Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 31, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'MOBIVITY HOLDINGS CORP. | ' | ' |
Entity Central Index Key | '0001447380 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-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 Public Float | ' | ' | $96,080 |
Entity Common Stock, Shares Outstanding | ' | 22,237,762 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current assets | ' | ' |
Cash | $2,572,685 | $363 |
Accounts receivable, net of allowance for doubtful accounts of $65,975 and $44,700, respectively | 280,667 | 414,671 |
Other current assets | 140,114 | 30,009 |
Total current assets | 2,993,466 | 445,043 |
Goodwill | 3,108,964 | 2,259,624 |
Intangible assets, net | 935,316 | 444,112 |
Other assets | 63,944 | 201,228 |
TOTAL ASSETS | 7,101,690 | 3,350,007 |
Current liabilities | ' | ' |
Accounts payable | 543,647 | 514,949 |
Accrued interest | 16,943 | 321,368 |
Accrued and deferred personnel compensation | 191,041 | 299,534 |
Deferred revenue - related party | ' | 35,262 |
Deferred revenue and customer deposits | 136,523 | 181,731 |
Convertible notes payable, net of discount | ' | 2,857,669 |
Notes payable | 20,000 | 171,984 |
Derivative liabilities | 106,176 | 3,074,504 |
Other current liabilities | 36,372 | 250,144 |
Earn-out payable | 34,755 | 2,032,881 |
Total current liabilities | 1,085,458 | 9,740,026 |
Non-current liabilities | 24,245 | ' |
Earn-out payable | 24,245 | ' |
Total non-current liabilities | 24,245 | ' |
Total liabilities | 1,109,703 | 9,740,026 |
Stockholders' equity (deficit) | ' | ' |
Common stock, $0.001 par value; 50,000,000 shares authorized;16,319,878 and 3,869,688 shares issued and outstanding | 16,320 | 3,870 |
Equity payable | 108,170 | ' |
Additional paid-in capital | 54,452,697 | 25,432,280 |
Accumulated deficit | -48,585,200 | -31,826,169 |
Total stockholders' equity (deficit) | 5,991,987 | -6,390,019 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $7,101,690 | $3,350,007 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Allowance for doubtful accounts | $65,975 | $44,700 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 16,319,878 | 3,869,688 |
Common stock, shares outstanding | 16,319,878 | 3,869,688 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues | ' | ' |
Revenues | $4,093,667 | $4,079,745 |
Cost of revenues | 1,122,037 | 1,300,325 |
Gross margin | 2,971,630 | 2,779,420 |
Operating expenses | ' | ' |
General and administrative | 3,416,850 | 2,984,118 |
Sales and marketing | 3,469,383 | 1,562,933 |
Engineering, research, and development | 824,653 | 562,459 |
Depreciation and amortization | 270,579 | 549,151 |
Goodwill impairment | 1,066,068 | 742,446 |
Intangible asset impairment | 644,170 | 145,396 |
Total operating expenses | 9,691,703 | 6,546,503 |
Loss from operations | -6,720,073 | -3,767,083 |
Other income/(expense) | ' | ' |
Interest income | 747 | 2,833 |
Interest expense | -6,348,186 | -4,559,564 |
Change in fair value of derivative liabilities | 3,766,231 | -359,530 |
Gain on debt extinguishment | 103,177 | ' |
Gain (loss) on adjustment in contingent consideration | -28,465 | 625,357 |
Total other income/(expense) | -10,038,958 | -3,571,844 |
Loss before income taxes | -16,759,031 | -7,338,927 |
Income tax expense | ' | ' |
Net loss | ($16,759,031) | ($7,338,927) |
Net loss per share - basic and diluted | ($1.58) | ($1.90) |
Weighted average number of shares during the period - basic and diluted | 10,612,007 | 3,869,247 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
OPERATING ACTIVITIES | ' | ' |
Net loss | ($16,759,031) | ($7,338,927) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ' | ' |
Bad debt expense | 32,858 | 115,059 |
Common stock and warrants issued for services | 106,138 | 270,000 |
Common stock issued for late payment | ' | 160,468 |
Stock-based compensation | 1,890,216 | 391,410 |
Depreciation and amortization expense | 270,579 | 549,151 |
Gain (Loss) on adjustment in contingent consideration | 28,465 | -625,357 |
Change in fair value of derivative liabilities | 3,766,231 | -359,530 |
Amortization of deferred financing costs | ' | 263,255 |
Amortization of note discounts | 6,134,367 | 3,935,108 |
Goodwill impairment | 1,066,068 | 742,446 |
Intangible asset impairment | 644,170 | 145,396 |
Loss on sale of assets | ' | 164 |
Increase (decrease) in cash resulting from changes in: | ' | ' |
Accounts receivable | 128,613 | -285,884 |
Other current assets | -104,605 | -29,460 |
Other assets | 27,300 | 9,929 |
Accounts payable | -17,521 | -327,828 |
Accrued interest | 65,361 | 335,035 |
Accrued and deferred personnel compensation | -71,493 | 61,843 |
Deferred revenue - related party | -35,262 | -164,738 |
Deferred revenue and customer deposits | -45,208 | 55,206 |
Other liabilities | -76,134 | -120,929 |
Net cash used in operating activities | -2,948,888 | -2,218,183 |
INVESTING ACTIVITIES | ' | ' |
Purchases of equipment | -51,285 | -11,112 |
Acquisition of intangible assets | -15,000 | ' |
Acquisitions | -400,000 | ' |
Net cash used in investing activities | -466,285 | -11,112 |
FINANCING ACTIVITIES | ' | ' |
Proceeds from issuance of notes payable, net of finance offering costs | 700,000 | 3,148,470 |
Payments on notes payable | -1,609,682 | -831,708 |
Payments on cash payment obligation | ' | -87,500 |
Proceeds from issuance of common stock, net of issuance costs | 6,897,177 | ' |
Net cash provided by financing activities | 5,987,495 | 2,229,262 |
Net change in cash | 2,572,322 | -33 |
Cash at beginning of period | 363 | 396 |
Cash at end of period | 2,572,685 | 363 |
Cash paid during period for : | ' | ' |
Interest | 146,973 | 33,385 |
Non-cash investing and financing activities: | ' | ' |
Debt discount from derivatives | 4,614,714 | 5,352,404 |
Adjustment to derivative liability due to note repayment | 40,511 | 1,374 |
Adjustment to derivative liability due to note conversion | 10,945,413 | 3,421,579 |
Adjustment to derivative liability due to Allonge / ASID conversion | 349,694 | ' |
Adjustment to derivative liability due to non-employee warrant conversion | 176,555 | ' |
Adjustment to derivative liability due to warrant cancellation | ' | 1,318 |
Issuance of common stock for Boomtext earn-out | 2,210,667 | ' |
Issuance of common stock for acquisitions | 1,296,060 | ' |
Issuance of common stock for accrued bonuses | ' | ' |
Issuance of common stock for cashless exercise of warrants | ' | ' |
Issuance of note payable for acquisition | 1,365,096 | ' |
Earn-out payable recorded for acquisition | 224,000 | ' |
Conversion of accrued interest into notes payable | ' | 137,649 |
Conversion of notes payable into common stock | 4,984,720 | ' |
Conversion of accrued interest into common stock | 369,786 | ' |
Settlement of working capital asset related to the Boomtext acquisition | $153,317 | ' |
Consolidated_Statement_of_Stoc
Consolidated Statement of Stockholders' Equity (Deficit) (USD $) | Common Stock | Equity Payable | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, Amount at Dec. 31, 2011 | $3,792 | ' | $21,118,251 | ($24,487,242) | ($3,365,199) |
Beginning balance, Shares at Dec. 31, 2011 | 3,792,385 | ' | ' | ' | ' |
Issuance of common stock and warrants for services, Amount | 38 | ' | 269,962 | ' | 270,000 |
Issuance of common stock and warrants for services, Shares | 37,500 | ' | ' | ' | ' |
Issuance of common stock for late payment penalty, Amount | 39 | ' | 160,429 | ' | 160,468 |
Issuance of common stock for late payment penalty, Shares | 39,241 | ' | ' | ' | ' |
Issuance of common stock for acquisitions, Amount | ' | ' | ' | ' | ' |
Adjustment to derivative liability due to note conversion | ' | ' | 3,421,579 | ' | 3,421,579 |
Adjustment to derivative liability due to note repayment, Amount | 1 | ' | 1,373 | ' | 1,374 |
Adjustment to derivative liability due to note repayment, Shares | 562 | ' | ' | ' | ' |
Adjustment of derivative liability due to note repayment 2 | ' | ' | 67,958 | ' | 67,958 |
Adjustment to derivative liability due to warrant cancellation | ' | ' | 1,318 | ' | 1,318 |
Issuance of common stock for accrued bonuses, Amount | ' | ' | ' | ' | -61,843 |
Stock based compensation | ' | ' | 391,410 | ' | 391,410 |
Net loss | ' | ' | ' | -7,338,927 | -7,338,927 |
Ending balance, Amount at Dec. 31, 2012 | 3,869,688 | ' | 25,432,280 | -31,826,169 | -6,390,019 |
Ending balance, Shares at Dec. 31, 2012 | 3,870 | ' | ' | ' | ' |
Issuance of common stock and warrants for services, Amount | 31 | 7,308 | 98,799 | ' | 106,138 |
Issuance of common stock and warrants for services, Shares | 31,292 | ' | ' | ' | ' |
Shares issued for Boomtext earn-out payment, Amount | 247 | ' | 2,210,420 | ' | 2,210,667 |
Shares issued for Boomtext earn-out payment, Shares | 247,279 | ' | ' | ' | ' |
Issuance of common stock for acquisitions, Amount | 1,292 | ' | 1,294,768 | ' | 1,296,060 |
Issuance of common stock for acquisitions, Shares | 1,291,667 | ' | ' | ' | ' |
Issuance of common stock for cash, net of transaction costs of $602,823, Amount | 6,250 | ' | 6,890,927 | ' | 6,897,177 |
Issuance of common stock for cash, net of transaction costs of $602,823, Shares | 6,250,000 | ' | ' | ' | ' |
Issuance of common stock for conversion of note principal and interest, Amount | 4,462 | ' | 5,350,044 | ' | 5,354,506 |
Issuance of common stock for conversion of note principal and interest, Shares | 4,462,089 | ' | ' | ' | ' |
Issuance of common stock for allonge, Amount | 88 | ' | 131,160 | ' | 131,248 |
Issuance of common stock for allonge, Shares | 87,947 | ' | ' | ' | ' |
Adjustment to derivative liability due to note conversion | ' | 218,446 | 10,726,967 | ' | 10,945,413 |
Adjustment of derivative liability due to note repayment 2 | ' | ' | 40,511 | ' | 40,511 |
Adjustment to derivative liability due to warrant cancellation | ' | ' | ' | ' | ' |
Adjustment of derivative liability for non-employee warrant conversion | ' | ' | 176,555 | ' | 176,555 |
Issuance of common stock and warrants for equity payable, Amount | 40 | -117,584 | 117,544 | ' | ' |
Issuance of common stock and warrants for equity payable, Shares | 39,382 | ' | ' | ' | ' |
Issuance of common stock for accrued bonuses, Amount | 19 | ' | 36,981 | ' | 37,000 |
Issuance of common stock for accrued bonuses, Shares | 19,271 | ' | ' | ' | ' |
Issuance of common stock for cashless exercise of warrants, Amount | 21 | ' | 55,525 | ' | 55,546 |
Issuance of common stock for cashless exercise of warrants, Shares | 21,171 | ' | ' | ' | ' |
Stock based compensation | ' | ' | 1,890,216 | ' | 1,890,216 |
Share rounding in reverse split, Amount | ' | ' | ' | ' | ' |
Share rounding in reverse split, Shares | 92 | ' | ' | ' | ' |
Net loss | ' | ' | ' | -16,759,031 | -16,759,031 |
Ending balance, Amount at Dec. 31, 2013 | $16,320 | $108,170 | $54,452,697 | ($48,585,200) | $5,991,987 |
Ending balance, Shares at Dec. 31, 2013 | 16,319,878 | ' | ' | ' | ' |
The_Company_and_Summary_of_Sig
The Company and Summary of Significant Accounting Policies | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Company And Summary Of Significant Accounting Policies | ' | ||||||||
The Company and Summary of Significant Accounting Policies | ' | ||||||||
The Company | |||||||||
We develop and operate proprietary platforms over which resellers, brands and enterprises can conduct localized mobile marketing campaigns. Our proprietary platforms allow resellers, brands and enterprises to market their products and services to consumers through text messages sent directly to the consumers’ mobile phones and mobile smartphone applications, consisting of software available to both phones and tablets PCs. Our customers include national franchisers, professional sports teams and associations and other national brands such as the Los Angeles Clippers, Dallas Cowboys, Chick-Fil-A, Jamba Juice, and others. | |||||||||
Our “C4” Mobile Marketing and Customer Relationship Management (CRM) platform is a Web-hosted software solution enabling our clients to develop, execute, and manage a variety of marketing engagements to a consumer’s mobile phone. Our C4 solution allows our clients to communicate directly with their customers through Short Messaging Service (SMS), Multi-Media Messaging (MMS), smartphone application development and Interactive Voice Response (IVR) interactions, all of which are facilitated via a set of Graphical User Interfaces (GUIs) operated from any Web browser. | |||||||||
Our C4 platform also allows our customers to deploy and administer our “Stampt” mobile device loyalty application. Stampt is a smartphone replacement for “Buy 10, Get 1 free” punch cards. Consumers no longer need to worry about forgetting paper-based loyalty punch cards. Stampt makes it easy to receive all of the rewards consumers want from their favorite businesses. Consumers can use Stampt throughout the United States to earn free sandwiches, coffee, pizza, frozen yogurt, donuts, bagels and more. Stampt’s nearby feature shows consumers all of the rewards they can earn at nearby businesses. From the Stampt mobile device application, consumers simply tap any business to learn more about that business and to see all of the loyalty points they have earned at that business. Consumers can keep track of all of the rewards they are close to earning through the “my cards” feature displayed in the application’s interface. Once a consumer has earned all of the Stampts they need for a reward, they simply show the cashier and click “tap to redeem” button from the application interface on their device. Our customers can create and manage any Stampt program from the C4 platform’s set of Web-based interfaces. | |||||||||
We generate revenue by charging the resellers, brands and enterprises a per-message transactional fee, or through fixed or variable software licensing fees. | |||||||||
Liquidity and Going Concern | |||||||||
We have $2.6 million of cash as of December 31, 2013. We had a net loss of $16.8 million for the year then ended, and we used $2.9 million of cash in our operating activities during 2013. On March 12, 2014, the Company conducted the first closing of the transactions contemplated by the Securities Purchase Agreement described. As of March 28, 2014, the Company has sold 5,413,000 units for the gross proceeds of $5,413,000. After cash paid in conjunction with acquisition of Smart Receipt and associated fees, we retained net proceeds of approximately $2,800,000. Based on our projected 2014 results and, if necessary, our ability to reduce certain variable operating expenses, we believe that our existing capital, together with anticipated cash flows from operations, will be sufficient to finance our operations through at least March 31, 2015. | |||||||||
If our cash reserves prove insufficient to sustain operations, we plan to raise additional capital by selling shares of capital stock or other equity or debt securities. However, there are no commitments or arrangements for future financings in place at this time, and we can give no assurance that such capital will be available on favorable terms or at all. We may need additional financing thereafter until we can achieve profitability. If we cannot, we will be forced to curtail our operations or possibly be forced to evaluate a sale or liquidation of our assets. Any future financing may involve substantial dilution to existing investors. | |||||||||
Although we are actively pursuing financing opportunities, we may not be able to raise cash on terms acceptable to us or at all. There can be no assurance that we will be successful in obtaining additional funding. Financings, if available, may be on terms that are dilutive to our shareholders, and the prices at which new investors would be willing to purchase our securities may be lower than the current price of our ordinary shares. The holders of new securities may also receive rights, preferences or privileges that are senior to those of existing holders of our ordinary shares. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations in the short term. | |||||||||
Principles of Consolidation and Basis of Presentation | |||||||||
The accompanying financial statements are consolidated and include the financial statements of Mobivity Holdings Corp. and our wholly-owned subsidiary. Intercompany transactions are eliminated. | |||||||||
Use of Estimates | |||||||||
Preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management's best knowledge of current events and actions we may undertake in the future. Significant estimates used are those related to: stock-based compensation; valuation of acquired assets, intangible assets and liabilities; useful lives for depreciation and amortization of long-lived assets; future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets; valuation of derivative liabilities; valuation allowance for deferred tax assets; and contingencies. | |||||||||
Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual year. However, in regard to ongoing impairment testing of goodwill and indefinite-lived intangible assets, significant deterioration in future cash flow projections or other assumptions used in estimating fair values versus those anticipated at the time of the initial valuations, could result in impairment charges that materially affect the consolidated financial statements in a given year. | |||||||||
Reverse Stock Split | |||||||||
We effected a 1 for 6 reverse stock split of our authorized common stock on November 12, 2013. As a result, the number of shares of common stock outstanding has been adjusted retrospectively to reflect the reverse stock split in all periods presented. Also, the exercise price and the number of common shares issuable under our share-based compensation plans and warrants have been adjusted retrospectively to reflect the reverse stock split. | |||||||||
Reclassifications | |||||||||
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications had no effect on previously reported net loss. | |||||||||
Acquisitions | |||||||||
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill. | |||||||||
Cash and Cash Equivalents | |||||||||
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts. | |||||||||
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations | |||||||||
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate. | |||||||||
As of December 31, 2013 and 2012, we recorded an allowance for doubtful accounts of $65,975 and $44,700, respectively. | |||||||||
From time to time, we may have a limited number of customers with individually large amounts due. Any unanticipated change in one of the customer’s credit worthiness could have a material effect on the results of operations in the period in which such changes or events occurred. | |||||||||
As of December 31, 2013, we had one customer whose balance represented 23% of total accounts receivable. As of December 31, 2012, we had one customer whose balance represented 43% of total accounts receivable. | |||||||||
Goodwill and Intangible Assets | |||||||||
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit. We conducted our annual impairment tests of goodwill as of December 31, 2013 and 2012. As a result of these tests, we recorded impairment charges to our goodwill during the years ended December 31, 2013 and 2012 of $1,066,068 and $742,446, respectively. | |||||||||
Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, and non-compete agreements. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from two to twenty years. No significant residual value is estimated for intangible assets. | |||||||||
Impairment of Long-Lived Assets | |||||||||
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate. | |||||||||
The Company’s evaluation of its long-lived assets completed during the years ended December 31, 2013 and 2012 resulted in impairment charges of $644,170 and $145,396, respectively. | |||||||||
Derivative Financial Instruments | |||||||||
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. | |||||||||
We review the terms of the common stock, warrants and convertible debt we issue to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. | |||||||||
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. | |||||||||
The fair value of the derivatives is estimated using a Monte Carlo simulation model. The model utilizes a series of inputs and assumptions to arrive at a fair value at the date of inception and each reporting period. Some of the key assumptions include the likelihood of future financing, stock price volatility, and discount rates. | |||||||||
Revenue Recognition and Concentrations | |||||||||
Our “C4” Mobile Marketing and Customer Relationship Management (CRM) and Txtstation Control Center platforms are hosted solutions. We generate revenue from licensing our software to clients in our software as a service (SaaS) model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. We recognize revenue at the time that the services are rendered, the selling price is fixed, and collection is reasonably assured, provided no significant obligations remain. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month to month basis with no contractual term and is collected by credit card. Revenue is recognized at the time that the services are rendered and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue. | |||||||||
We generate revenue from the Stampt App through customer agreements with business owners. Revenue is principally derived from monthly subscription fees which provide a license for unlimited use of the Stampt App by the business owners and their customers. The subscription fee is billed each month to the business owner. Revenue is recognized monthly as the subscription revenues are billed. There are no per-minute or transaction fees associated with the Stampt App. | |||||||||
During the years ended December 31, 2013 and 2012, one customer accounted for 31% and 14% of our revenues. | |||||||||
Stock-based Compensation | |||||||||
We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We generally recognize compensation expense using a straight-line amortization method over the respective vesting period for awards that are ultimately expected to vest. Accordingly, stock-based compensation expense for 2013 and 2012 has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. | |||||||||
Research and Development Expenditures | |||||||||
Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials. | |||||||||
Advertising Expense | |||||||||
Direct advertising costs are expensed as incurred, and consist primarily of E-commerce advertisements and other direct costs. Advertising expense was $19,959 and $70,193 for years ended December 31, 2013 and 2012, respectively. | |||||||||
Income Taxes | |||||||||
We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained. | |||||||||
Computation of Net Loss per Common Share | |||||||||
Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all potential common stock equivalents (convertible notes payable, stock options, and warrants) are converted or exercised. The calculation of diluted net loss per share excludes potential common stock equivalents if the effect is anti-dilutive. Our weighted average common shares outstanding for basic and diluted are the same because the effect of the potential common stock equivalents is anti-dilutive. | |||||||||
We had the following dilutive common stock equivalents as of December 31, 2013 and 2012 which were excluded from the calculation because their effect was anti-dilutive. | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Outstanding employee options | 5,672,464 | 325,846 | |||||||
Outstanding non-employee warrants | 150,835 | 150,835 | |||||||
Outstanding warrants | 5,187,587 | 140,372 | |||||||
11,010,886 | 617,053 | ||||||||
Recent Accounting Pronouncements | |||||||||
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following are a summary of recent accounting developments. | |||||||||
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations. | |||||||||
In February 2013, FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to: | |||||||||
- | Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and | ||||||||
- | Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense. | ||||||||
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 did not have a material impact on our financial position or results of operations. | |||||||||
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on our financial position or results of operations. | |||||||||
In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations. | |||||||||
In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations. | |||||||||
In July 2012, the FASB issued ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. ASU 2012-2 allows entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU No. 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test. Otherwise, the quantitative impairment test is not required. ASU No. 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of the provisions of ASU No. 2012-02 will not have a material impact on the Company's financial position or results of operations. |
Acquisitions_during_Fiscal_Yea
Acquisitions during Fiscal Year Ended December 31, 2013 | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
Acquisitions during Fiscal Year Ended December 31, 2013 | ' | ||||||||
We completed the following acquisitions in furtherance of our strategy to acquire small, privately owned enterprises in the mobile marketing sector through asset purchase structures. We made the acquisitions to expand our market presence and product offerings. | |||||||||
The purchase consideration for each acquisition was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated consideration recorded as goodwill. An independent valuation expert assisted us in determining these fair values. | |||||||||
We have included the financial results of these acquisitions in our consolidated financial statements from the date of acquisition. | |||||||||
Front Door Insights | |||||||||
We acquired certain assets and liabilities of Front Door Insights, LLC (“FDI”) in May 2013 pursuant to an asset purchase agreement. The assets acquired and liabilities assumed from FDI consisted of cash on hand, accounts receivable, all rights under all contracts other than excluded contracts, prepaid expenses, all technology and intellectual property rights, accounts payable, and obligations under a commercial lease. | |||||||||
The purchase consideration totaling $2,577,406 consisted of: (1) $100,000 in cash; (2) a non-interest bearing promissory note in the principal amount of $1,400,000, which was discounted by $34,904; and (3) 1,166,667 shares of our common stock valued based on the closing market price on the acquisition date at $1,112,310. The promissory note was settled in full in June 2013. | |||||||||
The asset purchase agreement included a working capital adjustment pursuant to which the number of shares issuable to FDI would be increased, or decreased, in the event the working capital of FDI exceeded, or was less than, $10,000, respectively, as of the closing. The working capital adjustment was immaterial and was settled in cash. | |||||||||
The asset purchase agreement contained customary representations, warranties and covenants by the parties, including each party’s agreement to indemnify the other against any claims or losses arising from their breach of the asset purchase agreement. FDI and its members have also agreed that for a period of three years following the closing not to engage in the business of providing interactive mobile marketing platforms or services or to solicit the pre-closing clients, vendors or employees of FDI, except in each case on our behalf. | |||||||||
The allocation of the purchase consideration to assets acquired and liabilities assumed was as follows: | |||||||||
Cash | $ | 5,500 | |||||||
Accounts receivable | 27,467 | ||||||||
Contracts | 813,000 | ||||||||
Customer relationships | 22,000 | ||||||||
Developed technology | 96,000 | ||||||||
Non-compete agreement | 124,000 | ||||||||
Goodwill | 1,535,658 | ||||||||
Total assets acquired | 2,623,625 | ||||||||
Liabilities assumed | (46,219 | ) | |||||||
Net assets acquired | $ | 2,577,406 | |||||||
The following information presents unaudited pro forma consolidated results of operations for the twelve months ended December 31, 2013 as if the FDI acquisition described above had occurred on January 1, 2013, and the results of operations for the year ended December 31, 2012 as if the FDI acquisition described above had occurred on January 1, 2012. The following unaudited pro forma financial information gives effect to certain adjustments, including the increase in compensation expense related to additional head-count and amortization of acquired intangible assets. The pro forma financial information is not necessarily indicative of the operating results that would have occurred if the acquisition been consummated as of the date indicated, nor are they necessarily indicative of future operating results. The unaudited pro forma financial information is as follows: | |||||||||
(Unaudited) | |||||||||
Year ended December 31, | |||||||||
2013 | 2012 | ||||||||
Total revenues | $ | 4,255,947 | $ | 4,427,542 | |||||
Net loss | $ | (17,120,236 | ) | $ | (9,533,541 | ) | |||
Basic and diluted loss per share | $ | (1.55 | ) | $ | (0.32 | ) | |||
Sequence (Stampt) | |||||||||
We acquired certain assets of Sequence, LLC (“Sequence”) in May 2013 pursuant to an asset purchase agreement. The assets acquired consisted of all application software, URL’s, websites, trademarks, brands, customers and customer lists. We assumed no liabilities in the transaction. | |||||||||
The purchase consideration totaling $707,750 consisted of: (1) $300,000 in cash; (2) 125,000 shares of our common stock valued based on the closing market price on the acquisition date at $183,750; and (3) twenty-four monthly earn-out payments consisting of 10% of the eligible monthly revenue subsequent to closing, with a fair value of $224,000. | |||||||||
The allocation of the purchase consideration to the assets acquired was as follows: | |||||||||
Merchant relationships | $ | 181,000 | |||||||
Trade name | 76,000 | ||||||||
Developed technology | 71,000 | ||||||||
Goodwill | 379,750 | ||||||||
Total assets acquired | $ | 707,750 | |||||||
Pro forma results of operations are not presented due to the investment test not reaching the level of a significant acquisition. |
Goodwill_and_Intangible_Assets
Goodwill and Intangible Assets | 12 Months Ended | ||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | ' | ||||||||||||||||||||||||||||||||
Goodwill | |||||||||||||||||||||||||||||||||
The following table presents goodwill and impairment for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||||||||||||||
Goodwill | |||||||||||||||||||||||||||||||||
31-Dec-11 | $ | 3,002,070 | |||||||||||||||||||||||||||||||
Acquired | - | ||||||||||||||||||||||||||||||||
Impairment | (742,446 | ) | |||||||||||||||||||||||||||||||
31-Dec-12 | 2,259,624 | ||||||||||||||||||||||||||||||||
Acquired | 1,915,408 | ||||||||||||||||||||||||||||||||
Impairment | (1,066,068 | ) | |||||||||||||||||||||||||||||||
31-Dec-13 | $ | 3,108,964 | |||||||||||||||||||||||||||||||
We conducted our annual impairment test of goodwill as of December 31, 2013 and 2012, which resulted in impairment charges of $1,066,068 and $742,446, respectively. | |||||||||||||||||||||||||||||||||
Intangible assets | |||||||||||||||||||||||||||||||||
The following table presents components of identifiable intangible assets for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization and Impairment | Net Carrying Amount | Weighted Average Useful Life (Years) | Gross Carrying Amount | Accumulated Amortization and Impairment | Net Carrying Amount | Weighted Average Useful Life (Years) | ||||||||||||||||||||||||||
Patents and trademarks | $ | 142,000 | $ | (23,902 | ) | $ | 118,098 | 20 | $ | 127,000 | $ | (15,381 | ) | $ | 111,619 | 20 | |||||||||||||||||
Customer contracts | 1,069,900 | (528,372 | ) | 541,528 | 5.88 | 256,900 | (178,135 | ) | 78,765 | 5 | |||||||||||||||||||||||
Customer and merchant relationships | 1,128,583 | (1,128,583 | ) | - | 4.78 | 925,583 | (896,527 | ) | 29,056 | 3.74 | |||||||||||||||||||||||
Trade name | 199,750 | (177,359 | ) | 22,391 | 5 | 123,750 | (93,162 | ) | 30,588 | 5 | |||||||||||||||||||||||
Acquired technology | 573,550 | (391,252 | ) | 182,298 | 4.72 | 406,550 | (213,091 | ) | 193,459 | 4.61 | |||||||||||||||||||||||
Non-compete agreement | 132,083 | (61,082 | ) | 71,001 | 2.9 | 8,083 | (7,458 | ) | 625 | 2.16 | |||||||||||||||||||||||
$ | 3,245,866 | $ | (2,310,550 | ) | $ | 935,316 | $ | 1,720,866 | $ | (1,403,754 | ) | $ | 444,112 | ||||||||||||||||||||
During the years ended December 31, 2013 and 2012, we recorded amortization expense related to our intangible assets of $262,626 and $526,998, respectively, which is included in depreciation and amortization in the consolidated statement of operations. | |||||||||||||||||||||||||||||||||
During the years ended December 31, 2013 and 2012, we recorded impairment charges related to our intangible assets of $644,170 and $145,396 respectively. | |||||||||||||||||||||||||||||||||
Expected future intangible asset amortization as of December 31, 2013 is as follows: | |||||||||||||||||||||||||||||||||
Year ending December 31, | Amount | ||||||||||||||||||||||||||||||||
2014 | $ | 211,574 | |||||||||||||||||||||||||||||||
2015 | 217,624 | ||||||||||||||||||||||||||||||||
2016 | 139,692 | ||||||||||||||||||||||||||||||||
2017 | 94,319 | ||||||||||||||||||||||||||||||||
2018 | 88,470 | ||||||||||||||||||||||||||||||||
Thereafter | 183,636 | ||||||||||||||||||||||||||||||||
Total | $ | 935,316 | |||||||||||||||||||||||||||||||
Derivative_Liabilities
Derivative Liabilities | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Derivative Liabilities | ' | ||||||||
Related to convertible notes payable and underlying warrants | |||||||||
As discussed in Note 5 under Bridge Financing, we previously issued convertible notes payable that provided for the issuance of warrants to purchase our common stock at a future date. The conversion term for the convertible notes was variable based on certain factors. The number of warrants to be issued was based on the future price of our common stock. | |||||||||
As of December 31, 2012 and through June 17, 2013, the number of warrants to be issued was indeterminate. Due to the fact that the number of warrants issuable was indeterminate, the equity environment was tainted. Because the equity environment was tainted, we accounted for the variable maturity conversion feature (“VMCO”) and the additional share issuance feature (“ASID”) contained in the convertible notes payable as derivative liabilities on the issuance date of the convertible notes payable. | |||||||||
On June 17, 2013, we converted all of the outstanding convertible notes payable into shares of our common stock, and issued the warrants underlying the convertible notes payable. At that time, the taint on the equity environment was removed, and the derivative liabilities related to the VMCO and ASID totaling $7,792,657 were reclassified to equity. | |||||||||
Related to private placement shares and warrants | |||||||||
We completed a private placement in September 2011 for the sale of units consisting of shares of common stock and warrants to purchase our common stock. Both the common shares and the warrants contain anti-dilutive, or down round, price protection. We recorded derivative liabilities related to the down round price protection on the common shares and the warrants at the issuance date. | |||||||||
The down round price protection on the common shares expired on August 15, 2012, resulting in a gain of $236,369 during 2012. The derivative liability was reduced to zero and the gain was recorded as a change in the fair market value of the derivative liability. The down round protection for the warrant terminates when the warrant expires or is exercised. | |||||||||
In October 2012, the exercise price of the warrants was reduced from $12.00 per share to $3.00 per share as a result of the price protection guarantee contained in the warrant agreement. | |||||||||
Our derivative liabilities at December 31, 2013 relate to these warrants. | |||||||||
Related to allonges | |||||||||
As discussed in Note 5 under Bridge Financing, all note holders with convertible notes payable maturing in February 2012 extended the maturity date through May 2012. As consideration to the note holders for the extension of the maturity date, we provided allonges which consisted of the accrued interest on each convertible note payable as of January 31, 2012. The allonges were convertible into shares of common stock at the latest financing price. The value of the allonges was recorded as a derivative liability at the issuance date. | |||||||||
In June 2013, the number of common shares issuable under the allonges was determined to be 87,947 and these shares were issued in July 2013. | |||||||||
Related to non-employee warrants | |||||||||
As discussed in Note 8, we previously accounted for warrants issued to non-employees as derivative liabilities. On June 17, 2013, the equity environment was no longer tainted and the value of the derivative liabilities related to the non-employee warrants totaling $176,555 was reclassified to equity. | |||||||||
Summary | |||||||||
The fair values of our derivative liabilities are estimated at the issuance date and are revalued at each subsequent reporting date using a Monte Carlo simulation discussed below. | |||||||||
At December 31, 2013 and 2012, we recorded current derivative liabilities of $106,176 and $3,074,504, respectively, which are detailed by instrument type in the table below. | |||||||||
The net change in fair value of the derivative liabilities for the years ended December 31, 2013 and 2012 was a loss of $3,766,231 and a gain of $359,530, respectively. | |||||||||
The following table presents the derivative liabilities by instrument type as of December 31, 2013 and 2012: | |||||||||
December 31, | |||||||||
Derivative Value by Instrument Type | 2013 | 2012 | |||||||
Convertible Bridge Notes | $ | - | $ | 2,850,085 | |||||
Common Stock and Warrants | 106,176 | 129,378 | |||||||
Non-employee Warrants | - | 95,041 | |||||||
$ | 106,176 | $ | 3,074,504 | ||||||
The following table presents details of the Company’s derivative liabilities from December 31, 2011 to December 31, 2013: | |||||||||
Balance December 31, 2011 | $ | 1,573,859 | |||||||
Issuances in derivative value due to new security issuances of notes | 5,352,404 | ||||||||
Issuances in derivative value due to vesting of non-employee warrants | 485,700 | ||||||||
Issuances in derivative value due to allonges | 118,633 | ||||||||
Adjustment to derivative liability due to debt repayment | (129,139 | ) | |||||||
Adjustment to derivative liability due to debt conversion | (3,361,772 | ) | |||||||
Adjustment to derivative liability due to warrant cancellation | (1,318 | ) | |||||||
Change in fair market value of derivative liabilities | (963,863 | ) | |||||||
Balance December 31, 2012 | $ | 3,074,504 | |||||||
Issuances in derivative value due to new security issuances of notes | 4,614,714 | ||||||||
Issuances in derivative value due to vesting of non-employee warrants | 26,969 | ||||||||
Adjustment to derivative liability due to note repayment | (40,511 | ) | |||||||
Adjustment to derivative liability due to note conversion into new notes | (3,152,786 | ) | |||||||
Adjustment to derivative liability due to note conversion into equity | (7,923,875 | ) | |||||||
Adjustment to derivative liability due to non-employee warrant conversion | (176,555 | ) | |||||||
Adjustment to derivative liability due to warrant exercises | (55,546 | ) | |||||||
Change in fair value of derivative liabilities | 3,739,262 | ||||||||
Balance December 31, 2013 | $ | 106,176 | |||||||
An independent valuation expert calculated the fair value of the compound embedded derivatives using a complex, customized Monte Carlo simulation model suitable to value path dependent American options. The model uses the risk neutral methodology adapted to value corporate securities. This model utilized subjective and theoretical assumptions that can materially affect fair values from period to period. | |||||||||
Key inputs and assumptions used in valuing our derivative liabilities are as follows: | |||||||||
For issuances of notes, common stock and warrants: | |||||||||
· Stock prices on all measurement dates were based on the fair market value | |||||||||
· Down round protection for dates prior to April 15, 2013 is based on the subsequent issuance of common stock at prices less than $3.00 per share and warrants with exercise prices less than $3.00 per share. Down round protection for dates between April 15, 2013 and June 17, 2013 is based on the subsequent issuance of common stock at prices less than $1.50 per share and warrants with exercise prices less than $1.50 per share. Thereafter, down round protection is based on the subsequent issuance of common stock at prices less than $1.00 per share and warrants with exercise prices less than $1.00 per share | |||||||||
· The probability of a future equity financing event triggering the down round protection was estimated at 100% | |||||||||
· Computed volatility ranging from 86.1% to 128.9% | |||||||||
· Risk free rates ranging from 0.05% to1.41% | |||||||||
For issuances of non-employee warrants through June 17, 2013: | |||||||||
· Computed volatility of 128.9% | |||||||||
· Risk free rates ranging from 0.30% to 0.66% | |||||||||
· Expected life (years) ranging from 2.48 to 3.27 | |||||||||
See Note 10 for a discussion of fair value measurements. | |||||||||
Bridge_Financing_Notes_Payable
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Bridge Financing, Notes Payable, and Accrued Interest | ' | ||||||||||||||||
Bridge Financing | |||||||||||||||||
Summary | |||||||||||||||||
Prior to June 2013, we issued 10% Senior Secured Convertible Bridge Notes Payable (“Bridge Notes” or “new Bridge Notes”) to various accredited investors, and then extended the due dates on the majority of the Bridge Notes several times. In June 2013, the outstanding principal of the Bridge Notes totaling $4,984,720 was converted into 4,153,934 shares of our common stock at $1.20 per share within the terms of the agreement; therefore, we did not recognize a gain or loss on this transaction. We no longer have any outstanding Bridge Notes. | |||||||||||||||||
The Bridge Notes contained variable maturity dates and additional share issuance obligations and we recorded discounts to the Bridge Notes for the VMCO and ASID. The discounts were amortized to interest expense over the term of the Bridge Notes using the effective interest method. We determined that the VMCO and the ASID represented embedded derivative features, and these were recorded as derivative liabilities. See Note 4. | |||||||||||||||||
We capitalized costs associated with the issuance of the Bridge Notes, and amortized these costs to interest expense over the term of the related Bridge Notes using the effective interest method. | |||||||||||||||||
The following table summarizes information relative to the outstanding Bridge Notes at December 31, 2013 and 2012: | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Bridge notes payable | $ | - | $ | 4,342,418 | |||||||||||||
Less unamortized discounts: | |||||||||||||||||
VMCO | - | (481,390 | ) | ||||||||||||||
ASID | - | (1,003,359 | ) | ||||||||||||||
Bridge notes payable, net of discounts | $ | - | $ | 2,857,669 | |||||||||||||
Following is a detailed discussion of the Bridge Notes transactions. | |||||||||||||||||
2012 | |||||||||||||||||
As of January 1, 2012, the principal balance on our outstanding Bridge Notes totaled $1,062,500. The principal balance and accrued interest was due on the earlier of (i) the date we completed a financing transaction for the offer and sale of shares of common stock (including securities convertible into or exercisable for its common stock), in an aggregate amount of no less than 125% of the principal amount (a qualifying financing), and (ii) February 2, 2012. If the Bridge Notes were held to maturity, we would have paid, at the option of the holder: i) in cash or ii) in securities to be issued by us in the qualifying financing at the same price paid by other investors. The Bridge Notes were secured by a first priority lien and security interest in all of our assets. | |||||||||||||||||
In January 2012, we issued additional Bridge Notes in the aggregate principal amount of $520,000. These Bridge Notes were due February 2, 2012 and contained the same rights and privileges as the previously issued Bridge Notes. | |||||||||||||||||
In March 2012, we repaid Bridge Notes totaling $65,000. | |||||||||||||||||
In April 2012, all note holders with Bridge Notes maturing on February 2, 2012 extended the maturity date through May 2, 2012. As consideration to the note holders for the extension of the maturity date, we provided allonges which consisted of the accrued interest for each Bridge Note as of January 31, 2012, which are convertible into shares of our common stock at the latest financing price. The value of the allonges was recorded as a derivative liability. See Note 5. | |||||||||||||||||
In March 2012 and April 2012, we issued additional Bridge Notes in the aggregate principal amount of $220,100 with a due date of May 2, 2012. In May 2012, theses notes were cancelled and converted into new Bridge Notes discussed below. | |||||||||||||||||
In May and June 2012, we issued to a number of accredited investors our new Bridge Notes in the aggregate principal amount of $4,347,419, consisting of (i) $2,656,250 of new funds and (ii) $1,691,169 of principal amount and accrued interest due under our previously issued Bridge Notes that were cancelled and converted into new Bridge Notes. The new Bridge Notes accrued interest at the rate of 10% per annum. | |||||||||||||||||
The principal amount under the new Bridge Notes plus all accrued and unpaid interest was due on the earlier of (i) the date we completed a financing transaction for the offer and sale of shares of common stock (including securities convertible into or exercisable for its common stock), in an aggregate amount of no less than 125% of the principal amount (a qualifying financing), and (ii) October 15, 2012, which date, as described below, was later extended to April 15, 2013. Payments could have been made in cash, or, at the option of the holder of the new Bridge Notes, in securities to be issued by us in the qualifying financing at the same price paid for such securities by other investors. The new Bridge Notes were secured by a first priority lien and security interest in all of our assets. | |||||||||||||||||
We also had the obligation to issue to the holders of the new Bridge Notes on the date that is the earlier of the repayment of the new Bridge Notes or the completion of the qualifying financing, at their option: | |||||||||||||||||
· | five year warrants to purchase that number of shares of common stock equal to the principal amount plus accrued interest divided by the per share purchase price of the common stock offered and sold in the qualifying financing (the offering price) which warrants were to be exercisable at the offering price and would include cashless exercise provisions commencing eighteen months from the date of issuance of the warrants if there is not at that time an effective registration statement covering the shares of common stock exercisable upon exercise of the warrants, or | ||||||||||||||||
· | that number of shares of common stock equal to the product arrived at by multiplying (x) the principal amount plus accrued interest divided by the offering price and (y) 0.33. | ||||||||||||||||
We granted piggy-back registration rights with respect to the securities to be issued in connection with the new Bridge Notes. | |||||||||||||||||
The new Bridge Notes further provided that in the event of a change of control transaction, the proceeds from such transaction must be used by us to pay to the holders of the new Bridge Notes, pro rata based on the amount of new Bridge Notes owned by each holder, an amount equal to 1.5 times the amount of the aggregate principal amount outstanding under the new Bridge Notes, plus accrued interest due there under, plus all other fees, costs or other charges due there under. | |||||||||||||||||
The holders of the new Bridge Notes were also granted the right to appoint two designees to serve as members of our board of directors, which members will also serve as members of the Compensation Committee and the Audit Committee of our board of directors. | |||||||||||||||||
We used $184,081 from the proceeds of the sale of the new Bridge Notes to pay off existing principal balances under the Bridge Notes that were not cancelled and converted into the new Bridge Notes. | |||||||||||||||||
In October 2012 and continuing thereafter, we entered into amendments with the holders of the new Bridge Notes. Under the terms of the amendments, the holders of new Bridge Notes in the aggregate principal amount of $4,342,419 agreed to extend the maturity date of the new Bridge Notes to April 15, 2013. In consideration of the new Bridge Note holders’ agreement to extend the maturity date, the amendment provides that the holder shall have the option to convert the principal and interest under the new Bridge Note into the securities offered by us in a qualifying equity financing at the lower of (a) the same price paid for such securities by other investors investing in the financing or (b) $3.00 per share (subject to adjustment in the event of a stock split, reclassification or the like). Prior to the amendment, the conversion option under the new Bridge Note entitled the holder to convert the principal and interest under the new Bridge Note into the securities offered by us in a qualifying equity financing at the same price paid for such securities by other investors investing in the financing. The conversion price of $3.00 in (b) above triggered the price protection guarantee contained in the warrants issued in our 2011 private placement, and the exercise price on the warrants changed from $12.00 per share to $3.00 per share. Therefore, the warrants issued in our 2011 private placement were revalued using the new exercise price on the financing date increasing the derivative liability balance with the offset to derivative loss. | |||||||||||||||||
In November 2012, we repaid a new Bridge Note totaling $5,000. | |||||||||||||||||
2013 | |||||||||||||||||
In January 2013, we partially repaid a new Bridge Note totaling $21,040. | |||||||||||||||||
In March 2013, we issued new Bridge Notes in the aggregate principal amount of $200,000 that contained the same rights and privileges as the previously issued new Bridge Notes. | |||||||||||||||||
In April 2013, we issued new Bridge Notes in the aggregate principal amount of $75,000 that contained the same rights and privileges as the previously issued new Bridge Notes. | |||||||||||||||||
In April 2013, we repaid a new Bridge Note totaling $36,659. | |||||||||||||||||
In April 2013, we issued a new Bridge Note to our Chief Financial Officer (“CFO”) totaling $20,000 that contained the same rights and privileges as the previously issued new Bridge Notes, the due date of which was extended to October 15, 2013. | |||||||||||||||||
In May 2013, a majority of the new Bridge Note holders agreed to extend the maturity date of the new Bridge Notes to October 15, 2013 from April 15, 2013. In consideration of the new Bridge Note holders’ agreement to extend the maturity date, the amendment provides that the new Bridge Note holders have the option to convert the principal and accrued interest under the new Bridge Note into the securities offered by us in a qualifying equity financing at the lower of (a) the same price paid for such securities by other investors investing in the financing or (b) $1.50 per share (subject to adjustment in the event of a stock split, reclassification or the like). Prior to the amendment, the conversion option under the new Bridge Notes entitled the new Bridge Note holders to convert the principal and accrued interest under the new Bridge Notes into the securities offered by us in a qualifying equity financing at the lower of (a) the same price paid for such securities by other investors investing in the financing or (b) $3.00 per share (subject to adjustment in the event of a stock split, reclassification or the like). | |||||||||||||||||
As a result of this amendment and the additional consideration given, the embedded derivative features in the Bridge Notes were revalued on April 15, 2013 to $4,052,148. We recorded new note discounts and derivative liabilities on April 15, 2013 based on the fair value of the derivative instruments. During the period from April 15, 2013 through June 17, 2013, the entire balance of the note discounts was amortized to interest expense as the conversion on June 17, 2013 triggered the immediate recognition of the full value of the debt discount. | |||||||||||||||||
In May 2013, we issued new Bridge Notes in the aggregate principal amount of $387,500 that contained the same rights and privileges as the previously issued and amended new Bridge Notes. | |||||||||||||||||
In May 2013, we issued a new Bridge Note to our Chief Executive Officer (“CEO”) totaling $17,500 that contained the same rights and privileges as the previously issued and amended new Bridge Notes. | |||||||||||||||||
In June 2013, we completed a qualifying equity financing at $1.20 per share. See Note 6. Pursuant to the terms of the new Bridge Notes, we converted the principal amount of Bridge Notes totaling $4,984,720 into 4,153,934 shares of our common stock at $1.20 per share. Also, in June 2013, we converted accrued interest on the Bridge Notes totaling $369,786 into 308,155 shares of our common stock at $1.20 per share. As both the conversion of the principal and interest amounts was within the terms of the agreement, no gain or loss was recognized as a result of this transaction. | |||||||||||||||||
Certain note holders elected to receive cash payment for their accrued interest, and the remaining accrued interest on the Bridge Notes of $95,404 was paid in July 2013. | |||||||||||||||||
Discounts recorded related to the Bridge Notes | |||||||||||||||||
We recorded discounts to the Bridge Notes for the VMCO and ASID. The discounts were amortized to interest expense over the term of the Bridge Notes using the effective interest method. All of the discounts related to the Bridge Notes were recognized as interest expense in June 2013 in conjunction with the conversion of the Bridge Notes into shares of our common stock. | |||||||||||||||||
We determined that the VMCO and the ASID represented embedded derivative features, and these were shown as derivative liabilities on the balance sheet. See Note 4. | |||||||||||||||||
The following table presents details of the discounts to our Bridge Notes from December 31, 2011 to December 31, 2013: | |||||||||||||||||
VMCO | ASID | Total | |||||||||||||||
31-Dec-11 | $ | (12,031 | ) | $ | (47,739 | ) | $ | (59,770 | ) | ||||||||
Additions | (1,409,797 | ) | (3,942,607 | ) | (5,352,404 | ) | |||||||||||
Amortization | 940,438 | 2,986,987 | 3,927,425 | ||||||||||||||
31-Dec-12 | (481,390 | ) | (1,003,359 | ) | (1,484,749 | ) | |||||||||||
Additions | (1,936,191 | ) | (2,678,523 | ) | (4,614,714 | ) | |||||||||||
Amortization | 2,417,581 | 3,681,882 | 6,099,463 | ||||||||||||||
31-Dec-13 | $ | - | $ | - | $ | - | |||||||||||
During the years ended December 31, 2013 and 2012, we recorded Bridge Note discount amortization to interest expense of $6,099,463 and $3,927,425, respectively. | |||||||||||||||||
Deferred financing costs related to the Bridge Notes | |||||||||||||||||
We capitalized deferred financing costs and amortized the capitalized amounts to interest expense over the term of the Bridge Notes using the effective interest method. | |||||||||||||||||
During the years ended December 31, 2013 and 2012, we recorded deferred financing cost amortization to interest expense of $-0- and $263,255, respectively. | |||||||||||||||||
Cherry Family Trust Note | |||||||||||||||||
This note was issued on March 1, 2007, for the principal amount of $20,000, interest accrues at the rate of 9% compounded annually, with a maturity date of December 31, 2008. Accrued interest was $16,943 and $13,775 as of December 31, 2013 and 2012, respectively. Currently past due. | |||||||||||||||||
Digimark, LLC Notes | |||||||||||||||||
As partial consideration for the acquisition of Boomtext in 2011, we issued an unsecured subordinated promissory note in the principal amount of $194,658. The promissory note did not bear interest, was payable in installments (varying in amount) from August 2011 through October 2012, and was subordinated to our obligations under the Bridge Notes discussed above. | |||||||||||||||||
We recorded the promissory note at the present value of the payments over the subsequent periods which amounted to $182,460. We amortized the discount using the effective interest method. | |||||||||||||||||
As of December 31, 2012, the outstanding balance on the note payable was $100,000, which was paid in June 2013. | |||||||||||||||||
Summary of Notes Payable and Accrued Interest | |||||||||||||||||
The following table summarizes our notes payable and accrued interest as of December 31, 2013 and 2012: | |||||||||||||||||
Notes Payable | Accrued Interest | ||||||||||||||||
31-Dec-13 | 31-Dec-12 | 31-Dec-13 | 31-Dec-12 | ||||||||||||||
Bridge notes, net, as discussed above | $ | - | $ | 2,857,669 | $ | - | $ | 261,213 | |||||||||
Convertible notes payable, net of discounts | - | 2,857,669 | - | 261,213 | |||||||||||||
Unsecured (as amended) note payable due to our Company’s former Chief Executive Officer, interest accrues at the rate of 9% compounded annually, all amounts due and payable December 31, 2008. Currently past due. | 20,000 | 20,000 | 16,943 | 13,775 | |||||||||||||
Note payable due to a trust, interest accrues at the rate of 10% per annum, all amounts due and payable December 31, 2006. | - | 51,984 | - | 24,297 | |||||||||||||
Digimark, LLC subordinated promissory note, net, as discussed above. | - | 100,000 | - | 22,083 | |||||||||||||
Notes payable | 20,000 | 171,984 | 16,943 | 60,155 | |||||||||||||
Totals | $ | 20,000 | $ | 3,029,653 | $ | 16,943 | $ | 321,368 | |||||||||
Interest Expense | |||||||||||||||||
The following table summarizes interest expense for the years ended December 31, 2013 and 2012: | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Amortization of note discounts | $ | 6,134,367 | $ | 3,935,108 | |||||||||||||
Amortization of deferred financing costs | - | 263,255 | |||||||||||||||
Other interest expense | 213,819 | 361,201 | |||||||||||||||
$ | 6,348,186 | $ | 4,559,564 | ||||||||||||||
Common_Stock_and_Equity_Payabl
Common Stock and Equity Payable | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Common Stock And Equity Payable | ' | ||||||||||||||||
Common Stock and Equity Payable | ' | ||||||||||||||||
Stock-based Plans | |||||||||||||||||
We have the 2010 Incentive Stock Option Plan and the 2013 Incentive Stock Option Plan under which we have granted stock options to our directors, officers and employees. At December 31, 2013, 6,085,015 shares were authorized under the plans and 261,716 shares were available for future grant. | |||||||||||||||||
We believe that such awards better align the interests of our directors, officers and employees with those of our shareholders. Option awards are generally granted with an exercise price that equals the fair market value of our stock at the date of grant. These option awards generally vest based on four years of continuous service and have five-year or 10-year contractual terms. | |||||||||||||||||
The following table summarizes stock option activity under our stock-based plans as of and for the year ended December 31, 2013: | |||||||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2011 | 268,333 | $ | 4.92 | 5.12 | $ | 1,240,000 | |||||||||||
Granted | 113,750 | $ | 3.36 | 4.53 | |||||||||||||
Exercised | - | $ | - | - | |||||||||||||
Canceled/forfeited/expired | (56,250 | ) | $ | 3.48 | 3.15 | ||||||||||||
Outstanding at December 31, 2012 | 325,833 | $ | 4.62 | 4.44 | $ | ||||||||||||
Granted | 5,473,705 | $ | 1.98 | ||||||||||||||
Exercised | - | $ | - | ||||||||||||||
Canceled/forfeited/expired | (127,097 | ) | $ | 4.06 | |||||||||||||
Outstanding at December 31, 2013 | 5,672,464 | $ | 2.08 | 9.17 | $ | 415,259 | |||||||||||
Expected to vest at December 31, 2013 | 2,644,882 | $ | 2.21 | 8.82 | $ | 181,501 | |||||||||||
Exercisable at December 31, 2013 | 1,021,191 | $ | 2.25 | 8.31 | $ | 79,421 | |||||||||||
Unrecognized expense at December 31, 2013 | $ | 3,074,119 | |||||||||||||||
The aggregate intrinsic value of options was calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock. At December 31, 2013, options to purchase 4,513,984 shares of common stock were in-the-money. | |||||||||||||||||
The weighted average grant-date fair value of options granted during the years 2013 and 2012 was $1.80 and $0.27, respectively. | |||||||||||||||||
On February 1, 2012 the Company granted one employee 1,667 options to purchase shares of Company common stock at the closing price as of February 1, 2012 of $6.96 per share. The options vest 25% on the first anniversary of grant, then equally in monthly installments thereafter, and are exercisable until February 1, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 65% and a call option value of $3.24 was $5,404. | |||||||||||||||||
On June 11, 2012 the Company granted 17 employees a total of 25,269 options to purchase shares of Company common stock at the closing price as of June 11, 2012 of $4.14 per share. The options vest 25% and the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until June 11, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.4% and a call option value of $2.14 was $56,206. | |||||||||||||||||
On June 11, 2012 the Company granted one employees a total of 33,334 options to purchase shares of Company common stock at the closing price as of June 11, 2012 of $4.14 per share. The options vest 25% on the first anniversary of grant. As to the remaining 75% of the shares (the “Performance Option Shares”), 10% of the Performance Option Shares (or such lower percentage then constituting the remainder of the Performance Option Shares) will vest for each full increment of $150,000 of Qualified Revenue (as defined below). “Qualified Revenue” means revenue from commission-eligible sales (as determined by the Corporation from time to time) actually collected by the Corporation from customers acquired primarily through Optionee’s direct sales efforts since January 1, 2012. The installments shall be cumulative (i.e., this option may be exercised, as to any or all shares covered by an installment, at any time or times after an installment becomes exercisable and until expiration or termination of this option). The options are exercisable until June 11, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.4% and a call option value of $2.74 was $91,335. | |||||||||||||||||
On August 20, 2012 the Company granted two employees a total of 52,500 options to purchase shares of Company common stock at the closing price as of August 20, 2012 of $2.40 per share. The options vest 25% and the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until August 20, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 61% and a call option value of $1.06 was $55,671. | |||||||||||||||||
On March 11, 2013 the Company granted 7 independent directors a total of 58,338 options to purchase shares of Company common stock at the closing price as of March 11, 2013 of $1.50 per share. The options vest in twelve equal monthly installments following the grant date, and are exercisable until March 11, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 122% and a call option value of $1.26 was $73,763. | |||||||||||||||||
On March 11, 2013 the Company granted one employee 4,167 options to purchase shares of Company common stock at the closing price as of March 11, 2013 of $1.50 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until March 11, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 122% and a call option value of $1.13 was $4,714. | |||||||||||||||||
On June 12, 2013 the Company granted one employee 417,326 options to purchase shares of Company common stock at the closing price as of June 12, 2013 of $2.04 per share. The options will vest as follows: (a) 33% of the options will vest at rate of 1/48th per month for the first forty-eight (48) months following the date of grant, (b) another 33% of the options vest when the Company reports $500,000 of EBITDA for an entire fiscal year, and (c) the final 33% of the options will vest when the Company reports $5,000,000 of EBITDA for an entire fiscal year. The options are exercisable until June 12, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.84 was $767,879. | |||||||||||||||||
On June 17, 2013 the Company granted two employees 2,782,174 options to purchase shares of Company common stock at the closing price as of June 17, 2013 of $1.80 per share. The option will vest as follows: (a) 20% of the shares underlying the option will vest and first become exercisable upon the date of grant; (b) 40% of the shares underlying the option will vest and first become exercisable when the Company realizes $10,000,000 of gross revenue over any fiscal year; and (c) the final 40% of the shares underlying the option will vest and first become exercisable at the rate of 1/48th per month over a 48 month period commencing on grant date, provided that the vesting of the final 40% shall accelerate and become fully vested when the Company realizes $15,000,000 of gross revenue over any fiscal year.. The options are exercisable until June 17, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.55 was $4,312,370. | |||||||||||||||||
On June 17, 2013 the Company granted two employees 1,669,306 options to purchase shares of Company common stock at the closing price as of June 17, 2013 of $1.80 per share. The options will vest and first become exercisable over a four year period at the rate of 1/48th shares per month commencing on the first month following the date of grant, and are exercisable until June 17, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.62 was $2,704,276. | |||||||||||||||||
On June 20, 2013 the Company granted 2 independent directors 33,334 options to purchase shares of Company common stock at the closing price as of June 20, 2013 of $2.46 per share. The options will vest and first become exercisable immediately upon the date of grant, and are exercisable until June 20, 2016. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.43 was $47,668. | |||||||||||||||||
On June 20, 2013 the Company granted 6 independent directors 100,002 options to purchase shares of Company common stock at the closing price as of June 20, 2013 of $2.46 per share. The options vest in three equal amounts on each of the next three anniversary dates of this agreement, and are exercisable until June 20, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $2.21 was $221,004. | |||||||||||||||||
On July 19, 2013 the Company granted two employees 33,335 options to purchase shares of Company common stock at the closing price as of July 19, 2013 of $4.20 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until July 19, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.78 was $126,006. | |||||||||||||||||
On July 26, 2013 the Company granted four employees 27,502 options to purchase shares of Company common stock at the closing price as of July 26, 2013 of $3.90 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until July 26, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.52 was $96,807. | |||||||||||||||||
On July 26, 2013 the Company granted one employees 278,218 options to purchase shares of Company common stock at the closing price as of July 26, 2013 of $3.90 per share. Options to purchase 139,109 shares of common stock will vest and first become exercisable over a four year period at the rate of 1/48th shares per month commencing on the first month following the date of grant. Options to purchase the remaining 139,109 shares of common stock will vest and first become exercisable when the Company realizes $20,000,000 of gross revenue over any fiscal year. The options are exercisable until July 26, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.52 was $976,545. | |||||||||||||||||
On September 13, 2013 the Company granted one employee 58,334 options to purchase shares of Company common stock at the closing price as of September 13, 2013 of $3.36 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until July 19, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.03 was $176,752. | |||||||||||||||||
On September 13, 2013 the Company granted 4 independent directors a total of 3,335 options to purchase shares of Company common stock at the closing price as of September 13, 2013 of $3.36 per share. The options vest in twelve equal monthly installments following the grant date, and are exercisable until September 13, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $2.95 was $9,838. | |||||||||||||||||
On November 13, 2013 the Company granted one employee 8,334 options to purchase shares of Company common stock at the closing price as of November 13, 2013 of $2.75 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until November 13, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $2.48 was $20,668. | |||||||||||||||||
Stock-based Compensation Expense | |||||||||||||||||
The impact on our results of operations of recording stock-based compensation expense for years ended December 31, 2013 and 2012 was as follows: | |||||||||||||||||
Years ended December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
General and administrative | $ | 895,903 | $ | 335,160 | |||||||||||||
Sales and marketing | 976,341 | 43,250 | |||||||||||||||
Engineering, research, and development | 17,972 | 13,000 | |||||||||||||||
$ | 1,890,216 | $ | 391,410 | ||||||||||||||
As of December 31, 2013, there was approximately $3,074,119 of unearned stock-based compensation that will be expensed from 2013 through 2017. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel all or a portion of the remaining unearned stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we grant additional equity awards. | |||||||||||||||||
Stock Option Valuation Assumptions | |||||||||||||||||
We calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The ranges of assumptions were used for the years ended December 31, 2013 and 2012: | |||||||||||||||||
Years ended December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Risk-free interest rate | 0.60% to 1.03% | 0.39% to 0.57% | |||||||||||||||
Expected life (years) | 3.58 to 5.27 | 2.86 to 3.58 | |||||||||||||||
Dividend yield | 0% | 0% | |||||||||||||||
Expected volatility | 122.0% to 132.0% | 61.0% to 73.4% | |||||||||||||||
The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options. | |||||||||||||||||
The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards. | |||||||||||||||||
The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts. | |||||||||||||||||
The expected volatility in 2013 is based on the historical publicly traded price of our common stock. The expected volatility prior to 2013 is based on the historical volatility of publicly traded surrogates in our peer group. |
Stockbased_Plans_and_Stockbase
Stock-based Plans and Stock-based Compensation | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Stock-based Plans and Stock-based Compensation | ' | ||||||||||||||||
Stock-based Plans | |||||||||||||||||
We have the 2010 Incentive Stock Option Plan and the 2013 Incentive Stock Option Plan under which we have granted stock options to our directors, officers and employees. At December 31, 2013, 6,085,015 shares were authorized under the plans and 261,716 shares were available for future grant. | |||||||||||||||||
We believe that such awards better align the interests of our directors, officers and employees with those of our shareholders. Option awards are generally granted with an exercise price that equals the fair market value of our stock at the date of grant. These option awards generally vest based on four years of continuous service and have five-year or 10-year contractual terms. | |||||||||||||||||
The following table summarizes stock option activity under our stock-based plans as of and for the year ended December 31, 2013: | |||||||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2011 | 268,333 | $ | 4.92 | 5.12 | $ | 1,240,000 | |||||||||||
Granted | 113,750 | $ | 3.36 | 4.53 | |||||||||||||
Exercised | - | $ | - | - | |||||||||||||
Canceled/forfeited/expired | (56,250 | ) | $ | 3.48 | 3.15 | ||||||||||||
Outstanding at December 31, 2012 | 325,833 | $ | 4.62 | 4.44 | $ | ||||||||||||
Granted | 5,473,705 | $ | 1.98 | ||||||||||||||
Exercised | - | $ | - | ||||||||||||||
Canceled/forfeited/expired | (127,097 | ) | $ | 4.06 | |||||||||||||
Outstanding at December 31, 2013 | 5,672,464 | $ | 2.08 | 9.17 | $ | 415,259 | |||||||||||
Expected to vest at December 31, 2013 | 2,644,882 | $ | 2.21 | 8.82 | $ | 181,501 | |||||||||||
Exercisable at December 31, 2013 | 1,021,191 | $ | 2.25 | 8.31 | $ | 79,421 | |||||||||||
Unrecognized expense at December 31, 2013 | $ | 3,074,119 | |||||||||||||||
The aggregate intrinsic value of options was calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock. At December 31, 2013, options to purchase 4,513,984 shares of common stock were in-the-money. | |||||||||||||||||
The weighted average grant-date fair value of options granted during the years 2013 and 2012 was $1.80 and $0.27, respectively. | |||||||||||||||||
On February 1, 2012 the Company granted one employee 1,667 options to purchase shares of Company common stock at the closing price as of February 1, 2012 of $6.96 per share. The options vest 25% on the first anniversary of grant, then equally in monthly installments thereafter, and are exercisable until February 1, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 65% and a call option value of $3.24 was $5,404. | |||||||||||||||||
On June 11, 2012 the Company granted 17 employees a total of 25,269 options to purchase shares of Company common stock at the closing price as of June 11, 2012 of $4.14 per share. The options vest 25% and the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until June 11, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.4% and a call option value of $2.14 was $56,206. | |||||||||||||||||
On June 11, 2012 the Company granted one employees a total of 33,334 options to purchase shares of Company common stock at the closing price as of June 11, 2012 of $4.14 per share. The options vest 25% on the first anniversary of grant. As to the remaining 75% of the shares (the “Performance Option Shares”), 10% of the Performance Option Shares (or such lower percentage then constituting the remainder of the Performance Option Shares) will vest for each full increment of $150,000 of Qualified Revenue (as defined below). “Qualified Revenue” means revenue from commission-eligible sales (as determined by the Corporation from time to time) actually collected by the Corporation from customers acquired primarily through Optionee’s direct sales efforts since January 1, 2012. The installments shall be cumulative (i.e., this option may be exercised, as to any or all shares covered by an installment, at any time or times after an installment becomes exercisable and until expiration or termination of this option). The options are exercisable until June 11, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.4% and a call option value of $2.74 was $91,335. | |||||||||||||||||
On August 20, 2012 the Company granted two employees a total of 52,500 options to purchase shares of Company common stock at the closing price as of August 20, 2012 of $2.40 per share. The options vest 25% and the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until August 20, 2017. The total estimated value using the Black-Scholes Model, based on a volatility rate of 61% and a call option value of $1.06 was $55,671. | |||||||||||||||||
On March 11, 2013 the Company granted 7 independent directors a total of 58,338 options to purchase shares of Company common stock at the closing price as of March 11, 2013 of $1.50 per share. The options vest in twelve equal monthly installments following the grant date, and are exercisable until March 11, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 122% and a call option value of $1.26 was $73,763. | |||||||||||||||||
On March 11, 2013 the Company granted one employee 4,167 options to purchase shares of Company common stock at the closing price as of March 11, 2013 of $1.50 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until March 11, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 122% and a call option value of $1.13 was $4,714. | |||||||||||||||||
On June 12, 2013 the Company granted one employee 417,326 options to purchase shares of Company common stock at the closing price as of June 12, 2013 of $2.04 per share. The options will vest as follows: (a) 33% of the options will vest at rate of 1/48th per month for the first forty-eight (48) months following the date of grant, (b) another 33% of the options vest when the Company reports $500,000 of EBITDA for an entire fiscal year, and (c) the final 33% of the options will vest when the Company reports $5,000,000 of EBITDA for an entire fiscal year. The options are exercisable until June 12, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.84 was $767,879. | |||||||||||||||||
On June 17, 2013 the Company granted two employees 2,782,174 options to purchase shares of Company common stock at the closing price as of June 17, 2013 of $1.80 per share. The option will vest as follows: (a) 20% of the shares underlying the option will vest and first become exercisable upon the date of grant; (b) 40% of the shares underlying the option will vest and first become exercisable when the Company realizes $10,000,000 of gross revenue over any fiscal year; and (c) the final 40% of the shares underlying the option will vest and first become exercisable at the rate of 1/48th per month over a 48 month period commencing on grant date, provided that the vesting of the final 40% shall accelerate and become fully vested when the Company realizes $15,000,000 of gross revenue over any fiscal year.. The options are exercisable until June 17, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.55 was $4,312,370. | |||||||||||||||||
On June 17, 2013 the Company granted two employees 1,669,306 options to purchase shares of Company common stock at the closing price as of June 17, 2013 of $1.80 per share. The options will vest and first become exercisable over a four year period at the rate of 1/48th shares per month commencing on the first month following the date of grant, and are exercisable until June 17, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.62 was $2,704,276. | |||||||||||||||||
On June 20, 2013 the Company granted 2 independent directors 33,334 options to purchase shares of Company common stock at the closing price as of June 20, 2013 of $2.46 per share. The options will vest and first become exercisable immediately upon the date of grant, and are exercisable until June 20, 2016. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.43 was $47,668. | |||||||||||||||||
On June 20, 2013 the Company granted 6 independent directors 100,002 options to purchase shares of Company common stock at the closing price as of June 20, 2013 of $2.46 per share. The options vest in three equal amounts on each of the next three anniversary dates of this agreement, and are exercisable until June 20, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $2.21 was $221,004. | |||||||||||||||||
On July 19, 2013 the Company granted two employees 33,335 options to purchase shares of Company common stock at the closing price as of July 19, 2013 of $4.20 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until July 19, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.78 was $126,006. | |||||||||||||||||
On July 26, 2013 the Company granted four employees 27,502 options to purchase shares of Company common stock at the closing price as of July 26, 2013 of $3.90 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until July 26, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.52 was $96,807. | |||||||||||||||||
On July 26, 2013 the Company granted one employees 278,218 options to purchase shares of Company common stock at the closing price as of July 26, 2013 of $3.90 per share. Options to purchase 139,109 shares of common stock will vest and first become exercisable over a four year period at the rate of 1/48th shares per month commencing on the first month following the date of grant. Options to purchase the remaining 139,109 shares of common stock will vest and first become exercisable when the Company realizes $20,000,000 of gross revenue over any fiscal year. The options are exercisable until July 26, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.52 was $976,545. | |||||||||||||||||
On September 13, 2013 the Company granted one employee 58,334 options to purchase shares of Company common stock at the closing price as of September 13, 2013 of $3.36 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until July 19, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $3.03 was $176,752. | |||||||||||||||||
On September 13, 2013 the Company granted 4 independent directors a total of 3,335 options to purchase shares of Company common stock at the closing price as of September 13, 2013 of $3.36 per share. The options vest in twelve equal monthly installments following the grant date, and are exercisable until September 13, 2023. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $2.95 was $9,838. | |||||||||||||||||
On November 13, 2013 the Company granted one employee 8,334 options to purchase shares of Company common stock at the closing price as of November 13, 2013 of $2.75 per share. The options vest 25% on the first anniversary of grant, then equally in 36 monthly installments thereafter, and are exercisable until November 13, 2018. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $2.48 was $20,668. | |||||||||||||||||
Stock-based Compensation Expense | |||||||||||||||||
The impact on our results of operations of recording stock-based compensation expense for years ended December 31, 2013 and 2012 was as follows: | |||||||||||||||||
Years ended December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
General and administrative | $ | 895,903 | $ | 335,160 | |||||||||||||
Sales and marketing | 976,341 | 43,250 | |||||||||||||||
Engineering, research, and development | 17,972 | 13,000 | |||||||||||||||
$ | 1,890,216 | $ | 391,410 | ||||||||||||||
As of December 31, 2013, there was approximately $3,074,119 of unearned stock-based compensation that will be expensed from 2013 through 2017. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel all or a portion of the remaining unearned stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we grant additional equity awards. | |||||||||||||||||
Stock Option Valuation Assumptions | |||||||||||||||||
We calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The ranges of assumptions were used for the years ended December 31, 2013 and 2012: | |||||||||||||||||
Years ended December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Risk-free interest rate | 0.60% to 1.03% | 0.39% to 0.57% | |||||||||||||||
Expected life (years) | 3.58 to 5.27 | 2.86 to 3.58 | |||||||||||||||
Dividend yield | 0% | 0% | |||||||||||||||
Expected volatility | 122.0% to 132.0% | 61.0% to 73.4% | |||||||||||||||
The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options. | |||||||||||||||||
The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards. | |||||||||||||||||
The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts. | |||||||||||||||||
The expected volatility in 2013 is based on the historical publicly traded price of our common stock. The expected volatility prior to 2013 is based on the historical volatility of publicly traded surrogates in our peer group. |
Warrants_to_Purchase_Common_St
Warrants to Purchase Common Stock | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||
Warrants to Purchase Common Stock | ' | ||||||||||||
Warrants Issued to Non-Employees | |||||||||||||
We issued warrants to purchase 150,835 shares of common stock to non-employees in 2010 and 2011. Prior to June 2013, the warrants were accounted for as derivative liabilities because the equity environment was tainted as discussed in Note 4. The equity environment was no longer tainted as of June 2013, and our independent valuation expert calculated the stock-based compensation for these warrants using the Black-Scholes valuation model. The valuation assumptions used are consistent with the valuation information for options above. | |||||||||||||
We recorded stock-based compensation expense of $40,204 in general and administrative expense and we recorded a gain of $123,946 in change in fair value of derivative liabilities for the year ended December 31, 2013. We recorded a gain of $117,477 in change in fair value of derivative liabilities for the year ended December 31, 2012. | |||||||||||||
The following table summarizes non-employee warrant activity under our stock-based plans as of and for the year ended December 31, 2013: | |||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | |||||||||||
Outstanding at December 31, 2011 | 150,835 | $ | 0.33 | 5.12 | |||||||||
Granted | 25,000 | $ | 1.16 | 4.09 | |||||||||
Exercised | - | $ | - | - | |||||||||
Canceled/forfeited/expired | (25,000 | ) | $ | 1.16 | 4.09 | ||||||||
Outstanding at December 31, 2012 | 150,835 | $ | 1.97 | ||||||||||
Granted | - | $ | - | ||||||||||
Exercised | - | $ | - | ||||||||||
Canceled/forfeited/expired | - | $ | - | ||||||||||
Outstanding at December 31, 2013 | 150,835 | $ | 1.97 | 1.99 | |||||||||
Expected to vest at December 31, 2013 | 150,835 | $ | 1.97 | 1.99 | |||||||||
Warrants exercisable | 141,546 | $ | 1.95 | 1.99 | |||||||||
Warrants with Price Protection | |||||||||||||
In 2011, we issued warrants for the purchase of 114,784 shares of common stock at $12.00 per share in connection with a private placement. In 2012, we issued warrants for the purchase of 25,588 shares of common stock at $12.00 per share in connection with the conversion of a portion of our Bridge Notes. These warrants are exercisable for four years from the date of issuance, and contain anti-dilution, or down round, price protection as long as the warrants remain outstanding. The current exercise price of these warrants is $1.20 per share as a result of the price protection guarantee contained in the warrant agreements. | |||||||||||||
In 2013, we issued 21,171 shares of common stock upon the cashless exercise of warrants to purchase 32,054 shares of common stock. | |||||||||||||
As of December 31, 2013, warrants with price protection to purchase 108,318 shares of common stock at $1.20 per share are outstanding. Of this amount, warrants to purchase 86,949 shares of common stock expire in 2015 and warrants to purchase 21,369 shares of common stock expire in 2016. | |||||||||||||
Warrants Issued in 2013 | |||||||||||||
We issued warrants for the purchase of 4,541,612 shares of common stock at $1.20 per share in connection with the conversion of the Bridge Notes into equity. The warrants are exercisable for five years from the date of issuance. | |||||||||||||
We issued warrants for the purchase of 611,746 shares of common stock at $1.20 per share to placement agents connected with the Bridge Note conversions and equity placements. The warrants are exercisable for five years from the date of issuance. | |||||||||||||
We issued warrants for the purchase of 25,384 shares of common stock at $1.20 per share to previous note holders in satisfaction of our additional share issuance obligation under the Bridge Notes. The warrants are exercisable for three years from the date of issuance. | |||||||||||||
We issued warrants for the purchase of 8,845 shares of common stock at $1.20 per share to an individual for services rendered, and recorded stock-based compensation of $16,188 in general and administrative expense. | |||||||||||||
As of December 31, 2013, we have warrants issued in 2013 to purchase 5,187,587 shares of common stock at $1.20 per share that are outstanding. Of this amount, warrants to purchase 34,229 shares of common stock expire in 2016 and warrants to purchase 5,153,358 shares of common stock expire in 2018. | |||||||||||||
The following table summarizes warrant activity as of and for the year ended December 31, 2013: | |||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | |||||||||||
Outstanding at December 31, 2011 | 114,784 | $ | 0.2 | 1.42 | |||||||||
Granted | 25,588 | $ | 0.2 | 1.84 | |||||||||
Exercised | - | ||||||||||||
Canceled/forfeited/expired | - | ||||||||||||
Outstanding at December 31, 2012 | 140,372 | $ | 0.2 | 1.5 | |||||||||
Granted | 5,187,587 | $ | 1.2 | 4.37 | |||||||||
Exercised | (32,054 | ) | $ | 0.2 | |||||||||
Canceled/forfeited/expired | - | ||||||||||||
Outstanding at December 31, 2013 | 5,295,905 | $ | 1.18 | 4.39 | |||||||||
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Notes to Financial Statements | ' | ||||||||||
Income Taxes | ' | ||||||||||
For the years ended December 31, 2013 and 2012 the provisions for income taxes were as follows: | |||||||||||
2013 | 2012 | ||||||||||
Federal – current | $ | - | $ | - | |||||||
State – current | - | - | |||||||||
Total | $ | - | $ | - | |||||||
Under ASC 740, deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. | |||||||||||
Significant components of our net deferred tax assets and liabilities as of December 31, 2013 and 2012 are as follows: | |||||||||||
2013 | 2012 | ||||||||||
Deferred tax assets (liabilities): | |||||||||||
Net operating loss carryforwards | $ | 6,283,000 | $ | 4,681,000 | |||||||
Stock based compensation | 1,735,000 | 940,000 | |||||||||
Accrued compensation | 31,000 | 70,000 | |||||||||
Derivative Liability | 42,000 | 634,000 | |||||||||
Depreciation and amortization | 5,099,000 | 4,816,000 | |||||||||
Other | 10,000 | 12,000 | |||||||||
Total deferred tax assets | 13,200,000 | 11,153,000 | |||||||||
Valuation allowance for net deferred tax assets | (13,200,000 | ) | (11,153,000 | ) | |||||||
Total | $ | - | $ | - | |||||||
The Company has provided a valuation allowance against deferred tax assets recorded as of December 31, 2013 and 2012 due to uncertainties regarding the realization of such assets. | |||||||||||
The net change in the total valuation allowance for the year ended December 31, 2013 was an increase of approximately $2,047,000. The net change in the total valuation allowance for the year ended December 31, 2012 was an increase of approximately $1,362,000. In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The Company considers projected future taxable income and planning strategies in making this assessment. Based on the level of historical operating results and projections for the taxable income for the future, the Company has determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to zero. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards, either due to ongoing operating losses or due to ownership changes, which limit the usefulness of the loss carryforwards. | |||||||||||
As of December 31, 2013, the Company has available net operating loss carryforwards of approximately $18,900,000 for federal income tax purposes, which will start to expire in 2026. The net operating loss carryforwards for state purposes are approximately $18,900,000 and will start to expire in 2016. | |||||||||||
The difference between the provision for income taxes and income taxes computed using the U.S. federal income tax rate for the years ended December 31, 2013 and 2012 was as follows: | |||||||||||
2013 | 2012 | ||||||||||
Computed "expected tax expense | $ | (5,698,000 | ) | $ | (2,495,000 | ) | |||||
State taxes, net of federal benefit | (300,000 | ) | (155,000 | ) | |||||||
Other | 3,951,000 | 1,288,000 | |||||||||
Change in valuation allowance | 2,047,000 | 1,362,000 | |||||||||
Total | $ | - | $ | - | |||||||
The Company has determined that during 2010 it experienced a “change of ownership” as defined by Section 382 of the Internal Revenue Code. As such, utilization of net operating loss carryforwards and credits generated before the 2010 change in ownership will be limited to approximately $207,000 per year until such carryforwards are fully utilized. The pre change net operating loss carryforward was approximately $7,000,000. | |||||||||||
The Company files income tax returns in the U.S. federal jurisdiction and California. Because the Company is carrying forward federal and state net operating losses from 2006, the Company is subject to U.S. federal and state income tax examinations by tax authorities for all years since 2006. The Company does not have a liability for any uncertain tax positions. As of December 31, 2013, no accrued interest or penalties are recorded in the financial statements. | |||||||||||
Fair_Value_Measurements_of_Fin
Fair Value Measurements of Financial Instruments | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Fair Value Measurements of Financial Instruments | ' | ||||||||||||||||
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013: | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | |||||||||||||
Goodwill (non-recurring) | $ | - | $ | - | $ | 3,108,964 | $ | (1,066,068 | ) | ||||||||
Intangibles, net (non-recurring) | $ | - | $ | - | $ | 935,316 | $ | (644,170 | ) | ||||||||
Derivative liabilities (recurring) | $ | - | $ | - | $ | 106,176 | $ | (3,766,231 | ) | ||||||||
Earn-out payable (recurring) | $ | - | $ | - | $ | 59,000 | $ | 165,000 | |||||||||
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012: | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | |||||||||||||
Goodwill (non-recurring) | $ | - | $ | - | $ | 2,259,624 | $ | (742,446 | ) | ||||||||
Intangibles, net (non-recurring) | $ | - | $ | - | $ | 444,112 | $ | (145,396 | ) | ||||||||
Derivative liabilities (recurring) | $ | - | $ | - | $ | 3,074,504 | $ | 359,530 | |||||||||
Earn-out payable (recurring) | $ | - | $ | - | $ | 2,032,881 | $ | 625,357 | |||||||||
The Company recorded goodwill, intangible assets and an earn-out payable as a result its business combinations, and these assets were valued with the assistance of a valuation consultant and consisted of Level 3 valuation techniques. | |||||||||||||||||
The Company recorded derivative liabilities as a result of: (i) the variable maturity conversion feature in its convertible notes payable; (ii) the additional security issuance feature in its convertible notes payable notes, common stock and warrants; and (iii) warrants issued to non-employees that were treated as derivative liabilities. These liabilities were valued with the assistance of a valuation consultant using a Monte-Carlo simulation model. The assumptions used in the Monte-Carlo simulation used to value the derivative liabilities involve expected volatility in the Company’s common stock, estimated probabilities related to the occurrence of a future financing, and interest rates. As all the assumptions employed to measure these liabilities are based on management’s judgment using internal and external data, this fair value determination is classified in Level 3 of the valuation hierarchy. | |||||||||||||||||
The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and a note payable. The estimated fair value of cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. The carrying value of note payable also approximates fair value because its terms are similar to those in the lending market for comparable loans with comparable risks. None of these instruments are held for trading purposes. |
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Notes to Financial Statements | ' | ||||
Commitments and Contingencies | ' | ||||
Litigation | |||||
As of the date of this report, there are no pending legal proceedings to which we or our properties are subject, except for routine litigation incurred in the normal course of business. | |||||
Operating Lease | |||||
The Company has a lease agreement for 6,730 square feet, as amended, for its office facilities in Chandler, AZ through December 2015. Monthly rental payments, excluding common area maintenance charges, are $11,958 in 2014 and $12,357 in 2015. The Company has month-to-month lease agreements for its office facilities in San Diego, CA and North Huron, MI. | |||||
The minimum lease payments for the Chandler, AZ facilities that are required over the next five years are shown below. | |||||
Minimum Lease Payments | |||||
2014 | $ | 143,492 | |||
2015 | 148,281 | ||||
2016 | - | ||||
2017 | - | ||||
2018 | - | ||||
Thereafter | - | ||||
$ | 291,773 | ||||
Rent expense for was $166,802 and $179,179 for the years ended December 31, 2013 and 2012. | |||||
Employee_Benefit_Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | ' |
Employee Benefit Plan | ' |
The Company has an employee savings plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code (the “Code”), covering all of its employees. Participants in the Plan may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. The Company may make contributions at the discretion of its Board of Directors. During the years ended December 31, 2013 and 2012, the Company made no contributions to the Plan. |
Related_Party_Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Related Party Transactions | ' |
Prior to our reverse merger on November 2, 2010, Optimal Payments Corporation converted $570,534 of debt into $370,534 worth of Mobivity Inc. common stock and $200,000 of prepaid services to be rendered by Mobivity. A member of our Board of Directors was President of Sterling Card Solutions, which has a minority ownership position in Optimal Payments Corporation. This director subsequently resigned from the Board in July 2013. We recognized deferred revenue from this related party during the years ended December 31, 2013 and 2012 totaling $-0- and $164,738, respectively. Optimal Payments Corporation ceased being a related party in June 2013. As of December 31, 2012, deferred revenue from this related party totaled $35,262. | |
Timothy Schatz | |
On August 1, 2012, we entered into an employment agreement with Timothy Schatz. Under the terms of the agreement, Mr. Schatz will serve as our Chief Financial Officer for an initial term of three years from August 1, 2012 (the “Effective Date”). Unless terminated no less than 90 days prior to the expiration date by either party, the agreement is renewed automatically for successive one year periods. Under the agreement, Mr. Schatz is paid a base annual salary of $160,000 and was also granted 225,000 stock options. The base salary is subject to an annual increase at the sole discretion our board of directors. The board may further award him, at its sole discretion, an annual bonus of up to 30% of his base salary and grant additional stock options. | |
If the agreement is terminated by us without cause (as defined in the agreement) or the we notify Mr. Schatz that we will not renew the agreement, we will be required to pay him a severance payment equal to three months of his base salary payable in regular intervals following such termination or expiration of the agreement. | |
The agreement includes non-compete, non-solicitation, intellectual property assignment and confidentiality provisions that are customary in our industry. | |
In April 2013, we issued a new Bridge Note to our CFO totaling $20,000 that contains the same rights and privileges as the previously issued new Bridge Notes, the due date of which was extended to October 15, 2013. The note and accrued interest were converted into 16,918 shares of common stock and he received five-year warrants to purchase 16,918 shares of common stock exercisable at $1.20 per share. | |
In May 2013, we issued a new Bridge Note to our CEO totaling $17,500 that contains the same rights and privileges as the previously issued and amended new Bridge Notes. The note and accrued interest were converted into 14,708 shares of common stock and he received five-year warrants to purchase 14,708 shares of common stock exercisable at $1.20 per share. | |
On June 17, 2013 the Company issued to Dennis Becker an option to purchase 1,251,979 shares of Company common stock. The exercise price of the option is $1.80, the fair market value on date of grant. The options will vest and first become exercisable over a four year period at the rate of 1/48th shares per month commencing on the first month following the date of grant. On June 17, 2013 the Company issued to Timothy Schatz an option to purchase 417,326 shares of Company common stock. The exercise price of the option is $1.80, the fair market value on date of grant. The options will vest and first become exercisable over a four year period at the rate of 1/48th shares per month commencing on the first month following the date of grant. | |
Subsequent_Events
Subsequent Events | 12 Months Ended | ||
Dec. 31, 2013 | |||
Subsequent Events [Abstract] | ' | ||
Subsequent Events | ' | ||
Smart Receipt Acquisition | |||
On March 12, 2014, Mobivity Holdings Corp., a Nevada corporation (the Company”), entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with SmartReceipt, Inc., a Delaware corporation (“SmartReceipt”). The closing of the transactions under the Asset Purchase Agreement took place on March 12, 2014. Pursuant to the Asset Purchase Agreement, the Company acquired all of the assets of SmartReceipt in exchange for: | |||
· | the Company’s payment at closing of $2.212 million of cash, net of a $150,000 loan made by the Company to SmartReceipt in January 2014; | ||
· | the Company’s issuance of 504,884 shares of its $0.001 par value common stock; and | ||
· | The Company’s earn-out payment of 200% of the “eligible revenue” of the Company over the 12 month period following the close of the transaction (“earn-out period”). The “eligible revenue” will consist of: 100% of Company revenue derived during the earn out period from the sale of SmartReceipt products and services to certain SmartReceipt clients as of the close (the “designated SmartReceipt clients”); plus 50% of Company revenue derived during the earn out period from the sale of Company products and services to the designated SmartReceipt clients, plus 50% of the Company revenue derived during the earn out period from the sale of SmartReceipt products and services to Company clients who are not designated SmartReceipt clients. The earn-out payment will be payable in common shares of the Company (valued at the Closing VWAP) no later than the 90th day following the end of the earn-out period. For purposes of the foregoing, the “Closing VWAP” means the volume weighted average trading price of the Company’s common stock for the 90 trading days preceding the initial close of the transactions under the Asset Purchase Agreement. | ||
Pursuant to the Asset Purchase Agreement, SmartReceipt has agreed that 50% of the shares issuable to SmartReceipt or its shareholders at the initial closing will be held back by the Company for a period of 12 months and will be subject to cancellation based on indemnification claims of the Company. | |||
Securities Purchase Agreement | |||
On March 10, 2014, the Company entered into a Securities Purchase Agreement and a Registration Rights Agreement with certain accredited investors in connection with a proposed private placement of up to 6,000,000 units of the Company’s securities at a price of $1.00 per unit for the gross proceeds of up to $6,000,000. Each unit consists of one share of the Company’s common stock and a common stock purchase warrant to purchase one-quarter share of the Company’s common stock, over a five year period, at an exercise price of $1.20 per share. The Securities Purchase Agreement includes customary representations, warranties, and covenants by the investors and the Company, and an indemnity from the Company. Pursuant to the terms of the Registration Rights Agreement, the Company agreed to cause a resale registration statement covering the common shares made part of the units to be filed by May 15, 2014. The Registration Rights Agreement also provides that the Company must make certain payments as liquidated damages to the investors if it fails to timely file the registration statement and cause it to become effective. The units were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) thereunder. Emerging Growth Equities, Ltd. (“EGE”) acted as placement agent for the private placement and received $345,835 in commissions from the Company. In addition, for its services as placement agent, the Company issued to EGE warrants to purchase an aggregate of 345,835 units, as defined above, exercisable for a period of five years from the closing date, at an exercise price of $1.00 per unit. | |||
An initial closing of the units was completed on March 12, 2014. As of March 28, 2014, the Company has sold 5,413,000 units for the gross proceeds of $5,413,000. | |||
The_Company_and_Summary_of_Sig1
The Company and Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Company And Summary Of Significant Accounting Policies | ' | ||||||||
The Company | ' | ||||||||
We develop and operate proprietary platforms over which resellers, brands and enterprises can conduct localized mobile marketing campaigns. Our proprietary platforms allow resellers, brands and enterprises to market their products and services to consumers through text messages sent directly to the consumers’ mobile phones and mobile smartphone applications, consisting of software available to both phones and tablets PCs. Our customers include national franchisers, professional sports teams and associations and other national brands such as the Los Angeles Clippers, Dallas Cowboys, Chick-Fil-A, Jamba Juice, and others. | |||||||||
Our “C4” Mobile Marketing and Customer Relationship Management (CRM) platform is a Web-hosted software solution enabling our clients to develop, execute, and manage a variety of marketing engagements to a consumer’s mobile phone. Our C4 solution allows our clients to communicate directly with their customers through Short Messaging Service (SMS), Multi-Media Messaging (MMS), smartphone application development and Interactive Voice Response (IVR) interactions, all of which are facilitated via a set of Graphical User Interfaces (GUIs) operated from any Web browser. | |||||||||
Our C4 platform also allows our customers to deploy and administer our “Stampt” mobile device loyalty application. Stampt is a smartphone replacement for “Buy 10, Get 1 free” punch cards. Consumers no longer need to worry about forgetting paper-based loyalty punch cards. Stampt makes it easy to receive all of the rewards consumers want from their favorite businesses. Consumers can use Stampt throughout the United States to earn free sandwiches, coffee, pizza, frozen yogurt, donuts, bagels and more. Stampt’s nearby feature shows consumers all of the rewards they can earn at nearby businesses. From the Stampt mobile device application, consumers simply tap any business to learn more about that business and to see all of the loyalty points they have earned at that business. Consumers can keep track of all of the rewards they are close to earning through the “my cards” feature displayed in the application’s interface. Once a consumer has earned all of the Stampts they need for a reward, they simply show the cashier and click “tap to redeem” button from the application interface on their device. Our customers can create and manage any Stampt program from the C4 platform’s set of Web-based interfaces. | |||||||||
We generate revenue by charging the resellers, brands and enterprises a per-message transactional fee, or through fixed or variable software licensing fees. | |||||||||
Liquidity and Going Concern | ' | ||||||||
We have $2.6 million of cash as of December 31, 2013. We had a net loss of $16.8 million for the year then ended, and we used $2.9 million of cash in our operating activities during 2013. On March 12, 2014, the Company conducted the first closing of the transactions contemplated by the Securities Purchase Agreement described. As of March 28, 2014, the Company has sold 5,413,000 units for the gross proceeds of $5,413,000. After cash paid in conjunction with acquisition of Smart Receipt and associated fees, we retained net proceeds of approximately $2,800,000. Based on our projected 2014 results and, if necessary, our ability to reduce certain variable operating expenses, we believe that our existing capital, together with anticipated cash flows from operations, will be sufficient to finance our operations through at least March 31, 2015. | |||||||||
If our cash reserves prove insufficient to sustain operations, we plan to raise additional capital by selling shares of capital stock or other equity or debt securities. However, there are no commitments or arrangements for future financings in place at this time, and we can give no assurance that such capital will be available on favorable terms or at all. We may need additional financing thereafter until we can achieve profitability. If we cannot, we will be forced to curtail our operations or possibly be forced to evaluate a sale or liquidation of our assets. Any future financing may involve substantial dilution to existing investors. | |||||||||
Although we are actively pursuing financing opportunities, we may not be able to raise cash on terms acceptable to us or at all. There can be no assurance that we will be successful in obtaining additional funding. Financings, if available, may be on terms that are dilutive to our shareholders, and the prices at which new investors would be willing to purchase our securities may be lower than the current price of our ordinary shares. The holders of new securities may also receive rights, preferences or privileges that are senior to those of existing holders of our ordinary shares. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations in the short term. | |||||||||
Principles of Consolidation and Basis of Presentation | ' | ||||||||
The accompanying financial statements are consolidated and include the financial statements of Mobivity Holdings Corp. and our wholly-owned subsidiary. Intercompany transactions are eliminated. | |||||||||
Use of Estimates | ' | ||||||||
Preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management's best knowledge of current events and actions we may undertake in the future. Significant estimates used are those related to: stock-based compensation; valuation of acquired assets, intangible assets and liabilities; useful lives for depreciation and amortization of long-lived assets; future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets; valuation of derivative liabilities; valuation allowance for deferred tax assets; and contingencies. | |||||||||
Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual year. However, in regard to ongoing impairment testing of goodwill and indefinite-lived intangible assets, significant deterioration in future cash flow projections or other assumptions used in estimating fair values versus those anticipated at the time of the initial valuations, could result in impairment charges that materially affect the consolidated financial statements in a given year. | |||||||||
Reverse Stock Split | ' | ||||||||
We effected a 1 for 6 reverse stock split of our authorized common stock on November 12, 2013. As a result, the number of shares of common stock outstanding has been adjusted retrospectively to reflect the reverse stock split in all periods presented. Also, the exercise price and the number of common shares issuable under our share-based compensation plans and warrants have been adjusted retrospectively to reflect the reverse stock split. | |||||||||
Reclassifications | ' | ||||||||
Certain prior year amounts have been reclassified to conform to the current year’s presentation. The reclassifications had no effect on previously reported net loss. | |||||||||
Acquisitions | ' | ||||||||
We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements reflect the operations of an acquired business starting from the completion of the acquisition. In addition, the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill. | |||||||||
Cash and Cash Equivalents | ' | ||||||||
We minimize our credit risk associated with cash by periodically evaluating the credit quality of our primary financial institution. Our balances at times may exceed federally insured limits. We have not experienced any losses on our cash accounts. | |||||||||
Accounts Receivable, Allowance for Doubtful Accounts and Concentrations | ' | ||||||||
Accounts receivable are carried at their estimated collectible amounts. We grant unsecured credit to substantially all of our customers. Ongoing credit evaluations are performed and potential credit losses are charged to operations at the time the account receivable is estimated to be uncollectible. Since we cannot necessarily predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate. | |||||||||
As of December 31, 2013 and 2012, we recorded an allowance for doubtful accounts of $65,975 and $44,700, respectively. | |||||||||
From time to time, we may have a limited number of customers with individually large amounts due. Any unanticipated change in one of the customer’s credit worthiness could have a material effect on the results of operations in the period in which such changes or events occurred. | |||||||||
As of December 31, 2013, we had one customer whose balance represented 23% of total accounts receivable. As of December 31, 2012, we had one customer whose balance represented 43% of total accounts receivable. | |||||||||
Goodwill and Other Intangible Assets | ' | ||||||||
Goodwill is tested for impairment at a minimum on an annual basis. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit. We conducted our annual impairment tests of goodwill as of December 31, 2013 and 2012. As a result of these tests, we recorded impairment charges to our goodwill during the years ended December 31, 2013 and 2012 of $1,066,068 and $742,446, respectively. | |||||||||
Intangible assets consist of patents and trademarks, purchased customer contracts, purchased customer and merchant relationships, purchased trade names, purchased technology, and non-compete agreements. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from two to twenty years. No significant residual value is estimated for intangible assets. | |||||||||
Impairment of Long-Lived Assets | ' | ||||||||
We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset is expected to generate. | |||||||||
The Company’s evaluation of its long-lived assets completed during the years ended December 31, 2013 and 2012 resulted in impairment charges of $644,170 and $145,396, respectively. | |||||||||
Derivative Financial Instruments | ' | ||||||||
We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. | |||||||||
We review the terms of the common stock, warrants and convertible debt we issue to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. | |||||||||
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. | |||||||||
The fair value of the derivatives is estimated using a Monte Carlo simulation model. The model utilizes a series of inputs and assumptions to arrive at a fair value at the date of inception and each reporting period. Some of the key assumptions include the likelihood of future financing, stock price volatility, and discount rates. | |||||||||
Revenue Recognition and Concentrations | ' | ||||||||
Our “C4” Mobile Marketing and Customer Relationship Management (CRM) and Txtstation Control Center platforms are hosted solutions. We generate revenue from licensing our software to clients in our software as a service (SaaS) model, per-message and per-minute transactional fees, and customized professional services. We recognize license/subscription fees over the period of the contract, service fees as the services are performed, and per-message or per-minute transaction revenue when the transaction takes place. We recognize revenue at the time that the services are rendered, the selling price is fixed, and collection is reasonably assured, provided no significant obligations remain. We consider authoritative guidance on multiple deliverables in determining whether each deliverable represents a separate unit of accounting. Some customers are billed on a month to month basis with no contractual term and is collected by credit card. Revenue is recognized at the time that the services are rendered and the selling price is fixed with a set range of plans. Cash received in advance of the performance of services is recorded as deferred revenue. | |||||||||
We generate revenue from the Stampt App through customer agreements with business owners. Revenue is principally derived from monthly subscription fees which provide a license for unlimited use of the Stampt App by the business owners and their customers. The subscription fee is billed each month to the business owner. Revenue is recognized monthly as the subscription revenues are billed. There are no per-minute or transaction fees associated with the Stampt App. | |||||||||
During the years ended December 31, 2013 and 2012, one customer accounted for 31% and 14% of our revenues. | |||||||||
Stock-based Compensation | ' | ||||||||
We primarily issue stock-based awards to employees in the form of stock options. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We generally recognize compensation expense using a straight-line amortization method over the respective vesting period for awards that are ultimately expected to vest. Accordingly, stock-based compensation expense for 2013 and 2012 has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. | |||||||||
Research and Development Expenditures | ' | ||||||||
Research and development expenditures are expensed as incurred, and consist primarily of compensation costs, outside services, and expensed materials. | |||||||||
Advertising Expense | ' | ||||||||
Direct advertising costs are expensed as incurred, and consist primarily of E-commerce advertisements and other direct costs. Advertising expense was $19,959 and $70,193 for years ended December 31, 2013 and 2012, respectively. | |||||||||
Income Taxes | ' | ||||||||
We account for income taxes using the assets and liability method, which recognizes deferred tax assets and liabilities determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established to reduce deferred tax assets when, based on available objective evidence, it is more likely than not that the benefit of such assets will not be realized. We recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained. | |||||||||
Computation of Net Loss Per Common Share | ' | ||||||||
Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all potential common stock equivalents (convertible notes payable, stock options, and warrants) are converted or exercised. The calculation of diluted net loss per share excludes potential common stock equivalents if the effect is anti-dilutive. Our weighted average common shares outstanding for basic and diluted are the same because the effect of the potential common stock equivalents is anti-dilutive. | |||||||||
We had the following dilutive common stock equivalents as of December 31, 2013 and 2012 which were excluded from the calculation because their effect was anti-dilutive. | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Outstanding employee options | 5,672,464 | 325,846 | |||||||
Outstanding non-employee warrants | 150,835 | 150,835 | |||||||
Outstanding warrants | 5,187,587 | 140,372 | |||||||
11,010,886 | 617,053 | ||||||||
Recent Accounting Pronouncements | ' | ||||||||
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Company’s future financial statements. The following are a summary of recent accounting developments. | |||||||||
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations. | |||||||||
In February 2013, FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to: | |||||||||
- | Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and | ||||||||
- | Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense. | ||||||||
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 did not have a material impact on our financial position or results of operations. | |||||||||
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on our financial position or results of operations. | |||||||||
In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations. | |||||||||
In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations. | |||||||||
In July 2012, the FASB issued ASU 2012-02, "Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. ASU 2012-2 allows entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU No. 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test. Otherwise, the quantitative impairment test is not required. ASU No. 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of the provisions of ASU No. 2012-02 will not have a material impact on the Company's financial position or results of operations. |
The_Company_and_Summary_of_Sig2
The Company and Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Company And Summary Of Significant Accounting Policies Tables | ' | ||||||||
Dilutive common stock equivalents | ' | ||||||||
We had the following dilutive common stock equivalents as of December 31, 2013 and 2012 which were excluded from the calculation because their effect was anti-dilutive. | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Outstanding employee options | 5,672,464 | 325,846 | |||||||
Outstanding non-employee warrants | 150,835 | 150,835 | |||||||
Outstanding warrants | 5,187,587 | 140,372 | |||||||
11,010,886 | 617,053 |
Acquisitions_during_Fiscal_Yea1
Acquisitions during Fiscal Year Ended December 31, 2013 (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Front Door [Member] | ' | ||||||||
Purchase price allocations | ' | ||||||||
Cash | $ | 5,500 | |||||||
Accounts receivable | 27,467 | ||||||||
Contracts | 813,000 | ||||||||
Customer relationships | 22,000 | ||||||||
Developed technology | 96,000 | ||||||||
Non-compete agreement | 124,000 | ||||||||
Goodwill | 1,535,658 | ||||||||
Total assets acquired | 2,623,625 | ||||||||
Liabilities assumed | (46,219 | ) | |||||||
Net assets acquired | $ | 2,577,406 | |||||||
Pro Form information | ' | ||||||||
(Unaudited) | |||||||||
Year ended December 31, | |||||||||
2013 | 2012 | ||||||||
Total revenues | $ | 4,255,947 | $ | 4,427,542 | |||||
Net loss | $ | (17,120,236 | ) | $ | (9,533,541 | ) | |||
Basic and diluted loss per share | $ | (1.55 | ) | $ | (0.32 | ) | |||
Sequence [Member] | ' | ||||||||
Purchase price allocations | ' | ||||||||
Merchant relationships | $ | 181,000 | |||||||
Trade name | 76,000 | ||||||||
Developed technology | 71,000 | ||||||||
Goodwill | 379,750 | ||||||||
Total assets acquired | $ | 707,750 | |||||||
Goodwill_and_Intangible_Assets1
Goodwill and Intangible Assets (Tables) | 12 Months Ended | ||||||||||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Tables | ' | ||||||||||||||||||||||||||||||||
Goodwill and impairment | ' | ||||||||||||||||||||||||||||||||
The following table presents goodwill and impairment for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||||||||||||||
Goodwill | |||||||||||||||||||||||||||||||||
31-Dec-11 | $ | 3,002,070 | |||||||||||||||||||||||||||||||
Acquired | - | ||||||||||||||||||||||||||||||||
Impairment | (742,446 | ) | |||||||||||||||||||||||||||||||
31-Dec-12 | 2,259,624 | ||||||||||||||||||||||||||||||||
Acquired | 1,915,408 | ||||||||||||||||||||||||||||||||
Impairment | (1,066,068 | ) | |||||||||||||||||||||||||||||||
31-Dec-13 | $ | 3,108,964 | |||||||||||||||||||||||||||||||
Intangible assets | ' | ||||||||||||||||||||||||||||||||
The following table presents components of identifiable intangible assets for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization and Impairment | Net Carrying Amount | Weighted Average Useful Life (Years) | Gross Carrying Amount | Accumulated Amortization and Impairment | Net Carrying Amount | Weighted Average Useful Life (Years) | ||||||||||||||||||||||||||
Patents and trademarks | $ | 142,000 | $ | (23,902 | ) | $ | 118,098 | 20 | $ | 127,000 | $ | (15,381 | ) | $ | 111,619 | 20 | |||||||||||||||||
Customer contracts | 1,069,900 | (528,372 | ) | 541,528 | 5.88 | 256,900 | (178,135 | ) | 78,765 | 5 | |||||||||||||||||||||||
Customer and merchant relationships | 1,128,583 | (1,128,583 | ) | - | 4.78 | 925,583 | (896,527 | ) | 29,056 | 3.74 | |||||||||||||||||||||||
Trade name | 199,750 | (177,359 | ) | 22,391 | 5 | 123,750 | (93,162 | ) | 30,588 | 5 | |||||||||||||||||||||||
Acquired technology | 573,550 | (391,252 | ) | 182,298 | 4.72 | 406,550 | (213,091 | ) | 193,459 | 4.61 | |||||||||||||||||||||||
Non-compete agreement | 132,083 | (61,082 | ) | 71,001 | 2.9 | 8,083 | (7,458 | ) | 625 | 2.16 | |||||||||||||||||||||||
$ | 3,245,866 | $ | (2,310,550 | ) | $ | 935,316 | $ | 1,720,866 | $ | (1,403,754 | ) | $ | 444,112 | ||||||||||||||||||||
Future amortization intangible assets | ' | ||||||||||||||||||||||||||||||||
Expected future intangible asset amortization as of December 31, 2013 is as follows: | |||||||||||||||||||||||||||||||||
Year ending December 31, | Amount | ||||||||||||||||||||||||||||||||
2014 | $ | 211,574 | |||||||||||||||||||||||||||||||
2015 | 217,624 | ||||||||||||||||||||||||||||||||
2016 | 139,692 | ||||||||||||||||||||||||||||||||
2017 | 94,319 | ||||||||||||||||||||||||||||||||
2018 | 88,470 | ||||||||||||||||||||||||||||||||
Thereafter | 183,636 | ||||||||||||||||||||||||||||||||
Total | $ | 935,316 | |||||||||||||||||||||||||||||||
Derivative_Liabilities_Tables
Derivative Liabilities (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Derivative Liabilities Tables | ' | ||||||||
Derivative liabilities by instrument type | ' | ||||||||
The following table presents the derivative liabilities by instrument type as of December 31, 2013 and 2012: | |||||||||
December 31, | |||||||||
Derivative Value by Instrument Type | 2013 | 2012 | |||||||
Convertible Bridge Notes | $ | - | $ | 2,850,085 | |||||
Common Stock and Warrants | 106,176 | 129,378 | |||||||
Non-employee Warrants | - | 95,041 | |||||||
$ | 106,176 | $ | 3,074,504 | ||||||
Derivative Liabilities | ' | ||||||||
The following table presents details of the Company’s derivative liabilities from December 31, 2011 to December 31, 2013: | |||||||||
Balance December 31, 2011 | $ | 1,573,859 | |||||||
Issuances in derivative value due to new security issuances of notes | 5,352,404 | ||||||||
Issuances in derivative value due to vesting of non-employee warrants | 485,700 | ||||||||
Issuances in derivative value due to allonges | 118,633 | ||||||||
Adjustment to derivative liability due to debt repayment | (129,139 | ) | |||||||
Adjustment to derivative liability due to debt conversion | (3,361,772 | ) | |||||||
Adjustment to derivative liability due to warrant cancellation | (1,318 | ) | |||||||
Change in fair market value of derivative liabilities | (963,863 | ) | |||||||
Balance December 31, 2012 | $ | 3,074,504 | |||||||
Issuances in derivative value due to new security issuances of notes | 4,614,714 | ||||||||
Issuances in derivative value due to vesting of non-employee warrants | 26,969 | ||||||||
Adjustment to derivative liability due to note repayment | (40,511 | ) | |||||||
Adjustment to derivative liability due to note conversion into new notes | (3,152,786 | ) | |||||||
Adjustment to derivative liability due to note conversion into equity | (7,923,875 | ) | |||||||
Adjustment to derivative liability due to non-employee warrant conversion | (176,555 | ) | |||||||
Adjustment to derivative liability due to warrant exercises | (55,546 | ) | |||||||
Change in fair value of derivative liabilities | 3,739,262 | ||||||||
Balance December 31, 2013 | $ | 106,176 | |||||||
Bridge_Financing_Notes_Payable1
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Forfeiture rate | ' | ||||||||||||||||
Schedule of outstanding Bridge Notes | ' | ||||||||||||||||
The following table summarizes information relative to the outstanding Bridge Notes at December 31, 2013 and 2012: | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Bridge notes payable | $ | - | $ | 4,342,418 | |||||||||||||
Less unamortized discounts: | |||||||||||||||||
VMCO | - | (481,390 | ) | ||||||||||||||
ASID | - | (1,003,359 | ) | ||||||||||||||
Bridge notes payable, net of discounts | $ | - | $ | 2,857,669 | |||||||||||||
Company's discounts to its Bridge Notes | ' | ||||||||||||||||
The following table presents details of the discounts to our Bridge Notes from December 31, 2011 to December 31, 2013: | |||||||||||||||||
VMCO | ASID | Total | |||||||||||||||
31-Dec-11 | $ | (12,031 | ) | $ | (47,739 | ) | $ | (59,770 | ) | ||||||||
Additions | (1,409,797 | ) | (3,942,607 | ) | (5,352,404 | ) | |||||||||||
Amortization | 940,438 | 2,986,987 | 3,927,425 | ||||||||||||||
31-Dec-12 | (481,390 | ) | (1,003,359 | ) | (1,484,749 | ) | |||||||||||
Additions | (1,936,191 | ) | (2,678,523 | ) | (4,614,714 | ) | |||||||||||
Amortization | 2,417,581 | 3,681,882 | 6,099,463 | ||||||||||||||
31-Dec-13 | $ | - | $ | - | $ | - | |||||||||||
Summary of Notes Payable and Accrued Interest | ' | ||||||||||||||||
The following table summarizes our notes payable and accrued interest as of December 31, 2013 and 2012: | |||||||||||||||||
Notes Payable | Accrued Interest | ||||||||||||||||
31-Dec-13 | 31-Dec-12 | 31-Dec-13 | 31-Dec-12 | ||||||||||||||
Bridge notes, net, as discussed above | $ | - | $ | 2,857,669 | $ | - | $ | 261,213 | |||||||||
Convertible notes payable, net of discounts | - | 2,857,669 | - | 261,213 | |||||||||||||
Unsecured (as amended) note payable due to our Company’s former Chief Executive Officer, interest accrues at the rate of 9% compounded annually, all amounts due and payable December 31, 2008. Currently past due. | 20,000 | 20,000 | 16,943 | 13,775 | |||||||||||||
Note payable due to a trust, interest accrues at the rate of 10% per annum, all amounts due and payable December 31, 2006. | - | 51,984 | - | 24,297 | |||||||||||||
Digimark, LLC subordinated promissory note, net, as discussed above. | - | 100,000 | - | 22,083 | |||||||||||||
Notes payable | 20,000 | 171,984 | 16,943 | 60,155 | |||||||||||||
Totals | $ | 20,000 | $ | 3,029,653 | $ | 16,943 | $ | 321,368 | |||||||||
Interest Expense | ' | ||||||||||||||||
The following table summarizes interest expense for the years ended December 31, 2013 and 2012: | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Amortization of note discounts | $ | 6,134,367 | $ | 3,935,108 | |||||||||||||
Amortization of deferred financing costs | - | 263,255 | |||||||||||||||
Other interest expense | 213,819 | 361,201 | |||||||||||||||
$ | 6,348,186 | $ | 4,559,564 |
Stockbased_Plans_and_Stockbase1
Stock-based Plans and Stock-based Compensation (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Stock-Based Plans And Stock-Based Compensation Tables | ' | ||||||||||||||||
Schedule of stock option activity | ' | ||||||||||||||||
The following table summarizes stock option activity under our stock-based plans as of and for the year ended December 31, 2013: | |||||||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | ||||||||||||||
Outstanding at December 31, 2011 | 268,333 | $ | 4.92 | 5.12 | $ | 1,240,000 | |||||||||||
Granted | 113,750 | $ | 3.36 | 4.53 | |||||||||||||
Exercised | - | $ | - | - | |||||||||||||
Canceled/forfeited/expired | (56,250 | ) | $ | 3.48 | 3.15 | ||||||||||||
Outstanding at December 31, 2012 | 325,833 | $ | 4.62 | 4.44 | $ | ||||||||||||
Granted | 5,473,705 | $ | 1.98 | ||||||||||||||
Exercised | - | $ | - | ||||||||||||||
Canceled/forfeited/expired | (127,097 | ) | $ | 4.06 | |||||||||||||
Outstanding at December 31, 2013 | 5,672,464 | $ | 2.08 | 9.17 | $ | 415,259 | |||||||||||
Expected to vest at December 31, 2013 | 2,644,882 | $ | 2.21 | 8.82 | $ | 181,501 | |||||||||||
Exercisable at December 31, 2013 | 1,021,191 | $ | 2.25 | 8.31 | $ | 79,421 | |||||||||||
Unrecognized expense at December 31, 2013 | $ | 3,074,119 | |||||||||||||||
Stock-based compensation expense | ' | ||||||||||||||||
The impact on our results of operations of recording stock-based compensation expense for years ended December 31, 2013 and 2012 was as follows: | |||||||||||||||||
Years ended December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
General and administrative | $ | 895,903 | $ | 335,160 | |||||||||||||
Sales and marketing | 976,341 | 43,250 | |||||||||||||||
Engineering, research, and development | 17,972 | 13,000 | |||||||||||||||
$ | 1,890,216 | $ | 391,410 | ||||||||||||||
Schedule of range of assumptions | ' | ||||||||||||||||
We calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The ranges of assumptions were used for the years ended December 31, 2013 and 2012: | |||||||||||||||||
Years ended December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Risk-free interest rate | 0.60% to 1.03% | 0.39% to 0.57% | |||||||||||||||
Expected life (years) | 3.58 to 5.27 | 2.86 to 3.58 | |||||||||||||||
Dividend yield | 0% | 0% | |||||||||||||||
Expected volatility | 122.0% to 132.0% | 61.0% to 73.4% | |||||||||||||||
Warrants_to_Purchase_Common_St1
Warrants to Purchase Common Stock (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Schedule of warrant activity | ' | ||||||||||||
The following table summarizes warrant activity as of and for the year ended December 31, 2013: | |||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | |||||||||||
Outstanding at December 31, 2011 | 114,784 | $ | 0.2 | 1.42 | |||||||||
Granted | 25,588 | $ | 0.2 | 1.84 | |||||||||
Exercised | - | ||||||||||||
Canceled/forfeited/expired | - | ||||||||||||
Outstanding at December 31, 2012 | 140,372 | $ | 0.2 | 1.5 | |||||||||
Granted | 5,187,587 | $ | 1.2 | 4.37 | |||||||||
Exercised | (32,054 | ) | $ | 0.2 | |||||||||
Canceled/forfeited/expired | - | ||||||||||||
Outstanding at December 31, 2013 | 5,295,905 | $ | 1.18 | 4.39 | |||||||||
Non-employee warrant [Member] | ' | ||||||||||||
Schedule of warrant activity | ' | ||||||||||||
The following table summarizes non-employee warrant activity under our stock-based plans as of and for the year ended December 31, 2013: | |||||||||||||
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | |||||||||||
Outstanding at December 31, 2011 | 150,835 | $ | 0.33 | 5.12 | |||||||||
Granted | 25,000 | $ | 1.16 | 4.09 | |||||||||
Exercised | - | $ | - | - | |||||||||
Canceled/forfeited/expired | (25,000 | ) | $ | 1.16 | 4.09 | ||||||||
Outstanding at December 31, 2012 | 150,835 | $ | 1.97 | ||||||||||
Granted | - | $ | - | ||||||||||
Exercised | - | $ | - | ||||||||||
Canceled/forfeited/expired | - | $ | - | ||||||||||
Outstanding at December 31, 2013 | 150,835 | $ | 1.97 | 1.99 | |||||||||
Expected to vest at December 31, 2013 | 150,835 | $ | 1.97 | 1.99 | |||||||||
Warrants exercisable | 141,546 | $ | 1.95 | 1.99 | |||||||||
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||||
Dec. 31, 2013 | |||||||||||
Income Taxes Tables | ' | ||||||||||
Provisions for income taxes | ' | ||||||||||
For the years ended December 31, 2013 and 2012 the provisions for income taxes were as follows: | |||||||||||
2013 | 2012 | ||||||||||
Federal – current | $ | - | $ | - | |||||||
State – current | - | - | |||||||||
Total | $ | - | $ | - | |||||||
Net deferred tax assets and liabilities | ' | ||||||||||
Significant components of our net deferred tax assets and liabilities as of December 31, 2013 and 2012 are as follows: | |||||||||||
2013 | 2012 | ||||||||||
Deferred tax assets (liabilities): | |||||||||||
Net operating loss carryforwards | $ | 6,283,000 | $ | 4,681,000 | |||||||
Stock based compensation | 1,735,000 | 940,000 | |||||||||
Accrued compensation | 31,000 | 70,000 | |||||||||
Derivative Liability | 42,000 | 634,000 | |||||||||
Depreciation and amortization | 5,099,000 | 4,816,000 | |||||||||
Other | 10,000 | 12,000 | |||||||||
Total deferred tax assets | 13,200,000 | 11,153,000 | |||||||||
Valuation allowance for net deferred tax assets | (13,200,000 | ) | (11,153,000 | ) | |||||||
Total | $ | - | $ | - | |||||||
Reconciliation of federal statutory income tax rate to our effective income tax rate | ' | ||||||||||
The difference between the provision for income taxes and income taxes computed using the U.S. federal income tax rate for the years ended December 31, 2013 and 2012 was as follows: | |||||||||||
2013 | 2012 | ||||||||||
Computed "expected tax expense | $ | (5,698,000 | ) | $ | (2,495,000 | ) | |||||
State taxes, net of federal benefit | (300,000 | ) | (155,000 | ) | |||||||
Other | 3,951,000 | 1,288,000 | |||||||||
Change in valuation allowance | 2,047,000 | 1,362,000 | |||||||||
Total | $ | - | $ | - | |||||||
Fair_Value_Measurements_of_Fin1
Fair Value Measurements of Financial Instruments (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Measurements Of Financial Instruments Tables | ' | ||||||||||||||||
Assets and liabilities measured at fair value on recurring and non-recurring bases | ' | ||||||||||||||||
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013: | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | |||||||||||||
Goodwill (non-recurring) | $ | - | $ | - | $ | 3,108,964 | $ | (1,066,068 | ) | ||||||||
Intangibles, net (non-recurring) | $ | - | $ | - | $ | 935,316 | $ | (644,170 | ) | ||||||||
Derivative liabilities (recurring) | $ | - | $ | - | $ | 106,176 | $ | (3,766,231 | ) | ||||||||
Earn-out payable (recurring) | $ | - | $ | - | $ | 59,000 | $ | 165,000 | |||||||||
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012: | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Gains (Losses) | |||||||||||||
Goodwill (non-recurring) | $ | - | $ | - | $ | 2,259,624 | $ | (742,446 | ) | ||||||||
Intangibles, net (non-recurring) | $ | - | $ | - | $ | 444,112 | $ | (145,396 | ) | ||||||||
Derivative liabilities (recurring) | $ | - | $ | - | $ | 3,074,504 | $ | 359,530 | |||||||||
Earn-out payable (recurring) | $ | - | $ | - | $ | 2,032,881 | $ | 625,357 | |||||||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments And Contingencies Tables | ' | ||||
Schedule of minimum lease payments | ' | ||||
The minimum lease payments for the Chandler, AZ facilities that are required over the next five years are shown below. | |||||
Minimum Lease Payments | |||||
2014 | $ | 143,492 | |||
2015 | 148,281 | ||||
2016 | - | ||||
2017 | - | ||||
2018 | - | ||||
Thereafter | - | ||||
$ | 291,773 | ||||
The_Company_and_Summary_of_Sig3
The Company and Summary of Significant Accounting Policies (Details) | Dec. 31, 2013 | Dec. 31, 2012 |
Antidilitive securities excluded from calculation | 11,010,886 | 617,053 |
Options | ' | ' |
Antidilitive securities excluded from calculation | 5,672,464 | 325,846 |
Non-employee warrant [Member] | ' | ' |
Antidilitive securities excluded from calculation | 150,835 | 150,835 |
Warrants | ' | ' |
Antidilitive securities excluded from calculation | 5,187,587 | 140,372 |
The_Company_and_Summary_of_Sig4
The Company and Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 28, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Company And Summary Of Significant Accounting Policies | ' | ' | ' |
Cash | ' | $2,572,685 | $363 |
Net loss | ' | -16,759,031 | -7,338,927 |
Net cash used in operating activities | ' | -2,948,888 | -2,218,183 |
Units sold in purchase agreement | 5,413,000 | ' | ' |
Proceeds from purchase agreement | 5,413,000 | ' | ' |
Net proceeds of sale of stock | 2,800,000 | ' | ' |
Allowance for doubtful accounts | ' | 65,975 | 44,700 |
Customer Receivable Risk Percentage | ' | 23.00% | 43.00% |
Impairment charges on evaluation of goodwill | ' | 1,066,068 | 742,446 |
Impairment charges on Intangible assets | ' | 644,170 | 145,396 |
Customer concentration risk | ' | 31.00% | 14.00% |
Advertising expense | ' | $19,959 | $70,193 |
Reverse stock split | ' | '1 for 6 | ' |
Acquisitions_during_Fiscal_Yea2
Acquisitions during Fiscal Year Ended December 31, 2013 (Details) (USD $) | Dec. 31, 2013 |
Front Door [Member] | ' |
Assets acquired | $2,623,625 |
Liabilities assumed | -46,219 |
Net assets acquired | 25,777,406 |
Sequence [Member] | ' |
Net assets acquired | 707,750 |
Cash | Front Door [Member] | ' |
Assets acquired | 5,500 |
Merchant relationships | Sequence [Member] | ' |
Assets acquired | 181,000 |
Accounts Receivable | Front Door [Member] | ' |
Assets acquired | 27,467 |
Contracts | Front Door [Member] | ' |
Assets acquired | 813,000 |
Customer relationships | Front Door [Member] | ' |
Assets acquired | 22,000 |
Developed technology | Front Door [Member] | ' |
Assets acquired | 96,000 |
Developed technology | Sequence [Member] | ' |
Assets acquired | 71,000 |
Non compete | Front Door [Member] | ' |
Assets acquired | 124,000 |
Goodwill | Front Door [Member] | ' |
Assets acquired | 1,535,658 |
Goodwill | Sequence [Member] | ' |
Assets acquired | 379,750 |
Trade Name | Sequence [Member] | ' |
Assets acquired | $76,000 |
Acquisitions_during_Fiscal_Yea3
Acquisitions during Fiscal Year Ended December 31, 2013 (Details1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues | $4,093,667 | $4,079,745 |
Net loss | -16,759,031 | -7,338,927 |
Net loss per share - basic and diluted | ($1.58) | ($1.90) |
Front Door [Member] | ' | ' |
Revenues | 4,255,947 | 4,427,542 |
Net loss | ($17,120,236) | ($9,533,541) |
Net loss per share - basic and diluted | ($1.55) | ($0.32) |
Acquisitions_during_Fiscal_Yea4
Acquisitions during Fiscal Year Ended December 31, 2013 (Details Narrative) (USD $) | Dec. 31, 2013 |
Front Door [Member] | ' |
Net assets acquired | $25,777,406 |
Discount on note payable | 34,904 |
Promissory note | 1,400,000 |
Common stock, shares | 1,166,667 |
Common stock | 1,112,310 |
Front Door [Member] | Cash | ' |
Net assets acquired | 100,000 |
Sequence [Member] | ' |
Net assets acquired | 707,750 |
Common stock, shares | 125,000 |
Common stock | 183,750 |
Earn-out rate | 10.00% |
Earn-out payable | 224,000 |
Sequence [Member] | Cash | ' |
Net assets acquired | $300,000 |
Goodwill_and_Intangible_Assets2
Goodwill and Intangible Assets (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Goodwill and impairment, beginning | $2,259,624 | $3,002,070 |
Acquired | 1,915,408 | ' |
Impairment | -1,066,068 | -742,446 |
Goodwill and impairment, end | $3,108,964 | $2,259,624 |
Goodwill_and_Intangible_Assets3
Goodwill and Intangible Assets (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Gross Carrying amount | $3,245,866 | $1,720,866 |
Accumulated amortization and impairment | 2,310,550 | 1,403,754 |
Net carrying amount | 935,316 | 444,112 |
Patents and trademarks [Member] | ' | ' |
Gross Carrying amount | 142,000 | 127,000 |
Accumulated amortization and impairment | 23,902 | 15,381 |
Net carrying amount | 118,098 | 111,619 |
Weighted Average Used Life (Years) | '20 years 0 months 0 days | '20 years 0 months 0 days |
Contracts | ' | ' |
Gross Carrying amount | 1,069,900 | 256,900 |
Accumulated amortization and impairment | 528,372 | 178,135 |
Net carrying amount | 541,528 | 78,765 |
Weighted Average Used Life (Years) | '5 years 10 months 15 days | '5 years 0 months 0 days |
Customer relationships | ' | ' |
Gross Carrying amount | 1,128,583 | 925,583 |
Accumulated amortization and impairment | 1,128,583 | 896,527 |
Net carrying amount | ' | 29,056 |
Weighted Average Used Life (Years) | '4 years 9 months 11 days | '3 years 8 months 27 days |
Trade Name | ' | ' |
Gross Carrying amount | 199,750 | ' |
Accumulated amortization and impairment | 177,359 | ' |
Net carrying amount | 22,391 | ' |
Weighted Average Used Life (Years) | '5 years 0 months 0 days | ' |
Technology [Member] | ' | ' |
Gross Carrying amount | 573,550 | ' |
Accumulated amortization and impairment | 391,252 | ' |
Net carrying amount | 182,298 | ' |
Weighted Average Used Life (Years) | '4 years 8 months 19 days | ' |
Non compete | ' | ' |
Gross Carrying amount | 132,083 | ' |
Accumulated amortization and impairment | 61,082 | ' |
Net carrying amount | 71,001 | ' |
Weighted Average Used Life (Years) | '2 years 10 months 24 days | ' |
Trade name [Member] | ' | ' |
Gross Carrying amount | ' | 123,750 |
Accumulated amortization and impairment | ' | 93,162 |
Net carrying amount | ' | 30,588 |
Weighted Average Used Life (Years) | ' | '5 years 0 months 0 days |
Acquired Technology [Member] | ' | ' |
Gross Carrying amount | ' | 406,550 |
Accumulated amortization and impairment | ' | 213,091 |
Net carrying amount | ' | 193,459 |
Weighted Average Used Life (Years) | ' | '4 years 7 months 10 days |
Non-compete [Member] | ' | ' |
Gross Carrying amount | ' | 8,083 |
Accumulated amortization and impairment | ' | 7,458 |
Net carrying amount | ' | $625 |
Weighted Average Used Life (Years) | ' | '2 years 1 month 28 days |
Goodwill_and_Intangible_Assets4
Goodwill and Intangible Assets (Details 2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes to Financial Statements | ' | ' |
2014 | $87,081 | ' |
2015 | 319,268 | ' |
2016 | 319,268 | ' |
2017 | 245,281 | ' |
2018 | 190,064 | ' |
Thereafter | 490,730 | ' |
Total | $935,316 | $444,112 |
Goodwill_and_Intangible_Assets5
Goodwill and Intangible Assets (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Amortization expense | $262,626 | $526,998 |
Goodwill impairment | 1,066,068 | 742,446 |
Intangible asset impairment expense | $644,170 | $145,396 |
Derivative_Liabilities_Details
Derivative Liabilities (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Derivative Liabilities | $106,176 | $3,074,504 | $1,573,859 |
Convertible Bridge Notes [Member] | ' | ' | ' |
Derivative Liabilities | ' | 2,850,085 | ' |
Common Stock and Warrants [Member] | ' | ' | ' |
Derivative Liabilities | 106,176 | 129,378 | ' |
NonEmployee Warrants [Member] | ' | ' | ' |
Derivative Liabilities | ' | $95,041 | ' |
Derivative_Liabilities_Details1
Derivative Liabilities (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Beginning balance | $3,074,504 | $1,573,859 |
Issuances in derivative value due to new security issuances of notes | 4,614,714 | 5,352,404 |
Issuances in derivative value due to vesting of non-employee warrants | 26,969 | 485,700 |
Issuances in derivative value due to allonges | ' | 118,633 |
Adjustment to derivative liability due to debt repayment | -40,511 | -129,139 |
Adjustment to derivative liability due to debt conversion | -3,152,786 | -3,361,772 |
Adjustment to derivative liability due to note conversion into equity | -7,923,875 | ' |
Adjustment to derivative liability due to warrant cancellation | -176,555 | -1,318 |
Adjustment to derivative liability due to warrant exercises | -55,546 | ' |
Change in fair value of derivative liabilities | 3,739,262 | -963,863 |
Ending balance | $106,176 | $3,074,504 |
Derivative_Liabilities_Details2
Derivative Liabilities (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Gain on derivatives | ($91,720) | ' | ' |
Private placement share exercise price | $3 | ' | ' |
Derivative Liabilities | 106,176 | 3,074,504 | 1,573,859 |
Net change in fair value of derivative liabilities | -3,766,231 | 359,530 | ' |
Convertible Notes Payable [Member] | ' | ' | ' |
Derivative liabilities reclassified to equity | 7,792,657 | ' | ' |
Private Placement Shares [Member] | ' | ' | ' |
Gain on derivatives | ' | 236,369 | ' |
Allonges [Member] | ' | ' | ' |
Shares issuable under allonges | 87,947 | ' | ' |
Non-employee warrant [Member] | ' | ' | ' |
Derivative liabilities reclassified to equity | $176,555 | ' | ' |
Bridge_Financing_Notes_Payable2
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes to Financial Statements | ' | ' |
Bridge notes payable | ' | $4,342,418 |
Less unamortized discounts | ' | ' |
VMCO | ' | -481,390 |
ASID | ' | -1,003,359 |
Bridge notes payable, net of discounts | ' | $2,857,669 |
Bridge_Financing_Notes_Payable3
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Beginning balance | ($1,484,749) | ($59,770) |
Additions | -4,614,714 | -5,352,404 |
Amortization | 6,099,463 | 3,927,425 |
Ending balance | ' | -1,484,749 |
VMCO [Member] | ' | ' |
Beginning balance | -481,390 | -12,031 |
Additions | -1,936,191 | -1,409,797 |
Amortization | 2,417,581 | 940,438 |
Ending balance | ' | -481,390 |
ASID [Member] | ' | ' |
Beginning balance | -1,003,359 | -47,739 |
Additions | -2,678,523 | -3,942,607 |
Amortization | 3,681,882 | 2,986,987 |
Ending balance | ' | ($1,003,359) |
Bridge_Financing_Notes_Payable4
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation (Details 2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Notes Payable | $20,000 | $3,029,653 |
Accrued Interest | 16,943 | 321,368 |
Bridge notes, net [Member] | ' | ' |
Notes Payable | ' | 2,857,669 |
Accrued Interest | ' | 261,213 |
Convertible notes payable, net of discounts [Member] | ' | ' |
Notes Payable | ' | 2,857,669 |
Accrued Interest | ' | 261,213 |
Unsecured Note Payable [Member] | ' | ' |
Notes Payable | 20,000 | 20,000 |
Accrued Interest | 16,943 | 13,775 |
Note Payable to Trust [Member] | ' | ' |
Notes Payable | ' | 51,984 |
Accrued Interest | ' | 24,297 |
Digimark Note [Member] | ' | ' |
Notes Payable | ' | 100,000 |
Accrued Interest | ' | 22,083 |
Notes payable [Member] | ' | ' |
Notes Payable | 20,000 | 171,984 |
Accrued Interest | $16,943 | $60,155 |
Bridge_Financing_Notes_Payable5
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation (Details 3) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Amortization of note discounts | $6,134,367 | $3,935,108 |
Amortization of deferred financing costs | ' | 263,255 |
Other interest expense | 213,819 | 361,201 |
Total | $6,348,186 | $4,559,564 |
Bridge_Financing_Notes_Payable6
Bridge Financing, Notes Payable, Accrued Interest and Cash Payment Obligation (Details Narrative) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | |
Outstanding principal of bridge notes | ' | $1,062,500 | $4,984,720 |
Notes converted into shares of common stock | ' | ' | 4,153,934 |
Value per share | ' | ' | $1.20 |
Bridge Note Issued | 700,000 | 3,148,470 | ' |
Bridge note repaid | 1,609,682 | 831,708 | ' |
Amortization of deferred financing costs | ' | 263,255 | ' |
Accrued interest | 16,943 | 13,775 | ' |
Discount amortization to interest expense | 6,099,463 | 3,927,425 | ' |
Digimark Note [Member] | ' | ' | ' |
Outstanding principal of bridge notes | 182,460 | 100,000 | ' |
Bridge NoteActivity 1 [Member] | ' | ' | ' |
Bridge Note Issued | ' | 520,000 | ' |
Note due date | ' | 2-Feb-12 | ' |
Bridge note repaid | 21,040 | ' | ' |
Bridge NoteActivity 2 [Member] | ' | ' | ' |
Bridge Note Issued | 200,000 | ' | ' |
Bridge note repaid | ' | 65,000 | ' |
Bridge NoteActivity 3 [Member] | ' | ' | ' |
Bridge Note Issued | 75,000 | 220,100 | ' |
Note due date | ' | 2-May-12 | ' |
Bridge NoteActivity 4 [Member] | ' | ' | ' |
Bridge Note Issued | ' | 4,347,419 | ' |
Bridge note repaid | 36,659 | 184,081 | ' |
Bridge note, new funds | ' | 2,656,250 | ' |
Bridge note, principal amount and accrued interest | ' | 1,691,169 | ' |
Bridge NoteActivity 5 [Member] | ' | ' | ' |
Bridge Note Issued | 20,000 | ' | ' |
Note due date | 15-Oct-13 | ' | ' |
Bridge note repaid | ' | 5,000 | ' |
Bridge NoteActivity 6 [Member] | ' | ' | ' |
Revaluation of derivative features | 4,052,148 | ' | ' |
Bridge NoteActivity 7 [Member] | ' | ' | ' |
Bridge Note Issued | 387,500 | ' | ' |
Bridge NoteActivity 8 [Member] | ' | ' | ' |
Bridge Note Issued | 17,500 | ' | ' |
Bridge NoteActivity 9 [Member] | ' | ' | ' |
Bridge note, principal amount and accrued interest | 4,984,720 | ' | ' |
Shares issued in conversion of note | 4,153,934 | ' | ' |
Bridge NoteActivity 10 [Member] | ' | ' | ' |
Bridge note, principal amount and accrued interest | 369,786 | ' | ' |
Shares issued in conversion of note | 308,155 | ' | ' |
BridgeNoteActivity11 [Member} | ' | ' | ' |
Shares issued for accrued interest payable | 95,404 | ' | ' |
BridgeNoteActivity12 [Member} | ' | ' | ' |
Bridge Note Issued | $20,000 | ' | ' |
Common_Stock_and_Equity_Payabl1
Common Stock and Equity Payable (Details Narratives) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Earn out recorded as derivative liability | $2,210,667 | $2,032,881 |
Earn out payment shares | 247,279 | ' |
Equity payable additional paid-in capital due | 218,446 | ' |
Warrants issued | 150,835 | ' |
Shares of stock issued | 16,319,878 | 3,869,688 |
Shares authorized under plan | 6,085,015 | ' |
StockIssuance1Member | ' | ' |
Common stock issued, shares | ' | 37,500 |
Common stock issued, value | ' | 270,000 |
StockIssuance2 [Member] | ' | ' |
Common stock issued, shares | ' | 39,241 |
Common stock issued, value | ' | 160,468 |
StockIssuance3 [Member] | ' | ' |
Common stock issued, shares | ' | 562 |
Common stock issued, value | ' | 1,374 |
StockIssuance4 [Member] | ' | ' |
Common stock issued, shares | 247,249 | ' |
Common stock issued, value | 2,210,667 | ' |
StockIssuance5 [Member] | ' | ' |
Common stock issued, shares | 1,291,667 | ' |
Common stock issued, value | 1,296,060 | ' |
StockIssuance6 [Member] | ' | ' |
Common stock issued, shares | 6,250,000 | ' |
Accrued interest | 5,354,506 | ' |
Shares of stock issued | 4,462,089 | ' |
Net proceeds | 602,823 | ' |
Stock Issuance 7 [Member] | ' | ' |
Common stock issued, shares | 31,292 | ' |
Warrants issued | 8,845 | ' |
Warrant exercise price | $1.20 | ' |
Warrants and shares issued to stock based compensation expense | 106,138 | ' |
Stock Issuance 8 [Member] | ' | ' |
Common stock issued, shares | 87,947 | ' |
Common stock issued, value | 131,248 | ' |
Stock Issuance 9 [Member] | ' | ' |
Common stock issued, shares | 39,382 | ' |
Stock Issuance 10 [Member] | ' | ' |
Common stock issued, shares | 19,271 | ' |
Common stock issued, value | 37,000 | ' |
Stock Issuance 11 [Member] | ' | ' |
Common stock issued, shares | 21,171 | ' |
Reduction to derivative liabilities | $55,546 | ' |
Stockbased_Plans_and_Stockbase2
Stock-based Plans and Stock-based Compensation (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Number Outstanding | ' | ' |
Granted | 5,187,587 | 25,588 |
Exercised | -32,054 | ' |
Canceled/forfeited/expired | ' | ' |
Weighted Average Exercise Price Per Share | ' | ' |
Granted | $1.20 | $0.20 |
Exercised | $0.20 | ' |
Stock Plan [Member] | ' | ' |
Number Outstanding | ' | ' |
Outstanding at Beginning of Period | 325,833 | 268,333 |
Granted | 5,473,705 | 113,750 |
Exercised | ' | ' |
Canceled/forfeited/expired | -127,097 | -56,250 |
Outstanding at End of Period | 5,672,464 | 325,833 |
Expected to vest at End of Period | 2,644,882 | ' |
Exerciseable at End of Period | 1,021,191 | ' |
Unrecognized expense at End of Period | $3,074,119 | ' |
Weighted Average Exercise Price Per Share | ' | ' |
Outstanding at Beginning of Period | $4.62 | $4.92 |
Granted | $1.98 | $3.36 |
Exercised | ' | ' |
Cancelled/forfeited/expired | $4.06 | $3.48 |
Outstanding at End of Period | $2.08 | $4.62 |
Vested | $2.21 | ' |
Exercisable at end of period | $2.25 | ' |
Weighted Average Remaining Contractual Life (Years) | ' | ' |
Outstanding at Beginning of Period | ' | '5 years 1 month 13 days |
Granted | ' | '4 years 6 months 11 days |
Outstanding at End of Period | '9 years 2 months 1 day | ' |
Expected to vest | '8 years 9 months 26 days | ' |
Exercisable at end of period | '8 years 3 months 22 days | ' |
Aggregate Intrinsic value | ' | ' |
Outstanding at Beginning of Period | ' | 1,240,000 |
Outstanding at End of Period | 415,259 | ' |
Expected to vest at End of Period | $181,501 | ' |
Exercisable at End of period | 79,421 | ' |
Stockbased_Plans_and_Stockbase3
Stock-based Plans and Stock-based Compensation (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Stock-Based Plans And Stock-Based Compensation Details 1 | ' | ' |
General and administrative expense | $895,903 | $335,160 |
Sales and marketing | 976,341 | 43,250 |
Engineering, research and development | 17,972 | 13,000 |
Operating Expenses | $1,890,216 | $391,410 |
Stockbased_Plans_and_Stockbase4
Stock-based Plans and Stock-based Compensation (Details 2) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Dividend yield | ' | ' |
Minimum [Member] | ' | ' |
Expected life (years) | '3 years 6 months 29 days | '2 years 10 months 10 days |
Expected volatility | 122.00% | 61.00% |
Maximum [Member] | ' | ' |
Risk-free interest rate | 0.60% | 1.03% |
Expected life (years) | '5 years 3 months 7 days | '3 years 6 months 29 days |
Expected volatility | 132.00% | 73.40% |
Stockbased_Plans_and_Stockbase5
Stock-based Plans and Stock-based Compensation (Details Narratives) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Shares authorized under stock plans | 6,085,015 | ' |
Shares available for future grant under stock plans | 261,716 | ' |
Options in-the-money | 4,513,984 | ' |
Weighted average grant-date fair value of options granted | $1.80 | $0.27 |
Options granted | 150,835 | ' |
Unearned stock based compensation expense | $3,074,119 | ' |
Option 1 [Member] | ' | ' |
Options granted | 1,667 | ' |
Option price per share | $6.96 | ' |
Volatility rate | 65.00% | ' |
Call option value | $3.24 | ' |
Total estimated value, option | 5,404 | ' |
Option 2 [Member] | ' | ' |
Options granted | 25,269 | ' |
Option price per share | $4.14 | ' |
Volatility rate | 73.40% | ' |
Call option value | $2.14 | ' |
Total estimated value, option | 56,206 | ' |
Option 3 [Member] | ' | ' |
Options granted | 333,334 | ' |
Volatility rate | 73.40% | ' |
Call option value | $2.74 | ' |
Total estimated value, option | 91,335 | ' |
Option 4 [Member] | ' | ' |
Options granted | 52,500 | ' |
Option price per share | $2.40 | ' |
Volatility rate | 61.00% | ' |
Call option value | $1.06 | ' |
Total estimated value, option | 55,671 | ' |
Option 5 [Member] | ' | ' |
Options granted | 58,338 | ' |
Option price per share | $1.50 | ' |
Volatility rate | 122.00% | ' |
Call option value | $1.13 | ' |
Total estimated value, option | 4,714 | ' |
Option 6 [Member] | ' | ' |
Options granted | 417,326 | ' |
Option price per share | $2.04 | ' |
Volatility rate | 132.00% | ' |
Call option value | $1.84 | ' |
Total estimated value, option | 767,879 | ' |
Option 7 [Member] | ' | ' |
Options granted | 2,782,174 | ' |
Volatility rate | 132.00% | ' |
Call option value | $1.55 | ' |
Total estimated value, option | 4,312,370 | ' |
Option 8 [Member] | ' | ' |
Options granted | 1,669,306 | ' |
Option price per share | $1.80 | ' |
Volatility rate | 132.00% | ' |
Call option value | $1.62 | ' |
Total estimated value, option | 2,704,276 | ' |
Option 9 [Member] | ' | ' |
Options granted | 33,334 | ' |
Option price per share | $2.46 | ' |
Volatility rate | 132.00% | ' |
Call option value | $1.43 | ' |
Total estimated value, option | 47,668 | ' |
Option 10 [Member] | ' | ' |
Options granted | 100,002 | ' |
Option price per share | $2.46 | ' |
Volatility rate | 132.00% | ' |
Call option value | $2.21 | ' |
Total estimated value, option | 221,004 | ' |
Option 11 [Member] | ' | ' |
Options granted | 33,335 | ' |
Option price per share | $4.20 | ' |
Volatility rate | 132.00% | ' |
Call option value | $3.78 | ' |
Total estimated value, option | 126,006 | ' |
Option 12 [Member] | ' | ' |
Options granted | 27,502 | ' |
Option price per share | $3.90 | ' |
Volatility rate | 132.00% | ' |
Call option value | $3.52 | ' |
Total estimated value, option | 96,807 | ' |
Option 13 [Member] | ' | ' |
Options granted | 278,218 | ' |
Option price per share | $3.90 | ' |
Volatility rate | 132.00% | ' |
Call option value | $3.52 | ' |
Total estimated value, option | 976,545 | ' |
Option 14 [Member] | ' | ' |
Options granted | 58,334 | ' |
Option price per share | $3.36 | ' |
Volatility rate | 132.00% | ' |
Call option value | $3.03 | ' |
Total estimated value, option | 176,752 | ' |
Option 15 [Member] | ' | ' |
Options granted | 3,335 | ' |
Option price per share | $3.36 | ' |
Volatility rate | 132.00% | ' |
Call option value | $2.95 | ' |
Total estimated value, option | 9,838 | ' |
Option 16 [Member] | ' | ' |
Options granted | 8,334 | ' |
Option price per share | $2.75 | ' |
Volatility rate | 132.00% | ' |
Call option value | $2.48 | ' |
Total estimated value, option | $20,668 | ' |
Warrants_to_Purchase_Common_St2
Warrants to Purchase Common Stock (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Number Outstanding | ' | ' |
Outstanding at Beginning of Period | 140,372 | 114,784 |
Granted | 5,187,587 | 25,588 |
Exercised | -32,054 | ' |
Canceled/forfeited/expired | ' | ' |
Outstanding at End of Period | 3,295,905 | 140,372 |
Weighted Average Exercise Price Per Share | ' | ' |
Outstanding at Beginning of Period | $0.20 | $0.20 |
Granted | $1.20 | $0.20 |
Exercised | $0.20 | ' |
Outstanding at End of Period | $1.18 | $0.20 |
Weighted Average Remaining Contractual Life (Years) | ' | ' |
Outstanding at Beginning of Period | '1 year 6 months 0 days | '1 year 5 months 1 day |
Granted | '4 years 4 months 13 days | '1 year 10 months 2 days |
Outstanding at End of Period | '4 years 4 months 21 days | '1 year 6 months 0 days |
Non-employee warrant [Member] | ' | ' |
Number Outstanding | ' | ' |
Outstanding at Beginning of Period | 150,835 | 150,835 |
Granted | ' | 2,500 |
Exercised | ' | ' |
Canceled/forfeited/expired | ' | -25,000 |
Outstanding at End of Period | 150,835 | 150,835 |
Vested and exercisable at End of Period | 150,835 | 150,835 |
Warrants exercisable | 141,546 | ' |
Weighted Average Exercise Price Per Share | ' | ' |
Outstanding at Beginning of Period | $1.97 | $0.33 |
Granted | ' | $1.16 |
Exercised | ' | ' |
Canceled/forfeited/expired | ' | $1.16 |
Outstanding at End of Period | $1.97 | $1.97 |
Vested | $1.97 | ' |
Warrants exercisable | $1.95 | ' |
Weighted Average Remaining Contractual Life (Years) | ' | ' |
Outstanding at Beginning of Period | ' | '5 years 1 month 13 days |
Granted | ' | '4 years 1 month 2 days |
Canceled/forfeited/expired | ' | '4 years 1 month 2 days |
Outstanding at End of Period | '1 year 11 months 27 days | ' |
Expected to vest at End of Period | '1 year 11 months 27 days | ' |
Warrants exercisable | '1 year 11 months 27 days | ' |
Warrants_to_Purchase_Common_St3
Warrants to Purchase Common Stock (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Number Outstanding | ' | ' |
Outstanding at Beginning of Period | 140,372 | 114,784 |
Granted | 5,187,587 | 25,588 |
Exercised | -32,054 | ' |
Canceled/forfeited/expired | ' | ' |
Outstanding at End of Period | 3,295,905 | 140,372 |
Weighted Average Exercise Price Per Share | ' | ' |
Outstanding at Beginning of Period | $0.20 | $0.20 |
Granted | $1.20 | $0.20 |
Exercised | $0.20 | ' |
Outstanding at End of Period | $1.18 | $0.20 |
Weighted Average Remaining Contractual Life (Years) | ' | ' |
Outstanding at Beginning of Period | '1 year 6 months 0 days | '1 year 5 months 1 day |
Granted | '4 years 4 months 13 days | '1 year 10 months 2 days |
Outstanding at End of Period | '4 years 4 months 21 days | '1 year 6 months 0 days |
Warrants_to_Purchase_Common_St4
Warrants to Purchase Common Stock (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Warrants | 150,835 | ' |
Warrant exercise price | $0.20 | ' |
Stock based compensation expense | $40,204 | ' |
Gain related to change in estimated dollar value of earn-out payable | 123,946 | 117,477 |
WarrantIssuance 1 [Member] | ' | ' |
Warrants | 114,784 | ' |
Warrant exercise price | $12 | ' |
Warrrant Issuance 2 [Member] | ' | ' |
Warrants | 25,588 | ' |
Warrant exercise price | $12 | ' |
Warrant Issuance 3 [Member] | ' | ' |
Warrants | 21,171 | ' |
Warrants to purchase shares of common stock | 32,054 | ' |
Warrant Issuance 4 [Member] | ' | ' |
Warrants | 108,318 | ' |
Warrant exercise price | $1.20 | ' |
Warrants expiring next twelve months | 86,949 | ' |
Warrants expiring after twelve months | 21,369 | ' |
Warrant Issuance 5 [Member] | ' | ' |
Warrants | 4,541,612 | ' |
Warrant exercise price | $1.20 | ' |
Warrant Issuance 6 [Member] | ' | ' |
Warrants | 611,746 | ' |
Warrant exercise price | $1.20 | ' |
Warrant Issuance 7 [Member] | ' | ' |
Warrants | 25,384 | ' |
Warrant exercise price | $1.20 | ' |
Warrant Issuance 8 [Member] | ' | ' |
Warrants | 8,845 | ' |
Warrant exercise price | $1.20 | ' |
Compensation expense to General and Administrative | $16,188 | ' |
Warrant Issuance 9 [Member] | ' | ' |
Warrants | 5,187,587 | ' |
Warrant exercise price | $1.20 | ' |
Warrants expiring next twelve months | 34,229 | ' |
Warrants expiring after twelve months | 5,153,358 | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Federal - current | ' | ' |
State - current | ' | ' |
Total | ' | ' |
Income_Taxes_Details_1
Income Taxes (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred tax assets (liabilities): | ' | ' |
Net operating loss carryforwards | $6,283,000 | $4,681,000 |
Stock based compensation | 1,735,000 | 940,000 |
Accrued compensation | 31,000 | 70,000 |
Deferred tax liabilities | 42,000 | 634,000 |
Depreciation and amortization | 5,099,000 | 4,816,000 |
Other | 10,000 | 12,000 |
Total deferred tax assets | 13,200,000 | 11,153,000 |
Valuation allowance for net deferred tax assets | -13,200,000 | -11,153,000 |
Total | ' | ' |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Computed expected tax expense | ($5,698,000) | ($2,495,000) |
State taxes, net of federal benefit | -300,000 | -155,000 |
Other | 3,951,000 | 1,288,000 |
Change in valuation allowance | 2,047,000 | 1,362,000 |
Total | ' | ' |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Change in valuation allowance | $2,047,000 | $1,362,000 |
Net operating loss carryforward, Federal | 18,900,000 | ' |
Net operating loss carryforward, State | 18,900,000 | ' |
Annual utilization of net operating loss carryforwards maximum | '$207,000 per year | ' |
Pre change net operating loss carryforward | $7,000,000 | ' |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Level 1 [Member] | ' | ' |
Goodwill (non-recurring) | ' | ' |
Intangibles, net (non-recurring) | ' | ' |
Derivatives (recurring) | ' | ' |
Earn-out payable (non-recurring) | ' | ' |
Level 2 [Member] | ' | ' |
Goodwill (non-recurring) | ' | ' |
Intangibles, net (non-recurring) | ' | ' |
Derivatives (recurring) | ' | ' |
Earn-out payable (non-recurring) | ' | ' |
Level 3 [Member] | ' | ' |
Goodwill (non-recurring) | 3,108,964 | 2,259,624 |
Intangibles, net (non-recurring) | 935,316 | 444,112 |
Derivatives (recurring) | 106,176 | 3,074,504 |
Earn-out payable (non-recurring) | 59,000 | 2,032,881 |
Gains (Losses) [Member] | ' | ' |
Goodwill (non-recurring) | -1,066,068 | -742,446 |
Intangibles, net (non-recurring) | -644,170 | -145,396 |
Derivatives (recurring) | -3,766,231 | 359,530 |
Earn-out payable (non-recurring) | $165,000 | $625,357 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | Dec. 31, 2013 |
Operating Lease | ' |
2014 | $143,492 |
2015 | 148,281 |
2016 | ' |
2017 | ' |
2018 | ' |
Thereafter | ' |
Total | $291,773 |
Commitments_and_Contingencies_2
Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Future monthly rental payments, next twelve months | $11,958 | ' |
Future monthly rental payments, next twelve months | 12,357 | ' |
Rent expense | $166,802 | $179,179 |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Debt converted into Mobivity stock | $570,534 | ' |
Debt conversion to common stock shares | 370,534 | ' |
Debt conversion to prepaid services | 200,000 | ' |
Recognized deferred revenue during period | 0 | 164,738 |
Deferred revenue | ' | 35,262 |
CFO [Member] | ' | ' |
Salary | 160,000 | ' |
Options issued per agreement | 225,000 | ' |
Bridge note | 20,000 | ' |
Note conversion into shares | 16,918 | ' |
Warrant to purchase shares of common stock | 16,918 | ' |
Warrant exercise price per share | $1.20 | ' |
Option to purchase shares | 417,326 | ' |
Option exercise price | $1.80 | ' |
CEO [Member] | ' | ' |
Bridge note | $17,500 | ' |
Note conversion into shares | 14,708 | ' |
Warrant to purchase shares of common stock | 14,708 | ' |
Warrant exercise price per share | $1.20 | ' |
Option to purchase shares | 1,251,979 | ' |
Option exercise price | $1.80 | ' |
Subsequent_Events_Details_Narr
Subsequent Events (Details Narrative) (USD $) | 12 Months Ended | 3 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | |
Smart Receipt [Member] | SPA [Member] | ||||
Payment for closing of purchase agreement | ' | ' | ' | $2,212,000 | ' |
Loan | -17,521 | -327,828 | ' | 1,500,000 | ' |
Issuance of shares | ' | ' | ' | 504,884 | ' |
Common stock par value | $0.00 | $0.00 | $0.00 | ' | ' |
Securities Purchase Agreement shares | ' | ' | ' | ' | 6,000,000 |
Per unit price | ' | ' | ' | ' | $1 |
Gross proceeds | ' | ' | ' | ' | 6,000,000 |
Warrant exercise price | ' | ' | ' | ' | $1.20 |
Commissions paid | ' | ' | ' | ' | 345,835 |
Commissions paids in warrants | ' | ' | ' | ' | 345,835 |
SPA shares sold | ' | ' | ' | ' | 5,413,000 |
Gross proceeds received to date | ' | ' | ' | ' | $5,413,000 |