Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 01, 2014 | Jun. 30, 2013 | |
Document and Entity Information | ' | ' | ' |
Entity Registrant Name | 'StrikeForce Technologies Inc. | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Entity Central Index Key | '0001285543 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 4,883,251 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Current Reporting Status | 'Yes | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Well-known Seasoned Issuer | 'No | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Entity Public Float | ' | ' | $578 |
BALANCE_SHEETS
BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current Assets: | ' | ' |
Cash | $7,559 | $133,279 |
Accounts receivable | 39,454 | 143,290 |
Prepayments and other current assets | 31,287 | 9,947 |
Total current assets | 78,300 | 286,516 |
Property and equipment, net | 3,989 | 7,110 |
Patents, net | 20,019 | 4,074 |
Website development costs, net | 4,500 | 7,500 |
Security deposit | 8,684 | 8,684 |
Total Assets | 115,492 | 313,884 |
Current Liabilities: | ' | ' |
Current maturities of convertible notes payable, net | 1,070,467 | 1,337,012 |
Convertible notes payable - related parties | 355,500 | 355,500 |
Current maturities of notes payable, net | 1,992,500 | 2,360,690 |
Notes payable - related parties | 722,638 | 722,638 |
Accounts payable | 1,237,165 | 863,704 |
Accrued expenses | 4,350,477 | 3,942,062 |
Derivative liabilities | 519,433 | 375,634 |
Convertible secured notes payables | 542,588 | 542,588 |
Capital leases payable | 5,532 | 5,532 |
Payroll taxes payable | 53,901 | 53,901 |
Due to factor | 209,192 | 209,192 |
Total current liabilities | 11,059,393 | 10,768,453 |
Non-current Liabilities: | ' | ' |
Common stock to be issued | 1 | 19 |
Convertible notes payable, net of current maturities | 70,000 | 30,000 |
Total non-current liabilities | 70,001 | 30,019 |
Total Liabilities | 11,129,394 | 10,798,472 |
Commitments and contingencies | ' | ' |
Stockholders' Deficit | ' | ' |
Series A Preferred stock, no par value; 100 shares authorized; 3 shares issued and outstanding | 987,000 | 987,000 |
Series B Preferred stock par value $0.10: 100,000,000 shares authorized; none issued or outstanding | 0 | 0 |
Preferred stock series not designated par value $0.10: 10,000,000 shares authorized; none issued or outstanding | 0 | 0 |
Common stock par value $0.0001: 1,500,000,000 shares authorized; 2,317,797 and 241,872 shares issued and outstanding, respectively | 232 | 24 |
Additional paid-in capital | 20,098,779 | 18,217,375 |
Accumulated deficit | -32,099,913 | -29,688,987 |
Total Stockholders' Deficit | -11,013,902 | -10,484,588 |
Total Liabilities and Stockholders' Deficit | $115,492 | $313,884 |
CONDENSED_BALANCE_SHEETS_PRENT
CONDENSED BALANCE SHEETS PRENTHETICALS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Stockholders equity number of shares par value and other disclosures | ' | ' |
Preferred Stock Series A, no par value | $0 | $0 |
Preferred Stock Series A, shares authorized | 100 | 100 |
Preferred Stock Series A, shares issued | 3 | 3 |
Preferred Stock Series A, shares outstanding | 3 | 3 |
Preferred Stock Series B, par value | $0.10 | $0.10 |
Preferred Stock Series B, shares authorized | 100,000,000 | 100,000,000 |
Preferred Stock Series B, shares issued | 0 | 0 |
Preferred Stock Series B, shares outstanding | 0 | 0 |
Preferred Stock, par or stated value | $0.10 | $0.10 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, par or stated value | $0.00 | $0.00 |
Common Stock, shares authorized | 1,500,000,000 | 1,500,000,000 |
Common Stock, shares issued | 2,317,797 | 241,872 |
Common Stock, shares outstanding | 2,317,797 | 241,872 |
STATEMENTS_OF_OPERATIONS
STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement | ' | ' |
Revenue | $434,657 | $805,312 |
Cost of revenue | 16,967 | 14,513 |
Gross margin | 417,690 | 790,799 |
Operating expenses: | ' | ' |
Compensation | 354,384 | 343,135 |
Professional fees | 710,526 | 468,561 |
Selling, general and administrative expenses | 245,684 | 284,337 |
Research and development | 340,600 | 339,300 |
Total operating expenses | 1,651,194 | 1,435,333 |
Loss from operations | -1,233,504 | -644,534 |
Other (income) expense: | ' | ' |
Interest and financing expense | 1,520,195 | 815,642 |
Change in fair value of derivative liabilities | -312,995 | -294,307 |
Forgiveness of debt | -29,778 | 0 |
Other (income) expense, net | 1,177,422 | 521,335 |
Net loss | ($2,410,926) | ($1,167,908) |
Net loss per common share - basic and diluted | ($3.68) | ($6.51) |
Weighted average common shares outstanding - basic and diluted | 654,326 | 179,479 |
STATEMENT_OF_STOCKHOLDERS_DEFI
STATEMENT OF STOCKHOLDERS' DEFICIT (USD $) | Series A preferred stock, no par value shares | Series A preferred stock, no par value Amount | Common stock at $.0001 Par Value Shares | Common stock at $.0001 Par Value Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders Deficit |
USD ($) | USD ($) | USD ($) | |||||
Balance at Dec. 31, 2011 | 3 | 987,000 | 147,592 | 15 | 17,271,837 | -28,521,079 | -10,262,227 |
Sale of shares of common stock including warrants | ' | ' | 37,407 | 4 | 427,846 | ' | 427,850 |
Issuance of shares of common stock for consulting services | ' | ' | 2,424 | ' | 55,504 | ' | 55,504 |
Issuance of shares of common stock for settlement and transfer of debt | ' | ' | 5,571 | 1 | 131,432 | ' | 131,433 |
Issuance of shares of common stock for financing | ' | ' | 375 | ' | 9,000 | ' | 9,000 |
Issuance of shares of common stock for conversions of convertible notes payable | ' | ' | 48,503 | 4 | 302,688 | ' | 302,692 |
Issuance of warrants for consulting services | ' | ' | ' | ' | $19,068 | ' | $19,068 |
Net loss | ' | ' | ' | ' | ' | -1,167,908 | -1,167,908 |
Balance at Dec. 31, 2012 | 3 | 987,000 | 241,872 | 24 | 18,217,375 | -29,688,987 | -10,484,588 |
Issuance of shares of common stock for consulting services | ' | ' | 935 | ' | 3,859 | ' | 3,859 |
Issuance of shares of common stock for conversions of convertible notes payable | ' | ' | 2,074,990 | 208 | 1,784,853 | ' | 1,785,061 |
Issuance of warrants for consulting services | ' | ' | ' | ' | 525 | ' | 525 |
Issuance of warrants in connection with notes payable to the lender | ' | ' | ' | ' | 64,167 | ' | 64,167 |
Issuance of stock options for employee services | ' | ' | ' | ' | 10,000 | ' | 10,000 |
Issuance of stock options for patent | ' | ' | ' | ' | 18,000 | ' | 18,000 |
Net loss | ' | ' | ' | ' | ' | ($2,410,926) | ($2,410,926) |
Balance at Dec. 31, 2013 | 3 | 987,000 | 2,317,797 | 232 | 20,098,779 | -32,099,913 | -11,013,902 |
STATEMENTS_OF_CASH_FLOWS
STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | ' | ' |
Net loss. | ($2,410,926) | ($1,167,908) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 9,675 | 7,444 |
Amortization of discount on notes payable | 924,470 | 344,314 |
Change in fair value of derivative financial instruments | -312,995 | -294,307 |
Issuance of stock options for employee services | 10,000 | 0 |
Issuance of common stock and warrants for consulting services | 4,384 | 74,572 |
Financing expense paid through the issuance of common stock | 0 | 9,000 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable. | 103,836 | -67,967 |
Prepaid expenses. | -21,340 | 2,474 |
Accounts payable. | 373,461 | -52,938 |
Accrued expenses. | 483,313 | 438,933 |
Net cash used in operating activities | -802,147 | -731,364 |
Cash flows from investing activities: | ' | ' |
Costs of website development | 0 | -9,000 |
Purchases of property and equipment | -1,499 | -5,961 |
Net cash used in investing activities | -1,499 | -14,961 |
Cash flows from financing activities: | ' | ' |
Bank overdraft (repayment) | 0 | -4,520 |
Proceeds from sale of common stock | 0 | 455,000 |
Repayment of notes payable | -7,824 | -24,626 |
Proceeds from convertible notes payable | 689,250 | 455,750 |
Repayment of convertible notes payable | -3,500 | -2,000 |
Net cash provided by financing activities | 677,926 | 879,604 |
Net change in cash | -125,720 | 133,279 |
Cash at beginning of the year | 133,279 | 0 |
Cash at end of the year | 7,559 | 133,279 |
Supplemental disclosure of cash flow information: | ' | ' |
Interest paid | 0 | 0 |
Income tax paid | 0 | 0 |
Non-cash investing and financing activities: | ' | ' |
Conversion of convertible notes payable into common stock | 950,107 | 302,692 |
Issuance of common stock in settlement of debt | 0 | 131,433 |
Issuance of stock options for patent | 18,000 | 0 |
Issuance of common stock for common stock to be issued | $19 | $25,000 |
Organization_and_Operations
Organization and Operations | 12 Months Ended |
Dec. 31, 2013 | |
Organization and Operations | ' |
Organization and Operations | ' |
Note 1 - Organization and Operations | |
StrikeForce Technical Services Corporation was incorporated in August 2001 under the laws of the State of New Jersey. On September 3, 2004, the stockholders approved an amendment to the Certificate of Incorporation to change its name to StrikeForce Technologies, Inc. (the “Company”). On November 15, 2010, the Company was re-domiciled under the laws of the State of Wyoming. The Company’s operations are based in Edison, New Jersey. | |
The Company is a software development and services company. The Company owned the exclusive right to license and develop various identification protection software products that were developed to protect computer networks from unauthorized access and to protect network owners and users from identity theft. The Company has developed a suite of products based upon the licenses and its strategy is to develop and exploit the products for customers in the areas of financial services, e-commerce, corporate, government, health care and consumer sectors. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Summary of Significant Accounting Policies | ' | |||||||||||||
Summary of Significant Accounting Policies | ' | |||||||||||||
Note 2 - Significant and Critical Accounting Policies and Practices | ||||||||||||||
The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles. | ||||||||||||||
Basis of Presentation | ||||||||||||||
The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). | ||||||||||||||
Use of Estimates and Assumptions | ||||||||||||||
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 disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). | ||||||||||||||
Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were: | ||||||||||||||
(i) Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. | ||||||||||||||
(ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. | ||||||||||||||
(iii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors. | ||||||||||||||
(iv) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments. | ||||||||||||||
These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value. | ||||||||||||||
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. | ||||||||||||||
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. | ||||||||||||||
Actual results could differ from those estimates. | ||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
The Company follows applicable accounting guidance for disclosures about fair value of its financial instruments. U.S. GAAP establishes a framework for measuring fair value, and requires disclosures about fair value measurements. To provide consistency and comparability in fair value measurements and related disclosures, U.S. GAAP establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are described below: | ||||||||||||||
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |||||||||||||
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |||||||||||||
Level 3 | Pricing inputs that are generally not observable inputs and not corroborated by market data. | |||||||||||||
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. | ||||||||||||||
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. | ||||||||||||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepayments and other current assets, accounts payable, accrued expenses, payroll taxes payable, and due to factor, approximate their fair values because of the short maturity of these instruments. | ||||||||||||||
The Company’s notes payable, convertible notes payable, convertible secured notes payable, and capital leases payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2013 and 2012. | ||||||||||||||
The Company’s Level 3 financial liabilities consist of the derivative financial instruments for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date. | ||||||||||||||
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. | ||||||||||||||
Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis | ||||||||||||||
Level 3 Financial Liabilities – Derivative Financial Instruments | ||||||||||||||
The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liability at the end of every reporting period and recognizes gains or losses in the Statements of Operations that are attributable to the change in the fair value of the derivative liability. | ||||||||||||||
Carrying Value, Recoverability and Impairment of Long-Lived Assets | ||||||||||||||
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include property and equipment, patents, and website development costs are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | ||||||||||||||
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. When long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. | ||||||||||||||
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. | ||||||||||||||
The key assumptions used in management’s estimates of projected cash flow deal largely with forecasts of sales levels, gross margins, and operating costs of the manufacturing facilities. These forecasts are typically based on historical trends and take into account recent developments as well as management’s plans and intentions. Any difficulty in manufacturing or sourcing raw materials on a cost effective basis would significantly impact the projected future cash flows of the Company’s manufacturing facilities and potentially lead to an impairment charge for long-lived assets. Other factors, such as increased competition or a decrease in the desirability of the Company’s products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets. | ||||||||||||||
The impairment charges, if any, is included in operating expenses in the accompanying statements of operations. | ||||||||||||||
Cash Equivalents | ||||||||||||||
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. | ||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | ||||||||||||||
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. | ||||||||||||||
Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received. | ||||||||||||||
Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. | ||||||||||||||
The Company does not have any off-balance-sheet credit exposure to its customers. | ||||||||||||||
Property and Equipment | ||||||||||||||
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows: | ||||||||||||||
Estimated Useful Life (Years) | ||||||||||||||
Computer equipment | 5 | |||||||||||||
Computer software | 3 | |||||||||||||
Furniture and fixture | 7 | |||||||||||||
Office equipment | 7 | |||||||||||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | ||||||||||||||
Leases | ||||||||||||||
Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with applicable paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 A lessee and a lessor shall consider whether a lease meets any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. In accordance with paragraphs 840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the present value of the minimum lease payments using the lessee's incremental borrowing rate unless both of the following conditions are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee's incremental borrowing rate. Capital lease assets are depreciated on a straight-line basis over the capital lease assets' estimated useful lives consistent with the Company’s normal depreciation policy for tangible assets, but generally not exceeding the term of the lease. Interest charges are expensed over the term of the lease in relation to the carrying value of the capital lease obligation. | ||||||||||||||
Operating leases primarily relate to the Company’s leases of office spaces. When the terms of an operating lease include tenant improvement allowances, periods of free rent, rent concessions, and/or rent escalation amounts, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized, which is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense. | ||||||||||||||
Intangible Assets Other Than Goodwill | ||||||||||||||
The Company has adopted Subtopic 350-30 of the FASB Accounting Standards Codification for intangible assets other than goodwill. Under the requirements, the Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over or their estimated useful lives, the terms of the exclusive licenses and/or agreements, or the terms of legal lives of the patents, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | ||||||||||||||
Patents | ||||||||||||||
For acquired patents the Company records the costs to acquire patents as patent and amortizes the patent acquisition cost over its remaining legal life, or estimated useful life, or the term of the contract, whichever is shorter. For internal developed patents, all costs incurred to the point when a patent application is to be filed are expended as incurred as research and development expense; patent application costs, generally legal costs, thereafter incurred are capitalized, which are to be amortized once the patents are granted or expended if the patent application is rejected. The Company amortizes the internal developed patents over the shorter of the expected useful lives or the legal lives of the patents, which are generally 17 to 20 years for domestic patents and 5 to 20 years for foreign patents from the date when the patents are granted. The costs of defending and maintaining patents are expended as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | ||||||||||||||
Website Development Costs | ||||||||||||||
The Company has adopted Subtopic 350-50 of the FASB Accounting Standards Codification for website development costs. Under the requirements of Sections 350-50-15 and 350-50-25, the Company capitalizes costs incurred to develop a website as website development costs, which are amortized on a straight-line basis over the estimated useful lives of three (3) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | ||||||||||||||
Discount on Debt | ||||||||||||||
The Company allocates the proceeds received from convertible debt instruments between the liability component and equity component, and records the conversion feature as a liability in accordance with subtopic 470-20 of the FASB Accounting Standards Codification (“Subtopic 470-20”). The conversion feature and certain other features that are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption option, have been recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The conversion liability is marked to market each reporting period with the resulting gains or losses shown in the Statement of Operations. The Company has also recorded the resulting discount on debt related to the warrants and conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments. | ||||||||||||||
Derivative Instruments and Hedging Activities | ||||||||||||||
The Company accounts for derivative instruments and hedging activities in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards Codification (“Paragraph 810-10-05-4”). Paragraph 810-10-05-4 requires companies to recognize all derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends upon: (i) whether the derivative has been designated and qualifies as part of a hedging relationship, and (ii) the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument based upon the exposure being hedged as either a fair value hedge, cash flow hedge or hedge of a net investment in a foreign operation. | ||||||||||||||
Derivative Warrant Liability | ||||||||||||||
The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations and comprehensive income (loss) as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity. | ||||||||||||||
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. | ||||||||||||||
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date. | ||||||||||||||
The Company marks to market the fair value of the remaining embedded derivative warrants at each balance sheet date and records the change in the fair value of the remaining embedded derivative warrants as other income or expense in the consolidated statements of operations and comprehensive income (loss). | ||||||||||||||
The Company utilizes the Lattice model that values the liability of the derivative warrants based on a probability weighted discounted cash flow model with the assistance of the third party valuation firm. The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument. Therefore, the fair value may not be appropriately captured by simple models. In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives). The Lattice model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features. Based on these features, there are two primary events that can occur; the Holder exercises the Warrants or the Warrants are held to expiration. The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.). Projections were then made on the underlying factors which led to potential scenarios. Probabilities were assigned to each scenario based on management projections. This led to a cash flow projection and a probability associated with that cash flow. A discounted weighted average cash flow over the various scenarios was completed to determine the value of the derivative warrants. | ||||||||||||||
Embedded Beneficial Conversion Feature of Convertible Instruments | ||||||||||||||
The Company recognizes and measures the embedded beneficial conversion feature of applicable convertible instruments by allocating a portion of the proceeds from the convertible instruments equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value of the embedded beneficial conversion feature is calculated at the commitment date as the difference between the conversion price and the fair value of the securities into which the convertible instruments are convertible. The Company recognizes the intrinsic value of the embedded beneficial conversion feature of the convertible notes so computed as interest expense. | ||||||||||||||
From time to time, the Company transfers the liability under the indenture instrument to a third party in certain circumstances. | ||||||||||||||
Related Parties | ||||||||||||||
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. | ||||||||||||||
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | ||||||||||||||
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | ||||||||||||||
Commitment and Contingencies | ||||||||||||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | ||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | ||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. | ||||||||||||||
Revenue Recognition | ||||||||||||||
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. | ||||||||||||||
The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of products. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the third party carrier and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues. | ||||||||||||||
In addition to the aforementioned general policy, the following are the specific revenue recognition policies for each major category of products and services: | ||||||||||||||
Hardware | ||||||||||||||
Revenue from hardware sales is recognized when the product is shipped to the customer and there are either no unfulfilled Company obligations or any obligations that will not affect the customer's final acceptance of the arrangement. All costs of these obligations are accrued when the corresponding revenue is recognized. There were no revenues from fixed price long-term contracts. | ||||||||||||||
Software, Services and Maintenance | ||||||||||||||
Revenue from time and service contracts is recognized as the services are provided. Revenue from delivered elements of one-time charge licensed software is recognized at the inception of the license term, provided the Company has vendor-specific objective evidence of the fair value of each delivered element. Revenue is deferred for undelivered elements. The Company recognizes revenue from the sale of software licenses when the four criteria discussed above are met. Delivery generally occurs when the product is delivered to a common carrier or the software is downloaded via email delivery or an FTP web site. The Company assesses collection based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. The Company does not request collateral from customers. If the Company determines that collection of a fee is not reasonably assured, the Company defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. Revenue from monthly software licenses is recognized on a subscription basis. | ||||||||||||||
ASP Hosted Cloud Services | ||||||||||||||
The Company offers an Application Service Provider Cloud Service whereby customer usage transactions are invoiced monthly on a cost per transaction basis. The service is sold via the execution of a Service Agreement between the Company and the customer. Initial set-up fees are recognized over the period in which the services are performed. | ||||||||||||||
Fixed Price Service Contracts | ||||||||||||||
Revenue from fixed price service contracts is recognized over the term of the contract based on the percentage of services that are provided during the period compared with the total estimated services to be provided over the entire contract. Losses on fixed price contracts are recognized during the period in which the loss first becomes apparent. Revenue from maintenance is recognized over the contractual period or as the services are performed. Revenue in excess of billings on service contracts is recorded as unbilled receivables and is included in trade accounts receivable. Applicable billings in excess of revenue that is recognized on service contracts are recorded as deferred income until the aforementioned revenue recognition criteria are met. | ||||||||||||||
Stock-Based Compensation for Obtaining Employee Services | ||||||||||||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||
Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||||||||||||
Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||||||||||||
The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. | ||||||||||||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | ||||||||||||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | ||||||||||||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||
Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||||||||||||
Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. | ||||||||||||||
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. | ||||||||||||||
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. | ||||||||||||||
Software Development Costs | ||||||||||||||
The Company has adopted paragraph 985-20-05-01 of the FASB Accounting Standards Codification (“Paragraph 985-20-05-01”) for the costs of computer software to be sold or licensed. Paragraph 985-20-05-01 requires research and development costs incurred in the process of software development before establishment of technological feasibility being expensed as incurred and capitalization of software development costs incurred subsequent to establishment of technological feasibility and prior to the availability of the product for general release to customers. Systematic amortization of capitalized costs begins when a product is available for general release to customers and is computed on a product-by-product basis at a rate not less than straight-line basis over the product’s remaining estimated economic life. To date, all costs have been accounted for as research and development costs and no software development cost has been capitalized. | ||||||||||||||
Income Tax Provision | ||||||||||||||
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Income and Comprehensive Income in the period that includes the enactment date. | ||||||||||||||
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 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 Section 740-10-25, the Company may recognize the 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 the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. | ||||||||||||||
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. | ||||||||||||||
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. | ||||||||||||||
Uncertain Tax Positions | ||||||||||||||
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended December 31, 2013 or 2012. | ||||||||||||||
Net Income (Loss) per Common Share | ||||||||||||||
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants. | ||||||||||||||
The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive, as adjusted by the Company’s 1:1,500 reverse stock split adopted on March 6, 2014: | ||||||||||||||
Potentially Outstanding Dilutive Common Shares | ||||||||||||||
For the Reporting Period Ended | For the Reporting Period Ended | |||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Conversion Feature Shares | ||||||||||||||
Common shares issuable under the conversion feature of convertible notes payable | 4,242,707 | 104,799 | ||||||||||||
Sub-total: Conversion feature shares | 4,242,707 | 104,799 | ||||||||||||
Stock Option Shares | ||||||||||||||
Options issued from May 20, 2003 through April 21, 2011 to employees to purchase common shares with exercise prices ranging from $3.75 to $15,000 per share expiring three (3) years to ten (10) years from the date of issuance | 89,257 | 93,352 | ||||||||||||
Options issued from December 2, 2004 through January 30, 2013 to parties other than employees to purchase common shares with exercise prices ranging from $3.00 to $13,500 per share expiring five (5) years to ten (10) years from the date of issuance | 8,000 | 1,841 | ||||||||||||
Options issued on January 3, 2013 from the 2012 Stock Incentive Plan to employees to purchase common shares with an exercise price of $3.45 per share expiring ten (10) years from the date of issuance | 3,333 | - | ||||||||||||
Sub-total: Stock option shares | 100,590 | 95,193 | ||||||||||||
Warrant Shares | ||||||||||||||
Warrants issued in connection with debentures | 61,781 | 1,849 | ||||||||||||
Warrants sold for cash | 121,669 | 148,233 | ||||||||||||
Warrants issued for services | 10,017 | 5,550 | ||||||||||||
Warrants issued in connection with the sale of common stock | 18,778 | 19,704 | ||||||||||||
Sub-total: Warrant shares | 212,245 | 175,336 | ||||||||||||
Total potentially outstanding dilutive common shares | 4,555,542 | 375,328 | ||||||||||||
Cash Flows Reporting | ||||||||||||||
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification. | ||||||||||||||
Subsequent Events | ||||||||||||||
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | ||||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||
In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. | ||||||||||||||
In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. | ||||||||||||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
Going_Concern
Going Concern | 12 Months Ended |
Dec. 31, 2013 | |
Going Concern | ' |
Going Concern Note | ' |
Note 3 - Going Concern | |
The financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. | |
As reflected in the financial statements, the Company had an accumulated deficit at December 31, 2013, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. | |
Currently, management is attempting to increase revenues and improve gross margins by a revised sales strategy. The Company is redirecting its sales focus from direct sales to domestic and international channel sales, where the Company is primarily selling through a channel of Distributors, Value Added Resellers, Strategic Partners and Original Equipment Manufacturers. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to continually increase its customer base and realize increased revenues from recently signed contracts. | |
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Property_and_Equipment
Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property Equipment at Cost | ' | ||||||||
Property and Equipment | ' | ||||||||
Note 4 - Property and Equipment | |||||||||
Property and equipment, stated at cost, less accumulated depreciation consisted of the following: | |||||||||
Estimated Useful Life (Years) | 31-Dec-13 | 31-Dec-12 | |||||||
Computer equipment | 5 | $ | 73,540 | $ | 73,540 | ||||
Computer software | 3 | 25,135 | 23,636 | ||||||
Furniture and fixture | 7 | 10,157 | 10,157 | ||||||
Office equipment | 7 | 15,906 | 15,906 | ||||||
124,738 | 123,239 | ||||||||
Less accumulated depreciation (i) | (120,749 | ) | (116,129 | ||||||
$ | 3,989 | $ | 7,110 | ||||||
(i) Depreciation Expense | |||||||||
Depreciation expense for the year ended December 31, 2013 and 2012 was $4,620 and $5,689, respectively. | |||||||||
(ii) Impairment | |||||||||
The Company completed the annual impairment test of property and equipment and determined that there was no impairment as the fair value of property, plant and equipment, exceeded their carrying values at December 31, 2013 and December 31, 2012, respectively. |
Patents
Patents | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Patents: | ' | ||||||||
PATENTS | ' | ||||||||
Note 5 – Patents | |||||||||
In November 2010, the Company received notice that the United States Patent and Trademark Office (“USPTO”) had issued an official Notice of Allowance for the patent application for the technology relating to its ProtectID® product, titled "Multi-Channel Device Utilizing a Centralized Out-of-Band Authentication System". In January 2011, the Company received notice that the USPTO issued the Company Patent No. 7,870,599. This “Out-of-Band” Patent went through a USPTO Re-Examination process starting on August 16, 2011 and concluded on December 27, 2011, with all of the Company’s patent claims remaining intact and eight additional patent claims being added. In 2011, the Company submitted an additional continuation patent on the “Out-of-Band” Patent, with approximately forty additional Company claims now pending. The technology the Company developed and uses in its GuardedID® product is the subject of a pending patent application. As of December 31, 2011, the Company capitalized $4,329 in patent application costs as incurred with no amortization, which was amortized over its legal life of 17 years starting January 1, 2012. | |||||||||
In January 2013, the Company granted an option to purchase 6,667 shares of its common stock, as adjusted by the Company’s 1:1,500 reverse stock split, to NetLabs, Inc. in exchange for the assignment of the entire right, title and interest in and to the “Out-of-Band Patent” which was recorded with the USPTO. The Options were valued at $3.00 per share, or $18,000, as adjusted by the Company’s 1:1,500 reverse stock split, which was recorded as Patent upon grant and amortized over patent’s remaining legal life of 10 years. | |||||||||
In February 2013, the Company’s patent attorneys submitted a new “Out-of-Band” Patent continuation, which is now pending. | |||||||||
In February 2013 the Company executed a retainer agreement with its patent attorneys to aggressively enforce its patent rights as it believes “Out-of-Band Authentication” is becoming the standard for authenticating consumers in the financial market. | |||||||||
In March 2013, the Company’s patent attorneys submitted a new “Methods and Apparatus for securing user input in a mobile device” Patent, which is now patent pending. The Company’s MobileTrust® product is the invention supporting the patent pending. | |||||||||
In July 2013, the Company received notice that the USPTO had added 54 additional patent claims for its Out-of-Band patent the Company received in January 2011, by issuing to the Company Patent No. 8,484,698 thereby strengthening its position with clients and its current and potential lawsuits. The Company's patent attorneys also filed third and fourth “Out of Band” continuation patents that are now patent pending and assisted the Company in obtaining a second Out-of-Band Authentication patent. | |||||||||
In October 2013, the Company received notice that the USPTO issued to the Company Patent No. 8,566,608 “Methods and apparatus for securing keystrokes from being intercepted between the keyboard and a browser.” This protects the Company's GuardedID® product and the keystroke encryption portion of its MobileTrust® products. | |||||||||
In February 2014, the Company received a Notice of Allowance from the USPTO for its third patent relating to the Company's “Methods and apparatus for securing keystrokes from being intercepted between the keyboard and a browser”, Patent No. 7,870,599. Upon receipt of this patent the Company filed another continuation patent for Patent No. 8,566,608. | |||||||||
In March 2014, the Company received Notice of Allowance from the USPTO for its second patent and first continuation of the Company's Keystroke Encryption patent, which only furthers its protection for all mobile devices when utilizing any keyboard for data entry. Upon receipt of this Notice, the Company also filed another continuation patent for Patent No. 8,566,608. | |||||||||
Patents, stated at cost, less accumulated amortization, consisted of the following: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Patents | 22,329 | 4,329 | |||||||
Accumulated amortization | (2,310 | ) | (255 | ) | |||||
$ | 20,019 | $ | 4,074 | ||||||
(i) Amortization Expense | |||||||||
Amortization expense for the years ended December 31, 2013 and 2012 was $2,055 and $255, respectively. | |||||||||
(ii) Impairment | |||||||||
The Company completed the annual impairment test of patents and determined that there was no impairment as the fair value of patents, exceeded their carrying values at December 31, 2013 and December 31, 2012, respectively |
Website
Website | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Website, stated at cost | ' | ||||||||
Website | ' | ||||||||
Note 6 - Website | |||||||||
Website, stated at cost, less accumulated amortization, consisted of the following: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Website | $ | 31,331 | $ | 31,331 | |||||
Accumulated amortization (i) | (26,831 | ) | (23,831 | ) | |||||
$ | 4,500 | $ | 7,500 | ||||||
(i) Amortization Expense | |||||||||
Amortization expense for the years ended December 31, 2013 and 2012 was $3,000 and $1,500, respectively. | |||||||||
(ii) Impairment | |||||||||
The Company completed the annual impairment test of website and determined that there was no impairment as the fair value of website, exceeded their carrying values at December 31, 2013 and December 31, 2012, respectively. |
Convertible_Note_Payable
Convertible Note Payable | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Convertible Note Payable | ' | ||||||||||
Convertible Notes Payable | ' | ||||||||||
Note 7 - Convertible Notes Payable | |||||||||||
Convertible notes payable consisted of the following: | |||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||
Convertible note bearing interest at 8% per annum, matured on March 28, 2008, with a conversion price of $13,500 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company is currently pursuing a settlement with the note holder. | $ | 235,000 | $ | 235,000 | |||||||
Convertible notes bearing interest at 8% per annum with a conversion price of $13,500 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured on December 31, 2010. The Company is currently pursuing a settlement with the note holder. | 50,000 | 50,000 | |||||||||
Convertible note bearing interest at 9% per annum with a conversion price of $2,100 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured on December 9, 2010. Pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and two unrelated parties in September 2013 and November 2013, the Company settled and transferred $50,000 and $70,000, respectively, of the note balance to the unrelated parties in the form of convertible notes for $50,000 and $70,000. The Company is currently pursuing a settlement with the note holder. | 80,000 | 200,000 | |||||||||
Convertible note bearing interest at 9% per with a conversion price of $1,200 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured on December 31, 2010. The Company is currently pursuing a settlement with the note holder. | 150,000 | 150,000 | |||||||||
Convertible note executed in May 2007 bearing interest at 9% per annum with a conversion price of $525 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured December 31, 2010. The Company is currently pursuing a settlement with the note holder. | 100,000 | 100,000 | |||||||||
Convertible notes executed in June 2007 bearing interest at 8% per annum matured on December 29, 2010. The Company is currently pursuing a settlement with the note holder. | 100,000 | 100,000 | |||||||||
Convertible note executed in July 2007 bearing interest at 8% per annum matured on January 2, 2011. The Company is currently pursuing a settlement with the note holder. | 100,000 | 100,000 | |||||||||
Convertible notes executed in August 2007 bearing interest at 9% per annum matured on August 9, 2010. The Company is currently pursuing extensions. | 120,000 | 120,000 | |||||||||
Convertible notes executed in December 2009 bearing interest at 9% per annum matured on December 1, 2012, with a conversion price of $157.50 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 134 warrants with an exercise price of $150 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring five (5) years from the date of issuance in connection with the issuance of the notes. | 50,000 | 50,000 | |||||||||
Convertible note bearing interest at 8% per annum, maturing on March 31, 2015, with a conversion price of $3 per share, as adjusted by the Company’s 1:1,500 reverse stock split. | 30,000 | 30,000 | |||||||||
Convertible note bearing interest at 8% per annum, matured on December 31, 2012, with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company is currently pursuing an extension. | 5,000 | 5,000 | |||||||||
Convertible notes, bearing compound interest at 8% per annum, matured on June 30, 2010, with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and a consultant in September 2011, the note holder transferred $10,000 of the note balance, including accrued interest, to the consultant in October 2011 (see Note 14). For the year ended December 31, 2013, the Company repaid $3,500 of the balance of the notes. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in June 2013, the Company settled and transferred $33,255 of the note balance, plus accrued interest of $36,920, to the unrelated party in the form of a convertible note for $50,000. Accrued interest of $21,175 was forgiven (see Note 14). The Company is currently pursuing extensions for the remaining note. | 10,000 | 46,755 | |||||||||
Four (4) convertible notes bearing interest at 4% per annum, matured on December 5, 2012, January 3, 2013, January 31, 2013 and March 2, 2013, respectively. For the year ended December 31, 2013 the note holder converted $36,660 of the note due on January 3, 2013 into 16,667 unrestricted shares of the Company's common stock, at conversion prices ranging from $1.7 to $2.5 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 15). The Company is currently pursuing extensions for the remaining notes. | 178,387 | 215,048 | |||||||||
Thirteen (13) convertible notes bearing interest at 8% per annum, matured on January 6, 2013, February 8, 2013, April 30, 2013, August 5, 2013, September 27, 2013, maturing on November 26, 2013, January 24, 2014, March 6, 2014, April 22, 2014 and June 3, 2014, and 10% per annum, maturing April 15, 2014, June 13, 2014 and July 9, 2014, respectively. Three (3) of the notes were settled debt purchase notes for balances transferred from a Company’s unrelated promissory note holder and unrelated convertible note holder. For the year ended December 31, 2013 the note holder converted $383,740 plus $9,400 of accrued interest, into 576,390 unrestricted shares, at conversion prices ranging from $0.15 to $4.65 per share, as adjusted by the Company’s 1:1,500 reverse stock split. For the year ended December 31, 2012 the note holder converted $77,000 plus $2,120 of accrued interest, into 25,007 shares, at conversion prices ranging from $1.8 to $7.5 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). Three (3) notes with maturity dates of March 6, 2014 (partial), April 22, 2014 and June 3, 2014 remain unpaid. | 95,100 | 126,000 | |||||||||
Four (4) convertible notes bearing interest at 8% per annum, matured on August 30, 2013 and November 19, 2013, and maturing on February 28, 2014 and July 1, 2014. For the year ended December 31, 2013 the note holder converted the full balance of $27,750 of the note due August 30, 2013, including accrued interest of $1,291, the full balance of $27,750 of the note due November 19, 2013, including accrued interest of $1,308, and $15,750 of the note due February 28, 2014 into 147,667 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.27 to $3.195 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 15). | 49,750 | 27,750 | |||||||||
One (1) convertible note bearing interest at 8% per annum, maturing on April 23, 2014. For the year ended December 31, 2013 the note holder converted the full balance $25,000 of the note, and accrued interest of $1,112, into 58,027 unrestricted shares of the Company's common stock, at a conversion price of $0.45 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 15). | - | - | |||||||||
Seven (7) convertible note bearing interest at 9.9% per annum, maturing on June 4, 2014, July 23, 2014 and October 4, 2014, and 10% per annum, maturing on June 4, 2014, July 14, 2014 and October 4, 2014. The four 10% notes were settled debt purchase notes for balances transferred from a Company’s unrelated promissory note holder and unrelated convertible note holder. For the year ended December 31, 2013 the note holder converted the full balance of $55,152 of one of the notes due June 4, 2014, the full balance of $50,000 of another of the notes due June 4, 2014, $50,497 of the remaining note due June 4, 2014, the full balance of $60,000 of the note due July 17, 2014 and the full balance of $70,000 of one of the notes due October 4, 2014 into 712,079 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.09 to $2.61 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | 86,502 | - | |||||||||
Three (3) convertible note bearing interest at 10% per annum, maturing on July 16, 2014, August 4, 2014 and August 18, 2014. All of the notes were settled debt purchase notes for balances transferred from a Company’s unrelated promissory note holder. For the year ended December 31, 2013 the note holder converted all of the notes for a total of $75,000 and $1,025 in legal fees into 179,824 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.33 to $0.5775 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | - | - | |||||||||
One (1) convertible note bearing interest at 12% per annum, maturing on October 18, 2014, including warrants to purchase 61,112 shares of the Company's common stock at $600 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring on October 31, 2018 (see Note 15). | 55,000 | - | |||||||||
Three (3) convertible note bearing interest at 9% per annum, maturing on November 13, 2014, November 20, 2014 and December 20, 2014. The note due November 13, 2014 was a settled debt purchase note for a balance transferred from a Company’s unrelated promissory note holder. For the year ended December 31, 2013 the note holder converted $41,057 of the note due November 13, 2014 into 181,307 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.087 to $0.261 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | 115,443 | - | |||||||||
One (1) convertible note bearing interest at 9% per annum, maturing on December 26, 2015. | 40,000 | - | |||||||||
One (1) convertible note bearing interest at 10% per annum, maturing on September 20, 2014. The note was a settled debt purchase note for a balance transferred from a Company’s unrelated promissory note holder. For the year ended December 31, 2013 the note holder converted $16,750 of the note into 203,031 unrestricted shares of the Company's common stock, at a conversion price of $0.0405 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | 8,250 | - | |||||||||
Convertible non-interest bearing notes, with a conversion price of $9.00 per share matured June 2006 and an 18% convertible note matured April 2008 with a conversion price of $750 per share and 5 shares of the Company’s common stock as adjusted by the Company’s 1:1,500 reverse stock split. The Company is currently pursuing a settlement agreement with the note holders. | 10,512 | 10,512 | |||||||||
1,668,944 | 1,566,064 | ||||||||||
Long-term portion | (70,000 | ) | -30,000 | ||||||||
1,598,944 | 1,536,064 | ||||||||||
Discount on convertible notes payable | (528,477 | ) | -199,052 | ||||||||
Current maturities, net of discount | $ | 1,070,467 | $ | 1,337,012 | |||||||
At December 31, 2013 and 2012, accrued interest due for the convertible notes was $794,395 and $658,375, respectively, and is included in accrued expenses in the balance sheets. Interest expense for the convertible notes payable for the year ended December 31, 2013 and 2012 was $136,020 and $121,354, respectively. | |||||||||||
The total long term portion of all funded debt is due as follows: 2015-$70,000. |
Convertible_Notes_Payable_Rela
Convertible Notes Payable Related Parties | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Convertible Notes Payable Related Parties | ' | |||||||||||||
Convertible Notes Payable Related Parties | ' | |||||||||||||
Note 8 - Convertible Notes Payable – Related Parties | ||||||||||||||
Convertible notes payable - related party consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Convertible note with the VP of Technology bearing interest at the prime rate plus 2% per annum with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on September 30, 2010. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split. In January 2014, the note was extended to December 31, 2014. | $ | 50,000 | $ | 50,000 | ||||||||||
Convertible note with the VP of Technology bearing interest at the prime rate plus 4% per annum with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on September 30, 2010. In January 2014, the note was extended to December 31, 2014. | 7,500 | 7,500 | ||||||||||||
Convertible notes with the CEO bearing interest at 8% per annum with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally scheduled to mature on April 30, 2011. The Company issued 2 warrants with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, which expired February 4, 2014, September 7, 2014 and August 16, 2015, respectively. In January 2014, the notes were extended to December 31, 2014. | 230,000 | 230,000 | ||||||||||||
Convertible notes with an employee bearing interest at 8% per annum with a conversion price of $15,000 per share, originally matured on June 30, 2010, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, and expiration dates of August 26, 2015 and September 29, 2015. In January 2014, the notes were extended to December 31, 2014. | 15,000 | 15,000 | ||||||||||||
Convertible note with an employee bearing interest at 8% per annum with a conversion price of $15,000 per share, originally matured on June 30, 2010, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, and an expiration date of December 6, 2015. In April 2007, the interest calculation was amended from simple to compound effective April 1, 2007. In January 2014, the note was extended to December 31, 2014. | 10,000 | 10,000 | ||||||||||||
Convertible notes with the CEO bearing compound interest at 8% per annum with a conversion price of $15,000 per share, originally matured on April 30, 2011, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring January 18, 2016 and February 28, 2016, respectively. In January 2014, the notes were extended to December 31, 2014. | 38,000 | 38,000 | ||||||||||||
Convertible note with an employee bearing compound interest at 8% per annum with a conversion price of $11.250 per share, originally matured on June 30, 2010, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring March 6, 2016. In January 2014, the note was extended to December 31, 2014. | 5,000 | 5,000 | ||||||||||||
$ | 355,500 | $ | 355,500 | |||||||||||
At December 31, 2013 and 2012, accrued interest due for the convertible notes – related parties was $292,449 and $248,606, respectively, and is included in accrued expenses in the accompanying balance sheets. Interest expense for convertible notes payable – related parties for the year ended December 31, 2013 and 2012 was $43,843 and $40,224, respectively. |
Notes_Payable
Notes Payable | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Notes Payable {1} | ' | |||||||||||||
Notes Payable | ' | |||||||||||||
Note 9 - Notes Payable | ||||||||||||||
Notes payable consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Seventy (70) units, with each unit consisting of a 10% promissory note of $25,000, matured from January 22, 2011 through December 18, 2011 with a 10% discount rate, and 55 non-dilutable (for one (1) year) restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. Pursuant to the terms and condition of a debt purchase agreement among certain note holders, the Company and the Consultant formalized in September 2011, the certain note holders transferred certain notes with the principal amount of $50,000 and $25,000, including accrued interest, in July 2011 and August 2011, respectively, to the consultant. Pursuant to the terms and conditions of a settlement agreement that the Company executed with the estate of a deceased note holder in November 2011, the Company settled a $25,000 note for restricted shares of its common stock, in December 2011, issued to two (2) beneficiaries of the estate (see Notes 7 and 14). Pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and two unrelated parties in September 2013, October 2013 and December 2013, the Company settled and transferred $100,000 of the note balance to the unrelated parties in the form of four (4) convertible notes for $25,000 each. The Company is currently pursuing extensions on the remaining notes. | $ | 1,550,000 | $ | 1,650,000 | ||||||||||
Promissory note bearing interest at 10% per annum, matured on January 23, 2012, with a total of 492 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. Pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and an unrelated party in July 2013 and October 2013, the Company transferred $60,000 and $70,000, respectively, of the note balance to the unrelated party in the form of a convertible notes for $60,000 and $70,000 (see Notes 7 and 14). The Company is currently pursuing an extension. | 95,000 | 225,000 | ||||||||||||
Two (2) units with each unit consisting of a 10% promissory note of $25,000, matured on April 20, 2012, and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The 67 shares, as adjusted by the Company’s 1:1,500 reverse stock split, were issued in June 2009. The Company is currently pursuing extensions. | 50,000 | 50,000 | ||||||||||||
10% promissory note, matured on October 20, 2012 and 55 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split ,valued at market price, for a total of 110 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split, issued in November 2009. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in July 2013, the Company transferred the note balance to the unrelated party in the form of a convertible note for $50,000 (see Notes 7 and 14). | - | 50,000 | ||||||||||||
One (1) unit consisting of a 10% promissory note of $25,000, matured on June 8, 2012, and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The shares were issued in June 2009. The Company is currently pursuing an extension. | 25,000 | 25,000 | ||||||||||||
Three (3) units with each unit consisting of a 10% promissory note of $25,000, matured on June 25, 2012, and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 100 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. The shares were issued in August 2009. The Company is currently pursuing extensions. | 75,000 | 75,000 | ||||||||||||
1.4 units with each unit consisting of a 10% promissory note of $25,000, matured on July 14, 2012 and 34 restricted shares of the Company’s common stock as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 47 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. The shares were issued in August 2009. The Company is currently pursuing an extension. | 35,000 | 35,000 | ||||||||||||
One (1) unit consisting of a 10% promissory note of $25,000, matured on August 18, 2012 and 50 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The Company is currently pursuing an extension. | 25,000 | 25,000 | ||||||||||||
Two (2) units with each unit consisting of a 10% promissory note of $25,000, matured on September 2, 2012 and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 67 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split . The April 2009 agreement whereby the note shall be repaid from the proceeds of sales of the Company’s products sold by the note holder who is a distributor for the Company also applies to this note. In September 2012, the note was extended to September 30, 2013. For the years ended December 31, 2013 and 2012, sales proceeds of $1,275 and $10,401, respectively, were applied to the note balance. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in June 2013, the Company transferred $31,814 of the note balance, plus accrued interest of $18,526, to the unrelated party in the form of a convertible note for $50,340 (see Notes 7 and 14). | - | 33,088 | ||||||||||||
A promissory note executed in October 2009 for $50,000, matured on October 20, 2012. Pursuant to the terms and conditions of the promissory note, the Company sold 3/4 unit with each unit consisting of a 10% promissory note of $25,000 and 89 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 67 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. Pursuant to the terms and conditions of a Forbearance Agreement executed with the note holder in December 2012, the Company repaid the principal of the note of $12,200 in December 2012, $6,100 in January 2013 and $450 in February 2013, and accrued interest of $5,650 in February 2013 (see Note 14). | - | 6,550 | ||||||||||||
A promissory note executed in May 2010 for $50,000, bearing interest at 10% per annum, matured on May 21, 2013, and 134 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The April 2009 agreement whereby the note shall be repaid from the proceeds of sales of the Company’s products sold by the note holder who is a distributor for the Company also applies to this note. For the years ended December 31, 2013 and 2012, no sales proceeds were applied to the note balance. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in June 2013, the Company settled and transferred the $50,000 note balance, plus accrued interest of $15,152, to the unrelated party in the form of a convertible note for $55,152. Accrued interest of $10,000 was forgiven (see Notes 7 and 14). | - | 50,000 | ||||||||||||
Promissory notes executed in July 2011 bearing interest at 10% per annum, matured on December 31, 2011. The Company issued 667 warrants with an exercise price of $750 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring July 15, 2014. The fair value of the warrants issued was $26,200, all of which was expensed in 2011 as interest expense. The Company is currently pursuing extensions. | 87,500 | 87,500 | ||||||||||||
A promissory note executed in August 2011 bearing interest at 10% per annum, matured on December 31, 2011. The Company is currently pursuing an extension. | 50,000 | 50,000 | ||||||||||||
1,992,500 | 2,362,138 | |||||||||||||
Long-term portion | (- | ) | (- | ) | ||||||||||
1,992,500 | 2,362,138 | |||||||||||||
Discount on convertible notes payable | (- | ) | (1,448 | ) | ||||||||||
Current maturities, net of discount | $ | 1,992,500 | $ | 2,360,690 | ||||||||||
At December 31, 2013 and 2012, accrued interest due for the notes was $1,329,835 and $1,107,639, respectively, and is included in accrued expenses in the accompanying balance sheets. Interest expense for notes payable for the year ended December 31, 2013 and 2012 was $222,196 and $238,761, respectively. |
Notes_Payables_Related_Party
Notes Payables Related Party | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Notes Payables Related Party | ' | |||||||||||||
Notes Payables Related Party | ' | |||||||||||||
Note 10 - Notes Payable – Related Parties | ||||||||||||||
Notes payable - related party consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Promissory notes executed with the CEO bearing interest at an amended rate of 8% per annum originally matured on April 30, 2011. In January 2014, the notes were extended to December 31, 2014. | $ | 504,000 | $ | 504,000 | ||||||||||
A promissory note executed with the CEO bearing interest at 9% per annum originally matured on April 30, 2011. The Company issued 14 warrants with an exercise price of $1,950 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on May 25, 2011. The fair value of the warrants issued was $24,300. In January 2014, the note was extended to December 31, 2014. | 100,000 | 100,000 | ||||||||||||
A promissory note with the CEO bearing interest at 8% per annum originally matured on April 30, 2011. The Company issued 6 warrants with an exercise price of $750 per share, as adjusted by the Company’s 1:1,500 reverse stock split, which originally matured on February 21, 2012. The fair value of the warrants issued was $3,758. In January 2014, the note was extended to December 31, 2014. | 22,000 | 22,000 | ||||||||||||
Two (2) 10% promissory notes, with the CEO, of $25,000 and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 67 shares, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on April 30, 2011. In January 2014, the note was extended to December 31, 2014. | 50,000 | 50,000 | ||||||||||||
Promissory notes with the CEO, non-interest bearing, originally matured on April 30, 2011. Partial payments of $6,580 were made towards the notes in August and September 2010 and $2,700 in February 2011. In January 2014, the notes were extended to December 31, 2014. | 31,420 | 31,420 | ||||||||||||
In October 2010, the Company assigned the proceeds of six (6) open accounts receivable invoices, totaling $20,761, to its CEO. The assignment was non-interest bearing and fee free with a due date of November 20, 2010. Partial repayments were made in October 2010 for $4,218 and November 2010 for $4,125. In January 2014, the note was extended to December 31, 2014 (see Note 14). | 12,418 | 12,418 | ||||||||||||
A promissory note executed in March 2011 with the CEO, non-interest bearing, originally matured on April 1, 2011. In January 2014, the note was extended to December 31, 2014. | 2,800 | 2,800 | ||||||||||||
$ | 722,638 | $ | 722,638 | |||||||||||
At December 31, 2013 and 2012, accrued interest due for the notes – related parties was $436,493 and $380,413, respectively, and is included in accrued expenses in the accompanying balance sheets. Interest expense for notes payable - related parties for the year ended December 31, 2013 and 2012 was $56,080 and $56,234, respectively. | ||||||||||||||
Convertible_Secured_Notes_Paya
Convertible Secured Notes Payable | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Convertible Secured Notes Payable | ' | |||||||||||||
Convertible Secured Notes Payable | ' | |||||||||||||
Note 11 - Convertible Secured Notes Payable | ||||||||||||||
Convertible secured notes payable consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
DART Limited (custodian for Citco Global and as assigned from YA Global/Highgate) (“DART”) | $ | 542,588 | $ | 542,588 | ||||||||||
Current maturities, net of discount | $ | 542,588 | $ | 542,588 | ||||||||||
At December 31, 2013, the Company's outstanding convertible secured notes payable are secured through the note holder's claim on the Company's intellectual property. | ||||||||||||||
The DART secured convertible debentures are matured. The Company has been in contact with the note holder who has indicated that it has no present intention of exercising its right to convert the debentures into restricted shares of the Company's common stock. | ||||||||||||||
Conversions to Common Stock | ||||||||||||||
For the year ended December 31, 2013 and 2012, DART and Citco Global had no conversions. |
DerivativeFinancial_Instrument
DerivativeFinancial Instruments | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Derivative Financial Instruments | ' | ||||||
DerivativeFinancial Instruments | ' | ||||||
Note 12 – Derivative Financial Instruments | |||||||
As of December 31, 2013, the Company’s derivative financial instruments are embedded derivatives associated with the Company’s secured and certain unsecured convertible notes. The Company’s secured convertible debentures issued to YA Global and Highgate in 2005, further assigned to Citco Global (“Citco Global Notes”), and unsecured convertible debentures issued to ten (10) unrelated investors firms: International Capital Group (“ICG”), Asher Enterprises, Inc. (“Asher”), Auctus Private Equity Fund (“Auctus”), Herbert Klei (“Klei”), Iconic Holdings, LLC (“Iconic”), Southridge Partners II, LP ("Southridge"), Tonaquint, Inc. ("Tonaquint"), WHC Capital, LLC ("WHC"), James Solakian ("Solakian") and Tarpon Bay Partners ("Tarpon"), are hybrid instruments, which individually warrant separate accounting as a derivative instrument. In July 2012, the Company was notified by Citco Global that the custodian for the Citco Global Notes is D.A.R.T. Limited (“DART”). The Citco Global Notes are hereinafter referred to as the “DART Notes” (see Notes 7 and 11). The embedded derivative feature has been bifurcated from the debt host contract, referred to as the "Compound Embedded Derivative Liability", which resulted in a reduction of the initial carrying amount (as unamortized discount) of the notes. The unamortized discount is amortized to interest expense using the effective interest method over the life of the notes, or 12 months. The embedded derivative feature includes the conversion feature within the notes and an early redemption option. The compound embedded derivatives within the convertible notes have been recorded at fair value at the date of issuance; and are marked-to-market each reporting period with changes in fair value recorded to the Company’s statement of operations as Change in fair value of derivative liabilities. | |||||||
Valuation of Derivative Financial Instruments | |||||||
(1) Valuation Methodology | |||||||
The Company has utilized a third party valuation consultant to assist the Company to fair value the compound embedded derivatives using a multinomial lattice models that values the derivative liabilities within the convertible notes based on a probability weighted discount cash flow model. | |||||||
(2) Valuation Assumptions - Change in Fair Value of Derivative Liability Related to DART Notes | |||||||
The following assumptions were used for the valuation of the derivative liability related to the Notes at December 31, 2013: | |||||||
· The principal balance of the DART Notes of $532,395; | |||||||
· The stock price of $0.0001 based on market data; | |||||||
· An event of default (in default as of 12/31/13) would occur 50% of the time, increasing 0.10% per month to a maximum of 95% with the Company most likely to negotiate an extension; | |||||||
· Alternative financing would be initially available to redeem the note 10% of the time and increase monthly by 0.1% to a maximum of 20%: | |||||||
· The monthly trading volume would average $564,345 over a year and would increase at 1% per period; | |||||||
· The projected volatility curve for each valuation period was based on the Company’s historical volatility: | |||||||
1 year | |||||||
9/30/13 | 239% | ||||||
12/31/13 | 299% | ||||||
· The Holder would automatically convert the notes at a stock price of the higher of: 2 times the conversion price or 1.5 times the stock price if the registration was effective and the company was not in default. | |||||||
As of December 31, 2013, the estimated fair value of derivative liabilities on secured convertible notes of DART was $35,314. | |||||||
(3) Valuation Assumptions - Change in Fair Value of Derivative Liabilities Related to ICG, Asher, Auctus, Klei, Iconic, Southridge, Tonaquint, WHC, Solakian and Tarpon Notes | |||||||
The following assumptions were used for the valuation of the derivative liability related to the ICG, Asher, Auctus, Klei, Iconic, Southridge, Tonaquint, WHC, Solakian and Tarpon Notes at issuance, conversion and period ended December 31, 2013: | |||||||
· The notes convert with an initial conversion price of 40%-60% of the average or low of the 1-3 lowest bid out of the 10-20 previous days (the effective rates are typically lower); | |||||||
· The projected volatility curve for each valuation period was based on the historical volatility of the company in the range of 210% to 299%; | |||||||
· An event of default would occur 1% of the time, increasing 1.00% per month to a maximum of 10%; | |||||||
· The company would redeem the notes (at 130% on average in the first 90 days and 145% on average from 91 to 180 days or 150%) projected initially at 0% of the time and increase monthly by 2.0% to a maximum of 10.0% (from alternative financing being available for a redemption event to occur); and | |||||||
· The Holder would automatically convert the note at the maximum of 2 times the conversion price if the company was not in default. With the target exercise price dropping as maturity approaches. | |||||||
As of December 31, 2013, the estimated fair value of derivative liabilities on the unsecured convertible notes from ICG, Asher, Auctus, Klei, Iconic, Southridge, Tonaquint, WHC, Solakian and Tarpon was $484,119. | |||||||
Summary of the Changes in Fair Value of Level 3 Financial Liabilities | |||||||
The table below provides a summary of the changes in the fair value of the derivative financial instruments and the changes in the fair value of the derivative financial instruments, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3): | |||||||
Fair Value Measurement Using Level 3 Inputs | |||||||
Derivative warrants Assets (Liability) | Total | ||||||
Balance, December 31, 2011 | $ | -334,605 | $ | -334,605 | |||
Purchases, issuances and settlements | -335,336 | -335,336 | |||||
Transfers in and/or out of Level 3 | - | - | |||||
Total gains or losses (realized/unrealized) included in: | |||||||
Net income (loss) | 294,307 | 294,307 | |||||
Other comprehensive income (loss) | - | - | |||||
Balance, December 31, 2012 | $ | -375,634 | -375,634 | ||||
Purchases, issuances and settlements | -456,794 | -456,794 | |||||
Transfers in and/or out of Level 3 | - | - | |||||
Total gains or losses (realized/unrealized) included in: | |||||||
Net income (loss) | 312,995 | 312,995 | |||||
Other comprehensive income (loss) | - | - | |||||
Balance, December 31, 2013 | $ | -519,433 | -519,433 |
Accrued_Expenses
Accrued Expenses | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Accrued Expenses | ' | ||||||
Accrued Expenses | ' | ||||||
Note 13 - Accrued Expenses | |||||||
Accrued expenses consisted of the following: | |||||||
31-Dec-13 | 31-Dec-12 | ||||||
Accrued interest | $ | 2,587,108 | $ | 2,208,223 | |||
Accrued salaries and payroll taxes (i) | 1,757,310 | 1,727,780 | |||||
Accrued expenses – other | 6,059 | 6,059 | |||||
$ | 4,350,477 | $ | 3,942,062 | ||||
(i) Including approximately $1,300,000 due three (3) of the Company’s current officer/stockholders and one (1) of the Company’s former officer/stockholders. |
Commitment_and_Contingencies
Commitment and Contingencies | 12 Months Ended | |||
Dec. 31, 2013 | ||||
Accrued Expenses | ' | |||
Commitments and Contingencies Disclosure | ' | |||
Note 14 - Commitments and Contingencies | ||||
Payroll Taxes | ||||
At December 31, 2013, the Company recorded $53,901 of payroll taxes, of which approximately $45,000 were delinquent from the year ended December 31, 2003. The Company had also recorded $32,462 of related estimated penalties and interest on the delinquent payroll taxes. In December 2013, the Company determined to re-examine the nature and amounts of this accrued liability. | ||||
Section 105 HRA Plan | ||||
In September 2011, the Company enacted a Section 105 HRA Plan, effective with the 2011, with an outside plan administrator. Pursuant to the terms and conditions of the plan, the Company will contribute plan dollars of $1,500 per plan year for employees with single health plan coverage and $3,000 per plan year for employees with family health plan coverage into the plan. The plan dollars will be reimbursed to the employees to offset the cost of health care expenses. | ||||
Lease Agreement | ||||
The Company operates from a leased office in New Jersey. Per the terms of the lease agreement with the landlord, the Company pays a monthly base rent of $3,807 commencing on July 1, 2009 through the lease termination date of January 31, 2016. The landlord holds the sum of $8,684 as the Company’s security deposit. | ||||
Future minimum payments required under this non-cancelable operating lease were as follows: | ||||
Year ending December 31: | ||||
2014 | 45,684 | |||
2015 | 45,684 | |||
2016 | 3,807 | |||
$ | 95,175 | |||
Consulting Agreements | ||||
In December 2009, the Company entered into a retainer agreement with an attorney, whereby the attorney will act as in-house counsel for the Company with respect to all general corporate matters. The agreement is at will and required a payment of 67 shares of common stock, valued at $75 per share, as adjusted by the Company’s 1:1,500 reverse stock split, upon execution. Commencing on January 1, 2010, the fee structure also includes a monthly cash fee of $1,000 and the monthly issuance of 1.7, as adjusted by the Company’s 1:1,500 reverse stock split, shares of common stock, valued at market (see Note 15). | ||||
In January 2012, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining clients and investors. The consultant will receive a fee of $5,000 per month and warrants to purchase 100 shares of the Company’s common stock, exercisable at $45 per share as adjusted by the Company’s 1:1,500 reverse stock split. The consultant also received warrants to purchase 100 shares of the Company’s common stock, exercisable at $45 per share, as adjusted by the Company’s 1:1,500 reverse stock split, upon execution of the agreement. The warrants have a three year term. The term of the agreement was one month. The agreement was amended and extended for February, March, April, July, August and September 2012. The February 2012 amendment reduced the exercise price of the warrants to $30 per share, as adjusted by the Company’s 1:1,500 reverse stock split. In July 2012, the agreement was amended for an additional one month extension and the monthly fee was increased to $5,500 and the issuance of warrants to purchase 110 shares of the Company’s common stock, exercisable at $30 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring three (3) year from the date of issuance. In May 2013, the agreement was amended to provide for a two-week fee of $2,500 and the issuance of warrants to purchase 50 shares of the Company’s common stock, exercisable at $6.00 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring three (3) year from the date of issuance. | ||||
In January 2012, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining investors. The consultant will receive a commission of 5% of all financing raised as a result of the consultant’s efforts. The consultant will also receive, as a commission, 10% of all financing raised as a result of the consultant’s efforts in the form of warrants to purchase shares of the Company’s common stock, exercisable at $30 per share expiring, as adjusted by the Company’s 1:1,500 reverse stock split, three (3) years from the date of issuance (see Note 15). The term of the agreement is two (2) years. As of December 31, 2013, no financing was raised relating to the agreement. | ||||
In February 2012, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining clients. The consultant will receive a commission of 50% of all contracted revenues and the first renewal of all contracted revenues for new clients and 25% of all contracted revenues for existing clients, recorded as a result of the consultant’s efforts. In March 2012, the agreement was amended to increase the 25% commission rate for existing clients to 35%. The parties may elect to remit commissions in the form of restricted shares of the Company’s common stock, with a maximum amount of shares issued in one (1) year not to exceed 3,333 shares, as adjusted by the Company’s 1:1,500 reverse stock split,. The agreement also includes performance incentives whereby the consultant will receive bonus restricted shares of the Company’s common stock at the end of the agreement term as follows: one million shares if contracted revenues exceed $1,000,000, two million shares if contracted revenues exceed $2,000,000, three million shares if contracted revenues exceed $3,000,000 and four million shares if contracted revenues exceed $4,000,000. At the end of the first year of the agreement, the consultant will also have the option to purchase restricted shares of the Company’s common stock directly from the Company at a 25% discount of the then current market price on the last day of the contract, up to a maximum of 3,333 shares, as adjusted by the Company’s 1:1,500 reverse stock split. The term of the agreement is one (1) year with automatic renewals. In July 2012, the parties extended the term of the agreement to October 31, 2013. As of December 31, 2013, no revenues were recorded relating to the agreement. | ||||
In April 2012, the Company entered into a consulting agreement with a firm whereby the consultant will provide public relations services to the Company. The consultant will receive a fee of $7,000 per month and $500 per month in the form of restricted shares of the Company's common stock valued on the closing market price of the first day of each month that the agreement is in effect. The agreement term is from May 1, 2012 to October 31, 2012 and may be renewed upon mutual agreement. In October 2012, the agreement was extended to April 30, 2013. In April 2013, a new agreement was executed with the consultant with the same terms and conditions with an expiration date of October 31, 2013 (see Note 15). | ||||
In January 2013, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining investors. The consultant will receive a commission of 10% cash plus 10% warrant coverage, to be negotiated per deal, of all financing raised as a result of the consultant’s efforts. The warrants to purchase shares of the Company’s common stock, exercisable at a per share price of the dollars invested divided by the strike price of the investment, with a 20% exercise price premium, expiring four (4) years from the date of issuance and vesting over six (6) months. The term of the agreement is one (1) year. As of December 31, 2013, no financing was raised relating to the agreement. | ||||
In February 2013 the Company executed a retainer agreement with its patent attorneys to enforce its patent rights as “Out-of-Band Authentication” is becoming the standard for authenticating consumers in the financial market. | ||||
In May 2013, the Company entered into a consulting agreement with a firm whereby the consultant will provide advertising and public relations services to the Company. The consultant will receive a fee of $1,000 per month. The term of the agreement was three (3) months. | ||||
In June 2013, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining clients. The consultant will receive a commission of 10% of all directly contracted revenues and 5% of revenues contracted through a third party, recorded as a result of the consultant’s efforts. The parties may elect to remit commissions in the form cash or restricted shares of the Company’s common stock (at a share price to be determined), or a combination of both. The term of the agreement is one (1) year with automatic renewals. As of December 31, 2013, no revenues were recorded relating to the agreement. | ||||
In June 2013, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining investors. The consultant will receive a commission of $5,000, per deal, of all financing raised as a result of the consultant’s efforts. The term of the agreement is six (6) months. As of December 31, 2013, the consultant received $5,000 as a result of financing raised relating to the agreement. | ||||
In July 2013, the Company entered into a consulting agreement with a firm whereby the consultant will assist the Company in obtaining lending sources. The consultant will receive a commission of 10%, per deal, of net funding received by the Company as a result of the consultant’s efforts. The term of the agreement is twelve (12) months. As of December 31, 2013, no lending has resulted from the agreement. | ||||
In August 2013 the Company executed a retainer agreement with its an attorney to enforce its patent rights, in the State of Washington, as “Out-of-Band Authentication” is becoming the standard for authenticating consumers in the financial market. | ||||
In December 2013, the Company entered into a revenue share agreement with a firm whereby the consultant will assist the Company is obtaining new clients. The consultant will receive a commission of 5% on any revenues resulting from new clients obtained relating to the agreement. Either party may terminate the agreement by notifying the other party in writing. As of December 31, 2013, no revenues were recorded as a result the consultant's efforts relating to the agreement. Also in December 2013, the Company executed an advertising contract with the consultant for various marketing services to be provided from December 2013 to March 2014, at a cost of $975 per month. | ||||
In December 2013, the Company entered into a consulting agreement with a firm whereby the firm will serve as a testifying expert as the Company enforces its patent rights through litigation. The Company shall compensate the consultant at a rate of $650 per hour for consultant services and $750 per hour for services relating to court testimony. As of December 31, 2013, no fees have been remitted to the consultant relating to this agreement. | ||||
Term Sheets | ||||
In November 2011, the Company executed a term sheet with an investor firm whereby the firm would invest in the Company up to $450,000, in tranches of $75,000 per month, for six (6) months, in the form of convertible promissory notes bearing interest at 4% per annum maturing 12 months from the date of issuance (see Note 7). A broker fee of 12% was deducted from each tranche and the notes will include a 15% prepayment penalty. The investor firm may process conversions after six months from the date of each closing. Conversions will include a 40% discount to the lower of (i) the average closing bid price of the Company’s common stock for the previous ten (10) days of a conversion notice or (ii) the closing bid price on the date of the conversion notice. In December 2011, the Company received the first tranche of $66,000, net of $9,000 broker fee, and executed a convertible promissory note and securities purchase agreement per the term sheet (see Note 7). Additional closings, for the same amounts, were held in January (two closings) and March (one closing) 2012. The debentures contain an embedded derivative feature (see Note 12). In March 2012, the investor firm notified the Company that it terminated the term sheet. | ||||
In March 2012, the Company executed a term sheet with an investor firm whereby the firm would invest in the Company $53,000 in the form of a convertible promissory note, bearing interest at 8% per annum maturing nine (9) months from the date of issuance. A closing fee of $3,000 would be deducted from the tranche and the note would include a tiered prepayment penalty. The investor firm may process conversions after six months from the date of the closing. Conversions would include a 42% discount to the average closing bid price of the Company’s common stock for the previous ten (10) days of a conversion notice, using the average of the three (3) lowest trading prices. In April 2012, the Company received the tranche of $50,000, net of $3,000 closing fee, and executed a convertible promissory note and securities purchase agreement per the terms of the term sheet. In May 2012, the investor firm invested an additional $32,500 in the Company governed by the term sheet and in the form of a convertible promissory note for $32,500. The Company received the second tranche of $30,000, net of a $2,500 closing fee, in May 2012. In July 2012, the investor firm invested an additional $42,500 in the Company governed by the terms of a July 2012 term sheet and in the form of a convertible promissory note for $42,500. The Company received the third tranche of $40,000, net of a $2,500 closing fee, in July 2012. In November 2012, the Company executed a new term sheet with the investor firm and received $30,000, net of a $2,500 closing fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In December 2012, the Company executed a new term sheet with the investor firm and received $40,000, net of a $2,500 closing fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In February 2013, the Company executed a new term sheet with the investor firm and received $40,000, net of a $2,500 closing fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In April 2013, the Company executed a new term sheet with the investor firm and received $40,000, net of a $2,500 legal fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In June 2013, the Company executed a new term sheet with the investor firm and received $40,000, net of a $2,500 legal fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In July 2013, the Company executed a new term sheet with the investor firm and received $37,500, net of a $2,500 closing fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In August 2013, the Company executed a new term sheet with the investor firm and received $37,500, net of a $2,500 closing fee, and executed a convertible promissory note and securities purchase agreement per the term sheet (see Note 7). The Company recorded all of the closing fees of $13,000 in 2012 and $2,500, from the February 2013 term sheet, for the year ended December 31, 2013, as deferred financing costs. The fees of $10,000, from the April, June, July and August 2013 term sheets, were expensed as legal fees for the year ended December 31, 2013. The debentures contain an embedded derivative feature (see Note 12). For the year ended December 31, 2013, the Company expensed $5,562 of financing expenses related to the deferred financing costs. | ||||
In November 2012, the Company executed a term sheet with an investor firm whereby the firm would invest in the Company $27,750 in the form of a convertible promissory note, bearing interest at 8% per annum maturing nine (9) months from the date of issuance. A legal fee of $2,750 would be deducted from the tranche and the note would include a tiered prepayment penalty. Conversions would include a 40% discount to the average closing bid price of the Company’s common stock for the previous ten (10) days of a conversion notice, using the average of the two (2) lowest trading prices. In December 2012, the Company received the tranche of $25,000, net of the $2,750 legal fee, and executed a convertible promissory note and securities purchase agreement per the term sheet. In February 2013, the Company executed a new term sheet with the investor firm and received $25,000, net of $2,750 in legal fees, and executed a convertible promissory note and securities purchase agreement per the term sheet. In May 2013, the Company executed a new term sheet with the investor firm and received $30,000, net of $2,750 in legal fees, and executed a convertible promissory note and securities purchase agreement per the term sheet. In October 2013, the Company executed a new term sheet with the investor firm and received $29,980, net of $2,770 in legal fees, and executed a convertible promissory note and securities purchase agreement per the term sheet (see Note 7). The debentures contain an embedded derivative feature (see Note 12). | ||||
Debt Purchase Agreements | ||||
In June 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a convertible note holder and an unrelated party, the Company settled and transferred $33,255 of the note balance, plus accrued interest of $36,920, to the unrelated party in the form of a convertible note for $50,000. Accrued interest of $21,175 was forgiven (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In June 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $31,814 of the note balance, plus accrued interest of $18,526, to the unrelated party in the form of a convertible note for $50,340 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In June 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company settled and transferred the $50,000 note balance, plus accrued interest of $15,152, to the unrelated party in the form of a convertible note for $55,152. Accrued interest of $10,000 was forgiven (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In July 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $50,000 of the note balance to the unrelated party in the form of a convertible note for $50,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In July 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $60,000 of the note balance to the unrelated party in the form of a convertible note for $60,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In September 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a convertible note holder and an unrelated party, the Company transferred $50,000 of the note balance to the unrelated party in the form of a convertible note for $50,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In September 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $25,000 of the note balance to the unrelated party in the form of a convertible note for $25,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In October 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $70,000 of the note balance to the unrelated party in the form of a convertible note for $70,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In October 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $25,000 of the note balance to the unrelated party in the form of a convertible note for $25,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In October 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $25,000 of the note balance to the unrelated party in the form of a convertible note for $25,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In November 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a convertible promissory note holder and an unrelated party, the Company transferred $70,000 of the note balance to the unrelated party in the form of a convertible note for $70,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
In December 2013, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $25,000 of the note balance to the unrelated party in the form of a convertible note for $25,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | ||||
Loan Repayment Agreement | ||||
In April 2009, the Company signed an agreement whereby two promissory notes executed with a distributor of its products were to be repaid from the proceeds of sales of the Company’s products sold by the distributor for the Company. In September 2009, the Company executed an additional promissory note with the distributor that is included in the loan repayment agreement. In May 2010, the Company executed an additional promissory note with the distributor that is included in the loan repayment agreement. In September 2012, the Company and the distributor executed an amendment to the March and April 2009 promissory notes whereby the Company would remit the accrued interest due on the notes, in the amount of $10,388, to the distributor by November 1, 2012. The payment was made in October 2012. For the year ended December 31, 2013 and 2012, sales proceeds of $1,275 and $12,426, respectively, were applied to the balance of the notes. In June 2013, pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and two unrelated parties, the Company settled and transferred the note balances, plus accrued interest, to the unrelated parties in the form of two convertible notes (see Notes 7 and 9). | ||||
Forbearance Agreement | ||||
In December 2012, the Company executed a forbearance agreement with a note holder whereby the Company agreed to pay down an October 2009 promissory note in the amount of $18,750 plus accrued interest of $5,650, for a total amount of $24,400. The Company made the initial payment of $12,200 to the note holder in December 2012. The remaining payments of $6,100 and $450 each were made in January and February 2013 (see Note 9). | ||||
Assignment | ||||
In October 2010, the Company assigned the proceeds of six of the Company’s open receivables invoices, in the total amount of $20,761, to its CEO. The assignment was non-interest bearing and fee free with a due date for repayment of November 20, 2010. Partial repayments of the assignment were made in October 2010 for $4,218 and November 2010 for $4,125. The due date of the assignment has been extended to December 31, 2014 (see Note 10). | ||||
Due to Factor | ||||
In March 2007, the Company entered into a sale and subordination agreement with a factoring firm whereby the Company sold its rights to two invoices, from February 2007 and March 2007, totaling $470,200 to the factor. Upon signing the agreement and providing the required disclosures, the factor remitted 65%, or $144,440, of the February 2007 invoice and a certain percentage of $53,010 of the March 2007 invoice to the Company. The Company paid a $500 credit review fee to the factor relating to the agreement. Per the terms of the agreement, once the Company’s client remits the invoice amount to the factor, the factor deducts a discount fee from the remaining balance of the factored invoices and forwards the net proceeds to the Company. The discount fee is computed as a percentage of the face amount of the invoice as follows: 2.25% fee for invoices paid within 30 days of the down payment date with an additional 1.125% for each 15 day period thereafter. In September 2007, the February 2007 factored invoice was deemed uncollectible and was written off as bad debt expense. In December 2007, the March 2007 factored invoice was deemed uncollectible and was written off as bad debt expense. In February 2008, the Company and the factor agreed to a total settlement amount of $75,000, which was scheduled to be paid by the Company to the factor in September 2008 unless both parties mutually agreed to extend the due date. In September 2008, the Company and the factor reached a verbal agreement to extend the due date to December 31, 2008. The Company is pursuing a further extension. As of December 31, 2013, the balance due to the factor by the Company was $209,192 including interest. | ||||
Litigation | ||||
On March 25, 2013, the Company filed a complaint In The United States District Court For The District Of New Jersey (case no: 13-cv-01895 (SRC)(CLW)) vs. WhiteSky, Inc (an existing channel partner). The Company filed claims that WhiteSky effectuated multiple contract breaches, misappropriation of trade secrets, breach of Intellectual Property, and disclosure of confidential information in commencing attempts to replace the Company's “GuardedID® Customized Desktop Product” with a third party's product since November 2012, even though the contractual agreement expires in May 2014. In July 2013, the Company filed an amended complaint based on the Court’s rulings on the motions, which required some minor adjustments and strengthening based on what it learned through early admissible discovery. The Company is aggressively litigating this matter and anticipates a successful outcome. To date, all of WhiteSky’s arguments against the Company's complaints have been denied by the Court. As of mid-November 2013 the case is in Discovery, which is actively progressing and limited to a certain number of months. If the Company is unsuccessful, the costs and results associated with these legal proceedings could be significant and could negatively affect the results of future operations. As of early 2014 settlement discussions are in progress, with no certainty they will succeed. However, the Company has already executed agreements which present new opportunities that could minimally replace the potential loss of revenues (or award) resulting from these proceedings in 2014. |
Stockholders_Deficit
Stockholders Deficit | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Stockholders Deficit | ' | ||||||||||||||||||
Stockholders' Deficit | ' | ||||||||||||||||||
Note 15 - Stockholders’ Deficit | |||||||||||||||||||
Preferred Stock | |||||||||||||||||||
On October 21, 2010, the Company amended its Articles of Incorporation in New Jersey to authorize 10,000,000 shares of preferred stock, par value $0.10. The designations, rights, and preferences of such preferred stock are to be determined by the Board of Directors. On November 15, 2010, the Company changed its domicile from the State of New Jersey to the State of Wyoming. | |||||||||||||||||||
In addition to the 10,000,000 shares of preferred stock authorized on October 21, 2010, on January 10, 2011, 100 shares of preferred stock were designated as Series A Preferred Stock and 100,000,000 shares were designated as Series B Preferred Stock. The bylaws under the Wyoming Incorporation were amended to reflect the rights and preferences of each additional new designation. | |||||||||||||||||||
The Series A Preferred Stock collectively has voting rights equal to eighty percent of the total current issued and outstanding shares of common stock. If at least one share of Series A Preferred Stock is outstanding, the aggregate shares of Series A Preferred Stock shall have voting rights equal to the number of shares of common stock equal to four times the sum of the total number of shares of common stock issued and outstanding, plus the number of shares of Series B Preferred Stock (or other designated preferred stock) which are issued and outstanding. | |||||||||||||||||||
The Series B Preferred Stock shall have preferential liquidation rights in the event of any liquidation, dissolution or winding up of the Company, such liquidation rights to be paid from the assets of the Company not delegated to parties with greater priority at $1.00 per share or, in the event an aggregate subscription by a single subscriber of the Series B Preferred Stock is greater than $100,000,000, $0.997 per share. The Series B Preferred Stock shall be convertible to a number of shares of common stock equal to the price of the Series B Preferred Stock divided by the par value of the Series B Preferred Stock. The option to convert the shares of Series B Preferred Stock may not be exercised until three months following the issuance of the Series B Preferred Stock to the recipient shareholder. The Series B Preferred Stock shall have ten votes on matters presented to the shareholders of the Company for one share of Series B Preferred Stock held. The initial price of the Series B Preferred Stock shall be $2.50, (subject to adjustment by the Company’s Board of Directors) until such time, if ever, the Series B Preferred Stock are listed on a secondary and/or public exchange. As of December 31, 2013, no shares of Series B Preferred Stock have been issued. | |||||||||||||||||||
In February 2014, the Company's Board of Directors amended the initial price for the Series B Preferred Stock from $2.50 to $1.50 per share. The Company's Board of Directors also amended the conversion feature of the Series B Preferred Stock, to be convertible to common shares $0.0001 par value, at a 40% discount to current market value (“current market value“) at the time the Company receives a conversion request. Current Market Value is defined as the average of the immediately prior five trading day's closing prices. Additionally, when Series B Preferred Stock shares convert to the Company's common stock, the minimum price discount floor level is set at $0.005, as decided by the Company's Board of Directors. | |||||||||||||||||||
Issuance of Series A Preferred Stock | |||||||||||||||||||
In February 2011, the Company issued three (3) shares of non-convertible Series A preferred stock valued at $329,000 per share, or $987,000 in aggregate, for voting purposes only, to the three members of the management team at one share each. The issued and outstanding shares of the Series A preferred stock have voting rights equal to eighty percent of the total issued and outstanding shares of the Company's common stock. This effectively provided them, upon retention of their Series A Preferred Stock, voting control on matters presented to the shareholders of the Company. They have each irrevocably waived their conversion rights relating to the Series A preferred shares issued. The Company expensed $987,000 in stock based compensation expense related to the issuance of the shares in 2011. | |||||||||||||||||||
Common Stock | |||||||||||||||||||
In December 2012, an increase of the authorized shares of the Company’s common stock from five hundred million (500,000,000) to seven hundred fifty million (750,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to the Company’s Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in February 2013. | |||||||||||||||||||
In May 2013, an increase of the authorized shares of the Company’s common stock from seven hundred fifty million (750,000,000) to one billion, five hundred million (1,500,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to the Company’s Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in May 2013. | |||||||||||||||||||
In July 2013, an increase of the authorized shares of the Company’s common stock from one billion, five hundred million (1,500,000,000) to three billion (3,000,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to the Company’s Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in July 2013. | |||||||||||||||||||
In August 2013, an increase of the authorized shares of the Company’s common stock from three billion (3,000,000,000) to five billion (5,000,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to the Company’s Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in September 2013. | |||||||||||||||||||
In December 2013, an increase of the authorized shares of the Company's common stock from five billion (5,000,000,000) to six billion seven hundred fifty million (6,750,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to the Company's Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in January 2014. | |||||||||||||||||||
In February 2014, a 1:1,500 reverse stock split of the Company's issued and outstanding shares of common stock was ratified, effective upon the filing of an amendment to the Company's Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in March 2014. | |||||||||||||||||||
All shares and per share amounts in the financial statements have been adjusted to give retroactive effect to the 1:1500 Reverse Stock Split. | |||||||||||||||||||
In February 2014, a decrease of the authorized shares of the Company's common stock from six billion seven hundred fifty million (6,750,000,000) to one billion, five hundred million (1,500,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to the Company's Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in March 2014. | |||||||||||||||||||
Issuance of Common Stock for Services | |||||||||||||||||||
In December 2009, the Company entered into a retainer agreement with an attorney, whereas the attorney acts as house counsel for the Company with respect to all general corporate matters. The agreement is at will and required a payment of 67 shares of common stock, valued at $75 per share, as adjusted by the Company’s 1:1,500 reverse stock split, due upon execution. Commencing on January 1, 2010, the fee structure also includes a monthly cash fee of $1,000 and the monthly issuance of 2,500 shares of common stock, valued at market, and the total of which remains 2,500 shares post to the Company's reverse stock split. In December 2012, the Company recorded $19 in legal fees related to the agreement, as common stock to be issued. The 5 shares of restricted common stock, as adjusted by the Company’s 1:1,500 reverse stock split, were issued in February 2013. For the years ended December 31, 2013 and 2012, the Company issued a total of 20 shares of restricted common stock, valued at $109 and 15 shares of restricted common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $230, respectively, all of which have been expensed as legal fees, related to the agreement. In December 2013, the Company recorded $1 in legal fees related to the agreement, as common stock to be issued. The 5, as adjusted by the Company’s 1:1,500 reverse stock split, shares of restricted common stock were issued in March 2014. | |||||||||||||||||||
In April 2011, the Company entered into a marketing advisory and financial agreement with a marketing firm whereby the consultant serves as a marketing and financial advisor to the Company. The agreement terminated on April 1, 2012. For acting in this role, the consultant received 3,334 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $130,000, in April 2011, which was expensed as consulting fees. The consultant also received warrants to purchase 4,334 shares of the Company’s common stock in April 2011. The warrants were exercisable at $90 per share for 1,334 shares, $165 per share for 1,334 shares, $240 per share for 1,000 shares and $390 per share for 666 shares, as adjusted by the Company’s 1:1,500 reverse stock split. The warrants were only exercisable if certain contractual thresholds are met as of June 1, 2012. The Company terminated the warrants in June 2012 because the thresholds were not met by the firm. | |||||||||||||||||||
In November 2011, the Company entered into a consulting agreement with a firm whereby the consultant will receive a success fee, in the form of restricted shares of the Company’s common stock, of 6% of all monies invested in the Company as a result of a term sheet the Company executed with an investor firm in November 2011. In December 2011, the consultant received 230 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $4,500 and all of which has been expensed as consulting fees, as a result of the first investor tranche of $75,000. In January 2012, the consultant received 177 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $4,500, as a result of the second investor tranche of $75,000. In February 2012, the consultant received 185 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $4,500, as a result of the third investor tranche of $75,000. In March 2012, the consultant received 215 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $4,500, as a result of the fourth investor tranche of $75,000 (see Note 14). The value of all of the shares issued was expensed as consulting fees. | |||||||||||||||||||
In January 2012, the Company issued 1,334 restricted shares of its common stock, as adjusted by the Company’s 1:1,500 reverse stock split, to a consultant in consideration of the consultant’s past support of the Company through several areas of assistance. The shares were valued at $36,000, all of which has been expensed as consulting fees. | |||||||||||||||||||
In May 2012, the Company entered into a consulting agreement with a firm whereby the consultant will provide public relations services to the Company. The consultant will receive a fee of $7,000 per month and $500 per month in the form of restricted shares of the Company's common stock valued on the closing market price of the first day of each month that the agreement is in effect. In May 2012, the consultant received 23 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In June 2012, the consultant received 38 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In July 2012, the consultant received 42 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In August 2012, the consultant received 39 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In September 2012, the consultant received 36 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In October 2012, the consultant received 36 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In December 2012, the consultant received 58 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $500. In March 2013, the consultant received 369 shares of the Company's common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $1,500, for payment of three months of services. In June 2013, the consultant received 159 shares of the Company's common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $1,500, for payment of three months of services. In October 2013, the consultant received 389 shares of the Company's common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $750, for payment of one and one-half months of services. The value of all of the shares issued has been expensed as consulting fees (see Note 14). | |||||||||||||||||||
In November 2012, the Company issued a total of 234 restricted shares of its common stock, as adjusted by the Company’s 1:1,500 reverse stock split, to the five members of its advisory board for serving in that capacity. The shares were valued at $2,275, all of which has been expensed as consulting fees. | |||||||||||||||||||
Issuance of Common Stock for Financing | |||||||||||||||||||
In March 2010, the Company executed a promissory note for $50,000 with its CEO, bearing interest at 10% per annum, maturing on April 30, 2011. Per the terms of the promissory note, the note holder purchased two units with each unit consisting of a 10% promissory note of $25,000 and 34 restricted shares of the Company’s common stock, valued at $37.50 per share and expensed in 2010, for a total of 68 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. In January 2014, the note was extended to December 31, 2014 (see Note 10). | |||||||||||||||||||
In April 2010, the Company executed a promissory note for $80,000, bearing interest at 10% per annum, maturing on July 23, 2010. As consideration for executing the note, the Company issued 334 shares of restricted common stock, valued at $31.50 per share, as adjusted by the Company’s 1:1,500 reverse stock split, and expensed in 2010, to the note holder. On May 2, 2011, the Company repaid $10,000 of the note balance to the note holder. Per the terms of a settlement agreement that the Company executed with the note holder in January 2012, the Company issued 3,373 restricted shares of its common stock, valued at $24.75 per share, as adjusted by the Company’s 1:1,500 reverse stock split, to the note holder as settlement of the remaining note balance of $70,000 plus accrued interest (see Note 9). | |||||||||||||||||||
In May 2010, the Company executed a promissory note for $50,000, bearing interest at 10% per annum, maturing on May 21, 2013. As consideration for executing the note, the Company issued 134 shares of restricted common stock, valued at $13.50 per share, as adjusted by the Company’s 1:1,500 reverse stock split, to the note holder. For the years ended December 31, 2013 and 2012, the Company expensed $250 and $600, respectively, of financing expenses related to the shares (see Note 9). | |||||||||||||||||||
In May 2012, the Company issued 375 restricted shares of its common stock, as adjusted by the Company’s 1:1,500 reverse stock split, valued at $9,000, to an investor firm as consideration for entering into and structuring an Equity Facility Agreement. The shares were included in the Form S-1 the Company with the SEC in June 2012. The value of the shares has been expensed as financing expense (see Note 14). | |||||||||||||||||||
Issuance of Common Stock for Settlement of Accounts Payable | |||||||||||||||||||
In August 2011, the Company issued 600 shares of its common stock, valued at $45 per share, as adjusted by the Company’s 1:1,500 reverse stock split, to a vendor for settlement of accounts payable. In March 2012, the remaining accounts payable balance was settled and the Company issued 1,200 shares of its common stock, valued at $22.50 per share, as adjusted by the Company’s 1:1,500 reverse stock split, to the vendor (see Note 14). | |||||||||||||||||||
Issuance of Common Stock for the Sale and Settlement of Debt | |||||||||||||||||||
Per the terms of a settlement agreement that the Company executed with its former President in January 2012, the Company issued 999 restricted shares of its common stock, valued at $21 per share, as adjusted by the Company’s 1:1,500 reverse stock split, to its former President for settlement of accrued interest owed (see Notes 10 and 14). | |||||||||||||||||||
Per the terms of a settlement agreement that the Company executed with a note holder in January 2012, the Company issued 3,373 restricted shares of its common stock, valued at $24.75 per share, as adjusted by the Company’s 1:1,500 reverse stock split, to the note holder for settlement of a promissory note and accrued interest (see Note 9). | |||||||||||||||||||
Conversions to Common Stock | |||||||||||||||||||
For the year ended December 31, 2013, the Company received conversion notices from ICG to convert $36,660 of the January 3, 2012 note into 16,667 unrestricted shares of the Company's common stock. The conversions were processed on January 24, 2013 for $11,280 into 6,667 shares at a conversion price of $1.692 per share and on May 17, 2013 for $25,380 into 10,000 shares at a conversion price of $2.538 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2012, the Company received conversion notices from ICG to convert $75,000 of the December 5, 2011 note, plus accrued interest of $2,417, into 19,561 unrestricted shares of the Company's common stock, as adjusted by the Company’s 1:1,500 reverse stock split. The conversions were processed on June 15, 2012 for $15,000 into 1,779 shares at a conversion price of $8.433 per share, on August 15, 2012 for $25,000 into 5,051 shares at a conversion price of $4.95 per share, on November 30, 2012 for $22,080 into 6,667 shares at a conversion price of $3.312 per share and on December 18, 2012 for $15,337 into 6,064 shares at a conversion price of $2.529 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company also received a conversion notice from ICG to convert $9,953 of the January 3, 2012 note into 3,936 unrestricted shares of the Company's common stock. The conversion was processed on December 18, 2012 at a conversion price of $2.529 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2013, the Company received conversion notices from Asher to convert the remaining balance of $8,500 of the note due February 8, 2013, including accrued interest of $1,300, the full balance of $42,500 of the note due April 30, 2013, including accrued interest of $1,700, the full balance of $32,500 of the note due August 5, 2013, including accrued interest of $1,300, the full balance of $50,340 of the note due June 14, 2013, the full balance of $42,500 of the note due September 27, 2013, including accrued interest of $1,700, the full balance of $42,500 of the note due November 26, 2013, including accrued interest of $1,700, the full balance of $50,000 of the note due April 15, 2014, the full balance of $50,000 of the note due July 9, 2014, the full balance of $42,500 of the note due January 24, 2014, including accrued interest of $1,700, and $22,400 of the note due March 6, 2014 into 576,390 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.15 to $4.65 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2012, the Company received conversion notices from Asher to convert the note dated April 11, 2012, for $53,000, and $2,120 in accrued interest, into 12,187 unrestricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split. The conversions were processed on October 19, 2012 for $12,000 into 1,600 shares at a conversion price of 7.50 per share, on October 31, 2012 for $14,000 into 2,122 shares at a conversion price of $6.60 per share, on November 14, 2012 for $12,000 into 2,759 shares at a conversion price of $4.35 per share and on November 27, 2012 for $17,120 into 5,706 shares at a conversion price of $3.00 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company also received conversion notices from Asher to convert $24,000 of the May 4, 2012 note into 12,821 unrestricted shares of the Company's common stock. The conversions were processed on December 13, 2012 for $12,000 into 6,154 shares at a conversion price of $1.95 per share and on December 21, 2012 for $12,000 into 6,667 shares at a conversion price of $1.80 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2013 the Company received conversion notices from Auctus to convert the full balance of $27,750 of the note due August 30, 2013, including accrued interest of $1,291, the full balance of $27,750 of the note due November 19, 2013, including accrued interest of $1,308, and $15,750 of the note due February 28, 2014 into 147,667 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.27 to $3.195 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2012, Auctus had no conversions. | |||||||||||||||||||
For the year ended December 31, 2013 the Company received a conversion notice from Klei to convert the full balance of $25,000 of the note due April 23, 2014, including accrued interest of $1,112, into 58,028 unrestricted shares of the Company's common stock, at a conversion price of $0.45 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2013, the Company received conversion notices from Iconic to convert the full balance of $55,152 of one of the notes due June 4, 2014, the full balance of $50,000 of another of the notes due June 4, 2014, the full balance of $60,000 of the note due July 17, 2014, the full balance of $70,000 of one of the notes due October 4, 2014, $50,498 of the remaining note due June 4, 2014 into 712,079 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.09 to $2.61 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2013, the Company received conversion notices from Southridge to convert the full balance of $25,000 of the note due July 16, 2014, and $375 in legal fees, the full balance of $25,000 of the note due August 4, 2014, and $275 in legal fees, and the full balance of $25,000 of the note due August 18, 2014, and $375 in legal fees, into 179,824 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.33 to $0.5775 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2013, the Company received conversion notices from WHC to convert $41,057 of the note due November 13, 2014 into 181,307 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.087 to $0.261 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
For the year ended December 31, 2013 the Company received a conversion notice from Tarpon to convert $16,750 of the note due September 20, 2014 into 203,031 unrestricted shares of the Company's common stock, at a conversion price of $0.0405 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |||||||||||||||||||
Sale of Common Shares | |||||||||||||||||||
In January 2012, the Company sold subscriptions to one individual for certain units containing common stock and warrants. The Company issued 2,280 shares of its common stock at $25.50 per share and warrants to purchase a total of 1,140 shares of the Company’s common stock, exercisable at $45 per share that expire in January 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In February 2012, the Company sold subscriptions to one individual for certain units containing common stock and warrants. The Company issued 2,963 shares of its common stock at $24 per share and warrants to purchase a total of 1,482 shares of the Company’s common stock, exercisable at $45.00 per share that expire in February 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In March 2012, the Company sold subscriptions to one individual for certain units containing common stock and warrants. The Company issued 1,812 shares of its common stock at $22.50 per share and warrants to purchase a total of 906 shares of the Company’s common stock, exercisable at $45.00 per share that expire in February 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In April 2012, the Company sold to three individuals certain units which contained common stock and warrants. The Company issued 4,650 shares of its common stock at $15.00 per share for 1,646 shares and $16.50 per share for 3,004 shares. The Company also issued warrants to purchase a total of 2,325 shares of the Company’s common stock, exercisable at $30 per share that expire in April 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In June 2012, the Company sold subscriptions to one individual for certain units containing common stock and warrants. The Company issued 2,667 shares of its common stock at $10.50 per share and warrants to purchase a total of 1,334 shares of the Company’s common stock, exercisable at $30 per share that expire in June 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In July 2012, the Company sold to two individuals certain units which contained restricted common stock and warrants. The Company issued 9,662 shares of its common stock at 7.05 per share for 7,048 shares and $9.60 per share for 2,614 shares. The Company also issued warrants to purchase a total of 4,831 shares of its common stock, exercisable at $30 per share that expires in July 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In August 2012, the Company sold subscriptions to one individual for certain units containing restricted common stock and warrants. The Company issued 3,704 shares of its common stock at $6.75 per share and warrants to purchase a total of 1,852 shares of its common stock, exercisable at $30 per share that expire in August 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In September 2012, the Company sold to two individuals certain units which contained restricted common stock and warrants. The Company issued 5,303 shares of its common stock at $8.40 per share for 2,963 shares and $10.65 per share for 2,340 shares. The Company also issued warrants to purchase a total of 2,652 shares of its common stock, exercisable at $30 per share that expires in September 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
In October 2012, the Company sold to an individual for certain units containing common stock and warrants. The Company issued 3,704 shares of its common stock at $6.75 per share and warrants to purchase a total of 1,852 shares of the Company’s common stock, exercisable at $30 per share that expire in October 2015, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
Issuance of Warrants for Financing and Acquiring Services | |||||||||||||||||||
In connection with consulting agreements, the Company issued warrants for 10,044 shares to consultants, as adjusted by the Company’s 1:1,500 reverse stock split, all of which were deemed earned upon issuance, as of December 31, 2013 (see Note 14). The fair value of these warrants granted, estimated on the date of grant using the Black-Scholes option-pricing model, was $1,004,403, which has been recorded as consulting expenses. | |||||||||||||||||||
The table below summarizes the Company’s non-derivative warrant activities through December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Number of | Exercise Price Range Per Share | Weighted Average Exercise Price | Fair Value at Date of Issuance | Aggregate | |||||||||||||||
Warrant Shares | Intrinsic | ||||||||||||||||||
Value | |||||||||||||||||||
Balance, December 31, 2011 | 160,646 | $ | 6.00-15,000.00 | $ | 75 | $ | 2,742,658 | $ | - | ||||||||||
Granted | 20,081 | 30.00-60.00 | 45 | 88,850 | - | ||||||||||||||
Canceled for cashless exercise | (-) | - | - | - | - | ||||||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | -5,391 | 6.00-8,250.00 | 315 | -1,305,717 | - | ||||||||||||||
Balance, December 31, 2012 | 175,336 | $ | 2.25-15,000.00 | $ | 73.5 | $ | 1,525,791 | $ | - | ||||||||||
Granted | 61,162 | 6.00-600.00 | 600 | 64,692 | - | ||||||||||||||
Canceled for cashless exercise | (-) | - | - | - | - | ||||||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | -24,253 | 22.50-15,000.00 | 49.5 | -482,177 | - | ||||||||||||||
Balance, December 31, 2013 | 212,245 | $ | 2.25-15,000.00 | $ | 238.5 | $ | 1,108,306 | $ | - | ||||||||||
Vested and exercisable, December 31, 2013 | 212,245 | $ | 2.25-15,000.00 | $ | 238.5 | $ | 1,108,306 | $ | - | ||||||||||
Unvested, December 31, 2013 | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Number Exercisable | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | |||||||||||||
$15,000.00 | 3 | 0.71 | $ | 15,000.00 | 3 | 0.71 | $ | 15,000.00 | |||||||||||
$22.50-1,200.00 | 212,242 | 1.3 | $ | 75 | 212,242 | 1.3 | $ | 75 | |||||||||||
$22.50 - $15,000.00 | 212,245 | 1.3 | $ | 75 | 212,245 | 1.3 | $ | 75 | |||||||||||
Issuance of Stock Options to Parties Other Than Employees for Acquiring Goods or Services | |||||||||||||||||||
In January 2013, the Company granted an option to purchase 6,667 shares of its common stock, as adjusted by the Company’s 1:1,500 reverse stock split, to NetLabs, Inc. in exchange for the assignment of the entire right, title and interest in and to the “Out-of-Band Patent”. The Options were valued at $2.7 per share, as adjusted by the Company’s 1:1,500 reverse stock split, or $18,000, which was recorded as Patent. | |||||||||||||||||||
The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: | |||||||||||||||||||
30-Jan-13 | |||||||||||||||||||
Expected life (year) | 10 | ||||||||||||||||||
Expected volatility | 142.00% | ||||||||||||||||||
Risk-free interest rate | 2.03% | ||||||||||||||||||
Expected annual rate of quarterly dividends | 0.00% | ||||||||||||||||||
As of December 31, 2013, options to purchase an aggregate of 8,000 shares of its common stock, as adjusted by the Company’s 1:1,500 reverse stock split, for non-employees were outstanding. The exercise price of the options to purchase 1,333 and 6,667 shares its common stock is $9.00 and $2.7, respectively, yielding a weighted average exercise price of $4.50, as adjusted by the Company’s 1:1,500 reverse stock split. In January 2013, options to purchase an aggregate of 507 of the Company's common stock at $5,400 per share, as adjusted by the Company’s 1:1,500 reverse stock split, were cancelled per an agreement executed with NetLabs, Inc. Also in January 2013, options to purchase an aggregate of 2 shares of the Company's common stock, at $13,500 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expired. |
Stock_Based_Compensation
Stock Based Compensation | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Stock Based Compensation | ' | ||||||||||||||||||
Stock Based Compensation | ' | ||||||||||||||||||
Note 16 - Stock Based Compensation | |||||||||||||||||||
2004 Equity Incentive Plan | |||||||||||||||||||
In September 2004, the stockholders approved the Equity Incentive Plan for the Company’s employees (“Incentive Plan”), effective April 1, 2004. The number of shares authorized for issuance under the Incentive Plan was increased to 6,667 in September 2006, 10,000 in March 2007, 13,333 in June 2007, 66,667 in December 2007 and 133,333 in April 2011, as adjusted by the Company’s 1:1,500 reverse stock split,, by unanimous consent of the Board of Directors prior to 2011 and by majority consent of the Board of Directors in 2011. | |||||||||||||||||||
2012 Stock Option Plan | |||||||||||||||||||
In November 2012, the stockholders approved the 2012 Stock Option Plan (“2012 Stock Incentive Plan”) for the Company’s employees, effective January 3, 2013. The number of shares authorized for issuance under the plan is 66,667, as adjusted by the Company’s 1:1,500 reverse stock split. | |||||||||||||||||||
Options granted in January 2013 | |||||||||||||||||||
On January 3, 2013, the Company granted options to purchase 3,333 shares of its common stock to the Company’s management team and employees with an exercise price at $3.45 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring ten (10) years from the date of grant vesting over an eight month period. | |||||||||||||||||||
The Company estimated the fair value of 2013 options on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: | |||||||||||||||||||
3-Jan-13 | |||||||||||||||||||
Expected life (year) | 10 | ||||||||||||||||||
Expected volatility | 154.00% | ||||||||||||||||||
Risk-free interest rate | 1.92% | ||||||||||||||||||
Expected annual rate of quarterly dividends | 0.00% | ||||||||||||||||||
The table below summarizes the Company’s 2004 Incentive Plan and 2012 Stock Incentive Plan activities through December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Number of | Exercise Price Range Per Share | Weighted Average Exercise Price | Fair Value at Date of Issuance | Aggregate | |||||||||||||||
Option Shares | Intrinsic | ||||||||||||||||||
Value | |||||||||||||||||||
Balance, December 31, 2011 | 93,352 | $ | 3.75-15,000.00 | $ | 21 | $ | 3,214,621 | $ | - | ||||||||||
Granted | - | - | - | - | - | ||||||||||||||
Canceled for cashless exercise | (-) | - | - | - | - | ||||||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | - | - | - | - | - | ||||||||||||||
Balance, December 31, 2012 | 93,352 | $ | 3.75-15,000.00 | $ | 21 | $ | 3,214,621 | $ | - | ||||||||||
Granted | 3,334 | $ | 3.45 | $ | 3.45 | $ | 10,000 | $ | - | ||||||||||
Canceled | -25 | $ | 1,500.00 | $ | 4,200.00 | $ | -41,488 | $ | - | ||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | -4,071 | 30.00- 120.00 | 90 | -383,480 | - | ||||||||||||||
Balance, December 31, 2013 | 92,590 | $ | 3.45-15,000.00 | $ | 15.45 | $ | 2,799,653 | $ | - | ||||||||||
Vested and exercisable, December 31, 2013 | 92,590 | $ | 3.45-15,000.00 | $ | 15.45 | $ | 2,799,653 | $ | - | ||||||||||
Unvested, December 31, 2013 | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
As of December 31, 2013, options to purchase an aggregate of 92,590 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split, were outstanding under the 2004 incentive plan and 2012 Stock Incentive Plan and there were 107,410 shares remaining available for issuance. Also in May 2013, options to purchase an aggregate of 20 shares of the Company's common stock, at $1,500.00 per share and 5 shares of the Company's common stock, at $15,000.00 per share, as adjusted by the Company’s 1:1,500 reverse stock split, were cancelled. | |||||||||||||||||||
The following table summarizes information concerning 2004 Incentive plan and 2012 Stock Incentive Plan as of December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Number Exercisable | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | |||||||||||||
$15,000 | 16 | 0.77 | $ | 15,000.00 | 16 | 0.77 | $ | 15,000 | |||||||||||
$1,500 | 50 | 2.51 | $ | 1,500.00 | 50 | 2.51 | $ | 1,500 | |||||||||||
$3.75-562.50 | 89,190 | 2.14 | $ | 15 | 89,190 | 2.14 | $ | 15 | |||||||||||
$3.45 | 3,334 | 9 | $ | 3.45 | 3,334 | 9.005 | 3.45 | ||||||||||||
$3.45-15,000 | 92,590 | 2.38 | $ | 17.98 | 92,590 | 2.38 | $ | 17.98 | |||||||||||
Concentration_of_Credit_Risk
Concentration of Credit Risk | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
Concentration of Credit Risk | ' | ||||||||||||||
Concentration of Credit Risk | ' | ||||||||||||||
Note 17 - Concentration of Credit Risk | |||||||||||||||
Customers and Credit Concentrations | |||||||||||||||
Revenue concentrations and the accounts receivables concentrations are as follows: | |||||||||||||||
Net Sales | Accounts Receivableat | ||||||||||||||
for the Years Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Customer A | 28.80% | 14.90% | -% | 87.60% | |||||||||||
Customer B | 25.30% | 11.60% | 25.90% | -% | |||||||||||
Customer C | 22.60% | 58.40% | -% | -% | |||||||||||
76.70% | 84.90% | 25.90% | 87.60% | ||||||||||||
A reduction in sales from or loss of such customers would have a material adverse effect on the Company’s results of operations and financial condition. | |||||||||||||||
Subsequent_Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events | ' |
Subsequent Events | ' |
Note 18 - Subsequent Events | |
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued. The Management of the Company determined that there were certain reportable subsequent events to be disclosed as follows: | |
Notes Payable | |
In January 2014, the Company issued a promissory note for $50,000 to an unrelated party, bearing interest at 8% per annum, maturing on July 22, 2015. | |
Convertible Notes Payable | |
In March, 2014, per the terms of a term sheet executed with Asher in February 2014, the Company issued a convertible note for $53,000, net of a legal fee of $3,000 for a total received of $50,000, with Asher, bearing interest at 8% per annum, maturing on December 13, 2014. The debenture contains an embedded derivative feature. | |
In March 2014, the Company issued a convertible note for $37,000, net of a legal fee of $2,000 for a total received of $35,000, with an unrelated party, bearing interest at 10% per annum, maturing on March 14, 2015. The debenture contains an embedded derivative feature. | |
In March 2014, the Company issued a convertible note for $37,000, net of a legal fee of $2,000 for a total received of $35,000, with an unrelated party, bearing interest at 10% per annum, maturing on March 24, 2015. The debenture contains an embedded derivative feature. | |
In March 2014, per the terms of a term sheet executed with an unrelated party for up to $500,000 of convertible debentures, the Company issued a convertible note for $150,000 with the unrelated party, bearing interest at 12% per annum, maturing on March 26, 2016. The debenture contains an embedded derivative feature. | |
In April 2014, per the terms of a term sheet executed with an unrelated party for up to $250,000, the Company issued a convertible note for $50,000 with the unrelated party, bearing interest at 10% per annum, maturing on April 2, 2015. The debenture contains an embedded derivative feature. | |
Term Sheet | |
In April 2014, the Company executed a term sheet with an investor firm whereby the firm would invest in the Company $53,000 in the form of a convertible promissory note, bearing interest at 8% per annum maturing nine (9) months from the date of issuance. A closing fee of $3,000 would be deducted from the tranche and the note would include a tiered prepayment penalty. The investor firm may process conversions after six months from the date of the closing. Conversions would include a 42% discount to the average closing bid price of the Company’s common stock for the previous ten (10) days of a conversion notice, using the average of the three (3) lowest trading prices. | |
Debt Purchase Agreement | |
In January 2014, pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, a promissory note holder and an unrelated party, the Company transferred $25,000 of the note balance to the unrelated party in the form of a convertible note for $25,000 (see Notes 7 and 9). The new debenture contains an embedded derivative feature (see Note 12). | |
Consulting Agreements | |
In March and April 2014, the Company entered into consulting agreements with a firm whereby the consultant will assist the Company in obtaining investors. The consultant will receive a commission of 10% cash per deal, plus warrants to purchase shares of the Company's common stock, to be negotiated per deal, of all financing raised as a result of the consultant’s efforts. The warrants to purchase shares of the Company’s common stock, exercisable at a per share price of the dollars invested divided by the strike price of the investment, with a 50% exercise price premium, expiring four (4) years from the date of issuance and vesting over six (6) months. The warrants shall not be affected by the Company's reverse stock split. The term of the agreement is per deal. As of April 4, 2014, the consultant received cash commissions of $23,500 as a result of financing raised relating to the agreement. The consultant is owed warrants to purchase 4,000 shares of the Company's common stock, which shall be issued in April 2014. | |
In March 2014, the Company executed a retainer agreement, for $5,000, with an attorney to assist the Company in responding to a February 2014 Depository Trust and Clearing Corporation ("DTCC") inquiry, including the issuance of a legal opinion letter. The DTCC inquiry has not yet been resolved. | |
In April 2014, the Company extended an advertising contract executed with a consultant in December 2013 for various marketing services to be provided. The contract was extended from May 2014 to August 2014, at a cost of $875 per month. | |
Sales of Shares of Series B Preferred Stock | |
In February 2014, the Company sold subscriptions to three individuals for the purchase of shares of its Series B preferred stock at $1.50 per share. The Company sold a total of 25,335 shares, for $38,000, that are convertible into shares of its common stock at a 40% discount to current market value, defined as the average of the immediately prior five trading day's closing prices upon receipt of a conversion notice, and with a minimum price level set by the Company's Board of Directors at $0.005. The Series B preferred shares can be converted at any time after six months from the subscription agreements, but only once every 30 days. | |
In March 2014, the Company sold subscriptions to one individual for the purchase of shares of its Series B preferred stock at $1.50 per share. The Company sold a total of 16,667 shares, for $25,000, that are convertible into shares of its common stock at a 40% discount to current market value, defined as the average of the immediately prior five trading day's closing prices upon receipt of a conversion notice, and with a minimum price level set by the Company's Board of Directors at $0.005. The Series B preferred shares can be converted at any time after six months from the subscription agreements, but only once every 30 days. | |
Common Stock | |
In March 2014, the Company's transfer agent issued 1,633 shares of our common stock as rounding shares relating to the Company's 1:1,500 reverse stock split of the Company's issued and outstanding shares of common stock that was adopted in March 2014. | |
Issuance of Common Stock for Services | |
In March 2014, the Company issued a total of 15,000 shares of restricted common stock related to a December 2009 retainer agreement with an attorney. The shares issued relating to the agreement are not affected by the Company's March 2014 reverse stock split. | |
Conversions to Common Stock | |
For the quarter ended March 31, 2014, the Company received conversion notices from Asher to convert $94,900 of open convertible notes, and accrued interest of $4,900, into 1,029,483 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.09 to $0.1112 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |
For the quarter ended March 31, 2014, the Company received conversion notices from Auctus to convert $17,000 of open convertible notes, and accrued interest of $1,579, into 206,438 unrestricted shares of the Company's common stock, at a conversion price of $0.09 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |
For the quarter ended March 31, 2014, the Company received conversion notices from Iconic to convert $48,054 of open convertible notes, and accrued interest of $1,800, into 553,937 unrestricted shares of the Company's common stock, at a conversion price of $0.09 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |
For the quarter ended March 31, 2014, the Company received conversion notices from Tarpon to convert $48,250 of open convertible notes into 574,073 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.077056 to $0.10175 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |
For the quarter ended March 31, 2014, the Company received conversion notices from WHC to convert $24,553 of open convertible notes into 282,223 unrestricted shares of the Company's common stock, at a conversion price of $0.087 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 7). | |
In April 2014, the Company received a conversion notice from WHC to convert $5,023 of open convertible notes into 61,859 unrestricted shares of the Company's common stock, at a conversion price of $0.0812 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Summary of Significant Accounting Policies (Policies) | ' | |||||||||||||
Basis of Presentation | ' | |||||||||||||
Basis of Presentation | ||||||||||||||
The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). | ||||||||||||||
Use of Estimates and assumptions | ' | |||||||||||||
Use of Estimates and Assumptions | ||||||||||||||
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 disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). | ||||||||||||||
Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were: | ||||||||||||||
(i) Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. | ||||||||||||||
(ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. | ||||||||||||||
(iii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors. | ||||||||||||||
(iv) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments. | ||||||||||||||
These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value. | ||||||||||||||
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. | ||||||||||||||
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. | ||||||||||||||
Actual results could differ from those estimates. | ||||||||||||||
Fair Value of Financial Instruments | ' | |||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
The Company follows applicable accounting guidance for disclosures about fair value of its financial instruments. U.S. GAAP establishes a framework for measuring fair value, and requires disclosures about fair value measurements. To provide consistency and comparability in fair value measurements and related disclosures, U.S. GAAP establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are described below: | ||||||||||||||
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |||||||||||||
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |||||||||||||
Level 3 | Pricing inputs that are generally not observable inputs and not corroborated by market data. | |||||||||||||
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. | ||||||||||||||
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. | ||||||||||||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepayments and other current assets, accounts payable, accrued expenses, payroll taxes payable, and due to factor, approximate their fair values because of the short maturity of these instruments. | ||||||||||||||
The Company’s notes payable, convertible notes payable, convertible secured notes payable, and capital leases payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2013 and 2012. | ||||||||||||||
The Company’s Level 3 financial liabilities consist of the derivative financial instruments for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date. | ||||||||||||||
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. | ||||||||||||||
Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis | ' | |||||||||||||
Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis | ||||||||||||||
Level 3 Financial Liabilities – Derivative Financial Instruments | ||||||||||||||
The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liability at the end of every reporting period and recognizes gains or losses in the Statements of Operations that are attributable to the change in the fair value of the derivative liability | ||||||||||||||
Carrying Value, Recoverability and Impairment of Long-Lived Assets | ' | |||||||||||||
Carrying Value, Recoverability and Impairment of Long-Lived Assets | ||||||||||||||
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include property and equipment, patents, and website development costs are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | ||||||||||||||
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. When long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. | ||||||||||||||
The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. | ||||||||||||||
The key assumptions used in management’s estimates of projected cash flow deal largely with forecasts of sales levels, gross margins, and operating costs of the manufacturing facilities. These forecasts are typically based on historical trends and take into account recent developments as well as management’s plans and intentions. Any difficulty in manufacturing or sourcing raw materials on a cost effective basis would significantly impact the projected future cash flows of the Company’s manufacturing facilities and potentially lead to an impairment charge for long-lived assets. Other factors, such as increased competition or a decrease in the desirability of the Company’s products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets. | ||||||||||||||
The impairment charges, if any, is included in operating expenses in the accompanying statements of operations. | ||||||||||||||
Cash Equivalents | ' | |||||||||||||
Cash Equivalents | ||||||||||||||
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. | ||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | ' | |||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | ||||||||||||||
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. | ||||||||||||||
Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received. | ||||||||||||||
Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. | ||||||||||||||
The Company does not have any off-balance-sheet credit exposure to its customers. | ||||||||||||||
Property and Equipment | ' | |||||||||||||
Property and Equipment | ||||||||||||||
Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows: | ||||||||||||||
Estimated Useful Life (Years) | ||||||||||||||
Computer equipment | 5 | |||||||||||||
Computer software | 3 | |||||||||||||
Furniture and fixture | 7 | |||||||||||||
Office equipment | 7 | |||||||||||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | ||||||||||||||
Intangible Assets Other Than Goodwill | ' | |||||||||||||
Intangible Assets Other Than Goodwill | ||||||||||||||
The Company has adopted Subtopic 350-30 of the FASB Accounting Standards Codification for intangible assets other than goodwill. Under the requirements, the Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over or their estimated useful lives, the terms of the exclusive licenses and/or agreements, or the terms of legal lives of the patents, whichever is shorter. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | ||||||||||||||
Patents | ' | |||||||||||||
Patents | ||||||||||||||
For acquired patents the Company records the costs to acquire patents as patent and amortizes the patent acquisition cost over its remaining legal life, or estimated useful life, or the term of the contract, whichever is shorter. For internal developed patents, all costs incurred to the point when a patent application is to be filed are expended as incurred as research and development expense; patent application costs, generally legal costs, thereafter incurred are capitalized, which are to be amortized once the patents are granted or expended if the patent application is rejected. The Company amortizes the internal developed patents over the shorter of the expected useful lives or the legal lives of the patents, which are generally 17 to 20 years for domestic patents and 5 to 20 years for foreign patents from the date when the patents are granted. The costs of defending and maintaining patents are expended as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | ||||||||||||||
Website Development Costs | ' | |||||||||||||
Website Development Costs | ||||||||||||||
The Company has adopted Subtopic 350-50 of the FASB Accounting Standards Codification for website development costs. Under the requirements of Sections 350-50-15 and 350-50-25, the Company capitalizes costs incurred to develop a website as website development costs, which are amortized on a straight-line basis over the estimated useful lives of three (3) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts. | ||||||||||||||
Discount on debt | ' | |||||||||||||
Discount on Debt | ||||||||||||||
The Company allocates the proceeds received from convertible debt instruments between the liability component and equity component, and records the conversion feature as a liability in accordance with subtopic 470-20 of the FASB Accounting Standards Codification (“Subtopic 470-20”). The conversion feature and certain other features that are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption option, have been recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The conversion liability is marked to market each reporting period with the resulting gains or losses shown in the Statement of Operations. The Company has also recorded the resulting discount on debt related to the warrants and conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments. | ||||||||||||||
Derivative Instruments and Hedging Activities | ' | |||||||||||||
Derivative Instruments and Hedging Activities | ||||||||||||||
The Company accounts for derivative instruments and hedging activities in accordance with paragraph 810-10-05-4 of the FASB Accounting Standards Codification (“Paragraph 810-10-05-4”). Paragraph 810-10-05-4 requires companies to recognize all derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends upon: (i) whether the derivative has been designated and qualifies as part of a hedging relationship, and (ii) the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument based upon the exposure being hedged as either a fair value hedge, cash flow hedge or hedge of a net investment in a foreign operation. | ||||||||||||||
Derivative Warrant Liability | ' | |||||||||||||
Derivative Warrant Liability | ||||||||||||||
The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations and comprehensive income (loss) as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity. | ||||||||||||||
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. | ||||||||||||||
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date. | ||||||||||||||
The Company marks to market the fair value of the remaining embedded derivative warrants at each balance sheet date and records the change in the fair value of the remaining embedded derivative warrants as other income or expense in the consolidated statements of operations and comprehensive income (loss). | ||||||||||||||
The Company utilizes the Lattice model that values the liability of the derivative warrants based on a probability weighted discounted cash flow model with the assistance of the third party valuation firm. The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument. Therefore, the fair value may not be appropriately captured by simple models. In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives). The Lattice model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features. Based on these features, there are two primary events that can occur; the Holder exercises the Warrants or the Warrants are held to expiration. The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.). Projections were then made on the underlying factors which led to potential scenarios. Probabilities were assigned to each scenario based on management projections. This led to a cash flow projection and a probability associated with that cash flow. A discounted weighted average cash flow over the various scenarios was completed to determine the value of the derivative warrants. | ||||||||||||||
Embedded Beneficial Conversion Feature of Convertible Instruments | ' | |||||||||||||
Embedded Beneficial Conversion Feature of Convertible Instruments | ||||||||||||||
The Company recognizes and measures the embedded beneficial conversion feature of applicable convertible instruments by allocating a portion of the proceeds from the convertible instruments equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value of the embedded beneficial conversion feature is calculated at the commitment date as the difference between the conversion price and the fair value of the securities into which the convertible instruments are convertible. The Company recognizes the intrinsic value of the embedded beneficial conversion feature of the convertible notes so computed as interest expense. | ||||||||||||||
From time to time, the Company transfers the liability under the indenture instrument to a third party in certain circumstances. | ||||||||||||||
Commitments and Contingencies, | ' | |||||||||||||
Commitment and Contingencies | ||||||||||||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | ||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | ||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. | ||||||||||||||
Revenue Recognition | ' | |||||||||||||
Revenue Recognition | ||||||||||||||
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. | ||||||||||||||
The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of products. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the third party carrier and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues. | ||||||||||||||
In addition to the aforementioned general policy, the following are the specific revenue recognition policies for each major category of products and services: | ||||||||||||||
Hardware | ' | |||||||||||||
Hardware | ||||||||||||||
Revenue from hardware sales is recognized when the product is shipped to the customer and there are either no unfulfilled Company obligations or any obligations that will not affect the customer's final acceptance of the arrangement. All costs of these obligations are accrued when the corresponding revenue is recognized. There were no revenues from fixed price long-term contracts. | ||||||||||||||
Software, Services and Maintenance | ' | |||||||||||||
Fixed Price Service Contracts | ||||||||||||||
Revenue from fixed price service contracts is recognized over the term of the contract based on the percentage of services that are provided during the period compared with the total estimated services to be provided over the entire contract. Losses on fixed price contracts are recognized during the period in which the loss first becomes apparent. Revenue from maintenance is recognized over the contractual period or as the services are performed. Revenue in excess of billings on service contracts is recorded as unbilled receivables and is included in trade accounts receivable. Applicable billings in excess of revenue that is recognized on service contracts are recorded as deferred income until the aforementioned revenue recognition criteria are met. | ||||||||||||||
ASP Hosted Cloud Services | ' | |||||||||||||
ASP Hosted Cloud Services | ||||||||||||||
The Company offers an Application Service Provider Cloud Service whereby customer usage transactions are invoiced monthly on a cost per transaction basis. The service is sold via the execution of a Service Agreement between the Company and the customer. Initial set-up fees are recognized over the period in which the services are performed. | ||||||||||||||
Fixed Price Service Contracts | ' | |||||||||||||
Fixed Price Service Contracts | ||||||||||||||
Revenue from fixed price service contracts is recognized over the term of the contract based on the percentage of services that are provided during the period compared with the total estimated services to be provided over the entire contract. Losses on fixed price contracts are recognized during the period in which the loss first becomes apparent. Revenue from maintenance is recognized over the contractual period or as the services are performed. Revenue in excess of billings on service contracts is recorded as unbilled receivables and is included in trade accounts receivable. Applicable billings in excess of revenue that is recognized on service contracts are recorded as deferred income until the aforementioned revenue recognition criteria are met. | ||||||||||||||
Stock-Based Compensation for Obtaining Employee Services | ' | |||||||||||||
Stock-Based Compensation for Obtaining Employee Services | ||||||||||||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||
Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||||||||||||
Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||||||||||||
The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. | ||||||||||||||
Equity instruments issued to parties other than employees for acquiring goods or services | ' | |||||||||||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | ||||||||||||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | ||||||||||||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||
Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||||||||||||
Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. | ||||||||||||||
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. | ||||||||||||||
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. | ||||||||||||||
Software Development Costs | ' | |||||||||||||
Software Development Costs | ||||||||||||||
The Company has adopted paragraph 985-20-05-01 of the FASB Accounting Standards Codification (“Paragraph 985-20-05-01”) for the costs of computer software to be sold or licensed. Paragraph 985-20-05-01 requires research and development costs incurred in the process of software development before establishment of technological feasibility being expensed as incurred and capitalization of software development costs incurred subsequent to establishment of technological feasibility and prior to the availability of the product for general release to customers. Systematic amortization of capitalized costs begins when a product is available for general release to customers and is computed on a product-by-product basis at a rate not less than straight-line basis over the product’s remaining estimated economic life. To date, all costs have been accounted for as research and development costs and no software development cost has been capitalized. | ||||||||||||||
Income Tax Provision | ' | |||||||||||||
Income Tax Provision | ||||||||||||||
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Income and Comprehensive Income in the period that includes the enactment date. | ||||||||||||||
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 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 Section 740-10-25, the Company may recognize the 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 the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. | ||||||||||||||
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. | ||||||||||||||
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. | ||||||||||||||
Uncertain Tax Positions | ' | |||||||||||||
Uncertain Tax Positions | ||||||||||||||
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended December 31, 2013 or 2012 | ||||||||||||||
Net Income (loss) Per Common Share | ' | |||||||||||||
Net Income (Loss) per Common Share | ||||||||||||||
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants. | ||||||||||||||
The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive, as adjusted by the Company’s 1:1,500 reverse stock split adopted on March 6, 2014: | ||||||||||||||
Potentially Outstanding Dilutive Common Shares | ||||||||||||||
For the Reporting Period Ended | For the Reporting Period Ended | |||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Conversion Feature Shares | ||||||||||||||
Common shares issuable under the conversion feature of convertible notes payable | 4,242,707 | 104,799 | ||||||||||||
Sub-total: Conversion feature shares | 4,242,707 | 104,799 | ||||||||||||
Stock Option Shares | ||||||||||||||
Options issued from May 20, 2003 through April 21, 2011 to employees to purchase common shares with exercise prices ranging from $3.75 to $15,000 per share expiring three (3) years to ten (10) years from the date of issuance | 89,257 | 93,352 | ||||||||||||
Options issued from December 2, 2004 through January 30, 2013 to parties other than employees to purchase common shares with exercise prices ranging from $3.00 to $13,500 per share expiring five (5) years to ten (10) years from the date of issuance | 8,000 | 1,841 | ||||||||||||
Options issued on January 3, 2013 from the 2012 Stock Incentive Plan to employees to purchase common shares with an exercise price of $3.45 per share expiring ten (10) years from the date of issuance | 3,333 | - | ||||||||||||
Sub-total: Stock option shares | 100,590 | 95,193 | ||||||||||||
Warrant Shares | ||||||||||||||
Warrants issued in connection with debentures | 61,781 | 1,849 | ||||||||||||
Warrants sold for cash | 121,669 | 148,233 | ||||||||||||
Warrants issued for services | 10,017 | 5,550 | ||||||||||||
Warrants issued in connection with the sale of common stock | 18,778 | 19,704 | ||||||||||||
Sub-total: Warrant shares | 212,245 | 175,336 | ||||||||||||
Total potentially outstanding dilutive common shares | 4,555,542 | 375,328 | ||||||||||||
Cash Flows Reporting | ' | |||||||||||||
Cash Flows Reporting | ||||||||||||||
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification | ||||||||||||||
Subsequent Events | ' | |||||||||||||
Subsequent Events | ||||||||||||||
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | ||||||||||||||
Recently Issued Accounting Pronouncements | ' | |||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||
In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. | ||||||||||||||
In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. | ||||||||||||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies potentially outstanding dilutive common shares excluded (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Summary of Significant Accounting Policies potentially outstanding dilutive common shares excluded (Tables) | ' | |||||||||||||
potentially outstanding dilutive common shares excluded | ' | |||||||||||||
The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive, as adjusted by the Company’s 1:1,500 reverse stock split adopted on March 6, 2014: | ||||||||||||||
Potentially Outstanding Dilutive Common Shares | ||||||||||||||
For the Reporting Period Ended | For the Reporting Period Ended | |||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Conversion Feature Shares | ||||||||||||||
Common shares issuable under the conversion feature of convertible notes payable | 4,242,707 | 104,799 | ||||||||||||
Sub-total: Conversion feature shares | 4,242,707 | 104,799 | ||||||||||||
Stock Option Shares | ||||||||||||||
Options issued from May 20, 2003 through April 21, 2011 to employees to purchase common shares with exercise prices ranging from $3.75 to $15,000 per share expiring three (3) years to ten (10) years from the date of issuance | 89,257 | 93,352 | ||||||||||||
Options issued from December 2, 2004 through January 30, 2013 to parties other than employees to purchase common shares with exercise prices ranging from $3.00 to $13,500 per share expiring five (5) years to ten (10) years from the date of issuance | 8,000 | 1,841 | ||||||||||||
Options issued on January 3, 2013 from the 2012 Stock Incentive Plan to employees to purchase common shares with an exercise price of $3.45 per share expiring ten (10) years from the date of issuance | 3,333 | - | ||||||||||||
Sub-total: Stock option shares | 100,590 | 95,193 | ||||||||||||
Warrant Shares | ||||||||||||||
Warrants issued in connection with debentures | 61,781 | 1,849 | ||||||||||||
Warrants sold for cash | 121,669 | 148,233 | ||||||||||||
Warrants issued for services | 10,017 | 5,550 | ||||||||||||
Warrants issued in connection with the sale of common stock | 18,778 | 19,704 | ||||||||||||
Sub-total: Warrant shares | 212,245 | 175,336 | ||||||||||||
Total potentially outstanding dilutive common shares | 4,555,542 | 375,328 | ||||||||||||
Property_Equipmentat_Cost_Tabl
Property Equipmentat Cost (Table) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property Equipment at Cost | ' | ||||||||
Property Equipment at Cost | ' | ||||||||
Property and equipment, stated at cost, less accumulated depreciation consisted of the following: | |||||||||
Estimated Useful Life (Years) | 31-Dec-13 | 31-Dec-12 | |||||||
Computer equipment | 5 | $ | 73,540 | $ | 73,540 | ||||
Computer software | 3 | 25,135 | 23,636 | ||||||
Furniture and fixture | 7 | 10,157 | 10,157 | ||||||
Office equipment | 7 | 15,906 | 15,906 | ||||||
124,738 | 123,239 | ||||||||
Less accumulated depreciation (i) | (120,749 | ) | (116,129 | ||||||
$ | 3,989 | $ | 7,110 |
Patents_stated_at_cost_Table
Patents stated at cost (Table) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Patents stated at cost (Table): | ' | ||||||||
Patents stated at cost (Table) | ' | ||||||||
Patents, stated at cost, less accumulated amortization, consisted of the following: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Patents | 22,329 | 4,329 | |||||||
Accumulated amortization | (2,310 | ) | (255 | ) | |||||
$ | 20,019 | $ | 4,074 |
Website_stated_at_cost_Table
Website, stated at cost (Table) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Website, stated at cost | ' | ||||||||
Website, stated at cost | ' | ||||||||
Website, stated at cost, less accumulated amortization, consisted of the following: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Website | $ | 31,331 | $ | 31,331 | |||||
Accumulated amortization (i) | (26,831 | ) | (23,831 | ) | |||||
$ | 4,500 | $ | 7,500 |
Convertible_Notes_Payable_Tabl
Convertible Notes Payable (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Convertible Notes Payable (Tables) | ' | ||||||||||
Detailed Information Relating to Convertible Notes Payable | ' | ||||||||||
Convertible notes payable consisted of the following: | |||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||
Convertible note bearing interest at 8% per annum, matured on March 28, 2008, with a conversion price of $13,500 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company is currently pursuing a settlement with the note holder. | $ | 235,000 | $ | 235,000 | |||||||
Convertible notes bearing interest at 8% per annum with a conversion price of $13,500 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured on December 31, 2010. The Company is currently pursuing a settlement with the note holder. | 50,000 | 50,000 | |||||||||
Convertible note bearing interest at 9% per annum with a conversion price of $2,100 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured on December 9, 2010. Pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and two unrelated parties in September 2013 and November 2013, the Company settled and transferred $50,000 and $70,000, respectively, of the note balance to the unrelated parties in the form of convertible notes for $50,000 and $70,000. The Company is currently pursuing a settlement with the note holder. | 80,000 | 200,000 | |||||||||
Convertible note bearing interest at 9% per with a conversion price of $1,200 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured on December 31, 2010. The Company is currently pursuing a settlement with the note holder. | 150,000 | 150,000 | |||||||||
Convertible note executed in May 2007 bearing interest at 9% per annum with a conversion price of $525 per share, as adjusted by the Company’s 1:1,500 reverse stock split, matured December 31, 2010. The Company is currently pursuing a settlement with the note holder. | 100,000 | 100,000 | |||||||||
Convertible notes executed in June 2007 bearing interest at 8% per annum matured on December 29, 2010. The Company is currently pursuing a settlement with the note holder. | 100,000 | 100,000 | |||||||||
Convertible note executed in July 2007 bearing interest at 8% per annum matured on January 2, 2011. The Company is currently pursuing a settlement with the note holder. | 100,000 | 100,000 | |||||||||
Convertible notes executed in August 2007 bearing interest at 9% per annum matured on August 9, 2010. The Company is currently pursuing extensions. | 120,000 | 120,000 | |||||||||
Convertible notes executed in December 2009 bearing interest at 9% per annum matured on December 1, 2012, with a conversion price of $157.50 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 134 warrants with an exercise price of $150 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring five (5) years from the date of issuance in connection with the issuance of the notes. | 50,000 | 50,000 | |||||||||
Convertible note bearing interest at 8% per annum, maturing on March 31, 2015, with a conversion price of $3 per share, as adjusted by the Company’s 1:1,500 reverse stock split. | 30,000 | 30,000 | |||||||||
Convertible note bearing interest at 8% per annum, matured on December 31, 2012, with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split. The Company is currently pursuing an extension. | 5,000 | 5,000 | |||||||||
Convertible notes, bearing compound interest at 8% per annum, matured on June 30, 2010, with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and a consultant in September 2011, the note holder transferred $10,000 of the note balance, including accrued interest, to the consultant in October 2011 (see Note 14). For the year ended December 31, 2013, the Company repaid $3,500 of the balance of the notes. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in June 2013, the Company settled and transferred $33,255 of the note balance, plus accrued interest of $36,920, to the unrelated party in the form of a convertible note for $50,000. Accrued interest of $21,175 was forgiven (see Note 14). The Company is currently pursuing extensions for the remaining note. | 10,000 | 46,755 | |||||||||
Four (4) convertible notes bearing interest at 4% per annum, matured on December 5, 2012, January 3, 2013, January 31, 2013 and March 2, 2013, respectively. For the year ended December 31, 2013 the note holder converted $36,660 of the note due on January 3, 2013 into 16,667 unrestricted shares of the Company's common stock, at conversion prices ranging from $1.7 to $2.5 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 15). The Company is currently pursuing extensions for the remaining notes. | 178,387 | 215,048 | |||||||||
Thirteen (13) convertible notes bearing interest at 8% per annum, matured on January 6, 2013, February 8, 2013, April 30, 2013, August 5, 2013, September 27, 2013, maturing on November 26, 2013, January 24, 2014, March 6, 2014, April 22, 2014 and June 3, 2014, and 10% per annum, maturing April 15, 2014, June 13, 2014 and July 9, 2014, respectively. Three (3) of the notes were settled debt purchase notes for balances transferred from a Company’s unrelated promissory note holder and unrelated convertible note holder. For the year ended December 31, 2013 the note holder converted $383,740 plus $9,400 of accrued interest, into 576,390 unrestricted shares, at conversion prices ranging from $0.15 to $4.65 per share, as adjusted by the Company’s 1:1,500 reverse stock split. For the year ended December 31, 2012 the note holder converted $77,000 plus $2,120 of accrued interest, into 25,007 shares, at conversion prices ranging from $1.8 to $7.5 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). Three (3) notes with maturity dates of March 6, 2014 (partial), April 22, 2014 and June 3, 2014 remain unpaid. | 95,100 | 126,000 | |||||||||
Four (4) convertible notes bearing interest at 8% per annum, matured on August 30, 2013 and November 19, 2013, and maturing on February 28, 2014 and July 1, 2014. For the year ended December 31, 2013 the note holder converted the full balance of $27,750 of the note due August 30, 2013, including accrued interest of $1,291, the full balance of $27,750 of the note due November 19, 2013, including accrued interest of $1,308, and $15,750 of the note due February 28, 2014 into 147,667 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.27 to $3.195 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 15). | 49,750 | 27,750 | |||||||||
One (1) convertible note bearing interest at 8% per annum, maturing on April 23, 2014. For the year ended December 31, 2013 the note holder converted the full balance $25,000 of the note, and accrued interest of $1,112, into 58,027 unrestricted shares of the Company's common stock, at a conversion price of $0.45 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Note 15). | - | - | |||||||||
Seven (7) convertible note bearing interest at 9.9% per annum, maturing on June 4, 2014, July 23, 2014 and October 4, 2014, and 10% per annum, maturing on June 4, 2014, July 14, 2014 and October 4, 2014. The four 10% notes were settled debt purchase notes for balances transferred from a Company’s unrelated promissory note holder and unrelated convertible note holder. For the year ended December 31, 2013 the note holder converted the full balance of $55,152 of one of the notes due June 4, 2014, the full balance of $50,000 of another of the notes due June 4, 2014, $50,497 of the remaining note due June 4, 2014, the full balance of $60,000 of the note due July 17, 2014 and the full balance of $70,000 of one of the notes due October 4, 2014 into 712,079 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.09 to $2.61 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | 86,502 | - | |||||||||
Three (3) convertible note bearing interest at 10% per annum, maturing on July 16, 2014, August 4, 2014 and August 18, 2014. All of the notes were settled debt purchase notes for balances transferred from a Company’s unrelated promissory note holder. For the year ended December 31, 2013 the note holder converted all of the notes for a total of $75,000 and $1,025 in legal fees into 179,824 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.33 to $0.5775 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | - | - | |||||||||
One (1) convertible note bearing interest at 12% per annum, maturing on October 18, 2014, including warrants to purchase 61,112 shares of the Company's common stock at $600 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring on October 31, 2018 (see Note 15). | 55,000 | - | |||||||||
Three (3) convertible note bearing interest at 9% per annum, maturing on November 13, 2014, November 20, 2014 and December 20, 2014. The note due November 13, 2014 was a settled debt purchase note for a balance transferred from a Company’s unrelated promissory note holder. For the year ended December 31, 2013 the note holder converted $41,057 of the note due November 13, 2014 into 181,307 unrestricted shares of the Company's common stock, at conversion prices ranging from $0.087 to $0.261 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | 115,443 | - | |||||||||
One (1) convertible note bearing interest at 9% per annum, maturing on December 26, 2015. | 40,000 | - | |||||||||
One (1) convertible note bearing interest at 10% per annum, maturing on September 20, 2014. The note was a settled debt purchase note for a balance transferred from a Company’s unrelated promissory note holder. For the year ended December 31, 2013 the note holder converted $16,750 of the note into 203,031 unrestricted shares of the Company's common stock, at a conversion price of $0.0405 per share, as adjusted by the Company’s 1:1,500 reverse stock split (see Notes 9 and 15). | 8,250 | - | |||||||||
Convertible non-interest bearing notes, with a conversion price of $9.00 per share matured June 2006 and an 18% convertible note matured April 2008 with a conversion price of $750 per share and 5 shares of the Company’s common stock as adjusted by the Company’s 1:1,500 reverse stock split. The Company is currently pursuing a settlement agreement with the note holders. | 10,512 | 10,512 | |||||||||
1,668,944 | 1,566,064 | ||||||||||
Long-term portion | (70,000 | ) | -30,000 | ||||||||
1,598,944 | 1,536,064 | ||||||||||
Discount on convertible notes payable | (528,477 | ) | -199,052 | ||||||||
Current maturities, net of discount | $ | 1,070,467 | $ | 1,337,012 | |||||||
Convertible_Notes_Payable_Rela1
Convertible Notes Payable Related Parties (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Convertible Notes Payable Related Parties (Tables) | ' | |||||||||||||
Detailed Information Relating to Convertible Notes Payable Related parties | ' | |||||||||||||
Convertible notes payable - related party consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Convertible note with the VP of Technology bearing interest at the prime rate plus 2% per annum with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on September 30, 2010. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split. In January 2014, the note was extended to December 31, 2014. | $ | 50,000 | $ | 50,000 | ||||||||||
Convertible note with the VP of Technology bearing interest at the prime rate plus 4% per annum with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on September 30, 2010. In January 2014, the note was extended to December 31, 2014. | 7,500 | 7,500 | ||||||||||||
Convertible notes with the CEO bearing interest at 8% per annum with a conversion price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally scheduled to mature on April 30, 2011. The Company issued 2 warrants with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, which expired February 4, 2014, September 7, 2014 and August 16, 2015, respectively. In January 2014, the notes were extended to December 31, 2014. | 230,000 | 230,000 | ||||||||||||
Convertible notes with an employee bearing interest at 8% per annum with a conversion price of $15,000 per share, originally matured on June 30, 2010, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, and expiration dates of August 26, 2015 and September 29, 2015. In January 2014, the notes were extended to December 31, 2014. | 15,000 | 15,000 | ||||||||||||
Convertible note with an employee bearing interest at 8% per annum with a conversion price of $15,000 per share, originally matured on June 30, 2010, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, and an expiration date of December 6, 2015. In April 2007, the interest calculation was amended from simple to compound effective April 1, 2007. In January 2014, the note was extended to December 31, 2014. | 10,000 | 10,000 | ||||||||||||
Convertible notes with the CEO bearing compound interest at 8% per annum with a conversion price of $15,000 per share, originally matured on April 30, 2011, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring January 18, 2016 and February 28, 2016, respectively. In January 2014, the notes were extended to December 31, 2014. | 38,000 | 38,000 | ||||||||||||
Convertible note with an employee bearing compound interest at 8% per annum with a conversion price of $11.250 per share, originally matured on June 30, 2010, as adjusted by the Company’s 1:1,500 reverse stock split. The Company issued 1 warrant with an exercise price of $15,000 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring March 6, 2016. In January 2014, the note was extended to December 31, 2014. | 5,000 | 5,000 | ||||||||||||
$ | 355,500 | $ | 355,500 |
Notes_Payable_Tables
Notes Payable (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Notes Payable (Tables) | ' | |||||||||||||
Detailed Information Relating To Notes Payable | ' | |||||||||||||
Notes payable consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Seventy (70) units, with each unit consisting of a 10% promissory note of $25,000, matured from January 22, 2011 through December 18, 2011 with a 10% discount rate, and 55 non-dilutable (for one (1) year) restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. Pursuant to the terms and condition of a debt purchase agreement among certain note holders, the Company and the Consultant formalized in September 2011, the certain note holders transferred certain notes with the principal amount of $50,000 and $25,000, including accrued interest, in July 2011 and August 2011, respectively, to the consultant. Pursuant to the terms and conditions of a settlement agreement that the Company executed with the estate of a deceased note holder in November 2011, the Company settled a $25,000 note for restricted shares of its common stock, in December 2011, issued to two (2) beneficiaries of the estate (see Notes 7 and 14). Pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and two unrelated parties in September 2013, October 2013 and December 2013, the Company settled and transferred $100,000 of the note balance to the unrelated parties in the form of four (4) convertible notes for $25,000 each. The Company is currently pursuing extensions on the remaining notes. | $ | 1,550,000 | $ | 1,650,000 | ||||||||||
Promissory note bearing interest at 10% per annum, matured on January 23, 2012, with a total of 492 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. Pursuant to the terms and conditions of debt purchase agreements formalized among the Company, the note holder and an unrelated party in July 2013 and October 2013, the Company transferred $60,000 and $70,000, respectively, of the note balance to the unrelated party in the form of a convertible notes for $60,000 and $70,000 (see Notes 7 and 14). The Company is currently pursuing an extension. | 95,000 | 225,000 | ||||||||||||
Two (2) units with each unit consisting of a 10% promissory note of $25,000, matured on April 20, 2012, and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The 67 shares, as adjusted by the Company’s 1:1,500 reverse stock split, were issued in June 2009. The Company is currently pursuing extensions. | 50,000 | 50,000 | ||||||||||||
10% promissory note, matured on October 20, 2012 and 55 shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split ,valued at market price, for a total of 110 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split, issued in November 2009. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in July 2013, the Company transferred the note balance to the unrelated party in the form of a convertible note for $50,000 (see Notes 7 and 14). | - | 50,000 | ||||||||||||
One (1) unit consisting of a 10% promissory note of $25,000, matured on June 8, 2012, and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The shares were issued in June 2009. The Company is currently pursuing an extension. | 25,000 | 25,000 | ||||||||||||
Three (3) units with each unit consisting of a 10% promissory note of $25,000, matured on June 25, 2012, and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 100 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. The shares were issued in August 2009. The Company is currently pursuing extensions. | 75,000 | 75,000 | ||||||||||||
1.4 units with each unit consisting of a 10% promissory note of $25,000, matured on July 14, 2012 and 34 restricted shares of the Company’s common stock as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 47 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. The shares were issued in August 2009. The Company is currently pursuing an extension. | 35,000 | 35,000 | ||||||||||||
One (1) unit consisting of a 10% promissory note of $25,000, matured on August 18, 2012 and 50 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The Company is currently pursuing an extension. | 25,000 | 25,000 | ||||||||||||
Two (2) units with each unit consisting of a 10% promissory note of $25,000, matured on September 2, 2012 and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 67 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split . The April 2009 agreement whereby the note shall be repaid from the proceeds of sales of the Company’s products sold by the note holder who is a distributor for the Company also applies to this note. In September 2012, the note was extended to September 30, 2013. For the years ended December 31, 2013 and 2012, sales proceeds of $1,275 and $10,401, respectively, were applied to the note balance. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in June 2013, the Company transferred $31,814 of the note balance, plus accrued interest of $18,526, to the unrelated party in the form of a convertible note for $50,340 (see Notes 7 and 14). | - | 33,088 | ||||||||||||
A promissory note executed in October 2009 for $50,000, matured on October 20, 2012. Pursuant to the terms and conditions of the promissory note, the Company sold 3/4 unit with each unit consisting of a 10% promissory note of $25,000 and 89 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 67 shares of common stock, as adjusted by the Company’s 1:1,500 reverse stock split. Pursuant to the terms and conditions of a Forbearance Agreement executed with the note holder in December 2012, the Company repaid the principal of the note of $12,200 in December 2012, $6,100 in January 2013 and $450 in February 2013, and accrued interest of $5,650 in February 2013 (see Note 14). | - | 6,550 | ||||||||||||
A promissory note executed in May 2010 for $50,000, bearing interest at 10% per annum, matured on May 21, 2013, and 134 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price. The April 2009 agreement whereby the note shall be repaid from the proceeds of sales of the Company’s products sold by the note holder who is a distributor for the Company also applies to this note. For the years ended December 31, 2013 and 2012, no sales proceeds were applied to the note balance. Pursuant to the terms and conditions of a debt purchase agreement formalized among the Company, the note holder and an unrelated party in June 2013, the Company settled and transferred the $50,000 note balance, plus accrued interest of $15,152, to the unrelated party in the form of a convertible note for $55,152. Accrued interest of $10,000 was forgiven (see Notes 7 and 14). | - | 50,000 | ||||||||||||
Promissory notes executed in July 2011 bearing interest at 10% per annum, matured on December 31, 2011. The Company issued 667 warrants with an exercise price of $750 per share, as adjusted by the Company’s 1:1,500 reverse stock split, expiring July 15, 2014. The fair value of the warrants issued was $26,200, all of which was expensed in 2011 as interest expense. The Company is currently pursuing extensions. | 87,500 | 87,500 | ||||||||||||
A promissory note executed in August 2011 bearing interest at 10% per annum, matured on December 31, 2011. The Company is currently pursuing an extension. | 50,000 | 50,000 | ||||||||||||
1,992,500 | 2,362,138 | |||||||||||||
Long-term portion | (- | ) | (- | ) | ||||||||||
1,992,500 | 2,362,138 | |||||||||||||
Discount on convertible notes payable | (- | ) | (1,448 | ) | ||||||||||
Current maturities, net of discount | $ | 1,992,500 | $ | 2,360,690 | ||||||||||
Notes_Payable_Related_Parties_
Notes Payable Related Parties (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Notes Payable Related Parties (Tables) | ' | |||||||||||||
Detailed Information Relating To Notes Payable Related Parties | ' | |||||||||||||
Notes payable - related party consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
Promissory notes executed with the CEO bearing interest at an amended rate of 8% per annum originally matured on April 30, 2011. In January 2014, the notes were extended to December 31, 2014. | $ | 504,000 | $ | 504,000 | ||||||||||
A promissory note executed with the CEO bearing interest at 9% per annum originally matured on April 30, 2011. The Company issued 14 warrants with an exercise price of $1,950 per share, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on May 25, 2011. The fair value of the warrants issued was $24,300. In January 2014, the note was extended to December 31, 2014. | 100,000 | 100,000 | ||||||||||||
A promissory note with the CEO bearing interest at 8% per annum originally matured on April 30, 2011. The Company issued 6 warrants with an exercise price of $750 per share, as adjusted by the Company’s 1:1,500 reverse stock split, which originally matured on February 21, 2012. The fair value of the warrants issued was $3,758. In January 2014, the note was extended to December 31, 2014. | 22,000 | 22,000 | ||||||||||||
Two (2) 10% promissory notes, with the CEO, of $25,000 and 34 restricted shares of the Company’s common stock, as adjusted by the Company’s 1:1,500 reverse stock split, and at market price, for a total of 67 shares, as adjusted by the Company’s 1:1,500 reverse stock split, originally matured on April 30, 2011. In January 2014, the note was extended to December 31, 2014. | 50,000 | 50,000 | ||||||||||||
Promissory notes with the CEO, non-interest bearing, originally matured on April 30, 2011. Partial payments of $6,580 were made towards the notes in August and September 2010 and $2,700 in February 2011. In January 2014, the notes were extended to December 31, 2014. | 31,420 | 31,420 | ||||||||||||
In October 2010, the Company assigned the proceeds of six (6) open accounts receivable invoices, totaling $20,761, to its CEO. The assignment was non-interest bearing and fee free with a due date of November 20, 2010. Partial repayments were made in October 2010 for $4,218 and November 2010 for $4,125. In January 2014, the note was extended to December 31, 2014 (see Note 14). | 12,418 | 12,418 | ||||||||||||
A promissory note executed in March 2011 with the CEO, non-interest bearing, originally matured on April 1, 2011. In January 2014, the note was extended to December 31, 2014. | 2,800 | 2,800 | ||||||||||||
$ | 722,638 | $ | 722,638 | |||||||||||
Convertible_Secured_Notes_Paya1
Convertible Secured Notes Payable (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Convertible Secured Notes Payable (Tables) | ' | |||||||||||||
Details Of Convertible Secured Notes Payables | ' | |||||||||||||
Convertible secured notes payable consisted of the following: | ||||||||||||||
31-Dec-13 | 31-Dec-12 | |||||||||||||
DART Limited (custodian for Citco Global and as assigned from YA Global/Highgate) (“DART”) | $ | 542,588 | $ | 542,588 | ||||||||||
Current maturities, net of discount | $ | 542,588 | $ | 542,588 |
Derivative_Financial_Instrumen
Derivative Financial Instruments (Tables) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Derivative Financial Instruments (Tables) | ' | ||||||
Fair Value Measurement Using Level Three Inputs | ' | ||||||
all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3): | |||||||
Fair Value Measurement Using Level 3 Inputs | |||||||
Derivative warrants Assets (Liability) | Total | ||||||
Balance, December 31, 2011 | $ | -334,605 | $ | -334,605 | |||
Purchases, issuances and settlements | -335,336 | -335,336 | |||||
Transfers in and/or out of Level 3 | - | - | |||||
Total gains or losses (realized/unrealized) included in: | |||||||
Net income (loss) | 294,307 | 294,307 | |||||
Other comprehensive income (loss) | - | - | |||||
Balance, December 31, 2012 | $ | -375,634 | -375,634 | ||||
Purchases, issuances and settlements | -456,794 | -456,794 | |||||
Transfers in and/or out of Level 3 | - | - | |||||
Total gains or losses (realized/unrealized) included in: | |||||||
Net income (loss) | 312,995 | 312,995 | |||||
Other comprehensive income (loss) | - | - | |||||
Balance, December 31, 2013 | $ | -519,433 | -519,433 | ||||
Accrued_expenses_consisted_Tab
Accrued expenses consisted (Table) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Accrued expenses consisted | ' | ||||||
Accrued expenses consisted | ' | ||||||
Accrued expenses consisted of the following: | |||||||
31-Dec-13 | 31-Dec-12 | ||||||
Accrued interest | $ | 2,587,108 | $ | 2,208,223 | |||
Accrued salaries and payroll taxes (i) | 1,757,310 | 1,727,780 | |||||
Accrued expenses – other | 6,059 | 6,059 | |||||
$ | 4,350,477 | $ | 3,942,062 | ||||
Stockholders_Deficit_Tables
Stockholders Deficit (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Stockholders Deficit (Tables) | ' | ||||||||||||||||||
Warrant Activities | ' | ||||||||||||||||||
The table below summarizes the Company’s non-derivative warrant activities through December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Number of | Exercise Price Range Per Share | Weighted Average Exercise Price | Fair Value at Date of Issuance | Aggregate | |||||||||||||||
Warrant Shares | Intrinsic | ||||||||||||||||||
Value | |||||||||||||||||||
Balance, December 31, 2011 | 160,646 | $ | 6.00-15,000.00 | $ | 75 | $ | 2,742,658 | $ | - | ||||||||||
Granted | 20,081 | 30.00-60.00 | 45 | 88,850 | - | ||||||||||||||
Canceled for cashless exercise | (-) | - | - | - | - | ||||||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | -5,391 | 6.00-8,250.00 | 315 | -1,305,717 | - | ||||||||||||||
Balance, December 31, 2012 | 175,336 | $ | 2.25-15,000.00 | $ | 73.5 | $ | 1,525,791 | $ | - | ||||||||||
Granted | 61,162 | 6.00-600.00 | 600 | 64,692 | - | ||||||||||||||
Canceled for cashless exercise | (-) | - | - | - | - | ||||||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | -24,253 | 22.50-15,000.00 | 49.5 | -482,177 | - | ||||||||||||||
Balance, December 31, 2013 | 212,245 | $ | 2.25-15,000.00 | $ | 238.5 | $ | 1,108,306 | $ | - | ||||||||||
Vested and exercisable, December 31, 2013 | 212,245 | $ | 2.25-15,000.00 | $ | 238.5 | $ | 1,108,306 | $ | - | ||||||||||
Unvested, December 31, 2013 | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Outstanding And Exercisable Warrants | ' | ||||||||||||||||||
The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Number Exercisable | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | |||||||||||||
$15,000.00 | 3 | 0.71 | $ | 15,000.00 | 3 | 0.71 | $ | 15,000.00 | |||||||||||
$22.50-1,200.00 | 212,242 | 1.3 | $ | 75 | 212,242 | 1.3 | $ | 75 | |||||||||||
$22.50 - $15,000.00 | 212,245 | 1.3 | $ | 75 | 212,245 | 1.3 | $ | 75 | |||||||||||
Weighted Average Assumptions | ' | ||||||||||||||||||
The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: | |||||||||||||||||||
30-Jan-13 | |||||||||||||||||||
Expected life (year) | 10 | ||||||||||||||||||
Expected volatility | 142.00% | ||||||||||||||||||
Risk-free interest rate | 2.03% | ||||||||||||||||||
Expected annual rate of quarterly dividends | 0.00% | ||||||||||||||||||
Stock_Based_Compensation_Table
Stock Based Compensation (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Stock Based Compensation (Tables) | ' | ||||||||||||||||||
Estimated fair value options | ' | ||||||||||||||||||
The Company estimated the fair value of 2013 options on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: | |||||||||||||||||||
3-Jan-13 | |||||||||||||||||||
Expected life (year) | 10 | ||||||||||||||||||
Expected volatility | 154.00% | ||||||||||||||||||
Risk-free interest rate | 1.92% | ||||||||||||||||||
Expected annual rate of quarterly dividends | 0.00% | ||||||||||||||||||
Incentive Plan Stock Option Activities | ' | ||||||||||||||||||
The table below summarizes the Company’s 2004 Incentive Plan and 2012 Stock Incentive Plan activities through December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Number of | Exercise Price Range Per Share | Weighted Average Exercise Price | Fair Value at Date of Issuance | Aggregate | |||||||||||||||
Option Shares | Intrinsic | ||||||||||||||||||
Value | |||||||||||||||||||
Balance, December 31, 2011 | 93,352 | $ | 3.75-15,000.00 | $ | 21 | $ | 3,214,621 | $ | - | ||||||||||
Granted | - | - | - | - | - | ||||||||||||||
Canceled for cashless exercise | (-) | - | - | - | - | ||||||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | - | - | - | - | - | ||||||||||||||
Balance, December 31, 2012 | 93,352 | $ | 3.75-15,000.00 | $ | 21 | $ | 3,214,621 | $ | - | ||||||||||
Granted | 3,334 | $ | 3.45 | $ | 3.45 | $ | 10,000 | $ | - | ||||||||||
Canceled | -25 | $ | 1,500.00 | $ | 4,200.00 | $ | -41,488 | $ | - | ||||||||||
Exercised (Cashless) | (-) | - | - | - | - | ||||||||||||||
Exercised | (-) | - | - | - | - | ||||||||||||||
Expired | -4,071 | 30.00- 120.00 | 90 | -383,480 | - | ||||||||||||||
Balance, December 31, 2013 | 92,590 | $ | 3.45-15,000.00 | $ | 15.45 | $ | 2,799,653 | $ | - | ||||||||||
Vested and exercisable, December 31, 2013 | 92,590 | $ | 3.45-15,000.00 | $ | 15.45 | $ | 2,799,653 | $ | - | ||||||||||
Unvested, December 31, 2013 | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Outstanding And Exercisable Incentive Plan Options | ' | ||||||||||||||||||
The following table summarizes information concerning 2004 Incentive plan and 2012 Stock Incentive Plan as of December 31, 2013, as adjusted by the Company’s 1:1,500 reverse stock split: | |||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | Number Exercisable | Average Remaining Contractual Life (in years) | Weighted Average Exercise Price | |||||||||||||
$15,000 | 16 | 0.77 | $ | 15,000.00 | 16 | 0.77 | $ | 15,000 | |||||||||||
$1,500 | 50 | 2.51 | $ | 1,500.00 | 50 | 2.51 | $ | 1,500 | |||||||||||
$3.75-562.50 | 89,190 | 2.14 | $ | 15 | 89,190 | 2.14 | $ | 15 | |||||||||||
$3.45 | 3,334 | 9 | $ | 3.45 | 3,334 | 9.005 | 3.45 | ||||||||||||
$3.45-15,000 | 92,590 | 2.38 | $ | 17.98 | 92,590 | 2.38 | $ | 17.98 |
Concentration_of_Credit_Risk_T
Concentration of Credit Risk (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
Concentration of Credit Risk (Tables) | ' | ||||||||||||||
Customers And Credit Concentrations | ' | ||||||||||||||
Revenue concentrations and the accounts receivables concentrations are as follows: | |||||||||||||||
Net Sales | Accounts Receivableat | ||||||||||||||
for the Years Ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Customer A | 28.80% | 14.90% | -% | 87.60% | |||||||||||
Customer B | 25.30% | 11.60% | 25.90% | -% | |||||||||||
Customer C | 22.60% | 58.40% | -% | -% | |||||||||||
76.70% | 84.90% | 25.90% | 87.60% |
Estimated_useful_lives_of_the_
Estimated useful lives of the respective assets as follows (Details) (USD $) | Dec. 31, 2013 |
Estimated useful lives of the respective assets as follows | ' |
Computer equipment | $5 |
Computer software | 3 |
Furniture and fixture | 7 |
Office equipment | $7 |
Expected useful lives or the legal lives of the domestic patents | '17 to 20 years |
Expected useful lives or the legal lives of the foreign patents | '5 to 20 years |
Recovered_Sheet1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES POTENTIALLY OUTSTANDING DILUTIVE COMMON SHARES (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES POTENTIALLY OUTSTANDING DILUTIVE COMMON SHARES | ' | ' |
Common shares issuable under the conversion feature of convertible notes payable | 4,242,707 | 104,799 |
Sub-total: Conversion feature shares | 4,242,707 | 104,799 |
Options issued from May 20, 2003 through April 21, 2011 to employees to purchase common shares with exercise prices ranging from $3.75 to $15,000 per share expiring three (3) years to ten (10) years from the date of issuance | 89,257 | 93,352 |
Options issued from December 2, 2004 through January 30, 2013 to parties other than employees to purchase common shares with exercise prices ranging from $3.00 to $13,500 per share expiring five (5) years to ten (10) years from the date of issuance | 8,000 | 1,841 |
Options issued on January 3, 2013 from the 2012 Stock Incentive Plan to employees to purchase common shares with an exercise price of $3.45 per share expiring ten (10) years from the date of issuance | 3,333 | 0 |
Sub-total: Stock option shares | 100,590 | 95,193 |
Warrants issued in connection with debentures | 61,781 | 1,849 |
Warrants sold for cash | 121,669 | 148,233 |
Warrants issued for services | 10,017 | 5,550 |
Warrants issued in connection with the sale of common stock | 18,778 | 19,704 |
Sub-total: Warrant shares | 212,245 | 175,336 |
Total potentially outstanding dilutive common shares | 4,555,542 | 375,328 |
Property_and_equipment_consist
Property and equipment consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Property and equipment consisted of the following | ' | ' |
Computer equipment with estimated useful lives 5 years | $73,540 | $73,540 |
Computer software with estimated useful lives 3 years | 25,135 | 23,636 |
Furniture and fixture with estimated useful lives 7 years | 10,157 | 10,157 |
Office equipment with estimated useful lives 7 years | 15,906 | 15,906 |
Property and equipment gross | 124,738 | 123,239 |
Less accumulated depreciation (i) | -120,749 | -116,129 |
Property and equipment net | $3,989 | $7,110 |
PATENTS_NET_COST_DETAILS
PATENTS NET COST (DETAILS) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
PATENTS NET COST | ' | ' |
Patents Gross | $22,329 | $4,329 |
Accumulated amortization Patents | -2,310 | -255 |
Net Vlaue of Patents | $20,019 | $4,074 |
Capitalized_patent_application
Capitalized patent application costs (Details) (USD $) | Dec. 31, 2011 |
Capitalized patent application costs | ' |
Capitalized patent application costs. | $4,329 |
Legal life in years | 17 |
Options granted to to purchase shares of its common stock, as adjusted by the Company's 1:1,500 reverse stock split | 6,667 |
Options value per share | $3 |
Patent upon granted recorded in the books | $18,000 |
Remaining legal life in years | 10 |
Convertible_notes_payable_cons
Convertible notes payable consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Convertible notes payable consisted of the following: | ' | ' |
Convertible note bearing interest at 8% per annum, matured on March 28, 2008, with a conversion price of $13,500 per share | $235,000 | $235,000 |
Convertible notes bearing interest at 8% per annum with a conversion price of $13,500 per share | 50,000 | 50,000 |
Convertible note bearing interest at 9% per annum with a conversion price of $2,100 per share | 80,000 | 200,000 |
Convertible note bearing interest at 9% per with a conversion price of $1,200 per share | 150,000 | 150,000 |
Convertible note executed in May 2007 bearing interest at 9% per annum | 100,000 | 100,000 |
Convertible notes executed in June 2007 bearing interest at 8% per annum | 100,000 | 100,000 |
Convertible note executed in July 2007 bearing interest at 8% per annum | 100,000 | 100,000 |
Convertible notes executed in August 2007 bearing interest at 9% per annum | 120,000 | 120,000 |
Convertible notes executed in December 2009 bearing interest at 9% per annum | 50,000 | 50,000 |
Convertible note bearing interest at 8% per annum, maturing on March 31, 2015, with a conversion price of $3 per share, as adjusted by the Company's 1:1,500 reverse stock split. | 30,000 | 30,000 |
Convertible note bearing interest at 8% per annum, matured on December 31, 2012, with a conversion price of $15,000 per share | 5,000 | 5,000 |
Convertible notes, bearing compound interest at 8% per annum | 10,000 | 46,755 |
Four (4) convertible notes bearing interest at 4% per annum | 178,387 | 215,048 |
Thirteen (13) convertible notes bearing interest at 8% per annum | 95,100 | 126,000 |
Four (4) convertible notes bearing interest at 8% per annum | 49,750 | 27,750 |
One (1) convertible note bearing interest at 8% per annum, maturing on April 23, 2014 | 0 | 0 |
Seven (7) convertible note bearing interest at 9.9% per annum | 86,502 | 0 |
Three (3) convertible note bearing interest at 10% per annum, maturing on July 16, 2014, August 4, 2014 and August 18, 2014 | 0 | 0 |
One (1) convertible note bearing interest at 12% per annum, maturing on October 18, 2014 | 55,000 | 0 |
Three (3) convertible note bearing interest at 9% per annum | 115,443 | 0 |
One (1) convertible note bearing interest at 9% per annum, maturing on December 26, 2015. | 40,000 | 0 |
One (1) convertible note bearing interest at 10% per annum, maturing on September 20, 2014. | 8,250 | 0 |
Convertible non-interest bearing notes, with a conversion price of $9.00 per share matured June 2006 | 10,512 | 10,512 |
Total Convertible notes payable | 1,668,944 | 1,566,064 |
Long-term portion | -70,000 | -30,000 |
Current portion of Long term notes | 1,598,944 | 1,536,064 |
Discount on convertible notes payable | -528,477 | -199,052 |
Current maturities, net of discount | 1,070,467 | 1,337,012 |
Accrued interest due for the convertible notes | $794,395 | $658,375 |
Amortization_and_depreciation_
Amortization and depreciation Expense (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Amortization and depreciation Expense | ' | ' |
Amortization expense for Website | $3,000 | $1,500 |
Amortization expense for Patents | 2,055 | 255 |
Depreciation expense on Property and equipment | $4,620 | $5,689 |
Website_consisted_of_the_follo
Website consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Website consisted of the following | ' | ' |
Website Gross | $31,331 | $31,331 |
Accumulated amortization Website | -26,831 | -23,831 |
Website net | $4,500 | $7,500 |
Recovered_Sheet2
Convertible notes payable - related party consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Convertible notes payable - related party consisted of the following: | ' | ' |
(1) Convertible note with the VP of Technology bearing interest at the prime rate plus 2% per annum | $50,000 | $50,000 |
(2) Convertible note with the VP of Technology bearing interest at the prime rate plus 4% per annum | 7,500 | 7,500 |
(3) Convertible notes with the CEO bearing interest at 8% per annum | 230,000 | 230,000 |
(4) Convertible notes with an employee bearing interest at 8% per annum | 15,000 | 15,000 |
(5) Convertible note with an employee bearing interest at 8% per annum with a conversion price of $ 15,000 per share | 10,000 | 10,000 |
(6) Convertible notes with the CEO bearing compound interest at 8% per annum with a conversion price of $15,000 per share | 38,000 | 38,000 |
(7) Convertible note with an employee bearing compound interest at 8% per annum with a conversion price of $7.50 per share | 5,000 | 5,000 |
Total of convertible notes Payable related party, | $355,500 | $355,500 |
Notes_payable_consisted_of_the
Notes payable consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes payable consisted of the following: | ' | ' |
Seventy units, with each unit consisting of a 10% promissory note | $1,550,000 | $1,650,000 |
Promissory note bearing interest at 10% per annum | 95,000 | 225,000 |
Two units with each unit consisting of a 10% promissory note | 50,000 | 50,000 |
10% promissory note, which matured on October 20, 2012 | 0 | 50,000 |
One unit consisting of a 10% promissory note | 25,000 | 25,000 |
Three units with each unit consisting of a 10% promissory note | 75,000 | 75,000 |
1.4 units with each unit consisting of a 10% promissory note | 35,000 | 35,000 |
One unit consisting of a 10% promissory note of $25,000, maturing on August 18, 2012 and 75,000 restricted shares of the Company's common stock, at market price | 25,000 | 25,000 |
Two units with each unit consisting of a 10% promissory note of $25,000, maturing on September 2, 2012 | 0 | 33,088 |
Promissory note executed in October 2009 for $50,000, which matured on October 20, 2012 | 0 | 6,550 |
Promissory note executed in May 2010 for $50,000, bearing interest at 10% per annum | 0 | 50,000 |
Promissory notes executed in July 2011 bearing interest at 10% per annum | 87,500 | 87,500 |
Promissory note executed in August 2011 bearing interest at 10% per annum | 50,000 | 50,000 |
Total promissory notes gross | 1,992,500 | 2,362,138 |
Long-term portion of promissory notes | 0 | 0 |
Current portion of promissory notes | 1,992,500 | 2,362,138 |
Discount on convertible promissory notes payable | 0 | -1,448 |
Current maturities of promissory notes, net of discount | 1,992,500 | 2,360,690 |
Accrued interest due for the notes | $1,329,835 | $1,107,639 |
Notes_payable_related_party_co
Notes payable - related party consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes payable - related party consisted of the following: | ' | ' |
(1) Promissory notes executed with the CEO bearing interest at an amended rate of 8% per annum | $504,000 | $504,000 |
(2) Promissory note executed with the CEO bearing interest at 9% per annum | 100,000 | 100,000 |
(3) Promissory note with the CEO bearing interest at 8% per annum which matured on April 30, 2011. | 22,000 | 22,000 |
(4) Two 10% promissory notes, with the CEO | 50,000 | 50,000 |
(5) Promissory notes with the CEO, non-interest bearing, which matured on April 30, 2011 | 31,420 | 31,420 |
(6) In October 2010, the Company assigned the proceeds of six open receivables invoices | 12,418 | 12,418 |
(7) Promissory note executed in March 2011 with the CEO, non-interest bearing, which matured on April 1, 2011 | 2,800 | 2,800 |
Total Notes Payable - Related Parties. | 722,638 | 722,638 |
Accrued interest due for the notes - related parties | $436,493 | $380,413 |
Interest_Expense_on_notes_and_
Interest Expense on notes and convertible notes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Interest Expense on notes and convertible notes | ' | ' |
Interest expense for related parties notes payable during the period | $56,080 | $56,234 |
Interest expense for notes payable during the period | 222,196 | 238,761 |
Interest expense for related parties convertible notes payable during the period | 43,843 | 40,224 |
Interest expense for convertible notes payable during the period | $136,020 | $121,354 |
Recovered_Sheet3
Convertible secured notes payable consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Convertible secured notes payable consisted of the following: | ' | ' |
DART Limited (custodian for Citco Global and as assigned from YA Global/Highgate) | $542,588 | $542,588 |
Current maturities, net of discount of Convertible secured notes payable | $542,588 | $542,588 |
Summary_of_the_Changes_in_Fair
Summary of the Changes in Fair Value of Financial Liabilities (Details) (USD $) | Derivative warrants Assets (Liability). | Total Value' |
Balance of Financial Liabilities at Dec. 31, 2011 | ($334,605) | ($334,605) |
Purchases, issuances and settlements | -335,336 | -335,336 |
Transfers in and/or out of Level 3 | 0 | 0 |
Total gains or losses (realized/unrealized) included in: Net income (loss) | 294,307 | 294,307 |
Other comprehensive income (loss), | 0 | 0 |
Balance of Financial Liabilities . at Dec. 31, 2012 | -375,634 | -375,634 |
Balance of Financial Liabilities at Dec. 31, 2012 | ' | ' |
Purchases, issuances and settlements; | -456,794 | -456,794 |
Transfers in and/or out of Level 3; | 0 | 0 |
Total gains or losses (realized/unrealized) included in: Net income (loss); | 312,995 | 312,995 |
Other comprehensive income (loss); | 0 | 0 |
Balance of Financial Liabilities , at Dec. 31, 2013 | ($519,433) | ($519,433) |
Accrued_expenses_consisted_of_
Accrued expenses consisted of the following (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Accrued expenses consisted of the following | ' | ' |
Accrued interest | $2,587,108 | $2,208,223 |
Accrued salaries and payroll taxes (i) | 1,757,310 | 1,727,780 |
Accrued expenses - other | 6,059 | 6,059 |
Total accrued expenses | $4,350,477 | $3,942,062 |
Commitments_and_Contingencies_
Commitments and Contingencies Payroll Taxes (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Payroll Taxes | ' |
Recognised Pay roll Taxes | $53,901 |
Pay roll taxes delinquent from the year ended December 31, 2003 | 45,000 |
Estimated Penalties and interest on delinquent payroll taxes | $32,462 |
Commitments_and_ContingenciesS
Commitments and ContingenciesSection 105 HRA Plan (Details) (USD $) | Dec. 31, 2013 |
Commitments and ContingenciesSection 105 HRA Plan | ' |
Contribution of single health plan coverage | $1,500 |
Contribution of family health plan coverage | $3,000 |
Commitments_and_Contingencies_1
Commitments and Contingencies Lease Agreements (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Lease Agreements | ' |
Base Rent for month | $3,807 |
Lease Security Deposit | $8,684 |
Commitments_and_Contingencies_2
Commitments and Contingencies Consulting Agreements (details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Consulting Agreements | ' |
Common stock paid to attorney as house of counsel | 67 |
Par value of Common stock paid to attorney | $75 |
Fee paid to attorney in cash per month | $1,000 |
Monthly issuance of shares of common stock | 100 |
Commitments_and_Contingencies_3
Commitments and Contingencies Debt Purchase Agreements (Details) (USD $) | Dec. 31, 2013 | Nov. 30, 2013 | Oct. 31, 2013 | Oct. 15, 2013 | Oct. 10, 2013 | Sep. 30, 2013 | Sep. 15, 2013 | Jul. 31, 2013 | Jul. 15, 2013 | Jun. 30, 2013 | Jun. 15, 2013 | Jun. 10, 2013 |
Commitments and Contingencies Debt Purchase Agreements | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Settled and transferred unrelated party convertible notes in aggregate | $25,000 | $70,000 | $25,000 | $25,000 | $70,000 | $25,000 | $50,000 | $60,000 | $50,000 | $50,000 | $31,814 | $33,255 |
Accrued interest on the above aggregate amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15,152 | 18,526 | 36,920 |
Aggregate Convertible notes issued to the extent of (new debenture contains an embedded derivative feature) | 25,000 | 70,000 | 25,000 | 25,000 | 70,000 | 25,000 | 50,000 | 60,000 | 50,000 | 55,152 | 50,340 | 50,000 |
Accrued interest forgive on the debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | $10,000 | ' | $21,175 |
Commitments_and_Contingencies_4
Commitments and Contingencies Due To Factor (Details) (USD $) | Mar. 31, 2007 |
Commitments and Contingencies Due To Factor | ' |
Factor amount total | $470,200 |
Percentage of factor | 65.00% |
Factor amount | 144,440 |
Certain percentage of factor | 5301000.00% |
Credit paid | 500 |
Percentage of factor. | 2.25% |
Additional percentage of factor | 1.13% |
Settlement amount | 75,000 |
Settlement amount of balance | $209,192 |
Commitments_and_Contingencies_5
Commitments and Contingencies Term Sheet Investor (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Term Sheet Investor | ' |
Investment by firm - convertible notes payable | $53,000 |
Interest rate | 8.00% |
Closing fee payable | 3,000 |
Conversion discount | 42.00% |
Received the first tranche. | 50,000 |
Additional investment - convertible notes payable | 32,500 |
Received the second tranche | 30,000 |
Closing fee. | 2,500 |
New investment on convertible notes payable | 40,000 |
Closing fees recorded | 13,000 |
Financing expenses | $5,562 |
Non_Derivative_Warrant_Details
Non - Derivative Warrant (Details) | Number of Warrant Shares | Weighted Average Exercise Price. | Fair Value at Date of Issuance. | Aggregate Intrinsic Value. |
Balance of Non -Derivative Warrant Exercise Price Range Per Share 6.00 to15,000.00 at Dec. 31, 2011 | 160,646 | 75 | 2,742,658 | 0 |
Granted Exercise Price Range Per Share 30.00 to60.00 | 20,081 | 45 | 88,850 | 0 |
Canceled for cashless exercise | ' | ' | ' | 0 |
Exercised (Cashless) | ' | ' | ' | 0 |
Exercised | ' | ' | ' | 0 |
Expired Exercise Price Range Per Share 6.00 to 8,250.00 | -5,391 | 315 | -1,305,717 | 0 |
Balance Exercise Price Range Per Share 2.25 to 15,000.00 at Dec. 31, 2012 | 175,336 | 73.5 | 1,525,791 | 0 |
Balance of Non -Derivative Warrant Exercise Price Range Per Share 6.00 to15,000.00 at Dec. 31, 2012 | ' | ' | ' | ' |
Granted Exercise Price Range Per Share 6.00 to 600.00 | 61,162 | 600 | 64,692 | 0 |
Canceled for cashless exercise. | ' | ' | ' | 0 |
Exercised (Cashless). | ' | ' | ' | 0 |
Exercised. | ' | ' | ' | 0 |
Expired Exercise Price Range Per Share 22.50 to 15,000.00 | -24,253 | 49.5 | -482,177 | 0 |
Unvested at Dec. 31, 2013 | ' | ' | ' | 0 |
Vested and exercisable Exercise Price Range Per Share 2.25 to 15,000.00 at Dec. 31, 2013 | 212,245 | 238.5 | 1,108,306 | 0 |
Balance Exercise Price Range Per Share 2.25 to 15,000.00. at Dec. 31, 2013 | 212,245 | 238.5 | 1,108,306 | 0 |
Customers_and_Credit_Concentra
Customers and Credit Concentrations (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Customers and Credit Concentrations | ' | ' |
Net sales customer A | 28.80% | 14.90% |
Net sales customer B | 25.30% | 11.60% |
Net sales customer C | 22.60% | 58.40% |
Aggregate percentage- Net Sales | 76.70% | 84.90% |
Receivables Customer A | ' | 87.60% |
Receivables Customer B | 25.90% | ' |
Aggregate percentage - Receivables | 25.90% | 87.60% |
Summarizes_Outstanding_and_Exe
Summarizes Outstanding and Exercisable Options As Follows (Details) | Number Outstanding (Options Outstanding) | Average Remaining ContractLife (in years) (Options Outstanding) | Weighted- Average Exercise Price (Options Outstanding) | Number Exercisable (Options Exercisable) | Average Remaining ContractLife (in years) (Options Exercisable) | Weighted- Average Exercise Price (Options Exercisable) |
Balance of Exercisable options at Dec. 31, 2012 | 0 | ' | ' | ' | ' | ' |
Range of Exercise Prices options 15000 | 16 | 0.77 | 15,000 | 16 | 0.77 | 15,000 |
Range of Exercise Prices options 1500 | 50 | 2.51 | 1,500 | 50 | 2.51 | 1,500 |
Range of Exercise Prices options 3.75-562.50 | 89,190 | 2.14 | 15 | 89,190 | 2.14 | 15 |
Range of Exercise Prices options 3.45 | 3,334 | 9 | 3.45 | 3,334 | 9.01 | 3.45 |
Range of Exercise Prices options 3.45-15,000 | 92,590 | 2.38 | 17.98 | 92,590 | 2.38 | 17.98 |
Balance of Exercisable options, at Dec. 31, 2013 | 0 | ' | ' | ' | ' | ' |
Summarizes_Outstanding_and_Exe1
Summarizes Outstanding and Exercisable warrants As Follows (Details) | Number Outstanding (warrants Outstanding) | Average Remaining ContractLife (in years) (warrants Outstanding) | Weighted- Average Exercise Price ( warrants Outstanding) | Number Exercisable (warrants Exercisable) | Average Remaining ContractLife (in years) (warrants Exercisable) | Weighted- Average Exercise Price (warrants Exercisable) |
Balance of Exercisable warrants at Dec. 31, 2012 | 0 | ' | ' | ' | ' | ' |
Range of Exercise Prices 15000 | 3 | 0.71 | 15,000 | 3 | 0.71 | 15,000 |
Range of Exercise Prices 22.50-1,200.00 | 212,242 | 1.3 | 75 | 212,242 | 1.3 | 75 |
Range of Exercise Prices 22.50 - $15,000.00 | 212,245 | 1.3 | 75 | 212,245 | 1.3 | 75 |
Balance - Exercisable warrants.., at Dec. 31, 2013 | 0 | ' | ' | ' | ' | ' |
BlackScholes_optionpricing_mod
Black-Scholes option-pricing model weighted-average assumptions (Details) | Jan. 30, 2013 | Jan. 03, 2013 |
Black-Scholes option-pricing model weighted-average assumptions | ' | ' |
Expected life (year) | 10 | 10 |
Expected volatility | 142.00% | 154.00% |
Risk-free interest rate | 2.03% | 1.92% |
Expected annual rate of quarterly dividends | 0.00% | 0.00% |
Companys_Incentive_Plan_stock_
Company's Incentive Plan stock option activities (Details) | Number of Options Shares | Weighted Average Exercise Price | Fair Value at Date of Issuance | Aggregate Intrinsic Value |
Balance of stock options Exercise Price Range Per Share 3.75-15,000.00 at Dec. 31, 2011 | 93,352 | 21 | 3,214,621 | 0 |
Granted options | ' | ' | ' | 0 |
Canceled for cashless exercise options | ' | ' | ' | 0 |
Exercised (Cashless) options | ' | ' | ' | 0 |
Exercised options | ' | ' | ' | 0 |
Expired options | ' | ' | ' | 0 |
Balance of stock options Exercise Price Range Per Share 3.75-15,000.00. at Dec. 31, 2012 | 93,352 | 21 | 3,214,621 | 0 |
Balance of stock options Exercise Price Range Per Share 3.75-15,000.00 at Dec. 31, 2012 | ' | ' | ' | ' |
Granted Exercise Price Range Per Share 3.45 | 3,334 | 3 | 10,000 | 0 |
Canceled for cashless exercise options, | -25 | 4,200 | -41,488 | 0 |
Exercised (Cashless) options, | ' | ' | ' | 0 |
Exercised options, | ' | ' | ' | 0 |
Expired options, | -4,071 | 90 | -383,480 | 0 |
Unvested, at Dec. 31, 2013 | ' | ' | ' | 0 |
Vested and exercisable Exercise Price Range Per Share 3.45-15,000.00 at Dec. 31, 2013 | 92,590 | 15 | 2,799,653 | 0 |
Balance of stock options Exercise Price Range Per Share 3.45-15,000.00 at Dec. 31, 2013 | 92,590 | 15 | 2,799,653 | 0 |
Future_minimum_payments_requir
Future minimum payments required under this non-cancelable operating lease were as follows: (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Future minimum payments required under this non-cancelable operating lease were as follows | ' |
Future minimum payments required under this non-cancelable operating lease for the year 2014 | $45,684 |
Future minimum payments required under this non-cancelable operating lease for the year 2015 | 45,684 |
Future minimum payments required under this non-cancelable operating lease for the year 2015 | 3,807 |
Future minimum payments required under this non-cancelable operating lease for the year total | $95,175 |
Subsequent_events_Convertible_
Subsequent events Convertible Notes Payable (Details) (USD $) | Apr. 30, 2014 | Mar. 31, 2014 | Mar. 21, 2014 | Mar. 11, 2014 | Mar. 01, 2014 |
Subsequent events Convertible Notes Payable | ' | ' | ' | ' | ' |
Company issued a convertible note | $50,000 | $150,000 | $37,000 | $37,000 | $53,000 |
Legal fee of convertible note | ' | ' | 2,000 | 2,000 | 3,000 |
Total proceeds of convertible note | ' | ' | 35,000 | 35,000 | 50,000 |
Rate of interest per annum on convertible note | 10.00% | 12.00% | 10.00% | 10.00% | 8.00% |
Term sheet executed with an unrelated party | $250,000 | $500,000 | ' | ' | ' |
Subsequent_events_common_stock
Subsequent events common stock transactions (Details) (USD $) | Mar. 31, 2014 |
Asher | ' |
Company received conversion notices to convert notes | $94,900 |
Company received conversion notices to convert notes | 94,900 |
Accrued interest on convertible notes | 4,900 |
Converted in to unrestricted shares of the Company's common stock | 1,029,483 |
Conversion prices ranging | '0.09 to 0.1112 per share |
Auctus | ' |
Company received conversion notices to convert notes | 17,000 |
Company received conversion notices to convert notes | 17,000 |
Accrued interest on convertible notes | 1,579 |
Converted in to unrestricted shares of the Company's common stock | 206,438 |
Conversion prices ranging | '0.09 per share |
Iconic | ' |
Company received conversion notices to convert notes | 48,054 |
Company received conversion notices to convert notes | 48,054 |
Accrued interest on convertible notes | 1,800 |
Converted in to unrestricted shares of the Company's common stock | 553,937 |
Conversion prices ranging | '0.09 per share |
Tarpon | ' |
Company received conversion notices to convert notes | 48,250 |
Company received conversion notices to convert notes | 48,250 |
Converted in to unrestricted shares of the Company's common stock | 574,073 |
Conversion prices ranging | '0.077056 to 0.10175 per share |
WHC | ' |
Company received conversion notices to convert notes | 24,553 |
Company received conversion notices to convert notes | 24,553 |
Converted in to unrestricted shares of the Company's common stock | 282,223 |
Conversion prices ranging | '0.087 per share |
WHC. | ' |
Company received conversion notices to convert notes | 5,023 |
Company received conversion notices to convert notes | $5,023 |
Converted in to unrestricted shares of the Company's common stock | 61,859 |
Conversion prices ranging | '0.0812 per share |