Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 06, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | iCoreConnect Inc. | |
Entity Central Index Key | 0001408057 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2020 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Common Stock Shares Outstanding | 82,241,148 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 76,000 | $ 445,000 |
Accounts receivable, net of allowance for doubtful accounts | 121,000 | 101,000 |
Prepaid expenses | 30,000 | 8,000 |
Total current assets | 227,000 | 554,000 |
Property and equipment, net | 3,000 | 6,000 |
Right of use lease asset - operating | 107,000 | 53,000 |
Software development costs, net | 764,000 | 625,000 |
Acquired technology, net | 600,000 | 891,000 |
Customer relationships, net | 398,000 | 32,000 |
Goodwill | 491,000 | 361,000 |
Total long-term assets | 2,363,000 | 1,968,000 |
TOTAL ASSETS | 2,590,000 | 2,522,000 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
Accounts payable and accrued expenses | 998,000 | 1,001,000 |
Operating lease liability, current portion | 38,000 | 55,000 |
Current maturities of long-term debt | 1,286,000 | 880,000 |
Deferred revenue, current portion | 6,000 | 0 |
Total current liabilities | 2,328,000 | 1,936,000 |
Long-term debt, net of current maturities | 129,000 | 13,000 |
Operating lease liability, net of current portion | 69,000 | 0 |
Deferred revenue, net of current portion | 83,000 | 108,000 |
Total long-term liabilities | 281,000 | 121,000 |
TOTAL LIABILITIES | 2,609,000 | 2,057,000 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Preferred Stock, Undesignated par value $0.001; Authorized 10,000,000 shares; none issued or outstanding | 0 | 0 |
Common Stock par value $0.001; 600,000,000 shares authorized; Issued and Outstanding: 79,941,148 as of September 30, 2020 and 67,476,089 as of December 31, 2019 | 80,000 | 67,000 |
Additional paid-in-capital | 76,652,000 | 74,738,000 |
Accumulated deficit | (76,751,000) | (74,340,000) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | (19,000) | 465,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 2,590,000 | $ 2,522,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 600,000,000 | 600,000,000 |
Common stock, shares issued | 79,941,148 | 67,476,089 |
Common stock, shares Outstanding | 79,941,148 | 67,476,089 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||
Revenue | $ 530,000 | $ 225,000 | $ 1,508,000 | $ 810,000 |
Cost of sales | 274,000 | 83,000 | 703,000 | 247,000 |
Gross profit | 256,000 | 142,000 | 805,000 | 563,000 |
Expenses | ||||
Selling, general and administrative | 746,000 | 741,000 | 2,425,000 | 2,310,000 |
Depreciation and amortization | 229,000 | 190,000 | 677,000 | 464,000 |
Total operating expenses | 975,000 | 931,000 | 3,102,000 | 2,774,000 |
Loss from operations | (719,000) | (789,000) | (2,297,000) | (2,211,000) |
Other income (expense) | ||||
Interest expense | (79,000) | (109,000) | (148,000) | (204,000) |
Other income | 0 | 0 | 10,000 | 0 |
Gain on cancellation of liabilities | 24,000 | 154,000 | 24,000 | 154,000 |
Total other income (expense) | (55,000) | 45,000 | (114,000) | (50,000) |
Net loss | $ (774,000) | $ (744,000) | $ (2,411,000) | $ (2,261,000) |
Net loss per share available to common stockholders, basic and diluted | $ (0.01) | $ (0.01) | $ (0.03) | $ (0.04) |
Weighted average number of shares, basic and diluted | 75,923,838 | 60,737,967 | 72,776,256 | 56,536,170 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED) - USD ($) | Total | Common Stock | Additional Paid-In Capital | Retained Earnings (Accumulated Deficit) |
Balance, shares at Dec. 31, 2018 | 50,864,131 | |||
Balance, amount at Dec. 31, 2018 | $ (958,000) | $ 51,000 | $ 70,335,000 | $ (71,344,000) |
Cumulative adjustment for the adoption of a new accounting pronouncement (Note 6) | (13,000) | $ 0 | 0 | (13,000) |
Stock issued for cash and conversion of notes payable, shares | 2,395,607 | |||
Stock issued for cash and conversion of notes payable, amount | 675,000 | $ 2,000 | 673,000 | 0 |
Stock compensation expense, shares | 212,500 | |||
Stock compensation expense, amount | 208,000 | $ 0 | 208,000 | 0 |
Net loss | (761,000) | $ 0 | 0 | (761,000) |
Balance, shares at Mar. 31, 2019 | 53,472,238 | |||
Balance, amount at Mar. 31, 2019 | (849,000) | $ 53,000 | 71,216,000 | (72,118,000) |
Balance, shares at Dec. 31, 2018 | 50,864,131 | |||
Balance, amount at Dec. 31, 2018 | (958,000) | $ 51,000 | 70,335,000 | (71,344,000) |
Net loss | (2,261,000) | |||
Stock issued for services, amount | 17,000 | |||
Balance, shares at Sep. 30, 2019 | 63,867,923 | |||
Balance, amount at Sep. 30, 2019 | 288,000 | $ 64,000 | 73,842,000 | (73,618,000) |
Balance, shares at Mar. 31, 2019 | 53,472,238 | |||
Balance, amount at Mar. 31, 2019 | (849,000) | $ 53,000 | 71,216,000 | (72,118,000) |
Stock compensation expense, shares | 1,047,860 | |||
Stock compensation expense, amount | 134,000 | $ 1,000 | 133,000 | 0 |
Net loss | (756,000) | $ 0 | 0 | (756,000) |
Stock issued for cash, shares | 1,600,152 | |||
Stock issued for cash, amount | 427,000 | $ 2,000 | 425,000 | 0 |
Stock issued for services, shares | 66,666 | |||
Stock issued for services, amount | 17,000 | $ 0 | 17,000 | 0 |
Stock issued for acquisition of technology, shares | 2,301,007 | |||
Stock issued for acquisition of technology, amount | 575,000 | $ 2,000 | 573,000 | 0 |
Balance, shares at Jun. 30, 2019 | 58,487,923 | |||
Balance, amount at Jun. 30, 2019 | (452,000) | $ 58,000 | 72,364,000 | (72,874,000) |
Net loss | (744,000) | $ 0 | 0 | (744,000) |
Stock issued for cash, shares | 5,380,000 | |||
Stock issued for cash, amount | 1,350,000 | $ 6,000 | 1,344,000 | 0 |
Stock compensation expense | 134,000 | $ 0 | 134,000 | 0 |
Balance, shares at Sep. 30, 2019 | 63,867,923 | |||
Balance, amount at Sep. 30, 2019 | 288,000 | $ 64,000 | 73,842,000 | (73,618,000) |
Balance, shares at Dec. 31, 2019 | 67,476,089 | |||
Balance, amount at Dec. 31, 2019 | 465,000 | $ 67,000 | 74,738,000 | (74,340,000) |
Stock issued for cash and conversion of notes payable, shares | 56,255 | |||
Stock issued for cash and conversion of notes payable, amount | 20,000 | $ 0 | 20,000 | 0 |
Stock compensation expense, shares | 131,250 | |||
Stock compensation expense, amount | 95,000 | $ 0 | 95,000 | 0 |
Net loss | (780,000) | $ 0 | 0 | (780,000) |
Stock issued for cash, shares | 2,280,000 | |||
Stock issued for cash, amount | 570,000 | $ 3,000 | 567,000 | 0 |
Stock issued for asset acquisition of TrinIT (Note 8), shares | 730,000 | |||
Stock issued for asset acquisition of TrinIT (Note 8), amount | 183,000 | $ 1,000 | 182,000 | 0 |
Balance, shares at Mar. 31, 2020 | 70,673,594 | |||
Balance, amount at Mar. 31, 2020 | 553,000 | $ 71,000 | 75,602,000 | (75,120,000) |
Balance, shares at Dec. 31, 2019 | 67,476,089 | |||
Balance, amount at Dec. 31, 2019 | 465,000 | $ 67,000 | 74,738,000 | (74,340,000) |
Net loss | $ (2,411,000) | |||
Stock issued for cash, shares | 5,708,000 | |||
Stock issued for services, amount | $ 0 | |||
Balance, shares at Sep. 30, 2020 | 79,941,148 | |||
Balance, amount at Sep. 30, 2020 | (19,000) | $ 80,000 | 76,652,000 | (76,751,000) |
Balance, shares at Mar. 31, 2020 | 70,673,594 | |||
Balance, amount at Mar. 31, 2020 | 553,000 | $ 71,000 | 75,602,000 | (75,120,000) |
Stock issued for cash and conversion of notes payable, shares | 76,997 | |||
Stock issued for cash and conversion of notes payable, amount | 8,000 | $ 0 | 8,000 | 0 |
Stock compensation expense, shares | 1,617,861 | |||
Stock compensation expense, amount | 225,000 | $ 1,000 | 224,000 | 0 |
Net loss | (857,000) | $ 0 | 0 | (857,000) |
Stock issued for cash, shares | 100,000 | |||
Stock issued for cash, amount | 25,000 | $ 0 | 25,000 | 0 |
Stock issued for conversion of accounts payable, shares | 1,000,000 | |||
Stock issued for conversion of accounts payable, amount | 250,000 | $ 1,000 | 249,000 | 0 |
Stock issued for stock option exercises, shares | 5,000 | |||
Stock issued for stock option exercises, amount | 1,000 | $ 0 | 1,000 | 0 |
Balance, shares at Jun. 30, 2020 | 73,473,452 | |||
Balance, amount at Jun. 30, 2020 | 205,000 | $ 73,000 | 76,109,000 | (75,977,000) |
Stock issued for cash and conversion of notes payable, shares | 3,114,696 | |||
Stock issued for cash and conversion of notes payable, amount | 118,000 | $ 3,000 | 115,000 | 0 |
Net loss | (774,000) | $ 0 | 0 | (774,000) |
Stock issued for cash, shares | 3,328,000 | |||
Stock issued for cash, amount | 382,000 | $ 4,000 | 378,000 | 0 |
Stock compensation expense | 48,000 | $ 0 | 48,000 | 0 |
Stock issued as origination fee in convertible debt agreement, shares | 25,000 | |||
Stock issued as origination fee in convertible debt agreement, Amount | 2,000 | $ 0 | 2,000 | 0 |
Balance, shares at Sep. 30, 2020 | 79,941,148 | |||
Balance, amount at Sep. 30, 2020 | $ (19,000) | $ 80,000 | $ 76,652,000 | $ (76,751,000) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITTIES | ||
Net loss | $ (2,411,000) | $ (2,261,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation expense | 6,000 | 4,000 |
Amortization expense | 671,000 | 460,000 |
Change in allowance for doubtful accounts | 60,000 | 0 |
Gain on cancellation of liabilities | (24,000) | (154,000) |
Stock issued for services | 0 | 17,000 |
Stock compensation expense | 368,000 | 476,000 |
Non-cash interest expense | 43,000 | 0 |
Changes in assets and liabilities: | ||
Accounts receivable | (80,000) | 114,000 |
Prepaid expenses | (16,000) | (88,000) |
Right of use asset, net of lease liability | (2,000) | (11,000) |
Accounts payable and accrued expenses | 268,000 | (48,000) |
Deferred revenue | (25,000) | (1,000) |
NET CASH USED IN OPERATING ACTIVITIES | (1,142,000) | (1,492,000) |
INVESTING ACTIVITIES | ||
Cash portion of consideration paid to acquire ClariCare | 0 | (50,000) |
Cash portion of consideration paid to acquire TrinIT (see Note 8) | (375,000) | 0 |
Additions to capitalized software | (435,000) | (298,000) |
NET CASH USED IN INVESTING ACTIVITIES | (810,000) | (348,000) |
FINANCING ACTIVITES | ||
Net proceeds from debt | 676,000 | 75,000 |
Payments on debt | (71,000) | (637,000) |
Proceeds from issuance of common stock | 977,000 | 2,432,000 |
Proceeds from exercise of employee stock options | 1,000 | 0 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,583,000 | 1,870,000 |
NET CHANGE IN CASH | (369,000) | 30,000 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 445,000 | 1,000 |
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | 76,000 | 31,000 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid during the period for interest | 74,000 | 170,000 |
Stock issued for acquisition of TrinIT | 183,000 | 0 |
Stock issued for acquisition of technology | 0 | 575,000 |
Stock issued for conversion of convertible notes payable | 146,000 | 0 |
Stock issued for conversion of notes payable | 0 | 20,000 |
Stock issued for conversion of accounts payable | $ 250,000 | $ 0 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Sep. 30, 2020 | |
NATURE OF OPERATIONS | |
1. NATURE OF OPERATIONS | iCoreConnect Inc., a Nevada Corporation, (the “Company”), builds secure cloud-based communications systems, focused on healthcare, although the core technology can be adopted to other vertical markets that require a high degree of secure data communication, such as the legal, financial and education markets. iCoreConnect’s iCoreExchange (Health Information Exchange) allows providers and health care professionals to exchange patient specific healthcare information via the internet while maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations and the current Direct protocol. Our products allow health care providers and other health care professionals to use the internet in ways previously unavailable to them due to HIPAA restrictions to quickly and cost effectively exchange and share patient medical information. The Company creates communication and practice management software that allows health care providers to share information at the highest level of security. Our software allows organizations and individuals to easily exchange information utilizing 2048-bit encryption in full compliance with current federal laws and regulations. The Company currently designs, engineers and sells cloud-based software for the healthcare industry. Due to current HIPAA regulations, providers and health care professionals have been prohibited from electronically exchanging unencrypted personal health information. Until recently, there was no cost-effective platform for transferring this information in a HIPAA compliant environment. We solved this problem. During Q1 2020 iCoreConnect iCoreRx iCoreHuddle iCoreRx iCoreHuddle Software products The Company currently markets ten different customizable secure HIPAA compliant cloud-based software products: iCoreExchange, iCoreCodeGenius, iCoreSecure, iCoreMD, iCoreDental, iCoreMobile, iCorePay, iCoreExam, iCoreHuddle and iCoreRx. IT Services On January 3, 2020, the Company purchased the business and substantially all of the assets of Computer Plumber, LLC, doing business as TrinIT (“TrinIT”), an IT service company located in the Charlotte, North Carolina area, to complement our technology line up. The trend in IT Services companies for over a decade has been to move away from a “Break/Fix ‘‘ model to a “Managed Service Provider (MSP)” model with recurring revenue. TrinIT was an early adopter operating in the MSP market. The MSP approach, by using preventative measures, keeps computers and networks up and running while data is accessible and safeguarded. Installation of critical patches and updates to virus protection are automated. Systems are monitored and backed up in real-time. They are fixed or upgraded before they cause a service disruption. A Unified Threat Management solution is deployed to protect against virus, malware, SPAM, phishing and ransomware attacks. Remote technical support is a click away. All support is delivered at a predictable monthly cost. Going forward, by leveraging managed services with our expertise in cloud computing, our customers can easily scale their business without extensive capital investment or disruption in services. The Company is now positioned to address the growing need for managed services: · Our current and future customers need managed IT services, along with cloud computing, storage and HIPAA compliant backup and encryption. · Managed service providers that can support the migration to cloud computing are in high demand. · The decision makers for our current technology and those for managed services are, in many cases, the same person or group of people. · Our management team has decades of experience operating successful IT companies. · The MSP revenue model matches our SaaS, HaaS, PaaS & IaaS MRR models. BASIS OF PRESENTATION Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2019, which are included in the Company’s Annual Report filed on Form 10-K with the SEC on March 27, 2020. The accompanying condensed balance sheet as of December 31, 2019 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial statements. The results of operations for the three and nine month periods ended September 30, 2020 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year. Readers of this Quarterly Report are strongly encouraged to review the risk factors relating to the Company which are set forth in the Company’s Form 10-K filed with the SEC. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2020 | |
GOING CONCERN | |
2. GOING CONCERN | The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. For the nine month period ended September 30, 2020 the Company generated an operating loss of $2,297,000. In addition, the Company has an accumulated deficit, total stockholders’ deficit and net working capital deficit of $76,751,000, $19,000 and $2,101,000, respectively, at September 30, 2020. The Company’s activities have been primarily financed through private placements of equity securities, convertible debt financing, and PPP Loan proceeds. The Company intends to raise additional capital through the issuance of debt and/or equity securities to fund its operations. The Company is reliant on future fundraising to finance operations in the near future. The financing may not be available on terms satisfactory to the Company, if at all. In light of these matters, there is substantial doubt that the Company will be able to continue as a going concern. Management intends to continue developing and marketing its healthcare software products to generate increasing revenues. While management believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. Management’s ability to continue as a going concern is ultimately dependent upon its ability to continually increase the Company’s customer base and realize increased revenues from signed contracts. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. In August 2019 the Company signed a $78,000 convertible promissory note due twelve months after issuance and received $75,000 net of closing fees. Interest at 10% per annum is not due until maturity. One hundred eighty (180) days following the date of funding and thereafter, the note became convertible into common stock. The conversion price of the note is 61% of the Market Price (as defined in the note) for the common stock (a discount of 39%). The conversion price is determined on the basis of the average of the three (3) lowest closing bid prices for the common stock during the fifteen (15) trading day period prior to conversion. There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding common stock at the time of conversion at any one time. During the first two quarters of fiscal 2020 the note holder converted on three separate occasions a total of $28,000 in convertible note principal into 133,252 common shares of the Company at an average conversion price of $0.21 per common share. In July 2020 the note holder converted the entire $3,500 of accrued interest along with the remaining $50,000 in convertible note principal. In total, the note holder converted on seven separate occasions a total of $78,000 in convertible note principal and $3,900 of accrued interest into 812,948 common shares of the Company at an average conversion price of $0.10 per common share. In July 2020 the Company signed a new $103,000 convertible promissory note with the same terms as described above and received $100,000 net of closing fees. In December 2019 the Company signed a $45,000 convertible promissory note payable to a second finance company due twelve (12) months after issuance and received $40,000 net of closing fees. Interest at 10% per annum is not due until maturity. The note holder can convert in part or in whole the unpaid accrued interest and principal at any time into the common shares of the Company. There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. The conversion price of the note is 61% of the Market Price (as defined in the note) for the common stock (a discount of 39%) plus an additional 21% discount should the conversion price fall below $0.25 until the note is no longer outstanding. The conversion price is determined on the basis of the lowest traded price for the common stock during the twenty (20) trading day period prior to conversion. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding common stock at the time of conversion at any one time. During the second and third quarters of fiscal 2020 the note holder converted on three separate occasions a total of $7,018.60 in convertible note principal into 410,000 common shares of the Company at an average conversion price of $0.02 per common share. In January 2020 the Company signed a $100,000 convertible promissory note payable to a third finance company due twelve (12) months after issuance and received $88,500 net of closing fees. Interest at 10% per annum is not due until maturity. The note holder can convert in part or in whole the unpaid accrued interest and principal at any time into the common shares of the Company. There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. The conversion price of the note is 61% of the Market Price (as defined in the note) for the common stock (a discount of 39%) plus an additional 10% discount should the trading price fall below $0.50 until the note is no longer outstanding. The conversion price is determined on the basis of the lowest traded price for the common stock during the twenty (20) trading day period prior to conversion. There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding common stock at the time of conversion at any one time. During the third quarter of fiscal 2020 the note holder converted on eight separate occasions a total of $56,584.38 in convertible note principal into 2,025,000 common shares of the Company at an average conversion price of $0.03 per common share. From October 1 to November 4, 2020 the note holder converted on six separate occasions a total of $32,023.28 in convertible note principal into 2,275,000 common shares of the Company at an average conversion price of $0.014 per common share. As a result, the note holder has converted a total of $88,607.66 in convertible note principal into 4,300,000 common shares of the Company at an average conversion price of $0.021. In July and September 2020, the Company signed two convertible promissory notes of $88,000 each payable to a fourth finance company due twelve (12) months after issuance and received $80,000 net of closing fees each time for a total of $160,000 in net cash proceeds. Interest at 10% per annum is not due until maturity. In addition, under the terms of the agreement, pursuant to which the Company issued the note, the Company issued 25,000 shares of its common stock to the finance company closely after each execution date. The note holder can convert in part or in whole the unpaid accrued interest and principal at any time into the common shares of the Company at a fixed price of $0.30 per share. There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. The note holder is limited to receive upon conversion no more than 9.99% of the issued and outstanding common stock at the time of conversion at any one time. On March 11, 2020, the World Health Organization characterized the spread of a novel strain of coronavirus (“COVID-19”) as a global pandemic and there has been widespread infection. Actions have been taken by federal, state and local governmental authorities to combat the spread of COVID-19, including issuance of “stay-at-home” directives and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. These measures, while intended to protect human life, have led to reduced economic activity. The rapid development and fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 outbreak in the United States. In May 2020 the Company received loan proceeds of $328,000 relating to the Paycheck Protection Program (PPP) as part of the CARES Act created by Congress to financially support companies during the COVID-19 pandemic. The PPP Loan carries interest at 1%. The principal and accrued interest may be wholly or partially forgiven after completing and submitting a PPP Loan Forgiveness Application with the financial institution associated with the SBA loan. The Company is ready to submit a PPP Loan Forgiveness Application once our financial institution begins accepting receipt of them. On August 7, 2020 the Company and Triton Funds LP, a Delaware limited partnership (the “Investor”), executed a Common Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which, upon the terms and subject to the conditions contained therein, the Investor agreed to invest up to seven hundred fifty thousand dollars ($750,000) to purchase shares of the Company’s common stock and, contemporaneously therewith, executed and delivered a Registration Rights Agreement pursuant to which the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, (the “Securities Act”) and the rules and regulations promulgated thereunder, and applicable state securities laws. Subject to the terms and conditions set forth therein, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, up to that number of shares of common stock having an aggregate value of seven hundred fifty thousand dollar ($750,000) at a purchase price of equal to eighty percent (80%) of the lowest trading price of the common stock during the 10 business days prior to the closing applicable to the Purchase Notice delivered by the Company to the Investor. The Purchase Notice shall set forth the number of shares of common stock that the Company elects to exercise its right pursuant to the Purchase Agreement to require the Investor to purchase from time to time during the period beginning on the business day immediately following the execution date of Purchase Agreement and ending on the expiration of the Purchase Agreement. The Company may, in its sole discretion, deliver a Purchase Notice to the Investor which states the number of shares of common stock the Company intends to sell to the Investor on a closing. Notwithstanding anything to the contrary in the Purchase Agreement, in no event shall the Investor be entitled to purchase that number of shares which when added to the sum of the number of shares of common stock beneficially owned by the Investor would exceed 9.99% of the number of shares of common stock outstanding on the closing date of such purchase. As of November 6, 2020, the Company has not delivered a Purchase Notice to the Investor. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”). Significant accounting principles followed by the Company and the methods of applying those principles, which materially affect the determination of our financial position, results of operations and cash flows are summarized below. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are customer obligations due under normal trade terms. We maintain an allowance for doubtful accounts for estimated losses resulting from the potential inability of certain customers to make required future payments on amounts due us. Management determines the adequacy of this allowance by periodically evaluating the aging and past due nature of individual customer receivable balances and considering the customer’s current financial situation as well as the existing industry economic conditions and other relevant factors that would be useful in assessing the risk of collectability. If the future financial condition of our customers were to deteriorate, resulting in their inability to make specific required payments, additions to the allowance for doubtful accounts may be required. Conversely, if the financial condition of our customers improves and collections of amounts outstanding commence or are reasonably assured, then we may reverse previously established allowances for doubtful accounts. The Company has estimated and recorded an allowance for doubtful accounts of $77,000 at September 30, 2020 and $17,000 December 31, 2019. Property, Equipment and Depreciation Property, equipment, and leasehold improvements are recorded at their historical cost. Depreciation and amortization have been determined using the straight-line method over the estimated useful lives of the assets which for computers and office equipment are 3 years and for office furniture and fixtures are 7 years. Software Development Costs and Acquired Software The Company accounts for software development costs, including costs to develop software products or the software components of products to be sold to external users. In accordance with ASC 985-730, Computer Software Research and Development, research and planning phase costs are expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs are capitalized. We have determined that technological feasibility for our products to be marketed to external users was reached before the release of those products. As a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred. Capitalized costs for software to be sold to external users and software acquired in a business combination are amortized based on current and projected future revenue for each product with an annual minimum amortization equal to the straight-line amortization of the costs over three years. Impairment of Long-Lived Assets Long lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount that the carrying amount of the asset exceeds the fair value of the asset. Goodwill Goodwill acquired in a business combination is not amortized, but is tested for impairment annually or between annual tests when an impairment indicator exists. If an optional qualitative goodwill impairment assessment is not performed, we are required to determine the fair value of each reporting unit. If a reporting unit’s fair value is lower than its carrying value, we must determine the amount of implied goodwill that would be established if the reporting unit were hypothetically acquired on the impairment test date. If the carrying amount of a reporting unit’s goodwill exceeds the amount of implied goodwill, an impairment loss equal to the excess is recorded. The recoverability of indefinite lived intangible assets is assessed by comparison of the carrying value of the asset to its estimated fair value. If we determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss equal to the excess would be recorded. Revenue Recognition The Company has six primary sources of revenue: 1. Electronic Health Records (EHR) licenses and Practice Management licenses 2. Encrypted Secure & HIPPA Compliant email services (“Encrypted Secure email”) 3. ICD Coding Software 4. Electronic ePrescription Software 5. IT Projects 6. Managed IT Services Revenue from EHR and Practice Management (PM)software licensing arrangements include private cloud hosting services and post contract support provided to clients that have purchased a perpetual or specific term license to the EHR software and have contracted with the Company to host the software. These arrangements provide a client with a contractual right to take possession of the software at any time during the private cloud hosting period and the client either uses the software on its own equipment or contracts with an unrelated third party to host the software. The Company recognizes revenue from the sale of its EHR/PM software licenses at the time the customer has access to use the software, with deferral of revenues associated with the cloud hosting and post contract support performance objectives, allocated based on relative fair value. The Company defers revenue from the sale of its EHR software products associated with cloud hosting and post contract support performance objectives over the term of the license agreement. Cloud hosting performance objective revenues are deferred based on forecasted cloud storage costs, encrypted secure email performance objective revenues are deferred based on the forecasted sales price of those services to other customers of the Company and customer support performance objective revenues are deferred based on forecasted customer support costs based on Company experience. Encrypted Secure email software is provided on a fee basis as software as a service (“SaaS”) with revenue being recognized ratably over the annual contract terms beginning on the date it is made available to the customer. ICD coding software is provided on a fee basis as software as a service (“SaaS”) with revenue being recognized ratably over the contract terms beginning on the date it is made available to the customer. ePrescription software is provided on a fee basis as software as a service (“SaaS”) with revenue being recognized ratably over the contract terms beginning on the date it is made available to the customer. IT Project revenue, relates to “ad hoc” customer projects involving time and material with revenue being recognized after job completion. Managed IT Services offers customers bundled IT managed services with annual contracts invoiced monthly as services are performed or prepaid annually with any unearned revenue being deferred and amortized ratably over the course of the remaining year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Net Loss Per Share Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares issuable on exercise of warrants, convertible preferred stock and convertible notes in the weighted average number of shares of common stock outstanding for a period, if dilutive. Common stock equivalents that are anti-dilutive are excluded from the computation of diluted earnings per share. Stock-Based Compensation The Company estimates the fair value of its shares of restricted common stock using the closing stock price of its common stock on the date of the award. The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option pricing model requiring the Company to determine the: 1) volatility of the common stock, 2) expected term of the option award, 3) risk-free interest rate, and 4) any expected dividends. The volatility of the common stock on the date of an option grant is based on its historical stock prices. The expected term of an option grant is based on the Simplified Method as allowed by SAB 107. The risk-free interest rate is obtained from U.S. Treasury issues with an approximately equal life. Lastly, the Company has never paid cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. Recently Issued Accounting Pronouncements The Company does not believe that any issued, but not yet effective accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations and cash flows. |
COMMON STOCK AND PREFERRED STOC
COMMON STOCK AND PREFERRED STOCK | 9 Months Ended |
Sep. 30, 2020 | |
COMMON STOCK AND PREFERRED STOCK | |
4. COMMON STOCK AND PREFERRED STOCK | Stock Issuances During the nine month period ended September 30, 2020, the Company issued 5,708,000 shares of common stock in exchange for cash proceeds totaling $977,000. The holders of convertible notes converted $146,000 of note principal into 3,247,948 shares. The Company issued 5,000 shares of common stock due to option exercises. The Company issued 25,000 shares of common stock in convertible debt origination fees. In addition, 1,047,861, 131,250, and 1,570,000 restricted shares of common stock issued in 2018, 2019 and 2020, respectively, vested during the nine month period ended September 30, 2020. Lastly, the Company issued 730,000 shares of common stock as part of the consideration to acquire the assets of TrinIT (See Note 8). Stock Options During the nine month period ended September 30, 2020, 5,000 options to purchase shares of common stock were exercised and no options expired or were forfeited. A summary of option activity for the nine month period ended September 30, 2020, is presented below: Options Outstanding Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Aggregate Intrinsic Value Balance Outstanding - January 1, 2020 1,410,000 $ 0.24 8.7 $ - Granted - $ - Exercised (5,000 ) $ 0.15 Forfeited - $ - Balance Outstanding - September 30, 2020 1,405,000 $ 0.24 7.9 $ - Exercisable - September 30, 2020 1,205,000 $ 0.24 7.9 $ - Nonvested Options Number of Options Weighted Average Grant Date Fair Value Weighted Average Remaining Years to Vest Nonvested - January 1, 2020 433,333 $ 0.13 0.6 Granted - $ - Vested (233,333 ) $ 0.13 Forfeited/expired - Nonvested - September 30, 2020 200,000 $ 0.13 0.05 |
SOFTWARE DEVELOPMENT COSTS
SOFTWARE DEVELOPMENT COSTS | 9 Months Ended |
Sep. 30, 2020 | |
SOFTWARE DEVELOPMENT COSTS | |
5. SOFTWARE DEVELOPMENT COSTS | The Company continued to develop its software products with new features and enhancements during the nine month period ended September 30, 2020 and continued to capitalize development costs during that period. A summary of the capitalization and amortization of the software development costs is as follows: September 30, December 31, 2020 2019 Development costs $ 2,371,000 $ 1,936,000 Acquired technology 1,277,000 1,277,000 Less accumulated amortization (2,284,000 ) (1,697,000 ) $ 1,364,000 $ 1,516,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
6. COMMITMENTS AND CONTINGENCIES | LEASE COMMITMENTS On November 15, 2017 the Company signed a three-year lease agreement commencing on November 1, 2017 and expiring on October 31, 2020 for approximately 4,100 square feet of office space located in Winter Garden, Florida in which the Company has its headquarters. An amendment to this lease was signed on October 26, 2020 which extends the lease term through October 31, 2021. On January 3, 2020, the Company purchased the assets of Computer Plumber, LLC, doing business as TrinIT (“TrinIT”), an IT service company located in the Charlotte, North Carolina area, to complement our technology line up. TrinIT signed a two-year lease for its headquarters starting on November 1, 2018 which expired on October 31, 2020. TrinIT signed a new three-year lease on July 14, 2020 for a different location commencing on September 1, 2020 and expiring on August 31, 2023. The new lease provides for a one-year renewal term at the option of TrinIT. As of September 30, 2020, undiscounted future lease obligations for the office spaces are as follows: Year Ended Lease Amount September 30, 2021 $ 48,000 September 30, 2022 41,000 September 30, 2023 37,000 $ 126,000 Lease costs for the nine months ended September 30, 2020 were $62,000 and cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2020 was $69,000. As of September 30, 2020, the following represents the difference between the remaining undiscounted lease commitments under non-cancelable leases and the lease liabilities: Undiscounted minimum lease commitments $ 126,000 Present value adjustment using incremental borrowing rate (19,000 ) Lease liabilities $ 107,000 POTENTIAL LOSS CONTINGENCY Director Demand Notice – The Company has received notice from a Director alleging certain amounts owed. The Company and the Director are currently in discussions regarding the matter. The ultimate settlement amount, if any, cannot be determined at the time of this filing and therefore no additional accruals have been recorded at September 30, 2020 in the accompanying interim financial statements. |
CONCENTRATION OF CREDIT RISK
CONCENTRATION OF CREDIT RISK | 9 Months Ended |
Sep. 30, 2020 | |
CONCENTRATION OF CREDIT RISK | |
7. CONCENTRATION OF CREDIT RISK | The Company has historically provided financial terms to customers in accordance with what management views as industry norms. Financial terms could range from immediate payment for access to the Company’s software products to payment over a period of several months. Management periodically and regularly reviews customer account activity to assess the adequacy of allowances for doubtful accounts, considering such factors as economic conditions and each customer’s payment history and creditworthiness. If the financial conditions of our customers were to deteriorate, or if they were otherwise unable to make payments in accordance with management’s expectations, we might have to increase our allowance for doubtful accounts, modify the financial terms of our customer accounts and/or pursue alternative collection methods. Revenue concentrations for the nine months ended September 30, 2020 and 2019 and the accounts receivable concentrations as of September 30, 2020 and December 31, 2019, expressed as a percentage of the Company’s revenue and accounts receivable, respectively, are as follows: Net Sales For the Nine Months Ended Accounts Receivable at September 30, September 30, September 30, December 31, 2020 2019 2020 2019 Customer A 15 % 42 % 17 % 32 % Customer B 4 % 0 % 38 % 0 % Customer C 2 % 6 % 21 % 0 % |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2020 | |
BUSINESS COMBINATIONS | |
8. BUSINESS COMBINATIONS | On January 3, 2020 the Company acquired substantially all of the assets and business of Computer Plumber, LLC, a North Carolina limited liability company doing business as TrinIT (“Seller”), in exchange for (i) 730,000 shares of common stock of Buyer, (ii) $400,000 in cash, and (iii) the assumption of certain specified debts, liabilities and obligations, all upon the terms and conditions set forth in an Asset Purchase Agreement dated as of January 3, 2020 (the “Computer Plumber LLC Asset Purchase Agreement”). Pursuant to the guidance in FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, the Company calculated the estimated fair value of the acquired customer relationships using the discounted cash flow approach. The key assumptions and inputs into the cash flow model used were: (1) an annual customer attrition rate of 8%, (2) a gross margin percentage of 55%, (3) a tax rate of 23.50% and (4) a discount rate of 12%. Certain fair values of acquired assets and assumed liabilities may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they may be adjusted retrospectively in subsequent periods within the measurement period when it reflects new information obtained about facts and circumstances that were in existence at the acquisition date. The measurement period cannot exceed one year from the acquisition date. The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of January 3, 2020: Consideration Paid: Cash $ 400,000 Common stock 183,000 $ 583,000 Fair values of identifiable assets acquired and liabilities assumed: Assets acquired: Cash $ 25,000 Other current asset 6,000 Right of Use - Lease 14,000 Fixed Assets 3,000 Customer relationships 450,000 Goodwill 130,000 Total assets acquired 628,000 Liabilities assumed: Due to Seller 10,000 Accrued Liability 15,000 Deferred revenue 6,000 Lease Liability 14,000 Total liabilities assumed 45,000 Net assets acquired $ 583,000 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Accounting | The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”). Significant accounting principles followed by the Company and the methods of applying those principles, which materially affect the determination of our financial position, results of operations and cash flows are summarized below. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable are customer obligations due under normal trade terms. We maintain an allowance for doubtful accounts for estimated losses resulting from the potential inability of certain customers to make required future payments on amounts due us. Management determines the adequacy of this allowance by periodically evaluating the aging and past due nature of individual customer receivable balances and considering the customer’s current financial situation as well as the existing industry economic conditions and other relevant factors that would be useful in assessing the risk of collectability. If the future financial condition of our customers were to deteriorate, resulting in their inability to make specific required payments, additions to the allowance for doubtful accounts may be required. Conversely, if the financial condition of our customers improves and collections of amounts outstanding commence or are reasonably assured, then we may reverse previously established allowances for doubtful accounts. The Company has estimated and recorded an allowance for doubtful accounts of $77,000 at September 30, 2020 and $17,000 December 31, 2019. |
Property, Equipment and Depreciation | Property, equipment, and leasehold improvements are recorded at their historical cost. Depreciation and amortization have been determined using the straight-line method over the estimated useful lives of the assets which for computers and office equipment are 3 years and for office furniture and fixtures are 7 years. |
Software Development Costs and Acquired Software | The Company accounts for software development costs, including costs to develop software products or the software components of products to be sold to external users. In accordance with ASC 985-730, Computer Software Research and Development, research and planning phase costs are expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs are capitalized. We have determined that technological feasibility for our products to be marketed to external users was reached before the release of those products. As a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred. Capitalized costs for software to be sold to external users and software acquired in a business combination are amortized based on current and projected future revenue for each product with an annual minimum amortization equal to the straight-line amortization of the costs over three years. |
Impairment of Long Lived Assets | Long lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount that the carrying amount of the asset exceeds the fair value of the asset. |
Goodwill | Goodwill acquired in a business combination is not amortized, but is tested for impairment annually or between annual tests when an impairment indicator exists. If an optional qualitative goodwill impairment assessment is not performed, we are required to determine the fair value of each reporting unit. If a reporting unit’s fair value is lower than its carrying value, we must determine the amount of implied goodwill that would be established if the reporting unit were hypothetically acquired on the impairment test date. If the carrying amount of a reporting unit’s goodwill exceeds the amount of implied goodwill, an impairment loss equal to the excess is recorded. The recoverability of indefinite lived intangible assets is assessed by comparison of the carrying value of the asset to its estimated fair value. If we determine that the carrying value of the asset exceeds its estimated fair value, an impairment loss equal to the excess would be recorded. |
Revenue Recognition | The Company has six primary sources of revenue: 1. Electronic Health Records (EHR) licenses and Practice Management licenses 2. Encrypted Secure & HIPPA Compliant email services (“Encrypted Secure email”) 3. ICD Coding Software 4. Electronic ePrescription Software 5. IT Projects 6. Managed IT Services Revenue from EHR and Practice Management (PM)software licensing arrangements include private cloud hosting services and post contract support provided to clients that have purchased a perpetual or specific term license to the EHR software and have contracted with the Company to host the software. These arrangements provide a client with a contractual right to take possession of the software at any time during the private cloud hosting period and the client either uses the software on its own equipment or contracts with an unrelated third party to host the software. The Company recognizes revenue from the sale of its EHR/PM software licenses at the time the customer has access to use the software, with deferral of revenues associated with the cloud hosting and post contract support performance objectives, allocated based on relative fair value. The Company defers revenue from the sale of its EHR software products associated with cloud hosting and post contract support performance objectives over the term of the license agreement. Cloud hosting performance objective revenues are deferred based on forecasted cloud storage costs, encrypted secure email performance objective revenues are deferred based on the forecasted sales price of those services to other customers of the Company and customer support performance objective revenues are deferred based on forecasted customer support costs based on Company experience. Encrypted Secure email software is provided on a fee basis as software as a service (“SaaS”) with revenue being recognized ratably over the annual contract terms beginning on the date it is made available to the customer. ICD coding software is provided on a fee basis as software as a service (“SaaS”) with revenue being recognized ratably over the contract terms beginning on the date it is made available to the customer. ePrescription software is provided on a fee basis as software as a service (“SaaS”) with revenue being recognized ratably over the contract terms beginning on the date it is made available to the customer. IT Project revenue, relates to “ad hoc” customer projects involving time and material with revenue being recognized after job completion. Managed IT Services offers customers bundled IT managed services with annual contracts invoiced monthly as services are performed or prepaid annually with any unearned revenue being deferred and amortized ratably over the course of the remaining year. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. |
Net Loss Per Share | Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares issuable on exercise of warrants, convertible preferred stock and convertible notes in the weighted average number of shares of common stock outstanding for a period, if dilutive. Common stock equivalents that are anti-dilutive are excluded from the computation of diluted earnings per share. |
Stock-Based Compensation | The Company estimates the fair value of its shares of restricted common stock using the closing stock price of its common stock on the date of the award. The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option pricing model requiring the Company to determine the: 1) volatility of the common stock, 2) expected term of the option award, 3) risk-free interest rate, and 4) any expected dividends. The volatility of the common stock on the date of an option grant is based on its historical stock prices. The expected term of an option grant is based on the Simplified Method as allowed by SAB 107. The risk-free interest rate is obtained from U.S. Treasury issues with an approximately equal life. Lastly, the Company has never paid cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. |
Recently Issued Accounting Pronouncements | The Company does not believe that any issued, but not yet effective accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations and cash flows. |
COMMON STOCK AND PREFERRED ST_2
COMMON STOCK AND PREFERRED STOCK (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
COMMON STOCK AND PREFERRED STOCK | |
Summary of stock option activity | Options Outstanding Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Aggregate Intrinsic Value Balance Outstanding - January 1, 2020 1,410,000 $ 0.24 8.7 $ - Granted - $ - Exercised (5,000 ) $ 0.15 Forfeited - $ - Balance Outstanding - September 30, 2020 1,405,000 $ 0.24 7.9 $ - Exercisable - September 30, 2020 1,205,000 $ 0.24 7.9 $ - Nonvested Options Number of Options Weighted Average Grant Date Fair Value Weighted Average Remaining Years to Vest Nonvested - January 1, 2020 433,333 $ 0.13 0.6 Granted - $ - Vested (233,333 ) $ 0.13 Forfeited/expired - Nonvested - September 30, 2020 200,000 $ 0.13 0.05 |
SOFTWARE DEVELOPMENT COSTS (Tab
SOFTWARE DEVELOPMENT COSTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
SOFTWARE DEVELOPMENT COSTS | |
Summary of capitalization and amortization of software development costs | September 30, December 31, 2020 2019 Development costs $ 2,371,000 $ 1,936,000 Acquired technology 1,277,000 1,277,000 Less accumulated amortization (2,284,000 ) (1,697,000 ) $ 1,364,000 $ 1,516,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of undiscounted fututre lease obligation | Year Ended Lease Amount September 30, 2021 $ 48,000 September 30, 2022 41,000 September 30, 2023 37,000 $ 126,000 |
Schedule of undiscounted lease commitments | Undiscounted minimum lease commitments $ 126,000 Present value adjustment using incremental borrowing rate (19,000 ) Lease liabilities $ 107,000 |
CONCENTRATION OF CREDIT RISK (T
CONCENTRATION OF CREDIT RISK (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
CONCENTRATION OF CREDIT RISK | |
Schedules of concentration of risk by customers | Net Sales For the Nine Months Ended Accounts Receivable at September 30, September 30, September 30, December 31, 2020 2019 2020 2019 Customer A 15 % 42 % 17 % 32 % Customer B 4 % 0 % 38 % 0 % Customer C 2 % 6 % 21 % 0 % |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
BUSINESS COMBINATIONS (Tables) | |
Schedule of consideration paid and the fair value of acquired assets and liabilities | Consideration Paid: Cash $ 400,000 Common stock 183,000 $ 583,000 Fair values of identifiable assets acquired and liabilities assumed: Assets acquired: Cash $ 25,000 Other current asset 6,000 Right of Use - Lease 14,000 Fixed Assets 3,000 Customer relationships 450,000 Goodwill 130,000 Total assets acquired 628,000 Liabilities assumed: Due to Seller 10,000 Accrued Liability 15,000 Deferred revenue 6,000 Lease Liability 14,000 Total liabilities assumed 45,000 Net assets acquired $ 583,000 |
GOING CONCERN (Details Narrativ
GOING CONCERN (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||||
Jul. 31, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Loss from operations | $ (719,000) | $ (789,000) | $ (2,297,000) | $ (2,211,000) | |||||||
Accumulated deficit | (76,751,000) | (76,751,000) | $ (74,340,000) | ||||||||
Working capital deficit | (2,101,000) | (2,101,000) | |||||||||
Total stockholders' Deficit | $ (19,000) | $ 288,000 | $ 205,000 | $ (19,000) | 288,000 | $ 553,000 | $ 465,000 | $ (452,000) | $ (849,000) | $ (958,000) | |
Convertible promissory note | $ 103,000 | ||||||||||
Proceeds from issuance of debt | $ 100,000 | ||||||||||
Shares issued upon conversion of debt | 3,247,948 | ||||||||||
Common stock, shares issued | 79,941,148 | 79,941,148 | 67,476,089 | ||||||||
Debt instrument converted amount | $ 146,000 | ||||||||||
Proceeds from issuance of common stock | 977,000 | $ 2,432,000 | |||||||||
Common stock value | $ 80,000 | 80,000 | $ 67,000 | ||||||||
October 1 to November 4, 2020 [Member] | |||||||||||
Convertible promissory note | $ 32,023 | $ 32,023 | |||||||||
Conversion price per share | $ 0.014 | $ 0.014 | |||||||||
Shares issued upon conversion of debt | 2,275,000 | ||||||||||
July 2020 [Member] | |||||||||||
Convertible promissory note | $ 50,000 | $ 50,000 | |||||||||
Shares issued upon conversion of debt | 812,948 | ||||||||||
Conversion price per share | $ 0.10 | $ 0.10 | |||||||||
Debt instrument converted amount | $ 78,000 | ||||||||||
Accrued interest | $ 3,900 | 3,900 | |||||||||
July 2020 [Member] | Accrued interest [Member] | |||||||||||
Debt instrument converted amount | 3,500 | ||||||||||
July 2020 [Member] | Fourth finance company [Member] | |||||||||||
Convertible promissory note | $ 88,000 | 88,000 | |||||||||
Proceeds from issuance of debt | 80,000 | ||||||||||
Net proceeds | $ 160,000 | ||||||||||
Interest rate | 10.00% | ||||||||||
Conversion price per share | $ 0.30 | $ 0.30 | |||||||||
Prepayment description | There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. | ||||||||||
Common stock, shares issued | 25,000 | 25,000 | |||||||||
Debt conversion limitation description | The note holder is limited to receive upon conversion no more than 9.99% of the issued and outstanding common stock at the time of conversion at any one time. | ||||||||||
January 2020 [Member] | |||||||||||
Convertible promissory note | $ 100,000 | $ 100,000 | |||||||||
Net proceeds | $ 88,500 | ||||||||||
Interest rate | 10.00% | ||||||||||
Debt conversion limitation description | The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding common stock at the time of conversion at any one time. | ||||||||||
Debt conversion price description | The conversion price of the note is 61% of the Market Price (as defined in the note) for the common stock (a discount of 39%) plus an additional 10% discount should the trading price fall below $0.50 until the note is no longer outstanding. | ||||||||||
December 2019 [Member] | |||||||||||
Convertible promissory note | $ 45,000 | $ 45,000 | |||||||||
Shares issued upon conversion of debt | 410,000 | 410,000 | |||||||||
Net proceeds | $ 40,000 | ||||||||||
Interest rate | 10.00% | ||||||||||
Conversion price per share | $ 0.02 | $ 0.02 | $ 0.02 | ||||||||
Debt conversion limitation description | The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding common stock at the time of conversion at any one time. | ||||||||||
Debt conversion price description | The conversion price of the note is 61% of the Market Price (as defined in the note) for the common stock (a discount of 39%) plus an additional 21% discount should the conversion price fall below $0.25 until the note is no longer outstanding. | ||||||||||
Debt instrument principal amount | $ 7,019 | $ 7,019 | $ 7,019 | ||||||||
August 2019 [Member] | |||||||||||
Convertible promissory note | $ 78,000 | $ 78,000 | |||||||||
Shares issued upon conversion of debt | 133,252 | ||||||||||
Net proceeds | $ 75,000 | ||||||||||
Interest rate | 10.00% | ||||||||||
Debt conversion limitation description | The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding common stock at the time of conversion at any one time. | ||||||||||
Debt instrument converted amount | $ 28,000 | ||||||||||
Debt conversion price description | The conversion price of the note is 61% of the Market Price (as defined in the note) for the common stock (a discount of 39%). | ||||||||||
Debt instrument conversion price | $ 0.21 | ||||||||||
August 7, 2020 [Member] | Triton Funds LP [Member] | Purchase Agreement [Member] | |||||||||||
Proceeds from issuance of common stock | $ 750,000 | ||||||||||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 9.99% | 9.99% | |||||||||
Purchase price for the investor, Description | the Investor shall purchase from the Company, up to that number of shares of common stock having an aggregate value of seven hundred fifty thousand dollar ($750,000) at a purchase price of equal to eighty percent (80%) of the lowest trading price of the common stock during the 10 business days prior to the closing applicable to the Purchase Notice delivered by the Company to the Investor. | ||||||||||
Common stock value | $ 750,000 | $ 750,000 | |||||||||
May 2020 [Member] | Paycheck Protection Program [Member] | |||||||||||
Interest rate | 1.00% | ||||||||||
Proceeds from loan | $ 328,000 | ||||||||||
Note Holder One [Member] | |||||||||||
Convertible promissory note | $ 88,608 | $ 88,608 | |||||||||
Conversion price per share | $ 0.021 | $ 0.021 | |||||||||
Shares issued upon conversion of debt | 4,300,000 | ||||||||||
Note Holder [Member] | |||||||||||
Convertible promissory note | $ 56,584 | $ 56,584 | |||||||||
Conversion price per share | $ 0.03 | $ 0.03 | |||||||||
Shares issued upon conversion of debt | 2,025,000 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Allowance for doubtful accounts | $ 77,000 | $ 17,000 |
Furniture and Fixtures [Member] | ||
Estimated useful life | 7 years | |
Computers and office equipment [Member] | ||
Estimated useful life | 3 years |
COMMON STOCK AND PREFERRED ST_3
COMMON STOCK AND PREFERRED STOCK (Details) | 9 Months Ended |
Sep. 30, 2020USD ($)$ / sharesshares | |
Options Outstanding | |
Number of Options/Warrants Outstanding, Beginning | shares | 1,410,000 |
Number of Options Outstanding, Exercised | shares | (5,000) |
Number of Options/Warrants Outstanding, Ending | shares | 1,405,000 |
Number of Options Outstanding, Exercisable Ending | shares | 1,205,000 |
Weighted Average Exercise Price, Beginning | $ / shares | $ 0.24 |
Weighted Average Exercise Price, Exercised | $ / shares | 0.15 |
Weighted Average Exercise Price, Forfeited/expired | $ / shares | 0.24 |
Weighted Average Exercise Price, Ending | $ / shares | $ 0.24 |
Weighted Average Remaining Contractual Term in Years, Beginning | 8 years 8 months 12 days |
Weighted Average Remaining Contractual Term in Years, Ending | 7 years 10 months 24 days |
Weighted Average Remaining Contractual Term in Years, Exercisable Ending | 7 years 10 months 24 days |
Aggregate Intrinsic Value, Beginning | $ | $ 0 |
Aggregate Intrinsic Value, Ending | $ | $ 0 |
Nonvested Options | |
Number of Options Nonvested, Beginning | shares | 433,333 |
Number of Options Nonvested, Vested | shares | (233,333) |
Number of Options Nonvested, Ending | shares | 200,000 |
Weighted Average grant date Fair Value Nonvested, Beginning | $ / shares | $ 0.13 |
Weighted Average grant date Fair Value Nonvested, Vested | $ / shares | 0.13 |
Weighted Average grant date Fair Value Nonvested, Ending | $ / shares | $ 0.13 |
Weighted Average Remaining Years to vest Nonvested, Begining | 7 months 6 days |
Weighted Average Remaining Years to vest Nonvested, Ending | 18 days |
COMMON STOCK AND PREFERRED ST_4
COMMON STOCK AND PREFERRED STOCK (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Jan. 03, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2018 | |
Common stock shares issued during the period | 5,708,000 | |||
Proceeds from issuance of common stock | $ 977,000 | $ 2,432,000 | ||
Restricted shares vested | 1,570,000 | 131,250 | 1,047,861 | |
Common stock shares issued upon options exercise, shares | 5,000 | |||
Debt instrument converted amount | $ 146,000 | |||
Convertible debt origination fees shares | 25,000 | |||
Debt instrument conversion shares issued | 3,247,948 | |||
TrinIT [Member] | ||||
Business acquisition, consideration transferred, shares issued | 730,000 |
SOFTWARE DEVELOPMENT COSTS (Det
SOFTWARE DEVELOPMENT COSTS (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Acquired technology | $ 600,000 | $ 891,000 |
Software development costs, net | 764,000 | 625,000 |
Software Development [Member] | ||
Development costs | 2,371,000 | 1,936,000 |
Acquired technology | 1,277,000 | 1,277,000 |
Less Accumulated amortization | (2,284,000) | (1,697,000) |
Software development costs, net | $ 1,364,000 | $ 1,516,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) - Lease [Member] | Sep. 30, 2020USD ($) |
September 30, 2021 | $ 48,000 |
September 30, 2022 | 41,000 |
September 30, 2023 | 37,000 |
Total | $ 126,000 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 1) - Lease [Member] | Sep. 30, 2020USD ($) |
Undiscounted minimum lease commitments | $ 126,000 |
Present value adjustment using incremental borrowing rate | (19,000) |
Lease liabilities | $ 107,000 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details Narrative) - Lease [Member] | Jan. 03, 2020 | Nov. 15, 2017ft² | Sep. 30, 2020USD ($) |
Operating lease, term | 2 years | 3 years | |
Lease term descriptions | An amendment to this lease was signed on October 26, 2020 which extends the lease term through October 31, 2021. | ||
Operating lease, area | ft² | 4,100 | ||
Operating lease, renewal term | 1 year | ||
Lease costs | $ 62,000 | ||
Cash paid for amounts included in the measurement of lease liabilities | $ 69,000 |
CONCENTRATION OF CREDIT RISK (D
CONCENTRATION OF CREDIT RISK (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Sales Revenue, Net [Member] | Customer A member [Member] | |||
Concentration Risk, Percentage | 15.00% | 42.00% | |
Sales Revenue, Net [Member] | Customer B member [Member] | |||
Concentration Risk, Percentage | 4.00% | 0.00% | |
Sales Revenue, Net [Member] | Customer C member [Member] | |||
Concentration Risk, Percentage | 2.00% | 6.00% | |
Accounts Receivable [Member] | Customer A member [Member] | |||
Concentration Risk, Percentage | 17.00% | 32.00% | |
Accounts Receivable [Member] | Customer B member [Member] | |||
Concentration Risk, Percentage | 38.00% | 0.00% | |
Accounts Receivable [Member] | Customer C member [Member] | |||
Concentration Risk, Percentage | 21.00% | 0.00% |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - TrinIT [Member] | Sep. 30, 2020USD ($) |
Cash | $ 400,000 |
Common stock | 183,000 |
Net asset acquired | $ 583,000 |
BUSINESS COMBINATIONS (Details
BUSINESS COMBINATIONS (Details 1) - TrinIT [Member] | Sep. 30, 2020USD ($) |
Assets acquired | |
Cash | $ 25,000 |
Other current asset | 6,000 |
Right of Use - Lease | 14,000 |
Fixed Assets | 3,000 |
Customer relationships | 450,000 |
Goodwill | 130,000 |
Total assets acquired | 628,000 |
Liabilities assumed: | |
Due to Seller | 10,000 |
Accrued Liability | 15,000 |
Deferred revenue | 6,000 |
Lease Liability | 14,000 |
Total liabilities assumed | 45,000 |
Net asset acquired | $ 583,000 |
BUSINESS COMBINATIONS (Detail_2
BUSINESS COMBINATIONS (Details Narrative) - TrinIT [Member] | 1 Months Ended |
Jan. 03, 2020USD ($)shares | |
Business acquisition, consideration transferred, shares issued | shares | 730,000 |
Cash | $ | $ 400,000 |
Annual customer attrition rate | 8.00% |
Gross margin percentage | 55.00% |
Tax rate | 23.50% |
Discount rate | 12.00% |