Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Oct. 31, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'American Doctors Online, Inc. | ' |
Entity Central Index Key | '0001164191 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-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? | 'No | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 12,172,408 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Cash and cash equivalents | $4,827 | $96,782 |
Accounts receivable | 110,311 | 115,917 |
Prepaid assets | ' | 12,500 |
Total current assets | 115,138 | 225,199 |
Patents Pending | 117,786 | 102,128 |
Patents, net of accumulated amortization of $37,159 (2014) and $33,290 (2013) | 48,838 | 52,707 |
Furniture, fixtures and equipment, net of accumulated depreciation of $182,146 (2014) and $168,139 (2013) | 24,252 | 38,257 |
Total assets | 306,014 | 418,291 |
Current Liabilities: | ' | ' |
Accounts payable and accrued expenses | 534,698 | 308,944 |
Accounts payable and accrued expenses, related parties | 255,161 | 21,610 |
Series B convertible preferred stock obligation | 179,667 | ' |
Total current liabilities | 969,526 | 330,554 |
Convertible notes payable, stockholder | 104,055 | 104,055 |
Total liabilities | 1,073,581 | 434,609 |
Commitment and Contingencies (Note 9) | ' | ' |
Deficit: | ' | ' |
Preferred stock, $0.01 par value; 15,000,000 shares authorized, Series A Convertible Preferred Stock, $0.01 par value, 3,500,000 shares authorized; 3,500,000 shares issued and outstanding | 35,000 | 35,000 |
Common stock, $0.01 par value; 100,000,000 shares authorized; 12,172,408 (2014) and 11,271,175 (2013) shares issued and outstanding | 121,723 | 112,611 |
Deferred compensation | -21,699 | -216,981 |
Additional paid-in capital | 17,376,266 | 16,842,107 |
Accumulated deficit | -15,855,070 | -14,333,703 |
Total company stockholders' equity | 1,656,220 | 2,439,034 |
Less noncontrolling interest | -2,423,787 | -2,455,352 |
Total deficit | -767,567 | -16,318 |
Total liabilities and deficit | $306,014 | $418,291 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Accumulated amortization of patents | $37,159 | $33,290 |
Accumulated depreciation of furniture, fixtures and equipment | $182,146 | $168,139 |
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 15,000,000 | 15,000,000 |
Preferred stock, shares issued | 3,500,000 | 3,500,000 |
Preferred stock, shares outstanding | 3,500,000 | 3,500,000 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 12,172,408 | 11,261,175 |
Common stock, shares outstanding | 12,172,408 | 11,261,175 |
Series A Convertible Preferred Stock | ' | ' |
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 3,500,000 | 3,500,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Fee revenue, net | $128,826 | $109,635 | $375,604 | $305,650 |
Operating expenses: | ' | ' | ' | ' |
Salaries and management fees (including stock compensation expenses of $94,311 and $282,935 for the three and nine months in 2014, respectively, and $3,528,039 and $3,843,852 for the three and nine months in 2013, respectively) | 203,532 | 3,549,634 | 613,291 | 3,973,745 |
Rent and occupancy costs | 20,050 | 10,383 | 62,482 | 20,573 |
Travel and entertainment | 4,760 | 4,890 | 28,626 | 21,794 |
Professional and consulting fees (including stock compensation expense of $455,617 for the nine months ended September 30, 2014) | 136,658 | 300,991 | 977,341 | 421,017 |
Insurance | 13,968 | 11,334 | 44,168 | 38,319 |
Depreciation and amortization | 5,797 | 6,944 | 17,877 | 22,333 |
Other general and administrative | 11,474 | 27,614 | 68,735 | 54,467 |
Total operating expenses | 396,239 | 3,911,790 | 1,812,520 | 4,552,248 |
Operating loss | -267,413 | -3,802,155 | -1,436,916 | -4,246,598 |
Other Expense: | ' | ' | ' | ' |
Interest expense | -38,127 | -630 | -49,037 | -1,386 |
Interest expense, stockholder | -1,297 | ' | -3,848 | -1,512 |
Total other expense | -39,424 | -630 | -52,885 | -2,898 |
Net loss | -306,837 | -3,802,785 | -1,489,801 | -4,249,496 |
Less net income (loss) attributable to noncontrolling interest | 15,387 | -125,138 | 31,566 | 321,887 |
Net loss attributable to American Doctors Online, Inc. | ($322,224) | ($3,677,647) | ($1,521,367) | ($4,571,383) |
Basic and diluted loss attributable to American Doctors Online, Inc. common stockholders, per share | ($0.03) | ($0.36) | ($0.13) | ($0.59) |
Weighted average number of common shares outstanding Basic and diluted | 12,172,409 | 10,104,351 | 11,609,588 | 7,697,669 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Stock compensation expense included in salaries and management fees | $94,311 | $282,935 | $3,528,039 | $3,843,852 |
Stock compensation expense included in professional and consulting fees | ' | ' | $455,617 | ' |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($1,489,801) | ($4,249,496) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Non cash interest expense series B convertible preferred stock | 44,917 | ' |
Depreciation and amortization | 17,877 | 22,333 |
Stock based compensation | 738,552 | 3,843,852 |
Change in operating assets and liabilities: | ' | ' |
Decrease (increase) in prepaid expenses | 12,500 | -25,000 |
Decrease (increase) in accounts receivable | 5,606 | -35,236 |
Increase in accounts payable and accrued expenses | 346,250 | 197,181 |
Increase in accounts payable and accrued expenses, related parties | 215,552 | 10,461 |
Net cash used in operating activities | -108,547 | -235,905 |
Cash flows from investing activities: | ' | ' |
Payment of patent pending costs | -15,658 | -6,396 |
Net cash used in investing activities | -15,658 | -6,396 |
Cash flows from financing activities: | ' | ' |
Proceeds from sale of common stock | ' | 370,000 |
Proceeds from sale of Series B Preferred Stock | 32,250 | ' |
Proceeds from issuance of convertible notes, related party | ' | 105,055 |
Payments on convertible notes, related party | ' | -1,000 |
Net cash provided by financing activities | 32,250 | 474,055 |
Net increase (decrease) in cash and cash equivalents | -91,955 | 231,755 |
Cash and cash equivalents, beginning | 96,782 | 9,114 |
Cash and cash equivalents, ending | 4,827 | 240,869 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid for interest | 5,416 | 1,386 |
Cash paid for income taxes | ' | ' |
Schedule of Non-Cash Investing and Financing Activities: | ' | ' |
Issuance of preferred stock for assignment of patents and patents pending | ' | 16,675 |
Issuance of common stock for accounts payable | ' | 52,245 |
Settlement of accrued expenses with issuance of preferred stock | $136,667 | ' |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
ORGANIZATION | ' |
NOTE 1 - ORGANIZATION | |
BUSINESS | |
American Doctors Online, Inc. (the “Company” or “ADOL”) was formed in the State of Delaware on September 17, 1999. ADOL owns four U.S. patents and has three pending patent applications. These patents cover the essential core processes required for the delivery of telehealth and telemedicine services. The Company’s business model is to license to telehealth and/or telemedicine providers one or more of the Company’s patents pursuant to non-exclusive agreements with terms and conditions similar to other licensing agreements involving medical related Intellectual property. The Company believes its’ intellectual property includes the fundamental methodologies inherent to the provision of telehealth and/or telemedicine. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||||||||||||||||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION | |||||||||||||||||||||||||
The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with a reading of the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2013 included in the Company’s Registration Statement on Form -10/A filed on October 6, 2014. Interim results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of future results for the full year. | |||||||||||||||||||||||||
ADOL receives fees pursuant to a Management Services and License Agreement with PhoneDOCTORx, LLC, (“PDRx”). PDRx, is a Massachusetts limited liability company, owned by five physicians, who collectively own over 70% of ADOL. Based on the common control and ownership of ADOL and PDRx, PDRx is considered a variable interest entity, of which ADOL is the primary beneficiary. Accordingly, these condensed consolidated financial statements include the accounts of PDRx. ADOL exerts no influence on, or has any involvement in the practice of medicine by PDRx’s clinical staff. | |||||||||||||||||||||||||
The condensed consolidated financial statements of the Company include the Company and PDRx. All material inter-company balances and transactions have been eliminated. | |||||||||||||||||||||||||
VARIABLE INTEREST ENTITY | |||||||||||||||||||||||||
The Company determined that it was the primary beneficiary of PDRx based primarily on qualitative factors. Specifically, PDRx was formed at the direction of the Company. PDRx is managed and effectively controlled, other than related to the provision of medical services, by the Company through common ownership, and a substantial portion of PDRx revenues accrue to the Company in the form of management fees. The carrying value of the assets and liabilities of PDRx included in the accompanying condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013 are as follows: | |||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
Cash | $ | 4,260 | $ | 73,234 | |||||||||||||||||||||
Accounts receivable | 102,229 | 107,778 | |||||||||||||||||||||||
Total current assets | 106,489 | 181,012 | |||||||||||||||||||||||
Property and equipment, net | 1,002 | 1,523 | |||||||||||||||||||||||
Total assets | $ | 107,491 | $ | 182,535 | |||||||||||||||||||||
Accounts payable | $ | 422,887 | $ | 176,567 | |||||||||||||||||||||
Due to related party | 24,800 | 24,800 | |||||||||||||||||||||||
Total current liabilities | $ | 447,687 | $ | 201,367 | |||||||||||||||||||||
EMERGING GROWTH COMPANY | |||||||||||||||||||||||||
We qualify as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. | |||||||||||||||||||||||||
USE OF ESTIMATES | |||||||||||||||||||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the valuation of stock-based compensation, the allowance for doubtful accounts and impairment of patents. | |||||||||||||||||||||||||
CASH AND CASH EQUIVALENTS | |||||||||||||||||||||||||
The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. | |||||||||||||||||||||||||
ACCOUNTS RECEIVABLE | |||||||||||||||||||||||||
Pursuant to licenses entered into by PDRx and their customers, the Company bills the customer monthly and records the corresponding accounts receivable due from its licensees. The Company extends credit of up to forty five (45) days from invoice date. The Company provides allowance for losses through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience. While management uses the best information available to make its evaluations, this estimate is susceptible to significant change in the near term. | |||||||||||||||||||||||||
PATENTS | |||||||||||||||||||||||||
The Company capitalizes legal fees and filing costs associated with the development and filing of its patents. Patents are generally amortized over an estimated useful life of 17 years using the straight-line method beginning on the issue date. Amortization expense of $1,290 and $3,870 was recorded during the three and nine months ended September 30, 2014, respectively, compared to $1,250 and $3,618 for the three and nine months ended September 30, 2013, respectively. | |||||||||||||||||||||||||
PROPERTY AND EQUIPMENT | |||||||||||||||||||||||||
Property and equipment are stated at cost, and depreciation is provided by use of straight-line methods over the estimated useful lives of the assets. The estimated useful lives of property and equipment are as follows: | |||||||||||||||||||||||||
Office equipment and furniture | 5 years | ||||||||||||||||||||||||
Computer hardware and software | 3 years | ||||||||||||||||||||||||
The Company's property and equipment consisted of the following at September 30, 2014 and December 31, 2013: | |||||||||||||||||||||||||
Cost | Accumulated Depreciation | Balance | |||||||||||||||||||||||
9/30/14 | 12/31/13 | 9/30/14 | 12/31/13 | 9/30/14 | 12/31/13 | ||||||||||||||||||||
Furniture and Equipment | $ | 191,596 | $ | 191,596 | $ | (167,344 | ) | $ | (153,339 | ) | $ | 24,252 | $ | 38,257 | |||||||||||
Software | 14,800 | 14,800 | (14,800 | ) | (14,800 | ) | — | — | |||||||||||||||||
Total | $ | 206,396 | $ | 206,396 | $ | (182,144 | ) | $ | (168,139 | ) | $ | 24,252 | $ | 38,257 | |||||||||||
Depreciation expense of $4,507 and $14,005 was recorded for the three and nine months ended September 30, 2014, respectively, compared to $5,694 and $18,715 for the three and nine months ended September 30, 2013, respectively. | |||||||||||||||||||||||||
REVENUE RECOGNITION | |||||||||||||||||||||||||
The Company recognizes revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. | |||||||||||||||||||||||||
The Company recognizes revenue during the period in which the licensed products are utilized. PDRx, through the sub-licensing of the ADOL patents, provides remote covering physician consultations via audio and/or video conferencing technologies. It provides Extended Care Facilities (“ECF”), ECF nurses, patients and their families’ confidential, real-time access to Board Certified physicians in non-urgent, urgent and emergent care settings through a state-of-the-art medical call center. PDRx through sub-licenses of ADOL’s patented telehealth / telemedicine technology provides medical services including face-to-face, real-time access to covering physicians, resulting in reduction of unnecessary and avoidable transfers and readmissions to the Emergency Department. | |||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||||||||||||||||||
The carrying value of the Company’s accounts receivable and accounts payable and accrued expenses approximate fair value due to their short term nature. The carrying value of convertible notes payable, stockholder approximates fair value because the terms are similar to prevailing market rates. | |||||||||||||||||||||||||
INCOME TAXES | |||||||||||||||||||||||||
The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. The Company recognizes deferred tax assets and liabilities to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. The Company records a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. | |||||||||||||||||||||||||
ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not been assessed, nor has the Company paid, any interest or penalties. | |||||||||||||||||||||||||
The Company measures and records uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. The Company’s tax years subsequent to 2005 remain subject to examination by federal and state tax jurisdictions. | |||||||||||||||||||||||||
EARNINGS (LOSS) PER SHARE | |||||||||||||||||||||||||
The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. The following potentially dilutive securities for the nine months ended September 30, 2014 and 2013 were not included in the calculation of diluted loss per share because their impact was anti-dilutive. | |||||||||||||||||||||||||
September 30, | |||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||
2007 Option Plan | 515,000 | 515,000 | |||||||||||||||||||||||
2011 Option Plan | 3,747,360 | 4,047,137 | |||||||||||||||||||||||
Class A Preferred Stock | 7,000,000 | — | |||||||||||||||||||||||
Class B Preferred Stock | 93,333 | — | |||||||||||||||||||||||
Convertible Notes | 104,055 | 104,055 | |||||||||||||||||||||||
11,459,748 | 4,666,192 | ||||||||||||||||||||||||
ACCOUNTING FOR STOCK-BASED COMPENSATION | |||||||||||||||||||||||||
The Company accounts for stock based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant). The fair value of our common stock options are estimated using the Black Scholes option-pricing model. | |||||||||||||||||||||||||
The Company estimates the fair value of stock options and warrants using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of options that have no vesting restrictions and are fully transferable. This model requires the input of subjective assumptions, including the expected price volatility of the underlying stock and the expected life of stock options. Projected data related to the expected volatility of stock options is based on the average volatility of the trading prices of comparable companies and the expected life of stock options is based upon the term and vesting schedules of the options. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore the existing valuation models do not provide a precise measure of the fair value of our stock options and warrants. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. | |||||||||||||||||||||||||
The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. | |||||||||||||||||||||||||
The Company estimates the fair value of shares of common stock issued for services based on the price of shares of the Company’s common stock sold in contemporaneous private placements of offerings on the date shares are granted. | |||||||||||||||||||||||||
RECENT ACCOUNTING PRONOUNCEMENTS | |||||||||||||||||||||||||
Recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements. |
PATENTS
PATENTS | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ' | ||||
PATENTS | ' | ||||
NOTE 3 – PATENTS | |||||
Patents as of September 30, 2014 consist of the following: | |||||
Gross carrying amount | $ | 85,997 | |||
Accumulated amortization | (37,159 | ) | |||
Net carrying amount | $ | 48,838 |
SALES_CONCENTRATION_AND_CONCEN
SALES CONCENTRATION AND CONCENTRATION OF CREDIT RISK | 9 Months Ended | ||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||||
SALES CONCENTRATION AND CONCENTRATION OF CREDIT RISK | ' | ||||||||||||||||||||||
NOTE 4 – SALES CONCENTRATION AND CONCENTRATION OF CREDIT RISK | |||||||||||||||||||||||
CASH | |||||||||||||||||||||||
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts. | |||||||||||||||||||||||
Sales and Accounts Receivable | |||||||||||||||||||||||
Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three and nine months ended September 30, 2014 and 2013 and the accounts receivable balance as of September 30, 2014: | |||||||||||||||||||||||
2013 | 2014 | ||||||||||||||||||||||
Customer | Sales % Three Months Ended September 30, | Sales % Nine Months Ended September 30, | Sales % Three Months Ended September 30, | Sales % Nine Months Ended September 30, | Accounts | ||||||||||||||||||
Receivable Balance as of September 30, 2014 | |||||||||||||||||||||||
A | 36.3 | % | 30.7 | % | 41.3 | % | 38.6 | % | $ | 32,634 | |||||||||||||
B | 35.1 | % | 35.2 | % | 33.5 | % | 31.3 | % | $ | 36,130 | |||||||||||||
C | 13.2 | % | 22.8 | % | — | — | $ | 8,082 | |||||||||||||||
D | 12.4 | % | 14.4 | % | — | — | $ | 11,930 | |||||||||||||||
CONVERTIBLE_NOTES_PAYABLE_STOC
CONVERTIBLE NOTES PAYABLE, STOCKHOLDER | 9 Months Ended |
Sep. 30, 2014 | |
Debt Disclosure [Abstract] | ' |
CONVERTIBLE NOTES PAYABLE, STOCKHOLDER | ' |
NOTE 5 – CONVERTIBLE NOTES PAYABLE, STOCKHOLDER | |
During the year ended December 31, 2013, the Company issued nine convertible promissory notes to its Chairman, Dr. Bulat (the “Bulat Notes”) for $105,055 in the aggregate and the Company repaid $1,000. As of December 31, 2013 and September 30, 2014, the balance of the Bulat Notes was $104,055. The notes mature on the third anniversary of their issuance (the “Maturity Date”) and carry a per annum interest rate of 5%. The Notes automatically convert on the nine month anniversary following the effectiveness of the Company becoming a public company (the “Conversion Date”) at a conversion price equal to the average closing bid price over the five consecutive days immediately preceding the Conversion Date. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 6 – RELATED PARTY TRANSACTIONS | |
For the three and nine months ended September 30, 2014, the Company incurred rent expense of $17,640 and $52,922, respectively, on behalf of St. Luke’s Emergency Associates (“SLEA”). Dr. Paul Bulat, the Company’s founder and Chairman is the President of SLEA. Additionally, as of September 30, 2014, the Company owes SLEA $16,267 and is included in accounts payable and accrued expenses related parties. | |
For the three and nine months ended September 30, 2014, the Company recorded interest expense, stockholder of $1,297 and $3,848, respectively, compared to $1,512 for nine months ended September 30, 2013. As of September 30, 2014, accrued interest of $9,192 is owed to the stockholder and is included in accounts payable and accrued expenses, related parties. | |
Effective on November 1, 2013 (the “Effective date”), the Company appointed Mr. Hollander as the Chief Financial Officer of the Company, and agreed to issue Mr. Hollander or his assigns 520,754 shares of common stock of the Company, and increased the monthly compensation to $8,000. Pursuant to this appointment, Mr. Hollander earned 50% of the additional shares on the nine month anniversary of the Effective Date and will earn 50% on the one year anniversary of the Effective Date. Accordingly, the 520,754 shares of common stock, with a value of $260,377 were recorded as deferred equity compensation and are included in the equity section on the condensed consolidated balance sheet. The Company valued the common stock at $0.50 per share, the same value as the then most recent sales of common stock. The Company is amortizing the deferred equity compensation over the twelve month term, and has included $65,094 and $195,282, respectively, in stock compensation expense for the three and nine months ended September 30, 2014. The balance of $21,698 in deferred equity compensation will be amortized in October 2014. As of September 30, 2014, the balance owed Mr. Hollander related to the monthly compensation is $28,000 and is included in accounts payable and accrued expenses related parties. | |
The Board also agreed to enter into an employment agreement with Mr. Bulat (Chief Innovations Officer) for an annual salary up to $300,000 effective January 1, 2014. The Company and Mr. Bulat agreed to accrue $10,000 per month for the nine months ended September 30, 2014 and agreed to increase the annual compensation to the full amount at a later date. Included in salaries and management fees for the three and nine months ended September 30, 2014, is $30,000 and $90,000, respectively and as of September 30, 2014, $90,000 is included in accounts payable and accrued expenses related party. The board also agreed to compensate Mr. Lane (Chief Executive Officer) up to $250,000 per annum beginning January 1, 2014, however Mr. Lane and the Company have agreed that he will continue to be paid at his previous annual salary of $152,500, and agreed to increase the annual compensation to the full amount at a later date. Included in salaries and management fees for the three and nine months ended September 30, 2014, is $38,126 and $114,295, respectively. As of September 30, 2014, the balance owed Mr. Lane is $21,702 for unpaid salary and is included in accounts payable and accrued expenses related parties. | |
As of September 30, 2014, the Company owes its Chief Technology Officer $90,000 for accrued and unpaid fees and is included in accounts payable and accrued expenses, related parties. |
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended | ||||||||||||||
Sep. 30, 2014 | |||||||||||||||
Equity [Abstract] | ' | ||||||||||||||
STOCKHOLDERS' EQUITY | ' | ||||||||||||||
NOTE 7 – STOCKHOLDERS’ EQUITY | |||||||||||||||
DEFERRED EQUITY COMPENSATION | |||||||||||||||
During the year ended December 31, 2013, the Company’s CFO was issued 520,754 shares of common stock. The common stock was valued at $260,377, equal to $0.50 per share, the same value as the most recent sales of common stock. The Company is amortizing the deferred equity compensation over the twelve month term, and has included $65,094 and $195,282, respectively, in stock compensation expense for the three and nine months ended September 30, 2014. The balance of $21,699 in deferred equity compensation will be amortized in October 2014. | |||||||||||||||
COMMON STOCK | |||||||||||||||
On June 18, 2014, pursuant to a consulting agreement, the Company issued 911,233 shares of common stock to Makena (see note 9). During the nine months ended September 30, 2014, the Company recorded an expense of $455,617 for the issuance, based on a per share price in the most recent private placements of $0.50 per share. | |||||||||||||||
SERIES B PREFERRED STOCK | |||||||||||||||
On November 13, 2013, the Board of Directors of the Company authorized the Company to sell 4,000,000 shares of Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock”), at $0.75 per share. | |||||||||||||||
On April 3, 2014, the Company received proceeds of $26,250 from the sale of 35,000 shares of Series B Preferred Stock. The shares were issued at $0.75 per share. | |||||||||||||||
On July 2, 2014, the Company received proceeds of $6,000 from the sale of 8,000 shares of Series B Preferred Stock. The shares were issued at $0.75 per share. | |||||||||||||||
On August 18, 2014, the Company issued 136,667 shares of Series B Preferred Stock in satisfaction of $102,500 of accrued and unpaid consulting fees. The shares were issued at $0.75 per share. | |||||||||||||||
The Series B Preferred Stock and any accrued and unpaid dividends thereon shall, with respect to rights on liquidation, winding up and dissolution, rank senior to the common stock, and the Series A Preferred Stock. | |||||||||||||||
The holders of shares of Series B Preferred Stock are entitled to receive an annual dividend at the rate of eight percent (8%) per annum. Such dividend can be paid in cash or in the issuance of additional Series B Preferred Shares. | |||||||||||||||
Each share of Series B Preferred Stock shall automatically convert (the “Mandatory Conversion”) and without the payment of additional consideration by the Holder thereof, into shares of Common Stock on the Mandatory Conversion Date (as hereinafter defined) at a conversion rate of seventy-five percent (75%) of the price of the Common Stock sold for cash in a non-affiliated equity transaction (the “Equity Price”). The Mandatory Conversion Date shall be the date that the five (5) day weighted average trading price of the Common Stock exceeds 110% of the Equity Price. | |||||||||||||||
At any time, or upon receipt of a redemption notice by the Company, the Holder will have twenty (20) days to elect to convert the Series B Preferred Stock into Common Stock at a price per share equal to a twenty-five percent (25%) discount to the most recent Common Stock price per share paid by any non-affiliated investor in a subsequent financing to the Series B Preferred Stock. | |||||||||||||||
Because the Series B convertible preferred stock is convertible into a variable number of shares of the Company’s stock, determined with referenced to a fixed dollar amount, the fair value of the conversion option, which approximates its intrinsic value, is required to be presented as a liability. Accordingly, $179,667 is presented as Series B convertible preferred stock obligation, a liability on the accompanying consolidated balance sheets as of September 30, 2014. The excess of the fair value of the conversion option over the proceeds received was recorded as interest expense of $36,167 and $44,917, respectively, for the three and nine months ended September 30, 2014. | |||||||||||||||
STOCK OPTIONS | |||||||||||||||
During the year ended December 31, 2007, the Company adopted the 2007 Stock Option/Stock Issuance Plan (the “2007 Plan”). The 2007 Plan permits the grants of Options to purchase shares of Common Stock, either ISOs or Non-Qualified Options; and awards of Restricted Stock. The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights, phantom stock awards or stock units. | |||||||||||||||
Effective May 17, 2011, the Company adopted the 2011 Stock Option/Stock Issuance Plan (the “2011 Plan”). The 2011 Plan permits the grants of Options to purchase shares of Common Stock, either ISOs or Non-Qualified Options; and awards of Restricted Stock. The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights, phantom stock awards or stock units. | |||||||||||||||
A summary of the plans as of September 30, 2014 is as follows: | |||||||||||||||
Plan | Authorized | Granted | Available | ||||||||||||
2007 | 1,500,000 | 515,000 | 985,000 | ||||||||||||
2011 | 10,000,000 | 3,747,360 | 6,252,460 | ||||||||||||
A summary of the activity of options for the nine months ended September 30, 2014 is as follows: | |||||||||||||||
Options | Weighted- | Weighted- | Weighted- | ||||||||||||
Average | Average | Average | |||||||||||||
exercise | grant date | remaining | |||||||||||||
price | fair value | term | |||||||||||||
4,562,137 | $ | 1.28 | 6.75 | ||||||||||||
Balance January 1, 2014 | |||||||||||||||
Options expired | (299,777 | ) | |||||||||||||
Outstanding as of September 30, 2014 | 4,262,360 | $ | 1.28 | 6.47 | |||||||||||
Exercisable at September 30, 2014 | 4,194,860 | $ | 1.28 | 6.48 | |||||||||||
As of September 30, 2014, there are options to purchase 67,500 shares of common stock that have not vested. Upon their vesting, expecting to occur through December 31, 2015, the Company will realize future expenses of $59,692. | |||||||||||||||
During the three and nine months ended September 30, 2014, the Company recorded stock based compensation expense related to stock options of $29,218 and $87,653 respectively. |
INCOME_TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
NOTE 8 – INCOME TAXES | |
Deferred income taxes reflect the net tax effects of operating loss and tax credit carry forwards and temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty of the Company’s ability to realize the benefit of the deferred tax assets, the deferred tax assets are fully offset by a valuation allowance at September 30, 2014, and December 31, 2013. | |
As of September 30, 2014, the Company had a tax net operating loss carry forward of approximately $987,000. Any unused portion of this carry forward expires in 2030. Utilization of this loss may be limited in the event of an ownership change pursuant to IRS Section 382. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
NOTE 9 – COMMITMENTS AND CONTINGENCIES | |
EMPLOYMENT AGREEMENTS | |
The Company entered into an employment agreement with Mr. Brian Lane, our Chief Executive Officer (Mr. Lane resigned October 27, 2014, see note 11), for a two-year term effective June 20, 2011. The agreement, as amended, provided for a base salary of $12,708 per month, annual incentive bonuses based on the Company’s performance in achieving prescribed revenue and earnings before interest and taxes (“EBIT”) targets, and discretionary bonuses. The amended agreement further provided for a grant of options to acquire 2,000,000 shares of common stock of the Company. Effective June 20, 2013, the Company further amended Mr. Lane’s employment agreement, extending the term through December 31, 2013 and agreed to issue 2,000,000 shares of common stock and cancelled the options. Effective November 1, 2103, the board also agreed to compensate Mr. Lane (Chief Executive Officer) up to $250,000 per annum beginning January 1, 2014, however Mr. Lane and the Company have agreed that he will continue to be paid at his previous annual salary of $152,500, and agreed to increase the annual compensation to the full amount at a later date. Included in salaries and management fees for the three and nine months ended September 30, 2014, is $38,126 and $114,295, respectively. | |
On November 1, 2013, the Board also agreed to enter into an employment agreement with Mr. Bulat (Chief Innovations Officer) for an annual salary up to $300,000 effective January 1, 2014. The Company and Mr. Bulat agreed to accrue $10,000 per month for the nine months ended September 30, 2014 and agreed to increase the annual compensation to the full amount at a later date. The corresponding liability is included in accounts payable and accrued expenses, related party as of September 30, 2014. | |
CONSULTING AGREEMENTS | |
On April 15, 2014, the Company entered into a three month Consulting Agreement with a consultant (the “Consultant”) to assist the Company regarding the formation of strategic relationships with existing and new identified technology companies. Additionally, the Consultant worked with the executive management team in developing market strategies and comprehensive video conferencing technology solution offerings including the bundling of these technologies, working with ADOL’s partner on developing licensing packages, creating new sales proposal formats for consultation services and technologies/products, and assisting with the development and placement of products and services. The Company agreed to compensate the Consultant $100 per hour, for a minimum of 40 hours per week, for these services, which may be paid, at the option of the Company, in the form of cash or equity consideration. The parties extended the Agreement through July 31, 2014, at which time the Agreement was terminated. For the three and nine months ended September 30, 2014, the Company recorded expenses of $24,700 and $102,500 pursuant to this agreement. On August 18, 2014, the Consultant and the Company entered into a Debt Settlement and Release Agreement, whereby the Company agreed to issue and the Consultant agreed to accept 136,667 shares of the Company’s Series B Preferred Stock as full settlement of the $102,500 due the Consultant. | |
Effective June 1, 2013, the Company entered into a consulting agreement with Venture Equity, LLC (“Venture Equity”), whereby Venture Equity will assist the Company in their seeking to become a public company. The Company issued 347,169 shares of common stock and agreed to pay Venture Equity $5,000 per month. On October 7, 2013, the Company appointed Mr. Hollander as the Chief Financial Officer of the Company, and effective on November 1, 2013 (the “Effective date”) agreed to issue Mr. Hollander or his assigns an additional 520,754 shares of common stock of the Company and increased the monthly fee to $8,000. Pursuant to these agreements, Mr. Hollander earned 50% of the additional shares on the nine month anniversary of the Effective Date and will earn 50% on the one year anniversary of the Effective Date. As of September 30, 2014, the balance owed Mr. Hollander related to the monthly compensation is $28,000 and is included in accounts payable and accrued expenses related party. | |
On June 7, 2013, the Company entered into a consulting agreement with Makena Investment Advisors, LLC. (“Makena”). Pursuant to the one year agreement Makena will assist the Company in its efforts to seek to become a public company, including but not limited to consulting in the preparation of a private placement memorandum, assisting and consulting on the preparation of a registration statement and other consulting services. The Company has agreed to compensate Makena $50,000 and 911,233 shares of the Company’s common stock. Makena began to provide the services in April 2013 and the Company has recorded $12,500 in consulting expenses related for the cash portion and $455,617 for the equity portion (See note 1) for the nine months ended September 30, 2014. | |
On November 13, 2013, the Company entered into a nine month Placement Agent and Advisory Services Agreement (“PAASA”) with Monarch Bay Securities, LLC (“MBS”). Pursuant to the PAASA, the Company has agreed to pay MBS a retainer of $30,000 and to pay a Success Fee comprised of: a)cash equal to 8% of the gross proceeds raised in a Financing (as defined in the PAASA) including proceeds received from the exercise of any warrants issued in any Financing and b)a warrant to purchase 8% of the total number of shares issued by the Company in connection with the Financing, including the shares issued upon conversion of an exercise of the securities sold in a Financing. The warrant will be issued at an exercise price equal to the purchase price per share sold in the Financing, or in the event that securities convertible into common stock are sold in the Financing, at the conversion price of such securities. The warrant issued to MBS also contains a cashless provision. The Board of Directors of the Company authorized MBS to raise up to Three Million Dollars ($3,000,000) by the sale of Four Million shares (4,000,000) of Series B Convertible Redeemable Preferred Stock, at $0.75 per share. Pursuant to the terms of the PAASA, on May 6, 2014, the Company notified MBS that the Company was terminating the PAASA. MBS has not concluded a Financing and the Company has not incurred any additional expenses. | |
LEASE AGREEMENTS | |
The Company utilizes office space in Fairhaven, Massachusetts that is leased from a third party by SLEA, the tenant of the space. There was no formal agreement between the Company and SLEA through September 30, 2014. For the three and nine months ended September 30, 2014, the Company recorded rent expense of $17,643 and $52,922, respectively, compared to $1,108 and $9,108, respectively, for the three and nine months ended September 30, 2013. The 2013 expense was related to a lease for a satellite office for PDRx (terminated July 2013). | |
LITIGATION | |
There are no material proceedings pending or threatened against ADOL. PDRx is a plaintiff in a law suit against HealthBridge Management, Inc, (“Healthbridge”) for non-payment of monies owed for services rendered. HealthBridge has answered the claim with a countersuit against PDRx. The outcome is unknown, legal expenses have been incurred and additional expenses will be forthcoming. The Company does not believe that the disposition or ultimate resolution of existing claims or lawsuits will have a material adverse effect on the business or financial condition of the Company. When and if it appears probable in management's judgment that the Company would incur monetary damages or other costs in connection with any claims or proceedings, and such costs can be reasonably estimated, liabilities will be recorded in the financial statements and charges will be recorded against earnings. |
GOING_CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
GOING CONCERN | ' |
NOTE 10 – GOING CONCERN | |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of September 30, 2014 the Company had an accumulated deficit of $15,855,070 and a working capital deficit of $854,388. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |
Management’s Plans | |
The Company currently plans to satisfy its cash requirements for the next 12 months though it’s current cash, sales, and raising funds in capital raise transactions and if necessary by borrowing from its officers and directors or companies affiliated with its officers and directors. The Company maintains daily operations and capital needs through the receipts of monthly amounts received pursuant to various license and sub-license agreements, however the Company anticipates that it will need a minimum of $180,000 to continue operations for the next twelve (12) months. ADOL believes it will meet its cash requirements although it has no agreements in place for a capital raise transaction or from any of its officers or directors. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
NOTE 11 – SUBSEQUENT EVENTS | |
Management has evaluated subsequent events through October 31, 2014, which is the date the financial statements were available to be issued. | |
On October 27, 2014, Mr. Brian Lane (“Lane”) resigned as CEO of the Company. Mr. Lane remains a member of the Board of Directors of the Company. On October 29, 2014, the Company and Mr. Lane entered into a Resignation and Separation Agreement (the “RSA”). Pursuant to the RSA, the Company has agreed to provide consideration to Mr. Lane of $58,856 in fourteen bi-weekly payments of approximately $4,204. The consideration included wages accrued and unpaid as of October 24, 2014. Mr. Lane’s resignation was not due to any disagreement with the Company, the Board or the Company’s management. | |
On October 30, 2014, the Board of Directors of the Company appointed Mr. Paul Bulat (“Bulat”) as the interim Chief Executive Officer. Mr. Bulat currently also serves as the Chairman of the Board and the Chief Innovations Officer of the Company. There will be no additional compensation due Mr. Bulat and the terms and conditions of his employment agreement as CIO remain in effect (see note 6). | |
Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements. |