Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Jul. 13, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Document Type | '10-K | ' | ' |
Amendment Flag | 'false | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Entity Registrant Name | 'Epazz Inc | ' | ' |
Entity Central Index Key | '0001335239 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 6,796,730,730 | ' |
Entity Public Float | ' | ' | $789,803 |
Entity current reporting status | 'Yes | ' | ' |
Well Known Seasoned Issuer? | 'No | ' | ' |
Voluntary Filer? | 'No | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current assets: | ' | ' |
Cash | $208,567 | $46,101 |
Accounts receivable, net | 25,248 | 36,995 |
Other current assets | 106,114 | 22,027 |
Total current assets | 339,929 | 105,123 |
Property and equipment, net | 113,410 | 196,297 |
Intangible assets, net | 374,162 | 821,150 |
Goodwill | 255,460 | 255,460 |
Total assets | 1,082,961 | 1,378,030 |
Current liabilities: | ' | ' |
Dividends payable | 11,000 | 0 |
Accounts payable | 258,163 | 104,727 |
Accrued expenses | 45,298 | 24,924 |
Accrued expenses, related parties | 28,741 | 19,205 |
Deferred revenue | 322,130 | 219,590 |
Lines of credit | 73,232 | 77,047 |
Current maturities of capital lease obligations payable | 17,421 | 25,699 |
Current maturities of notes payable, related parties ($88,868 currently in default) | 397,368 | 22,085 |
Convertible debt, net of discounts of $105,300 and $101,192, respectively ($56,900 currently in default) | 115,128 | 74,708 |
Current maturities of long term debts | 354,786 | 218,699 |
Total current liabilities | 1,623,267 | 786,684 |
Capital lease obligations payable, net of current maturities | 0 | 17,421 |
Notes payable, related parties | 85,000 | 0 |
Convertible debts, net of discounts of $4,483 and $37,876, respectively | 42,166 | 152,973 |
Long term debt, net of current maturities | 857,143 | 892,463 |
Total liabilities | 2,607,576 | 1,849,541 |
Stockholders' equity (deficit): | ' | ' |
Additional paid in capital | 6,429,493 | 4,324,916 |
Stockholders' receivable, consisting of 20,000,000 shares | -800,000 | -800,000 |
Accumulated deficit | -7,501,994 | -4,114,756 |
Total stockholders' equity (deficit) | -1,524,615 | -471,511 |
Total liabilities and stockholders' equity (deficit) | 1,082,961 | 1,378,030 |
Class A [Member] | ' | ' |
Stockholders' equity (deficit): | ' | ' |
Common stock | 346,836 | 117,779 |
Class B [Member] | ' | ' |
Stockholders' equity (deficit): | ' | ' |
Common stock | 1,050 | 550 |
Series A Preferred Stock [Member] | ' | ' |
Stockholders' equity (deficit): | ' | ' |
Convertible Preferred stock | 0 | 0 |
Series B Preferred Stock [Member] | ' | ' |
Stockholders' equity (deficit): | ' | ' |
Convertible Preferred stock | $0 | $0 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Discounts on convertible debt - current | $105,300 | $101,192 |
Discounts on convertible debt - noncurrent | 4,283 | 37,876 |
Notes Payable, Related Parties | ' | ' |
Debt in default | 88,868 | ' |
Convertible Debt [Member] | ' | ' |
Debt in default | $56,900 | ' |
Class A [Member] | ' | ' |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 6,000,000,000 | 6,000,000,000 |
Common stock, shares issued | 3,468,358,708 | 1,177,789,125 |
Common stock, shares outstanding | 3,468,358,708 | 1,177,789,125 |
Class B [Member] | ' | ' |
Common stock, par value per share | $0.00 | $0.00 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 10,500,000 | 5,500,000 |
Common stock, shares outstanding | 10,500,000 | 5,500,000 |
Series A Preferred Stock [Member] | ' | ' |
Preferred stock, par value per shares | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000 | 1,000 |
Preferred stock, shares issued | 1,000 | 1,000 |
Preferred stock, shares outstanding | 1,000 | 1,000 |
Series B Preferred Stock [Member] | ' | ' |
Preferred stock, par value per shares | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000 | 1,000 |
Preferred stock, shares issued | 1,000 | 1,000 |
Preferred stock, shares outstanding | 1,000 | 1,000 |
CONSOLIDATED_STATEMENT_OF_OPER
CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement [Abstract] | ' | ' |
Revenue | $750,139 | $1,193,217 |
Expenses: | ' | ' |
General and administrative | 758,353 | 698,895 |
Salaries and wages | 2,201,161 | 1,665,429 |
Depreciation and amortization | 260,423 | 275,076 |
Impairment on intangible assets | 276,282 | 0 |
Bad debts (recoveries) | -27,129 | 2,957 |
Total operating expenses | 3,469,090 | 2,642,357 |
Net operating loss | -2,718,951 | -1,449,140 |
Other income (expense): | ' | ' |
Interest income | 57 | 52 |
Interest expense | -562,586 | -320,402 |
Loss on debt modifications, related parties | -94,758 | -137,199 |
Total other income (expense) | -657,287 | -457,549 |
Net loss | ($3,376,238) | ($1,906,689) |
Weighted average number of common shares outstanding - basic and fully diluted | 2,536,096,673 | 399,031,314 |
Net loss per share - basic and fully diluted | $0 | $0 |
CONSOLIDATED_STATEMENT_OF_STOC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $) | Convertible Preferred Stock Series A | Convertible Preferred Stock Series B | Class A Common Stock | Convertible Class B Common Stock | Additional Paid-In Capital | Stockholders' Receivable | Accumulated Deficit | Total |
Beginning balance, value at Dec. 31, 2011 | $0 | $0 | $3,090 | $250 | $2,668,032 | ($1,000,000) | ($2,208,067) | ($536,695) |
Beginning balance, shares at Dec. 31, 2011 | 0 | 0 | 30,900,281 | 2,500,000 | ' | ' | ' | ' |
Shares issued for services, related parties, shares issued | 1,000 | 1,000 | 1,075,596,515 | 3,000,000 | ' | ' | ' | 1,180,834 |
Shares issued for services, related parties, value | 0 | 0 | 107,560 | 300 | 1,008,962 | 200,000 | ' | 1,316,822 |
Shares issued for conversion of debt, related parties, shares issued | ' | ' | 59,370,640 | ' | ' | ' | ' | ' |
Shares issued for conversion of debt, related parties, value | ' | ' | 5,937 | ' | 28,791 | ' | ' | 294,728 |
Shares issued for conversion of debt, shares issued | ' | ' | 11,921,689 | ' | ' | ' | ' | ' |
Shares issued for conversion of debt, value | ' | ' | 1,192 | ' | 81,808 | ' | ' | 83,000 |
Beneficial conversion feature of convertible debt | ' | ' | ' | ' | 277,323 | ' | ' | 277,323 |
Net loss | ' | ' | ' | ' | ' | ' | -1,906,689 | -1,906,689 |
Ending balance, value at Dec. 31, 2012 | 0 | 0 | 117,779 | 550 | 4,324,916 | -800,000 | -4,114,756 | -471,511 |
Ending balance, shares at Dec. 31, 2012 | 1,000 | 1,000 | 1,177,789,125 | 5,500,000 | ' | ' | ' | ' |
Shares issued for services, related parties, shares issued | ' | ' | 1,802,052,632 | 5,000,000 | ' | ' | ' | 1,713,150 |
Shares issued for services, related parties, value | ' | ' | 180,206 | 500 | 1,496,294 | ' | ' | 1,677,000 |
Shares issued for debt origination fees, related parties, shares issued | ' | ' | 25,750,000 | ' | ' | ' | ' | ' |
Shares issued for debt origination fees, related parties, value | ' | ' | 2,575 | ' | 33,575 | ' | ' | 36,150 |
Shares issued for conversion of debt, related parties, shares issued | ' | ' | 281,096,026 | ' | ' | ' | ' | ' |
Shares issued for conversion of debt, related parties, value | ' | ' | 28,110 | ' | 159,607 | ' | ' | 187,717 |
Shares issued for conversion of debt, shares issued | ' | ' | 181,670,925 | ' | ' | ' | ' | ' |
Shares issued for conversion of debt, value | ' | ' | 18,166 | ' | 137,657 | ' | ' | 155,823 |
Beneficial conversion feature of convertible debt | ' | ' | ' | ' | 195,652 | ' | ' | 195,652 |
Fair value of debt modification, related parties | ' | ' | ' | ' | 81,792 | ' | ' | 81,792 |
Dividends declared | ' | ' | ' | ' | ' | ' | -11,000 | -11,000 |
Net loss | ' | ' | ' | ' | ' | ' | -3,376,238 | -3,376,238 |
Ending balance, value at Dec. 31, 2013 | $0 | $0 | $346,836 | $1,050 | $6,429,493 | ($800,000) | ($7,501,994) | ($1,524,615) |
Ending balance, shares at Dec. 31, 2013 | 1,000 | 1,000 | 3,468,358,708 | 10,500,000 | ' | ' | ' | ' |
CONSOLIDATED_STATEMENT_OF_CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities | ' | ' |
Net loss | ($3,376,238) | ($1,906,689) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Bad debt (recoveries) | -27,129 | 2,957 |
Depreciation and amortization | 89,717 | 119,628 |
Amortization of intangible assets | 170,706 | 155,448 |
Impairment of intangible assets | 276,282 | 0 |
Amortization of deferred financing costs | 79,123 | 25,849 |
Amortization of discount on convertible notes payable | 237,065 | 155,759 |
Finance costs on debt modifications, related party | 0 | 98,528 |
Loss on debt modifications, related party | 96,032 | 38,671 |
Stock based compensation issued for services, related party | 1,713,150 | 1,278,151 |
Decrease (increase) in assets: | ' | ' |
Accounts receivable | 38,876 | 108,466 |
Other current assets | -56,134 | 7,032 |
Increase (decrease) in liabilities: | ' | ' |
Accounts payable | 153,436 | 63,297 |
Accrued expenses | 27,798 | -4,039 |
Accrued expenses, related parties | 10,796 | -19,356 |
Deferred revenues | 102,540 | -103,438 |
Net cash provided by (used in) operating activities | -463,980 | 20,264 |
Cash flows from investing activities | ' | ' |
Proceeds from the sale of equipment | 0 | 14,175 |
Purchase of equipment | -6,830 | -166,652 |
Acquisition of subsidiaries | 0 | -39,200 |
Net cash used in investing activities | -6,830 | -191,677 |
Cash flows from financing activities | ' | ' |
Payments on capital lease obligations payable | -25,699 | -36,066 |
Proceeds from notes payable, related parties | 634,379 | 203,650 |
Repayment of notes payable, related parties | -210,596 | -255,163 |
Proceeds from convertible debts | 202,000 | 158,374 |
Repayment of convertible debts | -60,500 | 0 |
Proceeds from long term debts | 450,800 | 386,041 |
Repayment of long term debt | -357,108 | -251,990 |
Net cash provided by financing activities | 633,276 | 204,846 |
Net increase (decrease) in cash | 162,466 | 33,433 |
Cash - beginning | 46,101 | 12,668 |
Cash - ending | 208,567 | 46,101 |
Supplemental disclosures: | ' | ' |
Interest paid | 205,508 | 80,023 |
Income taxes paid | 0 | 0 |
Non-cash investing and financing activities: | ' | ' |
Acquisition of subsidiary in exchange for debt | 0 | 460,800 |
Acquisition of leased assets for debt | 0 | 17,855 |
Value of shares issued for conversion of debt | 155,823 | 333,000 |
Value of shares issued for conversion of debt, related parties | 173,477 | 0 |
Discount on beneficial conversion feature of convertible debt | 195,652 | 277,323 |
Deferred financing costs | 107,076 | 0 |
Dividends payable declared | $11,000 | ' |
1_Nature_of_Business_and_Summa
1. Nature of Business and Summary of Significant Accounting Policies | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||
Nature of Business and Summary of Significant Accounting Policies | ' | ||||||
Nature of Business and Organization | |||||||
Epazz, Inc. (“Epazz” or the “Company”), an Illinois corporation, was formed on March 23, 2000 to create software to help college students organize their college information and resources. The idea behind the Company was that if the information and resources provided by colleges and universities was better organized and targeted toward each individual, the students would encounter a personal experience with the college or university that could lead to a lifetime relationship with the institution. This concept is already used by business software designed to retain relationships with clients, employees, vendors and partners. | |||||||
On or about June 18, 2008, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Desk Flex, Inc., an Illinois corporation (“DFI”) and Professional Resource Management, Inc., an Illinois corporation (“PRMI” and collectively with DFI, the “Target Companies”) to acquire 100% of the outstanding shares of the Target Companies. Pursuant to the Purchase Agreement, the Company purchased 100% of the outstanding shares of the Target Companies and DFI and PRMI became wholly-owned subsidiaries of the Company. | |||||||
PRMI and DFI are separate legal entities, but operate in conjunction. PRMI and DFI share office space and certain employees. DFI’s main source of revenue comes from the “Desk/Flex Software” product, which it owns, and PRMI’s main source of revenue comes from the “Agent Power” product line, which it owns. PRMI also acts as the general agent for DFI; however, there is no formal agency agreement between the two companies. DFI developed the Desk/Flex Software (Desk/Flex) to enhance the value of businesses’ real estate investments and modernize their office space. Desk/Flex lets businesses make better use of office space restrictions by enabling employees to instantly access their workstation tools from multiple areas in and outside of the office. Desk/Flex lets employees reserve space in advance or claim space instantly. It adjusts the telephone switch (Private Branch Exchange (PBX)) so that calls ring at the desk du jour, or go directly to voice mail when a worker is not checked in. Desk/Flex is responsive to office size and needs, servicing small to large businesses. Desk/Flex can be configured to administer a single site or multiple sites locally or remotely. Agent Power Software (Agent Power) is PRMI’s software line. Agent Power is a suite of six applications. Each can operate on a stand-alone basis, or can work in conjunction with the other applications. The applications feature workforce management components, which include planning and scheduling; agent adherence; agent performance; automatic call distributor (ACD) group performance; real-time agent status, and info screen. All modules of Agent Power have integration capabilities with Nortel, Avaya, and ROLM ACDs, and the planning and scheduling module works with any modern ACD system. | |||||||
On September 30, 2010, the Company acquired IntelliSys, Inc., doing business as, AutoHire Software, a Florida-based company owned by Igenti, Inc. (“Intellisys”). Intellisys had developed a Web portal infrastructure operating system product called BoxesOSv3.0. BoxesOS creates sources of revenue for Alumni Associations and Non-Profit organizations by utilizing a Web platform to conduct e-commerce and provides e-commerce tools for small businesses to create “my accounts” for their customers. BoxesOS also links a college or university’s resources with the business community by allowing businesses to train their employees by utilizing courseware development from higher education institutions. Epazz BoxesOS v3.0 (Web Infrastructure Operating System) is the Company’s flagship product. Epazz BoxesOS integrates with each organization’s back-end system and provides a customizable personal information system for each stakeholder. Its services include single sign-on, which provides a single-sign-on with security procedure to product users’ information and identity; course management system, which manages distance, traditional courses and calendar; enterprise Website content management, which manages public sites with multi contributors; integration management services, which is integrated into enterprise resource planning (ERP) and mainframes; e-mail management, which is an e-mail server and Web client; instant messenger services, which includes instant messaging and alerts; customer relationship management, which includes prospective students and alumni; calendar/scheduler management, which includes event directory, groupware, and personal calendar; administrative support services, which includes online payment services, and business services, which includes facility management and online bookstore. The AutoHire system provides a tool to power career centers, post job ads to sites and job boards, and to collect resumes online. One feature of the AutoHire system is the interactive question, and online screening and ranking system. The interactive question system provides a means for the client to maintain their own library of questions and to attach selected questions to job opportunities posted. Responses obtained can be used to screen and rank candidates to permit hiring managers to focus their attention on only the most suitable candidates. | |||||||
On October 26, 2011, the Company, through a newly-formed wholly-owned Illinois subsidiary, K9 Bytes, Inc., entered into an Asset Purchase Contract and Receipt Agreement with K9 Bytes, Inc., a Florida corporation (“K9 Bytes” and the “Purchase Contract”). Pursuant to the Purchase Contract, the Company purchased all of K9 Bytes assets, including all of its intellectual property, its business trade name, website (k9bytessoftware.com), furniture, fixtures, equipment and inventory, and goodwill. The Company did not purchase, and K9 Bytes agreed to retain and be responsible for, any and all liabilities of K9 Bytes. K9 Bytes sells Point of Sale software to retail pet stores throughout the United States. | |||||||
On March 28, 2012, we, through a newly-formed wholly-owned Illinois subsidiary, MS Health, Inc. (“MS Health”), closed on an Asset Purchase Agreement (“APA”) with MS Health Software Corporation, a New Jersey corporation (“MSHSC”). Pursuant to the APA, we purchased all of MSHSC’s assets, including all of its intellectual property, its business trademarks and copyrights, furniture, fixtures, equipment and software. MS Health develops and sells CHMCi, an enterprise wide solution that includes tools to effectively provide, manage, bill, and track behavioral healthcare and social services. With CMHCi, an organization will realize the benefits of increased efficiency, accountability, and productivity. CMHCi offers server-based, internet, and secure cloud computing enabling the user to access information as required. By maintaining a complete electronic client record, including data collection and reporting across multiple programs, locations, episodes of care, and service providers, CMHCi helps eliminate redundant record keeping. The scheduler component tracks client, staff, and group appointments. Easy to use, it interfaces seamlessly with service authorization tracking, service history, and billing. The integrated financial reporting component provides the basis for an efficient and comprehensive accounting system, including electronic claims and remittance, third party insurance, and client, municipality, and grantor billing. | |||||||
FlexFridge, Inc. (“FlexFridge”), an Illinois corporation, was formed as a wholly-owned subsidiary of Epazz on March 4, 2013 as Cooling Technology Solutions, Inc. (“CTS”), and was renamed Z Fridge, Inc. (“Z Fridge”) on September 19, 2013 prior to being renamed again to FlexFidge on May 27, 2014. The Company filed a non-provisional patent application and currently has limited activity. The Company has filed a non-provisional patent application for its Project Flex product, which consists of a patent pending foldable mini-fridge. On November 21, 2013, the Company was spun off to shareholders of record on September 15, 2013, whereby shareholders of Epazz, Inc. received one (1) share of FlexFridge in exchange for each ten (10) shares held of Epazz, Inc. Epazz has a controlling financial interest in FlexFridge. As such, FlexFridge is consolidated within these financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10. There has been no material activity within FlexFridge to date. | |||||||
Terran Power, Inc (“Terran”), an Illinois corporation formed as a wholly-owned subsidiary of Epazz on September 19, 2013 to file a non-provisional patent application to develop a mobile power device that allows iPhone and other smartphone users to power up their phone on the go without needing an outlet or a second battery, however, as of the date of this filing there has been no activity and, as such, there are no revenues or expenses. | |||||||
Basis of Accounting | |||||||
Our consolidated financial statements are prepared using the accrual method of accounting as generally accepted in the United States of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC). | |||||||
Principles of Consolidation | |||||||
The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership: | |||||||
State of | Abbreviated | ||||||
Name of Entity(2) | Incorporation | Relationship(1) | Reference | ||||
Epazz, Inc. | Illinois | Parent | Epazz | ||||
IntelliSys, Inc. | Wisconsin | Subsidiary | IntelliSys | ||||
Professional Resource Management, Inc. | Illinois | Subsidiary | PRMI | ||||
Desk Flex, Inc. | Illinois | Subsidiary | DFI | ||||
K9 Bytes, Inc. | Illinois | Subsidiary | K9 Bytes | ||||
MS Health, Inc. | Illinois | Subsidiary | MS Health | ||||
FlexFridge, Inc.(3) | Illinois | Subsidiary(4) | FlexFridge | ||||
Terran Power, Inc.(5) | Illinois | Subsidiary | Terran | ||||
____________ | |||||||
(1) All subsidiaries, with the exception of FlexFridge, are wholly-owned subsidiaries. | |||||||
(2) All entities are in the form of Corporations. | |||||||
(3) Formerly Z Fridge, Inc. and Cooling Technology Solutions, Inc. | |||||||
(4) FlexFridge, Inc. was spun-off on November 21, 2013, and distributed on a 1:10 basis to shareholders of record on September 15, 2013. Epazz has a controlling financial interest in FlexFridge. As such, FlexFridge is consolidated within these financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10. There has been no material activity within FlexFridge to date. | |||||||
(5) Entity formed for prospective purposes, but has not incurred any income or expenses to date. | |||||||
The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company, Epazz and subsidiaries, IntelliSys, PRMI, DFI, K9 Bytes, MS Health and FlexFridge will be collectively referred to herein as the “Company”, or “Epazz”. The Company's headquarters are located in Chicago, Illinois and substantially all of its customers are within the United States. | |||||||
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. | |||||||
Segment Reporting | |||||||
FASB ASC 280-10-50 requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. All of the Company’s software products are considered operating segments, and will be aggregated into one reportable segment given the similarities in economic characteristics among the operations represented by the common nature of the products, customers and methods of distribution. | |||||||
Reclassifications | |||||||
Certain amounts in the financial statements of the prior year have been reclassified to conform to the presentation of the current year for comparative purposes. | |||||||
Use of Estimates | |||||||
The preparation of financial statements in conformity with generally accepted accounting principles 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 of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||
Cash and Cash Equivalents | |||||||
Epazz maintains cash balances in non-interest-bearing transaction accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents on hand at December 31, 2013 and 2012. | |||||||
Property and Equipment | |||||||
Equipment is recorded at its acquisition cost, which includes the costs to bring the equipment to the condition and location for its intended use, and equipment is depreciated using the straight-line method over the estimated useful life of the related asset as follows: | |||||||
Furniture and fixtures | 5 years | ||||||
Computers and equipment | 3-5 years | ||||||
Software | 3 years | ||||||
Assets held under capital leases | 3-4 years | ||||||
Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. | |||||||
Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the useful lives of the assets due to transfer of ownership after the lease term has expired. | |||||||
Maintenance and repairs will be charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. | |||||||
Property and equipment are evaluated for impairment whenever impairment indicators are prevalent. The Company will assess the recoverability of equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management. | |||||||
Fair Value of Financial Instruments | |||||||
Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. | |||||||
Intangible Assets | |||||||
Intangible assets are amortized using the straight-line method over their estimated period of benefit of five to fifteen years. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. Amortization expense on intangible assets totaled $446,988 and $155,448 for the years ended December 31, 2013 and 2012, respectively, including impairments of $276,282 and $-0- for the years ended December 31, 2013 and 2012, respectively. | |||||||
Goodwill | |||||||
The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company's evaluation of goodwill completed during the year resulted in no impairment losses. | |||||||
Website Development Costs | |||||||
The Company accounts for website development costs in accordance with ASC 350-50, “Accounting for Website Development Costs” (“ASC 350-50”), wherein website development costs are segregated into three activities: | |||||||
1) | Initial stage (planning), whereby the related costs are expensed. | ||||||
2) | Development (web application, infrastructure, and graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. | ||||||
3) | Post-implementation (after site is up and running: security, training, and administration), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. | ||||||
The Company didn’t have any capitalized website development costs during the years ended December 31, 2013 and 2012. | |||||||
Deferred Financing Costs | |||||||
Costs relating to obtaining certain debts are capitalized and amortized over the term of the related debt using the straight-line method. The unamortized capitalized balance of deferred financing costs at December 31, 2013, and 2012, was $44,986 and $17,033, respectively. Amortization of deferred financing costs charged to operations was $79,123 and $25,849 for the years ended December 31, 2013 and 2012, respectively. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations. | |||||||
Allowance for Doubtful Accounts | |||||||
We generate the majority of our revenues and corresponding accounts receivable from the sales of software products. We evaluate the collectability of our accounts receivable considering a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off experience and the length of time the receivables are past due. Bad debts expense (recoveries) was $(27,129) and $2,957 for the years ended December 31, 2013 and 2012, respectively. The allowance for doubtful accounts was $7,017 and $68,521 for the years ended December 31, 2013 and 2012, respectively. | |||||||
Beneficial Conversion Features | |||||||
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. | |||||||
Revenue Recognition | |||||||
The Company designs and sells various software programs to business enterprises, hospitals and Government and post-secondary institutions. Prior to shipment, each software product is tested extensively to meet Company specifications. The software is shipped fully functional via electronic delivery, but some installation and setup is required. No other entities sell the same or largely interchangeable software. | |||||||
Installation is a standard process, outlined in the owner's manual, consisting principally of setup, calibrating, and testing the software. A purchaser of the software could complete the process using the information in the owner's manual, although it would probably take significantly longer than it would take the Company’s technicians to perform the tasks. Although other vendors do not install the Company’s software, they do provide largely interchangeable installation services for a fee. Historically, the Company has never sold the software without installation. Most installations are performed by the Company within 7 to 24 days of shipment and are included in the overall sales price of the software. In addition, the customer must pay for support contracts and training packages, depending on their desired level of service. The Company is the only manufacturer of the software and it only sells software on a standalone basis directly to the end user. | |||||||
The sales price of the arrangement consists of the software, installation, and training and support services, which the customer is obligated to pay in full upon delivery of the software. In addition, there are no general rights of return involved in these arrangements. Therefore, the software is accounted for as a separate unit of accounting. | |||||||
The Company does not have vendor-specific objective evidence of selling price for the software because it does not sell the software separately (without installation services and support contracts). In addition, third-party evidence of selling price does not exist as no vendor separately sells the same or largely interchangeable software. Therefore, the Company uses its best estimate of selling price when allocating such arrangement consideration. | |||||||
In estimating its selling price for the software, the Company considers the cost to produce the software, profit margin for similar arrangements, customer demand, effect of competitors on the Company’s software, and other market constraints. When applying the relative selling price method, the Company uses its best estimate of selling price for the software, and third-party evidence of selling price for the installation. Accordingly, without considering whether any portion of the amount allocable to the software is contingent upon delivery of the other items, the Company allocates the selling price to the software, support, and installation. | |||||||
The Company doesn’t currently provide product warranties, but if it does in the future it will provide for specific product lines and accrue for estimated future warranty costs in the period in which the revenue is recognized. | |||||||
Advertising and Promotion | |||||||
All costs associated with advertising and promoting products are expensed as incurred. These expenses approximated $181,497 and $104,431 for the years ended December 31, 2013 and 2012, respectively. | |||||||
Income Taxes | |||||||
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. | |||||||
Basic and Diluted Loss per Share | |||||||
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure. | |||||||
Stock-Based Compensation | |||||||
The Company adopted FASB guidance on stock based compensation on January 1, 2006. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Common stock issued for services and compensation was $1,713,150 and $1,278,151 for the years ended December 31, 2013 and 2012, respectively. | |||||||
Uncertain Tax Positions | |||||||
Effective January 1, 2009, the Company adopted new standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. | |||||||
Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities. | |||||||
The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. As of December 31, 2013, the Company had no uncertain tax positions. | |||||||
Recent Accounting Pronouncements | |||||||
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on our financial position or results of operations. | |||||||
In February 2013, FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to: | |||||||
- | Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and | ||||||
- | Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense. | ||||||
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 did not have a material impact on our financial position or results of operations. | |||||||
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on our financial position or results of operations. |
2_Going_Concern
2. Going Concern | 12 Months Ended |
Dec. 31, 2013 | |
Uncertainties [Abstract] | ' |
Going Concern | ' |
As shown in the accompanying financial statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $(7,501,994), and as of December 31, 2013, the Company’s current liabilities exceeded its current assets by $1,283,338 and its total liabilities exceeded its total assets by $1,524,615. These factors raise substantial doubt about the Company’s ability to continue as a going concern. | |
Epazz will require substantial additional funding for continuing research and development, obtaining regulatory approval and for the commercialization of its products. Management expects to be able to raise enough funds to meet its working capital requirements through debt and/or equity financing. There is no assurance that Epazz will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to Epazz. The accompanying financial statements do not include any adjustments that might be necessary should Epazz be unable to continue as a going concern. |
3_Subsidiary_Formation
3. Subsidiary Formation | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Subsidiary Formation | ' |
Formation of Subsidiary – Terran Power, Inc., September 19, 2013 | |
On September 19, 2013, the Board of Directors, consisting solely of Shaun Passley, Ph.D., the Company’s majority shareholder, approved the formation of a new wholly-owned subsidiary of the Company named Terran Power, Inc. The Company plans to file a non-provisional patent application to develop a mobile power device that allows iPhone and other smartphone users to power up their phone on the go without needing an outlet or a second battery, however, as of the date of this filing there has been no activity and, as such, there are no revenues or expenses. | |
Subsidiary Formation – FlexFridge, Inc., March 4, 2013 | |
On March 4, 2013, the Board of Directors of Epazz, Inc. (the “Company”), consisting solely of Shaun Passley, Ph.D., the Company’s majority shareholder, approved the formation of a new wholly-owned subsidiary of the Company named Cooling Technology Solutions, Inc., which was later renamed, Z Fridge, Inc., and ultimately again renamed as, FlexFridge, Inc. (“FlexFridge”) on May 29, 2014. The Company has filed a non-provisional patent application for its Project Flex product, which consists of a patent pending foldable mini-fridge. On November 21, 2013, the Company was spun off to shareholders of record on September 15, 2013, whereby shareholders of Epazz, Inc. received one (1) share of FlexFridge in exchange for each ten (10) shares held of Epazz, Inc. Epazz has a controlling financial interest in FlexFridge. As such, FlexFridge is consolidated within these financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10. There has been no material activity within FlexFridge to date. |
4_Asset_Purchase_Acquisitions
4. Asset Purchase Acquisitions | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
Asset Purchase Acquisitions | ' | ||||||||
Asset Purchase Acquisition – MS Health, Inc., March 28, 2012 | |||||||||
On March 28, 2012, we, through a newly-formed wholly-owned Illinois subsidiary, MS Health, Inc. (“MS Health”), closed on an Asset Purchase Agreement (“APA”) with MS Health Software Corporation, a New Jersey corporation (“MSHSC”). Pursuant to the APA, we purchased all of MSHSC’s assets, including all of its intellectual property, its business trademarks and copyrights, furniture, fixtures, equipment and software in consideration for an aggregate of $500,000, of which $39,200 was paid in cash at the closing, $360,800 was financed using a small business loan and $100,000 was paid by way of a Promissory Note (the “MSHSC Note”). The terms of the MSHSC Note include interest at 6% per annum, a ten (10) year amortization, a right of offset, no payments of either principal or interest for two (2) years and equal payments of principal and interest commencing in year 3, no prepayment penalty, and full payment of all amounts due after five (5) years. The MSHSC Note is secured by a security interest over the assets of MS Health. We did not purchase and MSHSC agreed to retain and be responsible for any and all liabilities of MSHSC. The acquisition was financed in part with a $360,800 Small Business Administration (“SBA”) loan, bearing interest at fixed and variable rates. The initial interest rate is 5.5% per year for three (3) years, consisting of the Prime Rate in effect on the first business day of the month in which the SBA loan application was received, plus 2.25%. The loan terms then transition to a variable interest rate over the remaining seven (7) years of the ten (10) year maturity term, calculated at 2.25% above the Prime Rate, as adjusted quarterly. The Company must pay principal and interest payments of $3,916 monthly. The SBA Loan is guaranteed by PRMI, K9 Bytes, Desk Flex, Inc., MS Health and the Company, and secured by the assets of MS Health and the Company. | |||||||||
MSHSC developed and sells CHMCi, an enterprise wide solution that includes tools to effectively provide, manage, bill, and track behavioral healthcare and social services. With CMHCi, an organization will realize the benefits of increased efficiency, accountability, and productivity. CMHCi offers server-based, internet, and secure cloud computing enabling the user to access information as required. By maintaining a complete electronic client record, including data collection and reporting across multiple programs, locations, episodes of care, and service providers, CMHCi helps eliminate redundant record keeping. The scheduler component tracks client, staff, and group appointments. Easy to use, it interfaces seamlessly with service authorization tracking, service history, and billing. The integrated financial reporting component provides the basis for an efficient and comprehensive accounting system, including electronic claims and remittance, third party insurance, and client, municipality, and grantor billing. | |||||||||
In connection with the Asset Purchase, the shareholders of MSHSC and the Company (through MS Health) entered into a Covenant Not to Compete; Consulting Agreement, Non-Competition and Consulting Agreement, pursuant to which the shareholders of MSHSC agreed to provide consulting services to the Company for a period of six months following closing. Pursuant to the agreement, the shareholders of MSHSC agreed not to compete against the Company for two years from the closing of the acquisition. | |||||||||
This acquisition was accounted for as a business combination under the purchase method of accounting, given that substantially all of the Company’s assets and ongoing operations were acquired. The purchase resulted in $114,627 of goodwill. According to the purchase method of accounting, the Company recognized the identifiable assets acquired and liabilities assumed as follows: | |||||||||
March 28, | |||||||||
2012 | |||||||||
Consideration: | |||||||||
Cash paid at closing | $ | 39,200 | |||||||
Small business loan(1) | 360,800 | ||||||||
Seller financed note payable(2)(3) | 124,697 | ||||||||
Fair value of total consideration exchanged | $ | 524,697 | |||||||
Fair value of identifiable assets acquired assumed: | |||||||||
Other current assets | $ | 7,367 | |||||||
Equipment | 2,703 | ||||||||
Contracts | 258,000 | ||||||||
Technology-based intangible assets | 124,000 | ||||||||
Non-compete agreement | 18,000 | ||||||||
Total fair value of assets assumed | 410,070 | ||||||||
Consideration paid in excess of fair value (Goodwill)(4) | $ | 114,627 | |||||||
(1)Consideration included partial proceeds obtained from a $360,800 Small Business Association (“SBA”) loan, bearing interest at fixed and variable rates. The initial interest rate is 5.5% per year for three (3) years, consisting of the Prime Rate in effect on the first business day of the month in which the SBA loan application was received, plus 2.25%. The loan terms then transition to a variable interest rate over the remaining seven (7) years of the ten (10) year maturity term, calculated at 2.25% above the Prime Rate, as adjusted quarterly. The Company must pay principal and interest payments of $3,916 monthly. The SBA Loan is guaranteed by PRMI, K9 Bytes, Desk Flex, Inc., MS Health and the Company, and secured by the assets of MS Health and the Company. | |||||||||
(2)Consideration included an unsecured $100,000 seller financed note payable (“MSHSC Note”), bearing interest at 6% per annum, a ten (10) year amortization, a right of offset, no payments of either principal or interest for two (2) years and equal payments of principal and interest commencing in year 3, no prepayment penalty, and full payment of all amounts due after five (5) years. The MSHSC Note is secured by a security interest over the assets of MS Health. We did not purchase and MSHSC agreed to retain and be responsible for any and all liabilities of MSHSC. | |||||||||
(3)The fair value of the seller financed note in excess of the $100,000 principal balance attributable to the deferred payment terms will be amortized to interest expense over the deferred financing period. | |||||||||
(4)The consideration paid in excess of the net fair value of assets acquired and liabilities assumed has been recognized as goodwill. | |||||||||
Management believes the product line of MS Health, customer base and other assets acquired will enable the Company to enhance their business model and strengthen its future cash flows to fund operations and take advantage of additional growth opportunities. | |||||||||
The unaudited supplemental pro forma results of operations of the combined entities had the dates of the acquisitions been January 1, 2012 are as follows: | |||||||||
Combined Pro Forma: | |||||||||
For the years ended | |||||||||
December 31, | |||||||||
2012 | |||||||||
Revenue: | $ | 1,256,054 | |||||||
Expenses: | |||||||||
Operating expenses | 2,710,529 | ||||||||
Net operating loss | (1,454,475 | ) | |||||||
Other income (expense) | (457,730 | ) | |||||||
Net loss | $ | (1,912,205 | ) | ||||||
Weighted average number of common shares | |||||||||
Outstanding – basic and fully diluted | 399,031,314 | ||||||||
Net loss per share – basic and fully diluted | $ | (0.00 | ) | ||||||
5_Related_Parties
5. Related Parties | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Related Parties | ' | ||||||||
Debt Financings | |||||||||
From time to time we have received and repaid loans from our CEO and his immediate family members to fund operations. These related party debts are fully disclosed in Note 14 below. | |||||||||
In addition to the debts disclosed in Note 14, we had two convertible notes with related parties that are disclosed in Note 15 as follows: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Unsecured $14,838 convertible promissory note carries an 11% interest rate (“First GG Mars Note”) owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note was acquired from and assigned by another independent lender on August 15, 2013 prior to being exchanged for the convertible note. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the average of the three lowest closing prices of the Company’s common stock for the one hundred and twenty (120) days prior to the conversion date, or $0.00001 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The principal of $14,838 was immediately converted at the election of the note holder into 46,856,526 shares. | $ | – | $ | – | |||||
Unsecured $440,849 convertible promissory note due to a related party, carries a 10% interest rate (“Star Convertible Note”), matures on July 2, 2017. The principal and unpaid interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 75% of the average closing price of the Company’s common stock over the five (5) consecutive trading days immediately preceding the date of conversion, or the fixed price of $0.005 per share, whichever is greater. The note carries a fourteen percent (14%) interest rate in the event of default, and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. This note was subsequently amended on March 5, 2013 to change the conversion price to, "equal to the greater of, (a) 50% of the Market Price, or (b) the fixed conversion price of $0.00075 per share". The modification resulted in a loss on debt modification of $81,792. The note holder converted $250,000 of outstanding principal into 50,000,000 shares pursuant to debt conversion on September 15, 2012, $46,000 into 50,000,000 shares pursuant to debt conversion on March 14, 2013, $40,000 into 50,000,000 shares pursuant to debt conversion on April 10, 2013, $26,400 into 80,000,000 shares pursuant to debt conversion on July 9, 2013 and $32,000 into another 40,000,000 shares pursuant to debt conversion on August 7, 2013. | 46,449 | 190,849 | |||||||
Total convertible debts, related parties | 46,449 | 190,849 | |||||||
Less: unamortized discount on beneficial conversion feature | (5,653 | ) | (45,098 | ) | |||||
Convertible debts | 40,796 | 145,751 | |||||||
Less: current maturities of convertible debts, related parties included in convertible debts | – | – | |||||||
Long term convertible debts, related parties included in convertible debts | $ | 40,796 | $ | 145,751 | |||||
Changes in Stockholders’ Equity, Related Parties | |||||||||
Dividends Payable | |||||||||
On January 1, 2013, the Company declared and accrued dividends quarterly on its Convertible Series B Preferred Stock pursuant to the recognition of revenues in excess of $1 million during the year ended December 31, 2012. Dividends equal to 1.5% of the Company’s revenues per quarter during the year ending December 31, 2013 accrue quarterly, resulting in a dividend payable of $11,000, which can be paid in cash or in shares of Class A Common Stock in lieu of cash. | |||||||||
Beneficial Conversion Feature | |||||||||
On August 20, 2013, the Company entered into a convertible promissory note with GG Mars Capital, Inc., a company owned by our CEO’s family member. The beneficial conversion feature discount resulting from the conversion price that was $0.001 below the market price of $0.0013 on the August 20, 2013 origination date resulted in a debt discount value of $14,838 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||
Debt Conversions into Class A Common Stock | |||||||||
On March 14, 2013, the Company issued 50,000,000 shares of Class A Common Stock pursuant to the conversion of $46,000 of convertible debt owed to Star Financial Corporation, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||
On April 10, 2013, the Company issued 50,000,000 shares of Class A Common Stock pursuant to the conversion of $40,000 of convertible debt owed to Star Financial Corporation, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||
On May 27, 2013, the Company modified a related party debt and issued 14,239,500 shares of Class A Common Stock in settlement of $14,239 of related party debt owed to Vivienne Passley, which consisted of $13,000 of principal and $1,239 of accrued and unpaid interest. The total fair value of the common stock was $28,479 based on the closing price of the Company’s common stock on the date of grant, resulting in the recognition of a $14,240 loss on debt settlement. | |||||||||
On July 9, 2013, the Company issued 80,000,000 shares of Class A Common Stock pursuant to the conversion of $26,400 of convertible debt owed to Star Financial Corporation, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||
On August 7, 2013, the Company issued 40,000,000 shares of Class A Common Stock pursuant to the conversion of $32,000 of convertible debt owed to Star Financial Corporation, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||
On August 27, 2013, the Company issued 46,856,526 shares of Class A Common Stock pursuant to the conversion of $14,838 of convertible debt owed to GG Mars Capital, Inc., which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||
Loss on Convertible Debt Modification to Related Party | |||||||||
On March 5, 2013, we amended a convertible promissory note with Star Financial Corporation, which then carried a balance of $190,849, to revise the conversion terms from a $0.005 floor and 75% discount to market to conversion terms consisting of, "equal to the greater of, (a) 50% of the Market Price, or (b) the fixed conversion price of $0.00075 per share". The Company compared the fair value of the debt immediately preceding the modification to the fair value after the modification to determine the loss on modification of $81,792. This value was determined using the value of the shares assuming the note was converted pursuant to the respective conversion terms on the date of modification. The total value of the shares after modification was $272,641, compared to the $190,849 value preceding the modification, resulting in a loss on modification of $81,792. | |||||||||
Shares of Class A Common Stock Issued for Services to Related Parties | |||||||||
On March 5, 2013, the Company issued 12,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing a personal guaranty on an acquisition loan that originated on September 30, 2010. The total fair value of the common stock was $25,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On March 5, 2013, the Company issued 12,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing a personal guaranty on two acquisition loans that originated on October 26, 2011. The total fair value of the common stock was $25,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On March 5, 2013, the Company issued 200,000,000 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services. The shares will be vested once the Company reports revenue of $10 million in a calendar year. The total fair value of the common stock was $400,000 based on the closing price of the Company’s common stock on the date of grant, which is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||
On March 20, 2013, the Company issued 35,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing collateral on acquisition loans that originated on September 30, 2010 and October 26, 2011. The total fair value of the common stock was $35,500 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On March 20, 2013, the Company issued 60,000,000 shares of Class A Common Stock to Craig Passley, a related party, for providing corporate secretary services from 2012 to 2021. The total fair value of the common stock was $60,000 based on the closing price of the Company’s common stock on the date of grant, which is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. A total of $6,000 was expensed related to the vested services for the year ended December 31, 2012. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||
On May 16, 2013, the Company issued 710,526,316 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services. The total fair value of the common stock was $1,350,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On May 24, 2013, the Company issued 35,500,000 shares of Class A Common Stock to Fay Passley, a related party, for providing collateral on acquisition loans that originated on September 30, 2010 and October 26, 2011. The total fair value of the common stock was $71,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On July 5, 2013, the Company issued 25,000,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing human resource services. The total fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On July 8, 2013, the Company issued 710,526,316 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services, of which 200,000,000 shares vested immediately and the remaining 510,526,316 shares will be vested once the Company reports revenue of $10 million in a calendar year. The total fair value of the common stock was $497,368 based on the closing price of the Company’s common stock on the date of grant, of which $140,000 is being expensed and $357,368 is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||
Shares of Class A Common Stock Issued for Loan Origination Fees to Related Parties | |||||||||
On July 19, 2013, the Company issued 2,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, as a loan origination cost in consideration for a $23,000 short term promissory note. The total fair value of the common stock was $4,250 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On July 31, 2013, the Company issued 3,000,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $32,000 short term promissory note. The total fair value of the common stock was $4,200 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On August 2, 2013, the Company issued 3,000,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $32,000 short term promissory note. The total fair value of the common stock was $5,100 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On August 7, 2013, the Company granted 2,500,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $24,000 short term promissory note. The total fair value of the common stock was $4,250 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||
On August 12, 2013, the Company issued 5,000,000 shares of Class A Common Stock to Vivienne Passley, a related party, as a loan origination cost in consideration for a $51,000 short term promissory note. The total fair value of the common stock was $7,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
On August 20, 2013, the Company granted 2,500,000 shares of Class A Common Stock to GG Mars Capital, Inc., a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $25,000 short term promissory note. The total fair value of the common stock was $3,250 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||
On August 27, 2013, the Company granted 1,250,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $12,500 short term promissory note. The total fair value of the common stock was $1,500 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||
On September 7, 2013, the Company granted 6,000,000 shares of Class A Common Stock to GG Mars Capital, Inc., a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $65,000 short term promissory note. The total fair value of the common stock was $6,600 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||
Convertible Common Stock, Class B, Related Parties | |||||||||
The Company has 60,000,000 authorized shares of $0.0001 par value Convertible Class B Common Stock, convertible at the option of the holder into shares of the Company’s Class A Common Stock on a 1:1 basis. The Convertible Class B Common Stock carries preferential voting rights of 10,000 votes to each Class A Common Stock vote (10,000:1). The Company shall reserve and keep available out of its authorized but unissued shares of Class A Common Stock such number of shares sufficient to effect the conversions. | |||||||||
On March 16, 2013, the Company issued 5,000,000 shares of Convertible Class B Common Stock to the Company’s CEO in consideration for providing product development services. The total fair value of the common stock was $9,500 based on the closing price of the Company’s common stock on the date of grant. | |||||||||
Employment Agreement | |||||||||
On September 6, 2012, we entered into an employment agreement with Shaun Passley, Ph.D., our Chief Executive Officer, President, and Chairman of the Board of Directors which had a term of ten (10) years. Compensation pursuant to the agreement calls for a base salary of $180,000 per year; of which $30,000 shall be payable annually in cash and $150,000 shall be payable in shares of the Company’s Common Stock at the rate of $0.006 per share, or 25,000,000 shares per year. In addition, the Company issued 1 billion shares of Class A Common Stock to the Company’s CEO as a bonus in consideration for various services performed, and to be performed over a ten year period beginning on September 6, 2012, provided that all of the shares remain subject to forfeiture until such time, if ever, as we generate annual revenues of at least $10 million, subject to the below termination provisions. The total fair value of the common stock was $6,000,000 based on the closing price of the Company’s common stock on the date of grant, which has been presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. In the event of the termination of Dr. Passley’s employment agreement for cause by the Company or without good reason by Dr. Passley, any non-vested shares are to be cancelled and he is to be paid any consideration he is owed through the date of termination. In the event of the termination of Dr. Passley’s employment agreement for good reason (as described in the agreement) by Dr. Passley or without cause by the Company, he is due eight additional weeks of compensation and all non-vested shares vest to him immediately. In the event of the termination of Dr. Passley’s employment agreement for any other reason, he is due eight weeks of additional salary and any non-vested shares are to be cancelled. | |||||||||
We do not have an employment or consultant agreement with Craig Passley, our Secretary, however on March 20, 2013, we granted 60 million shares to Craig Passley for services rendered between 2012 and 2021. The shares vest annually over the 10 year period with the first 6 million vesting upon the grant date. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||
Amendments to Employment Agreement | |||||||||
On August 16, 2013, the Company amended Shaun Passley, Ph.D.’s employment agreement to increase the cash portion of his compensation from $30,000 per year to $100,000 in the initial year of the agreement only. All other terms remain in effect, and the shares of stock awarded as a bonus as previously disclosed were granted in addition to the stock based compensation outlined in the original agreement. |
6_Fair_Value_of_Financial_Inst
6. Fair Value of Financial Instruments | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||
Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value. | |||||||||||||
The Company does not have any financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows: | |||||||||||||
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. | |||||||||||||
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). | |||||||||||||
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. | |||||||||||||
The following schedule summarizes the valuation of financial instruments at fair value on a non-recurring basis in the balance sheets as of December 31, 2013 and 2012: | |||||||||||||
Fair Value Measurements at December 31, 2013 | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Assets | |||||||||||||
Intangible assets | $ | – | $ | – | $ | 374,162 | |||||||
Goodwill | – | – | 255,460 | ||||||||||
Total assets | – | – | 629,622 | ||||||||||
Liabilities | |||||||||||||
Lines of credit | – | 73,232 | – | ||||||||||
Capital leases | – | 17,421 | – | ||||||||||
Long term debts | – | 1,211,929 | – | ||||||||||
Notes payable, related parties | – | 482,368 | – | ||||||||||
Convertible debts, net of discount of $109,583 | – | 157,294 | – | ||||||||||
Total Liabilities | – | 1,942,244 | – | ||||||||||
$ | – | $ | (1,942,244 | ) | $ | 629,622 | |||||||
Fair Value Measurements at December 31, 2012 | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Assets | |||||||||||||
Intangible assets | $ | – | $ | – | $ | 821,150 | |||||||
Goodwill | – | – | 255,460 | ||||||||||
Total assets | – | – | 1,076,610 | ||||||||||
Liabilities | |||||||||||||
Lines of credit | – | 77,047 | – | ||||||||||
Capital leases | – | 43,120 | – | ||||||||||
Long term debts | – | 1,111,162 | – | ||||||||||
Notes payable, related parties | – | 22,085 | – | ||||||||||
Convertible debts, net of discount of $139,068 | – | 227,681 | – | ||||||||||
Total Liabilities | – | 1,481,095 | – | ||||||||||
$ | – | $ | (1,481,095 | ) | $ | 1,076,610 | |||||||
There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years ended December 31, 2013 and 2012. | |||||||||||||
Level 3 assets consist of intangible assets and goodwill. Fair value adjustments related to the measurement of intangible assets of $276,282 and $-0- were necessary during the years ended December 31, 2013 and 2012. |
7_Other_Current_Assets
7. Other Current Assets | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ' | ||||||||
7. Other Current Assets | ' | ||||||||
As of December 31, 2013 and 2012 other current assets included the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Deferred financing costs | $ | 44,986 | $ | 17,032 | |||||
Prepaid expenses | – | 1,743 | |||||||
Other receivable | 51,250 | – | |||||||
Security deposits | 9,878 | 3,252 | |||||||
$ | 106,114 | $ | 22,027 | ||||||
The Company recognized $79,123 and $25,849 of amortization expense related to the deferred financing costs during the years ended December 31, 2013 and 2012, respectively. |
8_Property_and_Equipment
8. Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment | ' | ||||||||
Property and Equipment consists of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Furniture and fixtures | $ | 2,187 | $ | 2,187 | |||||
Computers and equipment | 325,105 | 318,275 | |||||||
Software | 67,986 | 67,986 | |||||||
Assets held under capital leases | 134,800 | 134,800 | |||||||
530,078 | 523,248 | ||||||||
Less accumulated depreciation and amortization | (416,668 | ) | (326,951 | ) | |||||
$ | 113,410 | $ | 196,297 | ||||||
Depreciation and amortization expense totaled $89,717 and $119,628 for the years ended December 31, 2013 and 2012, respectively. |
9_Intangible_Assets
9. Intangible Assets | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||
Intangible Assets | ' | ||||||||||
Intangible assets consisted of the following at December 31, 2013 and 2012, respectively: | |||||||||||
Useful | December 31, | December 31, | |||||||||
Description | Life | 2013 | 2012 | ||||||||
Technology-based intangible assets - PRMI | 15 Years | $ | – | $ | 480,720 | ||||||
Technology-based intangible assets - IntelliSys | 5 Years | 200,000 | 200,000 | ||||||||
Technology-based intangible assets - K9 Bytes | 5 Years | 42,000 | 42,000 | ||||||||
Technology-based intangible assets – MS Health | 5 Years | 124,000 | 124,000 | ||||||||
Contracts – MS Health | 6 Years | 258,000 | 258,000 | ||||||||
Trade name - K9 Bytes | 5 Years | 22,000 | 22,000 | ||||||||
Other intangible assets – MS Health | 2 Years | 18,000 | 18,000 | ||||||||
Other intangible assets - K9 Bytes | 2 Years | 26,000 | 26,000 | ||||||||
Total intangible assets | 690,000 | 1,170,720 | |||||||||
Less: accumulated amortization | (315,838 | ) | (349,570 | ) | |||||||
Intangible assets, net | $ | 374,162 | $ | 821,150 | |||||||
Amortization expense on intangible assets totaled $446,988 and $155,448 for the years ended December 31, 2013 and 2012, respectively, including impairments of $276,282 and $-0- for the years ended December 31, 2013 and 2012, respectively. | |||||||||||
A total of $480,720 of fully amortized intangible assets were removed during the year ended December 31, 2013, of which $276,282 was due to impairments and the remaining $204,438 was the removal of the fully amortized remaining balance from the PRMI assets with the offset to accumulated amortization. As these were due to the non-performance of the assets, there was no resulting gain or loss on the removal of intangible assets. |
10_Goodwill
10. Goodwill | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||
10. Goodwill | ' | ||||||||||||||||
The changes in the carrying amount of goodwill and accumulated impairment losses for the years ended December 31, 2013 and 2012, respectively, are as follows: | |||||||||||||||||
IntelliSys, Inc. | K9 Bytes, Inc. | MS Health | Total | ||||||||||||||
Balance, December 31, 2011: | |||||||||||||||||
Goodwill | $ | 53,588 | $ | 87,244 | $ | – | $ | 140,832 | |||||||||
Accumulated impairment losses | – | – | – | – | |||||||||||||
53,588 | 87,244 | – | 140,832 | ||||||||||||||
Goodwill acquired during the year | – | – | 114,628 | 114,628 | |||||||||||||
Impairment losses | – | – | – | – | |||||||||||||
Balance, December 31, 2012: | |||||||||||||||||
Goodwill | 53,588 | 87,244 | 114,628 | 255,460 | |||||||||||||
Accumulated impairment losses | – | – | – | – | |||||||||||||
53,588 | 87,244 | 114,628 | 255,460 | ||||||||||||||
Goodwill acquired during the year | – | – | – | – | |||||||||||||
Impairment losses | – | – | – | – | |||||||||||||
Balance, December 31, 2013: | |||||||||||||||||
Goodwill | 53,588 | 87,244 | 114,628 | 255,460 | |||||||||||||
Accumulated impairment losses | – | – | – | – | |||||||||||||
$ | 53,588 | $ | 87,244 | $ | 114,628 | $ | 255,460 | ||||||||||
Our subsidiaries operate as a single operating segment. The fair value of the goodwill is tested for impairment in the fourth quarter, after the annual forecasting process. Our annual forecasting did not result in impairment losses during the years ended December 31, 2013 and 2012. We will perform our next earnings forecast during the fourth quarter of 2013, unless events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The fair value of our goodwill was estimated using the expected present value of future cash flows. |
11_Accrued_Expenses
11. Accrued Expenses | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
11. Accrued Expenses | ' | ||||||||
As of December 31, 2013 and 2012 accrued expenses included the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Accrued interest | $ | 28,628 | $ | 19,509 | |||||
Accrued interest, related parties | 28,741 | 4,592 | |||||||
Accrued payroll and payroll taxes | 16,610 | 19,980 | |||||||
Other accrued expenses | 60 | 48 | |||||||
$ | 74,039 | $ | 44,129 | ||||||
12_Lines_of_Credit
12. Lines of Credit | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Line of Credit Facility [Abstract] | ' | ||||||||
Line of Credit | ' | ||||||||
Lines of credit consisted of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Line of credit of $50,000 from PNC bank, originating on February 16, 2012. The outstanding balance on the line of credit bears interest at an introductory rate of 4.25% for the first year, subject to renewal thereafter. Payments of $739 are due monthly. | $ | 49,508 | $ | 49,606 | |||||
Line of credit of $20,000 from US Bank, originating on June 8, 2012. The outstanding balance on the line of credit bears interest at 9.75%, maturing on June 5, 2019. Payments of $500 are due monthly. | 18,087 | 19,641 | |||||||
Line of credit of $40,000 from Dell Business Credit available for the purchase of Dell products, such as computer and software equipment. The outstanding balance on the line of credit bears interest at a rate of 26.99%. Variable payments are due monthly. | 5,637 | 7,800 | |||||||
Total line of credit | 73,232 | 77,047 | |||||||
Less: current portion | (73,232 | ) | (77,047 | ) | |||||
Line of credit, less current portion | $ | – | $ | – | |||||
13_Capital_Lease_Obligations_P
13. Capital Lease Obligations Payable | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Leases, Capital [Abstract] | ' | ||||
Capital Lease Obligations Payable | ' | ||||
The Company leases certain equipment under agreements that are classified as capital leases as follows: | |||||
Lease #1 - Commenced on March 12, 2010 with monthly lease payments of $2,455 and two months paid in advance, and the remaining payments paid over the following 43 months. | |||||
Lease #2 – Commenced on March 16, 2010 with monthly lease payments of $2,258 over the following 36 months. The lease was terminated on April 16, 2013 and the equipment was purchased pursuant to the mutual release and final payment of $5,500. | |||||
Lease #3 – Commenced on January 12, 2012 with monthly lease payments of $480 over the next 48 months, and a bargain purchase price of $1 at the end of the lease. | |||||
The cost of equipment under capital leases is included in the Balance Sheets as property and equipment and was $134,800 and $134,800 at December 31, 2013 and 2012, respectively. Accumulated amortization of the leased equipment was $124,087 and $108,090 at December 31, 2013 and 2012, respectively. Amortization of assets under capital leases is included in depreciation and amortization expense. | |||||
The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of December 31, 2013, are as follows: | |||||
Twelve Months | |||||
Ending | |||||
December 31, | Amount | ||||
2014 | $ | 13,232 | |||
2015 | 5,757 | ||||
2016 | 433 | ||||
Total minimum payments | $ | 19,422 | |||
Less: amount representing interest | (2,001 | ) | |||
Present value of net minimum lease payments | 17,421 | ||||
Less: Current maturities of capital lease obligations | (17,421 | ) | |||
Long-term capital lease obligations | $ | – | |||
14_Notes_Payable_Related_Parti
14. Notes Payable, Related Parties | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Notes Payable, Related Parties | ' | ||||||||
Notes payable, related parties consist of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
On various dates the Company’s CEO advanced and repaid funds to the Company at a 15% interest rate, due on demand. A total of $209,380 was advanced and repaid by the CEO during the year ended December 31, 2013, and total proceeds and repayments were $349,560 and $411,073, respectively during the year ended December 31, 2012. | $ | – | $ | – | |||||
Originated November 1, 2013, unsecured promissory note payable owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on March 7, 2014. In addition, a loan origination fee of $25,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $2,500 upon default. | 125,000 | – | |||||||
Originated October 15, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on June 12, 2015. In addition, a loan origination fee of $3,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $500 upon default. | 18,000 | – | |||||||
Originated September 7, 2013, unsecured promissory note payable owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on February 7, 2014. In addition, a loan origination fee of $10,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 6,000,000 shares of Series A Common Stock with a fair market value of $6,600 was granted as consideration for the loan on September 7, 2013 and the shares were subsequently issued on November 13, 2013. | 65,000 | – | |||||||
Originated August 20, 2013, unsecured promissory note payable owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 20, 2014. In addition, a loan origination fee of $5,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 2,500,000 shares of Series A Common Stock with a fair market value of $3,250 was granted as consideration for the loan on August 20, 2013 and the shares were subsequently issued on November 13, 2013. Currently in default. | 25,000 | – | |||||||
Originated August 12, 2013, unsecured promissory note payable owed to an immediate family member of the Company’s CEO carries a 15% interest rate, matures on February 15, 2014. In addition, a loan origination fee of $6,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 5,000,000 shares of Series A Common Stock with a fair market value of $7,000 was issued as consideration for the loan on August 12, 2013. The note was subsequently exchanged for a convertible note on April 2, 2014 and $58,433, consisting of $51,000 of principal, $4,933.33 of accrued interest and $2,500 of liquidated damages, was converted in exchange for 584,333,745 shares of common stock in complete satisfaction of the debt. | 51,000 | – | |||||||
Originated July 19, 2013, unsecured promissory note payable owed to an immediate family member of the Company’s CEO carries a 15% interest rate, matures on January 15, 2014. In addition, a loan origination fee of $3,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 2,500,000 shares of Series A Common Stock with a fair market value of $4,250 was issued as consideration for the loan on July 19, 2013. | 23,000 | – | |||||||
Originated August 27, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 27, 2014. In addition, a loan origination fee of $2,500 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 1,250,000 shares of Series A Common Stock with a fair market value of $1,500 was granted as consideration for the loan on August 27, 2013 and the shares were subsequently issued on November 13, 2013. | 12,500 | – | |||||||
Originated August 7, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 20, 2014. In addition, a loan origination fee of $4,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 2,500,000 shares of Series A Common Stock with a fair market value of $4,250 was granted as consideration for the loan on August 7, 2013 and the shares were subsequently issued on November 13, 2013. Currently in default. | 24,000 | – | |||||||
Originated August 2, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 17, 2014. In addition, a loan origination fee of $5,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 3,000,000 shares of Series A Common Stock with a fair market value of $5,100 was issued as consideration for the loan on August 2, 2013. Currently in default. | 32,000 | – | |||||||
Originated July 31, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 15, 2014. In addition, a loan origination fee of $5,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 3,000,000 shares of Series A Common Stock with a fair market value of $4,200 was issued as consideration for the loan on July 31, 2013. | 32,000 | – | |||||||
Originated June 12, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on June 12, 2015. In addition, a loan origination fee of $2,000 was issued as consideration for the loan on June 12, 2013, and is being amortized on a straight line basis over the life of the loan. | 10,000 | – | |||||||
Originated May 16, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on April 1, 2015. In addition, a loan origination fee of $2,000 was issued as consideration for the loan on May 16, 2013, and is being amortized on a straight line basis over the life of the loan. On December 31, 2013, the note holder sold and assigned the debt to Magna Group, LLC. The Company subsequently agreed to exchange the $14,000 of principal and $875 of accrued interest for a convertible note. The assigned note was combined with the assigned note, carrying an origination date of April 1, 2013 for a combined convertible note of $35,028. The assigned principal and interest of $35,028 was subsequently converted to a total of 216,806,667 shares of common stock over various dates from January 7, 2014 to February 6, 2014 in complete satisfaction of the debt. | – | – | |||||||
Originated April 12, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on April 12, 2015. In addition, a loan origination fee of $7,000 was issued as consideration for the loan on April 12, 2013, and is being amortized on a straight line basis over the life of the loan. | 57,000 | – | |||||||
Originated April 1, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on April 1, 2015. In addition, a loan origination fee of $3,000 was issued as consideration for the loan on April 1, 2013, and is being amortized on a straight line basis over the life of the loan. On December 31, 2013, the note holder sold and assigned the debt to Magna Group, LLC. The Company subsequently agreed to exchange the $19,000 of principal and $153 of accrued interest, and a $1,000 loan origination cost for a convertible note. The assigned note was combined with the assigned note, carrying an origination date of May 16, 2013 for a combined convertible note of $35,028. The assigned principal and interest of $35,028 was subsequently converted to a total of 216,806,667 shares of common stock over various dates from January 7, 2014 to February 6, 2014 in complete satisfaction of the debt. | – | – | |||||||
Originated October 9, 2012, unsecured promissory note payable owed to an immediate family member of the Company’s CEO carries a 15% interest rate, matures on July 15, 2013. In addition, a loan origination fee, consisting of 1,088,957 shares of Series A Common Stock with a fair market value of $6,630 was issued as consideration for the loan on October 9, 2012. | – | 13,000 | |||||||
Originated October 9, 2012, unsecured promissory note payable owed to a Company owned by an immediate family member of the Company’s CEO carries a 15% interest rate, matures on July 15, 2013. In addition, a loan origination fee, consisting of 144,928 shares of Series A Common Stock with a fair market value of $884 was issued as consideration for the loan on October 9, 2012. Currently in default. | 2,000 | 2,000 | |||||||
Unsecured promissory note payable owed to a Company owned by an immediate family member of the Company’s CEO carries a 15% interest rate, matured on July 31, 2007. Currently in default. | 5,868 | 7,085 | |||||||
Total notes payable, related parties | 482,368 | 22,085 | |||||||
Less: current portion | (397,368 | ) | (22,085 | ) | |||||
Notes payable, related parties, less current portion | $ | 85,000 | $ | – | |||||
The Company recorded interest expense on notes payable to related parties in the amounts of $26,416 and $41,417 during the years ended December 31, 2013 and 2012, respectively. | |||||||||
15_Convertible_Debts
15. Convertible Debts | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Convertible Debt [Abstract] | ' | ||||||||
Convertible Debts | ' | ||||||||
Convertible debts consist of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Unsecured $33,000 convertible promissory note originated on November 13, 2013, including an Original Issue Discount (“OID”) of $3,000, carries a 12% interest rate (“Second JMJ Note”), matures on November 12, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trading price of the Company’s common stock for the twenty five (25) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The unamortized OID is $2,604 at December 31, 2013. On July 11, 2014, the Company and JMJ Financial amended this note. The amendment specifies that due to the delinquent Form 10-K for the year ended December 31, 2013 and the Form 10-Q for the three months ended March 31, 2014, any future borrowings shall only be made by mutual agreement of both the borrow and lender. | $ | 33,000 | $ | – | |||||
Unsecured $35,028 convertible promissory note originated on December 31, 2013, carries an 12% interest rate (“First Magna Group Note”) owed to Magna Group, LLC. Two notes totaling $33,000 of principal and $1,028 of accrued interest were acquired from and assigned by Star Financial on December 31, 2013 prior to being exchanged for the convertible note, including $1,000 of loan origination costs. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the lowest trading price of the Company’s common stock for the five (5) days prior to the conversion date, or $0.00004 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The assigned principal and interest of $35,028 was subsequently converted to a total of 216,806,667 shares of common stock over various dates from January 7, 2014 to February 6, 2014 in complete satisfaction of the debt. | 35,028 | – | |||||||
Unsecured $14,838 convertible promissory note carries an 11% interest rate (“First GG Mars Note”) owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note was acquired from and assigned by another independent lender on August 15, 2013 prior to being exchanged for the convertible note. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the average of the three lowest closing prices of the Company’s common stock for the one hundred and twenty (120) days prior to the conversion date, or $0.00001 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The principal of $14,838 was immediately converted at the election of the note holder into 46,856,526 shares. | $ | – | $ | – | |||||
Unsecured $56,900 convertible promissory note, including an Original Issue Discount (“OID”) of $6,900, carries an 8% interest rate (“First St. George Note”), matures on May 30, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The unamortized OID is $3,791 at December 31, 2013. Currently in default. | 56,900 | – | |||||||
Unsecured $42,500 convertible promissory note carries an 8% interest rate (“Eighth Asher Note”), matures on June 20, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the three lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. | 42,500 | – | |||||||
Unsecured $53,000 convertible promissory note carries an 8% interest rate (“Seventh Asher Note”), matures on May 21, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the three lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. | 53,000 | – | |||||||
Unsecured $33,000 convertible promissory note originated on June 12, 2013, including an Original Issue Discount (“OID”) of $3,000, carries a 12% interest rate (“First JMJ Note”), matures on June 11, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trading price of the Company’s common stock for the twenty five (25) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The principal of $33,000 and $333 of accrued interest on the note was subsequently repaid in full on August 12, 2013 & thus the 12% interest was not assessed per the terms of the note. | – | – | |||||||
Unsecured $440,849 convertible promissory note due to a related party, carries a 10% interest rate (“Star Convertible Note”), matures on July 2, 2017. The principal and unpaid interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 75% of the average closing price of the Company’s common stock over the five (5) consecutive trading days immediately preceding the date of conversion, or the fixed price of $0.005 per share, whichever is greater. The note carries a fourteen percent (14%) interest rate in the event of default, and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. This note was subsequently amended on March 5, 2013 to change the conversion price to, "equal to the greater of, (a) 50% of the Market Price, or (b) the fixed conversion price of $0.00075 per share". The modification resulted in a loss on debt modification of $81,792. The note holder converted $250,000 of outstanding principal into 50,000,000 shares pursuant to debt conversion on September 15, 2012, $46,000 into 50,000,000 shares pursuant to debt conversion on March 14, 2013, $40,000 into 50,000,000 shares pursuant to debt conversion on April 10, 2013, $26,400 into 80,000,000 shares pursuant to debt conversion on July 9, 2013 and $32,000 into another 40,000,000 shares pursuant to debt conversion on August 7, 2013. | 46,449 | 190,849 | |||||||
Unsecured $56,900 convertible promissory note, including an Original Issue Discount (“OID”) of $4,400 and legal fees of $2,500, carries an 8% interest rate (“First Tonaquint Note”), matures on May 31, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder converted $5,000 of outstanding principal into 4,504,505 shares pursuant to debt conversion on March 12, 2013, $10,000 of principal into 15,151,515 shares on April 2, 2013, $10,000 of principal into 15,873,016 shares on April 24, 2013, $8,000 of principal into 22,222,222 shares on July 10, 2013, $13,000 of principal into 15,476,190 shares on July 30, 2013 and another $10,900 of principal and $3,764 of accrued interest into 19,551,267 shares on August 19, 2013. | – | 56,900 | |||||||
Unsecured $16,500 convertible promissory note carries an 8% interest rate (“Sixth Asher Note”), matures on September 14, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-one percent (41%) of the average of the three lowest trading bid prices of the Company’s common stock for the ninety (90) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder converted a total of $16,500 of principal and $660 of interest into a total of 40,857,143 shares in full settlement of the outstanding debt on June 24, 2013. | – | 16,500 | |||||||
Unsecured $27,500 convertible promissory note carries an 8% interest rate (“Fifth Asher Note”), matures on July 18, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-one percent (41%) of the average of the three lowest trading bid prices of the Company’s common stock for the ninety (90) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory note, consisting of $27,500 of principal and $21,716 of accrued interest and financing costs, was repaid in full with cash on April 15, 2013. | – | 27,500 | |||||||
Unsecured $32,500 convertible promissory note carries an 8% interest rate (“Fourth Asher Note”), matured on April 26, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the five lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder subsequently converted a total of $32,500 of principal and $1,300 of interest into a total of 24,461,538 shares in settlement of the outstanding debt on March 4, 2013 and March 6, 2013. | – | 32,500 | |||||||
Unsecured $42,500 convertible promissory note carries an 8% interest rate (“Third Asher Note”), matured on March 29, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the three lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder subsequently converted a total of $42,500 of principal and $1,700 of interest into a total of 23,573,529 shares of common stock in settlement of the outstanding debt between January 3, 2013 and February 26, 2013. | – | 42,500 | |||||||
Total convertible debts | 266,877 | 366,749 | |||||||
Less: unamortized discount on beneficial conversion feature | (103,188 | ) | (139,068 | ) | |||||
Less: unamortized OID | (6,395 | ) | – | ||||||
Convertible debts | 157,294 | 227,681 | |||||||
Less: current maturities of convertible debts | (115,128 | ) | (74,708 | ) | |||||
Long term convertible debts | $ | 42,166 | $ | 152,973 | |||||
The Company recognized interest expense in the amount of $38,614 and $20,965 for the years ended December 31, 2013 and 2012, respectively related to convertible debts. | |||||||||
In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible debts by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible debt. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt. | |||||||||
The aforementioned accounting treatment resulted in a total debt discount equal to $195,652 and $277,323 during the years ended December 31, 2013 and 2012, respectively. The discount is amortized on a straight line basis from the dates of issuance until the stated redemption date of the debts, as noted above. | |||||||||
The convertible notes, consisting of total original face values of $440,849 from Star Financial, $302,000 from Asher Enterprises, $56,900 from Tonaquint Inc. and $33,000 from JMJ Financial, Inc., $56,900 from St. George Investments, $35,028 from Magna Group, LLC and $14,838 from the related party, GG Mars Capital, Inc., that created the beneficial conversion feature carry default provisions that place a “maximum share amount” on the note holders that can be owned as a result of the conversions to common stock by the note holders is 9.99% and 4.99%, respectively, of the issued and outstanding shares of Epazz. | |||||||||
During the years ended December 31, 2013 and 2012, the Company recorded debt amortization expense in the amount of $237,065 and $155,759, respectively, attributed to the aforementioned debt discount, including $6,916 of amortization on the $17,300 OID during the year ended December 31, 2013. | |||||||||
During year ended December 31, 2013, the Company issued a total of 462,766,951 shares pursuant to debt conversions in settlement of $343,540, consisting of $336,094 of outstanding principal and $7,446 of unpaid interest, including 220,000,000 shares pursuant to debt conversion in settlement of $144,400 of outstanding principal owed to a related party (“Star Convertible Note”) and 46,856,526 shares pursuant to debt conversion in settlement of $14,838 of outstanding principal owed to a related party (“GG Mars Capital Convertible Note”). The principal and interest was converted in accordance with the conversion terms, therefore no gain or loss has been recognized. In addition, on May 27, 2013, the Company modified a related party debt and issued 14,239,500 shares of Class A Common Stock in settlement of $14,239 of related party debt owed to Vivienne Passley, which consisted of $13,000 of principal and $1,239 of accrued and unpaid interest. The total fair value of the common stock was $28,479 based on the closing price of the Company’s common stock on the date of grant, resulting in the recognition of a $14,240 loss on debt settlement. | |||||||||
During the year ended December 31, 2012, the Company issued a total of 71,292,329 shares pursuant to debt conversions in settlement of $374,228 of outstanding principal and $3,500 of unpaid interest, including 50,000,000 shares pursuant to debt conversion in settlement of $250,000 of outstanding principal owed to a related party (“Star Convertible Note”). The principal and interest was converted in accordance with the conversion terms, therefore no gain or loss has been recognized. | |||||||||
Asher Enterprises, Inc. Convertible Notes | |||||||||
On May 27, 2011, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $50,000. The First Asher Note had a maturity date of February 28, 2012, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 59% multiplied by the Market Price (representing a discount rate of 41%). “Market Price” means the average of the lowest five (5) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the First Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the First Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the First Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.02603 below the market price on May 27, 2011 of $0.056 provided a value of $43,421, of which $-0- and $7,769 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On June 28, 2011, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $37,500. The Second Asher Note had a maturity date of March 30, 2012, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 59% multiplied by the Market Price (representing a discount rate of 41%). “Market Price” means the average of the lowest five (5) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the Second Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Second Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Second Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.01298 below the market price on June 28, 2011 of $0.035 provided a value of $22,108, of which $-0- and $7,209 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On July 2, 2012, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $42,500. The Third Asher Note had a maturity date of March 29, 2013, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 59% multiplied by the Market Price (representing a discount rate of 41%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the Third Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Third Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Third Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00551 below the market price on July 2, 2012 of $0.012 provided a value of $36,082, of which $11,760 and $24,322 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On July 24, 2012, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $32,500. The Fourth Asher Note had a maturity date of April 26, 2013, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 59% multiplied by the Market Price (representing a discount rate of 41%). “Market Price” means the average of the lowest five (5) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the Fourth Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Fourth Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Fourth Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00583 below the market price on July 24, 2012 of $0.0126 provided a value of $27,959, of which $11,751 and $16,208 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On October 16, 2012, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $27,500. The Fifth Asher Note had a maturity date of July 18, 2013, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 41% multiplied by the Market Price (representing a discount rate of 59%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ninety (90) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00005 per share. The shares of common stock issuable upon conversion of the Fifth Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Fifth Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Fifth Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00603 below the market price on October 16, 2012 of $0.008 provided a value of $27,500, of which $19,900 and $7,600 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On December 12, 2012, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $16,500. The Sixth Asher Note had a maturity date of September 14, 2013, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 41% multiplied by the Market Price (representing a discount rate of 59%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ninety (90) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00005 per share. The shares of common stock issuable upon conversion of the Sixth Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Sixth Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Sixth Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00518 below the market price on December 12, 2012 of $0.0064 provided a value of $16,500, of which $15,364 and $1,136 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On August 19, 2013, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $53,000. The Seventh Asher Note had a maturity date of May 21, 2014, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 59% multiplied by the Market Price (representing a discount rate of 41%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00005 per share. The shares of common stock issuable upon conversion of the Seventh Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Seventh Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Seventh Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.0006 below the market price on August 19, 2013 of $0.0014 provided a value of $39,021, of which $19,014 and $-0- was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On September 18, 2013, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., pursuant to which we sold to Asher an 8% Convertible Promissory Note in the original principal amount of $42,500. The Eighth Asher Note had a maturity date of June 20, 2014, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 59% multiplied by the Market Price (representing a discount rate of 41%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00005 per share. The shares of common stock issuable upon conversion of the Eighth Asher Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Eighth Asher Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Eighth Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.0004 below the market price on September 18, 2013 of $0.0010 provided a value of $27,210, of which $10,290 and $-0- was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
GG Mars Capital, Inc. Convertible Note, Related Party | |||||||||
On August 20, 2013, we entered into a Convertible Promissory Note Agreement with GG Mars Capital, Inc. (“GG Mars”), a company owned by our CEO’s family member, pursuant to which we sold to GG Mars an 11% Convertible Promissory Note in the original principal amount of $14,838. The note was acquired from and assigned by another independent lender on August 15, 2013 prior to being exchanged for the convertible note. The First GG Mars Note was convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the average of the three lowest closing prices of the Company’s common stock for the one hundred and twenty (120) days prior to the conversion date, or $0.0001 per share, whichever is greater. The shares of common stock issuable upon conversion of the First GG Mars Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the First GG Mars Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the First GG Mars Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.001 below the market price on August 20, 2013 of $0.0013 provided a value of $14,838, of which $14,838 and $-0- was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
Star Financial, Inc. Convertible Note, Related Party | |||||||||
On July 2, 2012, we modified a previously outstanding non-convertible debt of $342,321, consisting of $296,103 of principal and $46,218 of accrued interest in exchange for a Convertible Promissory Note with Star Financial Corporation (“Star”), a company owned by our CEO’s family member, pursuant to which we issued to Star a 10% Convertible Promissory Note in the original principal amount of $440,849. The modification resulted in a loss on debt modification of $98,528. The note was again modified on March 5, 2013, resulting in a loss on debt modification of $81,792. The Star Convertible Note has a maturity date of July 2, 2017, and is convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). “Market Price” means the average of the five (5) Closing Prices for the Common Stock during the five (5) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00075 per share. The shares of common stock issuable upon conversion of the Star Convertible Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Star Convertible Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Star Convertible Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00141 below the market price on July 2, 2012 of $0.012 provided a value of $112,382, of which $39,445 and $67,284 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
Tonaquint, Inc. Convertible Note | |||||||||
On September 10, 2012, we entered into a Securities Purchase Agreement with Tonaquint, Inc., pursuant to which we sold to Tonaquint an 8% Convertible Promissory Note in the original principal amount of $56,900. The First Tonaquint Note has a maturity date of May 31, 2013, and is convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (representing a discount rate of 40%). “Market Price” means the average of the lowest two (2) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the First Tonaquint Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the First Tonaquint Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the First Tonaquint Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.0047 below the market price on September 10, 2012 of $0.0033 provided a value of $56,900, of which $32,669 and $24,231 was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
JMJ Financial, Inc. Convertible Note | |||||||||
On June 12, 2013, we entered into a Securities Purchase Agreement with JMJ Financial, Inc., (“JMJ”) pursuant to which we sold to JMJ a 12% Convertible Promissory Note in the original principal amount of $33,000. The First JMJ Note had a maturity date of June 11, 2014, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price, not less than $0.00009 per share. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (representing a discount rate of 40%). “Market Price” means the lowest Trading Price for the Common Stock during the twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the First JMJ Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the First JMJ Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the First JMJ Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00518 below the market price on June 12, 2013 of $0.0017 provided a value of $33,000, of which $33,000 and $-0- was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
On November 13, 2013, we drew additional funds on the June 12, 2013 Securities Purchase Agreement with JMJ Financial, Inc., (“JMJ”) pursuant to which we sold to JMJ another 12% Convertible Promissory Note in the original principal amount of $33,000. The Second JMJ Note has a maturity date of November 12, 2014, and was convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price, not less than $0.00009 per share. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (representing a discount rate of 40%). “Market Price” means the lowest Trading Price for the Common Stock during the twenty five (25) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00009 per share. The shares of common stock issuable upon conversion of the Second JMJ Note were restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the Second JMJ Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the Second JMJ Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.00024 was above the market price on November 13, 2013 and did not result in a beneficial conversion feature. | |||||||||
St. George Investments, Inc. Convertible Note | |||||||||
On September 5, 2013, we entered into a Securities Purchase Agreement with St. George Investments, Inc., (“First St. George Note”) pursuant to which we sold to St. George an 8% Convertible Promissory Note in the original principal amount of $56,900. The First St. George Note has a maturity date of May 30, 2014, and is convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 60% multiplied by the Market Price (representing a discount rate of 40%). “Market Price” means the average of the two lowest Closing Bid Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Fixed Conversion Price” shall mean $0.00005 per share. The shares of common stock issuable upon conversion of the First St. George Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the First St. George Note is exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser is an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the First St. George Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.0005 below the market price on September 5, 2013 of $0.0012 provided a value of $46,555, of which $20,975 and $-0- was amortized during the years ended December 31, 2013 and 2012, respectively. | |||||||||
Magna Group, LLC Convertible Note | |||||||||
On December 31, 2013, we issued to Magna Group, LLC (“First Magna Group Note”) a 12% Convertible Promissory Note in the original principal amount of $35,028. The note was issued in exchange for two notes totaling $33,000 of principal and $1,028 of accrued interest, along with a $1,000 origination fee, that were acquired from, and assigned by, Star Financial on December 31, 2013. The First Magna Group Note has a maturity date of December 31, 2014, and is convertible into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 50% multiplied by the Market Price (representing a discount rate of 50%). “Market Price” means the lowest Trading Price for the Common Stock during the five (5) day period prior to delivery of the conversion notice. “Fixed Conversion Price” shall mean $0.00004 per share. The shares of common stock issuable upon conversion of the First Magna Group Note are restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The issuance of the First Magna Group Note is exempt from the registration requirements of the Securities Act of 1933 pursuant to Rule 506 of Regulation D promulgated thereunder. The purchaser is an accredited and sophisticated investor, familiar with our operations, and there was no solicitation. | |||||||||
The Company evaluated the First Magna Group Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.0003 below the market price on December 31, 2013 of $0.0006 provided a value of $35,028, of which $-0- and $-0- was amortized during the years ended December 31, 2013 and 2012, respectively. |
16_Long_Term_Debts
16. Long Term Debts | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Long-term Debt, Current and Noncurrent [Abstract] | ' | ||||||||
Long Term Debts | ' | ||||||||
Long term debts consist of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
On November 4, 2013, the Company received net proceeds of $75,381, and a direct payoff of $36,619 on the Rapid Advance Loan listed below, on a loan of $112,000 from CAN Capital Assets Servicing, Inc., (“CAN Capital #2”) bearing an effective interest rate of 53.1%, consisting of 370 daily weekday payments of $552, maturing on November 13, 2014. The loan is collateralized with MS Health’s receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | $ | 98,984 | $ | – | |||||
On November 20, 2013, DeskFlex entered into a $10,550 demand promissory note bearing interest at 10.25%. The promissory note is payable in monthly installments of $1,223 per month, maturing on August 20, 2014 (the “Maturity Date”). | 9,417 | – | |||||||
On October 24, 2013, the Company purchased licenses to develop content management software in the total amount of $51,250 from Igenti, Inc., of which $51,250 was financed pursuant to an equipment financing agreement with Baytree National Bank & Trust Company bearing an effective interest rate of 13.235%, consisting of 36 monthly payments of $1,719; maturing on October 23, 2016. The loan is collateralized with the data management software. Igenti subsequently paid a total of $53,500, including $2,250 of penalties, to the Company for future payment for the development of the content management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 47,321 | – | |||||||
On October 10, 2013, the Company purchased licenses to develop content management software in the total amount of $34,800 from Igenti, Inc., of which $34,800 was financed pursuant to an equipment financing agreement with Financial Pacific Leasing bearing an effective interest rate of 31.625%, consisting of 36 monthly payments of $1,438; maturing on October 9, 2016. The loan is collateralized with the content management software. Igenti retained a total of $1,300 of financing fees and paid the remaining proceeds of $33,500 to the Company for future payment for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 32,025 | – | |||||||
On June 24, 2013, the Company received a loan of $15,000 from WebBank, c/o NewLogic Business Loans, Inc., (“NewLogic”), which has been renamed to CAN Capital Assets Servicing, Inc (“CAN Capital”) bearing an effective interest rate of 5.71%, consisting of 176 daily weekday payments of $106, maturing on February 19, 2014. The loan is collateralized with MS Health’s receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | $ | 4,202 | $ | – | |||||
On June 11, 2013, the Company received a loan of $24,000, including $499 of loan origination costs, from Horizon Business Funding, LLC (“Horizon”) bearing an effective interest rate of 368.05%, consisting of 78 daily week day payments of $448, maturing on October 2, 2013. The loan is collateralized with the Epazz receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | – | – | |||||||
On April 11, 2013, the Company received a loan of $70,000, including $1,650 of loan origination costs, from Small Business Financial Solutions, LLC (“SBFS”) bearing an effective interest rate of 95.6%, consisting of 240 daily week day payments of $394, maturing on March 13, 2014. The loan is collateralized with the Epazz receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | – | – | |||||||
On May 1, 2013, the Company purchased licenses to develop data management software in the total amount of $51,250 from Igenti, Inc., bearing an effective interest rate of 11%, consisting of 36 monthly payments of $1,674, maturing on April 30, 2016. The loan is collateralized with the data management software. Igenti retained a total of $4,615 of financing fees and paid the remaining proceeds of $46,615 to the Company for future payment to Sveltoz Solutions for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 41,167 | – | |||||||
On February 22, 2013, the Company purchased licenses to develop data management software in the total amount of $102,500 from Igenti, Inc., of which $51,250 was financed pursuant to an equipment financing agreement with Baytree National Bank & Trust Company on March 7, 2013 bearing an effective interest rate of 11.48%, consisting of 36 monthly payments of $1,674; maturing on March 6, 2016. The loan is collateralized with the data management software. Igenti retained a total of $3,000 of financing fees and paid the remaining proceeds of $99,500 to the Company for future payment to Sveltoz Solutions for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 38,361 | – | |||||||
On February 22, 2013, the Company purchased licenses to develop data management software in the total amount of $102,500 from Igenti, Inc., of which $51,250 was financed with an equipment finance loan from Summit Funding Group, Inc. equipment with a three year loan term consisting of monthly loan payments of $1,828, with $2,078 paid at signing, maturing on February 21, 2016. The loan is collateralized with the data management software. Igenti retained a total of $3,000 of financing fees and paid the remaining proceeds of $99,500 to the Company for future payment to Sveltoz Solutions for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 40,108 | – | |||||||
On August 10, 2012, the Company purchased $13,870 of equipment with a three year equipment finance loan. The loan bears interest at an effective interest rate of 31.55%, along with monthly principal and interest payments of $585. The loan is collateralized with the purchased equipment. Matures on August 9, 2015. | 10,228 | 13,448 | |||||||
On April 1, 2012, the Company purchased $129,747 of equipment with a three year equipment finance loan. The loan bears interest at an effective interest rate of 8.3%, along with monthly principal and interest payments of $4,078. The loan is collateralized with the purchased equipment. Matures on April 1, 2015. | 78,603 | 104,129 | |||||||
Consideration for the MS Health acquisition included partial proceeds obtained from a $360,800 Small Business Association (“SBA”) loan, bearing interest at fixed and variable rates, maturing on March 27, 2022. The initial interest rate is 5.5% per year for three (3) years, consisting of the Prime Rate in effect on the first business day of the month in which the SBA loan application was received, plus 2.25%. The loan terms then transition to a variable interest rate over the remaining seven (7) years of the ten (10) year maturity term, calculated at 2.25% above the Prime Rate, as adjusted quarterly. The Company must pay principal and interest payments of $3,916 monthly. The SBA Loan is guaranteed by PRMI, K9 Bytes, Desk Flex, Inc., MS Health and the Company, and secured by the assets of MS Health and the Company. | 312,095 | 343,060 | |||||||
Consideration for the MS Health acquisition included an unsecured $100,000 seller financed note payable (“MSHSC Note”), bearing interest at 6% per annum, a ten (10) year amortization, a right of offset, no payments of either principal or interest for two (2) years and equal payments of principal and interest commencing in year three (3), no prepayment penalty, and full payment of all amounts due after five (5) years, maturing March 27, 2022. Pursuant to an amendment to a consulting agreement with the seller on March 23, 2012, the Company agreed to begin to repay principal of $1,000 per month, and had repaid a total of $6,000 during the year ended December 31, 2012. The MSHSC Note is secured by a security interest over the assets of MS Health. We did not purchase and MSHSC agreed to retain and be responsible for any and all liabilities of MSHSC. | 94,000 | 94,000 | |||||||
On Deck Capital Loan – DeskFlex, Inc.: | |||||||||
On November 7, 2011, DeskFlex entered into a four month $20,000 note payable agreement with On Deck Capital. Payments of $183 were originally due daily on the loan. Origination fees of $500 were added to the initial loan, agreed to pay additional fees of $387 per month in servicing fees during the term of the loan and to repay the loan via daily payments of $183. The total payments due on the loan equate to an annual interest rate of 18%. | |||||||||
On February 15, 2012, we amended this loan agreement to increase the loan balance to $35,400, consisting of additional proceeds of $19,200, a rolled over loan balance of $10,050, an origination fee of $750 and interest amount of $5,400 to be paid over the restarted four month term of the loan via daily payments of $274. | – | 28,173 | |||||||
On July 23, 2012, we amended this loan agreement again to increase the remaining unpaid loan balance to $35,400 again, consisting of additional proceeds of $23,883, a rolled over loan balance of $5,367, an origination fee of $750 and interest amount of $5,400 to be paid over the restarted four month term of the loan via daily payments of $274. | |||||||||
On October 30, 2012, we amended this loan agreement again to increase the remaining unpaid loan balance to $41,300, consisting of additional proceeds of $18,085, a rolled over loan balance of $16,040, an origination fee of $875 and interest amount of $6,300 to be paid over the restarted four month term of the loan via daily payments of $320. | |||||||||
On February 8, 2013, we again amended this loan agreement again to increase the remaining unpaid loan balance to $41,300, consisting of additional proceeds of $17,541, a rolled over loan balance of $16,584, an origination fee of $875 and interest amount of $6,300 to be paid over the restarted four month term of the loan via daily payments of $320. | |||||||||
The proceeds of all refinancing loans were received with substantially the same terms as the original debt. | |||||||||
On Deck Capital Loan – Epazz, Inc.: | – | 54,088 | |||||||
On January 3, 2012, Epazz entered into a nine month $55,800 note payable agreement with On Deck Capital. Payments of $289 were originally due daily on the loan. Proceeds of $43,875 were received on the loan, origination fees of $1,125 were added to the initial loan, along with interest of $10,800. The total payments due on the loan equate to an annual interest rate of 18%. | |||||||||
On May 25, 2012, we amended this loan agreement to increase the loan balance to $63,000, consisting of additional proceeds of $25,043, a rolled over loan balance of $24,957 and interest of $13,000 to be paid over the restarted nine month term of the loan via daily payments of $326. | |||||||||
On September 10, 2012, we again amended this loan agreement to increase the loan balance to $76,800, consisting of additional proceeds of $22,613, a rolled over loan balance of $35,887, an origination fee of $1,500 and interest of $16,800 to be paid over the revised twelve month term of the loan via daily payments of $299. | |||||||||
The proceeds of all refinancing loans were received with substantially the same terms as the original debt. | |||||||||
On March 20, 2012, DeskFlex entered into a $25,000 three year promissory note bearing interest at 11%. The promissory note was payable in monthly installments of $843 per month, maturing on March 20, 2015 (the “Maturity Date”). The note was acquired and assigned by GG Mars Capital, Inc., a company owned by our CEO’s family member, on August 15, 2013 prior to being exchanged for a convertible note on August 20, 2013 and subsequently converted into 46,856,526 shares of Class A Common Stock. | – | 19,483 | |||||||
Pursuant to an asset purchase agreement entered into on October 26, 2011, the Company granted K9 Bytes, Inc., a Florida corporation, a subordinated secured $30,750 promissory note carrying a 6% interest rate, payable in monthly installments of $333 per month starting in November 2011 and ending on October 26, 2014, at which time the then remaining balance of the promissory note ($23,017, assuming no additional payments other than those scheduled) is due. The promissory note is secured by a secondary lien on all of the assets of Epazz’s subsidiary, K9 Bytes, Inc., an Illinois corporation formed to house the purchased assets. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | 2,510 | 6,234 | |||||||
Unsecured $50,000 promissory note originated on September 15, 2010 between Intellisys and Paul Prahl, payable in monthly installments of $970 carries a 6% interest rate, maturing on September 18, 2015. The Company also agreed to provide Mr. Prahl earn-out rights, which provide that he will receive up to a maximum of $13,350 per year for the three calendar years following the Closing (with the first such calendar year beginning on January 1, 2011), based on the revenues generated by IntelliSys during such applicable year, whereas $6,675 is earned if revenues are between $350,000 and $380,000, $10,012 is earned if revenues are between $380,000 and $395,000, or $13,350 is earned if revenues are greater than $395,000 during each relevant year. | 8,186 | 10,520 | |||||||
Unsecured term loan between Epazz and Bank of America, originating on June 15, 2011 bearing interest at 9.5% matures on June 17, 2016. Payments of $1,559 are due monthly. | 60,573 | 68,436 | |||||||
Unsecured promissory note between Epazz and Newtek Finance for $185,000 originating on September 30, 2010 bearing interest at 6% matures on September 30, 2020. Payments of $2,054 are due monthly. | 137,087 | 153,377 | |||||||
The Company raised funds paid pursuant to an asset purchase agreement with K9 Bytes, Inc., a Florida corporation, on October 26, 2011, through a $235,000 Small Business Association (“SBA”) loan from a third party lender (the “Third Party Lender” and the “SBA Loan”). The SBA Loan has a term of ten (10) years; maturing on October 26, 2021, bearing interest at the prime rate plus 2.75% per annum, adjusted quarterly; is payable in monthly installments (beginning in December 2011) of $2,609 per month; is guaranteed by the Company and personally guaranteed by Shaun Passley, Ph.D., the Company’s Chief Executive Officer; and is secured by all of the assets of K9 Bytes, Inc., the Illinois corporation and wholly-owned subsidiary formed to house the acquired assets and the Company, 100% of the outstanding capital of the K9 subsidiary, and a life insurance policy on Dr. Passley’s life in the amount of $235,000. A total of approximately $10,000 of the amount borrowed under the SBA Loan was used to pay closing fees in connection with the loan, $169,250 was used to pay K9 Bytes the cash amount due pursuant to the terms of the Purchase Contract and the remainder of such loan amount was made available for working capital for the Company and the wholly-owned subsidiary, K9 Bytes, Inc. | 197,062 | 216,214 | |||||||
Total long term debt | 1,211,929 | 1,111,162 | |||||||
Less: current portion | (354,786 | ) | (218,699 | ) | |||||
Long term debt, less current portion | $ | 857,143 | $ | 892,463 | |||||
The Company recorded interest expense on long term debts, credit lines and capital leases in the amount of $261,634 and $102,261 for the years ended December 31, 2013 and 2012, respectively. |
17_Stockholders_Equity
17. Stockholder's Equity | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||
Stockholder's Equity | ' | ||||||||||
On January 14, 2014 and May 17, 2013, the Board of Directors, consisting solely of Shaun Passley, Ph.D., the Company’s majority shareholder, amended the Article of Incorporation to change the par value and number of authorized shares of each class of common and series of preferred stock and authorize a third class of preferred stock, Series C Convertible Preferred Stock, in addition to the modification of the attributes and dividends. The disclosures herein reflect these modifications and the changes to the par value have been retroactively reflected throughout. | |||||||||||
Convertible Preferred Stock, Series A | |||||||||||
The Company has one thousand (1,000) authorized shares of $0.0001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”). The Series A Preferred Stock accrues dividends equal to 1.5% of the Company’s revenues per quarter, beginning on January 1st of any calendar year in which the Company has generated revenue over $2 million, and an additional 24% of the Company’s net income beginning on January 1st of any calendar year in which the Company has generated net income over $2 million. The dividends are payable at the discretion of the Company, provided that any unpaid dividends accrue until paid. The Series A Preferred Stock includes a liquidation preference equal to $0.0001 per share, plus any accrued and unpaid dividends. The Series A Preferred Stock is convertible, at the option of the holder into shares of the Company’s Class A Common Stock, with five business days’ notice into 60% of the total number of then issued and outstanding shares of Class A Common Stock. The Series A Preferred Stock has limited voting rights, relating solely to matters which adversely affect the rights of the Series A Preferred Stock holders. The Company shall reserve and keep available out of its authorized but unissued shares of Class A Common Stock such number of shares sufficient to effect the conversions. | |||||||||||
On July 2, 2012, the Company issued 1,000 shares of convertible Series A Preferred Stock to the Company’s CEO for services provided and personal guaranties associated with previous acquisition activities. The total fair value of the preferred stock was $229,236 based on valuations performed using an option-pricing method based on the Company’s publicly traded common stock on the date of grant, and a 5% discount for lack of marketability. | |||||||||||
Convertible Preferred Stock, Series B | |||||||||||
The Company has one thousand (1,000) authorized shares of $0.0001 par value Series B Convertible Preferred Stock (“Series B Preferred Stock”). The Series B Preferred Stock accrues dividends equal to 1.5% of the Company’s revenues per quarter, beginning on January 1st of any calendar year in which the Company has generated revenue over $1 million, and an additional 6% of the Company’s net income beginning on January 1st of any calendar year in which the Company has generated net income over $2 million. The dividends are payable at the discretion of the Company, provided that any unpaid dividends accrue until paid. The Series B Preferred Stock includes a liquidation preference equal to $0.0001 per share, plus any accrued and unpaid dividends. The Series B Preferred Stock is convertible, at the option of the holder into shares of the Company’s Class A Common Stock, with five business days’ notice into 10% of the total number of then issued and outstanding shares of Class A Common Stock, provided that no conversion will take place until all holders of the Series B Preferred Stock consent to such conversion. The Series B Preferred Stock has limited voting rights, relating solely to matters which adversely affect the rights of the Series B Preferred Stock holders. The Company shall reserve and keep available out of its authorized but unissued shares of Class A Common Stock such number of shares sufficient to effect the conversions. | |||||||||||
On July 2, 2012, the Company issued a total of 1,000 shares of convertible Series B preferred stock amongst three related parties pursuant to the exchange and extension of a promissory note owed to Star Financial Corporation, a related party. The total fair value of the preferred stock was $61,130 based on valuations performed using an option-pricing method based on the Company’s publicly traded common stock on the date of grant, and a 5% discount for lack of marketability. | |||||||||||
Convertible Preferred Stock, Series C | |||||||||||
Effective January 14, 2014, the Company has three billion (3,000,000,000) authorized shares of $0.0001 par value Series C Convertible Preferred Stock (“Series C Preferred Stock”). The Series C Preferred Stock accrues dividends equal to 1.5% of the Company’s revenues per quarter, beginning on January 1st of any calendar year in which the Company has generated revenue over $1 million, and an additional 6% of the Company’s net income beginning on January 1st of any calendar year in which the Company has generated net income over $2 million. The dividends are payable at the discretion of the Company, provided that any unpaid dividends accrue until paid. The Series C Preferred Stock includes a liquidation preference equal to $0.0001 per share, plus any accrued and unpaid dividends. Subject to certain conversion restrictions over the first three months from the original issuance date, each share of Series C Preferred Stock is convertible, at the option of the holder into three (3) shares of the Company’s Class A Common Stock, with five business days’ notice. The following conversion restrictions shall apply; (i) the holder shall be prohibited from converting any Series C Preferred shares for a period of one (1) month from the original issuance date, (ii) the holder shall be prohibited from converting not more than 30% of the Series C Preferred shares originally issued to holder during the second (2nd) month following the original issuance date, (iii) the holder shall be prohibited from converting not more than 30% (60% in total) of the Series C Preferred shares originally issued to holder during the third (3rd) month following the original issuance date, (iv) the holder shall be prohibited from converting not more than an additional 40% (100% in total) of the Series C Preferred shares originally issued to holder following the end of the third month following the original issuance date. The Series C Preferred Stock shall each vote three voting share and shall vote together with the Common Stock of the Company. The Company shall reserve and keep available out of its authorized but unissued shares of Class A Common Stock such number of shares sufficient to effect the conversions. | |||||||||||
A total of 2,943,722,200 shares of Series C Convertible Preferred Stock have been subsequently issued, as disclosed in the Subsequent Events footnote below. | |||||||||||
Common Stock, Class A | |||||||||||
The Company has 9 billion authorized shares of $0.0001 par value Class A Common Stock. | |||||||||||
Class A Common Stock Issuances, 2013: | |||||||||||
Debt Conversions into Class A Common Stock | |||||||||||
On January 3, 2013, the Company issued 4,000,000 shares of Class A Common Stock pursuant to the conversion of $12,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On February 19, 2013, the Company issued 8,823,529 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On February 26, 2013, the Company issued 10,750,000 shares of Class A Common Stock pursuant to the conversion of $17,200 of convertible debt, consisting of $15,500 of principal and $1,700 of accrued and unpaid interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On March 4, 2013, the Company issued 10,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On March 6, 2013, the Company issued 14,461,538 shares of Class A Common Stock pursuant to the conversion of $18,800 of convertible debt, consisting of $17,500 of principal and $1,300 of accrued and unpaid interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On March 12, 2013, the Company issued 4,504,505 shares of Class A Common Stock pursuant to the conversion of $5,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On March 14, 2013, the Company issued 50,000,000 shares of Class A Common Stock pursuant to the conversion of $46,000 of convertible debt owed to a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On April 2, 2013, the Company issued 15,151,515 shares of Class A Common Stock pursuant to the conversion of $10,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On April 10, 2013, the Company issued 50,000,000 shares of Class A Common Stock pursuant to the conversion of $40,000 of convertible debt owed to a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On May 27, 2013, the Company modified a related party debt and issued 14,239,500 shares of Class A Common Stock in settlement of $14,239 of related party debt owed to Vivienne Passley, which consisted of $13,000 of principal and $1,239 of accrued and unpaid interest. The total fair value of the common stock was $28,479 based on the closing price of the Company’s common stock on the date of grant, resulting in the recognition of a $14,240 loss on debt settlement. | |||||||||||
On April 24, 2013, the Company issued 15,873,016 shares of Class A Common Stock pursuant to the conversion of $10,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On June 24, 2013, the Company issued 40,857,143 shares of Class A Common Stock pursuant to the conversion of $17,160 of convertible debt, consisting of $16,500 of principal and $660 of accrued and unpaid interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 9, 2013, the Company issued 80,000,000 shares of Class A Common Stock pursuant to the conversion of $26,400 of convertible debt owed to a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 10, 2013, the Company issued 22,222,222 shares of Class A Common Stock pursuant to the conversion of $8,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 30, 2013, the Company issued 15,476,190 shares of Class A Common Stock pursuant to the conversion of $13,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On August 7, 2013, the Company issued 40,000,000 shares of Class A Common Stock pursuant to the conversion of $32,000 of convertible debt owed to a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On August 19, 2013, the Company issued 19,551,267 shares of Class A Common Stock pursuant to the conversion of $14,663 of convertible debt, which consisted of $10,900 of principal and $3,763 of accrued interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On August 27, 2013, the Company issued 46,856,526 shares of Class A Common Stock pursuant to the conversion of $14,838 of convertible debt owed to a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
Shares of Class A Common Stock Issued for Services to Related Parties | |||||||||||
On March 5, 2013, the Company issued 12,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing a personal guaranty on an acquisition loan that originated on September 30, 2010. The total fair value of the common stock was $25,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On March 5, 2013, the Company issued 12,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing a personal guaranty on two acquisition loans that originated on October 26, 2011. The total fair value of the common stock was $25,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On March 5, 2013, the Company issued 200,000,000 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services. The shares will be vested once the Company reports revenue of $10 million in a calendar year. The total fair value of the common stock was $400,000 based on the closing price of the Company’s common stock on the date of grant, which is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||||
On March 20, 2013, the Company issued 35,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing collateral on acquisition loans that originated on September 30, 2010 and October 26, 2011. The total fair value of the common stock was $35,500 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On March 20, 2013, the Company issued 60,000,000 shares of Class A Common Stock to Craig Passley, a related party, for providing corporate secretary services from 2012 to 2021. The total fair value of the common stock was $60,000 based on the closing price of the Company’s common stock on the date of grant, which is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. A total of $6,000 was expensed related to the vested services for the year ended December 31, 2012. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||||
On May 16, 2013, the Company issued 710,526,316 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services. The total fair value of the common stock was $1,350,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On May 24, 2013, the Company issued 35,500,000 shares of Class A Common Stock to Fay Passley, a related party, for providing collateral on acquisition loans that originated on September 30, 2010 and October 26, 2011. The total fair value of the common stock was $71,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On July 5, 2013, the Company issued 25,000,000 shares of Class A Common Stock to Vivienne Passley, a related party, for providing human resource services. The total fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On July 8, 2013, the Company issued 710,526,316 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services, of which 200,000,000 shares vested immediately and the remaining 510,526,316 shares will be vested once the Company reports revenue of $10 million in a calendar year. The total fair value of the common stock was $497,368 based on the closing price of the Company’s common stock on the date of grant, of which $140,000 is being expensed and $357,368 is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. The vesting restrictions were subsequently lifted on March 22, 2014 pursuant to the exchange of these shares for Convertible Series C Preferred shares. | |||||||||||
Shares of Class A Common Stock Issued for Loan Origination Fees to Related Parties | |||||||||||
On July 19, 2013, the Company issued 2,500,000 shares of Class A Common Stock to Vivienne Passley, a related party, as a loan origination cost in consideration for a $23,000 short term promissory note. The total fair value of the common stock was $4,250 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On July 31, 2013, the Company issued 3,000,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $32,000 short term promissory note. The total fair value of the common stock was $4,200 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On August 2, 2013, the Company issued 3,000,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $32,000 short term promissory note. The total fair value of the common stock was $5,100 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On August 7, 2013, the Company granted 2,500,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $24,000 short term promissory note. The total fair value of the common stock was $4,250 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||||
On August 12, 2013, the Company issued 5,000,000 shares of Class A Common Stock to Vivienne Passley, a related party, as a loan origination cost in consideration for a $51,000 short term promissory note. The total fair value of the common stock was $7,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On August 20, 2013, the Company granted 2,500,000 shares of Class A Common Stock to GG Mars Capital, Inc., a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $25,000 short term promissory note. The total fair value of the common stock was $3,250 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||||
On August 27, 2013, the Company granted 1,250,000 shares of Class A Common Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $12,500 short term promissory note. The total fair value of the common stock was $1,500 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||||
On September 7, 2013, the Company granted 6,000,000 shares of Class A Common Stock to GG Mars Capital, Inc., a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $65,000 short term promissory note. The total fair value of the common stock was $6,600 based on the closing price of the Company’s common stock on the date of grant. The shares were subsequently issued on November 13, 2013. | |||||||||||
Class A Common Stock Issuances, 2012: | |||||||||||
Debt Conversions into Class A Common Stock | |||||||||||
On March 13, 2012, the Company issued 1,075,269 shares of Class A Common Stock pursuant to the partial conversion in the amount of $10,000 of a $50,000 convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On June 26, 2012, the Company issued 1,538,462 shares of Class A Common Stock pursuant to the partial conversion in the amount of $10,000 of a $50,000 convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 9, 2012, the Company issued 1,578,947 shares of Class A Common Stock pursuant to the conversion of $9,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 16, 2012, the Company issued 1,525,424 shares of Class A Common Stock pursuant to the conversion of $9,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 24, 2012, the Company issued 789,474 shares of Class A Common Stock pursuant to the conversion of $6,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On July 31, 2012, the Company issued 1,898,734 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On August 7, 2012, the Company issued 1,481,481 shares of Class A Common Stock pursuant to the conversion of $12,000 of convertible debt, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On August 21, 2012, the Company issued 2,033,898 shares of Class A Common Stock pursuant to the conversion of $12,000 of convertible debt, consisting of $10,500 of principal and $1,500 of accrued and unpaid interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On September 15, 2012, the Company issued 50,000,000 shares of Class A Common Stock pursuant to the conversion of $250,000 of convertible debt owed to Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | |||||||||||
On September 24, 2012, the Company issued 10,343,963 shares of Class A Common Stock in settlement of $53,968 of accounts payable owed for the purchase of computer equipment on June 16, 2012 from L&F Lawn Services, a related party. The total fair value of the common stock was $116,887 based on the closing price of the Company’s common stock on the date of grant, resulting in additional compensation of $62,919. | |||||||||||
On October 1, 2012, the Company issued 9,370,640 shares of Class A Common Stock in settlement of $44,728 of related party debt owed to Fay Passley, which consisted of $34,700 of principal and $10,028 of accrued and unpaid interest. The total fair value of the common stock was $83,399 based on the closing price of the Company’s common stock on the date of grant, resulting in the recognition of a $38,671 loss on debt settlement. | |||||||||||
Shares of Class A Common Stock Issued for Services to Related Parties | |||||||||||
On July 19, 2012, the Company issued 30,000,000 shares of Class A Common Stock to the Company’s CEO in consideration for providing a personal guaranty and collateral on twelve loans over the past 10 years. The total fair value of the common stock was $375,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On July 19, 2012, the Company issued 3,000,000 shares of Class A Common Stock to a related party in consideration for providing a personal guaranty and collateral on two acquisition loans during 2010 and 2011. The total fair value of the common stock was $37,500 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On July 19, 2012, the Company issued 3,000,000 shares of Class A Common Stock to another related party in consideration for providing a personal guaranty and collateral on two acquisition loans during 2010 and 2011. The total fair value of the common stock was $37,500 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On August 27, 2012, the Company issued 20,000,000 shares of Class A Common Stock to the Company’s CEO in consideration for providing product development services. The total fair value of the common stock was $130,000 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On August 27, 2012, the Company issued 2,500,000 shares of Class A Common Stock to a family member of the Company’s CEO in consideration for providing a personal guaranty and collateral on two loans obtained during 2012. The total fair value of the common stock was $16,250 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On August 27, 2012, the Company issued 2,500,000 shares of Class A Common Stock to a family member of the Company’s CEO in consideration for providing a personal guaranty and collateral on two loans obtained during 2012. The total fair value of the common stock was $16,250 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On September 6, 2012, the Company issued 1 billion shares of Class A Common Stock to the Company’s CEO in consideration for various services performed, and to be performed over a ten year period beginning on September 6, 2012. The total fair value of the common stock was $6,000,000 based on the closing price of the Company’s common stock on the date of grant, which is presented as a deduction against additional paid in capital in the equity section of the balance sheet until the terms of the vesting periods are satisfied. Effective March 22, 2014, the vesting was accelerated on all unvested shares and they were subsequently exchanged for shares of Series C Convertible Preferred Stock on a 1:1 basis. The services performed and vesting periods were as follows: | |||||||||||
Vesting | Shares | Fair | |||||||||
Terms | Granted | Value | Services Performed | ||||||||
-1 | 250,000,000 | $ | 1,500,000 | Base salary of 25 million shares per year over a ten year term | |||||||
-2 | 225,000,004 | 1,350,000 | Compensation bonus for services provided | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of IntelliSys | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of PRM | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of DFI | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of K9 Bytes | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of AutoHire Software | ||||||||
-2 | 33,333,333 | 200,000 | Compensation for services provided related to the acquisition of MS Health | ||||||||
-3 | 33,333,333 | 200,000 | Compensation for services provided related to the acquisition of a future acquisition | ||||||||
-2 | 33,333,333 | 200,000 | Compensation for use of the CEO's personal residence as collateral on various loans | ||||||||
-4 | 299,999,997 | 1,800,000 | Compensation for future use of the CEO's personal residence as collateral on various loans | ||||||||
1,000,000,000 | $ | 6,000,000 | |||||||||
(1) Vested annually at a rate of 1/10th per year from the anniversary date of the employment agreement (September 6, 2012), subject to the recognition of at least $10 million in revenues for any calendar year. | |||||||||||
(2) Vested subject to the recognition of at least $10 million in revenues for any calendar year. | |||||||||||
(3) Vested upon the latter of both, a) the future closing of an acquisition, and b) the recognition of at least $10 million in revenues for any calendar year. | |||||||||||
(4) Vested annually at a rate of 1/9th per year from the anniversary date of the employment agreement (September 6, 2012), subject to the recognition of at least $10 million in revenues for any calendar year. | |||||||||||
On October 1, 2012, the Company issued 3,020,667 shares of Class A Common Stock to L&F Lawn Services, a related party, in consideration for providing a personal guaranty on a loan obtained during 2012. The total fair value of the common stock was $26,884 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
On October 9, 2012, the Company issued 144,928 shares of Class A Common Stock to L&F Lawn Services, a related party, as an origination fee in consideration for providing a $2,000 loan to the Company. The total fair value of the common stock was $884 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
Shares of Class A Common Stock Issued for Loan Origination Fees to Related Parties | |||||||||||
On October 9, 2012, the Company issued 1,086,957 shares of Class A Common Stock to Vivienne Passley, a related party, as an origination fee in consideration for providing a $13,000 loan to the Company. The total fair value of the common stock was $6,630 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
Convertible Common Stock, Class B | |||||||||||
The Company has 60,000,000 authorized shares of $0.0001 par value Convertible Class B Common Stock, convertible at the option of the holder into shares of the Company’s Class A Common Stock on a 1:1 basis. Effective January 14, 2014, the preferential voting rights of the Convertible Class B Common Stock were changed from preferential voting rights of 2,000 votes to each Class A Common Stock vote (2,000:1) to 10,000 votes to each Class A Common Stock vote (10,000:1). The Company shall reserve and keep available out of its authorized but unissued shares of Class A Common Stock such number of shares sufficient to effect the conversions. | |||||||||||
Convertible Class B Common Stock Issuances, 2013 | |||||||||||
On March 16, 2013, the Company issued 5,000,000 shares of Convertible Class B Common Stock to the Company’s CEO in consideration for providing product development services. The total fair value of the common stock was $9,500 based on the closing price of the Company’s common stock on the date of grant. | |||||||||||
Convertible Class B Common Stock Issuances, 2012 | |||||||||||
On July 1, 2012, the Company issued 3,000,000 shares of Convertible Class B Common Stock to the Company’s CEO for services provided and personal guaranties associated with previous acquisition activities. The fair value of the class B common stock was $24,000 based on valuations performed using an option-pricing method based on the Company’s publicly traded common stock on the date of grant, and a 5% discount for lack of marketability. | |||||||||||
Dividends Payable | |||||||||||
On January 1, 2013, the Company declared and accrued dividends quarterly on its Convertible Series B Preferred Stock pursuant to the recognition of revenues in excess of $1 million during the year ended December 31, 2012. Dividends equal to 1.5% of the Company’s revenues per quarter during the year ending December 31, 2013 accrue quarterly, resulting in a dividend payable of $11,000, which can be paid in cash or in shares of Class A Common Stock in lieu of cash. | |||||||||||
Beneficial Conversion Feature | |||||||||||
On June 12, 2013, the Company entered into a convertible promissory note with JMJ Financial. The beneficial conversion feature discount resulting from the conversion price that was $0.00518 below the market price of $0.0017 on the June 12, 2013 origination date resulted in a debt discount value of $33,000 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||||
On August 19, 2013, the Company entered into a convertible promissory note with Asher Enterprises. The beneficial conversion feature discount resulting from the conversion price that was $0.0006 below the market price of $0.0014 on the August 19, 2013 origination date resulted in a debt discount value of $39,021 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||||
On August 20, 2013, the Company entered into a convertible promissory note with GG Mars Capital, Inc., a company owned by our CEO’s family member. The beneficial conversion feature discount resulting from the conversion price that was $0.001 below the market price of $0.0013 on the August 20, 2013 origination date resulted in a debt discount value of $14,838 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||||
On September 5, 2013, the Company entered into a convertible promissory note with St. George Investments, Inc. The beneficial conversion feature discount resulting from the conversion price that was $0.0005 below the market price of $0.001 on the September 5, 2013 origination date resulted in a debt discount value of $46,555 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||||
On September 18, 2013, the Company entered into a convertible promissory note with Asher Enterprises. The beneficial conversion feature discount resulting from the conversion price that was $0.0004 below the market price of $0.001 on the September 18, 2013 origination date resulted in a debt discount value of $27,210 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||||
On December 31, 2013, the Company entered into a convertible promissory note with Magna Group, LLC. The beneficial conversion feature discount resulting from the conversion price that was $0.0003 below the market price of $0.0006 on the December 31, 2013 origination date resulted in a debt discount value of $35,028 that was recognized as additional paid in capital and is being amortized on a straight line basis over the life of the loan. | |||||||||||
Loss on Convertible Debt Modification to Related Party | |||||||||||
On March 5, 2013, we amended a convertible promissory note with Star Financial Corporation, which then carried a balance of $190,849, to revise the conversion terms from a $0.005 floor and 75% discount to market to conversion terms consisting of, "equal to the greater of, (a) 50% of the Market Price, or (b) the fixed conversion price of $0.00075 per share". The Company compared the fair value of the debt immediately preceding the modification to the fair value after the modification to determine the loss on modification of $81,792. This value was determined using the value of the shares assuming the note was converted pursuant to the respective conversion terms on the date of modification. The total value of the shares after modification was $272,641, compared to the $190,849 value preceding the modification, resulting in a loss on modification of $81,792. |
18_Income_Taxes
18. Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
18. Income Taxes | ' | ||||||||
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. | |||||||||
As of December 31, 2013, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. The Company had approximately $1,554,000 and $955,000 of federal net operating loss carry forwards at December 31, 2013 and 2012, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2029. | |||||||||
The components of the Company’s deferred tax asset are as follows: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Deferred tax assets: | |||||||||
Net operating loss carry forwards | $ | 1,554,000 | $ | 955,000 | |||||
Net deferred tax assets before valuation allowance | $ | 543,900 | $ | 334,250 | |||||
Less: Valuation allowance | (543,900 | ) | (334,250 | ) | |||||
Net deferred tax assets | $ | – | $ | – | |||||
Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2013 and 2012. The Company had no uncertain tax positions as of December 31, 2013 and 2012. | |||||||||
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Federal and state statutory rate | 35% | 35% | |||||||
Change in valuation allowance on deferred tax assets | -35% | -35% | |||||||
19_Subsequent_Events
19. Subsequent Events | 12 Months Ended | |||||||
Dec. 31, 2013 | ||||||||
Subsequent Events [Abstract] | ' | |||||||
Subsequent Events | ' | |||||||
Telecorp Products, Inc., Stock Purchase Agreement | ||||||||
On February 28, 2014, the Company entered into a Stock Purchase Agreement (the “Telecorp Purchase Agreement”) with Troy Holdings International, Inc., an Ontario Canada corporation (“Troy Holdings”), Telecorp Products, Inc. a Michigan corporation and Troy, Inc., a shareholder and the sole stockholder of Telecorp. Pursuant to the Telecorp Purchase Agreement, the Company purchased 100% of the outstanding shares of Telecorp from Troy Holdings, for an aggregate purchase price of $320,000 (the “Purchase Price”). The Purchase Price was payable as follows: | ||||||||
(a) | The Company paid Troy Holdings $200,000 at the Closing (the “Cash Consideration”) of the Telecorp Purchase Agreement; and | |||||||
(b) | The Company provided Troy Holdings with a Promissory Note in the amount of $120,000 (the “Telecorp Note”), which provides for six (6) equal monthly payments of $20,000 commencing thirty (30) days after the Closing. The Telecorp Note is non-interest bearing except upon default, in which case the interest rate shall be 10% per annum. | |||||||
Additionally, the Company agreed to assume aggregate outstanding Telecorp liabilities of up to $50,000 in connection with the Closing. As a result of the Closing, Telecorp became a wholly-owned subsidiary of the Company. | ||||||||
In connection with the Stock Purchase Agreement, the shareholders of Telecorp and the Company entered into a Non-Disclosure/Non-Compete Agreement, pursuant to which the shareholders of Telecorp and the Company, each agreed to not for a period of one (1) year, communicate or divulge to, or use for the benefit of itself or any other person, firm, association or corporation, any information in any way relating to the Proprietary Property, in competition with the business of the Company, and pursuant to the agreement, the shareholders of Telecorp agreed not to compete against the Company for one (1) year from the closing of the acquisition. | ||||||||
Zinergy (DBA) formerly Cynergy Software, Asset Purchase | ||||||||
On March 13, 2014, the Company entered into an Asset Purchase Agreement with Cynergy Corporation, an Oklahoma corporation (“Cynergy”). Pursuant to the Purchase Agreement, we purchased substantially all of the intangible assets and certain tangible assets used in connection with Cynergy’s help desk software business, including all of its intellectual property, its business trademarks and copyrights, equipment, computers, software, machinery and accounts receivable in consideration for an aggregate of $75,000, of which $25,000 was paid at the closing, $25,000 was paid within fifteen (15) days after the closing and the remaining $25,000 was paid within forty (40) days after the closing. We did not purchase and Cynergy agreed to retain and be responsible for any and all liabilities of Cynergy Corporation. The acquisition was financed in part with a software financing agreement. The financing agreement has a lien against the software assets of Zinergy. | ||||||||
Zinergy Service Desk Software is very customizable for business processes. Zinergy integrates with just about every other business tool available. Help Desk Support Software, Help Desk Ticketing Software, Customer Support Software, HRIS Ticketing Solution and much more. | ||||||||
Jadian Enterprises, Inc., Asset Purchase Agreement | ||||||||
On May 16, 2014, the Company, through a newly-formed wholly-owned Illinois subsidiary, Jadian Enterprises, Inc. (“Jadian Enterprises”), closed on an Asset Purchase Agreement (“APA”) with Jadian, Inc., a Michigan corporation (“Jadian”). Pursuant to the APA, we purchased substantially all of the intangible assets and certain tangible assets used in connection with Jadian’s software business, including all of its intellectual property, its business trademarks and copyrights, equipment, computers, software, machinery and accounts receivable in consideration for an aggregate of $425,000, of which $215,000 was paid at the closing and $210,000 was financed by way of a Promissory Note (the “Jadian Note”). The terms of the Jadian Note include interest at 6% per annum, a ten (10) year amortization, full right of offset, no payments of either principal or interest for thirty (30) days after Closing and equal payments of principal and interest commencing thereafter, no prepayment penalty, and a balloon payment consisting of full payment of all amounts due after three (3) years, subject to certain offsets, including an offset for $40,760 for prepaid maintenance contracts received by the seller prior to Closing. The Jadian Note is secured by a lien on the assets of Jadian. We did not purchase and Jadian agreed to retain and be responsible for any and all liabilities of Jadian. We did not purchase and Jadian agreed to retain and be responsible for any and all liabilities of Jadian. | ||||||||
The Company also agreed to provide the seller with additional earn-out rights in connection with the purchase, which provide that the seller will receive up to a maximum of $100,000 per year for the three twelve month periods following the Closing (any delinquent earn-out payment shall bear interest at the rate of 10% per annum until the delinquent amount is paid), based on the gross revenues generated by Jadian during such applicable year based on the following schedule (the “Earn-Out”): | ||||||||
Revenue for the Relevant Year | Earn-Out | |||||||
$-0- to $500,000 | $ | – | ||||||
$500,000 to $600,000 | $ | 25,000 | ||||||
$600,000 to $700,000 | $ | 50,000 | ||||||
$700,000 to $800,000 | $ | 75,000 | ||||||
$800,000 or more | $ | 100,000 | ||||||
Provided that in no event shall the total amount payable to Jadian Enterprises in connection with the Earn-Out exceed $100,000 per year, or $300,000 in aggregate. | ||||||||
The unaudited supplemental pro forma results of operations of the combined entities had the dates of the acquisitions been January 1, 2013 or January 1, 2012 are as follows: | ||||||||
Combined Pro Forma: | ||||||||
For the years ended | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
Revenue: | $ | 1,846,625 | $ | 2,459,767 | ||||
Expenses: | ||||||||
Operating expenses | 4,413,118 | 3,889,148 | ||||||
Net operating loss | -2,566,493 | -1,429,381 | ||||||
Other income (expense) | -660,325 | -475,117 | ||||||
Net loss | $ | -3,226,818 | $ | -1,904,498 | ||||
Weighted average number of common shares | ||||||||
Outstanding – basic and fully diluted | 2,536,096,673 | 399,031,314 | ||||||
Net loss per share – basic and fully diluted | $ | 0 | $ | 0 | ||||
Debt Financing, Related Parties, GG Mars Capital, Inc. | ||||||||
Originated February 7, 2014, a $26,000 unsecured promissory note payable, including a $6,000 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on March 30, 2014. In addition, a loan origination fee consisting of 2,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $500 upon default. | ||||||||
Originated February 22, 2014, a $100,000 unsecured promissory note payable, including a $25,000 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on April 30, 2014. In addition, a loan origination fee consisting of 15,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $35,000 upon default. | ||||||||
Originated March 7, 2014, a $22,000 unsecured promissory note payable, including a $7,000 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on May 7, 2014. In addition, a loan origination fee consisting of 2,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $7,000 upon default. | ||||||||
Originated March 26, 2014, a $37,500 unsecured promissory note payable, including a $7,500 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on May 26, 2014. In addition, a loan origination fee consisting of 3,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $1,500 upon default. | ||||||||
Originated March 28, 2014, an $18,750 unsecured promissory note payable, including a $3,750 loan origination fee, owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on May 28, 2014. In addition, a loan origination fee consisting of 2,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $7,000 upon default. | ||||||||
Debt Financing, Related Parties, Star Financial Corporation | ||||||||
Originated January 15, 2014, an unsecured $43,000 promissory note payable, including a $10,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on March 20, 2014. In addition, a loan origination fee consisting of 5,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $500 upon default. | ||||||||
Originated February 8, 2014, an unsecured $13,000 promissory note payable, including a $3,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on March 30, 2014. In addition, a loan origination fee consisting of 1,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $500 upon default. | ||||||||
Originated February 21, 2014, an unsecured $75,000 promissory note payable, including a $15,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on April 30, 2014. In addition, a loan origination fee consisting of 10,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $25,000 upon default. | ||||||||
Originated March 7, 2014, an unsecured $30,000 promissory note payable, including a $6,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on May 7, 2014. In addition, a loan origination fee consisting of 3,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $1,500 upon default. | ||||||||
Originated March 26, 2014, an unsecured $25,000 promissory note payable, including a $5,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on May 26, 2014. In addition, a loan origination fee consisting of 3,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $2,500 upon default. | ||||||||
Originated March 28, 2014, an unsecured $25,000 promissory note payable, including a $5,000 loan origination fee, owed to Star Financial, a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matured on May 28, 2014. In addition, a loan origination fee consisting of 3,000,000 shares of Convertible Series C Preferred Stock was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $2,500 upon default. | ||||||||
Convertible Debt Financing | ||||||||
Originated February 4, 2014, an unsecured $35,491 convertible promissory note, carries a 12% interest rate, matures on February 4, 2015, (“Second Magna Group Note”) owed to Magna Group, LLC, consisting of two notes acquired and assigned from Star Financial Corporation, a related party, consisting of a total of $33,000 of principal and $2,491 of accrued interest. The acquired promissory notes did not carry conversion terms, and were subsequently exchanged for the convertible note. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the lowest trading price of the Company’s common stock for the five (5) days prior to the conversion date, or $0.00004 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The assigned principal and interest of $35,491 was subsequently converted to a total of 236,606,400 shares of common stock over various dates from February 13, 2014 to February 27, 2014 in complete satisfaction of the debt. | ||||||||
Originated February 19, 2014, an unsecured $37,700 convertible promissory note, carries a 12% interest rate, matures on February 17, 2015, (“Third Magna Group Note”) owed to Magna Group, LLC, consisting of a promissory note acquired and assigned from Star Financial Corporation, a related party, consisting of $32,000 of principal and $5,700 of accrued interest. The acquired promissory note did not carry conversion terms, and were subsequently exchanged for the convertible note. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the lowest trading price of the Company’s common stock for the five (5) days prior to the conversion date, or $0.00004 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The assigned principal and interest of $35,491 was subsequently converted to a total of 377,000,000 shares of common stock over various dates from March 10, 2014 to March 19, 2014 in complete satisfaction of the debt. | ||||||||
Equity Based Debt Settlement Financing, Conversions into Class A Common Stock – IBC Funds, LLC | ||||||||
On February 14, 2014, IBC Funds, LLC (“IBC”) filed a Joint Motion for Approval of Settlement Agreement and Stipulation, and Request for Fairness Hearing in the Circuit Court of the Twelfth Judicial Circuit in and for Sarasota County, Florida, Case No. 2014-CA-000899. IBC has contracted with various note holders of the Company to acquire approximately $314,021 of Company debt and subsequently converted the debt to common stock of the Company at 50% of the lowest trading price over the 15 days prior to, and including the conversion request date pursuant to Section 3(a)(10) of the Securities Act of 1933, which allows the exchange of claims, securities, or property for stock when the arrangement is approved for fairness by a court proceeding. In addition, the Company agreed to issue 75,000,000 settlement shares to IBC. The Company has agreed to these terms as the acquisition of these debts and subsequent conversion would alleviate a significant portion of the Company’s liabilities. A fairness hearing was held on February 14, 2014 and the arrangement was approved. A total of 3,040,823,600 shares of Class A Common Stock was issued, in addition to the 75,000,000 settlement shares, in complete satisfaction of the debt, as disclosed in detail below. | ||||||||
On February 14, 2014, the Company issued 75,000,000 settlement shares of Class A Common Stock pursuant to the February 12, 2014 settlement agreement entered into with IBC Funds, LLC. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. The total fair value of the common stock was $37,500 based on the closing price of the Company’s common stock on the date of grant. | ||||||||
On February 14, 2014, the Company issued 25,000,000 shares of Class A Common Stock pursuant to the conversion of $3,750 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 24, 2014, the Company issued 100,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 25, 2014, the Company issued 100,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 25, 2014, the Company issued 150,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 28, 2014, the Company issued 142,900,000 shares of Class A Common Stock pursuant to the conversion of $21,435 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 7, 2014, the Company issued 150,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 11, 2014, the Company issued 150,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 14, 2014, the Company issued 101,900,000 shares of Class A Common Stock pursuant to the conversion of $10,190 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 25, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 27, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 2, 2014, the Company issued 151,900,000 shares of Class A Common Stock pursuant to the conversion of $15,190 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 7, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $30,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 10, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 16, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 22, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 28, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On May 1, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On May 6, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $10,000 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On May 6, 2014, the Company issued 169,123,600 shares of Class A Common Stock pursuant to the conversion of $8,456 of convertible debt held by IBC Funds, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
Shares of Convertible Series C Preferred Stock Issued for Services to Related Parties | ||||||||
On January 17, 2014, the Company issued 600,000,000 shares of the recently designated Series C Convertible Preferred Stock to the Company’s CEO in exchange for 600,000,000 shares of his previously issued Class A Common Stock. The total fair value of the Series C Convertible Preferred Stock was $367,713 based on an independent valuation on the date of grant. | ||||||||
On February 7, 2014, the Company issued 2,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost in consideration for a $26,000 short term promissory note. The total fair value of the common stock was $1,226 based on an independent valuation on the date of grant. | ||||||||
On February 21, 2014, the Company issued 10,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $75,000 short term promissory note. The total fair value of the common stock was $6,129 based on an independent valuation on the date of grant. | ||||||||
On February 22, 2014, the Company issued 15,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost in consideration for a $100,000 short term promissory note. The total fair value of the common stock was $9,193 based on an independent valuation on the date of grant. | ||||||||
On March 7, 2014, the Company issued 3,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $30,000 short term promissory note. The total fair value of the common stock was $1,839 based on an independent valuation on the date of grant. | ||||||||
On March 22, 2014, the Company issued 200,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, for providing a personal guaranty on an acquisition loan. The total fair value of the common stock was $122,571 based on an independent valuation on the date of grant. | ||||||||
On March 22, 2014, the Company issued 200,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, for providing a personal guaranty on an acquisition loan. The total fair value of the common stock was $122,571 based on an independent valuation on the date of grant. | ||||||||
On March 22, 2014, the Company issued 1,821,052,632 shares of the Series C Convertible Preferred Stock to the Company’s CEO in exchange for 1,821,052,632 shares, consisting of 1,730,526,316 previously issued and unvested shares of Class A Common Stock and 90,526,316 shares of his previously issued and vested Class A Common Stock. The vesting terms were accelerated commensurate with the exchange. The total fair value of the Series C Convertible Preferred Stock was $1,116,041 based on an independent valuation on the date of grant. | ||||||||
On March 22, 2014, the Company issued 13,669,568 shares of the Series C Convertible Preferred Stock to L&F Lawn Services, a company owned by our CEO’s family member, a related party, in exchange for 13,669,568 of their previously issued Class A Common Stock. The total fair value of the Series C Convertible Preferred Stock was $8,377 based on an independent valuation on the date of grant. | ||||||||
On March 22, 2014, the Company issued 60,000,000 shares of the Series C Convertible Preferred Stock to the Company’s CEO in exchange for 60,000,000 shares, consisting of 54,000,000 previously issued and unvested shares of Class A Common Stock and 6,000,000 shares of his previously issued and vested Class A Common Stock. The vesting terms were accelerated commensurate with the exchange. The total fair value of the Series C Convertible Preferred Stock was $36,771 based on an independent valuation on the date of grant. | ||||||||
Subscriptions Payable Issued for Shares of Convertible Series C Preferred Stock Granted for Services to Related Parties | ||||||||
On January 15, 2014, the Company granted 5,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $43,000 short term promissory note. The total fair value of the common stock was $3,064 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
On February 8, 2014, the Company granted 1,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $13,000 short term promissory note. The total fair value of the common stock was $613 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
On March 7, 2014, the Company granted 2,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost in consideration for a $22,000 short term promissory note. The total fair value of the common stock was $1,226 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
On March 26, 2014, the Company granted 3,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost in consideration for a $37,500 short term promissory note. The total fair value of the common stock was $1,839 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
On March 26, 2014, the Company granted 3,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $25,000 short term promissory note. The total fair value of the common stock was $1,839 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
On March 28, 2014, the Company granted 2,000,000 shares of Convertible Series C Preferred Stock to GG Mars Capital, a related party entity owned by Vivienne Passley, as a loan origination cost in consideration for a $18,750 short term promissory note. The total fair value of the common stock was $1,226 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
On March 28, 2014, the Company granted 3,000,000 shares of Convertible Series C Preferred Stock to Star Financial, a company owned by our CEO’s family member, a related party, as a loan origination cost in consideration for a $25,000 short term promissory note. The total fair value of the common stock was $1,839 based on an independent valuation on the date of grant. The shares were subsequently issued on July 7, 2014. | ||||||||
Debt Conversions into Class A Common Stock – Related Parties | ||||||||
On April 2, 2014, the Company issued 250,000,000 shares of Class A Common Stock pursuant to the conversion of $25,000 of convertible debt held by Vivienne Passley, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On April 7, 2014, the Company issued 125,000,000 shares of Class A Common Stock pursuant to the conversion of $18,750 of convertible debt held by Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On May 3, 2014, the Company issued 200,000,000 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On May 22, 2014, the Company issued 150,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by Star Financial Corporation, a related party, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On June 17, 2014, the Company issued 334,333,745 shares of Class A Common Stock pursuant to the conversion of $33,433 of convertible debt held by Vivienne Passley, a related party, which consisted of $26,000 of principal, $4,933 of interest and $2,500 of liquidated damages. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
Debt Conversions into Class A Common Stock – Magna Group, LLC | ||||||||
On January 7, 2014, the Company issued 25,140,000 shares of Class A Common Stock pursuant to the conversion of $5,028 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On January 22, 2014, the Company issued 25,000,000 shares of Class A Common Stock pursuant to the conversion of $5,000 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On January 31, 2014, the Company issued 66,666,667 shares of Class A Common Stock pursuant to the conversion of $10,000 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 6, 2014, the Company issued 100,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 13, 2014, the Company issued 103,273,067 shares of Class A Common Stock pursuant to the conversion of $15,491 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On February 27, 2014, the Company issued 133,333,333 shares of Class A Common Stock pursuant to the conversion of $20,000 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 10, 2014, the Company issued 180,000,000 shares of Class A Common Stock pursuant to the conversion of $18,000 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 19, 2014, the Company issued 197,000,000 shares of Class A Common Stock pursuant to the conversion of $19,700 of convertible debt held by Magna Group, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
Debt Conversions into Class A Common Stock – Asher Enterprises | ||||||||
On March 3, 2014, the Company issued 150,000,000 shares of Class A Common Stock pursuant to the conversion of $27,000 of convertible debt held by Asher Enterprises, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 5, 2014, the Company issued 200,857,143 shares of Class A Common Stock pursuant to the conversion of $28,120 of convertible debt held by Asher Enterprises, which consisted of $26,000 of principal and $2,120 of interest. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
On March 25, 2014, the Company issued 341,666,667 shares of Class A Common Stock pursuant to the conversion of $41,000 of convertible debt held by Asher Enterprises, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
Debt Conversions into Class A Common Stock – St. George Investments, LLC | ||||||||
On March 7, 2014, the Company issued 125,000,000 shares of Class A Common Stock pursuant to the conversion of $15,000 of convertible debt held by St. George Investments, LLC, which consisted entirely of principal. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized. | ||||||||
Convertible Class B Common Stock Issuance for Services | ||||||||
On March 22, 2014, the Company issued 12,500,000 shares of Convertible Class B Common Stock to the Company’s CEO in consideration for providing services. The total fair value of the common stock was $23,750 based on the closing price of the Company’s common stock on the date of grant. |
1_Nature_of_Business_and_Summa1
1. Nature of Business and Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Accounting Policies [Abstract] | ' | ||||||
Nature of Business and Organization | ' | ||||||
Nature of Business and Organization | |||||||
Epazz, Inc. (“Epazz” or the “Company”), an Illinois corporation, was formed on March 23, 2000 to create software to help college students organize their college information and resources. The idea behind the Company was that if the information and resources provided by colleges and universities was better organized and targeted toward each individual, the students would encounter a personal experience with the college or university that could lead to a lifetime relationship with the institution. This concept is already used by business software designed to retain relationships with clients, employees, vendors and partners. | |||||||
On or about June 18, 2008, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Desk Flex, Inc., an Illinois corporation (“DFI”) and Professional Resource Management, Inc., an Illinois corporation (“PRMI” and collectively with DFI, the “Target Companies”) to acquire 100% of the outstanding shares of the Target Companies. Pursuant to the Purchase Agreement, the Company purchased 100% of the outstanding shares of the Target Companies and DFI and PRMI became wholly-owned subsidiaries of the Company. | |||||||
PRMI and DFI are separate legal entities, but operate in conjunction. PRMI and DFI share office space and certain employees. DFI’s main source of revenue comes from the “Desk/Flex Software” product, which it owns, and PRMI’s main source of revenue comes from the “Agent Power” product line, which it owns. PRMI also acts as the general agent for DFI; however, there is no formal agency agreement between the two companies. DFI developed the Desk/Flex Software (Desk/Flex) to enhance the value of businesses’ real estate investments and modernize their office space. Desk/Flex lets businesses make better use of office space restrictions by enabling employees to instantly access their workstation tools from multiple areas in and outside of the office. Desk/Flex lets employees reserve space in advance or claim space instantly. It adjusts the telephone switch (Private Branch Exchange (PBX)) so that calls ring at the desk du jour, or go directly to voice mail when a worker is not checked in. Desk/Flex is responsive to office size and needs, servicing small to large businesses. Desk/Flex can be configured to administer a single site or multiple sites locally or remotely. Agent Power Software (Agent Power) is PRMI’s software line. Agent Power is a suite of six applications. Each can operate on a stand-alone basis, or can work in conjunction with the other applications. The applications feature workforce management components, which include planning and scheduling; agent adherence; agent performance; automatic call distributor (ACD) group performance; real-time agent status, and info screen. All modules of Agent Power have integration capabilities with Nortel, Avaya, and ROLM ACDs, and the planning and scheduling module works with any modern ACD system. | |||||||
On September 30, 2010, the Company acquired IntelliSys, Inc., doing business as, AutoHire Software, a Florida-based company owned by Igenti, Inc. (“Intellisys”). Intellisys had developed a Web portal infrastructure operating system product called BoxesOSv3.0. BoxesOS creates sources of revenue for Alumni Associations and Non-Profit organizations by utilizing a Web platform to conduct e-commerce and provides e-commerce tools for small businesses to create “my accounts” for their customers. BoxesOS also links a college or university’s resources with the business community by allowing businesses to train their employees by utilizing courseware development from higher education institutions. Epazz BoxesOS v3.0 (Web Infrastructure Operating System) is the Company’s flagship product. Epazz BoxesOS integrates with each organization’s back-end system and provides a customizable personal information system for each stakeholder. Its services include single sign-on, which provides a single-sign-on with security procedure to product users’ information and identity; course management system, which manages distance, traditional courses and calendar; enterprise Website content management, which manages public sites with multi contributors; integration management services, which is integrated into enterprise resource planning (ERP) and mainframes; e-mail management, which is an e-mail server and Web client; instant messenger services, which includes instant messaging and alerts; customer relationship management, which includes prospective students and alumni; calendar/scheduler management, which includes event directory, groupware, and personal calendar; administrative support services, which includes online payment services, and business services, which includes facility management and online bookstore. The AutoHire system provides a tool to power career centers, post job ads to sites and job boards, and to collect resumes online. One feature of the AutoHire system is the interactive question, and online screening and ranking system. The interactive question system provides a means for the client to maintain their own library of questions and to attach selected questions to job opportunities posted. Responses obtained can be used to screen and rank candidates to permit hiring managers to focus their attention on only the most suitable candidates. | |||||||
On October 26, 2011, the Company, through a newly-formed wholly-owned Illinois subsidiary, K9 Bytes, Inc., entered into an Asset Purchase Contract and Receipt Agreement with K9 Bytes, Inc., a Florida corporation (“K9 Bytes” and the “Purchase Contract”). Pursuant to the Purchase Contract, the Company purchased all of K9 Bytes assets, including all of its intellectual property, its business trade name, website (k9bytessoftware.com), furniture, fixtures, equipment and inventory, and goodwill. The Company did not purchase, and K9 Bytes agreed to retain and be responsible for, any and all liabilities of K9 Bytes. K9 Bytes sells Point of Sale software to retail pet stores throughout the United States. | |||||||
On March 28, 2012, we, through a newly-formed wholly-owned Illinois subsidiary, MS Health, Inc. (“MS Health”), closed on an Asset Purchase Agreement (“APA”) with MS Health Software Corporation, a New Jersey corporation (“MSHSC”). Pursuant to the APA, we purchased all of MSHSC’s assets, including all of its intellectual property, its business trademarks and copyrights, furniture, fixtures, equipment and software. MS Health develops and sells CHMCi, an enterprise wide solution that includes tools to effectively provide, manage, bill, and track behavioral healthcare and social services. With CMHCi, an organization will realize the benefits of increased efficiency, accountability, and productivity. CMHCi offers server-based, internet, and secure cloud computing enabling the user to access information as required. By maintaining a complete electronic client record, including data collection and reporting across multiple programs, locations, episodes of care, and service providers, CMHCi helps eliminate redundant record keeping. The scheduler component tracks client, staff, and group appointments. Easy to use, it interfaces seamlessly with service authorization tracking, service history, and billing. The integrated financial reporting component provides the basis for an efficient and comprehensive accounting system, including electronic claims and remittance, third party insurance, and client, municipality, and grantor billing. | |||||||
FlexFridge, Inc. (“FlexFridge”), an Illinois corporation, was formed as a wholly-owned subsidiary of Epazz on March 4, 2013 as Cooling Technology Solutions, Inc. (“CTS”), and was renamed Z Fridge, Inc. (“Z Fridge”) on September 19, 2013 prior to being renamed again to FlexFidge on May 27, 2014. The Company filed a non-provisional patent application and currently has limited activity. The Company has filed a non-provisional patent application for its Project Flex product, which consists of a patent pending foldable mini-fridge. On November 21, 2013, the Company was spun off to shareholders of record on September 15, 2013, whereby shareholders of Epazz, Inc. received one (1) share of FlexFridge in exchange for each ten (10) shares held of Epazz, Inc. Epazz has a controlling financial interest in FlexFridge. As such, FlexFridge is consolidated within these financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10. There has been no material activity within FlexFridge to date. | |||||||
Terran Power, Inc (“Terran”), an Illinois corporation formed as a wholly-owned subsidiary of Epazz on September 19, 2013 to file a non-provisional patent application to develop a mobile power device that allows iPhone and other smartphone users to power up their phone on the go without needing an outlet or a second battery, however, as of the date of this filing there has been no activity and, as such, there are no revenues or expenses. | |||||||
Basis of Accounting | ' | ||||||
Basis of Accounting | |||||||
Our consolidated financial statements are prepared using the accrual method of accounting as generally accepted in the United States of America (U.S. GAAP) and the rules of the Securities and Exchange Commission (SEC). | |||||||
Principles of Consolidation | ' | ||||||
Principles of Consolidation | |||||||
The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership: | |||||||
State of | Abbreviated | ||||||
Name of Entity(2) | Incorporation | Relationship(1) | Reference | ||||
Epazz, Inc. | Illinois | Parent | Epazz | ||||
IntelliSys, Inc. | Wisconsin | Subsidiary | IntelliSys | ||||
Professional Resource Management, Inc. | Illinois | Subsidiary | PRMI | ||||
Desk Flex, Inc. | Illinois | Subsidiary | DFI | ||||
K9 Bytes, Inc. | Illinois | Subsidiary | K9 Bytes | ||||
MS Health, Inc. | Illinois | Subsidiary | MS Health | ||||
FlexFridge, Inc.(3) | Illinois | Subsidiary(4) | FlexFridge | ||||
Terran Power, Inc.(5) | Illinois | Subsidiary | Terran | ||||
____________ | |||||||
(1) All subsidiaries, with the exception of FlexFridge, are wholly-owned subsidiaries. | |||||||
(2) All entities are in the form of Corporations. | |||||||
(3) Formerly Z Fridge, Inc. and Cooling Technology Solutions, Inc. | |||||||
(4) FlexFridge, Inc. was spun-off on November 21, 2013, and distributed on a 1:10 basis to shareholders of record on September 15, 2013. Epazz has a controlling financial interest in FlexFridge. As such, FlexFridge is consolidated within these financial statements pursuant to Accounting Standards Codification (“ASC”) 810-10. There has been no material activity within FlexFridge to date. | |||||||
(5) Entity formed for prospective purposes, but has not incurred any income or expenses to date. | |||||||
The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company, Epazz and subsidiaries, IntelliSys, PRMI, DFI, K9 Bytes, MS Health and FlexFridge will be collectively referred to herein as the “Company”, or “Epazz”. The Company's headquarters are located in Chicago, Illinois and substantially all of its customers are within the United States. | |||||||
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. | |||||||
Segment Reporting | ' | ||||||
Segment Reporting | |||||||
FASB ASC 280-10-50 requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. All of the Company’s software products are considered operating segments, and will be aggregated into one reportable segment given the similarities in economic characteristics among the operations represented by the common nature of the products, customers and methods of distribution. | |||||||
Reclassifications | ' | ||||||
Reclassifications | |||||||
Certain amounts in the financial statements of the prior year have been reclassified to conform to the presentation of the current year for comparative purposes. | |||||||
Use of Estimates | ' | ||||||
Use of Estimates | |||||||
The preparation of financial statements in conformity with generally accepted accounting principles 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 of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||||||
Cash and Cash Equivalents | ' | ||||||
Cash and Cash Equivalents | |||||||
Epazz maintains cash balances in non-interest-bearing transaction accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents on hand at December 31, 2013 and 2012. | |||||||
Property and Equipment | ' | ||||||
Property and Equipment | |||||||
Equipment is recorded at its acquisition cost, which includes the costs to bring the equipment to the condition and location for its intended use, and equipment is depreciated using the straight-line method over the estimated useful life of the related asset as follows: | |||||||
Furniture and fixtures | 5 years | ||||||
Computers and equipment | 3-5 years | ||||||
Software | 3 years | ||||||
Assets held under capital leases | 3-4 years | ||||||
Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. | |||||||
Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the useful lives of the assets due to transfer of ownership after the lease term has expired. | |||||||
Maintenance and repairs will be charged to expense as incurred. Significant renewals and betterments will be capitalized. At the time of retirement or other disposition of equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. | |||||||
Property and equipment are evaluated for impairment whenever impairment indicators are prevalent. The Company will assess the recoverability of equipment by determining whether the depreciation and amortization of these assets over their remaining life can be recovered through projected undiscounted future cash flows. The amount of equipment impairment, if any, will be measured based on fair value and is charged to operations in the period in which such impairment is determined by management. | |||||||
Fair Value of Financial Instruments | ' | ||||||
Fair Value of Financial Instruments | |||||||
Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. | |||||||
Intangible Assets | ' | ||||||
Intangible Assets | |||||||
Intangible assets are amortized using the straight-line method over their estimated period of benefit of five to fifteen years. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. Amortization expense on intangible assets totaled $446,988 and $155,448 for the years ended December 31, 2013 and 2012, respectively, including impairments of $276,282 and $-0- for the years ended December 31, 2013 and 2012, respectively. | |||||||
Goodwill | ' | ||||||
Goodwill | |||||||
The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies' data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company's evaluation of goodwill completed during the year resulted in no impairment losses. | |||||||
Website Development Costs | ' | ||||||
Website Development Costs | |||||||
The Company accounts for website development costs in accordance with ASC 350-50, “Accounting for Website Development Costs” (“ASC 350-50”), wherein website development costs are segregated into three activities: | |||||||
1) | Initial stage (planning), whereby the related costs are expensed. | ||||||
2) | Development (web application, infrastructure, and graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. | ||||||
3) | Post-implementation (after site is up and running: security, training, and administration), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. | ||||||
The Company didn’t have any capitalized website development costs during the years ended December 31, 2013 and 2012. | |||||||
Deferred Financing Costs | ' | ||||||
Deferred Financing Costs | |||||||
Costs relating to obtaining certain debts are capitalized and amortized over the term of the related debt using the straight-line method. The unamortized capitalized balance of deferred financing costs at December 31, 2013, and 2012, was $44,986 and $17,033, respectively. Amortization of deferred financing costs charged to operations was $79,123 and $25,849 for the years ended December 31, 2013 and 2012, respectively. When a loan is paid in full, any unamortized financing costs are removed from the related accounts and charged to operations. | |||||||
Allowance for Doubtful Accounts | ' | ||||||
Allowance for Doubtful Accounts | |||||||
We generate the majority of our revenues and corresponding accounts receivable from the sales of software products. We evaluate the collectability of our accounts receivable considering a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against amounts due in order to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on past write-off experience and the length of time the receivables are past due. Bad debts expense (recoveries) was $(27,129) and $2,957 for the years ended December 31, 2013 and 2012, respectively. The allowance for doubtful accounts was $7,017 and $68,521 for the years ended December 31, 2013 and 2012, respectively. | |||||||
Beneficial Conversion Features | ' | ||||||
Beneficial Conversion Features | |||||||
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. | |||||||
Revenue Recognition | ' | ||||||
Revenue Recognition | |||||||
The Company designs and sells various software programs to business enterprises, hospitals and Government and post-secondary institutions. Prior to shipment, each software product is tested extensively to meet Company specifications. The software is shipped fully functional via electronic delivery, but some installation and setup is required. No other entities sell the same or largely interchangeable software. | |||||||
Installation is a standard process, outlined in the owner's manual, consisting principally of setup, calibrating, and testing the software. A purchaser of the software could complete the process using the information in the owner's manual, although it would probably take significantly longer than it would take the Company’s technicians to perform the tasks. Although other vendors do not install the Company’s software, they do provide largely interchangeable installation services for a fee. Historically, the Company has never sold the software without installation. Most installations are performed by the Company within 7 to 24 days of shipment and are included in the overall sales price of the software. In addition, the customer must pay for support contracts and training packages, depending on their desired level of service. The Company is the only manufacturer of the software and it only sells software on a standalone basis directly to the end user. | |||||||
The sales price of the arrangement consists of the software, installation, and training and support services, which the customer is obligated to pay in full upon delivery of the software. In addition, there are no general rights of return involved in these arrangements. Therefore, the software is accounted for as a separate unit of accounting. | |||||||
The Company does not have vendor-specific objective evidence of selling price for the software because it does not sell the software separately (without installation services and support contracts). In addition, third-party evidence of selling price does not exist as no vendor separately sells the same or largely interchangeable software. Therefore, the Company uses its best estimate of selling price when allocating such arrangement consideration. | |||||||
In estimating its selling price for the software, the Company considers the cost to produce the software, profit margin for similar arrangements, customer demand, effect of competitors on the Company’s software, and other market constraints. When applying the relative selling price method, the Company uses its best estimate of selling price for the software, and third-party evidence of selling price for the installation. Accordingly, without considering whether any portion of the amount allocable to the software is contingent upon delivery of the other items, the Company allocates the selling price to the software, support, and installation. | |||||||
The Company doesn’t currently provide product warranties, but if it does in the future it will provide for specific product lines and accrue for estimated future warranty costs in the period in which the revenue is recognized. | |||||||
Advertising and Promotion | ' | ||||||
Advertising and Promotion | |||||||
All costs associated with advertising and promoting products are expensed as incurred. These expenses approximated $181,497 and $104,431 for the years ended December 31, 2013 and 2012, respectively. | |||||||
Income Taxes | ' | ||||||
Income Taxes | |||||||
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. | |||||||
Basic and Diluted Loss per Share | ' | ||||||
Basic and Diluted Loss per Share | |||||||
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure. | |||||||
Stock-Based Compensation | ' | ||||||
Stock-Based Compensation | |||||||
The Company adopted FASB guidance on stock based compensation on January 1, 2006. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Common stock issued for services and compensation was $1,713,150 and $1,278,151 for the years ended December 31, 2013 and 2012, respectively. | |||||||
Uncertain Tax Positions | ' | ||||||
Uncertain Tax Positions | |||||||
Effective January 1, 2009, the Company adopted new standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. | |||||||
Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities. | |||||||
The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. As of December 31, 2013, the Company had no uncertain tax positions. | |||||||
Recent Accounting Pronouncements | ' | ||||||
Recent Accounting Pronouncements | |||||||
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on our financial position or results of operations. | |||||||
In February 2013, FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to: | |||||||
- | Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and | ||||||
- | Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense. | ||||||
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 did not have a material impact on our financial position or results of operations. | |||||||
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on our financial position or results of operations. |
1_Nature_of_Business_and_Summa2
1. Nature of Business and Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||
Schedule of Consolidated Entities | ' | ||||||
State of | Abbreviated | ||||||
Name of Entity(2) | Incorporation | Relationship(1) | Reference | ||||
Epazz, Inc. | Illinois | Parent | Epazz | ||||
IntelliSys, Inc. | Wisconsin | Subsidiary | IntelliSys | ||||
Professional Resource Management, Inc. | Illinois | Subsidiary | PRMI | ||||
Desk Flex, Inc. | Illinois | Subsidiary | DFI | ||||
K9 Bytes, Inc. | Illinois | Subsidiary | K9 Bytes | ||||
MS Health, Inc. | Illinois | Subsidiary | MS Health | ||||
FlexFridge, Inc.(3) | Illinois | Subsidiary(4) | FlexFridge | ||||
Terran Power, Inc.(5) | Illinois | Subsidiary | Terran | ||||
Schedule of property and equipment useful lives | ' | ||||||
Furniture and fixtures | 5 years | ||||||
Computers and equipment | 3-5 years | ||||||
Software | 3 years | ||||||
Assets held under capital leases | 3-4 years |
4_Asset_Purchase_Acquisitions_
4. Asset Purchase Acquisitions (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Capital Lease Initiation Date | ' | ||||||||
Schedule of Assets Acquired and Liabilities Assumed | ' | ||||||||
March 28, | |||||||||
2012 | |||||||||
Consideration: | |||||||||
Cash paid at closing | $ | 39,200 | |||||||
Small business loan(1) | 360,800 | ||||||||
Seller financed note payable(2)(3) | 124,697 | ||||||||
Fair value of total consideration exchanged | $ | 524,697 | |||||||
Fair value of identifiable assets acquired assumed: | |||||||||
Other current assets | $ | 7,367 | |||||||
Equipment | 2,703 | ||||||||
Contracts | 258,000 | ||||||||
Technology-based intangible assets | 124,000 | ||||||||
Non-compete agreement | 18,000 | ||||||||
Total fair value of assets assumed | 410,070 | ||||||||
Consideration paid in excess of fair value (Goodwill)(4) | $ | 114,627 | |||||||
(1)Consideration included partial proceeds obtained from a $360,800 Small Business Association (“SBA”) loan, bearing interest at fixed and variable rates. The initial interest rate is 5.5% per year for three (3) years, consisting of the Prime Rate in effect on the first business day of the month in which the SBA loan application was received, plus 2.25%. The loan terms then transition to a variable interest rate over the remaining seven (7) years of the ten (10) year maturity term, calculated at 2.25% above the Prime Rate, as adjusted quarterly. The Company must pay principal and interest payments of $3,916 monthly. The SBA Loan is guaranteed by PRMI, K9 Bytes, Desk Flex, Inc., MS Health and the Company, and secured by the assets of MS Health and the Company. | |||||||||
(2)Consideration included an unsecured $100,000 seller financed note payable (“MSHSC Note”), bearing interest at 6% per annum, a ten (10) year amortization, a right of offset, no payments of either principal or interest for two (2) years and equal payments of principal and interest commencing in year 3, no prepayment penalty, and full payment of all amounts due after five (5) years. The MSHSC Note is secured by a security interest over the assets of MS Health. We did not purchase and MSHSC agreed to retain and be responsible for any and all liabilities of MSHSC. | |||||||||
(3)The fair value of the seller financed note in excess of the $100,000 principal balance attributable to the deferred payment terms will be amortized to interest expense over the deferred financing period. | |||||||||
(4)The consideration paid in excess of the net fair value of assets acquired and liabilities assumed has been recognized as goodwill. | |||||||||
Unaudited Supplemental Pro Forma Results of Operations | ' | ||||||||
Combined Pro Forma: | |||||||||
For the years ended | |||||||||
December 31, | |||||||||
2012 | |||||||||
Revenue: | $ | 1,256,054 | |||||||
Expenses: | |||||||||
Operating expenses | 2,710,529 | ||||||||
Net operating loss | (1,454,475 | ) | |||||||
Other income (expense) | (457,730 | ) | |||||||
Net loss | $ | (1,912,205 | ) | ||||||
Weighted average number of common shares | |||||||||
Outstanding – basic and fully diluted | 399,031,314 | ||||||||
Net loss per share – basic and fully diluted | $ | (0.00 | ) |
5_Related_Parties_Tables
5. Related Parties (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Related party debt | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Unsecured $14,838 convertible promissory note carries an 11% interest rate (“First GG Mars Note”) owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note was acquired from and assigned by another independent lender on August 15, 2013 prior to being exchanged for the convertible note. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the average of the three lowest closing prices of the Company’s common stock for the one hundred and twenty (120) days prior to the conversion date, or $0.00001 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The principal of $14,838 was immediately converted at the election of the note holder into 46,856,526 shares. | $ | – | $ | – | |||||
Unsecured $440,849 convertible promissory note due to a related party, carries a 10% interest rate (“Star Convertible Note”), matures on July 2, 2017. The principal and unpaid interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 75% of the average closing price of the Company’s common stock over the five (5) consecutive trading days immediately preceding the date of conversion, or the fixed price of $0.005 per share, whichever is greater. The note carries a fourteen percent (14%) interest rate in the event of default, and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. This note was subsequently amended on March 5, 2013 to change the conversion price to, "equal to the greater of, (a) 50% of the Market Price, or (b) the fixed conversion price of $0.00075 per share". The modification resulted in a loss on debt modification of $81,792. The note holder converted $250,000 of outstanding principal into 50,000,000 shares pursuant to debt conversion on September 15, 2012, $46,000 into 50,000,000 shares pursuant to debt conversion on March 14, 2013, $40,000 into 50,000,000 shares pursuant to debt conversion on April 10, 2013, $26,400 into 80,000,000 shares pursuant to debt conversion on July 9, 2013 and $32,000 into another 40,000,000 shares pursuant to debt conversion on August 7, 2013. | 46,449 | 190,849 | |||||||
Total convertible debts, related parties | 46,449 | 190,849 | |||||||
Less: unamortized discount on beneficial conversion feature | (5,653 | ) | (45,098 | ) | |||||
Convertible debts | 40,796 | 145,751 | |||||||
Less: current maturities of convertible debts, related parties included in convertible debts | – | – | |||||||
Long term convertible debts, related parties included in convertible debts | $ | 40,796 | $ | 145,751 |
6_Fair_Value_of_Financial_Inst1
6. Fair Value of Financial Instruments (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||
Schedule of Assets and Liabilities Measured on a Non-recurring Basis | ' | ||||||||||||
Fair Value Measurements at December 31, 2013 | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Assets | |||||||||||||
Intangible assets | $ | – | $ | – | $ | 374,162 | |||||||
Goodwill | – | – | 255,460 | ||||||||||
Total assets | – | – | 629,622 | ||||||||||
Liabilities | |||||||||||||
Lines of credit | – | 73,232 | – | ||||||||||
Capital leases | – | 17,421 | – | ||||||||||
Long term debts | – | 1,211,929 | – | ||||||||||
Notes payable, related parties | – | 482,368 | – | ||||||||||
Convertible debts, net of discount of $109,583 | – | 157,294 | – | ||||||||||
Total Liabilities | – | 1,942,244 | – | ||||||||||
$ | – | $ | (1,942,244 | ) | $ | 629,622 | |||||||
Fair Value Measurements at December 31, 2012 | |||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||
Assets | |||||||||||||
Intangible assets | $ | – | $ | – | $ | 821,150 | |||||||
Goodwill | – | – | 255,460 | ||||||||||
Total assets | – | – | 1,076,610 | ||||||||||
Liabilities | |||||||||||||
Lines of credit | – | 77,047 | – | ||||||||||
Capital leases | – | 43,120 | – | ||||||||||
Long term debts | – | 1,111,162 | – | ||||||||||
Notes payable, related parties | – | 22,085 | – | ||||||||||
Convertible debts, net of discount of $139,068 | – | 227,681 | – | ||||||||||
Total Liabilities | – | 1,481,095 | – | ||||||||||
$ | – | $ | (1,481,095 | ) | $ | 1,076,610 | |||||||
7_Other_Current_Assets_Tables
7. Other Current Assets (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ' | ||||||||
Schedule of other current assets | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Deferred financing costs | $ | 44,986 | $ | 17,032 | |||||
Prepaid expenses | – | 1,743 | |||||||
Other receivable | 51,250 | – | |||||||
Security deposits | 9,878 | 3,252 | |||||||
$ | 106,114 | $ | 22,027 |
8_Property_and_Equipment_Table
8. Property and Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Schedule of Property and Equipment | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Furniture and fixtures | $ | 2,187 | $ | 2,187 | |||||
Computers and equipment | 325,105 | 318,275 | |||||||
Software | 67,986 | 67,986 | |||||||
Assets held under capital leases | 134,800 | 134,800 | |||||||
530,078 | 523,248 | ||||||||
Less accumulated depreciation and amortization | (416,668 | ) | (326,951 | ) | |||||
$ | 113,410 | $ | 196,297 |
9_Intangible_Assets_Tables
9. Intangible Assets (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||
Schedule of Intangible Assets | ' | ||||||||||
Useful | December 31, | December 31, | |||||||||
Description | Life | 2013 | 2012 | ||||||||
Technology-based intangible assets - PRMI | 15 Years | $ | – | $ | 480,720 | ||||||
Technology-based intangible assets - IntelliSys | 5 Years | 200,000 | 200,000 | ||||||||
Technology-based intangible assets - K9 Bytes | 5 Years | 42,000 | 42,000 | ||||||||
Technology-based intangible assets – MS Health | 5 Years | 124,000 | 124,000 | ||||||||
Contracts – MS Health | 6 Years | 258,000 | 258,000 | ||||||||
Trade name - K9 Bytes | 5 Years | 22,000 | 22,000 | ||||||||
Other intangible assets – MS Health | 2 Years | 18,000 | 18,000 | ||||||||
Other intangible assets - K9 Bytes | 2 Years | 26,000 | 26,000 | ||||||||
Total intangible assets | 690,000 | 1,170,720 | |||||||||
Less: accumulated amortization | (315,838 | ) | (349,570 | ) | |||||||
Intangible assets, net | $ | 374,162 | $ | 821,150 |
10_Goodwill_Tables
10. Goodwill (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||
Changes in goodwill and accumulated impairment | ' | ||||||||||||||||
IntelliSys, Inc. | K9 Bytes, Inc. | MS Health | Total | ||||||||||||||
Balance, December 31, 2011: | |||||||||||||||||
Goodwill | $ | 53,588 | $ | 87,244 | $ | – | $ | 140,832 | |||||||||
Accumulated impairment losses | – | – | – | – | |||||||||||||
53,588 | 87,244 | – | 140,832 | ||||||||||||||
Goodwill acquired during the year | – | – | 114,628 | 114,628 | |||||||||||||
Impairment losses | – | – | – | – | |||||||||||||
Balance, December 31, 2012: | |||||||||||||||||
Goodwill | 53,588 | 87,244 | 114,628 | 255,460 | |||||||||||||
Accumulated impairment losses | – | – | – | – | |||||||||||||
53,588 | 87,244 | 114,628 | 255,460 | ||||||||||||||
Goodwill acquired during the year | – | – | – | – | |||||||||||||
Impairment losses | – | – | – | – | |||||||||||||
Balance, December 31, 2013: | |||||||||||||||||
Goodwill | 53,588 | 87,244 | 114,628 | 255,460 | |||||||||||||
Accumulated impairment losses | – | – | – | – | |||||||||||||
$ | 53,588 | $ | 87,244 | $ | 114,628 | $ | 255,460 |
11_Accrued_Expenses_Tables
11. Accrued Expenses (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
Schedule of accrued expenses | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Accrued interest | $ | 28,628 | $ | 19,509 | |||||
Accrued interest, related parties | 28,741 | 4,592 | |||||||
Accrued payroll and payroll taxes | 16,610 | 19,980 | |||||||
Other accrued expenses | 60 | 48 | |||||||
$ | 74,039 | $ | 44,129 |
12_Line_of_Credit_Tables
12. Line of Credit (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Line of Credit Facility [Abstract] | ' | ||||||||
Schedule of Lines of Credit | ' | ||||||||
Lines of credit consisted of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Line of credit of $50,000 from PNC bank, originating on February 16, 2012. The outstanding balance on the line of credit bears interest at an introductory rate of 4.25% for the first year, subject to renewal thereafter. Payments of $739 are due monthly. | $ | 49,508 | $ | 49,606 | |||||
Line of credit of $20,000 from US Bank, originating on June 8, 2012. The outstanding balance on the line of credit bears interest at 9.75%, maturing on June 5, 2019. Payments of $500 are due monthly. | 18,087 | 19,641 | |||||||
Line of credit of $40,000 from Dell Business Credit available for the purchase of Dell products, such as computer and software equipment. The outstanding balance on the line of credit bears interest at a rate of 26.99%. Variable payments are due monthly. | 5,637 | 7,800 | |||||||
Total line of credit | 73,232 | 77,047 | |||||||
Less: current portion | (73,232 | ) | (77,047 | ) | |||||
Line of credit, less current portion | $ | – | $ | – | |||||
13_Capital_Lease_Obligations_P1
13. Capital Lease Obligations Payable (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Leases, Capital [Abstract] | ' | ||||
Schedule of Future Minimum Lease Payments | ' | ||||
Twelve Months | |||||
Ending | |||||
December 31, | Amount | ||||
2014 | $ | 13,232 | |||
2015 | 5,757 | ||||
2016 | 433 | ||||
Total minimum payments | $ | 19,422 | |||
Less: amount representing interest | (2,001 | ) | |||
Present value of net minimum lease payments | 17,421 | ||||
Less: Current maturities of capital lease obligations | (17,421 | ) | |||
Long-term capital lease obligations | $ | – |
14_Notes_Payable_Related_Parti1
14. Notes Payable, Related Parties (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Schedule of Notes Payable, Related Parties | ' | ||||||||
Notes payable, related parties consist of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
On various dates the Company’s CEO advanced and repaid funds to the Company at a 15% interest rate, due on demand. A total of $209,380 was advanced and repaid by the CEO during the year ended December 31, 2013, and total proceeds and repayments were $349,560 and $411,073, respectively during the year ended December 31, 2012. | $ | – | $ | – | |||||
Originated November 1, 2013, unsecured promissory note payable owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on March 7, 2014. In addition, a loan origination fee of $25,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $2,500 upon default. | 125,000 | – | |||||||
Originated October 15, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on June 12, 2015. In addition, a loan origination fee of $3,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan. The note also carries a liquidated damages fee of $500 upon default. | 18,000 | – | |||||||
Originated September 7, 2013, unsecured promissory note payable owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on February 7, 2014. In addition, a loan origination fee of $10,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 6,000,000 shares of Series A Common Stock with a fair market value of $6,600 was granted as consideration for the loan on September 7, 2013 and the shares were subsequently issued on November 13, 2013. | 65,000 | – | |||||||
Originated August 20, 2013, unsecured promissory note payable owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 20, 2014. In addition, a loan origination fee of $5,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 2,500,000 shares of Series A Common Stock with a fair market value of $3,250 was granted as consideration for the loan on August 20, 2013 and the shares were subsequently issued on November 13, 2013. Currently in default. | 25,000 | – | |||||||
Originated August 12, 2013, unsecured promissory note payable owed to an immediate family member of the Company’s CEO carries a 15% interest rate, matures on February 15, 2014. In addition, a loan origination fee of $6,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 5,000,000 shares of Series A Common Stock with a fair market value of $7,000 was issued as consideration for the loan on August 12, 2013. The note was subsequently exchanged for a convertible note on April 2, 2014 and $58,433, consisting of $51,000 of principal, $4,933.33 of accrued interest and $2,500 of liquidated damages, was converted in exchange for 584,333,745 shares of common stock in complete satisfaction of the debt. | 51,000 | – | |||||||
Originated July 19, 2013, unsecured promissory note payable owed to an immediate family member of the Company’s CEO carries a 15% interest rate, matures on January 15, 2014. In addition, a loan origination fee of $3,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 2,500,000 shares of Series A Common Stock with a fair market value of $4,250 was issued as consideration for the loan on July 19, 2013. | 23,000 | – | |||||||
Originated August 27, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 27, 2014. In addition, a loan origination fee of $2,500 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 1,250,000 shares of Series A Common Stock with a fair market value of $1,500 was granted as consideration for the loan on August 27, 2013 and the shares were subsequently issued on November 13, 2013. | 12,500 | – | |||||||
Originated August 7, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 20, 2014. In addition, a loan origination fee of $4,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 2,500,000 shares of Series A Common Stock with a fair market value of $4,250 was granted as consideration for the loan on August 7, 2013 and the shares were subsequently issued on November 13, 2013. Currently in default. | 24,000 | – | |||||||
Originated August 2, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 17, 2014. In addition, a loan origination fee of $5,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 3,000,000 shares of Series A Common Stock with a fair market value of $5,100 was issued as consideration for the loan on August 2, 2013. Currently in default. | 32,000 | – | |||||||
Originated July 31, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 15% interest rate, matures on January 15, 2014. In addition, a loan origination fee of $5,000 was issued as consideration for the loan, and is being amortized on a straight line basis over the life of the loan, as well as, a loan origination fee, consisting of 3,000,000 shares of Series A Common Stock with a fair market value of $4,200 was issued as consideration for the loan on July 31, 2013. | 32,000 | – | |||||||
Originated June 12, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on June 12, 2015. In addition, a loan origination fee of $2,000 was issued as consideration for the loan on June 12, 2013, and is being amortized on a straight line basis over the life of the loan. | 10,000 | – | |||||||
Originated May 16, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on April 1, 2015. In addition, a loan origination fee of $2,000 was issued as consideration for the loan on May 16, 2013, and is being amortized on a straight line basis over the life of the loan. On December 31, 2013, the note holder sold and assigned the debt to Magna Group, LLC. The Company subsequently agreed to exchange the $14,000 of principal and $875 of accrued interest for a convertible note. The assigned note was combined with the assigned note, carrying an origination date of April 1, 2013 for a combined convertible note of $35,028. The assigned principal and interest of $35,028 was subsequently converted to a total of 216,806,667 shares of common stock over various dates from January 7, 2014 to February 6, 2014 in complete satisfaction of the debt. | – | – | |||||||
Originated April 12, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on April 12, 2015. In addition, a loan origination fee of $7,000 was issued as consideration for the loan on April 12, 2013, and is being amortized on a straight line basis over the life of the loan. | 57,000 | – | |||||||
Originated April 1, 2013, unsecured promissory note payable owed to Star Financial Corporation, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note carries a 10% interest rate, matures on April 1, 2015. In addition, a loan origination fee of $3,000 was issued as consideration for the loan on April 1, 2013, and is being amortized on a straight line basis over the life of the loan. On December 31, 2013, the note holder sold and assigned the debt to Magna Group, LLC. The Company subsequently agreed to exchange the $19,000 of principal and $153 of accrued interest, and a $1,000 loan origination cost for a convertible note. The assigned note was combined with the assigned note, carrying an origination date of May 16, 2013 for a combined convertible note of $35,028. The assigned principal and interest of $35,028 was subsequently converted to a total of 216,806,667 shares of common stock over various dates from January 7, 2014 to February 6, 2014 in complete satisfaction of the debt. | – | – | |||||||
Originated October 9, 2012, unsecured promissory note payable owed to an immediate family member of the Company’s CEO carries a 15% interest rate, matures on July 15, 2013. In addition, a loan origination fee, consisting of 1,088,957 shares of Series A Common Stock with a fair market value of $6,630 was issued as consideration for the loan on October 9, 2012. | – | 13,000 | |||||||
Originated October 9, 2012, unsecured promissory note payable owed to a Company owned by an immediate family member of the Company’s CEO carries a 15% interest rate, matures on July 15, 2013. In addition, a loan origination fee, consisting of 144,928 shares of Series A Common Stock with a fair market value of $884 was issued as consideration for the loan on October 9, 2012. Currently in default. | 2,000 | 2,000 | |||||||
Unsecured promissory note payable owed to a Company owned by an immediate family member of the Company’s CEO carries a 15% interest rate, matured on July 31, 2007. Currently in default. | 5,868 | 7,085 | |||||||
Total notes payable, related parties | 482,368 | 22,085 | |||||||
Less: current portion | (397,368 | ) | (22,085 | ) | |||||
Notes payable, related parties, less current portion | $ | 85,000 | $ | – | |||||
15_Convertible_Debt_Tables
15. Convertible Debt (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Convertible Debt [Abstract] | ' | ||||||||
Schedule of Convertible Debt | ' | ||||||||
Convertible debts consist of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Unsecured $33,000 convertible promissory note originated on November 13, 2013, including an Original Issue Discount (“OID”) of $3,000, carries a 12% interest rate (“Second JMJ Note”), matures on November 12, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trading price of the Company’s common stock for the twenty five (25) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The unamortized OID is $2,604 at December 31, 2013. On July 11, 2014, the Company and JMJ Financial amended this note. The amendment specifies that due to the delinquent Form 10-K for the year ended December 31, 2013 and the Form 10-Q for the three months ended March 31, 2014, any future borrowings shall only be made by mutual agreement of both the borrow and lender. | $ | 33,000 | $ | – | |||||
Unsecured $35,028 convertible promissory note originated on December 31, 2013, carries an 12% interest rate (“First Magna Group Note”) owed to Magna Group, LLC. Two notes totaling $33,000 of principal and $1,028 of accrued interest were acquired from and assigned by Star Financial on December 31, 2013 prior to being exchanged for the convertible note, including $1,000 of loan origination costs. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the lowest trading price of the Company’s common stock for the five (5) days prior to the conversion date, or $0.00004 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The assigned principal and interest of $35,028 was subsequently converted to a total of 216,806,667 shares of common stock over various dates from January 7, 2014 to February 6, 2014 in complete satisfaction of the debt. | 35,028 | – | |||||||
Unsecured $14,838 convertible promissory note carries an 11% interest rate (“First GG Mars Note”) owed to GG Mars Capital, Inc., a corporation owned by an immediate family member of the Company’s CEO. The note was acquired from and assigned by another independent lender on August 15, 2013 prior to being exchanged for the convertible note. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty percent (50%) of the average of the three lowest closing prices of the Company’s common stock for the one hundred and twenty (120) days prior to the conversion date, or $0.00001 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The principal of $14,838 was immediately converted at the election of the note holder into 46,856,526 shares. | $ | – | $ | – | |||||
Unsecured $56,900 convertible promissory note, including an Original Issue Discount (“OID”) of $6,900, carries an 8% interest rate (“First St. George Note”), matures on May 30, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The unamortized OID is $3,791 at December 31, 2013. Currently in default. | 56,900 | – | |||||||
Unsecured $42,500 convertible promissory note carries an 8% interest rate (“Eighth Asher Note”), matures on June 20, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the three lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. | 42,500 | – | |||||||
Unsecured $53,000 convertible promissory note carries an 8% interest rate (“Seventh Asher Note”), matures on May 21, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the three lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. | 53,000 | – | |||||||
Unsecured $33,000 convertible promissory note originated on June 12, 2013, including an Original Issue Discount (“OID”) of $3,000, carries a 12% interest rate (“First JMJ Note”), matures on June 11, 2014. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the lowest trading price of the Company’s common stock for the twenty five (25) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The debt holder was limited to owning 4.99% of the Company’s issued and outstanding shares. The principal of $33,000 and $333 of accrued interest on the note was subsequently repaid in full on August 12, 2013 & thus the 12% interest was not assessed per the terms of the note. | – | – | |||||||
Unsecured $440,849 convertible promissory note due to a related party, carries a 10% interest rate (“Star Convertible Note”), matures on July 2, 2017. The principal and unpaid interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 75% of the average closing price of the Company’s common stock over the five (5) consecutive trading days immediately preceding the date of conversion, or the fixed price of $0.005 per share, whichever is greater. The note carries a fourteen percent (14%) interest rate in the event of default, and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. This note was subsequently amended on March 5, 2013 to change the conversion price to, "equal to the greater of, (a) 50% of the Market Price, or (b) the fixed conversion price of $0.00075 per share". The modification resulted in a loss on debt modification of $81,792. The note holder converted $250,000 of outstanding principal into 50,000,000 shares pursuant to debt conversion on September 15, 2012, $46,000 into 50,000,000 shares pursuant to debt conversion on March 14, 2013, $40,000 into 50,000,000 shares pursuant to debt conversion on April 10, 2013, $26,400 into 80,000,000 shares pursuant to debt conversion on July 9, 2013 and $32,000 into another 40,000,000 shares pursuant to debt conversion on August 7, 2013. | 46,449 | 190,849 | |||||||
Unsecured $56,900 convertible promissory note, including an Original Issue Discount (“OID”) of $4,400 and legal fees of $2,500, carries an 8% interest rate (“First Tonaquint Note”), matures on May 31, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to sixty percent (60%) of the average of the two lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder converted $5,000 of outstanding principal into 4,504,505 shares pursuant to debt conversion on March 12, 2013, $10,000 of principal into 15,151,515 shares on April 2, 2013, $10,000 of principal into 15,873,016 shares on April 24, 2013, $8,000 of principal into 22,222,222 shares on July 10, 2013, $13,000 of principal into 15,476,190 shares on July 30, 2013 and another $10,900 of principal and $3,764 of accrued interest into 19,551,267 shares on August 19, 2013. | – | 56,900 | |||||||
Unsecured $16,500 convertible promissory note carries an 8% interest rate (“Sixth Asher Note”), matures on September 14, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-one percent (41%) of the average of the three lowest trading bid prices of the Company’s common stock for the ninety (90) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder converted a total of $16,500 of principal and $660 of interest into a total of 40,857,143 shares in full settlement of the outstanding debt on June 24, 2013. | – | 16,500 | |||||||
Unsecured $27,500 convertible promissory note carries an 8% interest rate (“Fifth Asher Note”), matures on July 18, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to forty-one percent (41%) of the average of the three lowest trading bid prices of the Company’s common stock for the ninety (90) trading days prior to the conversion date, or $0.00005 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The promissory note, consisting of $27,500 of principal and $21,716 of accrued interest and financing costs, was repaid in full with cash on April 15, 2013. | – | 27,500 | |||||||
Unsecured $32,500 convertible promissory note carries an 8% interest rate (“Fourth Asher Note”), matured on April 26, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the five lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder subsequently converted a total of $32,500 of principal and $1,300 of interest into a total of 24,461,538 shares in settlement of the outstanding debt on March 4, 2013 and March 6, 2013. | – | 32,500 | |||||||
Unsecured $42,500 convertible promissory note carries an 8% interest rate (“Third Asher Note”), matured on March 29, 2013. The principal is convertible into shares of common stock at the discretion of the note holder at a price equal to fifty-nine percent (59%) of the average of the three lowest trading bid prices of the Company’s common stock for the ten (10) trading days prior to the conversion date, or $0.00009 per share, whichever is greater. The note carries a twenty two percent (22%) interest rate in the event of default, and the debt holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The note holder subsequently converted a total of $42,500 of principal and $1,700 of interest into a total of 23,573,529 shares of common stock in settlement of the outstanding debt between January 3, 2013 and February 26, 2013. | – | 42,500 | |||||||
Total convertible debts | 266,877 | 366,749 | |||||||
Less: unamortized discount on beneficial conversion feature | (103,188 | ) | (139,068 | ) | |||||
Less: unamortized OID | (6,395 | ) | – | ||||||
Convertible debts | 157,294 | 227,681 | |||||||
Less: current maturities of convertible debts | (115,128 | ) | (74,708 | ) | |||||
Long term convertible debts | $ | 42,166 | $ | 152,973 | |||||
16_Long_Term_Debt_Tables
16. Long Term Debt (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Long-term Debt, Current and Noncurrent [Abstract] | ' | ||||||||
Schedule of Long-Term Debt | ' | ||||||||
Long term debts consist of the following at December 31, 2013 and 2012, respectively: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
On November 4, 2013, the Company received net proceeds of $75,381, and a direct payoff of $36,619 on the Rapid Advance Loan listed below, on a loan of $112,000 from CAN Capital Assets Servicing, Inc., (“CAN Capital #2”) bearing an effective interest rate of 53.1%, consisting of 370 daily weekday payments of $552, maturing on November 13, 2014. The loan is collateralized with MS Health’s receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | $ | 98,984 | $ | – | |||||
On November 20, 2013, DeskFlex entered into a $10,550 demand promissory note bearing interest at 10.25%. The promissory note is payable in monthly installments of $1,223 per month, maturing on August 20, 2014 (the “Maturity Date”). | 9,417 | – | |||||||
On October 24, 2013, the Company purchased licenses to develop content management software in the total amount of $51,250 from Igenti, Inc., of which $51,250 was financed pursuant to an equipment financing agreement with Baytree National Bank & Trust Company bearing an effective interest rate of 13.235%, consisting of 36 monthly payments of $1,719; maturing on October 23, 2016. The loan is collateralized with the data management software. Igenti subsequently paid a total of $53,500, including $2,250 of penalties, to the Company for future payment for the development of the content management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 47,321 | – | |||||||
On October 10, 2013, the Company purchased licenses to develop content management software in the total amount of $34,800 from Igenti, Inc., of which $34,800 was financed pursuant to an equipment financing agreement with Financial Pacific Leasing bearing an effective interest rate of 31.625%, consisting of 36 monthly payments of $1,438; maturing on October 9, 2016. The loan is collateralized with the content management software. Igenti retained a total of $1,300 of financing fees and paid the remaining proceeds of $33,500 to the Company for future payment for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 32,025 | – | |||||||
On June 24, 2013, the Company received a loan of $15,000 from WebBank, c/o NewLogic Business Loans, Inc., (“NewLogic”), which has been renamed to CAN Capital Assets Servicing, Inc (“CAN Capital”) bearing an effective interest rate of 5.71%, consisting of 176 daily weekday payments of $106, maturing on February 19, 2014. The loan is collateralized with MS Health’s receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | $ | 4,202 | $ | – | |||||
On June 11, 2013, the Company received a loan of $24,000, including $499 of loan origination costs, from Horizon Business Funding, LLC (“Horizon”) bearing an effective interest rate of 368.05%, consisting of 78 daily week day payments of $448, maturing on October 2, 2013. The loan is collateralized with the Epazz receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | – | – | |||||||
On April 11, 2013, the Company received a loan of $70,000, including $1,650 of loan origination costs, from Small Business Financial Solutions, LLC (“SBFS”) bearing an effective interest rate of 95.6%, consisting of 240 daily week day payments of $394, maturing on March 13, 2014. The loan is collateralized with the Epazz receivables. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | – | – | |||||||
On May 1, 2013, the Company purchased licenses to develop data management software in the total amount of $51,250 from Igenti, Inc., bearing an effective interest rate of 11%, consisting of 36 monthly payments of $1,674, maturing on April 30, 2016. The loan is collateralized with the data management software. Igenti retained a total of $4,615 of financing fees and paid the remaining proceeds of $46,615 to the Company for future payment to Sveltoz Solutions for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 41,167 | – | |||||||
On February 22, 2013, the Company purchased licenses to develop data management software in the total amount of $102,500 from Igenti, Inc., of which $51,250 was financed pursuant to an equipment financing agreement with Baytree National Bank & Trust Company on March 7, 2013 bearing an effective interest rate of 11.48%, consisting of 36 monthly payments of $1,674; maturing on March 6, 2016. The loan is collateralized with the data management software. Igenti retained a total of $3,000 of financing fees and paid the remaining proceeds of $99,500 to the Company for future payment to Sveltoz Solutions for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 38,361 | – | |||||||
On February 22, 2013, the Company purchased licenses to develop data management software in the total amount of $102,500 from Igenti, Inc., of which $51,250 was financed with an equipment finance loan from Summit Funding Group, Inc. equipment with a three year loan term consisting of monthly loan payments of $1,828, with $2,078 paid at signing, maturing on February 21, 2016. The loan is collateralized with the data management software. Igenti retained a total of $3,000 of financing fees and paid the remaining proceeds of $99,500 to the Company for future payment to Sveltoz Solutions for the development of the data management software. Given the nature and status of the software development, no equipment costs have been capitalized. | 40,108 | – | |||||||
On August 10, 2012, the Company purchased $13,870 of equipment with a three year equipment finance loan. The loan bears interest at an effective interest rate of 31.55%, along with monthly principal and interest payments of $585. The loan is collateralized with the purchased equipment. Matures on August 9, 2015. | 10,228 | 13,448 | |||||||
On April 1, 2012, the Company purchased $129,747 of equipment with a three year equipment finance loan. The loan bears interest at an effective interest rate of 8.3%, along with monthly principal and interest payments of $4,078. The loan is collateralized with the purchased equipment. Matures on April 1, 2015. | 78,603 | 104,129 | |||||||
Consideration for the MS Health acquisition included partial proceeds obtained from a $360,800 Small Business Association (“SBA”) loan, bearing interest at fixed and variable rates, maturing on March 27, 2022. The initial interest rate is 5.5% per year for three (3) years, consisting of the Prime Rate in effect on the first business day of the month in which the SBA loan application was received, plus 2.25%. The loan terms then transition to a variable interest rate over the remaining seven (7) years of the ten (10) year maturity term, calculated at 2.25% above the Prime Rate, as adjusted quarterly. The Company must pay principal and interest payments of $3,916 monthly. The SBA Loan is guaranteed by PRMI, K9 Bytes, Desk Flex, Inc., MS Health and the Company, and secured by the assets of MS Health and the Company. | 312,095 | 343,060 | |||||||
Consideration for the MS Health acquisition included an unsecured $100,000 seller financed note payable (“MSHSC Note”), bearing interest at 6% per annum, a ten (10) year amortization, a right of offset, no payments of either principal or interest for two (2) years and equal payments of principal and interest commencing in year three (3), no prepayment penalty, and full payment of all amounts due after five (5) years, maturing March 27, 2022. Pursuant to an amendment to a consulting agreement with the seller on March 23, 2012, the Company agreed to begin to repay principal of $1,000 per month, and had repaid a total of $6,000 during the year ended December 31, 2012. The MSHSC Note is secured by a security interest over the assets of MS Health. We did not purchase and MSHSC agreed to retain and be responsible for any and all liabilities of MSHSC. | 94,000 | 94,000 | |||||||
On Deck Capital Loan – DeskFlex, Inc.: | |||||||||
On November 7, 2011, DeskFlex entered into a four month $20,000 note payable agreement with On Deck Capital. Payments of $183 were originally due daily on the loan. Origination fees of $500 were added to the initial loan, agreed to pay additional fees of $387 per month in servicing fees during the term of the loan and to repay the loan via daily payments of $183. The total payments due on the loan equate to an annual interest rate of 18%. | |||||||||
On February 15, 2012, we amended this loan agreement to increase the loan balance to $35,400, consisting of additional proceeds of $19,200, a rolled over loan balance of $10,050, an origination fee of $750 and interest amount of $5,400 to be paid over the restarted four month term of the loan via daily payments of $274. | – | 28,173 | |||||||
On July 23, 2012, we amended this loan agreement again to increase the remaining unpaid loan balance to $35,400 again, consisting of additional proceeds of $23,883, a rolled over loan balance of $5,367, an origination fee of $750 and interest amount of $5,400 to be paid over the restarted four month term of the loan via daily payments of $274. | |||||||||
On October 30, 2012, we amended this loan agreement again to increase the remaining unpaid loan balance to $41,300, consisting of additional proceeds of $18,085, a rolled over loan balance of $16,040, an origination fee of $875 and interest amount of $6,300 to be paid over the restarted four month term of the loan via daily payments of $320. | |||||||||
On February 8, 2013, we again amended this loan agreement again to increase the remaining unpaid loan balance to $41,300, consisting of additional proceeds of $17,541, a rolled over loan balance of $16,584, an origination fee of $875 and interest amount of $6,300 to be paid over the restarted four month term of the loan via daily payments of $320. | |||||||||
The proceeds of all refinancing loans were received with substantially the same terms as the original debt. | |||||||||
On Deck Capital Loan – Epazz, Inc.: | – | 54,088 | |||||||
On January 3, 2012, Epazz entered into a nine month $55,800 note payable agreement with On Deck Capital. Payments of $289 were originally due daily on the loan. Proceeds of $43,875 were received on the loan, origination fees of $1,125 were added to the initial loan, along with interest of $10,800. The total payments due on the loan equate to an annual interest rate of 18%. | |||||||||
On May 25, 2012, we amended this loan agreement to increase the loan balance to $63,000, consisting of additional proceeds of $25,043, a rolled over loan balance of $24,957 and interest of $13,000 to be paid over the restarted nine month term of the loan via daily payments of $326. | |||||||||
On September 10, 2012, we again amended this loan agreement to increase the loan balance to $76,800, consisting of additional proceeds of $22,613, a rolled over loan balance of $35,887, an origination fee of $1,500 and interest of $16,800 to be paid over the revised twelve month term of the loan via daily payments of $299. | |||||||||
The proceeds of all refinancing loans were received with substantially the same terms as the original debt. | |||||||||
On March 20, 2012, DeskFlex entered into a $25,000 three year promissory note bearing interest at 11%. The promissory note was payable in monthly installments of $843 per month, maturing on March 20, 2015 (the “Maturity Date”). The note was acquired and assigned by GG Mars Capital, Inc., a company owned by our CEO’s family member, on August 15, 2013 prior to being exchanged for a convertible note on August 20, 2013 and subsequently converted into 46,856,526 shares of Class A Common Stock. | – | 19,483 | |||||||
Pursuant to an asset purchase agreement entered into on October 26, 2011, the Company granted K9 Bytes, Inc., a Florida corporation, a subordinated secured $30,750 promissory note carrying a 6% interest rate, payable in monthly installments of $333 per month starting in November 2011 and ending on October 26, 2014, at which time the then remaining balance of the promissory note ($23,017, assuming no additional payments other than those scheduled) is due. The promissory note is secured by a secondary lien on all of the assets of Epazz’s subsidiary, K9 Bytes, Inc., an Illinois corporation formed to house the purchased assets. The promissory note is also personally guaranteed by Shaun Passley, Ph.D., our Chief Executive Officer. | 2,510 | 6,234 | |||||||
Unsecured $50,000 promissory note originated on September 15, 2010 between Intellisys and Paul Prahl, payable in monthly installments of $970 carries a 6% interest rate, maturing on September 18, 2015. The Company also agreed to provide Mr. Prahl earn-out rights, which provide that he will receive up to a maximum of $13,350 per year for the three calendar years following the Closing (with the first such calendar year beginning on January 1, 2011), based on the revenues generated by IntelliSys during such applicable year, whereas $6,675 is earned if revenues are between $350,000 and $380,000, $10,012 is earned if revenues are between $380,000 and $395,000, or $13,350 is earned if revenues are greater than $395,000 during each relevant year. | 8,186 | 10,520 | |||||||
Unsecured term loan between Epazz and Bank of America, originating on June 15, 2011 bearing interest at 9.5% matures on June 17, 2016. Payments of $1,559 are due monthly. | 60,573 | 68,436 | |||||||
Unsecured promissory note between Epazz and Newtek Finance for $185,000 originating on September 30, 2010 bearing interest at 6% matures on September 30, 2020. Payments of $2,054 are due monthly. | 137,087 | 153,377 | |||||||
The Company raised funds paid pursuant to an asset purchase agreement with K9 Bytes, Inc., a Florida corporation, on October 26, 2011, through a $235,000 Small Business Association (“SBA”) loan from a third party lender (the “Third Party Lender” and the “SBA Loan”). The SBA Loan has a term of ten (10) years; maturing on October 26, 2021, bearing interest at the prime rate plus 2.75% per annum, adjusted quarterly; is payable in monthly installments (beginning in December 2011) of $2,609 per month; is guaranteed by the Company and personally guaranteed by Shaun Passley, Ph.D., the Company’s Chief Executive Officer; and is secured by all of the assets of K9 Bytes, Inc., the Illinois corporation and wholly-owned subsidiary formed to house the acquired assets and the Company, 100% of the outstanding capital of the K9 subsidiary, and a life insurance policy on Dr. Passley’s life in the amount of $235,000. A total of approximately $10,000 of the amount borrowed under the SBA Loan was used to pay closing fees in connection with the loan, $169,250 was used to pay K9 Bytes the cash amount due pursuant to the terms of the Purchase Contract and the remainder of such loan amount was made available for working capital for the Company and the wholly-owned subsidiary, K9 Bytes, Inc. | 197,062 | 216,214 | |||||||
Total long term debt | 1,211,929 | 1,111,162 | |||||||
Less: current portion | (354,786 | ) | (218,699 | ) | |||||
Long term debt, less current portion | $ | 857,143 | $ | 892,463 | |||||
17_Stockholders_Equity_Tables
17. Stockholders' Equity (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Equity [Abstract] | ' | ||||||||||
Schedule of shares granted for services performed | ' | ||||||||||
Vesting | Shares | Fair | |||||||||
Terms | Granted | Value | Services Performed | ||||||||
-1 | 250,000,000 | $ | 1,500,000 | Base salary of 25 million shares per year over a ten year term | |||||||
-2 | 225,000,004 | 1,350,000 | Compensation bonus for services provided | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of IntelliSys | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of PRM | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of DFI | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of K9 Bytes | ||||||||
-2 | 25,000,000 | 150,000 | Compensation for services provided related to the acquisition of AutoHire Software | ||||||||
-2 | 33,333,333 | 200,000 | Compensation for services provided related to the acquisition of MS Health | ||||||||
-3 | 33,333,333 | 200,000 | Compensation for services provided related to the acquisition of a future acquisition | ||||||||
-2 | 33,333,333 | 200,000 | Compensation for use of the CEO's personal residence as collateral on various loans | ||||||||
-4 | 299,999,997 | 1,800,000 | Compensation for future use of the CEO's personal residence as collateral on various loans | ||||||||
1,000,000,000 | $ | 6,000,000 |
18_Income_Taxes_Tables
18. Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Deferred tax assets | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Deferred tax assets: | |||||||||
Net operating loss carry forwards | $ | 1,554,000 | $ | 955,000 | |||||
Net deferred tax assets before valuation allowance | $ | 543,900 | $ | 334,250 | |||||
Less: Valuation allowance | (543,900 | ) | (334,250 | ) | |||||
Net deferred tax assets | $ | – | $ | – | |||||
Reconcilation of income tax rates | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Federal and state statutory rate | 35% | 35% | |||||||
Change in valuation allowance on deferred tax assets | -35% | -35% |
1_Nature_of_Business_and_Summa3
1. Nature of Business and Summary of Significant Accounting Policies (Details - Entities) | 12 Months Ended |
Dec. 31, 2013 | |
Epazz | ' |
Name of Entity | 'Epazz, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Parent |
Abbreviated | 'Epazz |
IntelliSys [Member] | ' |
Name of Entity | 'IntelliSys, Inc. |
State of Incorporation | 'Wisconsin |
Relationship | 'Subsidiary |
Abbreviated | 'IntelliSys |
PRMI [Member] | ' |
Name of Entity | 'Professional Resource Management, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Subsidiary |
Abbreviated | 'PRMI |
DFI | ' |
Name of Entity | 'Desk Flex, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Subsidiary |
Abbreviated | 'DFI |
K9 Bytes [Member] | ' |
Name of Entity | 'K9 Bytes, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Subsidiary |
Abbreviated | 'K9 Bytes |
MS Health | ' |
Name of Entity | 'MS Health, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Subsidiary |
Abbreviated | 'MS Health |
FlexFridge | ' |
Name of Entity | 'FlexFridge, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Subsidiary |
Abbreviated | 'FlexFridge |
Terran | ' |
Name of Entity | 'Terran Power, Inc. |
State of Incorporation | 'Illinois |
Relationship | 'Subsidiary |
Abbreviated | 'Terran |
1_Nature_of_Business_and_Summa4
1. Nature of Business and Summary of Significant Accounting Policies (Details - Property useful lives) | 12 Months Ended |
Dec. 31, 2013 | |
Furniture and Fixtures [Member] | ' |
Property estimated useful lives | '5 years |
Computers and Equipment [Member] | ' |
Property estimated useful lives | '3-5 years |
Software [Member] | ' |
Property estimated useful lives | '3 years |
Assets Held under Capital Leases [Member] | ' |
Property estimated useful lives | '3-4 years |
1_Nature_of_Business_and_Summa5
1. Nature of Business and Summary of Significant Accounting Polies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' |
Amortization and impairment of intangible assets | $446,988 | $155,448 |
Impairment of intangible assets | 276,282 | 0 |
Unamortized deferred finance costs | 44,986 | 17,033 |
Amortization of deferred financing costs | 79,123 | 25,849 |
Bad debts expense (recoveries) | -27,129 | 2,957 |
Allowance for doubtful accounts | 7,017 | 68,521 |
Advertising and promotional expense | 181,497 | 104,431 |
Common stock issued for services and compensation | $1,713,150 | $1,278,151 |
2_Going_Concern_Details_Narrat
2. Going Concern (Details Narrative) (USD $) | Dec. 31, 2013 |
Risks and Uncertainties [Abstract] | ' |
Working capital | ($1,283,338) |
Total liabilities over total assets (shown as negative) | ($1,524,615) |
4_Asset_Purchase_Acquisitions_1
4. Asset Purchase Acquisitions (Details - Acquisition) (MS Health, USD $) | 1 Months Ended |
Mar. 28, 2012 | |
MS Health | ' |
Business combination consideration: | ' |
Cash paid at closing | $39,200 |
Small business loan | 360,800 |
Seller financed note payable | 124,697 |
Fair value of total consideration exchanged | 524,697 |
Fair value of identifiable assets acquired assumed: | ' |
Other current assets | 7,367 |
Equipment | 2,703 |
Contracts | 258,000 |
Technology-based intangible assets | 124,000 |
Non-compete agreement | 18,000 |
Total fair value of assets assumed | 410,070 |
Consideration paid in excess of fair value (Goodwill) | $114,627 |
4_Asset_Purchase_Acquisitions_2
4. Asset Purchase Acquisitions (Details - Pro forma information) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Expenses: | ' | ' |
Weighted average number of common shares Outstanding - basic and fully diluted | 2,536,096,673 | 399,031,314 |
MS Health | ' | ' |
Asset Purchase Acquisition | ' | ' |
Revenue: | 750,139 | 1,256,054 |
Expenses: | ' | ' |
Operating expenses | 3,469,090 | 2,710,529 |
Net operating income (loss) | -2,718,951 | -1,454,475 |
Other income (expense) | -657,287 | -457,730 |
Net income (loss) | -3,376,238 | -1,912,205 |
Weighted average number of common shares Outstanding - basic and fully diluted | 2,536,096,073 | 399,031,314 |
Net income (loss) per share - basic and fully diluted | 0 | -0.01 |
5_Related_Parties_Details
5. Related Parties (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Total convertible debts, related parties | $266,877 | $366,749 |
Long term convertible debts, related parties included in convertible debts | 42,166 | 152,973 |
Related Parties | ' | ' |
Total convertible debts, related parties | 46,449 | 190,849 |
Less: unamortized discount on beneficial conversion feature | -5,653 | -45,098 |
Convertible debts | 40,796 | 145,751 |
Less: current maturities of convertible debts, related parties included in convertible debts | 0 | 0 |
Long term convertible debts, related parties included in convertible debts | 40,796 | 145,751 |
First GG Mars Note | ' | ' |
Total convertible debts, related parties | 0 | 0 |
Star Convertible Note | ' | ' |
Total convertible debts, related parties | $46,449 | $190,849 |
5_Related_Parties_Details_Narr
5. Related Parties (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Dividends payable | $11,000 | $0 |
Loss on modification of debt | -94,758 | -137,199 |
Related Parties | ' | ' |
Dividends payable | 11,000 | ' |
Beneficial conversion feature on convertible promissory note | 14,838 | ' |
Loss on modification of debt | $81,792 | ' |
6_Fair_Value_of_Financial_Inst2
6. Fair Value of Financial Instruments (Details) (Fair Value, Measurements, Nonrecurring [Member], USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Fair Value, Inputs, Level 1 [Member] | ' | ' |
Assets | ' | ' |
Intangible assets | $0 | $0 |
Goodwill | 0 | 0 |
Total assets | 0 | 0 |
Liabilities | ' | ' |
Lines of credit | 0 | 0 |
Capital leases | 0 | 0 |
Long term debts | 0 | 0 |
Notes payable, related parties | 0 | 0 |
Convertible debts, net of discounts | 0 | 0 |
Total Liabilities | 0 | 0 |
Total assets over liabilities | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ' | ' |
Assets | ' | ' |
Intangible assets | 0 | 0 |
Goodwill | 0 | 0 |
Total assets | 0 | 0 |
Liabilities | ' | ' |
Lines of credit | 73,232 | 77,047 |
Capital leases | 17,421 | 43,120 |
Long term debts | 1,211,929 | 1,111,162 |
Notes payable, related parties | 482,368 | 22,085 |
Convertible debts, net of discounts | 157,294 | 227,681 |
Total Liabilities | 1,942,244 | 1,481,095 |
Total assets over liabilities | -1,942,244 | -1,481,095 |
Fair Value, Inputs, Level 3 [Member] | ' | ' |
Assets | ' | ' |
Intangible assets | 374,162 | 821,150 |
Goodwill | 255,460 | 255,460 |
Total assets | 629,622 | 1,076,610 |
Liabilities | ' | ' |
Lines of credit | 0 | 0 |
Capital leases | 0 | 0 |
Long term debts | 0 | 0 |
Notes payable, related parties | 0 | 0 |
Convertible debts, net of discounts | 0 | 0 |
Total Liabilities | 0 | 0 |
Total assets over liabilities | $629,622 | $1,076,610 |
6_Fair_Value_of_Financial_Inst3
6. Fair Value of Financial Instruments (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Fair Value Disclosures [Abstract] | ' | ' |
Fair value adjustment - intangible assets | $276,282 | $0 |
7_Other_Current_Assets_Details
7. Other Current Assets (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Other Assets [Abstract] | ' | ' |
Deferred financing costs | $44,986 | $17,032 |
Prepaid expenses | 0 | 1,743 |
Other receivable | 51,250 | 0 |
Security deposits | 9,878 | 3,252 |
Total other current assets | $106,114 | $22,027 |
8_Property_and_Equipment_Detai
8. Property and Equipment (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | $530,078 | $523,248 |
Less accumulated depreciation and amortization | -416,668 | -326,951 |
Total property and equipment, net | 113,410 | 196,297 |
Depreciation | 89,717 | 119,628 |
Furniture and Fixtures [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | 2,187 | 2,187 |
Computers and Equipment [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | 325,105 | 318,275 |
Software [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | 67,986 | 67,986 |
Assets Held under Capital Leases [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | $134,800 | $134,800 |
9_Intangible_Assets_Details
9. Intangible Assets (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Intangible assets, gross | $1,170,720 | $1,170,720 |
Less: accumulated amortization | -315,838 | -349,570 |
Total intangible assets, net | 374,162 | 821,150 |
Amortization and impairment on intangible assets | 446,988 | 155,448 |
Impairment on intangible assets | 276,282 | 0 |
Technology-Based Intangible Assets [Member] | PRMI [Member] | ' | ' |
Intangible assets, gross | 0 | 258,000 |
Useful Life, years | '15 years | ' |
Technology-Based Intangible Assets [Member] | IntelliSys [Member] | ' | ' |
Intangible assets, gross | 200,000 | 124,000 |
Useful Life, years | '5 years | ' |
Technology-Based Intangible Assets [Member] | K9 Bytes [Member] | ' | ' |
Intangible assets, gross | 42,000 | 18,000 |
Useful Life, years | '5 years | ' |
Technology-Based Intangible Assets [Member] | MS Health | ' | ' |
Intangible assets, gross | 124,000 | 22,000 |
Useful Life, years | '5 years | ' |
Contracts [Member] | MS Health | ' | ' |
Intangible assets, gross | 258,000 | 42,000 |
Useful Life, years | '6 years | ' |
Trade Name [Member] | K9 Bytes [Member] | ' | ' |
Intangible assets, gross | 22,000 | 26,000 |
Useful Life, years | '5 years | ' |
Other Intangible Assets [Member] | K9 Bytes [Member] | ' | ' |
Intangible assets, gross | 26,000 | 200,000 |
Useful Life, years | '2 years | ' |
Other Intangible Assets [Member] | MS Health | ' | ' |
Intangible assets, gross | $18,000 | $480,720 |
Useful Life, years | '2 years | ' |
10_Goodwill_Details
10. Goodwill (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Goodwill, beginning balance | $255,460 | $140,832 |
Accumulated impairment losses | 0 | 0 |
Goodwill acquired during the year | 0 | 114,628 |
Goodwill, ending balance | 255,460 | 255,460 |
IntelliSys [Member] | ' | ' |
Goodwill, beginning balance | 53,588 | 53,588 |
Accumulated impairment losses | 0 | 0 |
Goodwill acquired during the year | 0 | 0 |
Goodwill, ending balance | 53,588 | 53,588 |
K9 Bytes [Member] | ' | ' |
Goodwill, beginning balance | 87,244 | 87,244 |
Accumulated impairment losses | 0 | 0 |
Goodwill acquired during the year | 0 | 0 |
Goodwill, ending balance | 87,244 | 87,244 |
MS Health | ' | ' |
Goodwill, beginning balance | 114,628 | 0 |
Accumulated impairment losses | 0 | 0 |
Goodwill acquired during the year | 0 | 114,628 |
Goodwill, ending balance | $114,628 | $114,628 |
11_Accrued_Expenses_Details
11. Accrued Expenses (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Payables and Accruals [Abstract] | ' | ' |
Accrued interest | $28,628 | $19,509 |
Accrued interest, related parties | 28,741 | 4,592 |
Accrued payroll and payroll taxes | 16,610 | 19,980 |
Other accrued expenses | 60 | 48 |
Total Accrued Expenses | $74,039 | $44,129 |
12_Line_of_Credit_Details
12. Line of Credit (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Line of Credit Facility [Line Items] | ' | ' |
Total line of credit | $73,232 | $77,047 |
Less: current portion | -73,232 | -77,047 |
Line of credit, less current portion | 0 | 0 |
PNC Bank [Member] | ' | ' |
Line of Credit Facility [Line Items] | ' | ' |
Total line of credit | 49,508 | 49,606 |
US Bank [Member] | ' | ' |
Line of Credit Facility [Line Items] | ' | ' |
Total line of credit | 18,087 | 19,641 |
Dell Business Credit [Member] | ' | ' |
Line of Credit Facility [Line Items] | ' | ' |
Total line of credit | $5,637 | $7,800 |
13_Capital_Lease_Obligations_P2
13. Capital Lease Obligations Payable (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Leases, Capital [Abstract] | ' | ' |
2014 | $13,232 | ' |
2015 | 5,757 | ' |
2016 | 433 | ' |
Total minimum payments | 19,422 | ' |
Less: amount representing interest | -2,001 | ' |
Present value of net minimum lease payments | 17,421 | ' |
Less: Current maturities of capital lease obligations | -17,421 | -25,699 |
Long-term capital lease obligations | $0 | $17,421 |
14_Notes_Payable_Related_Parti2
14. Notes Payable, Related Parties (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | $482,368 | $22,085 |
Less: current portion | -397,368 | -22,085 |
Notes payable, related parties, less current portion | 85,000 | 0 |
Unsecured Note 1 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 0 | 0 |
Unsecured Note 2 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 125,000 | 0 |
Unsecured Note 3 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 18,000 | 0 |
Unsecured Note 4 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 65,000 | 0 |
Unsecured Note 5 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 25,000 | 0 |
Unsecured Note 6 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 51,000 | 0 |
Unsecured Note 7 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 23,000 | 0 |
Unsecured Note 8 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 12,500 | 0 |
Unsecured Note 9 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 24,000 | 0 |
Unsecured Note 10 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 10,000 | 0 |
Unsecured Note 11 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 32,000 | 0 |
Unsecured Note 12 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 10,000 | 0 |
Unsecured Note 13 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 0 | 0 |
Unsecured Note 14 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 57,000 | 0 |
Unsecured Note 15 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 12,500 | 0 |
Unsecured Note 16 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 24,000 | 0 |
Unsecured Note 17 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 32,000 | 0 |
Unsecured Note 18 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 32,000 | 0 |
Unsecured Note 19 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 10,000 | 0 |
Unsecured Note 20 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 0 | 0 |
Unsecured Note 21 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 57,000 | 0 |
Unsecured Note 22 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 0 | 0 |
Unsecured Note 23 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 0 | 13,000 |
Unsecured Note 24 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | 2,000 | 2,000 |
Unsecured Note 25 | ' | ' |
Related Party Transaction [Line Items] | ' | ' |
Total notes payable, related parties | $5,868 | $7,085 |
15_Convertible_Debt_Details
15. Convertible Debt (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | $266,877 | $366,749 |
Less: unamortized discount on beneficial conversion feature | -103,188 | -139,068 |
Less: unamortized OID | -6,395 | 0 |
Convertible debts | 157,294 | 227,681 |
Less: current maturities of convertible debts | -115,128 | -74,708 |
Long term convertible debts | 42,166 | 152,973 |
Convertible Debt A | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | 0 | 0 |
Convertible Debt B | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | 35,028 | 0 |
Convertible Debt C | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | 0 | 56,900 |
Convertible Debt D | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | 0 | 16,500 |
Convertible Debt E | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | 0 | 27,500 |
Convertible Debt F | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | 0 | 32,500 |
Convertible Debt G | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total convertible debts | $0 | $32,500 |
15_Convertible_Debts_Details_N
15. Convertible Debts (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Debt amortization expense | $237,065 | $155,759 |
Stock issued pursuant to debt conversions, value | 155,823 | 83,000 |
Loss on debt modification | -94,758 | -137,199 |
First Asher Note | ' | ' |
Debt amortization expense | 0 | 7,769 |
Second Asher Note | ' | ' |
Debt amortization expense | 0 | 7,209 |
Third Asher Note | ' | ' |
Beneficial conversion feature | ' | 36,082 |
Debt amortization expense | 11,760 | 24,322 |
Fourth Asher Note | ' | ' |
Beneficial conversion feature | ' | 27,959 |
Debt amortization expense | 11,751 | 16,208 |
Fifth Asher Note | ' | ' |
Beneficial conversion feature | ' | 27,500 |
Debt amortization expense | 19,900 | 7,600 |
Sixth Asher Note | ' | ' |
Beneficial conversion feature | ' | 16,500 |
Debt amortization expense | 15,364 | 1,136 |
Seventh Asher Note | ' | ' |
Beneficial conversion feature | 39,021 | ' |
Debt amortization expense | 19,014 | 0 |
Eighth Asher Note | ' | ' |
Beneficial conversion feature | 27,210 | ' |
Debt amortization expense | 10,290 | 0 |
GG Mars | ' | ' |
Beneficial conversion feature | 14,838 | ' |
Star Financial | ' | ' |
Loss on debt modification | -81,792 | ' |
JMJ Financial, Inc. | ' | ' |
Beneficial conversion feature | 33,000 | ' |
St. George Investments, Inc. | ' | ' |
Beneficial conversion feature | 46,555 | ' |
Magna Group, LLC | ' | ' |
Beneficial conversion feature | 35,028 | ' |
Convertible Debt [Member] | ' | ' |
Interest expense on convertible debts | 38,614 | 20,965 |
Unamortized debt discount | 195,652 | 277,323 |
Debt amortization expense | 237,065 | 155,759 |
Stock issued pursuant to debt conversions, shares issued | 462,766,951 | 71,292,329 |
Stock issued pursuant to debt conversions, value | 343,540 | 374,228 |
Stock issued in modification of debt, shares issued | 14,239,500 | ' |
Stock issued in modification of debt, value | 28,479 | ' |
Loss on debt modification | -14,240 | ' |
Convertible Debt [Member] | GG Mars | ' | ' |
Beneficial conversion feature | 14,838 | ' |
Debt amortization expense | 14,838 | 0 |
Convertible Debt [Member] | Star Financial | ' | ' |
Beneficial conversion feature | ' | 112,382 |
Debt amortization expense | 39,445 | 67,284 |
Convertible Debt [Member] | Tonaquint, Inc. | ' | ' |
Beneficial conversion feature | ' | 56,900 |
Debt amortization expense | 32,669 | 24,231 |
Convertible Debt [Member] | JMJ Financial, Inc. | ' | ' |
Beneficial conversion feature | 33,000 | ' |
Debt amortization expense | 33,000 | 0 |
Convertible Debt [Member] | St. George Investments, Inc. | ' | ' |
Beneficial conversion feature | 46,555 | ' |
Debt amortization expense | 20,975 | 0 |
Convertible Debt [Member] | Magna Group, LLC | ' | ' |
Beneficial conversion feature | 35,028 | ' |
Debt amortization expense | $0 | $0 |
16_Long_Term_Debt_Details
16. Long Term Debt (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | $211,929 | $1,111,162 |
Less: current portion | -354,786 | -218,699 |
Long term debt, less current portion | 857,143 | 892,463 |
Long Term Debt A | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 98,984 | 0 |
Long Term Debt B | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 9,417 | 0 |
Long Term Debt C | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 47,321 | 0 |
Long Term Debt D | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 32,025 | 0 |
Long Term Debt E | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 4,202 | 0 |
Long Term Debt F | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 0 | 0 |
Long Term Debt G | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 0 | 0 |
Long Term Debt H | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 41,167 | 0 |
Long Term Debt I | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 38,361 | 0 |
Long Term Debt J | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 40,108 | 0 |
Long Term Debt K | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 10,228 | 13,448 |
Long Term Debt L | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 78,603 | 104,129 |
Long Term Debt M | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 312,095 | 343,060 |
Long Term Debt N | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 94,000 | 94,000 |
Long Term Debt O | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 0 | 28,173 |
Long Term Debt P | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 0 | 54,088 |
Long Term Debt Q | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 0 | 19,483 |
Long Term Debt R | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 2,510 | 6,234 |
Long Term Debt S | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 8,186 | 10,520 |
Long Term Debt T | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 60,573 | 68,436 |
Long Term Debt U | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | 137,087 | 153,377 |
Long Term Debt V | ' | ' |
Debt Instrument [Line Items] | ' | ' |
Total long term debt | $197,062 | $216,214 |
16_Long_Term_Debt_Details_Narr
16. Long Term Debt (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Long-term Debt, Unclassified [Abstract] | ' | ' |
Interest expense on long term debts, credit lines and capital leases | $261,634 | $102,261 |
17_Stockholders_Equity_Details
17. Stockholders' Equity (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Beneficial Conversion Feature | ' | ' |
Loss on debt modification | ($94,758) | ($137,199) |
JMJ Financial, Inc. | ' | ' |
Beneficial Conversion Feature | ' | ' |
Type of equity security | 'Convertible promirrowy note | ' |
Beneficial conversion feature | 33,000 | ' |
Asher Enterprises | ' | ' |
Beneficial Conversion Feature | ' | ' |
Type of equity security | 'Convertible promirrowy note | ' |
Beneficial conversion feature | 39,021 | ' |
GG Mars | ' | ' |
Beneficial Conversion Feature | ' | ' |
Type of equity security | 'Convertible promirrowy note | ' |
Beneficial conversion feature | 14,838 | ' |
St. George Investments, Inc. | ' | ' |
Beneficial Conversion Feature | ' | ' |
Type of equity security | 'Convertible promirrowy note | ' |
Beneficial conversion feature | 46,555 | ' |
Asher Enterprises | ' | ' |
Beneficial Conversion Feature | ' | ' |
Type of equity security | 'Convertible promirrowy note | ' |
Beneficial conversion feature | 27,210 | ' |
Magna Group, LLC | ' | ' |
Beneficial Conversion Feature | ' | ' |
Type of equity security | 'Convertible promirrowy note | ' |
Beneficial conversion feature | 35,028 | ' |
Star Financial | ' | ' |
Beneficial Conversion Feature | ' | ' |
Loss on debt modification | ($81,792) | ' |
18_Income_Taxes_Details_Deferr
18. Income Taxes (Details - Deferred tax assets) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred tax assets: | ' | ' |
Net operating loss carry forwards | $1,554,000 | $955,000 |
Net deferred tax assets before valuation allowance | 543,900 | 334,250 |
Less: Valuation allowance | -543,900 | -334,250 |
Net deferred tax assets | $0 | $0 |
18_Income_Taxes_Details_Reconc
18. Income Taxes (Details - Reconciliation) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Federal and state statutory rate | 35.00% | 35.00% |
Change in valuation allowance on deferred tax assets | -35.00% | -35.00% |