or $5,130,000 with a net carrying amount of $922,202 immediately prior to the May 12, 2014 modification resulted in a troubled debt restructuring treatment where no gain or loss was recognized due to fact that the carrying amount of the debt balance was less than total future cash payments specified by the terms of the debt remaining unsettled after the modification. | ||||||||||||
Fair Value of Modified Convertible Notes | ||||||||||||
The modified convertible debt instrument with a face value of $23,075,000,accounted for as debt extinguishment, was recorded with a fair value of $21,404,018. The Company used a binomial model to determine the fair value of the instrument. The binomial model method uses significant unobservable inputs and falls within the Level III measurement method in accordance with the Fair Value Hierarchy under ASC 820 “Fair Value Measurements.” | ||||||||||||
The significant unobservable inputs and information used to develop those inputs include the following: | ||||||||||||
● | volatility of stock price was determined to be 47% and was based on the Company’s historical volatility | |||||||||||
● | risk free rate of 1.41%; | |||||||||||
● | credit spread over the risk free rate was determined to be approximately 20%, which was derived from a combination of the credit spread of CCC rated bonds with added premium for lack of marketability of the convertible instrument; | |||||||||||
● | nodes of the binomial model were extended for 2.5 years, which approximates the time period until maturity of the convertible instrument; the model included 5 nodes; and | |||||||||||
● | conversion price was fixed at $1.43 per share | |||||||||||
On June 9, 2014 the Company entered into the Eighth Amendment to the Note Purchase Agreement and the Sixth Amendment to the Notes with a majority of the Noteholders. The only modification that resulted from these amendments was direct subordination of all current and future Notes under the Note Purchase Agreement to the Loan and Security Agreement (the “LSA”) with Comerica Bank (“Comerica”), which is discussed further below. | ||||||||||||
IDB Credit Facility and Comerica LSA | ||||||||||||
The Company had an outstanding promissory note with Israel Discount Bank (“IDB”) that had a maturity date of May 31, 2014 (the “IDB Credit Facility”). Borrowings under the IDB Credit Facility were guaranteed by Atlas Capital SA (“Atlas”) and subsequent to the merger between Atlas and Mirelis InvesTrust SA (“Mirelis”), by Mirelis. The IDB Credit Facility was further secured by an extended irrevocable standby letter of credit (“SBLC”) issued by UBS Private Bank with an expiration date of November 30, 2015. The Company received a confirmation that it will not be required to re-pay any fees associated with previous or future guarantees of the Company’s bank loan throuh issuance of the SBLC by UBS. As such, the Company reversed previously accrued fees associated with issuance of SBLC in IDB transactions and recorded a $169,861 gain on reversal of previously recorded liabilities. | ||||||||||||
On June 9, 2014, the Company refinanced the IDB Credit Facility with a new financial institution by entering into the LSA with Comerica. The Company borrowed the entire amount available under the LSA ($5,000,000) and used those proceeds to repay the IDB Credit Facility in full. | ||||||||||||
The LSA has the following terms: | ||||||||||||
● | a maturity date of June 9, 2016; | |||||||||||
● | a variable interest rate at prime plus 0.6% (3.85% on the date of execution) payable quarterly; | |||||||||||
● | secured by substantially all of the assets of the Company, including the Company’s intellectual property; | |||||||||||
● | secured by an extended irrevocable standby letter of credit (“SBLC”) issued by UBS AG (Geneva, Switzerland) (“UBS AG”) with an initial term expiring on May 31, 2015, which term shall be automatically renewed for one year periods, unless notice of non-renewal is given by UBS AG at least 45 days prior to the then current expiration date; and | |||||||||||
● | acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, including but not limited to, failure by the Company to perform its obligations and observe the covenants made by it under the LSA and insolvency of the Company. | |||||||||||
This transaction was accounted for under the guidance of ASC 470 “Debt” as debt extinguishment. The $12,500 in bank fees that the Company paid to Comerica in connection with entering into the LSA was recorded as loss on extinguishment in the current period. The approximately $40,000 in legal fees were deferred as deferred financing costs and will be charged to interest expense over the life of the LSA. |
3_COMMITMENTS_AND_CONTINGENCIE
3. COMMITMENTS AND CONTINGENCIES | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
3. COMMITMENTS AND CONTINGENCIES | ' | ||||
Aggregate future lease commitments | |||||
The Company leases computers, office equipment and office furniture under capital lease agreements that expire through August 2019. Total amounts financed under these capital leases were $156,683 and $169,099 at June 30, 2014 and December 31, 2013, respectively. These obligations are included within the Company’s total debt. | |||||
The table below summarizes Company’s future obligations under its capital leases: | |||||
Year: | |||||
2014 | $ | 19,278 | |||
2015 | 39,259 | ||||
2016 | 39,259 | ||||
2017 | 39,259 | ||||
2018 | 34,189 | ||||
Thereafter | 19,412 | ||||
190,656 | |||||
Less amount representing interest | -34,324 | ||||
Capital lease obligations | $ | 156,332 | |||
The Company leases its office space in Raleigh, North Carolina pursuant to a lease with an initial term that expires in March 2019. The lease contains an option to renew for two, three-year terms. In addition, the Company leases a vehicle pursuant to a lease that expires in July 2016. | |||||
The table below summarizes the Company’s future obligations under its office and vehicle leases: | |||||
Year: | |||||
2014 | $ | 79,488 | |||
2015 | 162,528 | ||||
2016 | 165,678 | ||||
2017 | 167,786 | ||||
2018 | 172,418 | ||||
Thereafter | 44,082 | ||||
Total | $ | 791,980 | |||
Legal Proceedings | |||||
The Company may be subject to legal proceedings and litigation arising in the ordinary course of business, including, but not limited to, certain pending patent and privacy matters, including class action lawsuits, as well as inquiries, investigations, audits and other regulatory proceedings. | |||||
The Company will record a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. The Company periodically evaluates developments in its legal matters that could affect the amount of liability that it has previously accrued, if any, and makes adjustments as appropriate. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters, and the Company’s judgment may be incorrect. The outcome of any proceeding is not determinable in advance. Until the final resolution of any such matters that the Company may be required to accrue for, there may be an exposure to loss in excess of the amount accrued, and such amounts could be material. |
4_EQUITY_COMPENSATION
4. EQUITY COMPENSATION | 6 Months Ended | |||||||||||
Jun. 30, 2014 | ||||||||||||
Equity [Abstract] | ' | |||||||||||
4. EQUITY COMPENSATION | ' | |||||||||||
The following is a summary of the stock option activity for the six months ended June 30, 2014: | ||||||||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Shares | Exercise Price | Contractual Term | Value | |||||||||
Outstanding, December 31, 2013 | 530,378 | $ | 1.99 | |||||||||
Cancelled | -99,708 | 4.29 | ||||||||||
Issued | - | - | ||||||||||
Outstanding, June 30, 2014 | 430,670 | $ | 1.46 | 4.90 | $ | 20,800 | ||||||
Vested and exercisable, June 30, 2014 | 182,683 | $ | 1.31 | 5.66 | $ | 18,125 | ||||||
Aggregate intrinsic value represents the difference between the closing price of the Company’s common stock at June 30, 2014 and the exercise price of outstanding, in-the-money stock options. The closing price of the Common Stock at June 30, 2014, as reported on the Over-the-Counter Bulletin Board, was $1.30 per share. | ||||||||||||
At June 30, 2014, $216,950 of unvested expense has yet to be recorded related to outstanding stock options. |
5_MAJOR_CUSTOMERS_AND_CONCENTR
5. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
5. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK | ' |
For the six months ended June 30, 2014, two major customers accounted for 28% of total revenues and five customers accounted for 75% of the accounts receivable balance. For the six months ended June 30, 2013, two major customers accounted for 26% of total revenues and three customers accounted for 62% of the accounts receivable balance. |
2_DEBT_Tables
2. DEBT (Tables) | 6 Months Ended | |||||||||||
Jun. 30, 2014 | ||||||||||||
Debt Disclosure [Abstract] | ' | |||||||||||
Company's debt | ' | |||||||||||
Debt Description | June 30, | December 31, | ||||||||||
2014 | 2013 | Maturity | Rate | |||||||||
Bank Loan | $ | 5,000,000 | $ | 5,000,000 | June, 2016 | 3.85 | % | |||||
Capital lease obligations - Noteholder lease | 122,899 | 132,321 | August, 2019 | 8 | % | |||||||
Capital lease obligations - Office furniture | 33,433 | 36,778 | September, 2016 | 9.8 | % | |||||||
Convertible notes - related parties, net of discount of $5,515,357 and $1,921,394, respectively | 23,358,874 | 23,512,836 | November, 2016 | 8 | % | |||||||
Convertible notes, net of discount of $50,129 and zero, respectively | 680,640 | 730,770 | November, 2016 | 8 | % | |||||||
Total debt | 29,195,846 | 29,412,705 | ||||||||||
Less: current portion of long term debt | ||||||||||||
Capital lease obligations | 27,206 | 26,113 | ||||||||||
Bank Loan | - | 5,000,000 | ||||||||||
Total current portion of long term debt | 27,206 | 5,026,113 | ||||||||||
Debt - long term | $ | 29,168,640 | $ | 24,386,592 | ||||||||
3_COMMITMENTS_AND_CONTINGENCIE1
3. COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Company's future obligations under its capital leases | ' | ||||
Year: | |||||
2014 | $ | 19,278 | |||
2015 | 39,259 | ||||
2016 | 39,259 | ||||
2017 | 39,259 | ||||
2018 | 34,189 | ||||
Thereafter | 19,412 | ||||
190,656 | |||||
Less amount representing interest | -34,324 | ||||
Capital lease obligations | $ | 156,332 | |||
Company's future obligation under the new office and vehicle leases | ' | ||||
Year: | |||||
2014 | $ | 79,488 | |||
2015 | 162,528 | ||||
2016 | 165,678 | ||||
2017 | 167,786 | ||||
2018 | 172,418 | ||||
Thereafter | 44,082 | ||||
Total | $ | 791,980 |
4_EQUITY_COMPENSATION_Tables
4. EQUITY COMPENSATION (Tables) | 6 Months Ended | |||||||||||
Jun. 30, 2014 | ||||||||||||
Equity Compensation Tables | ' | |||||||||||
Schedule of Stock Options Outstanding | ' | |||||||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Shares | Exercise Price | Contractual Term | Value | |||||||||
Outstanding, December 31, 2013 | 530,378 | $ | 1.99 | |||||||||
Cancelled | -99,708 | 4.29 | ||||||||||
Issued | - | - | ||||||||||
Outstanding, June 30, 2014 | 430,670 | $ | 1.46 | 4.90 | $ | 20,800 | ||||||
Vested and exercisable, June 30, 2014 | 182,683 | $ | 1.31 | 5.66 | $ | 18,125 | ||||||
2_DEBT_Details
2. DEBT (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Debt Details | ' | ' |
IDB credit facility | $5,000,000 | $5,000,000 |
Capital leases obligations - Noteholder lease | 122,899 | 132,321 |
Capital lease obligations - Office furniture | 33,433 | 36,778 |
Convertible notes - related parties, net of discount of $5,515,357 and $1,921,394, respectively | 23,358,874 | 23,512,836 |
Convertible notes, net of discount of $50,129 and zero, respectively | 680,640 | 730,770 |
Total debt | 29,195,846 | 29,412,705 |
Less: current portion of long term debt | ' | ' |
Capital lease obligations | 27,206 | 26,113 |
IDB Bank | 0 | 5,000,000 |
Total current portion of long term debt | 27,206 | 5,026,113 |
Debt - long term | $29,168,640 | $24,386,592 |
3_COMMITMENTS_AND_CONTINGENCIE2
3. COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Jun. 30, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $19,278 |
2015 | 39,259 |
2016 | 39,259 |
2017 | 39,259 |
2018 | 34,189 |
Thereafter | 19,412 |
Capital Leases, Future Minimum Payments Due | 190,656 |
Less amount representing interest | -34,324 |
Capital lease obligations | $156,332 |
3_COMMITMENTS_AND_CONTINGENCIE3
3. COMMITMENTS AND CONTINGENCIES (Details 1) (USD $) | Jun. 30, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $79,488 |
2015 | 162,528 |
2016 | 165,678 |
2017 | 167,786 |
2018 | 172,418 |
Thereafter | 44,082 |
Total | $791,980 |
4_EQUITY_COMPENSATION_Details
4. EQUITY COMPENSATION (Details) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Equity Compensation Details | ' |
Number of Shares Outstanding, Beginning | 530,378 |
Number of Shares Cancelled | -99,708 |
Number of Shares Issued | 0 |
Number of Shares Outstanding, Ending | 430,670 |
Stock Options Vested and Exercisable Number of Shares | 182,683 |
Weighted Average Exercise Price Outstanding, Beginning | $1.99 |
Weighted Average Exercise Price Cancelled | $4.29 |
Weighted Average Exercise Price Issued | $0 |
Weighted Average Exercise Price Outstanding, Ending | $1.46 |
Weighted Average Exercise Price Vested and exercisable, Ending | $1.31 |
Weighted Average Remaining Contractual Life (in years) Outstanding | '4 years 10 months 24 days |
Weighted Average Remaining Contractual Life (in years) Vested and expected to vest | '5 years 7 months 28 days |
Aggregate Intrinsic Value Outstanding | $20,800 |
Aggregate Intrinsic Value vested and expected to vest | $18,125 |
5_MAJOR_CUSTOMERS_AND_CONCENTR1
5. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details Narrative) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Two Customers | ' | ' |
Percentage of revenues from major customers | 28.00% | 26.00% |
Five Customers | ' | ' |
Percentage of accounts receivables from major customers | 75.00% | ' |
Three Customers | ' | ' |
Percentage of accounts receivables from major customers | ' | 62.00% |