Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 15, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Worlds Inc. | ' |
Entity Central Index Key | '0000001961 | ' |
Document Type | 'S-1 | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 85,152,677 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Balance_Sheets
Balance Sheets (USD $) | Dec. 31, 2011 | Sep. 30, 2013 | Dec. 31, 2012 |
Unaudited | Audited | ||
Current Assets | ' | ' | ' |
Cash and cash equivalents | $152,526 | $63,836 | $95,069 |
Due from related party | 43,819 | 266,196 | 134,654 |
Prepaid expenses | 82,633 | 0 | 0 |
Total Current Assets | 278,978 | 330,032 | 229,724 |
Patents | 0 | 7,000 | 7,000 |
Total Assets | 278,978 | 337,032 | 236,724 |
Current Liabilities | ' | ' | ' |
Accounts payable | 798,808 | 797,908 | 797,908 |
Accrued expenses | 1,866,172 | 1,949,651 | 1,953,934 |
Derivative liability | 0 | 359,127 | 0 |
Notes payable | 773,279 | 773,279 | 773,279 |
Convertible notes payable, net | ' | 79,726 | 0 |
Total Current Liabilities | 3,438,259 | 3,959,691 | 3,525,121 |
LONG-TERM LIABILITIES | ' | ' | ' |
Promissory note payable | 0 | 50,000 | 0 |
TOTAL LIABILITIES | 0 | 4,009,691 | 3,525,121 |
Stockholders (Deficit) | ' | ' | ' |
Common stock (Par value $0.001 authorized 100,000,000 shares, issued and outstanding 92,928,477 and 79,813,071 at September 30, 2013 and December 31, 2012, respectively) | 74,862 | 92,929 | 79,813 |
Common stock subscribed but not yet issued (0 and 1,500,000 at September 30, 2013 and December 31, 2012, respectively) | 525 | 0 | 1,500 |
Subscription receivable | 0 | 0 | -10,000 |
Additional paid in capital | 25,231,804 | 29,882,333 | 26,580,244 |
Common stock-warrants | 0 | 97,869 | 203,237 |
Deferred compensation | 0 | -160,867 | -12,500 |
Accumulated deficit | -28,466,471 | -33,584,923 | -30,130,692 |
Total stockholders deficit | -3,159,281 | -3,672,659 | -3,288,398 |
Total Liabilities and stockholders deficit | $278,978 | $337,032 | $236,723 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2011 | Sep. 30, 2013 | Dec. 31, 2012 |
Unaudited | Audited | ||
Common Stock, par value | $0.00 | $0.00 | $0.00 |
Common Stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 |
Common Stock, shares issued | 74,862,146 | 92,928,477 | 79,813,071 |
Common Stock, shares outstanding | 74,862,146 | 92,928,477 | 79,813,071 |
Common stock subscribed not yet issued | 525,000 | 0 | 1,500,000 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Revenues | ' | ' | ' | ' | ' | ' |
Revenue | ' | ' | ' | ' | ' | $199 |
Total Revenue | ' | ' | ' | ' | ' | 199 |
Cost of Revenue | ' | ' | ' | ' | ' | 86,459 |
Gross Profit/(Loss) | ' | ' | ' | ' | ' | -86,260 |
Option expense | 0 | 0 | 0 | 0 | 705,918 | 18,188 |
Common Stock issued for services rendered | 2,723,399 | 65,297 | 2,955,915 | 299,333 | 361,685 | 1,056,849 |
Selling, General & Admin. | 66,775 | 53,077 | 431,856 | 211,614 | 355,761 | 333,249 |
Salaries and related taxes | 47,119 | 68,267 | 159,357 | 197,108 | 240,858 | 200,094 |
Operating (loss) | -2,837,293 | -186,641 | -3,547,128 | -708,055 | -166,221 | -1,694,640 |
Other Income Expense | ' | ' | ' | ' | ' | ' |
Gain on change in fair value of derivative liability | 6,399 | ' | 456,929 | ' | ' | ' |
Interest Expense | -53,558 | ' | -365,462 | ' | ' | ' |
Interest income | ' | ' | 1,430 | ' | ' | ' |
Net (Loss) | ($2,884,452) | ($186,641) | ($3,454,231) | ($708,055) | ($1,664,221) | ($1,694,640) |
Weighted Average (Loss) per share | ($0.03) | $0 | ($0.04) | ($0.01) | ($0.02) | ($0.02) |
Weighted Average Common Shares Outstanding | 89,243,523 | 77,132,854 | 84,998,810 | 76,194,707 | 76,792,137 | 69,984,791 |
Shareholders_Equity
Shareholders Equity (USD $) | Common Stock | Additional Paid-In Capital | Common Stock Warrants | Subscription Receivables | Common Shares Subscribed Not Issued | Deferred Compensation | Accumulated Deficit | Total |
Beginning Balance, amount at Dec. 31, 2009 | $62,780 | $23,453,111 | ' | ' | $3,358 | ' | ($26,771,832) | ($3,252,582) |
Beginning Balance, shares at Dec. 31, 2009 | 62,781,122 | ' | ' | ' | 3,358,331 | ' | ' | ' |
Conversion of debt to equity, shares | 309,741 | ' | ' | ' | ' | ' | ' | ' |
Conversion of debt to equity, amount | 310 | 72,065 | ' | ' | ' | ' | ' | 72,375 |
Common Stock Issued for services, shares | 5,348,619 | ' | ' | ' | 500,000 | ' | ' | ' |
Common Stock Issued for services, amount | 5,349 | 1,088,133 | ' | ' | 500 | ' | ' | 1,093,982 |
Issuance of common stock for cash investment, shares | 4,333,331 | ' | ' | ' | -3,333,331 | ' | ' | ' |
Issuance of common stock for cash investment, amount | 4,333 | 149,000 | ' | ' | -3,333 | ' | ' | 150,000 |
Exercise of option, shares | 1,160,804 | ' | ' | ' | ' | ' | ' | ' |
Exercise of option, amount | 1,161 | 117,285 | ' | ' | ' | ' | ' | 118,446 |
Issuance of stock options, shares | 928,529 | ' | ' | ' | ' | ' | ' | ' |
Issuance of stock options, amount | 929 | 57,071 | ' | ' | ' | ' | ' | 58,000 |
Issuance of stock options | ' | 18,188 | ' | ' | ' | ' | ' | 18,188 |
Net loss for the year ended | ' | ' | ' | ' | ' | ' | -1,694,640 | -1,694,640 |
Ending Balance, amount at Dec. 31, 2010 | 74,862 | 25,231,804 | ' | ' | 525 | ' | -28,466,471 | -3,159,281 |
Deferred Revenue at Dec. 31, 2010 | ' | 276,950 | ' | ' | ' | ' | ' | 276,950 |
Ending Balance, shares at Dec. 31, 2010 | 74,862,146 | ' | ' | ' | 525,000 | ' | ' | ' |
Common Stock Issued for services, shares | 3,100,925 | ' | ' | ' | -525,000 | ' | ' | ' |
Common Stock Issued for services, amount | 3,101 | 371,609 | ' | ' | -525 | -12,500 | ' | ' |
Issuance of common stock for cash investment, shares | 1,700,000 | ' | ' | ' | 1,500,000 | ' | ' | 361,684 |
Issuance of common stock for cash investment, amount | 1,700 | 466,800 | ' | -10,000 | 1,500 | ' | ' | 460,000 |
Exercise of option, shares | 150,000 | ' | ' | ' | ' | ' | ' | ' |
Exercise of option, amount | 150 | 7,350 | ' | ' | ' | ' | ' | 7,500 |
Issuance of stock options, shares | ' | ' | ' | ' | ' | ' | ' | ' |
Issuance of stock options, amount | ' | 705,918 | ' | ' | ' | ' | ' | 705,918 |
Warrants issued with PPM | ' | -203,237 | 203,237 | ' | ' | ' | ' | ' |
Net loss for the year ended | ' | ' | ' | ' | ' | ' | -1,664,221 | -1,694,640 |
Ending Balance, amount at Dec. 31, 2011 | 79,813 | 26,580,244 | 203,237 | -10,000 | 1,500 | -12,500 | -30,130,692 | -3,159,281 |
Ending Balance, shares at Dec. 31, 2011 | 79,813,071 | ' | ' | ' | 1,500,000 | ' | ' | ' |
Warrants issued with PPM | ' | -203,237 | 203,237 | ' | ' | ' | ' | 0 |
Net loss for the year ended | ' | ' | ' | ' | ' | ' | -1,664,221 | -1,664,221 |
Ending Balance, amount at Dec. 31, 2012 | 79,813 | 26,580,244 | 203,237 | -10,000 | 1,500,000 | -12,500 | -30,130,692 | -3,288,397 |
Deferred Revenue at Dec. 31, 2012 | ' | ' | ' | ' | ' | ' | ' | $631,950 |
Ending Balance, shares at Dec. 31, 2012 | 79,813,071 | ' | ' | ' | ' | ' | ' | 680,000 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Cash flows from operating activities: | ' | ' | ' | ' | ' |
Net (loss) | ($3,454,231) | ($708,055) | ($1,664,221) | ($1,694,640) | ($1,694,640) |
Adjustments to reconcile net (loss) to net cash (used in) operating activities | ' | ' | ' | ' | ' |
Depreciation | ' | ' | ' | 759 | ' |
Common stock issued for services rendered | 2,955,915 | 299,333 | 361,685 | 1,056,849 | ' |
Fair value of stock opotions issued | ' | ' | 705,918 | 18,188 | ' |
Amortization of discount to note payable | 259,178 | ' | ' | ' | ' |
Derivative expense | 586,195 | ' | ' | ' | ' |
Changes in fair value of derivative liabilities | -969,566 | ' | ' | ' | ' |
Prepaid expenses | ' | ' | 82,633 | -10,258 | ' |
Accounts payable and accrued expenses | -4,283 | 33,571 | 86,864 | 63,420 | ' |
Due from related party | -131,542 | -21,970 | -90,835 | -43,819 | ' |
Net cash (used in) operating activities: | -758,334 | -397,121 | -517,958 | -572,368 | ' |
Patent | ' | -7,000 | -7,000 | ' | ' |
Net cash (used in) investing activities: | ' | -7,000 | -7,000 | ' | ' |
Proceeds from issuance of common stock | 97,500 | 250,000 | 460,000 | 150,000 | ' |
Proceeds from exercise of options | ' | 7,500 | 7,500 | 58,000 | ' |
Proceeds from exercise of warrants | 131,000 | ' | ' | 118,446 | ' |
Proceeds from promissory note | 50,000 | ' | ' | ' | ' |
Proceeds from issuance of note payable | 2,400,000 | ' | ' | ' | ' |
Redemption of note payable | -1,951,400 | ' | ' | ' | ' |
Repayment of officer loan payable | ' | ' | ' | -2,400 | ' |
Net cash provided by financing activities | 727,100 | 257,500 | 467,500 | 324,046 | ' |
Net increase/(decrease) in cash and cash equivalents | -31,234 | -146,621 | -57,458 | -248,322 | ' |
Cash and cash equivalents, beginning of year | 95,069 | 152,526 | 152,526 | 400,848 | ' |
Cash and cash equivalents, end of year | 63,836 | 5,905 | 95,069 | 152,526 | 400,848 |
Non-cash financing activities | ' | ' | ' | ' | ' |
Common stock issued for payable | ' | ' | ' | 72,375 | ' |
Deferred revenue | ' | ' | ' | 276,950 | ' |
Prepayment of expenses through issuance of commom stock | ' | ' | ' | 82,633 | ' |
Interest | ' | ' | ' | ' | ' |
Income taxes | ' | ' | ' | ' | ' |
NOTE_1_DESCRIPTION_OF_BUSINESS
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCTING POLICIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' |
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCTING POLICIES | ' | ' |
NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES | NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES | |
Description of Business | Description of Business | |
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies. | On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies. | |
Basis of Presentation | Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. | The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), which contemplates continuation of the Company as a going concern. The Company has always been considered a developmental stage business, has incurred significant losses since its inception and has had minimal revenues from operations. The Company will require substantial additional funds for development and enforcement of its patent portfolio. There can be no assurance that the Company will be able to obtain the substantial additional capital resources to pursue its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company has not been able to generate sufficient revenue or obtain sufficient financing which has had a material adverse effect on the Company, including requiring the Company to reduce operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. For the past year the Company has been operating at a significantly reduced capacity, with only one full time employee, performing primarily consulting services and licensing software and using consultants to perform any additional work that may be required. | |
The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the years ended December 31, 2012 and 2011 thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. | Use of Estimates | |
Use of Estimates | The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. | |
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. | Cash and Cash Equivalents | |
Cash and Cash Equivalents | Cash and cash equivalents are comprised of highly liquid money market instruments, which have original maturities of three months or less at the time of purchase. | |
Cash and cash equivalents are comprised of highly liquid money market instruments, which have original maturities of three months or less at the time of purchase. | Due from Related Party | |
Due from Related Party | Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. | |
Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. | Revenue Recognition | |
Revenue Recognition | Effective for the second quarter of 2011, the Company spun off its online businesses to Worlds Online Inc. The Company’s sources of revenue after the spin off will be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents prior to the spin-off , the Company had the following sources of revenue: (1) consulting/licensing revenue from the performance of development work performed on behalf of the Company, licensing revenue or from the sale of certain software to third parties; and (2) VIP subscriptions to our Worlds Ultimate 3-D Chat service. The Company recognizes revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract, delivery has occurred, the price is fixed or determinable, and collectibility is reasonable assured. This will usually be in the form of a receipt of a customer’s acceptance indicating the product has been completed to their satisfaction except for development work and service revenue which is recognized when the services have been performed. Deferred revenue represents cash payments received in advance to be recorded as revenue when earned. The corresponding cost associated with those contracts is also deferred as deferred costs until the revenue is ultimately recognized. | |
Effective for the second quarter of 2011, the Company spun off its online businesses to Worlds Online Inc. The Company’s sources of revenue after the spin off will be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents. Prior to the spin-off, the Company had the following sources of revenue: (1) consulting/licensing revenue from the performance of development work performed on behalf of the Company and licensing revenue or from the sale of certain software to third parties; and (2) VIP subscriptions to our Worlds Ultimate 3-D Chat service. Following the spin-off we expect to receive revenue from royalties on licenses of our IP and from litigation settlements from infringers of our IP. The Company recognizes revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract, delivery has occurred, the price is fixed or determinable, and collectibility is reasonable assured. This will usually be in the form of a receipt of a customer’s acceptance indicating the product has been completed to their satisfaction except for development work and service revenue which is recognized when the services have been performed. Deferred revenue represents cash payments received in advance to be recorded as revenue when earned. The corresponding cost associated with those contracts is also deferred as deferred costs until the revenue is ultimately recognized. | Research and Development Costs | |
Research and Development Costs | Research and development costs are charged to operations as incurred. | |
Research and development costs are charged to operations as incurred. | Property and Equipment | |
Property and Equipment | Property and equipment are stated at cost. Depreciation is provided on a straight line basis over the estimated useful lives of the assets ranging from three to five years. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Maintenance and repairs are charged to expense in the period incurred. | |
Property and equipment are stated at cost. Depreciation is provided on a straight line basis over the estimated useful lives of the assets ranging from three to five years. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Maintenance and repairs are charged to expense in the period incurred. | Impairment of Long Lived Assets | |
Impairment of Long Lived Assets | The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during 2012 and 2011. | |
The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification (“ASC”) for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the six months ended June 30, 2013 and 2012. | Stock-Based Compensation | |
Stock-Based Compensation | The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity 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 (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. | |
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB ASC for disclosure about Stock-Based Compensation. This section requires a public entity 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 (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. | Income Taxes | |
Income Taxes | The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. | |
The Company accounts for income taxes under Section 740-10-30 of the FASB ASC. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. | ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. | |
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. | Notes Payable | |
Notes Payable | The Company has $773,279 in short term notes outstanding at December 31, 2012 and 2011. | |
The Company has $773,279 in short term notes outstanding at September 30, 2013. | Deferred Revenue | |
Comprehensive Income (Loss) | As part of a debt refinancing in 2000, $631,950 of debt was renegotiated to deferred revenue representing future services to be provided by the Company. $355,000 has been amortized into income since then. The balance was transferred over to Worlds Online Inc. and no longer appears on the Company’s balance sheets. | |
The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB ASC which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the consolidated financial statements. | Call Option Agreements | |
Loss Per Share | The Company has entered into call option agreements with 13 of its major shareholders. The call options give the Company the right to purchase up to 4,150,000 shares of stock back at prices ranging from $0.15 per share up to $0.40 per share. The Company issued an aggregate of 680,000 shares of stock to these shareholders as an inducement to enter into these call option agreements. The call option agreements have expiration dates of 1 and 2 years. In 2011, 12 of the call options were extended for 1 year. The Company issued 315,000 additional shares as an inducement to enter into the 1 year extensions. At December 31, 2012 all call options have expired | |
Net loss per common share is computed pursuant to section 260-10-45 of the FASB ASC. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. As of September 30, 2013, there were 8,462,500 options and 5,273,214 warrants whose effect was anti-dilutive and not included in diluted net loss per share for the three and nine months ended September 30, 2013. The options and warrants may dilute future earnings per share. | Comprehensive Income (Loss) | |
Commitments and Contingencies | The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements. | |
The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | Loss Per Share | |
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of December 31, 2012 and 2011. | |
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. | Commitments and Contingencies | |
Risk and Uncertainties | The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |
The Company is subject to risks common to companies in the technology industries, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel. | If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | |
Off Balance Sheet Arrangements | Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. | |
The Company does not have any off-balance sheet arrangements. | During 2000 the Company was involved in a lawsuit relating to unpaid consulting services. In April, 2001 a judgment against the Company was rendered for approximately $205,000. As of December 31, 2012, and 2011 the Company recorded a reserve of $205,000 for this lawsuit, which is included in accrued expenses in the accompanying balance sheets. | |
Uncertain Tax Positions | Risk and Uncertainties | |
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of FASB ASC 740-10-25 for the six months ended September 30, 2013 and 2012. | The Company is subject to risks common to companies in the technology industries, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel. | |
Recent Accounting Pronouncements | Off Balance Sheet Arrangements | |
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2013-09, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations. | The Company does not have any off-balance sheet arrangements. | |
Uncertain Tax Positions | ||
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 31, 2012 or 2011. | ||
Subsequent Events | ||
On March 14, 2013 the Company entered into strategic financing agreements with several institutional investors that could provide the Company with up to $2.3 million of debt financing based upon the amount of conversions and redemptions. The transaction documents provide, among other things, that (i) the investors will receive five year warrants in an amount equal to 100% of the number of shares of our common stock the investors would receive if the Notes (defined below) were converted on March 13, 2013, at an exercise price of $0.50 per share, (ii) $1.950 million of the funds will deposited in one of our bank accounts but will be subject to a control account agreement which will provide that the Company can only withdraw funds from the account as the investors convert or redeem the Notes, (iii) the investors have demand and piggy-back registration rights for the shares of common stock underlying the warrants and Notes, (iv) the Notes will be secured by a first priority security interest in all of our assets, other than its patents, (v) each investor may not convert any Note or exercise any warrants if doing so will cause the investor to own more than 4.99% of our outstanding common stock at any time, although under certain circumstances they can each own up to 9.99% of our outstanding common stock, (vi) we paid $40,000 of the investors’ legal fees incurred with respect to this transaction, and (vii) for the next three years the investors have a right to participate in up to 50% of any of our future financings. The warrants and Notes contain standard anti-dilution provisions and the Securities Purchase Agreements contains standard covenants for a financing of this nature. In the event the Company acquire any subsidiaries while the Notes are outstanding, such subsidiaries will be obligated to guaranty the Notes and any other obligations we owe to the investors pursuant to the transaction documents. | ||
We issued an aggregate of $2.4 million face amount of Senior Secured Convertible Notes (the “Notes”). The Notes are divided into Series A, Series B and Series C with the Series A and B Notes aggregating to $1.95 million and the Series C Notes aggregating to $450,000. All of the Notes carry a 14% annual interest rate and are payable on March 13, 2016. Until July 1, 2013 (i) the Series A Notes initially convert into our common stock at a rate of $0.50 per share, (ii) the Series B initially convert at a rate of $0.75 per share and (iii) the Series C Notes initially convert at a rate of $0.35 per share, in each case subject to adjustments as provided in the Notes. Commencing July 1, 2013, the conversion rate for all Notes becomes the lower of (x) the conversion rate described above or (y) 85% of the average of the daily VWAP of each trading day during the twenty (20) consecutive trading day period ending on the trading day immediately prior to the conversion date, subject to adjustments as provided in the Notes. We have the right to redeem, at 120% of face value, up to 75% of the Series A and Series B Notes. | ||
Recent Accounting Pronouncements | ||
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations. | ||
In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures. | ||
In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation. | ||
In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, which allows, but does not require, an entity when performing its annual goodwill impairment test the option to first do an initial assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount for purposes of determining whether it is even necessary to perform the first step of the two-step goodwill impairment test. Accordingly, based on the option created in ASU 2011-08, the calculation of a reporting unit’s fair value is not required unless, as a result of the qualitative assessment, it is more likely than not that fair value of the reporting unit is less than its carrying amount. If it is less, the quantitative impairment test is then required. ASU 2011-08 also provides for new qualitative indicators to replace those currently used. Prior to ASU 2011-08, entities were required to test goodwill for impairment on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test is performed to measure the amount of impairment loss, if any. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 during the first quarter of fiscal 2013. The adoption of ASU 2011-08 did not impact the Company’s results of operations or financial condition. | ||
In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on its results of operations, cash flows or financial condition. | ||
In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test. | ||
ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period. | ||
ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its financial statements. |
NOTE_2_GOING_CONCERNS
NOTE 2 - GOING CONCERNS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Loss Contingency [Abstract] | ' | ' |
NOTE 2 - GOING CONCERNS | ' | ' |
NOTE 2 - GOING CONCERN | NOTE 2 - GOING CONCERN | |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Since its inception, the Company has had periods where it had only minimal revenues from operations. There can be no assurance that the Company will be able to obtain the additional capital resources to fully implement its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will likely have a material adverse effect on the Company, including possibly requiring the Company to reduce and/or cease operations. | The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Since its inception, the Company has had periods where it had only minimal revenues from operations. There can be no assurance that the Company will be able to obtain the additional capital resources to fully implement its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will likely have a material adverse effect on the Company, including possibly requiring the Company to reduce and/or cease operations. | |
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. | These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
NOTE_3_PRIVATE_PLACEMENT_OF_EQ
NOTE 3 - PRIVATE PLACEMENT OF EQUITY | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Equity [Abstract] | ' | ' |
NOTE 3 - PRIVATE PLACEMENT OF EQUITY | ' | ' |
NOTE 3 - PRIVATE PLACEMENTS OF EQUITY | NOTE 3 - PRIVATE PLACEMENTS OF EQUITY | |
During the nine months ended September 30, 2013, the Company sold 875,000 common shares for a cash investment of $87,500. The company received $10,000 for stock issued in 2012 and recorded as subscription receivable. | During the year ended December 31, 2011, the Company issued an aggregate of 5,348,619 shares of common stock as payment for services rendered with an aggregate value of $1,093,482. | |
During the nine months ended September 30, 2013, the Company raised $120,000 with the exercise of warrants covering 800,000 shares of its common stock at a price of $0.15 per share. | During the year ended December 31, 2011, the Company raised $118,446 with the exercise of warrants covering 1,160,804 shares of its common stock at a price per share ranging from $0.01 to $0.15 per share. | |
During the nine months ended September 30, 2013, 100,000 stock options were exercised at a price of $0.11 per share for cash proceeds of $11,000. | During the year ended December 31, 2011, the Company raised $58,000 with the exercise of options covering 928,529 shares of its common stock at a price ranging from $0.05 to $0.30 per share. 128,529 of those shares were exercised on a cashless basis by the surrender to the Company of an aggregate of 131,747 options with a value of $38,558 being equal to the difference in price between the exercise price and the market price on the date of exercise. | |
During the nine months ended September 30, 2013, the Company issued an aggregate of 7,675,800 shares of common stock as payment for services rendered with an aggregate value of $2,609,332, $160,867 of which was recorded as deferred compensation as of September 30, 2013. | During the year ended December 31, 2011, the Company issued 4,333,331 common shares for a cash investment of $150,000. Included in these shares were 3,333,331 in shares from the prior year that were issued for $400,000. | |
During the nine months ended September 30, 2013, the Company issued 1,500,000 common shares for a cash investment of $150,000 which was received in 2012. The shares were not issued as of December 31, 2012, and were recorded as common stock subscribed but not yet issued at December 31, 2012. | During the year ended December 31, 2012, the Company sold 3,200,000 common shares for a cash investment of $470,000. $10,000 from the 4th quarter financing was not received until 2013 and 1,500,000 shares were subscribed but not yet issued at December 31, 2012. | |
During the nine months ended September 30, 2012, the Company issued 1,000,000 common shares for a cash investment of $250,000. | ||
During the year ended December 31, 2012, the Company issued an aggregate of 2,575,925 shares of common stock as payment for services rendered with an aggregate value of $374,184, $12,500 of which was deferred and performed in the first quarter in 2013. The Company also issued an aggregate of 525,000 shares of common stock for services rendered in prior years. | ||
During the nine months ended September 30, 2012, the Company issued an aggregate of 3,323,382 shares of common stock as payment for services rendered with an aggregate value of $299,333. | ||
During the year ended December 31, 2012, the Company raised $7,500 with the exercise of options covering 150,000 shares of its common stock at a price of $0.05 per share. | ||
During the nine months ended September 30, 2012, the Company raised $7,500 with the exercise of options covering 150,000 shares of its common stock at a price of $0.05 per share. |
NOTE_4_NOTES_PAYABLE
NOTE 4 - NOTES PAYABLE | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Debt Disclosure [Abstract] | ' | ' | ||||||||
NOTE 4 - NOTES PAYABLE | ' | ' | ||||||||
NOTE 4 - NOTES PAYABLE | NOTE 4 - NOTES PAYABLE | |||||||||
We issued an aggregate of $2.4 million face amount of Senior Secured Convertible Notes (the “Notes”). The Notes are divided into Series A, Series B and Series C with the Series A and B Notes aggregating to $1.95 million and the Series C Notes aggregating to $450,000. The Series A and Series B notes were redeemed by the return of the face amount of the notes and for 7 million shares of common stock of the Company. The remaining Series C note carries a 14% annual interest rate upon default and is payable on March 13, 2016. The Company has determined that the conversion feature of the Note represent an embedded derivative since the Note is convertible into a variable number of shares upon conversion. This Notes is classified as a derivative liability and not a note payable, see Note 10 below. | ||||||||||
Short term notes payable at December 31, 2012 consist of the following: | ||||||||||
Notes payable at September 30, 2013 consist of the following: | Unsecured note payable to a shareholder bearing 8% interest. | |||||||||
Entire balance of principal and unpaid interest due on demand | $ | 124,230 | ||||||||
Unsecured note payable to a shareholder bearing 8% interest. | Unsecured note payable to a shareholder bearing 10% interest | |||||||||
Entire balance of principal and unpaid interest due on demand | $ | 124,230 | Entire balance of principal and unpaid interest due on demand | $ | 649,049 | |||||
Unsecured note payable to a shareholder bearing 10% interest | Total current | $ | 773,279 | |||||||
Entire balance of principal and unpaid interest due on demand | $ | 649,049 | ||||||||
2013 | $ | 773,279 | ||||||||
Total current | $ | 773,279 | 2014 | $ | -0- | |||||
2015 | $ | -0- | ||||||||
2013 | $ | 773,279 | 2016 | $ | -0- | |||||
2014 | $ | -0- | 2017 | $ | -0- | |||||
2015 | $ | 50,000 | $ | 773,279 | ||||||
2016 | $ | -0- | ||||||||
2017 | $ | -0- | ||||||||
$ | 823,229 | |||||||||
We issued a promissory note in the amount of $50,000 on September 30, 2013. The promissory note carries a 6% annual interest rate and is payable upon the earlier of (a) 24 months from the date of the promissory note or (b) the Company reaching a settlement(s) on a patent infringement claim(s) and receiving an aggregate of at least $2 million net proceeds from such settlement(s). | ||||||||||
The holder of the promissory note shall receive repayment in the full face amount of the note from the initial $500,000 the Company actually receives from the net proceeds of its patent infringement claim(s) or from the net proceeds of a public offering. In addition the holder shall receive a preferred return (i) in an amount equal to up to 200% of the initial face amount of the note out of available cash by sharing with all other investors in this series of notes in the allocation of 50% of the available cash received by the Company form $2M - $4M and (ii) in an amount equal to up to 100% of the initial face amount of the note out of available cash by sharing with all other investors in this series of notes in the allocation of 25% of the available cash received by the Company from $4M - $6M. In other words, if the Company collects $6M in the net proceeds of available cash, the holder will receive a return equal to 400% of its investment. |
NOTE_5_STOCK_OPTIONS
NOTE 5 - STOCK OPTIONS | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ||||||||||||||||||||
NOTE 5 - STOCK OPTIONS | ' | ' | ||||||||||||||||||||
NOTE 5 – STOCK OPTIONS | STOCK OPTIONS | |||||||||||||||||||||
During the nine months ended September 30, 2013, the Company issued 4,535,714 warrants as part of the offering of the senior secured convertible notes. During the nine months ended September 30, 2013, 800,000 warrants were exercised for cash proceeds of $120,000. During the nine months ended September 30, 2013, 100,000 stock options were exercised for cash proceeds of $11,000. During the nine months ended September 30, 2013, 900,000 stock options were exercised through a cashless exercise of options resulting in the issuance of 639,606 shares of common stock. | During the year ended December 31, 2012, the Company issued 8,000,000 stock options to directors and officers of the Company. 7,500,000 stock options were issued as part of the employment agreement with it’s President and CEO, Thom Kidrin. The stock option allows Thom Kidrin to purchase 7,500,000 shares of the Company’s common stock at $0.076 per share per each individual option. The option allows. The options expire on March 31, 2014. The Company issued 300,000 stock options to Chris Ryan, the Company’s CFO. The stock option allows Chris Ryan to purchase 300,000 shares of the Company’s common stock at $0.0115 per share per each individual option. The options expire on September 30, 2017. The Company issued 100,000 shares to each of the Company’s directors, Bernard Stolar and Robert Fireman. The stock options allow each director to purchase 100,000 shares of the Company’s common stock at $0.0115 per share per each individual option. The options expire on September 30, 2017. The Company did not grant any registration rights with respect to any shares of common stock issuable upon exercise of the options. | |||||||||||||||||||||
During the nine months ended September 30, 2012, stock options representing 150,000 shares at $0.05 per share were exercised. No warrants were exercised. | During the period ended December 31, 2012, the Company recorded an expense of $705,918, equal to the estimated fair value of the options at the date of grants. The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 1.6% risk-free interest, 0% dividend yield, 279% volatility, and expected life of 1.5 years for Mr Kidrin’s options and 4.5 years for the remaining options. | |||||||||||||||||||||
No stock options were issued in the year ended December 31, 2011. | ||||||||||||||||||||||
Stock Warrants and Options | ||||||||||||||||||||||
Stock warrants/options outstanding and exercisable on September 30, 2013 are as follows: | During the year ended December 31, 2011, 1,160,804 warrants were exercised and 928,529 stock options were exercised for cash proceeds of $118,446 and $58,000, respectively. | |||||||||||||||||||||
Exercise Price per Share | Shares Under Option/warrant | Remaining Life in Years | ||||||||||||||||||||
Outstanding | Stock Warrants and Options | |||||||||||||||||||||
$ | 1 | 4,535,714 | 4.46 | Stock warrants/options outstanding and exercisable on December 31, 2012 are as follows: | ||||||||||||||||||
$ | 0.35 | 212,500 | 0.25 | |||||||||||||||||||
$ | 0.2 | 100,000 | 0.25 | |||||||||||||||||||
$ | 0.19 | 200,000 | 4.25 | Exercise Price per Share | Shares Under Option/warrant | Remaining Life in Years | ||||||||||||||||
$ | 0.15 | 737,500 | 1.25 | |||||||||||||||||||
$ | 0.115 | 300,000 | 4.08 | Outstanding | ||||||||||||||||||
$ | 0.11 | 150,000 | 1.55 | $0.35 | 212,500 | 1 | ||||||||||||||||
$ | 0.076 | 7,500,000 | 0.5 | $0.20 | 300,000 | 1 | ||||||||||||||||
$ | $0.15 | 1,537,500 | 2 | |||||||||||||||||||
Exercisable | $0.12 | 500,000 | 4.83 | |||||||||||||||||||
$ | 1 | 4,535,714 | 4.46 | $0.11 | 150,000 | 2.3 | ||||||||||||||||
$ | 0.35 | 212,500 | 0.25 | $0.11 | 300,000 | 0.3 | ||||||||||||||||
$ | 0.2 | 100,000 | 0.25 | $0.08 | 7,500,000 | 1.25 | ||||||||||||||||
$ | 0.15 | 737,500 | 1.25 | $0.05 | 600,000 | 0.85 | ||||||||||||||||
$ | 0.115 | 300,000 | 4.08 | |||||||||||||||||||
$ | 0.11 | 150,000 | 1.55 | Exercisable | ||||||||||||||||||
$ | 0.076 | 7,500,000 | 0.5 | $0.35 | 212,500 | 1 | ||||||||||||||||
$0.20 | 300,000 | 1 | ||||||||||||||||||||
$0.15 | 1,537,500 | 2 | ||||||||||||||||||||
$0.11 | 150,000 | 2.3 | ||||||||||||||||||||
$0.11 | 300,000 | 0.3 | ||||||||||||||||||||
$0.08 | 7,500,000 | 1.25 | ||||||||||||||||||||
$0.05 | 600,000 | 0.85 | ||||||||||||||||||||
NOTE_6_INCOME_TAXES
NOTE 6 - INCOME TAXES | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2011 | |||||||||
Income Tax Disclosure [Abstract] | ' | ' | ||||||||
NOTE 6 - INCOME TAXES | ' | ' | ||||||||
NOTE 6 - INCOME TAXES | INCOME TAXES | |||||||||
At September 30, 2013, the Company had federal and state net operating loss carry forwards of approximately $44,469,000 that expire in various years through the year 2026. | At December 31, 2012, the Company had federal and state net operating loss carry forwards of approximately $41,200,000 that expire in various years through the year 2025. | |||||||||
Due to operating losses, there is no provision for current federal or state income taxes for the nine months ended September 30, 2013 and 2012. | Due to operating losses, there is no provision for current federal or state income taxes for the year ended December 31, 2012 and 2011. | |||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes. | Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes. | |||||||||
The Company’s deferred tax asset at September 30, 2013 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $17,343,000 less a valuation allowance in the amount of approximately $17,343,000. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased by approximately $1,283,000 and $200,000 for the nine months ended September 30, 2013 and 2012, respectively. | The Company’s deferred tax asset at December 31, 2012 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $16,060,000 less a valuation allowance in the amount of approximately $16,060,000. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased by approximately $220,000 and $240,000 for the years ended December 31, 2012 and 2011, respectively. | |||||||||
The Company’s total deferred tax asset as of September 30, 2013 is as follows: | The Company’s total deferred tax asset as of December 31, 2012 is as follows: | |||||||||
Net operating loss carry forwards | $ | 17, 343,000 | Net operating loss carry forwards | $ | 16,060,000 | |||||
Valuation allowance | -17,343,000 | Valuation allowance | -16,060,000 | |||||||
Net deferred tax asset | $ | — | Net deferred tax asset | $ | — | |||||
The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes for the nine months ended September 30, 2013 and 2012 is as follows: | The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes for the year ended December 31, 2012 and 2011 is as follows: | |||||||||
Income tax computed at the federal statutory rate | 34% | Income tax computed at the federal statutory rate | 34% | |||||||
Income tax computed at the state statutory rate | 5% | Income tax computed at the state statutory rate | 5% | |||||||
Valuation allowance | -39% | Valuation allowance | -39% | |||||||
Total deferred tax asset | 0% | Total deferred tax asset | 0% | |||||||
NOTE_7_COMMITMENTS_AND_CONTING
NOTE 7 - COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
NOTE 7 - COMMITMENTS AND CONTINGENCIES | ' |
NOTE 7 - COMMITMENTS AND CONTINGENCIES | |
The Company is committed to an employment agreement with its President and CEO, Thom Kidrin. The agreement, dated as of August 30, 2012, is for five years with a one-year renewal option held by Mr. Kidrin. The agreement provides for a base salary of $175,000, which increases 10% on September 1 of each year; a monthly car allowance of $500; an annual bonus equal to 2.5% of Pre-Tax Income (as defined in the agreement); an additional bonus as follows: $75,000, if Pre-Tax Income for the year is between 150% and 200% of the prior fiscal year’s Pre-Tax Income or (B) $100,000, if Pre-Tax Income for the year is between 201% and 250% of the prior fiscal year’s Pre-Tax Income or (C) $200,000, if Pre-Tax Income for the year is 251% or greater than the prior fiscal year’s Pre-Tax Income, but in no event shall this additional bonus exceed five (5%) percent of Pre-Tax Income for such year; payment of up to $10,000 in life insurance premiums; options to purchase 7.5 million shares of Worlds Inc. common stock at an exercise price of $0.076 per share, all of which vested on August 30, 2012; a death benefit of at least $2 million dollars; and a payment equal to 2.99 times his base amount (as defined in the agreement) in the event of a Change of Control (as defined in the agreement). The agreement also provides that Mr. Kidrin can be terminated for cause (as defined in the agreement) and that he is subject to restrictive covenants for 12 months after termination. | |
The Company is committed to a consulting agreement with an unrelated business consultant. The contract is dated January 1, 2012, calls for monthly payments in the amounts of $5,000 for the 24 month term of the contract and expires on December 31, 2013. |
NOTE_8_RELATED_PARTY_TRANSACTI
NOTE 8 - RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
NOTE 8 - RELATED PARTY TRANSACTIONS | ' |
NOTE 8 - RELATED PARTY TRANSACTIONS | |
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies. | |
Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. The balance due at September 30, 2013 is $265,196. |
NOTE_9_PATENTS
NOTE 9 - PATENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Text Block [Abstract] | ' | ' |
NOTE 9 - PATENTS | ' | ' |
NOTE 9 - PATENTS | PATENTS | |
Worlds Inc. currently has eight patents, 6,219,045 - 7,181,690 - 7,493,558 – 7,945,856, - 8,082,501, 8,145,998, 8,161,383 and 8,407,592. On March 30, 2012, the Company filed a patent infringement lawsuit against Activision Bizzard Inc., Blizzard Entertainment Inc. and Activision Publishing Inc. in the United States District Court for the District of Massachusetts. Susman Godfrey LLP is lead counsel for the Company. The costs to prosecute those parties that the Company and our legal counsel believe to be infringing on said patents were capitalized under patents until a resolution is reached. | Worlds Inc. currently has seven patents, 6,219,045 - 7,181,690 - 7,493,558 – 7,945,856, - 8,082,501, 8,145,998 and 8,161,383. On March 30, 2012, the Company filed a patent infringement lawsuit against Activision Bizzard Inc., Blizzard Entertainment Inc. and Activision Publishing Inc. in the United States District Court for the District of Massachusetts. Susman Godfrey LLP is lead counsel for the Company. The costs to prosecute those parties that the Company and our legal counsel believe to be infringing on said patents were capitalized under patents until a resolution is reached. | |
There can be no assurance that the Company will be successful in its ability to prosecute its IP portfolio or that we will be able to acquire additional patents. | There can be no assurance that the Company will be successful in our ability to prosecute our IP portfolio or that we will be able to acquire additional patents |
NOTE_10_DERIVATIVE_LIABILITIES
NOTE 10 - DERIVATIVE LIABILITIES | 9 Months Ended | ||||||
Sep. 30, 2013 | |||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||
NOTE 10 - DERIVATIVE LIABILITIES | ' | ||||||
NOTE 10 – DERIVATIVE LIABILITIES | |||||||
On March 20, 2013 the Company entered into strategic financing agreements with several institutional investors that could provide the Company with up to $2.3 million of debt financing based upon the amount of conversions and redemptions. The transaction documents provide, among other things, that (i) the investors will receive five year warrants in an amount equal to 100% of the number of shares of our common stock the investors would receive if the Notes (defined below) were converted on March 13, 2013, at an exercise price of $0.50 per share, (ii) $1.950 million of the funds will deposited in one of our bank accounts but will be subject to a control account agreement which will provide that the Company can only withdraw funds from the account as the investors convert or redeem the Notes, (iii) the investors have demand and piggy-back registration rights for the shares of common stock underlying the warrants and Notes, (iv) the Notes will be secured by a first priority security interest in all of our assets, other than our patents, (v) each investor may not convert any Note or exercise any warrants if doing so will cause the investor to own more than 4.99% of our outstanding common stock at any time, although under certain circumstances they can each own up to 9.99% of our outstanding common stock, (vi) we paid $40,000 of the investors’ legal fees incurred with respect to this transaction, and (vii) for the next three years the investors have a right to participate in up to 50% of any of our future financings. The warrants and Notes contain standard anti-dilution provisions and the Securities Purchase Agreements contains standard covenants for a financing of this nature. In the event the Company acquires any subsidiaries while the Notes are outstanding, such subsidiaries will be obligated to guaranty the Notes and any other obligations we owe to the investors pursuant to the transaction documents. | |||||||
On July 15, 2013 we entered into Amendment and Exchange Agreements with each of the existing holders of our Series A, B and C Senior Secured Convertible Notes and related warrants to purchase our common stock, which securities were originally issued pursuant to that certain Securities Purchase Agreement dated as of March 14, 2013 (“Securities Purchase Agreement”), by and among us and such holders. | |||||||
Each Exchange Agreement provides for, among other things, that: | |||||||
(i) | Various restrictive provisions of the Securities Purchase Agreement and the Class C Senior Secured Convertible Notes were either eliminated by amendment or waived; | ||||||
(ii) | the related warrants, initially exercisable into an aggregate of 4,535,714 shares of Common Stock at an initial exercise price of $0.50, were exchanged for new warrants, initially exercisable into an aggregate of 4,535,714 shares of Common Stock at an initial exercise price of $1.00; and | ||||||
(iii) | the Series A and B Senior Secured Convertible Notes, with an aggregate original principal amount of $1,950,000, were exchanged for an aggregate of 7 million shares of our common stock and the payment by the Company to such holders of an aggregate of approximately $1,951,400 (the remaining cash amount held in a control account pursuant to the terms and conditions of the Series A and B Senior Secured Convertible Notes) | ||||||
The Company has determined that the conversion feature of the Note represent an embedded derivative since the Note is convertible into a variable number of shares upon conversion. Accordingly, the Note is not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the Note. Such discount will be accreted from the grant date to the maturity date of the Note. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Note resulted in an initial debt discount of $450,000 and an initial loss on the valuation of derivative liabilities of $96,119 based on the initial fair value of the derivative liability of $546,119. The fair value of the embedded derivative liability was calculated at grant date utilizing the following assumptions: | |||||||
Assumed Conversion Price | Market Price on Grant Date | ||||||
Grant Date | Term | Volatility Percentage | Risk-free | ||||
Fair Value | (Years) | Rate | |||||
3/20/13 | $546,119 | 3 | $0.33 | $0.47 | 238% | 0.0038 | |
At September 30, 2013, the Company revalued the embedded derivative liability. For the period from the grant date to September 30, 2013, the Company decreased the derivative liability of $546,119 by $186,992 resulting in a derivative liability of $359,127 at September 30, 2013. | |||||||
The fair value of the embedded derivative liability was calculated at September 30, 2013 utilizing the following assumptions: | |||||||
Assumed Conversion | |||||||
Fair Value | Term | Price | Volatility Percentage | Risk-free | |||
(Years) | Rate | ||||||
$359,127 | 2.47 | $0.21 | 212% | 0.0063 | |||
The carrying value of the Notes was $359,127 as of September 30, 2013. The Company recorded interest expense related to this note of $33,658 and amortization of the debt discount in the amount of $80,137 during the period ended September 30, 2013. |
NOTE_11_SUBSEQUENT_EVENT
NOTE 11 - SUBSEQUENT EVENT | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Subsequent Events [Abstract] | ' | ' |
NOTE 11 - SUBSEQUENT EVENT | ' | ' |
NOTE 11 - SUBSEQUENT EVENT | Subsequent Events | |
On March 14, 2013 the Company entered into strategic financing agreements with several institutional investors that could provide the Company with up to $2.3 million of debt financing based upon the amount of conversions and redemptions. The transaction documents provide, among other things, that (i) the investors will receive five year warrants in an amount equal to 100% of the number of shares of our common stock the investors would receive if the Notes (defined below) were converted on March 13, 2013, at an exercise price of $0.50 per share, (ii) $1.950 million of the funds will deposited in one of our bank accounts but will be subject to a control account agreement which will provide that the Company can only withdraw funds from the account as the investors convert or redeem the Notes, (iii) the investors have demand and piggy-back registration rights for the shares of common stock underlying the warrants and Notes, (iv) the Notes will be secured by a first priority security interest in all of our assets, other than its patents, (v) each investor may not convert any Note or exercise any warrants if doing so will cause the investor to own more than 4.99% of our outstanding common stock at any time, although under certain circumstances they can each own up to 9.99% of our outstanding common stock, (vi) we paid $40,000 of the investors’ legal fees incurred with respect to this transaction, and (vii) for the next three years the investors have a right to participate in up to 50% of any of our future financings. The warrants and Notes contain standard anti-dilution provisions and the Securities Purchase Agreements contains standard covenants for a financing of this nature. In the event the Company acquire any subsidiaries while the Notes are outstanding, such subsidiaries will be obligated to guaranty the Notes and any other obligations we owe to the investors pursuant to the transaction documents. | ||
On October 6th through October 27, 2013 we issued four Promissory Notes totaling $175,000. One of the Promissory Notes in the amount $50,000 was in lieu of payment of cash for an outstanding balance due to a consultant of the Company. | ||
We will issue an aggregate of $2.4 million face amount of Senior Secured Convertible Notes (the “Notes”). The Notes are divided into Series A, Series B and Series C with the Series A and B Notes aggregating to $1.95 million and the Series C Notes aggregating to $450,000. All of the Notes carry a 14% annual interest rate and are payable on March 13, 2016. Until July 1, 2013 (i) the Series A Notes initially convert into our common stock at a rate of $0.50 per share, (ii) the Series B initially convert at a rate of $0.75 per share and (iii) the Series C Notes initially convert at a rate of $0.35 per share, in each case subject to adjustments as provided in the Notes. Commencing July 1, 2013, the conversion rate for all Notes becomes the lower of (x) the conversion rate described above or (y) 85% of the average of the daily VWAP of each trading day during the twenty (20) consecutive trading day period ending on the trading day immediately prior to the conversion date, subject to adjustments as provided in the Notes. We have the right to redeem, at 120% of face value, up to 75% of the Series A and Series B Notes. | ||
The promissory notes carry a 6% annual interest rate and is payable upon the earlier of (a) 24 months from the date of the promissory notes or (b) the Company reaching a settlement(s) on a patent infringement claim(s) and receiving an aggregate of at least $2 million net proceeds from such settlement(s). | ||
The holders of the promissory notes shall receive repayment in the full face amount of the notes from the initial $500,000 the Company actually receives from the net proceeds of its patent infringement claim(s) or from the net proceeds of a public offering. In addition, the holders shall receive a preferred return (i) in an amount equal to up to 200% of the initial face amount of the notes out of available cash by sharing with all other investors in this series of notes in the allocation of 50% of the available cash received by the Company from $2M - $4M and (ii) in an amount equal to up to 100% of the initial face amount of the notes out of available cash by sharing with all other investors in this series of notes in the allocation of 25% of the available cash received by the Company from $4M - $6M. In other words, if the Company collects $6M in the net proceeds of available cash, the holder will receive a return equal to 400% of its investment. |
NOTE_1_DESCRIPTION_OF_BUSINESS1
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Accounting Policies [Abstract] | ' | ' |
Description of Business | ' | ' |
Description of Business | ||
Description of Business | ||
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies. | ||
On May 16, 2011, the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more aggressively enforce against alleged infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense its patented technologies. | ||
Basis of Presentation | ' | ' |
Basis of Presentation | Basis of Presentation | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. | The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), which contemplates continuation of the Company as a going concern. The Company has always been considered a developmental stage business, has incurred significant losses since its inception and has had minimal revenues from operations. The Company will require substantial additional funds for development and enforcement of its patent portfolio. There can be no assurance that the Company will be able to obtain the substantial additional capital resources to pursue its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company has not been able to generate sufficient revenue or obtain sufficient financing which has had a material adverse effect on the Company, including requiring the Company to reduce operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. For the past year the Company has been operating at a significantly reduced capacity, with only one full time employee, performing primarily consulting services and licensing software and using consultants to perform any additional work that may be required. | |
The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the years ended December 31, 2012 and 2011 thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. | ||
Use of Estimates | ' | ' |
Use of Estimates | Use of Estimates | |
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. | The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. | |
Cash and Cash Equivalents | ' | ' |
Cash and Cash Equivalents | Cash and Cash Equivalents | |
Cash and cash equivalents are comprised of highly liquid money market instruments, which have original maturities of three months or less at the time of purchase. | Cash and cash equivalents are comprised of highly liquid money market instruments, which have original maturities of three months or less at the time of purchase. | |
Due from Related Party | ' | ' |
Due from Related Party | Due from Related Party | |
Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. | Due from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. | |
Revenue Recognition | ' | ' |
Revenue Recognition | Revenue Recognition | |
Effective for the second quarter of 2011, the Company spun off its online businesses to Worlds Online Inc. The Company’s sources of revenue after the spin off will be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents. Prior to the spin-off, the Company had the following sources of revenue: (1) consulting/licensing revenue from the performance of development work performed on behalf of the Company and licensing revenue or from the sale of certain software to third parties; and (2) VIP subscriptions to our Worlds Ultimate 3-D Chat service. Following the spin-off we expect to receive revenue from royalties on licenses of our IP and from litigation settlements from infringers of our IP. The Company recognizes revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract, delivery has occurred, the price is fixed or determinable, and collectibility is reasonable assured. This will usually be in the form of a receipt of a customer’s acceptance indicating the product has been completed to their satisfaction except for development work and service revenue which is recognized when the services have been performed. Deferred revenue represents cash payments received in advance to be recorded as revenue when earned. The corresponding cost associated with those contracts is also deferred as deferred costs until the revenue is ultimately recognized. | Effective for the second quarter of 2011, the Company spun off its online businesses to Worlds Online Inc. The Company’s sources of revenue after the spin off will be from sublicenses of the patented technology by Worlds Online and any revenue that may be generated from enforcing its patents prior to the spin-off, the Company had the following sources of revenue: (1) consulting/licensing revenue from the performance of development work performed on behalf of the Company, licensing revenue or from the sale of certain software to third parties; and (2) VIP subscriptions to our Worlds Ultimate 3-D Chat service. The Company recognizes revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract, delivery has occurred, the price is fixed or determinable, and collectibility is reasonable assured. This will usually be in the form of a receipt of a customer’s acceptance indicating the product has been completed to their satisfaction except for development work and service revenue which is recognized when the services have been performed. Deferred revenue represents cash payments received in advance to be recorded as revenue when earned. The corresponding cost associated with those contracts is also deferred as deferred costs until the revenue is ultimately recognized. | |
Research and Development Costs | ' | ' |
Research and Development Costs | Research and Development Costs | |
Research and development costs are charged to operations as incurred. | Research and development costs are charged to operations as incurred. | |
Property and Equipment | ' | ' |
Property and Equipment | Property and Equipment | |
Property and equipment are stated at cost. Depreciation is provided on a straight line basis over the estimated useful lives of the assets ranging from three to five years. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Maintenance and repairs are charged to expense in the period incurred. | Property and equipment are stated at cost. Depreciation is provided on a straight line basis over the estimated useful lives of the assets ranging from three to five years. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Maintenance and repairs are charged to expense in the period incurred. | |
Impairment of Long Lived Assets | ' | ' |
Impairment of Long Lived Assets | Impairment of Long Lived Assets | |
The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification (“ASC”) for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the six months ended June 30, 2013 and 2012. | The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during 2012 and 2011. | |
Stock-Based Compensation | ' | ' |
Stock-Based Compensation | Stock-Based Compensation | |
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB ASC for disclosure about Stock-Based Compensation. This section requires a public entity 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 (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. | The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity 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 (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. | |
Income Taxes | ' | ' |
Income Taxes | Income Taxes | |
The Company accounts for income taxes under Section 740-10-30 of the FASB ASC. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. | The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. | |
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. | ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. | |
Notes Payable | ' | ' |
Notes Payable | Notes Payable | |
The Company has $773,279 in short term notes outstanding at September 30, 2013. | The Company has $773,279 in short term notes outstanding at December 31, 2012 and 2011. | |
Comprehensive Income (Loss) | ' | ' |
Comprehensive Income (Loss) | Comprehensive Income (Loss) | |
The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB ASC which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the consolidated financial statements. | The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements. | |
Loss Per Share | ' | ' |
Loss Per Share | Loss Per Share | |
Net loss per common share is computed pursuant to section 260-10-45 of the FASB ASC. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. As of September 30, 2013, there were 8,462,500 options and 5,273,214 warrants whose effect was anti-dilutive and not included in diluted net loss per share for the three and nine months ended September 30, 2013. The options and warrants may dilute future earnings per share. | Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of December 31, 2012 and 2011. | |
Commitments and Contingencies | ' | ' |
Commitments and Contingencies | Commitments and Contingencies | |
The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | |
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. | Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. | |
During 2000 the Company was involved in a lawsuit relating to unpaid consulting services. In April, 2001 a judgment against the Company was rendered for approximately $205,000. As of December 31, 2012, and 2011 the Company recorded a reserve of $205,000 for this lawsuit, which is included in accrued expenses in the accompanying balance sheets. | ||
Risk and Uncertainties | ' | ' |
Risk and Uncertainties | Risk and Uncertainties | |
The Company is subject to risks common to companies in the technology industries, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel. | The Company is subject to risks common to companies in the technology industries, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel. | |
Off Balance Sheet Arrangements | ' | ' |
Off Balance Sheet Arrangements | Off Balance Sheet Arrangements | |
The Company does not have any off-balance sheet arrangements. | The Company does not have any off-balance sheet arrangements. | |
Uncertain Tax Positions | ' | ' |
Uncertain Tax Positions | Uncertain Tax Positions | |
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of FASB ASC 740-10-25 for the six months ended September 30, 2013 and 2012. | The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 31, 2012 or 2011. | |
Recent Accounting Pronouncements | ' | ' |
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2013-09, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations. | The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations. | |
In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures. | ||
In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation. | ||
In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, which allows, but does not require, an entity when performing its annual goodwill impairment test the option to first do an initial assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount for purposes of determining whether it is even necessary to perform the first step of the two-step goodwill impairment test. Accordingly, based on the option created in ASU 2011-08, the calculation of a reporting unit’s fair value is not required unless, as a result of the qualitative assessment, it is more likely than not that fair value of the reporting unit is less than its carrying amount. If it is less, the quantitative impairment test is then required. ASU 2011-08 also provides for new qualitative indicators to replace those currently used. Prior to ASU 2011-08, entities were required to test goodwill for impairment on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test is performed to measure the amount of impairment loss, if any. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 during the first quarter of fiscal 2013. The adoption of ASU 2011-08 did not impact the Company’s results of operations or financial condition. | ||
In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on its results of operations, cash flows or financial condition. | ||
In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test. | ||
ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period. | ||
ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its financial statements. |
NOTE_4_NOTES_PAYABLE_Tables
NOTE 4 - NOTES PAYABLE (Tables) | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Debt Disclosure [Abstract] | ' | ' | ||||||||
Notes payable | ' | ' | ||||||||
NOTES PAYABLE | ||||||||||
Notes payable at September 30, 2013 consist of the following: | ||||||||||
Short term notes payable at December 31, 2012 consist of the following: | ||||||||||
Unsecured note payable to a shareholder bearing 8% interest. | ||||||||||
Entire balance of principal and unpaid interest due on demand | $ | 124,230 | Unsecured note payable to a shareholder bearing 8% interest. | |||||||
Entire balance of principal and unpaid interest due on demand | $ | 124,230 | ||||||||
Unsecured note payable to a shareholder bearing 10% interest | ||||||||||
Entire balance of principal and unpaid interest due on demand | $ | 649,049 | Unsecured note payable to a shareholder bearing 10% interest | |||||||
Entire balance of principal and unpaid interest due on demand | $ | 649,049 | ||||||||
Total current | $ | 773,279 | ||||||||
Total current | $ | 773,279 | ||||||||
2013 | $ | 773,279 | ||||||||
2014 | $ | -0- | 2013 | $ | 773,279 | |||||
2015 | $ | 50,000 | 2014 | $ | -0- | |||||
2016 | $ | -0- | 2015 | $ | -0- | |||||
2017 | $ | -0- | 2016 | $ | -0- | |||||
2017 | $ | -0- | ||||||||
$ | 823,229 | $ | 773,279 | |||||||
NOTE_5_STOCK_OPTIONS_Tables
NOTE 5 - STOCK OPTIONS (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||
Sep. 30, 2012 | Dec. 31, 2012 | |||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ||||||||||||||||||||
Stock option table | ' | ' | ||||||||||||||||||||
Exercise Price per Share | Shares Under Option/warrant | Remaining Life in Years | ||||||||||||||||||||
Stock Warrants and Options | ||||||||||||||||||||||
Stock warrants/options outstanding and exercisable on September 30, 2013 are as follows: | Outstanding | |||||||||||||||||||||
$0.35 | 212,500 | 1 | ||||||||||||||||||||
Exercise Price per Share | Shares Under Option/warrant | Remaining Life in Years | $0.20 | 300,000 | 1 | |||||||||||||||||
$0.15 | 1,537,500 | 2 | ||||||||||||||||||||
Outstanding | $0.12 | 500,000 | 4.83 | |||||||||||||||||||
$ | 1 | 4,535,714 | 4.46 | $0.11 | 150,000 | 2.3 | ||||||||||||||||
$ | 0.35 | 212,500 | 0.25 | $0.11 | 300,000 | 0.3 | ||||||||||||||||
$ | 0.2 | 100,000 | 0.25 | $0.08 | 7,500,000 | 1.25 | ||||||||||||||||
$ | 0.19 | 200,000 | 4.25 | $0.05 | 600,000 | 0.85 | ||||||||||||||||
$ | 0.15 | 737,500 | 1.25 | |||||||||||||||||||
$ | 0.115 | 300,000 | 4.08 | Exercisable | ||||||||||||||||||
$ | 0.11 | 150,000 | 1.55 | $0.35 | 212,500 | 1 | ||||||||||||||||
$ | 0.076 | 7,500,000 | 0.5 | $0.20 | 300,000 | 1 | ||||||||||||||||
$ | $0.15 | 1,537,500 | 2 | |||||||||||||||||||
Exercisable | $0.11 | 150,000 | 2.3 | |||||||||||||||||||
$ | 1 | 4,535,714 | 4.46 | $0.11 | 300,000 | 0.3 | ||||||||||||||||
$ | 0.35 | 212,500 | 0.25 | $0.08 | 7,500,000 | 1.25 | ||||||||||||||||
$ | 0.2 | 100,000 | 0.25 | $0.05 | 600,000 | 0.85 | ||||||||||||||||
$ | 0.15 | 737,500 | 1.25 | |||||||||||||||||||
$ | 0.115 | 300,000 | 4.08 | |||||||||||||||||||
$ | 0.11 | 150,000 | 1.55 | |||||||||||||||||||
$ | 0.076 | 7,500,000 | 0.5 |
NOTE_6_INCOME_TAXES_Tables
NOTE 6 - INCOME TAXES (Tables) | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2013 | Dec. 31, 2012 | |||||||||
Income Tax Disclosure [Abstract] | ' | ' | ||||||||
Company's deferred tax assets | ' | ' | ||||||||
The Company’s total deferred tax asset as of December 31, 2012 is as follows: | ||||||||||
Net operating loss carry forwards | $ | 17, 343,000 | ||||||||
Valuation allowance | -17,343,000 | Net operating loss carry forwards | $ | 16,060,000 | ||||||
Valuation allowance | -16,060,000 | |||||||||
Net deferred tax asset | $ | — | ||||||||
Net deferred tax asset | $ | — | ||||||||
Reconciliation of income taxes - Fedaral and state statutory rate | ' | ' | ||||||||
Income tax computed at the federal statutory rate | 34% | |||||||||
Income tax computed at the federal statutory rate | 34% | Income tax computed at the state statutory rate | 5% | |||||||
Income tax computed at the state statutory rate | 5% | Valuation allowance | -39% | |||||||
Valuation allowance | -39% | Total deferred tax asset | 0% | |||||||
Total deferred tax asset | 0% |
NOTE_10_DERIVATIVE_LIABILITIES1
NOTE 10 - DERIVATIVE LIABILITIES (Tables) | 9 Months Ended | ||||||
Sep. 30, 2012 | |||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||
Fair value of the embedded derivative liability grant date | ' | ||||||
Assumed Conversion Price | Market Price on Grant Date | ||||||
Grant Date | Term | Volatility Percentage | Risk-free | ||||
Fair Value | (Years) | Rate | |||||
3/20/13 | $546,119 | 3 | $0.33 | $0.47 | 238% | 0.0038 | |
Fair value of the derivative liabilites | ' | ||||||
Assumed Conversion | |||||||
Fair Value | Term | Price | Volatility Percentage | Risk-free | |||
(Years) | Rate | ||||||
$359,127 | 2.47 | $0.21 | 212% | 0.0063 |
NOTE_1_DESCRIPTION_OF_BUSINESS2
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCTING POLICIES (Details Narrative) (USD $) | 9 Months Ended | |||
Sep. 30, 2013 | Apr. 01, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Short term notes outstanding | ' | $773,279 | $773,279 | $773,279 |
Options shares | 8,462,500 | ' | ' | ' |
Unaudited | ' | ' | ' | ' |
Short term notes outstanding | $773,279 | ' | ' | ' |
Warrants | 5,273,214 | ' | ' | ' |
NOTE_3_PRIVATE_PLACEMENT_OF_EQ1
NOTE 3 - PRIVATE PLACEMENT OF EQUITY (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Apr. 01, 2012 | |
Common shares sold | 875,000 | 1,000,000 | ' | ' | ' |
Stock issued | 1,500,000 | ' | ' | ' | ' |
Proceeds from sales of stock | $87,500 | $250,000 | $150,000 | ' | ' |
Proceeds from previous stock issued | ' | ' | ' | ' | 10,000 |
Cash proceeds from warrants exercised | 120,000 | 7,500 | ' | ' | ' |
Number of warrants exercised | 800,000 | 150,000 | ' | ' | ' |
Exercised price per share | $0.15 | $0.05 | ' | ' | ' |
Aggregated shares of common stock issued for services rendered | 7,678,800 | 3,323,382 | ' | ' | ' |
Aggregated value of common stock issued for services | 2,609,332 | 299,333 | ' | ' | ' |
Stock options exercised | 100,000 | ' | ' | ' | ' |
Exercise price | $0.11 | ' | ' | ' | ' |
Cash proceeds | ' | 7,500 | 7,500 | 58,000 | ' |
Unaudited | ' | ' | ' | ' | ' |
Deferred compensation | $160,867 | ' | ' | ' | ' |
NOTE_4_NOTES_PAYABLE_Details_N
NOTE 4 - NOTES PAYABLE (Details Narrative) (USD $) | Jun. 30, 2013 |
Debt Disclosure [Abstract] | ' |
Senior secured convertible notes | $2,400,000 |
Total principal of series A and series B note | 1,950,000 |
Principal of series C note | $450,000 |
Annual interest rate on all notes | 0.14 |
NOTE_5_STOCK_OPTIONS_Details_N
NOTE 5 - STOCK OPTIONS (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ' | ' |
Warrants issued as part of senior secured convertible notes | 4,535,714 | ' | ' | ' |
Number of warrants exercised | 800,000 | 150,000 | ' | ' |
Cash proceeds from warrants exercised | $120,000 | $7,500 | ' | ' |
Stock option exercised | 100,000 | ' | ' | ' |
Cash proceeds from stock options | ' | $7,500 | $7,500 | $58,000 |
Cashless stock option exercised | 900,000 | ' | ' | ' |
Shares of common stock issued | 639,606 | ' | ' | ' |
Stock options represents | 150,000 | ' | ' | ' |
Price per share - exercised | $0.05 | ' | ' | ' |
NOTE_6_INCOME_TAXES_Details_Na
NOTE 6 - INCOME TAXES (Details Narrative) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Deffered tax asset | ' | ' | $16,060,000 |
Valuation allowance | ' | ' | -16,060,000 |
Valuation allowance increase | 1,283,000 | 200,000 | ' |
Unaudited | ' | ' | ' |
Federal and State net operating loss carry forwards | 44,469,000 | ' | ' |
Deffered tax asset | 17,343,000 | ' | ' |
Valuation allowance | ($17,343,000) | ' | ' |
NOTE_7_COMMITMENTS_AND_CONTING1
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | Apr. 01, 2013 | Aug. 30, 2012 |
shareholders | shareholders | |
Term of employment agreement | ' | 5 |
Officer compensation | ' | $175,000 |
Yearly increase | ' | 10.00% |
Car allowance | ' | 500 |
Annual bonus | ' | 0.025 |
Additional bonus | ' | 75,000 |
Pre-tax income range | ' | 1.5 |
Pre-tax income range | ' | 2 |
Llife insurance premium | ' | 10,000 |
Option to purchase stock | ' | 7,500,000 |
Exercise price per share | ' | $0.08 |
Death benefit | ' | 2,000,000 |
Payment of base amount | ' | 2.99 |
Restrictive convenants time | ' | 12 |
Consulting agreement monthly payments | 5,000 | ' |
Term on consulting agreement | 24 | ' |
Additional bonus 1 | ' | ' |
Additional bonus | ' | 100,000 |
Pre-tax income range | ' | 2.01 |
Pre-tax income range | ' | 2.5 |
Additional bonus 2 | ' | ' |
Annual bonus | ' | 0.05 |
Additional bonus | ' | $200,000 |
Pre-tax income | ' | 2.51 |
NOTE_8_RELATED_PARTY_TRANSACTI1
NOTE 8 - RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | Jun. 30, 2013 |
Related Party Transactions [Abstract] | ' |
Shared operating expenses due from related parties | $265,196 |
NOTE_9_PATENTS_Details_Narrati
NOTE 9 - PATENTS (Details Narrative) (Unaudited, USD $) | Sep. 30, 2013 |
Unaudited | ' |
Patent I | $6,219,045 |
Patent II | 7,181,690 |
Patent III | 7,493,558 |
Patent IV | 7,945,856 |
Patent V | 8,082,501 |
Patent VI | 8,145,998 |
Patent VII | $8,161,383 |
NOTE_10_DERIVATIVE_LIABILITIES2
NOTE 10 - DERIVATIVE LIABILITIES (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Mar. 20, 2013 | |
shareholders | |||||
Financing agreement | ' | ' | ' | ' | $2,300,000 |
Years on warrants | ' | ' | ' | ' | 5 |
Percent of number of shares received | ' | ' | ' | ' | 10000.00% |
Exercise price per share | ' | ' | ' | ' | $0.50 |
Fair value of derivative liability | ' | ' | ' | ' | 546,119 |
Decrease amount of derivative | -969,566 | ' | ' | ' | ' |
Interest expense related | 33,658 | ' | ' | ' | ' |
Amortization of debt discount | 80,137 | ' | ' | ' | ' |
Unaudited | ' | ' | ' | ' | ' |
Beneficial conversion - debt discount | 2,400,000 | ' | ' | ' | ' |
Loss on valuation of derivative liability | 512,637 | ' | ' | ' | ' |
Fair value of derivative liability | $1,949,470 | ' | ' | ' | ' |
NOTE_4_NOTES_PAYABLE_Details
NOTE 4 - NOTES PAYABLE (Details) (USD $) | Apr. 01, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Debt Disclosure [Abstract] | ' | ' | ' |
Entire balance of principal and unpaid interest due on demand 1 | $124,230 | $124,230 | ' |
Entire balance of principal and unpaid interest due on demand 2 | 649,049 | 649,049 | ' |
Total current | 773,279 | 773,279 | 773,279 |
Notes payable due within 2013 | 773,279 | 773,279 | ' |
Notes payable due within 2014 | 0 | 0 | ' |
Notes payable due within 2015 | 50,000 | 0 | ' |
Notes payable due within 2016 | 0 | 0 | ' |
Notes payable due within 2017 | $0 | $773,279 | ' |
NOTE_5_STOCK_OPTIONS_Stock_opt
NOTE 5 - STOCK OPTIONS - Stock option table (Details) (USD $) | Sep. 30, 2013 |
Outstanding (1) | ' |
Shares under options | 4,535,714 |
Price per shares | $1 |
Remaining life in years | 4.46 |
Exercisable (1) | ' |
Shares under options | 4,535,714 |
Price per shares | $1 |
Remaining life in years | 4.46 |
Outstanding (2) | ' |
Shares under options | 212,500 |
Price per shares | $0.35 |
Remaining life in years | 0.25 |
Exercisable (2) | ' |
Shares under options | 212,500 |
Price per shares | $0.35 |
Remaining life in years | 0.25 |
Outstanding (3) | ' |
Shares under options | 100,000 |
Price per shares | $0.20 |
Remaining life in years | 0.25 |
Exercisable (3) | ' |
Shares under options | 100,000 |
Price per shares | $0.20 |
Remaining life in years | 0.25 |
Outstanding (4) | ' |
Shares under options | 200,000 |
Price per shares | $0.19 |
Remaining life in years | 4.25 |
Exercisable (4) | ' |
Shares under options | 737,500 |
Price per shares | $0.15 |
Remaining life in years | 1.25 |
Outstanding (5) | ' |
Shares under options | 737,500 |
Price per shares | $0.15 |
Remaining life in years | 1.25 |
Exercisable (5) | ' |
Shares under options | 300,000 |
Price per shares | $0.12 |
Remaining life in years | 4.08 |
Outstanding (6) | ' |
Shares under options | 300,000 |
Price per shares | $0.12 |
Remaining life in years | 4.08 |
Exercisable (6) | ' |
Shares under options | 150,000 |
Price per shares | $0.11 |
Remaining life in years | 1.55 |
Outstanding (7) | ' |
Shares under options | 150,000 |
Price per shares | $0.11 |
Remaining life in years | 1.55 |
Exercisable (7) | ' |
Shares under options | 7,500,000 |
Price per shares | $0.08 |
Remaining life in years | 0.5 |
Outstanding (8) | ' |
Shares under options | 7,500,000 |
Price per shares | $0.08 |
Remaining life in years | 0.5 |
NOTE_6_INCOME_TAXES_Companys_t
NOTE 6 - INCOME TAXES - Company's total deferred tax (Details) (USD $) | Dec. 31, 2012 | Sep. 30, 2013 |
Unaudited | ||
Deferred tax assets | $16,060,000 | $17,343,000 |
Valuation allowance | -16,060,000 | -17,343,000 |
Net deferred tax asset | ' | ' |
NOTE_6_INCOME_TAXES_Reconcilia
NOTE 6 - INCOME TAXES - Reconciliation of income taxes (Details) (USD $) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Income Tax Disclosure [Abstract] | ' | ' | ' | ' |
Income tax computed at the federal statutory rate | 34.00% | 34.00% | 34.00% | 34.00% |
Income tax computed at the state statutory rate | 5.00% | 5.00% | 5.00% | 5.00% |
Valuation allowance | -0.39 | -0.39 | -0.039 | -0.39 |
Total deferred tax asset | $0 | $0 | ' | $0 |
NOTE_10_DERIVATIVE_LIABILITIES3
NOTE 10 - DERIVATIVE LIABILITIES - Fair value of the embedded derivative liability grant date (Details) (USD $) | Mar. 20, 2013 |
Y | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Fair Value | $546,119 |
Term (Years) | 3 |
Assumed Conversion Price | 0.326 |
Market Price on Grant Date | 0.465 |
Volatility Percentage | 238.00% |
Risk-free Rate | 0.38% |
NOTE_10_DERIVATIVE_LIABILITIES4
NOTE 10 - DERIVATIVE LIABILITIES - Fair value of the derivative liabilites (Details) (USD $) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Mar. 20, 2013 | |
Y | |||||
Term (Years) | ' | ' | ' | ' | 3 |
Volatility Percentage | ' | ' | ' | ' | 238.00% |
Interest expense | $90,533 | ' | ' | ' | ' |
Amortization of debt | 259,178 | ' | ' | ' | ' |
Unaudited | ' | ' | ' | ' | ' |
Fair Value | $359,127 | ' | ' | ' | ' |
Term (Years) | 2.47 | ' | ' | ' | ' |
Assumed Conversion Price | 0.213 | ' | ' | ' | ' |
Volatility Percentage | 21.20% | ' | ' | ' | ' |
Risk-free Rate | 0.36% | ' | ' | ' | ' |
NOTE_11_SUBSEQUENT_EVENT_Detai
NOTE 11 - SUBSEQUENT EVENT (Details Narrative) (Unaudited, USD $) | Sep. 30, 2013 |
Unaudited | ' |
Four promissory notes | $175,000 |
Notes Payable/Officer Loan | $50,000 |