Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 19, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'DIRECTVIEW HOLDINGS INC | ' |
Entity Central Index Key | '0001441769 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 198,959,278 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
ASSETS | ' | ' |
Cash | $5,201 | $2,951 |
Accounts Receivable - Net | 86,463 | 27,735 |
Other Current Assets | 961 | 7,241 |
Total Current Assets | 92,625 | 37,927 |
PROPERTY AND EQUIPMENT - Net | ' | 153 |
OTHER ASSETS | 100 | 100 |
Total Assets | 92,725 | 38,180 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ' | ' |
Convertible Promissory Notes, Net of Debt Discounts | 42,730 | 51,750 |
Short Term Advances | 146,015 | 110,136 |
Notes Payable | 182,152 | 198,792 |
Accounts Payable | 393,613 | 363,253 |
Accrued Expenses | 1,181,100 | 914,552 |
Due to Related Parties | 688,188 | 532,839 |
Derivative Liability | 51,788 | 37,969 |
Total Current Liabilities | 2,685,586 | 2,209,291 |
Total Liabilities | 2,685,586 | 2,209,291 |
STOCKHOLDERS' DEFICIT: | ' | ' |
Preferred Stock ($0.0001 Par Value; 5,000,000 Shares Authorized; None Issued and Outstanding) | ' | ' |
Common Stock ($0.0001 Par Value; 500,000,000 Shares Authorized; 167,359,134 and 164,359,134 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively) | 19,792 | 16,436 |
Additional Paid-in Capital | 13,339,658 | 13,337,703 |
Accumulated Deficit | -15,947,809 | -15,524,502 |
Total DirectView Holdings, Inc. Stockholders' Deficit | -2,588,359 | -2,170,363 |
Non-Controlling Interest in Subsidiary | -4,502 | -748 |
Total Stockholders' Deficit | -2,592,861 | -2,171,111 |
Total Liabilities and Stockholders' Deficit | $92,725 | $38,180 |
Consolidated_Balance_Sheets_Un1
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Stockholders equity: | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, authorized shares | 5,000,000 | 5,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized shares | 500,000,000 | 500,000,000 |
Common stock, issued shares | 197,919,134 | 164,359,134 |
Common stock, outstanding shares | 197,919,134 | 164,359,134 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
NET SALES | ' | ' | ' | ' |
Sales of Product | $7,095 | $30,121 | $128,738 | $67,224 |
Service | 4,318 | 16,334 | 45,660 | 28,009 |
Total Net Sales | 11,413 | 46,455 | 174,398 | 95,233 |
COST OF SALES | ' | ' | ' | ' |
Cost of Product | 12,632 | 17,558 | 68,991 | 38,389 |
Cost of Service | 20,696 | 7,393 | 59,603 | 23,340 |
Total Cost of Sales | 33,328 | 24,951 | 128,594 | 61,729 |
GROSS PROFIT | -21,915 | 21,504 | 45,804 | 33,504 |
OPERATING EXPENSES: | ' | ' | ' | ' |
Marketing & Public Relations | 240 | 7,283 | 810 | 7,283 |
Depreciation | 3 | 75 | 153 | 225 |
Compensation, Related Taxes | 88,243 | 144,222 | 265,165 | 768,846 |
Other Selling, General and Administrative | 64,818 | 9,321 | 194,602 | 131,688 |
Total Operating Expenses | 153,304 | 160,901 | 460,730 | 908,042 |
LOSS FROM OPERATIONS | -175,219 | -139,397 | -414,926 | -874,538 |
OTHER INCOME (EXPENSES): | ' | ' | ' | ' |
Other Income | ' | ' | 146 | 21,316 |
Change in Fair Falue of Derivative Liabilities | 37,552 | 23,782 | 42,030 | 29,033 |
Other Expense | ' | 4,049 | ' | ' |
Interest Expense | -11,245 | -33,853 | -54,311 | -76,941 |
Total Other (Expense) Income | 26,307 | -6,022 | -12,135 | -26,592 |
NET LOSS | -148,912 | -145,419 | -427,061 | -901,130 |
Less: Net (Income) Loss Attributable to Non-Controlling Interest | 16,736 | 1,288 | 3,754 | 7,169 |
Net Loss Attributable to DirectView Holdings, Inc. | ($132,176) | ($144,131) | ($423,307) | ($893,961) |
NET LOSS PER COMMON SHARE: | ' | ' | ' | ' |
Basic and Diluted | ' | ' | ' | ($0.01) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and Diluted | 197,919,134 | 162,908,585 | 178,867,559 | 111,632,588 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($427,061) | ($901,130) |
Adjustments to Reconcile Net Loss to Net Cash Flows Used in Operating Activities: | ' | ' |
Depreciation | 153 | 225 |
Common stock issued for compensation | ' | 437,125 |
Change in fair value of derivative liability | -42,030 | -29,033 |
Amortization of debt discount | 18,000 | 17,064 |
Noncash interest charges | 2,000 | ' |
Bad debt expenses | ' | -2,258 |
(Increase) Decrease in: | ' | ' |
Accounts receivable | -58,728 | -45,731 |
Other current assets | 6,280 | 17,777 |
Other assets | ' | 200 |
Increase (Decrease) in: | ' | ' |
Accounts payable | 30,360 | -51,527 |
Accrued expenses | 266,548 | 343,184 |
Deferred revenue | ' | -32 |
Net Cash Flows Used in Operating Activities | -204,478 | -214,136 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Repayments of note payable | ' | -36,000 |
Net proceeds from note payable | 15,500 | 15,000 |
Net proceeds from sale of common stock | ' | 127,675 |
Net proceeds from short term advances | 35,879 | ' |
Net proceeds from loans payable | ' | 48,738 |
Due to related parties | 155,349 | 51,996 |
Net Cash Flows Provided by Financing Activities | 206,728 | 207,409 |
Net Increase (Decrease) in Cash | 2,250 | -6,727 |
Cash - Beginning of Period | 2,951 | 7,248 |
Cash - End of Period | 5,201 | 521 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ' | ' |
Interest | ' | ' |
Income Taxes | ' | ' |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ' | ' |
Derivative liability reclassified to equity | ' | 77,226 |
Issuance of common stock in connection with conversion of promissory note | 22,920 | 29,250 |
Conversion of related party advance to related party note payable | ' | 745,613 |
Beneficial conversion and derivative liabilities on convertible notes payable | $69,186 | $15,026 |
1_BASIS_OF_PRESENTATION_AND_SI
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUTNING POLICIES | 9 Months Ended | ||
Sep. 30, 2013 | |||
Notes to Financial Statements | ' | ||
Basis of Presentation and Significant Accounting Policies | ' | ||
Organization | |||
DirectView Holdings, Inc., (the “Company”), was incorporated in the State of Delaware on October 2, 2006. On July 6, 2012 the Company changed its domicile from Delaware and incorporated in the state of Nevada. | |||
The Company is a full-service provider of teleconferencing services to businesses and organizations. The Company's conferencing services enable its clients to cost-effectively conduct remote meetings by linking participants in geographically dispersed locations. The Company's primary focus is to provide high value-added conferencing services to organizations such as professional service firms, investment banks, high tech companies, law firms, investor relations firms, and other domestic and multinational companies. The Company is also a provider of technologies in surveillance systems, digital video recording and services. The systems provide onsite and remote video and audio surveillance. | |||
Basis of Presentation and Principles of Consolidation | |||
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. | |||
The Company has the following four subsidiaries: DirectView Video Technologies Inc., Ralston Communication Services Inc., Meeting Technologies Inc. and DirectView Security Systems Inc. The consolidated financial statements include the accounts of the Company’s three wholly-owned subsidiaries, and a subsidiary with a majority voting interest of approximately 58% (42% is owned by non-controlling interests of which 23% is owned by the Company’s CEO who is a majority shareholder of the Parent Company) as of September 30, 2013, and 100% prior to January 2011. | |||
In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of subsidiaries applicable to non-controlling interests. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes as of and for the year ended December 31, 2012. | |||
In the opinion of management, all adjustments (consisting of normal recurring items) necessary to present fairly the Company's financial position as of September 30, 2013, and the results of operations and cash flows for the nine months ending September 30, 2013 have been included. The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year. | |||
Reclassifications | |||
Certain amounts have been reclassified within the nine month period ended September 30, 2012 to conform with the presentation of the nine month period ended September 30, 2013. Included is the presentation of non-controlling interests in the statement of cash flows and the presentation of a convertible note payable. These reclassifications have no effect on net loss for the period. | |||
Use of Estimates | |||
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, valuation of stock-based compensation, accrued expenses pertaining to abandoned lease office space, the useful life of property and equipment, the assumptions used to calculate beneficial conversion on notes payable, valuation of common stock issued for services and derivative liabilities. | |||
Non-controlling Interests in Consolidated Financial Statements | |||
In December 2007, the FASB issued ASC 810-10-65, “Non-controlling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51,” (“SFAS No. 160”). This statement clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. This statement is effective for fiscal years beginning after December 15, 2008, with presentation and disclosure requirements applied retrospectively to comparative financial statements. In accordance with ASC 810-10-45-21, the losses attributable to the parent and the non-controlling interest in subsidiary may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. As of September 30, 2013, the Company recorded a non-controlling interest of ($4,502) in connection with our majority-owned subsidiary, DirectView Security Systems Inc. as reflected in the accompanying consolidated balance sheets. | |||
Cash and Cash Equivalents | |||
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. For the nine months ended September 30, 2013 the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. | |||
Fair Value of Financial Instruments | |||
Effective January 1, 2008, the Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. | |||
ASC 820 defines fair value 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. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: | |||
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets | ||
or liabilities | |||
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data | ||
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of | ||
the reporting entity’s own assumptions. | |||
Cash and cash equivalents include money market securities that are considered to be highly liquid and easily tradable as of September 30, 2013. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. | |||
In addition, ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments. | |||
The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable, accrued expenses, notes payable and due to related parties approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying amount of the notes and convertible promissory notes approximates the estimated fair value for these financial instruments as management believes that such notes constitute substantially all of the Company's debt and the interest payable on the notes approximates the Company's incremental borrowing rate. | |||
Accounts Receivable | |||
The Company has a policy of reserving for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company uses specific identification of accounts to reserve possible uncollectible receivables. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt allowance after all means of collection have been exhausted and the potential for recovery is considered remote. At September 30, 2013 and December 31, 2012, management determined that an allowance is necessary which amounted to $99,215 and $99,215, respectively. During the nine months ended September 30, 2013 and 2012, the Company had bad debt expense of $0 and $0. | |||
Advertising | |||
Advertising is expensed as incurred. Advertising expenses for the nine months ended September 30, 2013 and 2012 were deemed to be not material. | |||
Shipping costs | |||
Shipping costs are included in other selling, general and administrative expenses and were deemed to be not material for the nine months ended September 30, 2013 and 2012. | |||
Inventories | |||
Inventories, consisting of finished goods related to our products are stated at the lower of cost or market utilizing the first-in, first-out method. There was no inventory at September 30, 2013 and December 31, 2012. | |||
Property and equipment | |||
Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. | |||
Impairment of Long-Lived Assets | |||
Long-Lived Assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets”. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the nine months ended September 30, 2013 and 2012. | |||
Income Taxes | |||
Income taxes are accounted for under the asset and liability method as prescribed by ASC Topic 740: Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance, when in the Company's opinion it is likely that some portion or the entire deferred tax asset will not be realized. | |||
Pursuant to ASC Topic 740-10: Income Taxes related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The adoption had no effect on the Company’s consolidated financial statements. | |||
Stock Based Compensation | |||
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. | |||
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. | |||
Revenue recognition | |||
The Company follows the guidance of the FASB ASC 605-10-S99 “Revenue Recognition Overall – SEC Materials. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. When a customer order contains multiple items such as hardware, software, and services which are delivered at varying times, the Company determines whether the delivered items can be considered separate units of accounting. Delivered items should be considered separate units of accounting if delivered items have value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of undelivered items, and if delivery of undelivered items is probable and substantially in the Company’s control. | |||
The following policies reflect specific criteria for the various revenues streams of the Company: | |||
Revenue is recognized upon completion of conferencing services. The Company generally does not charge up-front fees and bills its customers based on usage. | |||
Revenue for video equipment sales and security surveillance equipment sales is recognized upon delivery and installation. | |||
Revenue from periodic maintenance agreements is generally recognized ratably over the respective maintenance periods provided no significant obligations remain and collectibility of the related receivable is probable. | |||
Cost of sales includes cost of products and cost of service. Product cost includes the cost of products and freight costs. Cost of services includes labor and fuel expenses. | |||
Concentrations of Credit Risk and Major Customers | |||
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions. Almost all of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. | |||
During the nine months ended September 30, 2013, one customer accounted for 69% of the Company’s revenues. | |||
During the nine months ended September 30, 2012, one customer accounted for 60% of the Company’s revenues. | |||
During the nine months ended September 30, 2013, four customers accounted for 80% of total accounts receivable. The following is a list of percentage of accounts receivable owed by the four customers: | |||
Customer 1 11% | |||
Customer 2 11% | |||
Customer 3 17% | |||
Customer 4 41% | |||
As of December 31, 2012, two customers accounted for 90% of total accounts receivable. The following is a list of percentage of accounts receivable owed by the two customers: | |||
Customer 1 57% | |||
Customer 2 33% | |||
Related Parties | |||
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at the fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to a related party. | |||
Net Loss per Common Share | |||
Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net earnings per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. At September 30, 2013, the Company has 40,064,943 share equivalents issuable pursuant to embedded conversion features. As of September 30, 2012, the Company had 11,637,931 share equivalents issuable pursuant to embedded conversion features. | |||
Recent Accounting Pronouncements | |||
In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." This ASU expands the presentation of changes in accumulated other comprehensive income. The new guidance requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the net income statement or as a separate disclosure in the notes. ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. The Company does not believe that the adoption of this ASU will have a significant impact on its consolidated financial position, results of operations or cash flows. | |||
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. |
2_GOING_CONCERN_CONSIDERATIONS
2. GOING CONCERN CONSIDERATIONS | 9 Months Ended |
Sep. 30, 2013 | |
Text Block [Abstract] | ' |
2. GOING CONCERN CONSIDERATIONS | ' |
The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern. At September 30, 2013, the Company had an accumulated deficit of approximately $15.9 million, a stockholders’ deficit of approximately $2.6 million and a working capital deficiency of $2,592,961. Additionally, for the nine months September 30, 2013, the Company incurred net losses of $427,061 and had negative cash flows from operations in the amount of $204,478. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon increasing sales and obtaining additional capital and financing. Management intends to attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The Company's limited financial resources have prevented the Company from aggressively advertising its products and services to achieve consumer recognition. The financial statements do not include adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. |
3_PROPERTY_AND_EQUIPMENT
3. PROPERTY AND EQUIPMENT | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||||
3. PROPERTY AND EQUIPMENT | ' | |||||||||
Property and equipment consisted of the following: | ||||||||||
Estimated life | September 30, | December 31, | ||||||||
2013 | 2012 | |||||||||
Furniture and fixtures | 3 years | $ | 2,771 | $ | 2,771 | |||||
Less: Accumulated depreciation | (2,771 | ) | (2,618 | ) | ||||||
$ | 0 | $ | 153 | |||||||
For the nine months ended September 30, 2013 and 2012, depreciation expense amounted to $153 and $225, respectively. |
4_NOTES_PAYABLE
4. NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2013 | |
Debt Disclosure [Abstract] | ' |
4. NOTES PAYABLE | ' |
During fiscal 2009, the Company reclassified $45,000 3% unsecured notes payable from long-term to short-term. The maturity of these notes payable ranged from January 2010 to April 2010 and the notes are in default at September 30, 2013. The Company is currently in negotiations with the note holder to extend the maturity date and has accrued 12% interest per annum based on the default provision until such time this note is extended or settled. In June 2013 the note holder converted $7,640 into common shares. The balance of the unsecured note payable amounted to $37,360 as of September 30, 2013 and $45,000 as of December 31, 2012. | |
In November 2009, the Company issued unsecured notes payable of $20,000. The note is payable either in cash or security equivalent at the option of the Company. In the event the Company repays this note in shares of the Company’s common stock the rate is $0.05 per share. The note payable bears 6% interest per annum and matured in May 2010. In January 2010, this note was satisfied by issuing a note payable to another unrelated party with the same terms and conditions except for its maturity date changed to January 2011. The note is in default as of September 30, 2013. The Company is currently in negotiations with the note holder to extend the maturity date and has accrued 12% interest per annum based on the default provision until such time this note is extended or settled. The balance of these unsecured notes payable is $20,000 as of September 30, 2013 and December 31, 2012. | |
During the year ended December 31, 2012, the Company entered into demand notes with Regal Capital (formerly a related party) totaling $116,792 bearing interest at 12% per annum. As of September 30, 2013 and December 31, 2012 the notes amounted to $116,792 and $116,792, respectively. | |
In August 2013, the Company issued a non-interest bearing demand note payable in the amount of $8,000. | |
As of September 30, 2013 and December 31, 2012, notes payable amounted to $182,152 and $198,792, respectively. | |
Accrued interest on the notes payable amounted to approximately $132,000 and $113,000 as of September 30, 2013 and December 31, 2012, respectively and is included in accrued expenses. | |
5_SHORT_TERM_ADVANCES
5. SHORT TERM ADVANCES | 9 Months Ended |
Sep. 30, 2013 | |
Debt Disclosure [Abstract] | ' |
5. SHORT TERM ADVANCES | ' |
During the year ended December 31, 2012, an unrelated party advanced a total of $110,136 to the Company. This advance is payable in cash and is non interest bearing and due on demand. During the nine months ended September 30, 2013 the unrelated party advanced additional funds and the balance as of September 30, 2013 totaled $146,015. |
6_CONVERTIBLE_PROMISSORY_NOTES
6. CONVERTIBLE PROMISSORY NOTES | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
6. CONVERTIBLE PROMISSORY NOTES | ' | ||||||||
Senior secured promissory notes aggregating an original principal of $85,500 were issued in 2008. These notes are payable either in cash or security equivalent at the option of the Company. The notes payable bear 8% interest per annum and are payable on April 1, 2011. The principal and accrued interest is convertible at the option of the note holder into shares of our common stock at a conversion price of $0.50 per share. In July 2013, the Company reclassified the balance of these notes totaling $17,000 to Convertible Promissory Notes from Notes Payable. In July 2013 the note holder converted $7,640 of the convertible note payable into 7,640,000 shares of the Company’s common stock at the conversion rate of $ .001 per share. The balance of the senior secured promissory note amounted to $9,360 and $17,000 as of September 30, 2013 and as of December 31, 2012, respectively. The notes are in default at September 2013. The Company is currently in negotiations with the note holder to extend the maturity date. | |||||||||
During the three months ended March 31, 2013, note holders’ converted $5,100 of convertible notes payables into 3,000,000 shares of the Company’s common stock at the contract rate of 58% of the fair market value on the date of conversion or $.0017 per share. In May 2013 a note holder assigned it’s note to two third party entities. The Company agreed to increase the value of the note by $2,000 resulting in a note balance of $20,000 to the third parties. | |||||||||
In July 2013, note holders’ converted $15,280 of convertible notes payables into 15,280,000 shares of the Company’s common stock at $.001 per share. | |||||||||
In September 2013, the Company issued a short term convertible note payable in the amount of $7,500. This note is convertible at $0.0001, the conversion rate results in a beneficial conversion feature (“BCF”) of $7,500. Accordingly, the debt discount due to the BCF is amortized as interest expense over the term of the note. | |||||||||
Convertible promissory notes consisted of the following: | |||||||||
30-Sep-13 | 31-Dec-12 | ||||||||
Secured convertible promissory notes | $ | 50,230 | $ | 51,750 | |||||
Less: debt discount | -7,500 | - | |||||||
Secured convertible promissory notes | $ | 42,730 | $ | 51,750 | |||||
– net | |||||||||
As of September 30, 2013 and December 31, 2012, amortization of debt discount amounted to $18,000 and $0, respectively, and is included in interest expense. |
7_DERIVATIVE_LIABILITY
7. DERIVATIVE LIABILITY | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Notes to Financial Statements | ' | ||||
7. DERIVATIVE LIABILITY | ' | ||||
In June 2008, a FASB approved guidance related to the determination of whether a freestanding equity-linked instrument should be classified as equity or debt under the provisions of FASB ASC Topic No. 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Stock. The adoption of this requirement will affect accounting for convertible instruments and warrants with provisions that protect holders from declines in the stock price ("down-round" provisions). Warrants with such provisions will no longer be recorded in equity and would have to be reclassified to a liability. ASC Topic No. 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Stock, is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Earlier application by an entity that has previously adopted an alternative accounting policy is not permitted. | |||||
Instruments with down-round protection are not considered indexed to a company's own stock under ASC Topic 815, because neither the occurrence of a sale of common stock by the company at market nor the issuance of another equity-linked instrument with a lower strike price is an input to the fair value of a fixed-for-fixed option on equity shares. | |||||
ASC Topic 815 guidance is to be applied to outstanding instruments for fiscal years beginning after December 15, 2008. The cumulative effect of the change in accounting principle shall be recognized as an adjustment to the opening balance of retained earnings (or other appropriate components of equity) for that fiscal year, presented separately. If an instrument is classified as debt, it is valued at fair value, and this value is re-measured on an ongoing basis, with changes recorded on the statement of operations in each reporting period. The Company did not have outstanding instruments with down-round provisions as of the beginning of fiscal 2009 thus no adjustment will be made to the opening balance of retained earnings. | |||||
In connection with the convertible promissory notes outstanding as of September 30, 2013, the convertible notes' conversion features include adjustments for dilutive issuances (i.e. "ratchet provisions"). These provisions give rise to the derivative liabilities accounted for by the Company in accordance with ASC 815. The Company has determined that the terms of the convertible promissory notes issued include provisions whereby after 180 days from the date of issuance the holders can convert at prices that range between 30% and 58% of the average of the three lowest trading prices during the 10 trading day period of the Company’s common stock prior to the conversion date. Accordingly, the convertible instruments are accounted for as a derivative liability as of September 30, 2013 and adjusted to fair value through earnings at each reporting date. The Company has recognized a derivative liability of $51,788 and $37,969 as of September 30, 2013 and December 31, 2012 respectively. The gain resulting from the decrease in fair value of these convertible instruments was $42,030 for the nine months ended September 30, 2013 and $29,033 for the nine months ended September 30, 2012. | |||||
The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2013 to September 30, 2013: | |||||
Conversion feature | |||||
derivative liability | |||||
Balance at December 31, 2012 | $ | 37,969 | |||
Recognition of derivative liability | 61,686 | ||||
Effect of conversion | (5,837 | ) | |||
Change in fair value included in earnings | (42,030 | ) | |||
Balance at September 30, 2013 | $ | 51,788 | |||
During the quarter ended September 30, 2013 the company recorded a derivative liability in the amount of $9,704 for the issuance of an additional convertible note subject to a ratchet provision. During the quarter ended June 30, 2013 the company recorded a derivative liability in the amount of $4,999 for the issuance of an additional convertible note subject to a ratchet provision. During the quarter ended March 31, 2013 the company recorded a derivative liability in the amount of $46,983 for the issuance of convertible notes with ratchet provisions and removed $5,837 from derivative liabilities for the effect of conversions of notes with ratchet provisions into common stock. | |||||
The Company used the following assumptions for determining the fair value of the convertible instruments granted under the Black-Scholes option pricing model: | |||||
30-Sep-13 | |||||
Expected volatility | 195% - 292% | ||||
Expected term | 3 months | ||||
Risk-free interest rate | 0.02-0.09% | ||||
Expected dividend yield | 0 | % | |||
8_STOCKHOLDERS_DEFICIT
8. STOCKHOLDERS DEFICIT | 9 Months Ended |
Sep. 30, 2013 | |
Equity [Abstract] | ' |
8. STOCKHOLDERSb DEFICIT | ' |
In March 2013, the Company issued 3,000,000 shares in connection with the conversion of a convertible promissory note issued in September 2012 for a total amount of $5,100. The contractual conversion price was based on a 58% discount to the quoted market price or $0.0017 per share. | |
Pursuant to the terms of a promissory note issued in January 2007 the Company issued 7,640,000 common shares in June 2013 at market value of $.001 per share totaling $7,640. | |
Pursuant to the terms of promissory notes issued in July and August 2008 the Company issued 7,640,000 common shares in July 2013 at market value of $.001 per share totaling $7,640. | |
Pursuant to the terms of a promissory note issued in September 2012 the Company issued 15,280,000 common shares in July 2013 at market value of $.001 per share totaling $15,280. | |
9_RELATED_PARTY_TRANSACTIONS
9. RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
9. RELATED PARTY TRANSACTIONS | ' |
Due to Related Parties | |
During 2007 and 2006, the Company’s principal officer loaned $39,436 and $14,400, respectively to the Company for working capital purposes. This debt carries 3% interest per annum and matures in July 2010. The amount due to such related party at September 30, 2013 and December 31, 2012 was $52,347 and $52,347, respectively. As of September 30, 2013 and December 31, 2012, this note was included in due to related party. In March 2012, the Company and the principal officer of the Company agreed to change the term of this promissory note into a demand note. | |
In June 2009, the Company issued a promissory note amounting $22,000 to the Chief Executive Officer of the Company. This note is payable either in cash or security equivalent at the option of the note holder. The note payable bears 12% interest per annum and shall be payable in June 2010. The balance of the note was at $10,843 as of September 30, 2013 and December 31, 2012. | |
Accrued interest on the notes payable to the Chief Executive Officer of the Company amounted to $20,159 and $18,799 as of June 30, 2013 and December 31, 2012, respectively and is included in accrued expenses in the Company’s balance sheet. | |
The Chief Executive Officer of the Company, from time to time, provided advances to the Company for operating expenses. At September 30, 2013 and December 31, 2012, the Company had a payable to the Chief Executive Officer of the Company amounting to $187,440 and $32,091, respectively. These advances are included in Due to Related Parties on the Company’s financial statements and are short-term in nature and non-interest bearing. | |
The Chief Financial Officer of the Company, from time to time, provided advances to the Company for operating expenses. At September 30, 2013 and December 31, 2012, the Company had a payable to the Chief Financial Officer of the Company amounting to $8,119 and $8,119, respectively. These advances are included in Due to Related Parties on the Company’s financial statements and are short-term in nature and non-interest bearing. | |
During the quarter ended June 30, 2012, the Company issued notes payable to the CFO amounting to $429,439 related to the accrued salaries. As of September 30, 2013 and December 31, 2012 the balance on the notes payable related to the accrued salaries remained at $429,439. |
10_ACCRUED_PAYROLL_TAXES
10. ACCRUED PAYROLL TAXES | 9 Months Ended |
Sep. 30, 2013 | |
Notes to Financial Statements | ' |
10. ACCRUED PAYROLL TAXES | ' |
As of December 31, 2012, the Company recorded a liability related to unpaid payroll taxes of $227,060 which includes interest and penalties. The liability was incurred in the years ended December 31, 2007 through December 31, 2010 as a result of the company not remitting payroll tax liabilities. In August 2013, the Company paid $43,176 toward the outstanding payroll tax liabilities. As of September 30, 2013 the Company recorded a liability related to unpaid payroll taxes of $211,783. Such amount also includes current payroll tax liabilities and has been included in accrued expenses in the accompanying consolidated financial statements. |
11_NONCONTROLLING_INTEREST_IN_
11. NON-CONTROLLING INTEREST IN SUBSIDIARY | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Noncontrolling Interest [Abstract] | ' | ||||
11. NON-CONTROLLING INTEREST IN SUBSIDIARY | ' | ||||
The Company has a majority voting interest of approximately 58% in one of its subsidiaries, Directview Security Systems, Inc. The following table shows the changes to the balance of the non-controlling interest in the subsidiary reported on September 30, 2013. | |||||
Non-Controlling | |||||
Interest | |||||
Balance at December 31, 2012 | $ | (748 | ) | ||
Net loss for the period | $ | (3,754 | ) | ||
Balance at September 30, 2013 | (4,502 | ) | |||
1_BASIS_OF_PRESENTATION_AND_SI1
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUTNING POLICIES (Policies) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Notes to Financial Statements | ' | ||
Basis of Presentation | ' | ||
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. | |||
The Company has the following four subsidiaries: DirectView Video Technologies Inc., Ralston Communication Services Inc., Meeting Technologies Inc. and DirectView Security Systems Inc. The consolidated financial statements include the accounts of the Company’s three wholly-owned subsidiaries, and a subsidiary with a majority voting interest of approximately 58% (42% is owned by non-controlling interests of which 23% is owned by the Company’s CEO who is a majority shareholder of the Parent Company) as of September 30, 2013, and 100% prior to January 2011. | |||
In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of subsidiaries applicable to non-controlling interests. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes as of and for the year ended December 31, 2012. | |||
In the opinion of management, all adjustments (consisting of normal recurring items) necessary to present fairly the Company's financial position as of September 30, 2013, and the results of operations and cash flows for the nine months ending September 30, 2013 have been included. The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year. | |||
Reclassifications | ' | ||
Certain amounts have been reclassified within the nine month period ended September 30, 2012 to conform with the presentation of the nine month period ended September 30, 2013. Included is the presentation of non-controlling interests in the statement of cash flows and the presentation of a convertible note payable. These reclassifications have no effect on net loss for the period. | |||
Use of Estimates | ' | ||
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, valuation of stock-based compensation, accrued expenses pertaining to abandoned lease office space, the useful life of property and equipment, the assumptions used to calculate beneficial conversion on notes payable, valuation of common stock issued for services and derivative liabilities. | |||
Non-controlling Interests in Consolidated Financial Statements | ' | ||
In December 2007, the FASB issued ASC 810-10-65, “Non-controlling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51,” (“SFAS No. 160”). This statement clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. This statement is effective for fiscal years beginning after December 15, 2008, with presentation and disclosure requirements applied retrospectively to comparative financial statements. In accordance with ASC 810-10-45-21, the losses attributable to the parent and the non-controlling interest in subsidiary may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. As of September 30, 2013, the Company recorded a non-controlling interest of ($4,502) in connection with our majority-owned subsidiary, DirectView Security Systems Inc. as reflected in the accompanying consolidated balance sheets. | |||
Cash and Cash Equivalents | ' | ||
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. For the nine months ended September 30, 2013 the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. | |||
Fair Value of Financial Instruments | ' | ||
Effective January 1, 2008, the Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. | |||
ASC 820 defines fair value 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. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: | |||
Level 1: | Observable inputs such as quoted market prices in active markets for identical assets | ||
or liabilities | |||
Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data | ||
Level 3: | Unobservable inputs for which there is little or no market data, which require the use of | ||
the reporting entity’s own assumptions. | |||
Cash and cash equivalents include money market securities that are considered to be highly liquid and easily tradable as of September 30, 2013. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. | |||
In addition, ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments. | |||
The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable, accrued expenses, notes payable and due to related parties approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying amount of the notes and convertible promissory notes approximates the estimated fair value for these financial instruments as management believes that such notes constitute substantially all of the Company's debt and the interest payable on the notes approximates the Company's incremental borrowing rate. | |||
Accounts Receivable | ' | ||
The Company has a policy of reserving for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company uses specific identification of accounts to reserve possible uncollectible receivables. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt allowance after all means of collection have been exhausted and the potential for recovery is considered remote. At September 30, 2013 and December 31, 2012, management determined that an allowance is necessary which amounted to $99,215 and $99,215, respectively. During the nine months ended September 30, 2013 and 2012, the Company had bad debt expense of $0 and $0. | |||
Advertising | ' | ||
Advertising is expensed as incurred. Advertising expenses for the nine months ended September 30, 2013 and 2012 were deemed to be not material. | |||
Shipping Costs | ' | ||
Shipping costs are included in other selling, general and administrative expenses and were deemed to be not material for the nine months ended September 30, 2013 and 2012. | |||
Inventories | ' | ||
Inventories, consisting of finished goods related to our products are stated at the lower of cost or market utilizing the first-in, first-out method. There was no inventory at September 30, 2013 and December 31, 2012. | |||
Property and Equipment | ' | ||
Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. | |||
Impairment of Long-Lived Assets | ' | ||
Long-Lived Assets of the Company are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets”. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the nine months ended September 30, 2013 and 2012. | |||
Income Taxes | ' | ||
Income taxes are accounted for under the asset and liability method as prescribed by ASC Topic 740: Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance, when in the Company's opinion it is likely that some portion or the entire deferred tax asset will not be realized. | |||
Pursuant to ASC Topic 740-10: Income Taxes related to the accounting for uncertainty in income taxes, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. The accounting standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The adoption had no effect on the Company’s consolidated financial statements. | |||
Stock Based Compensation | ' | ||
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. | |||
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. | |||
Revenue Recognition | ' | ||
The Company follows the guidance of the FASB ASC 605-10-S99 “Revenue Recognition Overall – SEC Materials. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. When a customer order contains multiple items such as hardware, software, and services which are delivered at varying times, the Company determines whether the delivered items can be considered separate units of accounting. Delivered items should be considered separate units of accounting if delivered items have value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of undelivered items, and if delivery of undelivered items is probable and substantially in the Company’s control. | |||
The following policies reflect specific criteria for the various revenues streams of the Company: | |||
Revenue is recognized upon completion of conferencing services. The Company generally does not charge up-front fees and bills its customers based on usage. | |||
Revenue for video equipment sales and security surveillance equipment sales is recognized upon delivery and installation. | |||
Revenue from periodic maintenance agreements is generally recognized ratably over the respective maintenance periods provided no significant obligations remain and collectibility of the related receivable is probable. | |||
Cost of sales includes cost of products and cost of service. Product cost includes the cost of products and freight costs. Cost of services includes labor and fuel expenses. | |||
Concentrations of Credit Risk and Major Customers | ' | ||
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high credit quality financial institutions. Almost all of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. | |||
During the nine months ended September 30, 2013, one customer accounted for 69% of the Company’s revenues. | |||
During the nine months ended September 30, 2012, one customer accounted for 60% of the Company’s revenues. | |||
During the nine months ended September 30, 2013, four customers accounted for 80% of total accounts receivable. The following is a list of percentage of accounts receivable owed by the four customers: | |||
Customer 1 11% | |||
Customer 2 11% | |||
Customer 3 17% | |||
Customer 4 41% | |||
As of December 31, 2012, two customers accounted for 90% of total accounts receivable. The following is a list of percentage of accounts receivable owed by the two customers: | |||
Customer 1 57% | |||
Customer 2 33% | |||
Related Parties | ' | ||
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at the fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to a related party. | |||
Net Loss per Common Share | ' | ||
Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net earnings per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. At September 30, 2013, the Company has 40,064,943 share equivalents issuable pursuant to embedded conversion features. As of September 30, 2012, the Company had 11,637,931 share equivalents issuable pursuant to embedded conversion features. | |||
Recent Accounting Pronouncements | ' | ||
In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." This ASU expands the presentation of changes in accumulated other comprehensive income. The new guidance requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the net income statement or as a separate disclosure in the notes. ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. The Company does not believe that the adoption of this ASU will have a significant impact on its consolidated financial position, results of operations or cash flows. | |||
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. |
1_BASIS_OF_PRESENTATION_AND_SU
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2013 | |
Basis Of Presentation And Summary Of Significant Accounting Policies Tables | ' |
Major Customers | ' |
During the nine months ended September 30, 2013, four customers accounted for 80% of total accounts receivable. The following is a list of percentage of accounts receivable owed by the four customers: | |
Customer 1 11% | |
Customer 2 11% | |
Customer 3 17% | |
Customer 4 41% | |
As of December 31, 2012, two customers accounted for 90% of total accounts receivable. The following is a list of percentage of accounts receivable owed by the two customers: | |
Customer 1 57% | |
Customer 2 33% | |
3_PROPERTY_AND_EQUIPMENT_Table
3. PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||||
Property and Equipment | ' | |||||||||
Estimated life | September 30, | December 31, | ||||||||
2013 | 2012 | |||||||||
Furniture and fixtures | 3 years | $ | 2,771 | $ | 2,771 | |||||
Less: Accumulated depreciation | (2,771 | ) | (2,618 | ) | ||||||
$ | 0 | $ | 153 |
6_CONVERTIBLE_PROMISSORY_NOTES1
6. CONVERTIBLE PROMISSORY NOTES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Convertible Promissory Note | ' | ||||||||
30-Sep-13 | 31-Dec-12 | ||||||||
Secured convertible promissory notes | $ | 50,230 | $ | 51,750 | |||||
Less: debt discount | -7,500 | - | |||||||
Secured convertible promissory notes | $ | 42,730 | $ | 51,750 | |||||
– net | |||||||||
7_DERIVATIVE_LIABILITY_Tables
7. DERIVATIVE LIABILITY (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Notes to Financial Statements | ' | ||||
Schedule for reconciliation of the derivative liability measured at fair value on a recurring basis | ' | ||||
Conversion feature | |||||
derivative liability | |||||
Balance at December 31, 2012 | $ | 37,969 | |||
Recognition of derivative liability | 61,686 | ||||
Effect of conversion | (5,837 | ) | |||
Change in fair value included in earnings | (42,030 | ) | |||
Balance at September 30, 2013 | $ | 51,788 | |||
Assumptions for Pricing Model to Fair Value Derivatives | ' | ||||
30-Sep-13 | |||||
Expected volatility | 195% - 292% | ||||
Expected term | 3 months | ||||
Risk-free interest rate | 0.02-0.09% | ||||
Expected dividend yield | 0 | % |
11_NONCONTROLLING_INTEREST_IN_1
11. NON-CONTROLLING INTEREST IN SUBSIDIARY (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Non-Controlling Interest In Subsidiary Tables | ' | ||||
Schedule of non controlling interest | ' | ||||
Non-Controlling | |||||
Interest | |||||
Balance at December 31, 2012 | $ | (748 | ) | ||
Net loss for the period | $ | (3,754 | ) | ||
Balance at September 30, 2013 | (4,502 | ) |
1_BASIS_OF_PRESENTATION_AND_SU1
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 9 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | |
Customer 1 | ' | ' |
Major Customer Percentage of revenue | 11.00% | ' |
Major customer percentage of accounts receivable | ' | 57.00% |
Customer 2 | ' | ' |
Major Customer Percentage of revenue | 11.00% | ' |
Major customer percentage of accounts receivable | ' | 33.00% |
Customer 3 | ' | ' |
Major Customer Percentage of revenue | 17.00% | ' |
Customer 4 | ' | ' |
Major Customer Percentage of revenue | 41.00% | ' |
1_BASIS_OF_PRESENTATION_AND_SU2
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Basis Of Presentation And Summary Of Significant Accounting Policies Details Narrative | ' | ' |
Accounts receivable allowance for doubtful accounts | $99,215 | $99,215 |
2_GOING_CONCERN_CONSIDERATIONS1
2. GOING CONCERN CONSIDERATIONS (Details Narrative) (USD $) | Sep. 30, 2013 |
Going Concern Considerations Details Narrative | ' |
Working capital deficiency | $2,592,961 |
3_PROPERTY_AND_EQUIPMENT_Detai
3. PROPERTY AND EQUIPMENT (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | |
Property And Equipment Details | ' | ' |
Furniture and fixtures | $2,771 | $2,771 |
Less: Accumulated depreciation | -2,771 | -2,618 |
Property and Equipment | $0 | $153 |
Estimated Life | '3 years | ' |
6_CONVERTIBLE_PROMISSORY_NOTES2
6. CONVERTIBLE PROMISSORY NOTES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Convertible Promissory Notes Details | ' | ' |
Secured convertible promissory note | $50,230 | $51,750 |
Less: debt discount | -7,500 | ' |
Secured convertible promissory note - net | $42,730 | $51,750 |
7_DERIVATIVE_LIABILITY_Details
7. DERIVATIVE LIABILITY (Details) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Derivative Liability Details | ' |
Derivative Liability, beginning | $37,969 |
Recognition of derivative liability | 61,686 |
Conversion of derivative liability to equity | -5,837 |
Change in fair value included in earnings | -42,030 |
Derivative Liability | $51,788 |
7_DERIVATIVE_LIABILITY_Details1
7. DERIVATIVE LIABILITY (Details 1) | 9 Months Ended |
Sep. 30, 2013 | |
Expected term | '3 months |
Expected dividend yield | 0.00% |
Minimum | ' |
Expected volatility | 195.00% |
Risk-free interest rate | 0.02% |
Maximum | ' |
Expected volatility | 292.00% |
Risk-free interest rate | 0.09% |
11_NONCONTROLLING_INTEREST_IN_2
11. NON-CONTROLLING INTEREST IN SUBSIDIARY (Details) (USD $) | Sep. 30, 2013 |
Non-Controlling Interest In Subsidiary Details | ' |
Balance at December 31, 2012 | ($748) |
Net loss for the period | -3,754 |
Balance at September 30, 2013 | ($4,502) |