Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 10, 2017 | Jun. 30, 2016 | |
Intangible and other assets | |||
Entity Registrant Name | 3PEA INTERNATIONAL, INC. | ||
Entity Central Index Key | 1,496,443 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
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 | $ 4,062,058 | ||
Entity Common Stock, Shares Outstanding | 43,185,765 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash | $ 1,631,943 | $ 1,389,494 |
Cash Restricted | 10,002,505 | 7,063,945 |
Accounts Receivable | 110,269 | 16,742 |
Prepaid Expenses and other assets | 270,634 | 254,225 |
Total current assets | 12,015,351 | 8,724,406 |
Fixed assets, net | 300,761 | 271,967 |
Intangible and other assets | ||
Deposits | 5,551 | 3,551 |
Intangible assets, net | 1,550,044 | 1,264,151 |
Total assets | 13,871,707 | 10,264,075 |
Current liabilities | ||
Accounts payable and accrued liabilities | 765,596 | 465,318 |
Customer card funding | 10,002,505 | 7,063,945 |
Legal settlement payable - current portion | 254,900 | 915,475 |
Stocks payable - related parties | 71,586 | 125,987 |
Notes payable | 124,168 | 174,098 |
Total current liabilities | 11,218,755 | 8,744,823 |
Long term liabilities | ||
Notes Payable | 27,892 | 0 |
Legal settlement payable-long-term portion | 0 | 339,183 |
Total long-term liabilities | 27,892 | 339,183 |
Total liabilities | 11,246,647 | 9,084,006 |
Commitments and contingencies | ||
Stockholders' equity (deficit) | ||
Common stock; $0.001 par value; 150,000,000 shares authorized, 43,185,765 and 42,510,765 issued and outstanding at December 31, 2016 and December 31, 2015, respectively | 43,186 | 42,511 |
Additional paid-in capital | 6,726,173 | 6,579,508 |
Treasury stock at cost, 303,450 and 303,450 shares, respectively | (150,000) | (150,000) |
Accumulated deficit | (3,799,613) | (5,200,412) |
Total 3Pea International, Inc.'s stockholders' equity | 2,819,746 | 1,271,607 |
Non-controlling interest | (194,686) | (91,538) |
Total stockholders' equity | 2,625,060 | 1,180,069 |
Total liabilities and stockholders' equity | $ 13,871,707 | $ 10,264,075 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common stock par value (in Dollars per share) | $ .001 | $ 0.001 |
Common stock shares authorized | 150,000,000 | 150,000,000 |
Common stock shares issued | 43,185,765 | 42,510,765 |
Common stock shares outstanding | 43,185,765 | 42,510,765 |
Treasury stock shares | 303,450 | 303,450 |
STATEMENTS OF INCOME
STATEMENTS OF INCOME - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Revenues | $ 10,416,672 | $ 8,107,541 |
Cost of revenues | 5,197,370 | 4,019,514 |
Gross profit | 5,219,302 | 4,088,027 |
Operating expenses | ||
Depreciation and amortization | 572,320 | 362,712 |
Selling, general and administrative | 3,288,373 | 3,734,187 |
Total operating expenses | 3,860,693 | 4,096,899 |
Income (loss) from operations | 1,358,609 | (8,872) |
Other income (expense) | ||
Gain on debt extinguishment | 0 | 11,337 |
Other expenses | 16,149 | (6,359) |
Legal settlement | 0 | (2,500,000) |
Interest expense | (77,107) | (45,683) |
Total other income (expense) | (60,958) | (2,540,705) |
Income (loss) before provision for income taxes and noncontrolling interest | 1,297,651 | (2,549,577) |
Provision for income taxes | 0 | 0 |
Net income (loss) before noncontrolling interest | 1,297,651 | (2,549,577) |
Net loss attributable to the noncontrolling interest | 103,148 | 139,240 |
Net income (loss) attributable to 3Pea International, Inc. | $ 1,400,799 | $ (2,410,337) |
Net income (loss) per common share - basic | $ .03 | $ (0.06) |
Net income (loss) per common share - fully diluted | $ .03 | |
Weighted average common shares outstanding - basic | 42,875,519 | 39,641,175 |
Weighted average common shares outstanding - fully diluted | 43,867,228 |
STATEMENT OF STOCKHOLDERS' EQUI
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Common Stock [Member] | Additional Paid-In Capital | Treasury Stock | Retained Earnings / Accumulated Deficit | Noncontrolling Interest | Total |
Beginning balance, shares at Dec. 31, 2014 | 36,669,106 | |||||
Beginning balance, value at Dec. 31, 2014 | $ 36,669 | $ 5,634,886 | $ (150,000) | $ (2,790,075) | $ 47,702 | $ 2,779,182 |
Issuance of stock for services, shares | 629,159 | |||||
Issuance of stock for services, value | $ 630 | 201,920 | 202,550 | |||
Issuance of stock and warrant for accrued liabilities, shares | 200,000 | |||||
Issuance of stock and warrant for accrued liabilities, value | $ 200 | 65,014 | 65,214 | |||
Issuance of stock for accrued liabilities, shares | 12,500 | |||||
Issuance of stock for accrued liabilities, value | $ 12 | 2,688 | 2,700 | |||
Issuance of stock for accrued stock payable, shares | 5,000,000 | |||||
Issuance of stock for accrued stock payable, value | $ 5,000 | 675,000 | 680,000 | |||
Net income (loss) | (2,410,337) | (139,240) | (2,549,577) | |||
Ending balance, shares at Dec. 31, 2015 | 42,510,765 | |||||
Ending balance, value at Dec. 31, 2015 | $ 42,511 | 6,579,508 | (150,000) | (5,200,412) | (91,538) | 1,180,069 |
Issuance of stock and warrant for accrued liabilities, shares | 312,500 | |||||
Issuance of stock and warrant for accrued liabilities, value | $ 313 | 95,277 | 95,590 | |||
Issuance of stock for accrued liabilities, shares | 362,500 | |||||
Issuance of stock for accrued liabilities, value | $ 362 | 51,388 | 51,750 | |||
Net income (loss) | 1,400,799 | (103,148) | 1,297,651 | |||
Ending balance, shares at Dec. 31, 2016 | 43,185,765 | |||||
Ending balance, value at Dec. 31, 2016 | $ 43,186 | $ 6,726,173 | $ (150,000) | $ (3,799,613) | $ (194,686) | $ 2,625,060 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 1,400,799 | $ (2,410,337) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Change in noncontrolling interest | (103,148) | (139,240) |
Stock based expenses | 92,939 | 202,550 |
Depreciation and amortization | 572,320 | 362,712 |
Gain on debt extinguishment | 0 | (11,337) |
Changes in operating assets and liabilities: | ||
Change in restricted cash | (2,938,560) | 728,310 |
Change in accounts receivable | (93,527) | 69,916 |
Change in prepaid expenses | (16,409) | (44,723) |
Change in other assets | (2,000) | 900 |
Change in accounts payable, accrued liabilities and stocks payable | 415,504 | (130,590) |
Change in customer card funding | 2,938,560 | (728,310) |
Change in legal settlement payable | (999,758) | 1,254,658 |
Change in stock payable | 0 | 125,987 |
Net cash provided by (used in) operating activities | 1,266,723 | (719,504) |
Cash flows from investing activities: | ||
Purchase of fixed assets | (109,865) | (138,332) |
Purchase of intangible assets | (777,144) | (787,850) |
Net cash used in investing activities | (887,009) | (926,182) |
Cash flows from financing activities: | ||
Proceeds from borrowing | 44,753 | 0 |
Payments on notes payable-related parties | 0 | (700,440) |
Payments on notes payable | (182,018) | (151,348) |
Net cash used in financing activities | (137,265) | (851,788) |
Net change in cash | 242,449 | (2,497,474) |
Cash, beginning of period | 1,389,494 | 3,886,968 |
Cash, end of period | 1,631,943 | 1,389,494 |
Supplemental cash flow information: | ||
Issuance of common stock for satisfaction of stocks payable | 54,401 | 0 |
Non-cash financing activities | ||
Transfer of accrued interest from accrued liabilities to notes payable | $ 115,227 | $ 0 |
1. DESCRIPTION OF BUSINESS, HIS
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Description of business About 3PEA International, Inc. 3PEA International, Inc. is a vertically integrated provider of innovative prepaid card products and processing services for corporate, consumer and government applications. Our payment solutions are utilized by our corporate customers as a means to increase customer loyalty, reduce administration costs and streamline operations. Public sector organizations can utilize the solutions to disburse public benefits or for internal payments. The Company markets prepaid debit card solutions under our PaySign ® The PaySign brand offers prepaid card based solutions, or “card products” for corporate incentive rewards and corporate expense, per diem and travel payments, healthcare reimbursement payments, pharmaceutical co-pay assistance, plasma donor remuneration and clinical trials. The Company plans to expand its product offering to include payroll cards, general purpose re-loadable cards, and others. Our cards are offered to end users through our relationships with bank issuers. The Company’s proprietary PaySign ® The Company manages all aspects of the debit card lifecycle, from managing the card design and approval processes with partners and associations, to production, packaging, distribution, and personalization. The Company oversees inventory and security controls, renewals, lost and stolen card management and replacement. The Company deploys a fully staffed, in-house customer service department which utilizes bi-lingual customer service agents, Interactive Voice Response (IVR), and two way short message service (SMS) messaging and text alerts. Principles of consolidation Year end Use of estimates Cash and cash equivalents Cash restricted and Customer card funding Fixed assets The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. Goodwill and intangible assets For intangible assets, we recognize an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. Fair value of financial instruments We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following describes the three-level hierarchy: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities. Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. We currently do not have any assets or liabilities in this category. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the overall fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments for which the determination of fair value requires significant management judgment or estimation. The fair value for such assets and liabilities is generally determined using pricing models, market comparables, discounted cash flow methodologies or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. We currently do not have any assets or liabilities in this category. Earnings per share Income taxes We recognize and measure income tax benefits based upon a two-step model: 1) a tax position must be more likely-than-not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more likely-than-not to be sustained upon settlement. The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit. We accrue income tax related interest and penalties, if applicable, within income tax expense. We are in the process of filing certain consolidated tax returns whereby past subsidiary losses are used to offset tax liabilities on current profits. This approach could be challenged by the IRS and if not accepted, may affect net income and earnings per share. Management believes that the likelihood of the IRS not accepting such filings is minimal. Revenue and expense recognition The Company generates revenues primarily from fees generated by cardholder transactions and interchange. Such revenues are recognized in accordance with FASB ASC 985-605. The Company records all revenues on gross basis in accordance with FASB ASC 605-45 since it is the primary obligor and establishes the price in the revenue arrangement. The Company is currently under no obligation for refunding any fees or has any obligations for disputed claim settlements. Stock-Based Compensation , Shares issued to employees are expensed upon issuance. Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. Advertising costs Research and development costs New accounting pronouncements Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). . In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting Under ASU 2016-09, all excess tax benefits and tax deficiencies related to stock compensation will be recognized as income tax expense or benefit in the income statement instead of additional paid-in capital on the consolidated balance sheets. The impact of adopting this standard on our consolidated financial statements is dependent upon the intrinsic value of share-based compensation awards at the time of exercise, vesting or expiration and may result in more variability in our effective tax rate and net profit or loss, as well as impact our share dilution. The Company has not assessed the impact of this application as of the date of this report and is unable to make any determination as to any impact to its consolidate financial statements. Additionally, upon adoption of ASU 2016-09, we will elect to account for forfeitures on stock-based compensation as they occur, rather than estimate future expected forfeitures. We do not expect the change in our accounting policy for forfeitures to have a material impact on our financial results and, except as described above with respect to excess tax benefits, do not expect any of the other provisions of ASU 2016-09 to have a material impact to our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Leases (Topic 840). In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities |
2. FIXED ASSETS
2. FIXED ASSETS | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
FIXED ASSETS | Fixed assets consist of the following: December 31, 2016 December 31, 2015 Equipment $ 746,117 $ 660,813 Software 117,163 114,097 Furniture and fixtures 107,141 85,646 Leasehold improvements 36,499 36,499 1,006,920 897,055 Less: accumulated depreciation 706,159 625,088 Fixed assets, net $ 300,761 $ 271,967 |
3. INTANGIBLE ASSETS
3. INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | Intangible assets consist of the following: December 31, 2016 December 31, 2015 Patents and trademarks $ 34,771 $ 34,771 Platform 2,008,307 1,284,551 Kiosk Development 64,802 64,802 Licenses 382,414 329,028 2,490,294 1,713,152 Less: accumulated amortization 940,250 449,001 Intangible assets, net $ 1,550,044 $ 1,264,151 Intangible assets are amortized over their useful lives ranging from periods of 3 to 15 years. |
4. NOTES PAYABLE
4. NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | Notes payable consist of the following: December 31, 2016 December 31, 2015 Note payable bearing interest at 8%, due on demand and unsecured. $ 102,613 $ 150,000 Notes payable due to various equipment finance companies bearing interest from 12.89% to 15.14%. 49,447 24,098 152,060 174,098 Less: non-current portion 27,892 – $ 124,168 $ 174,098 |
5. COMMON STOCK
5. COMMON STOCK | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
COMMON STOCK | At December 31, 2016, the Company’s authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had outstanding 43,185,765 shares of common stock, and no shares of preferred stock. 2016 Transactions: · 675,000 shares of common stock for current services rendered and prior services which had previously been recorded as stocks payable totaling $131,305. At December 31, 2015, the Company's authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had outstanding 42,510,765 shares of common stock, and no shares of preferred stock. 2015 Transactions · 629,159 shares of common stock issued for various services valued at $202,550. · 212,500 shares of common stock issued for prior services which had previously been recorded as an accrued liability totaling $67,914 in 2014. · 5,000,000 shares of common stock issued related to previously recorded stock payable for $680,000 in 2014. Warrants: As of December 31, 2016, warrants outstanding consisted of the following: Date of Issuance or Declaration Number of Exercise Contractual Number of March 18, 2015 200,000 0.50 3 years 200,000 September 10, 2014 150,000 0.25 3 years 150,000 September 10, 2014 150,000 0.50 3 years 150,000 September 18, 2014 200,000 0.25 3 years 200,000 November 05, 2014 100,000 0.50 3 years 100,000 800,000 800,000 Stock and Warrant Grants: In November 2016 the Company granted a total of 5,000,000 shares to certain officers and directors of the Company with a total value of $787,950 or $0.15759 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 5,000,000 shares have a quarterly vesting period of five years with the first vesting period occurring on December 31, 2016. The approximate value vested for 2016 is $39,397, for which a payable has been recorded for the same vested amount as of December 31, 2016. As of December 31, 2016, none of the shares have been issued. In November 2016 the Company granted 210,000 shares to a consultant. The shares were valued at $33,094 or $0.15759 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 210,000 shares have a quarterly vesting period of three years with the first vesting period occurring on December 31, 2016. The approximate value vested for 2016 is $2,758 for which a payable has been recorded for the same vested amount as of December 31, 2016. As of December 31, 2016, none of the shares have been issued. In March 2015, the Company granted 200,000 shares of common stock along with 200,000 warrants to a consultant. The shares were valued at $30,600 or $0.16 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The warrants were valued at $34,611, using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $0.18 per share; exercise price of $0.50; 3 year life; discount rate of 2.00%; and volatility rate of 245%. The 200,000 shares and 200,000 warrants granted have a vesting period of six months of which seven months had vested as of December 31, 2015. As of December 31, 2016, the 200,000 shares have been issued and the warrants for 200,000 shares were granted. In August 2014, the Company granted 150,000 shares of common stock to a consultant with a total value of $25,500 or $0.17 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 150,000 shares granted have a vesting period of three years of which five and seventeen months had vested as of December 31, 2014. The approximate value vested for the years ended December 31, 2015 and 2016 was $12,000 and $12,000, for which a payable has been recorded for the same vested amount as of December 31, 2014 and 2015. As of December 31, 2016, 100,000 shares have been issued. In September 2014, the Company granted 150,000 shares of common stock along with 150,000 Class A warrants and 150,000 Class B warrants to an advisory board member. The shares were valued at $19,125 or $0.13 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity. The warrants were valued at $42,761, using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $0.15 per share; exercise price of $0.25 for the Class A warrants and $0.50 for the Class B warrants; 3 year life; discount rate of 2.00 %; and volatility rate of 245%. The 150,000 shares and 300,000 warrants granted vest over a 3 year period, at 50,000 shares and 100,000 warrants per year of which sixteen and twenty eight months had vested as of December 31, 2015 and 2016, respectively. The approximate value vested for the years ended December 31,2015 and 2016 was,$20,700 and $20,700, for which a payable has been recorded for $20,700 as of December 31, 2015 and $17,321 for 2016. As of December 31, 2016, 112,500 of the 150,000 shares have been issued and none of the 300,000 warrants have been issued. In September 2014, the Company granted 200,000 shares of common stock along with 200,000 warrants to a consultant. The shares were valued at $30,600 or $0.16 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The warrants were valued at $34,611, using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $0.18 per share; exercise price of $0.25; 3 year life; discount rate of 2.00%; and volatility rate of 245%. The 200,000 shares and 200,000 warrants granted have a vesting period of six months. As of December 31, 2015, the 200,000 shares and 200,000 warrants had been issued and granted. In October 2014, the Company granted 150,000 shares of common stock to an advisory board member with a total value of $32,400 or $0.21 per share (including a 10% discount of fair market value due to these shares being restricted and lacking market liquidity). The 150,000 shares granted will vest over a 3 year period, at 50,000 shares per year of which fifteen and 27 months had vested as of December 31,2015 and 2016, respectively. The approximate value vested for the year ended December 31, 2015 and 2016 was $13,000 and $11,300. As of December 31, 2016, 112,500 shares of the 150,000 shares granted have been issued. In November 2014, the Company issued a warrant for 100,000 shares of common stock as part of an issuance of note payable totaling $100,000. The warrant has an exercise price of $0.50 and life of three years. In October 2013, the Company granted 300,000 shares of common stock to an employee of the Company with a total value of $38,250 or $0.13 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 300,000 shares granted have a vesting period of three years of which twenty-six months and was fully vested as of December 31, 2015 and 2016, respectively. The approximate value vested for the years ended December 31, 2015 and 2016 were $12,750 and $12,750, for which a payable has been recorded for the same vested amounts as of December 31, 2014 and 2015. As of December 31, 2016, all of the 300,000 shares granted have been issued. |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Office lease Data Center Lease Pending of threatened litigation |
7. INCOME TAXES
7. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The provision for income taxes on the statements of operations consists of $-0- and $-0- for the years ended December 31, 2016 and 2015, respectively. Deferred tax assets are comprised of the following at December 31: 2016 2015 Net operating loss carryforward $ 5,510,000 $ 6,034,000 Temporary differences 303,000 238,000 Less valuation allowance (5,813,000 ) (6,272,000 ) Deferred tax asset, net $ – $ – Deferred taxes arise from temporary differences in the recognition of certain expenses for tax and financial reporting purposes. At December 31, 2016 and 2015, management determined that realization of these benefits is not assured and has provided a valuation allowance for the entire amount of such benefits. At December 31, 2016 and 2015, net operating loss carryforwards were approximately $5,813,000 and $6,272,000, respectively, for federal tax purposes that expire at various dates from 2014 through 2031. Utilization of net operating loss carryforwards may be subject to substantial annual limitations due to the "change in ownership" provisions of the Internal Revenue Code of 1986, as amended, and similar state regulations. The annual limitation may result in the expiration of substantial net operating loss carryforwards before utilization. For December 31, 2016 and 2015, the provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (34% in 2016 and 2015) to income taxes as follows: 2016 2015 Tax benefit computed at 34% $ 65,000 $ 81,000 Change in valuation allowance 460,000 (323,000 ) Change in carryovers and tax attributes (525,000 ) 242,000 Income tax provision $ – $ – |
8. LEGAL SETTLEMENT
8. LEGAL SETTLEMENT | 12 Months Ended |
Dec. 31, 2016 | |
Legal Settlement | |
LEGAL SETTLEMENT | On August 11, 2015, PSKW, LLC (“PSKW”) served the Company, with a complaint styled PSKW, LLC v. 3Pea International, Inc. |
9. SUBSEQUENT EVENTS
9. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | As of March, 2017, the Company paid the total remaining accrued balance as of December 31, 2016 in the amount of $254,900 for the Legal Settlement liability. Additionally, the Company paid the total remaining balance of a note payable as of December 31, 2016 in the amount of $152,060. |
1. SUMMARY OF SIGNIFICANT POLIC
1. SUMMARY OF SIGNIFICANT POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Description of business | Description of business About 3PEA International, Inc. 3PEA International, Inc. is a vertically integrated provider of innovative prepaid card products and processing services for corporate, consumer and government applications. Our payment solutions are utilized by our corporate customers as a means to increase customer loyalty, reduce administration costs and streamline operations. Public sector organizations can utilize the solutions to disburse public benefits or for internal payments. The Company markets prepaid debit card solutions under our PaySign ® The PaySign brand offers prepaid card based solutions, or “card products” for corporate incentive rewards and corporate expense, per diem and travel payments, healthcare reimbursement payments, pharmaceutical co-pay assistance, plasma donor remuneration and clinical trials. The Company plans to expand its product offering to include payroll cards, general purpose re-loadable cards, and others. Our cards are offered to end users through our relationships with bank issuers. The Company’s proprietary PaySign ® The Company manages all aspects of the debit card lifecycle, from managing the card design and approval processes with partners and associations, to production, packaging, distribution, and personalization. The Company oversees inventory and security controls, renewals, lost and stolen card management and replacement. The Company deploys a fully staffed, in-house customer service department which utilizes bi-lingual customer service agents, Interactive Voice Response (IVR), and two way short message service (SMS) messaging and text alerts. |
Principles of consolidation | Principles of consolidation |
Year end | Year end |
Use of estimates | Use of estimates |
Cash and cash equivalents | Cash and cash equivalents |
Cash restricted and Customer card funding | Cash restricted and Customer card funding |
Fixed assets | Fixed assets The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. |
Goodwill and intangible assets | Goodwill and intangible assets For intangible assets, we recognize an impairment loss if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives. |
Fair value of financial instruments | Fair value of financial instruments We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following describes the three-level hierarchy: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. We currently do not have any assets or liabilities in this category. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the overall fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments for which the determination of fair value requires significant management judgment or estimation. The fair value for such assets and liabilities is generally determined using pricing models, market comparables, discounted cash flow methodologies or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. We currently do not have any assets or liabilities in this category. |
Earnings per share | Earnings per share |
Income taxes | Income taxes We recognize and measure income tax benefits based upon a two-step model: 1) a tax position must be more likely-than-not to be sustained based solely on its technical merits in order to be recognized, and 2) the benefit is measured as the largest dollar amount of that position that is more likely-than-not to be sustained upon settlement. The difference between the benefit recognized for a position and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit. We accrue income tax related interest and penalties, if applicable, within income tax expense. We are in the process of filing certain consolidated tax returns whereby past subsidiary losses are used to offset tax liabilities on current profits. This approach could be challenged by the IRS and if not accepted, may affect net income and earnings per share. Management believes that the likelihood of the IRS not accepting such filings is minimal. |
Revenue and expense recognition | Revenue and expense recognition The Company generates revenues primarily from fees generated by cardholder transactions and interchange. Such revenues are recognized in accordance with FASB ASC 985-605. The Company records all revenues on gross basis in accordance with FASB ASC 605-45 since it is the primary obligor and establishes the price in the revenue arrangement. The Company is currently under no obligation for refunding any fees or has any obligations for disputed claim settlements. |
Stock-Based Compensation | Stock-Based Compensation , Shares issued to employees are expensed upon issuance. Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. |
Advertising costs | Advertising costs |
Research and development costs | Research and development costs |
New accounting pronouncements | New accounting pronouncements Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). . In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting Under ASU 2016-09, all excess tax benefits and tax deficiencies related to stock compensation will be recognized as income tax expense or benefit in the income statement instead of additional paid-in capital on the consolidated balance sheets. The impact of adopting this standard on our consolidated financial statements is dependent upon the intrinsic value of share-based compensation awards at the time of exercise, vesting or expiration and may result in more variability in our effective tax rate and net profit or loss, as well as impact our share dilution. The Company has not assessed the impact of this application as of the date of this report and is unable to make any determination as to any impact to its consolidate financial statements. Additionally, upon adoption of ASU 2016-09, we will elect to account for forfeitures on stock-based compensation as they occur, rather than estimate future expected forfeitures. We do not expect the change in our accounting policy for forfeitures to have a material impact on our financial results and, except as described above with respect to excess tax benefits, do not expect any of the other provisions of ASU 2016-09 to have a material impact to our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Leases (Topic 840). In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities |
2. FIXED ASSETS (Tables)
2. FIXED ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Fixed assets | December 31, 2016 December 31, 2015 Equipment $ 746,117 $ 660,813 Software 117,163 114,097 Furniture and fixtures 107,141 85,646 Leasehold improvements 36,499 36,499 1,006,920 897,055 Less: accumulated depreciation 706,159 625,088 Fixed assets, net $ 300,761 $ 271,967 |
3. INTANGIBLE ASSETS (Tables)
3. INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | December 31, 2016 December 31, 2015 Patents and trademarks $ 34,771 $ 34,771 Platform 2,008,307 1,284,551 Kiosk Development 64,802 64,802 Licenses 382,414 329,028 2,490,294 1,713,152 Less: accumulated amortization 940,250 449,001 Intangible assets, net $ 1,550,044 $ 1,264,151 |
4. NOTES PAYABLE (Tables)
4. NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes payable | December 31, 2016 December 31, 2015 Note payable bearing interest at 8%, due on demand and unsecured. $ 102,613 $ 150,000 Notes payable due to various equipment finance companies bearing interest from 12.89% to 15.14%. 49,447 24,098 152,060 174,098 Less: non-current portion 27,892 – $ 124,168 $ 174,098 |
5. COMMON STOCK (Tables)
5. COMMON STOCK (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Warrant Activity | Date of Issuance or Declaration Number of Exercise Contractual Number of March 18, 2015 200,000 0.50 3 years 200,000 September 10, 2014 150,000 0.25 3 years 150,000 September 10, 2014 150,000 0.50 3 years 150,000 September 18, 2014 200,000 0.25 3 years 200,000 November 05, 2014 100,000 0.50 3 years 100,000 800,000 800,000 |
7. INCOME TAXES (Tables)
7. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets | 2016 2015 Net operating loss carryforward $ 5,510,000 $ 6,034,000 Temporary differences 303,000 238,000 Less valuation allowance (5,813,000 ) (6,272,000 ) Deferred tax asset, net $ – $ – |
Provision for income taxes | 2016 2015 Tax benefit computed at 34% $ 65,000 $ 81,000 Change in valuation allowance 460,000 (323,000 ) Change in carryovers and tax attributes (525,000 ) 242,000 Income tax provision $ – $ – |
1. DESCRIPTION OF BUSINESS, H22
1. DESCRIPTION OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accounting Policies [Abstract] | ||
Estimated useful life of assets | 3 to 10 years | |
Deferred revenues | $ 0 | $ 0 |
2. FIXED ASSETS (Details)
2. FIXED ASSETS (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Fixed Assets Gross | $ 1,006,920 | $ 897,055 |
Less: accumulated depreciation | 706,159 | 625,088 |
Fixed assets, net | 300,761 | 271,967 |
Equipment [Member] | ||
Fixed Assets Gross | 746,117 | 660,813 |
Software [Member] | ||
Fixed Assets Gross | 117,163 | 114,097 |
Furniture and Fixtures [Member] | ||
Fixed Assets Gross | 107,141 | 85,646 |
Leasehold Improvements [Member] | ||
Fixed Assets Gross | $ 36,499 | $ 36,499 |
3. INTANGIBLE ASSETS (Details)
3. INTANGIBLE ASSETS (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Intangible assets gross | $ 2,490,294 | $ 1,713,152 |
Less: accumulated amortization | 940,250 | 449,001 |
Intangible assets, net | 1,550,044 | 1,264,151 |
Patents and Trademarks | ||
Intangible assets gross | 34,771 | 34,771 |
Platform | ||
Intangible assets gross | 2,008,307 | 1,284,551 |
Kiosk Development | ||
Intangible assets gross | 64,802 | 64,802 |
Licenses | ||
Intangible assets gross | $ 382,414 | $ 329,028 |
3. INTANGIBLE ASSETS (Details N
3. INTANGIBLE ASSETS (Details Narrative) | 12 Months Ended |
Dec. 31, 2016 | |
Minimum | |
Intangible assets useful lives | 3 years |
Maximum | |
Intangible assets useful lives | 15 years |
4. NOTES PAYABLE (Details)
4. NOTES PAYABLE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Notes payable | $ 152,060 | $ 174,098 |
Less: non-current portion | 27,892 | 0 |
Notes payable current portion | 124,168 | 174,098 |
Note payable 1 | ||
Notes payable | $ 102,613 | 150,000 |
Interest rate | 0.08 | |
Note payable 2 | ||
Notes payable | $ 49,447 | $ 24,098 |
Interest rate | 12.89% to 15.14% |
5. COMMON STOCK (Details)
5. COMMON STOCK (Details) | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Number of warrants | 800,000 |
Number of Shares Exercisable | 800,000 |
Warrant 1 | |
Date of Issuance | Mar. 18, 2015 |
Number of warrants | 200,000 |
Exercise Price | $ / shares | $ .50 |
Contractual Life | 3 years |
Number of Shares Exercisable | 200,000 |
Warrant 2 | |
Date of Issuance | Sep. 10, 2014 |
Number of warrants | 150,000 |
Exercise Price | $ / shares | $ .25 |
Contractual Life | 3 years |
Number of Shares Exercisable | 150,000 |
Warrant 3 | |
Date of Issuance | Sep. 10, 2014 |
Number of warrants | 150,000 |
Exercise Price | $ / shares | $ .50 |
Contractual Life | 3 years |
Number of Shares Exercisable | 150,000 |
Warrant 4 | |
Date of Issuance | Sep. 18, 2014 |
Number of warrants | 200,000 |
Exercise Price | $ / shares | $ .25 |
Contractual Life | 3 years |
Number of Shares Exercisable | 200,000 |
Warrant 5 | |
Date of Issuance | Nov. 5, 2014 |
Number of warrants | 100,000 |
Exercise Price | $ / shares | $ .50 |
Contractual Life | 3 years |
Number of Shares Exercisable | 100,000 |
5. COMMON STOCK (Details Narrat
5. COMMON STOCK (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Common stock par value (in Dollars per share) | $ .001 | $ 0.001 |
Common stock shares authorized | 150,000,000 | 150,000,000 |
Common stock shares issued | 43,185,765 | 42,510,765 |
Common stock shares outstanding | 43,185,765 | 42,510,765 |
Preferred stock outstanding | 0 | |
Stock issued for current and prior services, value | $ 202,550 | |
Issuance of stock for accrued stock payable, value | $ 680,000 | |
Common Stock [Member] | Certain Officers and Directors [Member] | ||
Stock granted | 5,000,000 | |
Stock granted, fair value | $ 787,950 | |
Stock vested, value | $ 39,397 | |
Stock grant issued | 0 | |
Common Stock [Member] | Consultant [Member] | ||
Stock granted | 210,000 | |
Stock granted, fair value | $ 33,094 | |
Stock vested, value | $ 2,758 | |
Stock grant issued | 0 | |
Stock Payable [Member] | ||
Stock issued for current and prior services, shares | 675,000 | |
Stock issued for current and prior services, value | $ 131,305 | |
Issuance of stock for accrued stock payable, shares | 5,000,000 | |
Issuance of stock for accrued stock payable, value | $ 680,000 | |
Various [Member] | ||
Stock issued for current and prior services, shares | 629,159 | |
Stock issued for current and prior services, value | $ 202,550 | |
Prior Services [Member] | ||
Stock issued for current and prior services, shares | 212,500 | |
Stock issued for current and prior services, value | $ 67,914 |
6. COMMITMENTS AND CONTINGENC29
6. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Lease payments | $ 174,725 | $ 177,234 |
Office Lease [Member] | ||
Monthly lease payments | 17,080 | |
Data Center Lease [Member] | ||
Monthly lease payments | $ 4,674 |
7. INCOME TAXES (Details - Defe
7. INCOME TAXES (Details - Deferred taxes) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 5,510,000 | $ 6,034,000 |
Temporary differences | 303,000 | 238,000 |
Less valuation allowance | (5,813,000) | (6,272,000) |
Deferred tax asset, net | $ 0 | $ 0 |
7. INCOME TAXES (Details - Tax
7. INCOME TAXES (Details - Tax provision) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit computed at 34% | $ 65,000 | $ 81,000 |
Change in valuation allowance | 460,000 | (323,000) |
Change in carryovers and tax attributes | (525,000) | 242,000 |
Income tax provision | $ 0 | $ 0 |
7. INCOME TAXES (Details Narrat
7. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 5,813,000 | $ 6,272,000 |
NOL expiration dates | Dec. 31, 2031 |
8. LEGAL SETTLEMENT (Details Na
8. LEGAL SETTLEMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Legal Settlement | ||
Litigation settlement total | $ 0 | $ 2,500,000 |
Payments on litigation settlement | 999,758 | |
Settlement payable | $ 254,900 | $ 915,475 |