Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 07, 2014 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Internet Media Services, Inc. | ' | ' |
Entity Central Index Key | '0001487718 | ' | ' |
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 | ' | ' | $150,441 |
Entity Common Stock, Par Value per Share | $0.00 | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 1,353,068,182 | ' |
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 | $14,620 | $1,262 |
Prepaid expenses and other assets | 4,114 | 10,169 |
Receivable from U-Vend, Canada, Inc. | 162,536 | ' |
Current assets of discontinued operations | ' | 116,460 |
Total current assets | 181,270 | 127,891 |
Deferred financing costs, net | 16,333 | ' |
Non-current assets of discontinued operations | ' | 99,092 |
Total assets | 197,603 | 226,983 |
Current liabilities: | ' | ' |
Accounts payable | 35,192 | 39,026 |
Accrued expenses | 28,032 | 61,340 |
Accrued salary - officer | 142,608 | ' |
Note payable - director | 50,000 | ' |
Senior convertible notes, net of discount of $143,751 | 56,249 | ' |
Convertible notes payable | ' | 280,034 |
Revolving note from related party | ' | 281,228 |
Current liabilities of discontinued operations | ' | 156,912 |
Total current liabilities | 312,081 | 818,540 |
Warrant liabilities | 214,609 | ' |
Commitments and contingencies (Note 9) | ' | ' |
Stockholders' deficiency | ' | ' |
Common stock, $.001 par value, 600,000,000 shares authorized, 489,255,193 shares issued and outstanding (24,637,893 - 2012) | 489,255 | 24,638 |
Additional paid-in capital | 955,920 | 770,786 |
Accumulated deficit | -1,774,262 | -1,386,981 |
Total stockholders' deficiency | -329,087 | -591,557 |
Total liabilities and stockholders' deficiency | $197,603 | $226,983 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Debt discount on senior convertible notes | $143,751 | ' |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 600,000,000 | 600,000,000 |
Common stock, shares issued | 489,255,193 | 24,637,893 |
Common stock, shares outstanding | 489,255,193 | 24,637,893 |
CONSOLIDATED_STATEMENT_OF_OPER
CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Operating expenses: | ' | ' |
Salaries and benefits | $220,421 | $73,716 |
Professional fees | 65,780 | 47,219 |
Other | 53,684 | 121,571 |
Operating expenses, Total | 339,885 | 242,506 |
Operating loss | -339,885 | -242,506 |
Other income (expenses): | ' | ' |
Loss from change in fair value of notes payable | ' | -105,009 |
Amortization of debt discount and deferred financing costs | -63,417 | ' |
Interest expense | -35,882 | -37,440 |
Gain on extinguishment of debt | 31,090 | ' |
Other expenses, Total | -68,209 | -142,449 |
Loss before income taxes | -408,094 | -384,955 |
Income tax provision | -2,200 | -4,185 |
Loss from continued operations | -410,294 | -389,140 |
Discontinued operations | ' | ' |
Gain from disposal of discontinued operations | 3,839 | ' |
Net income (loss) from discontinued operations | 19,174 | -2,858 |
Write-down of assets associated with a discounted component, net of income tax effect | ' | -35,000 |
Income (Loss) from Discontinued Operation | 23,013 | -37,858 |
Net loss | ($387,281) | ($426,998) |
Net loss from continuing operations per share- basic and diluted (in dollars per share) | ($0.01) | ($0.02) |
Net (loss) income from discontinued operations per share- basic and diluted (in dollars per share) | $0 | $0 |
Net loss per share - basic and diluted (in dollars per share) | ($0.01) | ($0.02) |
Weighted average common shares outstanding - basic and diluted (in shares) | 71,373,884 | 24,313,958 |
CONSOLIDATED_STATEMENT_OF_CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($387,281) | ($426,998) |
(Income) loss from discontinued operations | -23,013 | 37,858 |
Adjustments to reconcile net loss to net cash used by operating activities | ' | ' |
Stock based compensation | 23,496 | 24,796 |
Amortization of debt discount and deferred financing costs | 63,417 | ' |
Gain on extinguishment of debt | -31,090 | ' |
Change in provisions for deferred tax liability | ' | 541 |
Impairment of property and equipment | ' | 38,200 |
Loss from change in fair value of notes payable | ' | 105,009 |
(Increase) decrease in assets | ' | ' |
Prepaid expenses and other assets | 6,055 | -222 |
Increase in liabilities: | ' | ' |
Accounts payable and accrued expenses | 48,851 | 53,410 |
Accrued salary - officer | 142,608 | ' |
Net cash used by continuing operations | -156,957 | -167,406 |
Net cash provided by discontinued operations | 7,653 | 90,621 |
Net cash used by operating activities | -149,304 | -76,785 |
Cash flows from investing activities: | ' | ' |
Advances to U-Vend Canada, Inc. | -116,822 | ' |
Net proceeds from sale of LegalStore.com | 74,000 | ' |
Net cash provided by investing activities | -42,822 | ' |
Cash flows from financing activities: | ' | ' |
Proceeds from sale of common stock | ' | 10,500 |
Proceeds from senior convertible notes, net of financing costs | 176,500 | ' |
Proceeds from note payable, director | 50,000 | ' |
Net (repayments) borrowings on revolving note from related party | -21,016 | 66,739 |
Net cash provided by financing activities | 205,484 | 77,239 |
Net increase in cash | 13,358 | 454 |
Cash - beginning of period | 1,262 | 808 |
Cash - end of period | 14,620 | 1,262 |
Cash paid for: | ' | ' |
Income taxes | 2,200 | 3,400 |
Interest | 1,711 | ' |
Non-cash financing activities: | ' | ' |
Note payable and accrued interest converted to shares of common stock | 599,051 | 50,990 |
Debt discount related to warrant liability and beneficial conversion feature | 200,000 | ' |
Derivative warrant liability issued for equipment leasing | $45,714 | ' |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY EQUITY (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance at Dec. 31, 2011 | $23,821 | $685,317 | ($959,983) | ($250,845) |
Beginning balance, shares at Dec. 31, 2011 | 23,821,000 | ' | ' | ' |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ' | ' | ' | ' |
Issuance of common stock and warrants for cash | 200 | 10,300 | ' | 10,500 |
Issuance of common stock and warrants for cash, shares | 200,000 | ' | ' | ' |
Stock-based compensation expense | ' | 24,796 | ' | 24,796 |
Shares issued upon conversion of convertible notes and accrued interest | 617 | 50,373 | ' | 50,990 |
Shares issued upon conversion of convertible notes and accrued interest | 616,893 | ' | ' | ' |
Net loss | ' | ' | -426,998 | -426,998 |
Beginning balance at Dec. 31, 2012 | 24,638 | 770,786 | -1,386,981 | -591,557 |
Beginning balance, shares at Dec. 31, 2012 | 24,637,893 | ' | ' | 24,637,893 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ' | ' | ' | ' |
Stock-based compensation expense | ' | 23,496 | ' | 23,496 |
Shares issued upon conversion of convertible notes and accrued interest | 464,617 | 130,533 | ' | 595,150 |
Shares issued upon conversion of convertible notes and accrued interest | 464,617,300 | ' | ' | ' |
Beneficial conversion feature on senior convertible notes | ' | 31,105 | ' | 31,105 |
Net loss | ' | ' | -387,281 | -387,281 |
Beginning balance at Dec. 31, 2013 | $489,255 | $955,920 | ($1,774,262) | ($329,087) |
Beginning balance, shares at Dec. 31, 2013 | 489,255,193 | ' | ' | 489,255,193 |
NATURE_OF_BUSINESS_AND_SUMMARY
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | |
Dec. 31, 2013 | ||
Nature Of Business And Summary Of Significant Accounting Policies | ' | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | |
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Nature of Business – On January 7, 2014, Internet Media Services, Inc. (“Company”) entered into an Exchange of Securities Agreement (“Agreement”) by and between ourselves, U-Vend Canada, Inc. and the shareholders of U-Vend Canada, Inc. U-Vend Canada, Inc. together with its wholly owned subsidiary, U-Vend USA LLC (collectively, U-Vend), is in the business of developing, marketing and distributing co-branded self-serve electronic kiosks, mall/airport co-branding islands, and digital advertising solutions throughout North America. As of December 31, 2013, U-Vend owned and operated 33 kiosks in the greater Chicago, IL area and markets products supplied by its co-branding partners. U-Vend expects to place 15 additional kiosks into service early in the second quarter of 2014. Pursuant to the Agreement, we have acquired all of the outstanding shares of U-Vend in exchange for 466,666,667 shares of our common stock. U-Vend Canada, Inc. will also have the ability to earn up to an additional 603,046,666 shares of our common stock subject to certain earn-out provisions more fully described in the Agreement. The Agreement was approved by a written consent by the majority of the Company's stockholders and by the Company’s Board of Directors. (See Note 10 Subsequent Events) | ||
On October 8, 2009, the Company completed an acquisition in the legal vertical market through the purchase of the assets and assumption of certain liabilities of LegalStore.com. LegalStore.com is an Internet based company that primarily sells legal supplies and legal forms. Despite sustained efforts from 2009 through 2012 to bring to market our customer relationship solutions product offerings, the Company was unable to secure the needed funding. As a result, in early 2013 the Company elected to change the strategic direction of the Company. On March 13, 2013, the Company entered into a stock sale agreement with Western Principal Partners LLC (“WPP”), a California Limited Liability Company. Pursuant to the Agreement, WPP purchased from the Company all the outstanding capital stock of the Company’s wholly-owned subsidiary, LegalStore.com, a Delaware Corporation. LegalStore.com was operating the Company’s e-commerce business. The Agreement was approved by a written consent by the majority of the Company's stockholders. In consideration of the sale, WPP agreed to pay to the Company total consideration of $210,000 including assumption of operating liabilities. Operating liabilities included, but are not limited to existing operating agreements, trade payables and certain tax obligations. The fair value of consideration received for the stock of LegalStore.com was less than the carrying value of the assets. As a result, an impairment charge was estimated as on December 31, 2012 in the amount of $35,000, net of income tax effect and a gain of $3,839 was recorded during the year ended December 31, 2013 (See Note 2 Discontinued Operations). | ||
In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 205-20 “Discontinued Operations-Other Presentation Matters” results of LegalStore.com operations are presented as discontinued operations on the consolidated balance sheets, statements of operations and statements of cash flows. | ||
Management's plans | ||
The accompanying consolidated financial statements have been prepared on a going concern basis. As shown in the accompanying consolidated financial statements, the Company incurred a loss of approximately $387,000 during the year ended December 31, 2013, has incurred accumulated losses totaling approximately $1,774,000, has a stockholders’ deficiency of approximately $329,000 and has a working capital deficit of approximately $131,000 at December 31, 2013. These factors, among others, indicate that the Company may be unable to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. | ||
The Company needs to raise additional financing to fund the Company’s operations for fiscal year 2014, to allow the Company to continue the development of its business plans and satisfy its obligations on a timely basis. Should additional financing not be available, the Company will have to negotiate with its lenders to extend the repayment dates of its indebtedness. There can be no assurance, however, that the Company will be able to successfully restructure its debt obligations in the event it fails to obtain additional financing. | ||
As discussed above, on January 7, 2014, Internet Media Services, Inc. entered into an Exchange of Securities Agreement with U-Vend Canada, Inc., and the shareholders of U-Vend. The Company believes the merger with U-Vend will provide it with business operations and also necessary working capital. The Company is in discussion for raising additional capital to execute on its current business plans. There is no assurance that future financing arrangements will be successful or that the operating results of U-Vend will yield sufficient cash flow to execute the Company’s business plans or satisfy its obligations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. | ||
Principles of Consolidation - The consolidated financial statements include the accounts of Internet Media Services, Inc. and the discontinued operations of its wholly-owned subsidiary (LegalStore.com, Inc.). All intercompany balances and transactions have been eliminated in consolidation. (See Note 10 Subsequent Events) | ||
Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired or as additional information is obtained. | ||
Income Taxes - The Company accounts for income taxes with the recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carryforwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized in the immediate future. | ||
The Company reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination resulting in an uncertain tax position. The Company did not have any material unrecognized tax benefit at December 31, 2013 or 2012. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2013 and 2012, the Company recognized no interest and penalties. | ||
Common Shares Issued - As of December 31, 2013 there were not adequate authorized shares to satisfy the current obligations upon conversion or exercise issued by the Company. Common shares issued are recorded based on the value of the shares issued or consideration received, including cash, services rendered or other non-monetary assets, whichever is more readily determinable. | ||
Preferred Stock Authorized - The Company has authorization for “blank check” preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to common stock. As of December 31, 2013 and 2012, there are 10,000,000 shares of preferred stock authorized, and no shares issued or outstanding. | ||
Fair Value of Financial Instruments- Financial instruments include cash, accounts receivable, accounts payable, accrued expenses, derivative warrant liabilities, revolving note from related party, convertible notes payables, and senior convertible notes payable. Fair values were assumed to approximate carrying values for these financial instruments, except for derivative warrant liabilities, convertible notes payable and senior convertible notes payable, since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the revolving note from related party approximates the carrying value of the obligations based on these instruments bearing interest at variable rates consistent with the current rates available to the Company. The senior convertible notes payable are recorded at face amount, net of any unamortized discounts, and have an estimated fair value of approximately $210,000 based on the underlying shares the notes can be converted into. The fair value was estimated using the trading price on December 31, 2013, since the underlying shares are trading in an active, observable market, the fair value measurement qualifies as a Level 1 input. The convertible notes payable are measured at fair value each reporting period, as further discussed in Note 4. The determination of the fair value of the derivative warrant liabilities includes unobservable inputs and is therefore categorized as a Level 3 measurement, as further discussed in Note 6. | ||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 “Fair Value Measurement” establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: | ||
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |
· | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
· | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | |
Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. | ||
As of December 31, 2013, there were not adequate authorized shares to satisfy the current obligations upon conversion or exercise issued by the Company. As of December 31, 2013, there were 1,604,270,805 (36,704,425 - 2012) shares potentially issuable under convertible debt agreements, options, and warrants that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the year. | ||
Subsequent to December 31, 2013, the Company issued approximately 819,000,000 shares related to its acquisition of U-Vend, including advisor fee shares, approximately 603,000,000 contingently issuable shares in conjunction with the U-Vend acquisition, and instruments convertible into approximately 3,300,000,000 shares (see Notes 3, 9, 10). Of the convertible instruments issued subsequent to year end, 43,000,000 were converted to common shares. | ||
Derivative Financial Instruments - The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Certain warrants the Company has issued have a “down round provision” and further, the Company does not have adequate shares authorized to accommodate the exercise of all outstanding equity instruments. As a result, the warrants are classified as derivative liabilities for accounting purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. | ||
Share-Based Compensation Expense - The Company accounts for stock-based compensation under the provisions of FASB ASC 718 “Stock Compensation.” This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period. | ||
Reclassifications - Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to current period presentation. These classifications had no effect on the results of operations or cash flows for the periods presented. |
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Discontinued operations | ' | ||||||||
DISCONTINUED OPERATIONS | ' | ||||||||
NOTE 2. DISCONTINUED OPERATIONS | |||||||||
On March 13, 2013, the Company entered into a stock sale agreement (“Agreement”) dated March 8, 2013 with Western Principal Partners LLC (“WPP”), a California Limited Liability Company. Pursuant to the Agreement, WPP purchased from the Company all the outstanding capital stock of the Company’s wholly-owned subsidiary, LegalStore.com, a Delaware Corporation. LegalStore.com was operating the Company’s e-commerce business. The Agreement was approved by a written consent by the majority of the Company's stockholders. In consideration of the sale, WPP paid the Company $95,000 at close and assumed certain operating liabilities. Operating liabilities included, but are not limited to existing operating agreements, trade payables and certain tax obligations. At December 31, 2012, the fair value of consideration received for the stock of LegalStore.com was less than the carrying value of the assets. As a result, an impairment charge was recorded on December 31, 2012 in the amount of $35,000, net of income tax effect. The Company used the proceeds for payment of its payables and for working capital purposes. | |||||||||
As a result of the board of directors committing to a plan to sell LegalStore.com prior to December 31, 2012, the related assets and liabilities are considered to be held for sale and are presented as discontinued operations on the balance sheet as of December 31, 2012. In accordance with FASB ASC 205-20 “Discontinued Operations” the Company has presented the results of LegalStore.com operations as discontinued operations in the accompanying statements of operations and statements of cash flows for the years ended December 31, 2013 and 2012. | |||||||||
The following table sets forth information regarding calculation of the gain recognized from the sale of LegalStore.com: | |||||||||
Net cash proceeds after brokerage fee of $21,000 | $ | 74,000 | |||||||
LegalStore.com liabilities assumed | 136,241 | ||||||||
Total purchase price | 210,241 | ||||||||
LegalStore.com assets | 206,402 | ||||||||
Gain on sale | $ | 3,839 | |||||||
The following table sets forth the carrying amounts of the major classes of assets and liabilities aggregated in discontinued operations in the consolidated balance sheet as of December 31, 2012: | |||||||||
Cash | $ | 379 | |||||||
Account receivable, net | 26,641 | ||||||||
Inventory | 89,440 | ||||||||
Current assets of discontinued operations | $ | 116,460 | |||||||
Property and equipment, net | $ | 1,532 | |||||||
Other intangibles, net | 97,560 | ||||||||
Noncurrent assets of discontinued operations | $ | 99,092 | |||||||
Accounts payable | $ | 92,684 | |||||||
Accrued expenses | 64,228 | ||||||||
$ | 156,912 | ||||||||
Discontinued Operations for the years ended December 31, 2013 and 2012 were as follows: | |||||||||
December 31, 2013 | December 31, 2012 | ||||||||
Revenue | $ | 95,241 | $ | 511,283 | |||||
Cost of revenue | 40,535 | 276,617 | |||||||
Gross profit | 54,706 | 234,666 | |||||||
Operating expenses | 35,532 | 237,524 | |||||||
Net income (loss) from discontinued operations | 19,174 | (2,858 | ) | ||||||
Write-down of assets associated with a discontinued component, net of taxes | - | (35,000 | ) | ||||||
Gain on disposal of discontinued operations | 3,839 | - | |||||||
$ | 23,013 | $ | (37,858 | ) | |||||
SENIOR_CONVERTIBLE_NOTES
SENIOR CONVERTIBLE NOTES | 12 Months Ended |
Dec. 31, 2013 | |
Senior Convertible Notes | ' |
SENIOR CONVERTIBLE NOTES | ' |
NOTE 3. SENIOR CONVERTIBLE NOTES | |
In August 2013, the Company entered into a Securities Purchase Agreement ("SPA") dated June 18, 2013 with Cobrador Multi-Strategy Partners, LP ("Investor") pursuant to which the Investor will provide an aggregate of $400,000 financing through senior convertible notes and warrants. The financing and the related terms are dependent on several conditions including the Company's merger with U-Vend, which was completed on January 7, 2014 (see Note 10), and the Company effecting certain changes in its capital structure. | |
During the third and fourth quarters of 2013, the Company issued five senior convertible notes ("Senior Convertible Notes") to the Investor in the aggregate principal amount of $200,000 along with Series A and Series B warrants ("Warrants") to the Investor to acquire shares of common stock in the Company. The SPA, Senior Convertible Notes, Warrants and other ancillary agreements with the Investor are referred to as the “Financing Agreement.” Each Senior Convertible Note under the Financing Agreement is for a term of one year and bears interest at 7% payable in cash or shares of the Company's common stock, and provides for an increase in the rate of interest if there is a default as defined in the Financing Agreement. | |
The Investor can convert $150,000 of outstanding principal into shares of the Company's common stock at a conversion price of $0.001 per share, and $50,000 of outstanding principal amounts into shares of the Company’s common stock at $0.00025 per share, subject to an adjustment with a minimum adjusted conversion price of $0.00015 per share. The conversion price is subject to certain anti-dilution protection; for example, if the Company issues shares for a consideration less than the applicable conversion price, the conversion price is reduced to such amount. The Investor agreed to restrict its ability to convert the Senior Convertible Note and receive shares of the Company if the number of shares of common stock beneficially held by the lender and its affiliates in the aggregate after such conversion exceeds 4.99% of the then outstanding shares of common stock. However, this limitation does not preclude the holder from converting notes payable into common stock after selling shares owned into the market. As of December 31, 2013, the Senior Convertible Notes were convertible into 350,000,000 shares of common stock, without taking into account the 4.99% limitation on ownership. | |
Through December 31, 2013, the Company issued the Investor an aggregate 525 million Series A warrants and 525 million Series B warrants. The Series A warrants have exercise prices ranging from $0.001 to $0.00025 and the Series B warrants have exercise prices ranging from $0.0012 to $0.0003. Series A warrants expire in 15 months from the date of issuance and series B warrants expire in five years from the date of issuance. | |
The Company allocated the $200,000 of proceeds received from the Senior Convertible Notes based on the computed fair values of the Senior Convertible Note and Warrants issued. The Company valued the Warrants at fair value of $168,895 after reflecting additional debt discount and warrant liability. Accordingly, the resulting fair value allocated to the debt component of $31,105 was used to measure the intrinsic value of the embedded conversion option of the Senior Convertible Notes, which resulted in a beneficial conversion feature of $31,105 recorded to additional paid-in capital. The value of the beneficial conversion feature was limited to the amount of the proceeds allocated to the debt component of the Senior Convertible Notes. The aggregate amounts allocated to the warrants and beneficial conversion feature of $200,000 were recorded as a debt discount at the date of issuance and are being amortized to interest expense over the term of Senior Convertible Notes under the interest method of accounting. The initial carrying value was $0 after the debt discounts. As of December 31, 2013, the Senior Convertible Notes had a face value of $200,000 net of unamortized debt discounts of $143,751, resulting in a carrying amount of $56,249. During the year ended December 31, 2013, $56,249 of discount has been amortized and recorded as interest expense. | |
The Warrants issued have a “down round provision” and further, the Company does not have adequate shares authorized to accommodate the exercise of all outstanding equity instruments. As a result, the Warrants are classified as derivative liabilities for accounting purposes. The derivative warrant liabilities are marked to market at each balance sheet date. The fair value of these warrants was measured at $168,895 upon issuance and at December 31, 2013. The fair value of the warrants was determined based on the consideration of the enterprise value of the Company, the limited market of the shares issuable under the agreement and modeling of the Black Scholes valuations using multiple volatility assumptions. Due to certain unobservable inputs in the fair value calculations of the warrants, derivative warrant liabilities are classified as Level 3. | |
Financing costs of $23,500 paid or payable to third parties associated with the Senior Convertible Notes are included in deferred financing costs on the balance sheet, and are amortized to interest expense over the one year term of the respective Senior Convertible Note. | |
The Company and the Investor have entered into a registration rights agreement covering the registration of common stock underlying the Senior Convertible Notes the Warrants. The Company is required to file a registration statement within 120 days after completion of the acquisition of U-Vend and meet an effectiveness deadline of 165 days after the closing date of the acquisition, 195 days if the Securities and Exchange Commission provides comment. If the Company fails to comply with the terms of the registration rights agreement, the Investor would be entitled to an amount in cash equal to one percent (1%) of the Investor’s original principal amount stated in each Senior Convertible Note on the date of the failure and monthly thereafter until failure is cured and all registration rights have been paid. Management believes the registration statement will be filed and effective timely, and as of December 31, 2013, the Company has not accrued any amount for potential registration rights penalties. | |
Subsequent to December 31, 2013, the Company borrowed an additional $125,000 at a conversion price of $0.00025 pursuant to the SPA and issued the Investor 750 million Series A warrants with an exercise price of $0.00025 per share and 750 million Series B warrants with an exercise price of $0.0003 per share under previously described terms. |
NOTES_PAYABLE
NOTES PAYABLE | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Notes Payable [Abstract] | ' | ||||
NOTES PAYABLE | ' | ||||
NOTE 4. NOTES PAYABLE | |||||
During 2011, the Company issued three Convertible Promissory Notes (“Notes”) in the aggregate principal amount of $117,500. The Notes, which are due on various dates between May and September, 2012, bear interest at the rate of 8% per annum, with a provision for additional interest under certain circumstances, are unsecured and are convertible into shares of the Company's common stock at the election of lender at any time after 180 days from the date of the Note issuance at a conversion price equal to a 41% discount (for two Notes) or 42% discount (for one Note) to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The conversion price is subject to certain anti-dilution protection; for example, if the Company issues shares for a consideration less than the applicable conversion price, the conversion price is reduced to such amount. The lender agreed to restrict its ability to convert the Note and receive shares of the Company if the number of shares of common stock beneficially held by the lender and its affiliates in the aggregate after such conversion exceeds 4.99% of the then outstanding shares of common stock. On March 2, 2012, the lender elected to partially convert one Note in the principal amount of $8,000 into shares of the Company stock and was issued 338,983 shares of common stock by the Company pursuant to the terms of the Note. The fair value of the note converted and shares issued was $16,949. | |||||
As of December 31, 2012, the outstanding principal of the three Notes amounted to $109,500 and the maximum number of common shares the note could be converted into based on 4.99% of the outstanding shares was 1,229,431 shares. As of December 31, 2012 the three convertible promissory notes had become due and payable along with any unpaid interest on various dates between May and September 2012. The aggregate outstanding principal of $109,500 plus unpaid interest had not been paid on the maturity dates. As a result, the three convertible promissory notes are considered to be in default and therefore, due and payable in an amount equal to the Default Sum as defined in the agreement. The Default Sum is equal to 150% of the sum of the unpaid principal, unpaid interest and unpaid default interest, which amounted to $193,954 in aggregate as of December 31, 2012. Further, the default interest rate for the three convertible notes during the default period was increased to 22%. On November 7, 2012, the Company received a demand notice requesting payment for the Default Sum owed together with all unpaid interest. During the year ended December 31, 2013, the lender elected to convert all Convertible Promissory Notes principal amount, plus default sum and accrued interest aggregating to $285,734 into shares of the Company’s common stock. As a result, 147,881,704 shares of common stock were issued by the Company in 2013 pursuant to the terms of the Convertible Promissory Notes. | |||||
As of December 31, 2013 all outstanding principal on the Notes had been satisfied through conversion to common stock. All outstanding accrued interest on the Notes was converted into common stock during the first quarter of 2014. | |||||
Under FASB ASC 480 “Distinguishing Liabilities from Equity,” the Company determined the Notes are liabilities reported at fair value because the Notes will be convertible into a variable number of common shares at fixed monetary amount, known at inception. The Notes are to be subsequently measured at fair value at each reporting period, with changes in fair value being recognized in earnings. The fair value of the Notes is measured by calculating possible outcomes of conversion to common shares and repayment of the Notes, then weighting the probability of each possible outcome according to management’s estimates. Management has determined that the most likely outcome will be conversion at the default sum and the fair value of the Notes is equal to the estimated fair value of equity securities the Company will issue upon conversion. The fair value measurement is classified as a Level 3 in the valuation hierarchy. The following table is a roll forward of the Notes fair value: | |||||
Fair value as of December 31, 2011 | $ | 223,224 | |||
Changes in fair value and adjustment for default provision | 105,009 | ||||
Adjustments for conversion | (48,199 | ) | |||
Fair value as of December 31, 2012 | 280,034 | ||||
Adjustments for conversion | (280,034 | ) | |||
Fair value as of December 31, 2013 | $ | - |
REVOLVING_NOTE_FROM_RELATED_PA
REVOLVING NOTE FROM RELATED PARTY | 12 Months Ended |
Dec. 31, 2013 | |
Revolving Note From Related Party | ' |
REVOLVING NOTE FROM RELATED PARTY | ' |
NOTE 5. REVOLVING NOTE FROM RELATED PARTY | |
Revolving Credit Agreement | |
The Company has a revolving credit agreement with Mr. Raymond Meyers, a shareholder and chief executive officer of the Company. This credit agreement allows borrowings up to $282,000, and has been amended to extend the agreement through June 30, 2014. The outstanding balance on the credit agreement bears interest at an annual rate of 6% above one year LIBOR (6.6% as of December 31, 2013), and is secured by all of the assets of the Company. | |
In September 2013, Mr. Meyers requested payment of $86,591 of the outstanding revolving credit balance in newly issued common stock of the Company, which the Company’s Board of Director’s approved. The terms of the conversion were established and approved by the Company’s Board of Directors to be the average lowest bid price of the Company’s common stock on the prior ten business days. On September 17, 2013, the repayment amount of $86,591was converted to 36,260,596 shares. On December 16 and December 30, 2013, Mr. Meyers converted $80,746 and $145,980, respectively of principal and accrued interest outstanding to shares of the Company’s common stock in accordance with the revolving credit agreement. The outstanding interest and principal at these dates were converted at $0.0008 per share, which reflected the average lowest bid price of the Company’s common stock for the prior ten days as prescribed in the agreement. As a result, an aggregate of 280,475,000 common shares were issued to Mr. Meyers in connection with these conversions. | |
As a result of the conversions, as of December 31, 2013 the revolving credit line had no outstanding balance ($281,228 - December 31, 2012). Future borrowings wil be at the descretion of Mr. Meyers. For the years ended December 31, 2013 and 2012, interest expense under this note amounted to $16,926 and $17,814, respectively. As of December 31, 2013, accrued interest amounted to $2,934 ($39,112 - 2012), which is included in accrued expenses in the accompanying balance sheet. Under the terms of the agreement the Company is required to comply with various covenants. In the event of default and upon the expiration of any applicable cure period, Mr. Meyers, in his sole discretion may request repayment in the form of newly issued common stock of the Company. | |
Accrued Salary – Mr. Meyers | |
During 2013, the Company recorded salary expense for Mr. Meyers in the amount of $15,000 per month, as approved by the Company’s board of directors. As of December 31, 2013, $142,608 of this salary was unpaid and recorded as accrued expenses on the balance sheet. Mr. Meyers did not receive a salary in fiscal year 2012 and no amount was accrued at December 31, 2012. | |
Note Payable – Director | |
On August 29, 2013, the Company borrowed from an individual who is a director of the Company, $50,000 pursuant to a promissory note. The promissory note matures in one year from the date of the borrowing and bears interest at 8% per annum. For the year ended December 31, 2013, interest expense under this note amounted to $1,340 ($0 - 2012). As of December 3, 2013, accrued interest expense amounted to $1,000 ($0 - 2012). Interest is paid monthly. | |
STOCKHOLDERS_DEFICIENCY
STOCKHOLDERS' DEFICIENCY | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Stockholders Deficiency | ' | |||||||||
STOCKHOLDERS' DEFICIENCY | ' | |||||||||
NOTE 6. STOCKHOLDERS’ DEFICIENCY | ||||||||||
On September 12, 2013 and December 19, 2013, the majority of the shareholders of the Company approved in two written consents, an amendment to the Company’s Certificate of Incorporation, increasing the number of authorized shares of common stock from 100,000,000 to 300,000,000, then from 300,000,000 to 600,000,000, respectively. The increase in authorized shares was affected pursuant to a Certificate of Amendment to the Certificate of Incorporation filed with the Secretary of State of the State of Delaware. | ||||||||||
As of December 31, 2013, there were not adequate authorized shares to satisfy the current obligations upon conversion or exercise of all equity instruments issued by the Company. As a result, the all warrants have been measured at fair market value and are presented in the balance sheet as liabilities. Warrants issued in and prior to 2012 are significantly out of the money and diluted therefore, management has deemed the fair value of these to be de minimis. The fair value of warrants issued in 2013 are determined based on the consideration of the enterprise value of the Company, the limited market of the shares issuable under the agreement and modeling of the Black Scholes valuations using multiple volatility assumptions. Due to certain unobservable inputs in the fair value calculations of the warrants, derivative warrant liabilities are classified as Level 3. | ||||||||||
During the year ended December 31, 2013, the Company issued 1,050,000,000 warrants to the Senior Convertible Notes holder (see Note 3) and 197,250,000 warrants to the Lessor provided an equipment lease financing line jointly to U-Vend and the Company. | ||||||||||
On March 21, 2012, the Company sold in a private placement 50,000 shares of its common stock and warrants to acquire 50,000 shares of the Company stock at an exercise price of $0.15 for total proceeds of $5,000. The warrants have a contractual term of three years. The fair value of warrants issued in the private placement is minor. In April 2012, the Company sold in a private placement 100,000 shares of its common stock and warrants to acquire 100,000 shares of the Company stock at an exercise price of $0.15 for total proceeds of $5,000. The warrants have a contractual term of three years. The fair value of warrants issued in the private placement is minor. In December 2012, the Company sold in a private placement 50,000 shares of its common stock for $500. | ||||||||||
The fair value of derivative warrant liabilities is as follows: | ||||||||||
Fair value as of December 31, 2012 | $ | - | ||||||||
Derivative warrant liabilities issued | 214,609 | |||||||||
Change in fair value | - | |||||||||
Fair value as of December 31, 2013 | $ | 214,609 | ||||||||
Outstanding warrant securities consist of the following at December 31, 2013: | ||||||||||
Exercise | ||||||||||
Warrants | Price | Expiration | ||||||||
2,500,000 | $ | 0.3 | Mar-18 | |||||||
2011 Common share private placement warrants | ||||||||||
2011 Convertible notes warrants | 16,667 | $ | 0.3 | Jun-14 | ||||||
2012 Private placements warrants | 150,000 | $ | 0.15 | March - April 2015 | ||||||
2013 Series A warrants Senior Convertible Notes | 225,000,000 | $ | 0.001 | October-November 2014 | ||||||
2013 Series A warrants Senior Convertible Notes | 300,000,000 | $ | 0.00025 | January 2014 - March 2015 | ||||||
2013 Series B warrants Senior Convertible Notes | 225,000,000 | $ | 0.0012 | June-August 2018 | ||||||
2013 Series B warrants Senior Convertible Notes | 300,000,000 | $ | 0.0003 | October - December 2018 | ||||||
2013 Lease obligation with U-Vend | 197,250,000 | $ | 0.006 | Nov-16 | ||||||
1,249,916,667 | ||||||||||
Outstanding warrant securities consist of the following at December 31, 2012: | ||||||||||
Warrants | Exercise Price | Expiration | ||||||||
2011 Common share private placement warrants | 2,500,000 | $ | 0.3 | Mar-18 | ||||||
2011 Convertible Notes warrants | 16,667 | $ | 0.3 | Jun-14 | ||||||
2012 Private Placements warrants | 150,000 | $ | 0.15 | March - April 2015 | ||||||
2,666,667 |
EQUITY_INCENTIVE_PLAN
EQUITY INCENTIVE PLAN | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Equity Incentive Plan | ' | ||||||||||||
EQUITY INCENTIVE PLAN | ' | ||||||||||||
NOTE 7. EQUITY INCENTIVE PLAN | |||||||||||||
On July 22, 2011, the Board of Directors of the Company approved the Company’s 2011 Equity Incentive Plan (the “Plan”) and on July 26, 2011, shareholders holding a majority of shares of the Company approved, by written consent, the Plan. The total number of shares of common stock available for issuance under the Plan is 5,000,000 shares. Awards may be granted to employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its related companies. Such options may be designated at the time of grant as either incentive stock options or nonqualified stock options. Stock based compensation includes expense charges related to all stock-based awards. Such awards include options, warrants and stock grants. Generally, the Company issues stock options that vest over three years and expire in 5 to 10 years. | |||||||||||||
The Company records shares based payments under the provisions of FASB ASC 718 "Compensation - Stock Compensation." Stock based compensation expense is recognized over the requisite service period based on the grant date fair value of the awards. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. | |||||||||||||
The Company estimated the expected volatility based on data used by its peer group of public companies. The expected term was estimated using the simplified method. The risk-free interest rate assumption was determined using the equivalent U.S. Treasury bonds yield over the expected term. The Company has never paid any cash dividends and does not anticipate paying any cash dividends in the foreseeable future. Therefore, the Company assumed an expected dividend yield of zero. | |||||||||||||
A summary of all stock option activity for the years ended December 31, 2013 and 2012 is as follows: | |||||||||||||
Weighted Average | Weighted Average | Aggregate Intrinsic | |||||||||||
Options | Exercise Price | Contractual life | Value | ||||||||||
Outstanding at December 31, 2011 | 3,015,000 | $ | 0.27 | ||||||||||
Options cancelled | -355,000 | 0.1 | |||||||||||
Outstanding at December 31, 2012 | 2,660,000 | 0.29 | |||||||||||
Options cancelled | -30,000 | 0.1 | |||||||||||
Outstanding at December 31, 2013 | 2,630,000 | 0.29 | 5.7 years | $ | - | ||||||||
Exercisable at December 31, 2013 | 1,753,333 | $ | 0.29 | 5.7 years | $ | - | |||||||
The Company did not grant any options during the years ended December 31, 2013 or 2012 and no options were exercised during the years ended December 31, 2013 or 2012. The fair value of options that vested during the year ended December 31, 2013 amounted to $23,400. The Company recorded stock compensation expense for options vesting during the years ended December 31, 2013 and 2012 of $23,496 and $24,796, respectively. | |||||||||||||
At December 31, 2013, there was approximately $10,000 of unrecognized compensation cost related to non-vested options. This cost is expected to be recognized over a weighted average period of approximately 0.5 years. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Taxes | ' | ||||||||
INCOME TAXES | ' | ||||||||
NOTE 8. INCOME TAXES | |||||||||
Following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Current: | |||||||||
Federal | $ | - | $ | - | |||||
State | 2,200 | 3,644 | |||||||
Total current | 2,200 | 3,644 | |||||||
Deferred | |||||||||
Federal | (128,472 | ) | (119,282 | ) | |||||
State | (15,983 | ) | (37,514 | ) | |||||
Total deferred | (144,455 | ) | (156,796 | ) | |||||
Less increase in allowance | 144,455 | 157,337 | |||||||
Net deferred | - | 541 | |||||||
Total income tax provision | $ | 2,200 | $ | 4,185 | |||||
Individual components of deferred taxes are as follows as of December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Deferred tax assets (liabilities): | |||||||||
Net operating loss carryforwards | $ | 499,696 | $ | 419,720 | |||||
Depreciable and amortizable assets | - | 20,938 | |||||||
Prepaid expense | (888 | ) | (1,001 | ) | |||||
Fair market value adjustments | - | 52,580 | |||||||
Stock based compensation | 15,769 | 9,437 | |||||||
Beneficial conversion feature | (8,623 | ) | - | ||||||
Bad debt reserve | - | 766 | |||||||
Accrued salary | 54,519 | - | |||||||
Total | 560,473 | 502,440 | |||||||
Less valuation allowance | (560,473 | ) | (502,440 | ) | |||||
Net deferred tax (liabilities) | $ | - | $ | - | |||||
The Company has approximately $1,308,000 in net operating loss carryforwards (“NOLs”) available to reduce future taxable income. These carryforwards begin to expire in year 2029. Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in the future and utilize the NOLs before they expire, the Company has recorded a valuation allowance to fully offset the NOLs, and the total net deferred tax assets, as well. | |||||||||
Internal Revenue Code Section 382 ("Section 382") imposes limitations on the availability of a company's net operating losses and other corporate tax attributes as ownership changes occur. As a result of the historical equity transactions of the Company, a Section 382 ownership change may have occurred and a study will be required to determine the date of the ownership change, if any. The amount of the Company's net operating losses and other tax attributes incurred prior to the ownership change may be limited based on the Company's value. A full valuation allowance has been established for the Company's deferred tax assets, including net operating losses and other corporate tax attributes. Accordingly, any limitation resulting from Section 382 application is note expected to have a material effect on the balance sheets or statements of operations of the Company. | |||||||||
During the years ended December 31, 2013 and 2012 the Company had no unrecognized tax benefits. The Company’s policy is to recognize interest accrued and penalties related to unrecognized tax benefits in tax expense. | |||||||||
The Company files income tax returns in the U.S. federal jurisdiction and in the states of California and New York. The tax years 2010-2013 generally remain open to examination by these taxing authorities. In addition, the 2009 tax year is still open for the state of California. | |||||||||
The differences between United States statutory Federal income tax rate and the effective income tax rate in the accompanying consolidated statements of operations are as follows: | |||||||||
2013 | 2012 | ||||||||
Statutory United States Federal rate | 34.00% | 34.00% | |||||||
State income taxes net of federal benefit | 2.20% | 3.60% | |||||||
Change in valuation reserves | -36.20% | -40.50% | |||||||
Permanent differences | -0.60% | -1.50% | |||||||
Other | - | 3.30% | |||||||
Effective tax rate (provision) | -0.60% | -1.10% |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments And Contingencies | ' | ||||
COMMITMENTS AND CONTINGENCIES | ' | ||||
NOTE 9. COMMITMENTS AND CONTINGENCIES | |||||
Capital Lease Obligation with U-Vend | |||||
Prior to the merger with U-Vend described in Note 10, the Company and U-Vend jointly entered into a term sheet dated October 15, 2013 with a financing company (“Lessor”) to provide for equipment lease financing in the aggregate amount of $1 million. The Company and U-Vend will use this financing to acquire certain equipment to be used in the direct income producing activities of U-Vend. | |||||
In accordance with FASB ASC 405-40 “Obligations Resulting from Joint and Several Liability Arrangements,” these lease obligations have not been recorded by the Company based on the expectation that U-Vend will use the leased assets in its operations and satisfy the payment obligations. However, the Company would be responsible for the lease payments should U-Vend default on the lease obligation and fail to make payments. | |||||
Per the terms of the agreement with the Lessor, the Company and U-Vend will be obligated to pay $57,200 annually and also buy the equipment from the Lessor for approximately $86,000 in November 2016. The following schedule provides minimum future rental payments required under this lease obligation which have a remaining non-cancelable lease term in excess of one year: | |||||
2014 | $ | 57,200 | |||
2015 | 57,200 | ||||
2016 | 52,434 | ||||
Total minimum lease payments | 166,834 | ||||
Guaranteed residual value | 86,191 | ||||
$ | 253,025 | ||||
The Lessor was induced to extend the equipment lease line with a grant of 197,250,000 common stock warrants with a term of three years and an exercise price of $0.0006 per share. The warrant was determined to have a fair value of $45,174, which was recorded as a discount to the capital lease obligation carried on the books of U-Vend. The warrant obligation has been included in derivative warrant liabilities and receivable from U-Vend Canada, Inc. on the Company’s balance sheet at December 31, 2013. | |||||
The Company and the Lessor have entered into a registration rights agreement covering the registration of 110% of common stock underlying the Warrants. The Company is required to file a registration statement within 45 days after completion of the acquisition of U-Vend and meet an effectiveness deadline of 90 days after the closing date of the acquisition, 120 days if the Securities and Exchange Commission provides comment. If the Company fails to comply with the terms of the registration rights agreement, the Lessor would be entitled to an amount in cash equal to one percent (1%) of the Lessor’s original lease amount on the date of the failure and monthly thereafter until failure is cured and all registration rights have been paid. Management does not believe that the potential registration rights penalties related to this agreement will be significant. | |||||
Subsequent to December 31, 2103, the Company and U-Vend assumed additional lease obligations for leased equipment of approximately $100,000 and issued 47,562,211 warrants with an exercise price of $0.001 and expire three years from the date of issuance. As a result of the additional lease financing, U-Vend will place 15 kiosks into service during the second quarter of 2014. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Subsequent Events [Abstract] | ' | ||||||||
SUBSEQUENT EVENTS | ' | ||||||||
NOTE 10. SUBSEQUENT EVENTS | |||||||||
Merger with U-Vend Canada, Inc. | |||||||||
On January 7, 2014, the Company entered into an Exchange of Securities Agreement with U-Vend Canada, Inc. Pursuant to the agreement, the Company acquired all the outstanding shares of U-Vend in exchange for 466,666,667 shares of the Company’s common stock. Certain shareholders of U-Vend Canada, Inc. will also have the ability to earn up to an additional 603,046,666 shares of the Company’s common stock subject to certain earn-out provisions based on targeted revenue achievement in 2014 and 2015. Effective on January 7, 2104, as a result of the merger, U-Vend became a wholly owned subsidiary of the Company. In connection with the merger, the Company issued on the closing date, its securities to U-Vend’s shareholders in exchange for the common stock owned by U-Vend’s shareholders as follows: an aggregate of 466,666,667 shares of the Company’s common stock, par value $0.001 per share. In addition, the Company issued an aggregate of 352,422,184 shares of Common Stock and 822,787,600 warrants to financial advisors as compensation for their services in connection with the transaction contemplated by the merger agreement. | |||||||||
U.S. GAAP, requires that for each business combination, one of the combining entities shall be identified as the acquirer and the existence of a controlling financial interest shall be used to identify the acquirer in a business combination. In a business combination effected primarily by exchanging equity interests, the acquirer is usually is the entity that issues its equity interests. In accordance with FASB ASC 805 “Business Combinations”, if a business combination has occurred, but it is not clear which of the combining entities is the acquirer, U.S. GAAP requires considering additional factors in making that determination. These factors include the relative voting rights of the combined entity, the composition of the governing body of the combined entity, the composition of senior management in the combined entity and the relative size of the combining entities. | |||||||||
Based on the aforementioned and after taking in consideration all the relevant facts and circumstances, management came to the conclusion that Internet Media Services, Inc., as the legal acquirer was also the accounting acquirer in the transaction. As a result, the merger will be accounted for as a business combination in accordance with the FASB ASC 805. Under the guidance, consideration, including contingent consideration, the assets and liabilities of U-Vend are recorded at their estimated fair value on the date of the acquisition. The excess of the purchase price over the estimated fair values is recorded as goodwill, if any. If the fair value of the assets acquired exceeds the purchase price and the liabilities assumed, then a bargain purchase gain on acquisition is recorded. | |||||||||
U-Vend is in the business of developing, marketing and distributing various self-serve electronic kiosks and mall/airport co-branded islands throughout North America. U-Vend has four market segments; Environmental, Retail, Service and Mall/Airport Islands with a primary focus on Environmental and Retail. U-Vend seeks to place its kiosks in high-traffic host locations such as big box stores, restaurants, malls, airports, casinos, universities, and colleges. Currently, U-Vend owns and operates their kiosks, but intends to also provide the kiosks, through a distributor relationship, to the entrepreneur wanting to own their own business. | |||||||||
The Company is still in the process of determining the fair value of the consideration paid, which will include shares, contingent shares and the effective settlement of amounts owed to the Company by U-Vend, as well as the fair value of the assets acquired and liabilities assumed. These assets and liabilities are expected to include working capital items, fixed assets, separately identifiable intangible assets, capital lease obligations, convertible notes payable, deferred taxes and goodwill, if any. This evaluation will be completed during the measurement period following the acquisition. | |||||||||
The unaudited pro forma condensed results for the consolidated statement of operations from continued operations for the years ended December 31, 2013 and 2012 of the combined entity had the acquisition date been January 1, 2012 are as follows: | |||||||||
2013 | 2012 | ||||||||
Revenue | $ | 23,592 | $ | 5,094 | |||||
Operating loss | $ | (683,615 | ) | $ | (345,120 | ) | |||
Net loss | $ | (808,354 | ) | $ | (509,160 | ) | |||
Basic and diluted earnings per share | $ | (0.00 | ) | $ | (0.00 | ) | |||
Reverse Stock Split | |||||||||
On January 7, 2014, the holders of more than 50 percent of the outstanding shares of the Company’s common stock voted in favor of a corporate resolution authorizing the reverse split of its common stock (“Reverse Split”) on the basis of one share of common stock for up to each 200 shares of common stock outstanding, on the effective date of the Reverse Split. The Board of Directors shall determine the exact number of shares to be split and the timing of the Reverse Split, in its sole discretion. The Reverse Split may be declared as effective by the Company’s Board of Directors at any time before June 30, 2014, subject to FINRA and other regulatory approvals. This split has not been reflected in the share amounts presented throughout this document. |
NATURE_OF_BUSINESS_AND_SUMMARY1
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |
Dec. 31, 2013 | ||
Nature Of Business And Summary Of Significant Accounting Policies Policies | ' | |
Principles of Consolidation | ' | |
Principles of Consolidation - The consolidated financial statements include the accounts of Internet Media Services, Inc. and the discontinued operations of its wholly-owned subsidiary (LegalStore.com, Inc.). All intercompany balances and transactions have been eliminated in consolidation. (See Note 10 Subsequent Events) | ||
Use of Estimates | ' | |
Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired or as additional information is obtained. | ||
Income Taxes | ' | |
Income Taxes - The Company accounts for income taxes with the recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carryforwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized in the immediate future. | ||
The Company reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination resulting in an uncertain tax position. The Company did not have any material unrecognized tax benefit at December 31, 2013 or 2012. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2013 and 2012, the Company recognized no interest and penalties. | ||
Common Shares Issued and Preferred Stock Authorized | ' | |
Common Shares Issued - As of December 31, 2013 there were not adequate authorized shares to satisfy the current obligations upon conversion or exercise issued by the Company. Common shares issued are recorded based on the value of the shares issued or consideration received, including cash, services rendered or other non-monetary assets, whichever is more readily determinable. | ||
Preferred Stock Authorized - The Company has authorization for “blank check” preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to common stock. As of December 31, 2013 and 2012, there are 10,000,000 shares of preferred stock authorized, and no shares issued or outstanding. | ||
Fair Value of Financial Instruments | ' | |
Fair Value of Financial Instruments- Financial instruments include cash, accounts receivable, accounts payable, accrued expenses, derivative warrant liabilities, revolving note from related party, convertible notes payables, and senior convertible notes payable. Fair values were assumed to approximate carrying values for these financial instruments, except for derivative warrant liabilities, convertible notes payable and senior convertible notes payable, since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the revolving note from related party approximates the carrying value of the obligations based on these instruments bearing interest at variable rates consistent with the current rates available to the Company. The senior convertible notes payable are recorded at face amount, net of any unamortized discounts, and have an estimated fair value of approximately $210,000 based on the underlying shares the notes can be converted into. The fair value was estimated using the trading price on December 31, 2013, since the underlying shares are trading in an active, observable market, the fair value measurement qualifies as a Level 1 input. The convertible notes payable are measured at fair value each reporting period, as further discussed in Note 4. The determination of the fair value of the derivative warrant liabilities includes unobservable inputs and is therefore categorized as a Level 3 measurement, as further discussed in Note 6. | ||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 “Fair Value Measurement” establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: | ||
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |
· | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
· | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | |
Earnings Per Common Share | ' | |
Earnings Per Common Share - The Company presents basic and diluted earnings per share. Basic earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. | ||
As of December 31, 2013, there were not adequate authorized shares to satisfy the current obligations upon conversion or exercise issued by the Company. As of December 31, 2013, there were 1,604,270,805 (36,704,425 - 2012) shares potentially issuable under convertible debt agreements, options, and warrants that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the year. | ||
Subsequent to December 31, 2013, the Company issued approximately 819,000,000 shares related to its acquisition of U-Vend, including advisor fee shares, approximately 603,000,000 contingently issuable shares in conjunction with the U-Vend acquisition, and instruments convertible into approximately 3,300,000,000 shares (see Notes 3, 9, 10). Of the convertible instruments issued subsequent to year end, 43,000,000 were converted to common shares. | ||
Derivative Financial Instruments | ' | |
Derivative Financial Instruments - The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Certain warrants the Company has issued have a “down round provision” and further, the Company does not have adequate shares authorized to accommodate the exercise of all outstanding equity instruments. As a result, the warrants are classified as derivative liabilities for accounting purposes. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. | ||
Share-Based Compensation Expense | ' | |
Share-Based Compensation Expense - The Company accounts for stock-based compensation under the provisions of FASB ASC 718 “Stock Compensation.” This statement requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period in which the employee is required to provide service in exchange for the award, which is usually the vesting period. | ||
Reclassifications | ' | |
Reclassifications - Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to current period presentation. These classifications had no effect on the results of operations or cash flows for the periods presented. |
DISCONTINUED_OPERATIONS_Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | ||||||||
Schedule of gain from the sale of discontinued operation | ' | ||||||||
The following table sets forth information regarding calculation of the gain recognized from the sale of LegalStore.com: | |||||||||
Net cash proceeds after brokerage fee of $21,000 | $ | 74,000 | |||||||
LegalStore.com liabilities assumed | 136,241 | ||||||||
Total purchase price | 210,241 | ||||||||
LegalStore.com assets | 206,402 | ||||||||
Gain on sale | $ | 3,839 | |||||||
Schedule of major calsses of assets and liabilities in discontinued operations | ' | ||||||||
The following table sets forth the carrying amounts of the major classes of assets and liabilities aggregated in discontinued operations in the consolidated balance sheet as of December 31, 2012: | |||||||||
Cash | $ | 379 | |||||||
Account receivable, net | 26,641 | ||||||||
Inventory | 89,440 | ||||||||
Current assets of discontinued operations | $ | 116,460 | |||||||
Property and equipment, net | $ | 1,532 | |||||||
Other intangibles, net | 97,560 | ||||||||
Noncurrent assets of discontinued operations | $ | 99,092 | |||||||
Accounts payable | $ | 92,684 | |||||||
Accrued expenses | 64,228 | ||||||||
$ | 156,912 | ||||||||
Schedule of discontinued operations | ' | ||||||||
Discontinued Operations for the years ended December 31, 2013 and 2012 were as follows: | |||||||||
December 31, 2013 | December 31, 2012 | ||||||||
Revenue | $ | 95,241 | $ | 511,283 | |||||
Cost of revenue | 40,535 | 276,617 | |||||||
Gross profit | 54,706 | 234,666 | |||||||
Operating expenses | 35,532 | 237,524 | |||||||
Net income (loss) from discontinued operations | 19,174 | (2,858 | ) | ||||||
Write-down of assets associated with a discontinued component, net of taxes | - | (35,000 | ) | ||||||
Gain on disposal of discontinued operations | 3,839 | - | |||||||
$ | 23,013 | $ | (37,858 | ) |
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Notes Payable Tables | ' | ||||
Rollforward schedule of fair value of notes payable | ' | ||||
The following table is a roll forward of the Notes fair value: | |||||
Fair value as of December 31, 2011 | $ | 223,224 | |||
Changes in fair value and adjustment for default provision | 105,009 | ||||
Adjustments for conversion | (48,199 | ) | |||
Fair value as of December 31, 2012 | 280,034 | ||||
Adjustments for conversion | (280,034 | ) | |||
Fair value as of December 31, 2013 | $ | - |
STOCKHOLDERS_DEFICIENCY_Tables
STOCKHOLDERS' DEFICIENCY (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Stockholders Deficiency Tables | ' | |||||||||
Schedule of fair value of derivative warrant liabilities | ' | |||||||||
The fair value of derivative warrant liabilities is as follows: | ||||||||||
Fair value as of December 31, 2012 | $ | - | ||||||||
Derivative warrant liabilities issued | 214,609 | |||||||||
Change in fair value | - | |||||||||
Fair value as of December 31, 2013 | $ | 214,609 | ||||||||
Schedule of outstanding warrant securities | ' | |||||||||
Outstanding warrant securities consist of the following at December 31, 2013: | ||||||||||
Exercise | ||||||||||
Warrants | Price | Expiration | ||||||||
2,500,000 | $ | 0.3 | Mar-18 | |||||||
2011 Common share private placement warrants | ||||||||||
2011 Convertible notes warrants | 16,667 | $ | 0.3 | Jun-14 | ||||||
2012 Private placements warrants | 150,000 | $ | 0.15 | March - April 2015 | ||||||
2013 Series A warrants Senior Convertible Notes | 225,000,000 | $ | 0.001 | October-November 2014 | ||||||
2013 Series A warrants Senior Convertible Notes | 300,000,000 | $ | 0.00025 | January 2014 - March 2015 | ||||||
2013 Series B warrants Senior Convertible Notes | 225,000,000 | $ | 0.0012 | June-August 2018 | ||||||
2013 Series B warrants Senior Convertible Notes | 300,000,000 | $ | 0.0003 | October - December 2018 | ||||||
2013 Lease obligation with U-Vend | 197,250,000 | $ | 0.006 | Nov-16 | ||||||
1,249,916,667 | ||||||||||
Outstanding warrant securities consist of the following at December 31, 2012: | ||||||||||
Warrants | Exercise Price | Expiration | ||||||||
2011 Common share private placement warrants | 2,500,000 | $ | 0.3 | Mar-18 | ||||||
2011 Convertible Notes warrants | 16,667 | $ | 0.3 | Jun-14 | ||||||
2012 Private Placements warrants | 150,000 | $ | 0.15 | March - April 2015 | ||||||
2,666,667 |
EQUITY_INCENTIVE_PLAN_Tables
EQUITY INCENTIVE PLAN (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Equity Incentive Plan Tables | ' | ||||||||||||
Schedule of stock option activity | ' | ||||||||||||
A summary of all stock option activity for the years ended December 31, 2013 and 2012 is as follows: | |||||||||||||
Weighted Average | Weighted Average | Aggregate Intrinsic | |||||||||||
Options | Exercise Price | Contractual life | Value | ||||||||||
Outstanding at December 31, 2011 | 3,015,000 | $ | 0.27 | ||||||||||
Options cancelled | -355,000 | 0.1 | |||||||||||
Outstanding at December 31, 2012 | 2,660,000 | 0.29 | |||||||||||
Options cancelled | -30,000 | 0.1 | |||||||||||
Outstanding at December 31, 2013 | 2,630,000 | 0.29 | 5.7 years | $ | - | ||||||||
Exercisable at December 31, 2013 | 1,753,333 | $ | 0.29 | 5.7 years | $ | - | |||||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Schedule of components of income tax expense | ' | ||||||||
Following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Current: | |||||||||
Federal | $ | - | $ | - | |||||
State | 2,200 | 3,644 | |||||||
Total current | 2,200 | 3,644 | |||||||
Deferred | |||||||||
Federal | (128,472 | ) | (119,282 | ) | |||||
State | (15,983 | ) | (37,514 | ) | |||||
Total deferred | (144,455 | ) | (156,796 | ) | |||||
Less increase in allowance | 144,455 | 157,337 | |||||||
Net deferred | - | 541 | |||||||
Total income tax provision | $ | 2,200 | $ | 4,185 | |||||
Schedule of deferred tax assets | ' | ||||||||
Individual components of deferred taxes are as follows as of December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Deferred tax assets (liabilities): | |||||||||
Net operating loss carryforwards | $ | 499,696 | $ | 419,720 | |||||
Depreciable and amortizable assets | - | 20,938 | |||||||
Prepaid expense | (888 | ) | (1,001 | ) | |||||
Fair market value adjustments | - | 52,580 | |||||||
Stock based compensation | 15,769 | 9,437 | |||||||
Beneficial conversion feature | (8,623 | ) | - | ||||||
Bad debt reserve | - | 766 | |||||||
Accrued salary | 54,519 | - | |||||||
Total | 560,473 | 502,440 | |||||||
Less valuation allowance | (560,473 | ) | (502,440 | ) | |||||
Net deferred tax (liabilities) | $ | - | $ | - | |||||
Schedule of income tax rate reconciliation | ' | ||||||||
The differences between United States statutory Federal income tax rate and the effective income tax rate in the accompanying consolidated statements of operations are as follows: | |||||||||
2013 | 2012 | ||||||||
Statutory United States Federal rate | 34.00% | 34.00% | |||||||
State income taxes net of federal benefit | 2.20% | 3.60% | |||||||
Change in valuation reserves | -36.20% | -40.50% | |||||||
Permanent differences | -0.60% | -1.50% | |||||||
Other | - | 3.30% | |||||||
Effective tax rate (provision) | -0.60% | -1.10% | |||||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments And Contingencies Tables | ' | ||||
Schedule of minimum future rental payments | ' | ||||
The following schedule provides minimum future rental payments required under this lease obligation which have a remaining non-cancelable lease term in excess of one year: | |||||
2014 | $ | 57,200 | |||
2015 | 57,200 | ||||
2016 | 52,434 | ||||
Total minimum lease payments | 166,834 | ||||
Guaranteed residual value | 86,191 | ||||
$ | 253,025 |
SUBSEQUENT_EVENTS_Tables
SUBSEQUENT EVENTS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Subsequent Events Tables | ' | ||||||||
Schedule of unaudited pro forma condensed results for the consolidated statement of operations from continued operations | ' | ||||||||
The unaudited pro forma condensed results for the consolidated statement of operations from continued operations for the years ended December 31, 2013 and 2012 of the combined entity had the acquisition date been January 1, 2012 are as follows: | |||||||||
2013 | 2012 | ||||||||
Revenue | $ | 23,592 | $ | 5,094 | |||||
Operating loss | $ | (683,615 | ) | $ | (345,120 | ) | |||
Net loss | $ | (808,354 | ) | $ | (509,160 | ) | |||
Basic and diluted earnings per share | $ | (0.00 | ) | $ | (0.00 | ) | |||
NATURE_OF_BUSINESS_AND_SUMMARY2
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | 0 Months Ended | 12 Months Ended | ||||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Jan. 07, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Senior Convertible Note Payable | Subsequent event | LegalStore.com | LegalStore.com | ||||
U-Vend Canada, Inc | |||||||
N | |||||||
Number of kiosks | ' | ' | ' | ' | 33 | ' | ' |
Number of additional expected kiosks | ' | ' | ' | ' | 15 | ' | ' |
Number of common shares issued | ' | ' | ' | ' | 466,666,667 | ' | ' |
Number of additional common shares issued after earn-out provisions | ' | ' | ' | ' | 603,046,666 | ' | ' |
Impairment charge on discontinued operations | ' | $35,000 | ' | ' | ' | ' | $35,000 |
Total purchase price | ' | ' | ' | ' | ' | 210,241 | ' |
Gain on sale | ' | ' | ' | ' | ' | 3,839 | ' |
Net loss | -387,281 | -426,998 | ' | ' | ' | ' | ' |
Accumulated deficit | -1,774,262 | -1,386,981 | ' | ' | ' | ' | ' |
Total stockholders' deficiency | -329,087 | -591,557 | -250,845 | ' | ' | ' | ' |
Working capital deficit | -131,000 | ' | ' | ' | ' | ' | ' |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ' | ' | ' | ' | ' |
Preferred stock, shares issued | 0 | 0 | ' | ' | ' | ' | ' |
Preferred, shares outstanding | 0 | 0 | ' | ' | ' | ' | ' |
Fair value of debt | ' | ' | ' | $210,000 | ' | ' | ' |
Anti-dilutive shares excluded from calculation | 1,604,270,805 | 36,704,425 | ' | ' | ' | ' | ' |
Number of common shares issued for merger agreement service | ' | ' | ' | ' | 352,422,184 | ' | ' |
Number of warrants issued for merger agreement service | ' | ' | ' | ' | 822,787,600 | ' | ' |
Number of common shares converted | ' | ' | ' | ' | 43,000,000 | ' | ' |
DISCONTINUED_OPERATIONS_Detail
DISCONTINUED OPERATIONS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Impairment charge on discontinued operations | ' | $35,000 |
LegalStore.com | ' | ' |
Gross proceeds from discontinued operations | 95,000 | ' |
Impairment charge on discontinued operations | ' | $35,000 |
DISCONTINUED_OPERATIONS_Detail1
DISCONTINUED OPERATIONS (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Net proceeds from sale of LegalStore.com | $74,000 |
LegalStore.com | ' |
Net proceeds from sale of LegalStore.com | 74,000 |
LegalStore.com liabilities assumed | 136,241 |
Total purchase price | 210,241 |
LegalStore.com assets | 206,402 |
Gain on sale | 3,839 |
Brokerage fee | $21,000 |
DISCONTINUED_OPERATIONS_Detail2
DISCONTINUED OPERATIONS (Details 1) (USD $) | Dec. 31, 2012 |
Current assets of discontinued operations | $116,460 |
Non current assets of discontinued operations | 99,092 |
Current liabilities of discontinued operations | 156,912 |
LegalStore.com | ' |
Cash | 379 |
Accounts receivable, net | 26,641 |
Inventory | 89,440 |
Current assets of discontinued operations | 116,460 |
Property and equipment, net | 1,532 |
Other intangibles, net | 97,560 |
Non current assets of discontinued operations | 99,092 |
Accounts payable | 92,684 |
Accrued expenses | 64,228 |
Current liabilities of discontinued operations | $156,912 |
DISCONTINUED_OPERATIONS_Detail3
DISCONTINUED OPERATIONS (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Net income (loss) from discontinued operations | $19,174 | ($2,858) |
Write-down of assets associated with a discontinued component, net of taxes | ' | -35,000 |
Gain on sale | -3,839 | ' |
Income (Loss) from Discontinued Operation | 23,013 | -37,858 |
LegalStore.com | ' | ' |
Revenue | 95,241 | 511,283 |
Costs of revenue | 40,535 | 276,617 |
Gross profit | 54,706 | 234,666 |
Operating expenses | 35,532 | 237,524 |
Net income (loss) from discontinued operations | 19,174 | -2,858 |
Write-down of assets associated with a discontinued component, net of taxes | ' | -35,000 |
Gain on sale | 3,839 | ' |
Income (Loss) from Discontinued Operation | $23,013 | ($37,858) |
SENIOR_CONVERTIBLE_NOTES_Detai
SENIOR CONVERTIBLE NOTES (Details Narrative) (USD $) | Dec. 31, 2013 | Apr. 30, 2012 | Mar. 21, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 18, 2013 | Dec. 31, 2013 |
Class A Warrants | Class A Warrants | Class A Warrants | Class A Warrants | Class B Warrants | Class B Warrants | Class B Warrants | Class B Warrants | Senior Convertible Note Payable | Senior Convertible Note Payable | Senior Convertible Note Payable | ||||
Subsequent event | Minimum | Maximum | Subsequent event | Minimum | Maximum | Subsequent event | ||||||||
Total debt financing available | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $400,000 | ' | ' |
Face amount of five debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 200,000 | ' | ' |
Debt term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '1 year | ' | ' |
Stated interest rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7.00% | ' | ' |
Outstanding principal amount - Conversion option | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 150,000 | ' | ' |
Debt price - Coversion option | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.00 | ' | $0.00 |
Outstanding principal amount - Conversion option | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 50,000 | ' | ' |
Debt price - Coversion option | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.00 | ' | ' |
Minimum adjusted conversion price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.00 | ' | ' |
Maximum number of common shares percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4.99% | ' | ' |
Debt conversion, number of shares convertible into | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 350,000,000 | ' | ' |
Number of common stock warrants issued | ' | ' | ' | 525,000,000 | 750,000,000 | ' | ' | 525,000,000 | 500,000,000 | ' | ' | ' | ' | ' |
Exercise price of warrants | ' | 0.15 | 0.15 | ' | 0.00025 | 0.001 | 0.00025 | ' | 0.0003 | 0.0012 | 0.0003 | ' | ' | ' |
Expiration | ' | ' | ' | '15 months | ' | ' | ' | '5 years | ' | ' | ' | ' | ' | ' |
Proceeds from Senior Convertible Notes | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 200,000 | ' | ' |
Warrant liabilities | 214,609 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 168,895 | ' | ' |
Fair value of beneficial conversion feature | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 31,105 | ' | ' |
Carrying value of Senior Notes | 56,249 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 56,249 | 0 | ' |
Amortization of debt discount | 143,751 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 143,751 | ' | ' |
Financing Costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 23,500 | ' | ' |
Registration right agreement, monthly penalty | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.00% | ' | ' |
Additional debt borrowings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $125,000 |
NOTES_PAYABLE_Details_Narrativ
NOTES PAYABLE (Details Narrative) (USD $) | 12 Months Ended | 0 Months Ended | 12 Months Ended | 12 Months Ended | ||||
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 02, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | |
Convertible Promissory Notes | Convertible Promissory Notes | Convertible Promissory Notes | Convertible Promissory Note 1 | Convertible Promissory Note 2 | Convertible Promissory Note 3 | |||
Face amount of debt | ' | ' | ' | ' | $117,500 | ' | ' | ' |
Interest rate on Convertible Promissory Notes | ' | ' | ' | ' | 8.00% | ' | ' | ' |
Conversion percentage, against fair value | ' | ' | ' | ' | ' | 41.00% | 41.00% | 42.00% |
Maximum number of common shares percentage | ' | ' | ' | ' | 4.99% | ' | ' | ' |
Note converted, principal amount | ' | ' | 8,000 | ' | ' | ' | ' | ' |
Note converted, shares | 595,150 | 50,990 | 338,983 | 147,881,704 | ' | ' | ' | ' |
Note converted, fair value of shares | ' | ' | 16,949 | ' | ' | ' | ' | ' |
Outstanding principal of convertible promissory note | ' | ' | ' | 285,734 | 109,500 | ' | ' | ' |
Maximum number of common shares the notes could be converted | ' | ' | ' | ' | 1,229,431 | ' | ' | ' |
Default percentage, as a sum of unpaid principal interest and default interest | ' | ' | ' | ' | 150.00% | ' | ' | ' |
Default Note new principal balance | ' | ' | ' | ' | $193,954 | ' | ' | ' |
Default interest rate on convertible notes | ' | ' | ' | ' | 22.00% | ' | ' | ' |
NOTES_PAYABLE_Details
NOTES PAYABLE (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes Payable Details | ' | ' |
Fair value, beginning year | $280,034 | $223,224 |
Changes in fair value and adjustment for default provision | ' | 105,009 |
Adjustment for conversion | -280,034 | -48,199 |
Fair value, end of period | ' | $280,034 |
REVOLVING_NOTE_FROM_RELATED_PA1
REVOLVING NOTE FROM RELATED PARTY (Details (Narrative) (USD $) | 12 Months Ended | 0 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | ||||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 30, 2013 | Dec. 16, 2013 | Sep. 17, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 29, 2013 | Dec. 31, 2013 | |
Mr. Raymond Meyers | Mr. Raymond Meyers | Mr. Raymond Meyers | Mr. Raymond Meyers | Mr. Raymond Meyers | Director | Director | |||
Revolving credit agreement, maximum borrowing | ' | ' | ' | ' | ' | $282,000 | ' | ' | ' |
Revolving credit agreement, outstanding balance | ' | ' | ' | ' | ' | ' | 281,228 | ' | ' |
Interest rate variable basis | ' | ' | ' | ' | ' | 'one year LIBOR | ' | ' | ' |
Interest rate, variable rate basis spread | ' | ' | ' | ' | ' | 6.00% | ' | ' | ' |
Effective interest rate | ' | ' | ' | ' | ' | 6.60% | ' | ' | ' |
Credit agreement expiration | ' | ' | ' | ' | ' | 30-Jun-14 | ' | ' | ' |
Interest expense | 35,882 | 37,440 | ' | ' | ' | 16,926 | 17,814 | ' | 1,340 |
Accrued interest | ' | ' | ' | ' | ' | 2,934 | 39,112 | ' | 1,000 |
Repayment of line of credit | ' | ' | ' | ' | 86,591 | ' | ' | ' | ' |
Common shares converted, value | 595,150 | 50,990 | 145,980 | 80,746 | 86,591 | ' | ' | ' | ' |
Number of common shares converted | ' | ' | ' | ' | 36,260,596 | 280,475,000 | ' | ' | ' |
Conversion price (in dollars per share) | ' | ' | $0.00 | $0.00 | ' | ' | ' | ' | ' |
Monthly salary expense | ' | ' | ' | ' | ' | 15,000 | ' | ' | ' |
Accrued salary - officer | 142,608 | ' | ' | ' | ' | 142,608 | ' | ' | ' |
Borrowed amount of promissory note | ' | ' | ' | ' | ' | ' | ' | $50,000 | ' |
Promissory note expiration term | ' | ' | ' | ' | ' | ' | ' | '1 year | ' |
Promissory note interest rate | ' | ' | ' | ' | ' | ' | ' | 8.00% | ' |
Promissory note frequency of periodic payment | ' | ' | ' | ' | ' | ' | ' | 'Monthly | ' |
STOCKHOLDERS_DEFICIENCY_Detail
STOCKHOLDERS' DEFICIENCY (Details Narrative) (USD $) | 0 Months Ended | 1 Months Ended | 12 Months Ended | 0 Months Ended | |||
Mar. 21, 2012 | Dec. 31, 2012 | Apr. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Oct. 15, 2013 | |
Class A Warrants | Class B Warrants | Equipment lease financing | |||||
Common stock sold in private placement | $5,000 | $500 | $5,000 | $10,500 | ' | ' | ' |
Common stock sold in private placement, shares | 50,000 | 50,000 | 100,000 | ' | ' | ' | ' |
Exercise price of warrants | 0.15 | ' | 0.15 | ' | ' | ' | 0.0006 |
Warrant term | '3 years | ' | '3 years | ' | ' | ' | '3 years |
Number of common stock warrants issued | ' | ' | ' | ' | 525,000,000 | 525,000,000 | 197,250,000 |
STOCKHOLDERS_DEFICIENCY_Detail1
STOCKHOLDERS' DEFICIENCY (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Stockholders Deficiency Details | ' |
Derivative warrant liabilities issued | $214,609 |
Fair value, End | $214,609 |
STOCKHOLDERS_DEFICIENCY_Detail2
STOCKHOLDERS' DEFICIENCY (Details 1) | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 30, 2012 | Mar. 21, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 |
2011 Common share private placement warrants | 2011 Common share private placement warrants | 2011 Convertible notes warrants | 2011 Convertible notes warrants | 2012 Private placements warrants | 2012 Private placements warrants | 2013 Series A warrants Senior Convertible Notes | 2013 Series A warrants Senior Convertible Notes | 2013 Series B warrants Senior Convertible Notes | 2013 Series B warrants Senior Convertible Notes | 2013 Lease obligation with U-Vend | |||||
Warrants | 1,249,916,667 | 2,666,667 | ' | ' | 2,500,000 | 2,500,000 | 16,667 | 16,667 | 150,000 | 150,000 | 225,000,000 | 300,000,000 | 225,000,000 | 300,000,000 | 197,250,000 |
Exercise Price | ' | ' | 0.15 | 0.15 | 0.3 | 0.3 | 0.3 | 0.3 | 0.15 | 0.15 | 0.001 | 0.00025 | 0.0012 | 0.0003 | 0.006 |
Expiration | ' | ' | ' | ' | 'March 2018 | 'March 2018 | 'June 2014 | 'June 2014 | 'March - April 2015 | 'March - April 2015 | 'October-November 2014 | 'January 2014 - March 2015 | 'June-August 2018 | 'October - December 2018 | 'November 2016 |
EQUITY_INCENTIVE_PLAN_Details_
EQUITY INCENTIVE PLAN (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Shares available under stock option plan | 5,000,000 | ' |
Vesting period under stock option plan | '3 years | ' |
Method used | 'Black-Scholes option-pricing model | ' |
Total fair value of options | $23,400 | ' |
Unrecognized compensation cost | $10,000 | ' |
Weighted average period for non-vested options | '6 months | ' |
Stock compensation expense | $23,496 | $24,796 |
Minimum | ' | ' |
Expiration period of stock options | '5 years | ' |
Maximum | ' | ' |
Expiration period of stock options | '10 years | ' |
EQUITY_INCENTIVE_PLAN_Details
EQUITY INCENTIVE PLAN (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Equity Incentive Plan Details | ' | ' |
Outstanding, beginning - Options | 2,660,000 | 3,015,000 |
Options cancelled - Options | -30,000 | -355,000 |
Outstanding, ending - Options | 2,630,000 | 2,660,000 |
Exercisable, ending - Options | 1,753,333 | ' |
Outstanding, beginning - Weighted Average Exercise Price | $0.29 | $0.27 |
Options cancelled - Weighted Average Exercise Price | $0.10 | $0.10 |
Outstanding, ending - Weighted Average Exercise Price | $0.29 | $0.29 |
Exercisable, ending - Weighted Average Exercise Price | $0.29 | ' |
Outstanding, ending - Weighted Average Contractual life | '5 years 8 months 12 days | ' |
Exercisable, ending -Weighted Average Contractual life | '5 years 8 months 12 days | ' |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Income Taxes Details Narrative | ' |
NOL available for future taxable income | $1,308,000 |
Operating loss carryforwards expiry year | '2029 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Current: | ' | ' |
State | $2,200 | $3,644 |
Total current | 2,200 | 3,644 |
Deferred | ' | ' |
Federal | -128,472 | -119,282 |
State | -15,983 | -37,514 |
Total deferred | -144,455 | -156,796 |
Less increase in allowance | 144,455 | 157,337 |
Net deferred | ' | 541 |
Total income tax provision | $2,200 | $4,185 |
INCOME_TAXES_Details_1
INCOME TAXES (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Deferred tax assets (liabilities): | ' | ' |
Net operating loss carryforwards | $499,696 | $419,720 |
Depreciable and amortizable assets | ' | 20,938 |
Prepaid expense | -888 | -1,001 |
Fair market value adjustments | ' | 52,580 |
Stock based compensation | 15,769 | 9,437 |
Beneficial conversion feature | -8,623 | ' |
Bad debt reserve | ' | 766 |
Accrued salary | 54,519 | ' |
Total | 560,473 | 502,440 |
Less valuation allowance | ($560,473) | ($502,440) |
INCOME_TAXES_Details_2
INCOME TAXES (Details 2) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details 2 | ' | ' |
Statutory United States Federal rate | 34.00% | 34.00% |
State income taxes net of federal benefit | 2.20% | 3.60% |
Change in valuation reserves | -36.20% | -40.50% |
Permanent differences | -0.60% | -1.50% |
Other | ' | 3.30% |
Effective tax rate (provision) | -0.60% | -1.10% |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 0 Months Ended | 1 Months Ended | 0 Months Ended | 12 Months Ended | |
Mar. 21, 2012 | Apr. 30, 2012 | Jan. 07, 2014 | Oct. 15, 2013 | Dec. 31, 2013 | |
Subsequent event | Equipment lease financing | Equipment lease financing | |||
U-Vend Canada, Inc | Subsequent event | ||||
U-Vend Canada, Inc | |||||
Aggregate equipment lease | ' | ' | ' | $1,000,000 | $100,000 |
Additional equipment lease | ' | ' | ' | $86,000 | ' |
Number of common stock warrants issued | ' | ' | 822,787,600 | 197,250,000 | 47,562,211 |
Warrant term | '3 years | '3 years | ' | '3 years | '3 years |
Exercise price of warrants | 0.15 | 0.15 | ' | 0.0006 | 0.001 |
COMMITMENTS_AND_CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Dec. 31, 2013 |
Commitments And Contingencies Details | ' |
2014 | $57,200 |
2015 | 57,200 |
2016 | 52,434 |
Total minimum lease payments | 166,834 |
Guaranteed residual value | 86,191 |
Net minimum lease payments | $253,025 |
SUBSEQUENT_EVENTS_Details_Narr
SUBSEQUENT EVENTS (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 | Jan. 07, 2014 |
Subsequent event | Subsequent event | |||
U-Vend Canada, Inc | ||||
Number of common shares issued | ' | ' | ' | 466,666,667 |
Number of additional common shares issued after earn-out provisions | ' | ' | ' | 603,046,666 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 | ' | $0.00 |
Number of common shares issued for merger agreement service | ' | ' | ' | 352,422,184 |
Number of warrants issued for merger agreement service | ' | ' | ' | 822,787,600 |
Description of acquired entity | ' | ' | ' | ' |
U-Vend is in the business of developing, marketing and distributing various self-serve electronic kiosks and mall/airport co-branded islands throughout North America. U-Vend has four market segments; Environmental, Retail, Service and Mall/Airport Islands with a primary focus on Environmental and Retail. U-Vend seeks to place its kiosks in high-traffic host locations such as big box stores, restaurants, malls, airports, casinos, universities, and colleges. Currently, U-Vend owns and operates their kiosks, but intends to also provide the kiosks, through a distributor relationship, to the entrepreneur wanting to own their own business. | ||||
Description of reverse stock split | ' | ' | 'One share of common stock for up to each 200 shares of common stock outstanding. | ' |
Reverse stock split ratio | ' | ' | 0.50% | ' |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Subsequent event, U-Vend Canada, Inc, USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Subsequent event | U-Vend Canada, Inc | ' | ' |
Revenue | $23,592 | $5,094 |
Operating loss | -683,615 | -345,120 |
Net loss | ($808,354) | ($509,160) |
Basic and diluted earnings per share | $0 | $0 |