Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended |
Sep. 30, 2014 | |
Document And Entity Information | |
Entity Registrant Name | One Horizon Group, Inc. |
Entity Central Index Key | 225211 |
Document Type | S-1 |
Document Period End Date | 30-Sep-14 |
Amendment Flag | FALSE |
Current Fiscal Year End Date | -19 |
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 |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
In Thousands, unless otherwise specified | ||||
Current assets: | ||||
Cash | $650 | $2,070 | $699 | [1] |
Accounts receivable | 8,916 | 7,264 | 977 | [1] |
Other assets | 624 | 139 | 136 | [1] |
Total current assets | 10,190 | 9,473 | 1,812 | [1] |
Property and equipment, net | 239 | 315 | 350 | [1] |
Intangible assets, net | 11,515 | 12,760 | 12,329 | [1] |
Investment | 20 | 23 | 0 | [1] |
Total assets | 21,964 | 22,571 | 14,491 | [1] |
Current liabilities: | ||||
Accounts payable | 693 | 661 | 747 | [1] |
Accrued expenses | 1,248 | 964 | 436 | [1] |
Accrued compensation | 14 | 59 | 38 | [1] |
Income taxes | 94 | 117 | 94 | [1] |
Amounts due to related parties | 3,500 | 3,500 | 3,500 | [1] |
Current portion of long-term debt | 72 | 65 | 59 | [1] |
Total current liabilities | 5,621 | 5,366 | 4,874 | [1] |
Long-term liabilities | ||||
Long term debt, net of current portion | 129 | 184 | 219 | [1] |
Deferred income taxes | 235 | 445 | 445 | [1] |
Mandatorily redeemable preferred shares | 90 | 90 | 90 | [1] |
Total liabilities | 6,075 | 6,085 | 5,628 | [1] |
One Horizon Group, Inc. stockholders' equity | ||||
Preferred stock $0.0001 par value, 50,000,000 shares authorized; Mandatorily Convertible Preferred Stock, Series A, 170,940 and no shares issued and outstanding | 1 | 0 | 0 | [1] |
Common stock $0.0001 par value, authorized 200,000,000 shares issued and outstanding 33,035,069 shares (December 2013 32,920,069) and (2012 30,845,844) | 3 | 3 | 3 | [1] |
Additional paid-in capital | 30,025 | 28,269 | 21,630 | [1] |
Stock subscriptions receivable | -500 | [1] | ||
Deferred compensation | -268 | 0 | ||
Accumulated deficit | -14,578 | -13,319 | -12,725 | [1] |
Accumulated other comprehensive income | 398 | 1,137 | 455 | [1] |
Total One Horizon Group, Inc. stockholders' equity | 15,581 | 16,090 | 8,863 | [1] |
Non-controlling interest | 308 | 396 | 0 | [1] |
Total Equity | 15,889 | 16,486 | 8,863 | [1] |
Total liabilities and equity | $21,964 | $22,571 | $14,491 | [1] |
[1] | Restated |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Statement of Financial Position [Abstract] | ||||
Preferred stock, par value | $0.00 | $0.00 | $0.00 | [1] |
Preferred stock, Authorized | 50,000,000 | 50,000,000 | 50,000,000 | [1] |
Preferred stock, issued shares | 170,940 | 0 | 0 | [1] |
Preferred stock, outstanding shares | 170,940 | 0 | 0 | [1] |
Common stock, par value | $0.00 | $0.00 | $0.00 | [1] |
Common stock, Authorized | 200,000,000 | 200,000,000 | 200,000,000 | [1] |
Common stock, Issued | 33,035,069 | 32,920,069 | 30,845,844 | [1] |
Common stock, outstanding | 33,035,069 | 32,920,069 | 30,845,844 | [1] |
[1] | Restated |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2012 | ||
Income Statement [Abstract] | |||||||||
Revenue | $1,641 | $2,517 | $6,959 | [1] | $4,130 | $5,690 | $9,106 | $2,612 | [1] |
Cost of Revenue: | |||||||||
Hardware | 285 | 34 | 121 | [1] | 413 | 522 | 545 | 80 | [1] |
Amortization of software development costs | 477 | 509 | 873 | [1] | 1,446 | 1,359 | 1,908 | 1,655 | [1] |
Cost of revenue | 994 | [1] | 2,453 | 1,735 | [1] | ||||
Gross margin | 879 | 1,974 | 5,965 | [1] | 2,271 | 3,809 | 6,653 | 877 | [1] |
Expenses: | |||||||||
General and administrative | 1,259 | 1,347 | 4,023 | [1] | 3,577 | 5,041 | 6,706 | 4,570 | [1] |
Depreciation | 26 | 45 | 73 | [1] | 120 | 120 | 166 | 884 | [1] |
Total Expenses | 1,285 | 1,392 | 4,096 | [1] | 3,697 | 5,161 | 6,872 | 5,454 | [1] |
Income (loss) from operations | -406 | 582 | 1,869 | [1] | -1,426 | -1,352 | -219 | -4,577 | [1] |
Other income and expense: | |||||||||
Interest expense | 0 | -96 | -87 | [1] | -2 | -108 | -322 | -218 | [1] |
Interest expense - related parties | -14 | -50 | -107 | -150 | |||||
Foreign exchange | -5 | -38 | 16 | [1] | -24 | -38 | -158 | 49 | [1] |
Interest income | 0 | 0 | 1 | [1] | 2 | 0 | 1 | 0 | [1] |
Other income and expense | -19 | -184 | -70 | [1] | -131 | -296 | -479 | -169 | [1] |
Income (loss) before income taxes | -425 | 398 | 1,799 | [1] | -1,557 | -1,648 | -698 | -4,746 | [1] |
Income taxes expense (benefit) | -54 | 0 | 0 | [1] | -210 | 0 | 0 | 0 | [1] |
Income from (loss) continuing operations | 0 | 0 | 1,799 | [1] | 0 | 0 | -698 | -4,746 | [1] |
Discontinued operations: | |||||||||
Loss from discontinued operations | 0 | 0 | -40 | [1] | 0 | 0 | 0 | 0 | [1] |
Loss on sale of discontinued businesses | 0 | 0 | -81 | [1] | 0 | 0 | 0 | 0 | [1] |
Income from discontinued operations | 0 | 0 | -121 | [1] | 0 | 0 | 0 | 0 | [1] |
Net income (loss) for the period | -371 | 398 | 1,678 | [1] | -1,347 | -1,648 | -698 | -4,746 | [1] |
Loss attributable to the non-controlling interest | -23 | -29 | 0 | [1] | -88 | -73 | -104 | 0 | [1] |
Net income (loss) for the period attributable to One Horizon Group, Inc. | -348 | 427 | 1,678 | [1] | -1,259 | -1,575 | -594 | -4,746 | [1] |
Less: Preferred stock dividends | -19 | 0 | 0 | [1] | -19 | 0 | 0 | 0 | [1] |
Net income (loss) attributable to common stockholders | ($367) | $427 | $1,678 | [1] | ($1,278) | ($1,575) | ($594) | ($4,746) | [1] |
Earnings (loss) per share attributable to One Horizon Group, Inc. shareholders | |||||||||
Basic and diluted net loss per share | ($0.01) | $0.01 | ($0.04) | ($0.05) | |||||
Basic net income per share | $0.06 | [1] | ($0.02) | ($0.21) | [1] | ||||
Diluted net income per share | $0.06 | [1] | ($0.02) | ($0.21) | [1] | ||||
Weighted average number of shares outstanding | |||||||||
Basic and diluted | 33,029 | 31,767 | 32,966 | 31,538 | |||||
Basic | 27,331 | [1] | 31,661 | 22,695 | [1] | ||||
Diluted | 29,268 | [1] | 0 | 0 | [1] | ||||
[1] | Restated |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2012 | ||
Consolidated Statements Of Comprehensive Income Loss | |||||||||
Net (loss) | ($371) | $398 | $1,678 | [1] | ($1,347) | ($1,648) | ($698) | ($4,746) | [1] |
Other comprehensive income (loss): | |||||||||
Foreign currency translation adjustment gain (loss) | -674 | 532 | 455 | [1] | -739 | 482 | 682 | 0 | [1] |
Total comprehensive income (loss) | -1,045 | 930 | 2,133 | [1] | -2,086 | -1,166 | 88 | -4,746 | [1] |
Comprehensive loss attributable to the non-controlling interest | -23 | -29 | 0 | [1] | -88 | -73 | -104 | 0 | [1] |
Comprehensive income (loss) attributable to One Horizon Group, Inc. | ($1,022) | $959 | $2,133 | [1] | ($1,998) | ($1,093) | ($16) | ($4,746) | [1] |
[1] | Restated |
Consolidated_Statements_of_Sto
Consolidated Statements of Stockholders' Equity (USD $) | Preferred Stock | Deferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings (Deficit) | Stock Subscriptions Receivable | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interest | Total | Deferred Compensation | ||
In Thousands, except Share data | ||||||||||||
Beginning Balance, Amount at Jun. 30, 2011 | $90 | $2 | $13,448 | ($9,657) | $3,793 | |||||||
Beginning Balance, Shares (in thousands) at Jun. 30, 2011 | 50 | 22,214 | ||||||||||
Net income (loss) | -4,746 | -4,746 | [1] | |||||||||
Commons stock issued for cash, Shares | 2,238 | |||||||||||
Commons stock issued for cash, Amount | 5,750 | 5,750 | ||||||||||
Comprehensive income | [1] | -4,746 | ||||||||||
Options issued for services, Amount | 6 | 6 | ||||||||||
Warrants issued for services received | 400 | 400 | ||||||||||
Ending Balance, Amount at Jun. 30, 2012 | 90 | 2 | 19,604 | -14,403 | 5,203 | |||||||
Ending Balance, Shares (in thousands) at Jun. 30, 2012 | 50 | 24,452 | ||||||||||
Net income (loss) | 1,678 | 1,678 | [1] | |||||||||
Foreign currency translation adjustment | 455 | 455 | ||||||||||
Common stock issued for services received, Shares (in thousands) | 146 | |||||||||||
Common stock issued for services received, Amount | 50 | 50 | ||||||||||
Commons stock issued for cash, Shares | 195 | |||||||||||
Commons stock issued for cash, Amount | 502 | 502 | ||||||||||
Common stock issued for note receivable, Shares | 1,460 | |||||||||||
Common stock issued for note receivable, Amount | 500 | -500 | ||||||||||
Comprehensive income | [1] | 2,133 | ||||||||||
Options issued for services, Amount | 22 | 22 | 22 | |||||||||
Warrants issued for services received | 2 | 2 | 2 | |||||||||
Common stock issued for services received from related parties, Shares | 3,503 | |||||||||||
Common stock issued for services received from related parties, Amount | 1 | 1,199 | 1,200 | |||||||||
Common stock accounted for in business combination, Shares | 1,160 | |||||||||||
Common stock accounted for in business combination, Amount | 170 | 170 | ||||||||||
Return of stock on disposal of subsidiaries, Shares | -70 | |||||||||||
Return of stock on disposal of subsidiaries, Amount | -419 | -419 | ||||||||||
Ending Balance, Amount at Dec. 31, 2012 | 90 | 3 | 21,630 | -12,725 | -500 | 455 | 8,863 | [1] | ||||
Ending Balance, Shares (in thousands) at Dec. 31, 2012 | 50 | 30,846 | ||||||||||
Common stock issued on exercise of warrants, Shares | 1,168 | |||||||||||
Receipt of subscription receivable by offset against shareholder loan | 500 | 500 | ||||||||||
Net income (loss) | -594 | -104 | -698 | |||||||||
Foreign currency translation adjustment | 682 | 682 | ||||||||||
Common stock issued for services received, Shares (in thousands) | 101 | |||||||||||
Common stock issued for services received, Amount | 643 | |||||||||||
Common stock repurchased, shares | -1 | |||||||||||
Common stock repurchased, amount | -4 | -4 | ||||||||||
Commons stock issued for cash, Shares | 807 | |||||||||||
Commons stock issued for cash, Amount | 6,000 | 6,000 | ||||||||||
Comprehensive income | -16 | |||||||||||
Options issued for services, Amount | 0 | |||||||||||
Warrants issued for services received | 0 | |||||||||||
Ending Balance, Amount at Dec. 31, 2013 | 0 | 90 | 3 | 28,269 | -13,319 | 1,137 | 396 | 16,486 | ||||
Ending Balance, Shares (in thousands) at Dec. 31, 2013 | 0 | 50 | 32,921 | |||||||||
Net income (loss) | -1,259 | -88 | -1,347 | |||||||||
Foreign currency translation adjustment | -739 | -739 | ||||||||||
Common stock issued for services received, Shares (in thousands) | 15 | |||||||||||
Common stock issued for services received, Amount | 65 | 65 | ||||||||||
Common Stock issued for services to be received in the future, Shares | 75 | |||||||||||
Common Stock issued for services to be received in the future, Amount | 323 | -323 | ||||||||||
Preferred stock issued for cash, Shares | 171 | |||||||||||
Preferred stock issued for cash net of offering costs, Amount | 1 | 981 | 982 | |||||||||
Costs of financing | -108 | -108 | ||||||||||
Comprehensive income | -1,998 | |||||||||||
Amortization of deferred compensation | 55 | 55 | ||||||||||
Options issued for services, Amount | 387 | 387 | ||||||||||
Warrants issued for services received | 0 | |||||||||||
Ending Balance, Amount at Sep. 30, 2014 | $1 | $3 | $30,025 | ($14,578) | $398 | $308 | $15,889 | ($268) | ||||
Ending Balance, Shares (in thousands) at Sep. 30, 2014 | 171 | 33,036 | ||||||||||
[1] | Restated |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
In Thousands, unless otherwise specified | Dec. 31, 2012 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Jun. 30, 2012 | ||||
Cash provided by (used in) operating activities: | |||||||||
Net income (loss) for the period | $1,678 | [1] | ($1,259) | ($1,575) | ($594) | ($4,746) | [1] | ||
Adjustment to reconcile net loss for the period to net cash provided by (used in) operating activities: | |||||||||
Depreciation of property and equipment | 73 | 120 | 120 | 166 | 884 | ||||
Amortization of intangible assets | 873 | 1,446 | 1,359 | 1,908 | 1,655 | ||||
Loss on disposal of discontinued businesses | 81 | [1] | 0 | 0 | 0 | 0 | [1] | ||
Change in allowace for doubtful accounts | 0 | 130 | 0 | 0 | 0 | ||||
Common stock issued for services received | 50 | 120 | 643 | 643 | 0 | ||||
Options issued for services | 22 | 387 | 0 | 0 | 6 | ||||
Warrants issued for services received | 2 | 0 | 0 | 0 | 400 | ||||
Deferred income taxes | 0 | -210 | 0 | 0 | 0 | ||||
Common shares issued for services received from related parties | 1,200 | 0 | 0 | 0 | 0 | ||||
Net income (loss) attributable to non-controlling interest | 0 | [1] | -88 | -73 | -104 | 0 | [1] | ||
Changes in operating assets and liabilities net of effects of acquistions: | |||||||||
Accounts receivable | 355 | -1,782 | -3,865 | -6,287 | -1,724 | ||||
Other assets | -15 | -482 | -193 | -3 | 182 | ||||
Accounts payable and accrued expenses | -5,152 | 271 | 997 | 488 | 539 | ||||
Income taxes | 0 | 23 | -91 | ||||||
Net cash (used in) operating activities | -833 | -1,347 | -2,587 | -3,760 | -2,895 | ||||
Cash flows from investing activities: | |||||||||
Acquisition of intangible assets | -486 | -874 | -831 | -1,211 | -3,466 | ||||
Acquisition of property and equipment | 0 | -48 | -121 | -131 | -101 | ||||
Other assets | 55 | 0 | -196 | -23 | -55 | ||||
Net cash (used in) investing activities | -431 | -922 | -1,148 | -1,365 | -3,622 | ||||
Cash provided by (used in) financing activities: | |||||||||
Increase (decrease) in long-term borrowing, net | 0 | -48 | -10 | 0 | -980 | ||||
Cash proceeds from issuance of common stock | 502 | 0 | 6,000 | 6,000 | 5,750 | ||||
Repurchase of common stock | 0 | 0 | -2 | -4 | 0 | ||||
Net proceeds from issuance of preferred stock | 0 | 982 | 0 | 0 | 0 | ||||
Advances from related parties, net of repayment | 1,500 | 0 | 500 | 500 | 1,800 | ||||
Net checks issued in excess of funds | -39 | 0 | 0 | 0 | -53 | ||||
Net cash provided by (used in) financing activities | 1,963 | 934 | 6,488 | 6,496 | 6,517 | ||||
Increase (decrease) in cash during the period | 699 | -1,335 | 2,753 | 1,371 | 0 | ||||
Foreign exchange effect on cash | -85 | 0 | |||||||
Cash at beginning of the period | 0 | 2,070 | 699 | [1] | 699 | [1] | 0 | ||
Cash at end of the period | 699 | [1] | 650 | 3,452 | 2,070 | 0 | |||
Supplementary Information: | |||||||||
Interest paid | 0 | 0 | 0 | 0 | 0 | ||||
Income taxes paid | 0 | 0 | 0 | 0 | 0 | ||||
Non-cash transactions: | |||||||||
Contribution of software for non-controlling interest in exchange for software with a fair value of $500 | 0 | 0 | 500 | 0 | 0 | ||||
Common stock returned as part consideration for sale of division | 420 | 0 | 0 | 0 | 0 | ||||
Exchange of 25% interest in subsidiary for intangible assets | 0 | 0 | 0 | 500 | 0 | ||||
Settlement of debt with Satcom in consideration of sale of license | 5,000 | 0 | 0 | 0 | 0 | ||||
Settlement of subscription receivable through partial repayment of loan payable | $0 | $0 | $0 | $500 | $0 | ||||
[1] | Restated |
1_Description_of_Business_Orga
1. Description of Business, Organization and Principles of Consolidation | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Description Of Business Organization And Principles Of Consolidation | ||
1. Description of Business, Organization and Principles of Consolidation | Description of Business | |
Description of Business | ||
One Horizon Group, Inc., (the “Company” or “Horizon”) develops proprietary software primarily in the Voice over Internet Protocol (VoIP) and bandwidth optimization markets (“Horizon Globex”) and provides it under perpetual license arrangements (“Master License”) throughout the world. The Company sells related user licenses and software maintenance services as well. | ||
One Horizon Group, Inc., (the “Company” or “Horizon”) develops proprietary software primarily in the Voice over Internet Protocol (VoIP) and bandwidth optimization markets (“Horizon Globex”) and provides it under perpetual license arrangements (“Master License”) throughout the world. The Company sells related user licenses and software maintenance services as well. | ||
Interim Period Financial Statements | ||
Organization | ||
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the Securities and Exchange Commission’s instructions. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for such interim period. The results reported in these interim consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and note disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on April 15, 2014. | ||
On November 30, 2012, the predecessor company “ICE” acquired all of the stock of One Horizon Group plc (“OHG”), a company incorporated in the United Kingdom through the issuance of 29,755,794 shares of common stock of the Company. Upon completion of this transaction the former shareholders of OHG controlled approximately 96% of the outstanding stock of the Company and OHG was deemed the acquiring entity The share exchange has been accounted for as a reverse acquisition. The historical combined financial statements of OHG form the consolidated financial statements presented. For accounting purposes ICE was considered to have been acquired as of November 30, 2012. | ||
Principles of Consolidation and Combination | ||
The consolidated financial statements reflect the deemed acquisition of ICE by OHG and the recognition of the 1,160,051 shares of common stock, with a fair value of $170,000, at November 30, 2012. | ||
The September 30, 2014 and 2013 consolidated financial statements include the accounts of One Horizon Group, Inc. and its wholly owned subsidiaries OHG, Horizon Globex GmbH, Abbey Technology GmbH, One Horizon Hong Kong Limited, Horizon Globex Ireland Limited, Global Phone Credit Limited, One Horizon Group Pte., Limited and Ishuo Network Information Co., Ltd. together with Horizon Network Technology Co. Ltd. which is a 75% owned subsidiary. | ||
On December 31, 2012 the Company sold the operations of Global Integrated Media Limited and Modizo for the return of 70,000 shares of common stock with a fair value of $420,000. These companies were subsidiaries and divisions of ICE. | ||
All significant intercompany balances and transactions have been eliminated. | ||
On August 6, 2013, the Company's shareholders approved the reverse split of the Company's common stock at a ratio of 1-for-600. The reverse stock split proportionately reduced the number of all issued and outstanding common shares and adjusted the number of shares underlying outstanding stock options and warrants. | ||
On August 26, 2013 the Company continued its corporate entity from Pennsylvania to Delaware. There was no change in authorized and issued share capital as all shareholders transferred intact. | ||
Principles of Consolidation and Combination | ||
The December 31, 2013 consolidated financial statements include the accounts of One Horizon Group, Inc., its wholly owned subsidiaries OHG, Abbey Technology GmbH, Horizon Globex GmbH, Global Phone Credit Ltd., Horizon Globex Ireland Ltd., One Horizon Hong Kong Ltd., and Global Phone Credit together with Ishuo Network Information Co., Ltd which is controlled by One Horizon Group, Inc. The consolidated financial statements also include the accounts of One Horizon Hong Kong Ltd.’s 75% owned subsidiary, Horizon Network Technology Co., Ltd, which is both controlled and managed by One Horizon Hong Kong Ltd. | ||
The December 31, 2012 and June 30, 2012 consolidated financial statements include the accounts of One Horizon Group, Inc. and its subsidiaries, Horizon Globex GmbH (“HGG”) and Abbey Technology GmbH (“ATG”). The accounts and operations of ICE, including its subsidiaries Global Integrated Media Limited and Global Integ. Media (GIM) Ltd., Corporation, have been included from the time of the share exchange on November 30, 2012 until divestiture on December 31, 2012. For financial statement presentation prior to November 30, 2012, the reporting entity consists of the combined financial statements of OHG and its two subsidiaries, HGG and ATG. | ||
Prior to the share exchange referred to above, OHG owned separate legal entities which operated in a separate line of business, Satcom Global. That line of business was sold in a transaction executed in October 2012, prior to the share exchange with ICE. The historical financial statements presented as it relates to dates prior to the share exchange are those of the separate combined operations of OHG and its two subsidiaries, which are presented on a carve-out basis from the discontinued historical operations of Satcom Global. Management of the Company considers the basis on which the expenses have been allocated to the combined group to be a reasonable reflection of the utilization of the services provided to or received from during the periods presented. All revenues, expenses, gains and losses, assets and liabilities related to the Satcom Global business have been eliminated from these combined financial statements. | ||
All significant intercompany balances and transactions have been eliminated. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended | |||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | ||||||||||||||
Summary Of Significant Accounting Policies | |||||||||||||||
2. Summary of Significant Accounting Policies | Basis of Accounting and Presentation | Basis of Accounting and Presentation | |||||||||||||
These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States | These consolidated and combined financial statements have presented in conformity with accounting principles generally accepted in the United States. The Company changed its year end to December 31 and is presenting six-months operations for the period ended December 31, 2012. | ||||||||||||||
The reporting currency of the Company is the United States dollar. Assets and liabilities of operations other than those denominated in U.S. dollars, primarily in Switzerland, the United Kingdom and China, are translated into United States dollars at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. | Reporting Currency and Currency Translation | ||||||||||||||
Transaction gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the functional currency are included in general and administrative expenses. | The reporting currency of the Company is the United States dollar. Assets and liabilities of operations other than those denominated in U.S. dollars, primarily in Switzerland, the United Kingdom and China, are translated into United States dollars at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. | ||||||||||||||
Cash | Transaction gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the functional currency are included in general and administrative expenses. | ||||||||||||||
Cash and cash equivalents include bank demand deposit accounts and highly liquid short term investments with maturities of three months or less when purchased. Cash consists of checking accounts held at financial institutions in the United Kingdom, Switzerland, Ireland, Singapore, Hong Kong and China which, at times, balances may exceed insured limits. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal. | Cash and cash equivalents | ||||||||||||||
Accounts Receivable | Cash and cash equivalents include bank demand deposit accounts and highly liquid short term investments with maturities of three months or less when purchased. Cash consists of checking accounts held at financial institutions in the United Kingdom, Switzerland, Ireland, Singapore, Hong Kong and China which, at times, balances may exceed insured limits. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal. | ||||||||||||||
Accounts receivable result primarily from sale of software and licenses to customers and are recorded at their principal amounts. Receivables are considered past due once they exceed the terms of the sales transaction. When necessary, the Company provides an allowance for doubtful accounts that is based on a review of outstanding receivables, historical collection information, and current economic conditions. There was an allowance of $342,000 and $212,000 for doubtful accounts at September 30, 2014 and December 31, 2013, respectively. Receivables are generally unsecured. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. As at September 30, 2014 and December 31, 2013, two customers accounted for 22% and two customers accounted for 26%, respectively, of the accounts receivable balance. | Accounts Receivable | ||||||||||||||
Property and Equipment | Accounts receivable result primarily from sale of software licenses to customers and are recorded at their principal amounts as payments become due. Receivables are considered past due once they exceed the terms of the sales transaction. When necessary, the Company provides an allowance for doubtful accounts that is based on a review of outstanding receivables, historical collection information, and current economic conditions. There was an allowance of $212,000 and $218,000 for doubtful accounts at December 31, 2013 and December 31, 2012 respectively. Receivables are generally unsecured. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. One customer accounted for 15 percent of accounts receivable as of December 31, 2013. Two customers accounted for 26 percent of revenue for the year ended December 31, 2013. | ||||||||||||||
Property and equipment is primarily comprised of leasehold property improvements, motor vehicles and equipment that are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: motor vehicles – 5 years, equipment – between 3 and 5 years, leasehold property improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. | Property and Equipment | ||||||||||||||
Repairs and maintenance are charged to expense as incurred. Expenditures that substantially increase the useful lives of existing assets are capitalized. | Property and equipment is primarily comprised of leasehold property improvements, motor vehicles and equipment that are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: motor vehicles – 5 years, equipment – between 3 and 5 years and leasehold property improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. | ||||||||||||||
Fair Value Measurements | Repairs and maintenance are charged to expense as incurred. Expenditures that substantially increase the useful lives of existing assets are capitalized. | ||||||||||||||
Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable: | Fair Value Measurements | ||||||||||||||
Level 1 – Quoted prices in active markets for identical assets or liabilities. | Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable: | ||||||||||||||
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | Level 1 – Quoted prices in active markets for identical assets or liabilities. | ||||||||||||||
Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities. | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||||||||||||||
Intangible Assets | Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities. | ||||||||||||||
Intangible assets include software development costs and customer lists and are amortized on a straight-line basis over the estimated useful lives of five years for customer lists and ten years for software development. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company. | Intangible Assets | ||||||||||||||
The Company expenses software development costs as incurred until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. Judgement is required in determining when technological feasibility of a product is established. The Company has determined that after technological feasibility for software products is reached, the Company continues to address all high risk development issues through coding and testing prior to the release of the products to customers. The amortization of these costs is included in cost of revenue over the estimated life of the products. | Intangible assets include software development costs and customer relationships. Customer relationships are amortized on a straight-line basis over their estimated useful lives of five years. Amortization of capitalized software development costs is computed using the greater of (a) the ratio of the product’s current gross revenues to the total of current and expected gross revenues or (b) the straight-line method, computed by dividing the remaining unamortized cost by the estimated economic life of the product. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. | ||||||||||||||
During the nine months ended September 30, 2014 and 2013 software development costs of $874,000 and $831,000, respectively, have been capitalized. | The Company expenses all costs related to the development of software as incurred, other than those incurred after the achievement of technological feasibility during the application development stage. The Company expenses software development costs as incurred until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that after technological feasibility for software products is reached, the Company continues to address all high-risk development issues through coding and testing prior to the release of the products to customers. The amortization of these costs is included in cost of revenue over the estimated life of the products. During the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012, software development costs of $1,211,000, $486,000 and $3,466,000, respectively, have been capitalized. | ||||||||||||||
Impairment of Other Long-Lived Assets | Impairment of Other Long-Lived Assets | ||||||||||||||
The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. During the nine months ended September 30, 2014 and 2013 the Company identified no impairment losses related to the Company’s long-lived assets. | The Company evaluates the recoverability of its property and equipment and other long-lived assets including capitalized software development costs and customer relationships whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. During the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012, the Company identified no impairment losses related to the Company’s long-lived assets. | ||||||||||||||
Revenue Recognition | Revenue Recognition | ||||||||||||||
The Company recognizes revenue when it is realized or realizable and earned. The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer and that delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured. | The Company recognizes revenue when it is realized or realizable and earned. The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer and that delivery has occurred or services have been rendered, the price is fixed and determinable, and collectability is reasonably assured. | ||||||||||||||
● | Software and licenses – revenue from sales of perpetual licenses to customers when payments are fixed is recognized at the inception of the arrangement, unless the payment term exceeds one year and then only if the presumption that the license fee is not fixed or determinable can be overcome, presuming all other relevant revenue recognition criteria are met. If the presumption cannot be overcome, revenue is recognized as payment from the customer becomes due. Revenue from sales of perpetual licenses are payable over a period exceeding a year, and those payments are variable based upon customer usage are recognized as payments from customers become due. | ||||||||||||||
● | Software licenses – revenue from sales of perpetual licenses to customers when payments for the licenses are fixed is recognized at the inception of the arrangement, unless the payment term exceeds one year and then only if the presumption that the license fee is not fixed or determinable can be overcome, presuming all other relevant revenue recognition criteria are met. If the presumption cannot be overcome, revenue is recognized as payments from the customer become due. Revenue from sales of perpetual licenses when payments for the licenses are payable over a period exceeding a year, and those payments are variable based on customer usage, are recognized as payments from the customer become due. | ||||||||||||||
● | Revenues for user licenses purchased by customers are recognized when the user license is delivered. | ● | Revenues for user licenses purchased by customers is recognized when the user license is delivered. | ||||||||||||
● | Revenues for maintenance services are recognized over the period of delivery of the services. | ● | Revenues for maintenance services are recognized over the period of delivery of the services. | ||||||||||||
We enter into arrangements in which a customer purchases a combination of software licenses, maintenance services and post-contract customer support (“PCS”). As a result, judgment is sometimes required to determine the appropriate accounting, including how the price should be allocated among the deliverable elements if there are multiple elements. PCS may include rights to upgrades, when and if available, support, updates and enhancements. When vendor specific objective evidence (“VSOE”) of fair value exists for all elements in a multiple element arrangement, revenue is allocated to each element based on the relative fair value of each of the elements. VSOE of fair value is established by the price charged when the same element is sold separately. Accordingly, the judgments involved in assessing the fair values of various elements of an agreement can impact the recognition of revenue in each period. Changes in the allocation of the sales price between deliverables might impact the timing of revenue recognition, but would not change the total revenue recognized on the contract. When elements such as software and services are contained in a single arrangement, or in related arrangements with the same customer, we allocate revenue to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. In the absence of fair value for a delivered element, revenue is first allocated to the fair value of the undelivered elements and then allocated to the residual delivered elements. In the absence of fair value for an undelivered element, the arrangement is accounted for as a single unit of accounting, resulting in a delay of revenue recognition for the delivered elements until the undelivered elements are fulfilled. No sales arrangements to date include undelivered elements for which VSOE does not exist. | The Company enters into arrangements under which a customer purchases a combination of software licenses, maintenance services and post-contract customer support (“PCS”). As a result, judgment is sometimes required to determine the appropriate accounting, including how the price should be allocated among the deliverable elements if there are multiple elements. PCS may include rights to upgrades, when and if available, support, updates and enhancements. When vendor specific objective evidence (“VSOE”) of fair value exists for all elements in a multiple element arrangement, revenue is allocated to each element based on the relative fair value of each of the elements. VSOE of fair value is established by the price charged when the same element is sold separately. Accordingly, the judgments involved in assessing the fair values of various elements of an agreement can impact the recognition of revenue in each period. Changes in the allocation of the sales price between deliverables might impact the timing of revenue recognition, but would not change the total revenue recognized on the contract. When elements such as software and services are contained in a single arrangement, or in related arrangements with the same customer, revenue is allocated to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. In the absence of fair value for a delivered element, revenue is first allocated to the fair value of the undelivered elements and then allocated to the residual delivered elements. In the absence of fair value for an undelivered element, the arrangement is accounted for as a single unit of accounting, resulting in a delay of revenue recognition for the delivered elements until the undelivered elements are fulfilled. No sales arrangements to date include undelivered elements for which VSOE does not exist. | ||||||||||||||
For purposes of revenue recognition for perpetual licenses, the Company considers payment terms exceeding one year as a presumption that the fee in the transaction is not fixed and determinable. This presumption however, may be overcome if persuasive evidence demonstrates that the Company has a business practice of extending payment terms and has been successful in collecting under the original terms, without providing any concessions. In doing so, the Company considers if the arrangement is sufficiently similar to historical arrangements in terms of similar customers and products is assessing whether there is evidence of a history of successful collection. | For purposes of revenue recognition for perpetual licenses, the Company considers payment terms exceeding one year as a presumption that the fee in the transaction is not fixed or determinable. This presumption however, may be overcome if persuasive evidence demonstrates that the Company has a business practice of extending payment terms and has been successful in collecting under the original terms, without providing any concessions. In doing so, the Company considers if the arrangement is sufficiently similar to historical arrangements in terms of similar customers and products is assessing whether there is evidence of a history of successful collection. | ||||||||||||||
In order to determine if the company’s historical experience is based on sufficiently similar arrangements, the Company considers the various factors including the types of customers and products, product life cycle, elements included in the arrangement, length of payment terms and economics of license arrangement. | In order to determine the Company’s historical experience is based on sufficiently similar arrangements, the Company considers the various factor including the types of customers and products, product life cycle, elements included in the arrangement, length of payment terms and economics of license arrangement. | ||||||||||||||
If the presumption cannot be overcome due to a lack of such evidence, revenue is recognized as payments become due, assuming all other revenue recognition criteria has been met. | If the presumption cannot be overcome due to a lack of such evidence, revenue is recognized as payments become due, assuming all other revenue recognition criteria has been met. Through December 31, 2013, the Company had no sales contracts for which revenue had been recognized since inception of the arrangements. | ||||||||||||||
Leases | Leases | ||||||||||||||
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. | Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. | ||||||||||||||
Assets held under finance leases are recognized as assets of the Company at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. | Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. | ||||||||||||||
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. | Advertising Expenses | ||||||||||||||
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. | It is the Company’s policy to expense advertising costs as incurred. No advertising costs were incurred during each of the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012. | ||||||||||||||
Advertising Expenses | Research and Development Expenses | ||||||||||||||
It is the Company’s policy to expense advertising costs as incurred. No advertising costs were incurred during the three and nine months ended September 30, 2014 and 2013. | Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new products, significant enhancements to existing products, and the portion of costs of development of software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization. The Company incurred no research and development costs in the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012, respectively. | ||||||||||||||
Research and Development Expenses | Income Taxes | ||||||||||||||
Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new products, significant enhancements to existing products, and the portion of costs of development of internal-use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization. The Company incurred no research and development costs in the three and nine months ended September 30, 2014 and 2013. | Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance. | ||||||||||||||
Income Taxes | The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively. | ||||||||||||||
Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance. | Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. | ||||||||||||||
The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively. | |||||||||||||||
Net Income per Share | |||||||||||||||
Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. | |||||||||||||||
Basic earnings per share of common stock is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common and potential common shares outstanding during the period, which includes the additional dilution related to conversion of outstanding stock options and warrants computed under the treasury stock method. | |||||||||||||||
Net Loss per Share | |||||||||||||||
Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations. (in thousands) | |||||||||||||||
For the quarter ended September 30, 2013, there were no potential issuable shares included in the diluted earnings per share calculation as the conversion price of those instruments was all out-of-the-money. For the nine months period ended September 30, 2013, potential issuable shares were not included in the computation of diluted earnings per share under the treasury stock method because their effect would be anti-dilutive due to net losses incurred. For the three and nine months ended September 30, 2014, options, warrants and convertible debt were not included in the computation of diluted earnings per share because their effect would be anti-dilutive due to net losses incurred under the treasury stock method. | |||||||||||||||
Accumulated Other Comprehensive Income (Loss) | 31-Dec | 30-Jun | |||||||||||||
2013 | 2012 | 2012 | |||||||||||||
Other comprehensive income (loss), as defined, includes net income, foreign currency translation adjustment, and all changes in equity (net assets) during a period from non-owner sources. To date, the Company has not had any significant transactions that are required to be reported in other comprehensive income (loss), except for foreign currency translation adjustments. | |||||||||||||||
Basic | 31,661 | 27,331 | 22,695 | ||||||||||||
Use of Estimates | Incremental shares under stock compensation plans | 95 | 1,937 | 1,528 | |||||||||||
Fully Diluted | 31,756 | 29,268 | 24,223 | ||||||||||||
The preparation of consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, determining fair values of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred tax assets, allowances for doubtful accounts, and potential income tax assessments and other contingencies. The Company bases its estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions. | |||||||||||||||
Accumulated Other Comprehensive Income (Loss) | |||||||||||||||
Financial Instruments | |||||||||||||||
Other comprehensive income (loss), as defined, includes net income, foreign currency translation adjustment, and all changes in equity (net assets) during a period from non-owner sources. To date, the Company has not had any significant transactions that are required to be reported in other comprehensive income (loss), except for foreign currency translation adjustments. | |||||||||||||||
The Company has the following financial instruments: cash, amounts due to related parties and long-term debt. The carrying value of these financial instruments approximates their fair value due to their liquidity or their short-term nature valued consistent with the use of level 2 inputs. The fair value of amounts due to related parties is not determinable. | |||||||||||||||
Use of Estimates | |||||||||||||||
Share-Based Compensation | |||||||||||||||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (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 consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, determining fair values of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred tax assets, allowances for doubtful accounts, and potential income tax assessments and other contingencies. The Company bases its estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions. | |||||||||||||||
The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures. | |||||||||||||||
Financial Instruments | |||||||||||||||
Recently Issued Accounting Standards | |||||||||||||||
The Company has the following financial instruments: cash, amounts due to related parties, and long-term debt. The carrying value of cash and long-term debt approximates their fair value due to their liquidity or their short-term nature valued consistent with the use of level 2 inputs. The fair value of amounts due to related parties is not determinable. | |||||||||||||||
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09 – Revenue From Contracts with Customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This ASU will be effective for us in our first quarter of 2018. Early adoption is not permitted. The ASU allows for either full retrospective or modified retrospective adoption. The Company is evaluating the transaction method that will be elected and the potential effects of the adoption of this ASU on its financial statements. | |||||||||||||||
Share-Based Compensation | |||||||||||||||
The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures. | |||||||||||||||
2a_Restatement_of_Financial_St
2a. Restatement of Financial Statements | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Notes to Financial Statements | |||||||||||||
2a. Restatement of Financial Statements | One Horizon Group, Inc. (the "Company") is restating its consolidated financial statements as of December 31, 2012 for the six months ended December 31, 2012 and as of and for years ended June 30, 2012, and 2011, to correct errors related to the recognition of revenue from sales of perpetual licenses to larger, top-tier ("Tier 1") and other ("Tier 2) telecom entities. Contracts with Tier 1 entities typically require agreed-upon fixed payments over fixed future periods extending beyond one year. Contracts with Tier 2 have long-term variable payment terms based on customer usage. The Company historically recognized the present value of Tier 1 contracts at the time of delivery. Revenue from Tier 2 contracts was historically recognized over the initial 5-year term on a straight-line basis. | ||||||||||||
The Company's decision to restate the aforementioned financial statements was made as a result of management's identification of errors related to the recognition of revenue from sales of perpetual licenses to certain Tier 1 and Tier 2 telecom entities. Management subsequently determined, and the Audit Committee of the Board of Directors adopted management's conclusion that, as a result of applying the guidance in ASC 985-605-25-32, a portion of the revenue recognized at the time of the sale of perpetual licenses to certain Tier 1 entities should have been deferred and recognized in future periods as payments became due. The conclusion was also reached that revenue from contracts with Tier 2 entities should have been recognized based on the timing of when payments became due (which is based on usage). The errors impacted accounts receivable and deferred revenue in the consolidated balance sheets as well as revenue in the consolidated statements of operations. As a result, revenue and net income were misstated in the consolidated statements of operations for the six months ended December 31, 2012 and years ended June 30, 2012 and 2011. Accounts receivable and deferred revenue were misstated in the consolidated balance sheet as of December 31, 2012, June 30, 2012 and June 30, 2011. These errors were considered material to the consolidated financial statements. The effect of these errors on the consolidated results of operations for the six months ended December 31, 2012, was to reduce revenue and decrease net income by $4.75 million and $3.58 million, respectively The effect of these errors on the consolidated results of operations for the year ended June 30, 2012 was to reduce revenue and increase the net loss by $2.61 million and $2.54 million, respectively. The effect of these errors on the consolidated results of operations for the year ended June 30, 2011 was to reduce revenue and increase the net loss by $1.825 million and $1.825 million, respectively. | |||||||||||||
The consolidated financial statements have been restated as follows. The errors had no impact on the Company's consolidated net cash flows from investing and financing activities. The Company has also reclassified amortization of software development costs from the prior presentation as operating expenses to cost of revenue. | |||||||||||||
Consolidated Balance Sheet | |||||||||||||
(in thousands) | |||||||||||||
As of December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Assets | |||||||||||||
Accounts receivable, current portion | $ | 5,899 | (4,922 | ) | $ | 977 | |||||||
Total current assets | 6,734 | (4,922 | ) | 1,812 | |||||||||
Accounts receivable, net of current portion | 26,263 | (26,263 | ) | - | |||||||||
Total assets | $ | 45,676 | (31,185 | ) | $ | 14,491 | |||||||
Liabilities and Stockholders' Equity | |||||||||||||
Current portion of deferred revenue | $ | 6,000 | (6,000 | ) | $ | - | |||||||
Incom Taxes | 1,332 | (1,238 | ) | 94 | |||||||||
Total current liabilities | 12,114 | (7,240 | ) | 4,874 | |||||||||
Deferred revenue | 16,000 | (16,000 | ) | - | |||||||||
Total liabilities | 28,868 | (23,240 | ) | 5,628 | |||||||||
Accumulated deficit | (4,780 | ) | (7,945 | ) | (12,725 | ) | |||||||
Total stockholders' equity | 16,808 | (7,945 | ) | 8,863 | |||||||||
Total liabilities and stockholders' equity | $ | 45,676 | (31,185 | ) | $ | 14,491 | |||||||
Consolidated Statements of Operations | |||||||||||||
(in thousands) | |||||||||||||
Six Months Ended December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Revenue | $ | 11,709 | (4,750 | ) | $ | 6,959 | |||||||
Cost of revenue | 121 | 873 | 994 | ||||||||||
Gross margin | 11,588 | 5,623 | 5,965 | ||||||||||
Expenses | 4,968 | (872 | ) | 4,096 | |||||||||
Income (loss) from operations | 6,620 | (4,751 | ) | 1,869 | |||||||||
Other income and expense | (70 | ) | - | (70 | ) | ||||||||
Income (loss) from continuing operations before income taxes | 6,550 | (4,751 | ) | 1,799 | |||||||||
Income taxes | 1,169 | (1,169 | ) | - | |||||||||
Income (loss) from continuing operations | 5,381 | (3,582 | ) | 1,799 | |||||||||
Loss from discontinued operations | (121 | ) | - | (121 | ) | ||||||||
Net income (loss) for the period | $ | 5,260 | (3,582 | ) | $ | 1,678 | |||||||
Earning per share: | |||||||||||||
Basic | $ | - | $ | 0.06 | |||||||||
Diluted | $ | - | $ | 0.06 | |||||||||
Consolidated Statements of Comprehensive Income | |||||||||||||
(in thousands) | |||||||||||||
Six months ended December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Net income | $ | 5,260 | $ | (3,582 | ) | $ | 1,678 | ||||||
Comprehensive income | 5,715 | (3,582 | ) | 2,133 | |||||||||
Consolidated Statements of Cash Flows | |||||||||||||
(in thousands) | |||||||||||||
Six months ended December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Cash provided by (used in) operating activities: | |||||||||||||
Operating activities | |||||||||||||
Net income | $ | 5,260 | (3,582 | ) | 1,678 | ||||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | (8,395 | ) | 8,750 | 355 | |||||||||
Deferred revenue | 4,000 | (4,000 | ) | - | |||||||||
Income Taxes | 1,169 | (1,169 | ) | - | |||||||||
Net cash provided by (used in) operating activities | $ | (833 | ) | - | (833 | ) | |||||||
Consolidated Balance Sheet | |||||||||||||
(in thousands) | |||||||||||||
As of June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Assets | |||||||||||||
Accounts receivable, current portion | $ | 953 | 380 | $ | 1,333 | ||||||||
Total current assets | 1,074 | 380 | 1,454 | ||||||||||
Accounts receivable, net of current portion | 22,814 | (22,814 | ) | 0 | |||||||||
Total assets | $ | 36,549 | (22,434 | ) | $ | 14,115 | |||||||
Liabilities and Stockholders' Equity | |||||||||||||
Current portion of deferred revenue | $ | 4,600 | (4,600 | ) | $ | 0 | |||||||
Income taxes payable | 163 | (69 | ) | 94 | |||||||||
Total current liabilities | 12,988 | (4,669 | ) | 8,319 | |||||||||
Deferred revenue | 13,400 | (13,400 | ) | 0 | |||||||||
Total liabilities | 26,983 | (18,069 | ) | 8,619 | |||||||||
Accumulated deficit | (10,040 | ) | (4,365 | ) | (14,405 | ) | |||||||
Total stockholders' equity | 9,566 | (4,365 | ) | 5,201 | |||||||||
Total liabilities and stockholders' equity | $ | 36,549 | (22,434 | ) | $ | 14,115 | |||||||
Consolidated Statements of Operations | |||||||||||||
(in thousands) | |||||||||||||
Year Ended June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Revenue | $ | 5,222 | (2,610 | ) | $ | 2,612 | |||||||
Cost of revenue | 80 | 1,655 | 1,735 | ||||||||||
Gross margin | 5,142 | (4,265 | ) | 877 | |||||||||
Expenses | 7,109 | (1,655 | ) | 5,454 | |||||||||
Income (loss) from operations | (1,967 | ) | (2,610 | ) | (4,577 | ) | |||||||
Other income and expense | (169 | ) | - | (169 | ) | ||||||||
Income (loss) from income taxes | (2,205 | ) | (2,541 | ) | (4,746 | ) | |||||||
Income taxes | 69 | (69 | ) | - | |||||||||
Net income (loss) | $ | (2,205 | ) | (2,541 | ) | $ | (4,746 | ) | |||||
Earning per share: | |||||||||||||
Basic | $ | - | $ | (0.21 | ) | ||||||||
Diluted | $ | - | $ | (0.20 | ) | ||||||||
Consolidated Statements of Comprehensive Income | |||||||||||||
(in thousands) | |||||||||||||
Year ended June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Net loss | $ | (2,205 | ) | (2,541 | ) | $ | (4,746 | ) | |||||
Comprehensive loss | (2,205 | ) | (2,541 | ) | (4,746 | ) | |||||||
Consolidated Statements of Cash Flows | |||||||||||||
(in thousands) | |||||||||||||
Year ended June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Cash provided by (used in) operating activities: | |||||||||||||
Operating activities | |||||||||||||
Net income (loss) | $ | (2,205 | ) | (2,541 | ) | (4,746 | ) | ||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | (20,734 | ) | 19,010 | (1,724 | ) | ||||||||
Deferred revenue | 16,400 | (16,400 | ) | - | |||||||||
Income taxes | (22 | ) | (69 | (91 | ) | ||||||||
Net cash provided by (used in) operating activities | $ | (2,895 | ) | - | (2,895 | ) | |||||||
Consolidated Balance Sheet | |||||||||||||
(in thousands) | |||||||||||||
As of June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Assets | |||||||||||||
Accounts receivable, current portion | $ | 212 | (29 | ) | $ | 183 | |||||||
Total current assets | 576 | (29 | ) | 547 | |||||||||
Accounts receivable, net of current portion | 2,821 | (2,821 | ) | 0 | |||||||||
Total assets | $ | 14,383 | (2,850 | ) | $ | 11,533 | |||||||
Liabilities and Stockholders' Equity | |||||||||||||
Deferred customer credit | $ | 0 | 575 | $ | 575 | ||||||||
Current portion of deferred revenue | 400 | (400 | ) | 0 | |||||||||
Total current liabilities | 7,033 | 125 | 7,158 | ||||||||||
Deferred revenue | 1,200 | (1,200 | ) | 0 | |||||||||
Total liabilities | 8,768 | (1,025 | ) | 7,743 | |||||||||
Accumulated deficit | (7,835 | ) | (1,825 | ) | (9,660 | ) | |||||||
Total stockholders' equity | 5,615 | (1,825 | ) | 3,790 | |||||||||
Total liabilities and stockholders' equity | $ | 14,383 | (2,850 | ) | $ | 11,533 | |||||||
Consolidated Statements of Operations | |||||||||||||
(in thousands) | |||||||||||||
Year Ended June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Revenue | $ | 2,726 | (1,825 | ) | $ | 901 | |||||||
Cost of revenue | 207 | 1,307 | 1,514 | ||||||||||
Gross margin | 2,519 | (3,132 | ) | (613 | ) | ||||||||
Expenses | 3,539 | (1,307 | ) | 2,232 | |||||||||
Income (loss) from operations | (1,020 | ) | (1,825 | ) | (2,845 | ) | |||||||
Other income and expense | 301 | 0 | 301 | ||||||||||
Income (loss) from income taxes | (403 | ) | (1,825 | ) | (2,228 | ) | |||||||
Income taxes | |||||||||||||
Net income (loss) | $ | (403 | ) | (1,825 | ) | $ | (2,228 | ) | |||||
Consolidated Statements of Comprehensive Income | |||||||||||||
(in thousands) | |||||||||||||
Year Ended June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Net loss | $ | (403 | ) | (1,825 | ) | $ | (2,228 | ) | |||||
Year ended June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Cash provided by (used in) operating activities: | |||||||||||||
Operating activites | |||||||||||||
Net income (loss) | $ | (403 | ) | (1,825 | ) | $ | (2,228 | ) | |||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | 2,675 | 2,850 | 5,525 | ||||||||||
Deferred customer credit | 0 | 575 | 575 | ||||||||||
Deferred revenue | 1,600 | (1,600 | ) | 0 | |||||||||
Net cash provided by (used in) operating activities | $ | 5,363 | 0 | $ | 5,363 | ||||||||
3_China_Operations
3. China Operations | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
China Operations | ||
3. China Operations | During the year ended December 31, 2013, the Company established a subsidiary in China, Horizon Network Technology Co. Ltd. (“HNT”). The establishment of HNT is part of the Company’s strategic plan to expand the application of mobile software and related marketing efforts into emerging markets. The Company contributed $1.5 million for a 75% ownership interest in HNT. The remaining 25% ownership interest in HNT was acquired by non-related parties through the transfer of noncash assets with a fair value of $500,000. | During the year ended December 31, 2013 the Company established a subsidiary in China, Horizon Network Technology Co. Ltd. (“HNT”). The establishment of HNT is part of the Company’s strategic plan to expand the application of mobile software and related marketing efforts into emerging markets. The Company contributed $1.5 million to form the subsidiary in which it now ownes a 75% interest. The remaining 25% ownership interest in HNT was acquired by non-related parties through the transfer of noncash assets with a fair value of $500,000. |
The results of operations, assets, liabilities and cash flows of HNT have been consolidated in the accompanying condensed consolidated financial statements as the Company owns a controlling interest. The ownership interests in HNT held by parties other than the Company are presented separately from the Company’s equity on the Consolidated Balance Sheet. The amount of consolidated net loss attributable to the Company and the non-controlling interest are both presented on the face of the Consolidated Statement of Operations. | The results of operations, assets, liabilities and cash flows of HNT have been consolidated in the accompanying condensed consolidated financial statements as the Company owns a controlling interest in and manages HNT. The ownership interests in HNT held by parties other than the Company are presented separately from the Company’s equity on the Consolidated Balance Sheet as the Non Controlling Interest. The amount of consolidated net loss attributable to the Company and the non-controlling interest are both presented on the face of the consolidated financial statements. | |
4_Property_and_Equipment_net
4. Property and Equipment, net | 9 Months Ended | 12 Months Ended | ||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||
Property And Equipment Net | ||||||||||||||
4. Property and Equipment, net | Property and equipment consist of the following: (in thousands) | Property and equipment consist of the following: (in thousands) | ||||||||||||
September 30 | 31-Dec | 31-Dec | ||||||||||||
2014 | 2013 | |||||||||||||
Leasehold improvements | $ | 265 | $ | 265 | 2013 | 2012 | ||||||||
Motor vehicle | 120 | 120 | ||||||||||||
Equipment | 351 | 310 | ||||||||||||
736 | 695 | Leasehold improvements | $ 265 | $ 265 | ||||||||||
Less accumulated depreciation | (497 | ) | (380 | ) | Motor vehicle | 120 | 120 | |||||||
Equipment | 310 | 177 | ||||||||||||
Property and equipment, net | $ | 239 | $ | 315 | 695 | 562 | ||||||||
Less accumulated depreciation | -380 | ( 212 ) | ||||||||||||
Property and equipment, net | $ 315 | $ 350 |
5_Intangible_Assets
5. Intangible Assets | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||||||
Intangible Assets | ||||||||||||||||||
5. Intangible Assets | Intangible assets consist primarily of software development costs and customer and reseller relationships which are amortized over the estimated useful life, generally on a straight-line basis with the exception of customer relationships, which are generally amortized either using the straight-line method or the related asset’s pattern of economic benefit (whichever is more representative). (in thousands) | Intangible assets consist primarily of software development costs and customer relationships (in thousands) | ||||||||||||||||
30-Sep | 31-Dec | |||||||||||||||||
2014 | 2013 | 31-Dec | ||||||||||||||||
Horizon software | $ | 17,332 | $ | 17,599 | 2013 | 2012 | ||||||||||||
ZTEsoft Telecom software | 494 | 497 | Capitalized software development costs | |||||||||||||||
Contractual relationships | 885 | 885 | Horizon software | $ | 17,599 | $ | 16,085 | |||||||||||
18,711 | 18,981 | ZTEsoft Telecom software | 497 | - | ||||||||||||||
Less accumulated amortization | (7,196 | ) | (6,221 | ) | Customer relationships | 885 | 885 | |||||||||||
18,981 | 16,970 | |||||||||||||||||
Intangible assets, net | $ | 11,515 | $ | 12,760 | Less accumulated amortization | (6,221 | ) | ( 4,641 | ) | |||||||||
Amortization of intangible assets for each of the next five years is estimated to be $1,900,000 per year | Intangible assets, net | $ | 12,760 | $ | 12,329 | |||||||||||||
Amortization of intangible assets for each of the next five years is estimated to be $1,900,000 per year | ||||||||||||||||||
6_Longterm_Debt
6. Long-term Debt | 9 Months Ended | 12 Months Ended | ||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||
Long-term Debt, Unclassified [Abstract] | ||||||||||||||
6. Long-term Debt | Long – term liabilities consist of the following: (in thousands) | |||||||||||||
Long – term liabilities consist of the following (in thousands) | ||||||||||||||
September 30 | 31-Dec | |||||||||||||
2014 | 2013 | 31-Dec | ||||||||||||
Vehicle loan | $ | 39 | $ | 51 | ||||||||||
Equipment loan | 18 | 27 | 2013 | 2012 | ||||||||||
Office term loan | 144 | 171 | ||||||||||||
201 | 249 | |||||||||||||
Less current portion | (72 | ) | (65 | ) | Vehicle loan | $ 51 | $ 67 | |||||||
Equipment loan | 27 | - | ||||||||||||
Balance | $ | 129 | $ | 184 | Office term loan | 171 | 211 | |||||||
249 | 278 | |||||||||||||
Less current portion | -65 | -59 | ||||||||||||
Balance | $ 184 | $ 219 | ||||||||||||
7_RelatedParty_Transactions
7. Related-Party Transactions | 9 Months Ended | 12 Months Ended | ||||||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||
7. Related-Party Transactions | Amounts due to related parties include the following: (in thousands) | Amounts due to related parties include the following: (in thousands) | ||||||||||||||||
30-Sep | 31-Dec | 31-Dec | 31-Dec | |||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||||
Loans due to stockholders | $ | 3,500 | $ | 3,500 | ||||||||||||||
Loans due to stockholders | $ | 3,500 | $ | 3,500 | ||||||||||||||
Loans due to stockholders include: | ||||||||||||||||||
Loans due to stockholders include | ||||||||||||||||||
● | Balance of loans, advanced during 2011, of $1,500,000 which are unsecured and have an interest rate of 10%. During the nine months ended September 30, 2014 and 2013 interest of $107,000 and $150,000, respectively, has been accrued. | |||||||||||||||||
● | Loans advanced by an officer and director together with a former officer and director during 2012 totaling $1,500,000 which is unsecured and has an interest rate of 0.21%. The loan is due on or before December 31, 2014 and can be repaid in cash or shares of ordinary shares of OHG at an exchange price of $5.14 per share. | |||||||||||||||||
● | loans advanced during 2011 totaling $2,000,000 which are unsecured and have an interest rate of 10%. During the year ended December 31, 2013 and the six months ended December 31, 2012 interest of $200,000 and $100,000, respectively, has been accrued. During the year ended June 30, 2012, interest of $100,000 was accrued. During the year ended December 31, 2013 $500,000 of this loan was settled by applying it towards a stock subscription receivable. | |||||||||||||||||
● | Convertible loans advanced in January 2013 from an officer and director together with a former officer and director in the amount of $250,000 each. These convertible loans bear an interest rate of 0.21% and is repayable on or before January 22, 2015. The Company has the option to repay the loans at any time, without penalty, at any time in cash or shares of common stock of the Company at a price of $5.14 per share. If the Company elects to repay the convertible loan in full by the issuance of shares the Company will issue 48,650 shares of common stock for repayment of the loan. | |||||||||||||||||
● | loans advanced by two officers and directors during 2012 totaling $1,500,000 which are unsecured and have an interest rate of 0.21%. The loans are due on or before December 31, 2014 and can be repaid in cash or shares of common stock of OHG at an exchange price of $5.14 per share. | |||||||||||||||||
During the year ended June 30, 2011, the Company entered into a sales contract, in the normal course of business with a customer in which the Company holds an equity interest. The customer purchased perpetual software license with total commitment of $2.0 million, of which $45,000 and $nil has been recognized in the nine months ended September 30, 2014 and 2013, respectively. The Company owns a cost based investment interest of 18% of the voting capital of the customer. | ||||||||||||||||||
● | convertible loans advanced in January 2013 from two officers and directors in the amount of $250,000 each. These convertible loans bear an interest rate of 0.21% and are repayable on or before January 22, 2014. On January 21, 2014 the loan repayment date was extended to January 22, 2015. The Company has the option to repay the loans at any time, without penalty, at any time in cash or shares of common stock of the Company at a price of $5.14 per share. If the Company elects to repay the convertible loans in full by the issuance of shares the Company will issue 48,650 shares of common stock for each loan so repaid. | |||||||||||||||||
● | during the year ended December 31, 2013, the Company entered into a sales contract, in the normal course of business, with a customer in which the Company is negotiating an ownership interest of 45% of the voting capital of the customer. The customer purchased a perpetual software license with a total commitment of $5.0 million, of which $700,000 has been recognized as revenue in the year ended December 31, 2013. | |||||||||||||||||
● | during the year ended June 30, 2011, the Company entered into a sales contract, in the normal course of business with a customer in which the Company holds an equity interest. The customer purchased perpetual software license with total commitment of $2.0 million, of which $139,300 has been recognized in the year ended December 31, 2013; $72,500 was recognized in the six months ended December 31, 2012 and nil was recognized in the year ended June 30, 2012. The Company owns a cost based investment interest of 18% of the voting capital of the customer. | |||||||||||||||||
● | during the year ended December 31, 2013, the six months ended December 31, 2012 and the year ended June 30, 2012, a company owned by a director and officer of the Company provided services in the amounts of $Nil, $Nil and $632,000, respectively. | |||||||||||||||||
● | During the six months ended December 31, 2012 two directors and officers of the Company were granted a total of 3,502,800 shares of common stock for services received in the amount of $1,200,000. | |||||||||||||||||
8_Share_Capital
8. Share Capital | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2014 | Dec. 31, 2013 | ||||||||||
Share Capital | |||||||||||
8. Share Capital | Preferred Stock | Preferred Stock | |||||||||
The Company’s authorized capital includes 50,000,000 shares of preferred stock of $0.0001 par value. The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares. | The Company’s authorized capital includes 50,000,000 shares of preferred stock of $0.0001 par value. The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares. | ||||||||||
On July 21, 2014, the Company completed a private placement of 170,940 shares of Series A Preferred Stock that also included 100,000 Class B warrants convertible into common stock on a one-to-one basis at an exercise price of $4.00 per share. The net proceeds of the offering were $982,000 after deducting offering costs. | On August 6, 2013 the shareholders approved the reduction of the authorized preferred stock to 50 million with the par value remaining unchanged at $0.0001 per preferred share. | ||||||||||
Unless converted earlier, each share of the Mandatorily Convertible Series A Preferred Stock will automatically convert on July 20, 2016, into common stock at a conversion price of $5.85 per share, subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to July 20, 2016, holders of the Mandatorily Convertible Series A Preferred Stock may elect to convert all or a portion of their shares into common stock at the conversion rate. | No shares of preferred stock are issued and outstanding as of December 31, 2013 and 2012. | ||||||||||
The holders of Mandatorily Convertible Series A Preferred Stock are entitled to receive cumulative dividends during a period of twenty-four (24) months from and after the Issuance Date (the “Dividend Period”). During the Dividend Period for each outstanding share of Mandatorily Convertible Series A Preferred Stock, dividends shall be payable quarterly in cash, at the rate of 10% per annum on or before each ninety (90) day period following the Issuance Date (each a “Dividend Payment Date”), with the first Dividend Payment Date to occur promptly following the three month period following the Issuance Date, and continuing until the end of the Dividend Period. Following the expiration of the Dividend Period, the holders of Series A Preferred Stock shall not be entitled to any additional dividend payment or coupon rate. | |||||||||||
Mandatorily Redeemable Preferred Shares (Deferred Stock) | |||||||||||
Shares of Series A Preferred Stock are redeemable, at the option of the holders commencing any time after 12 months from and after the closing at a price equal to the original purchase price plus all accrued but unpaid dividends. In the event that the Company completes a financing of $10 million or greater prior to July 20, 2016, the Series A Preferred Stock will be redeemed at a price equal to the original purchase price plus all accrued but unpaid dividends. | |||||||||||
The Company’s subsidiary OHG is authorized to issue 50,000 shares of deferred stock, par value of £1.These shares are non-voting, non-participating, redeemable and have been presented as a long-term liability. | |||||||||||
170,940 shares of Series A preferred stock are issued and outstanding as of September 30, 2014. | |||||||||||
Mandatorily Redeemable Preferred Shares (Deferred Stock) | Common Stock | ||||||||||
The Company’s subsidiary OHG is authorized to issue 50,000 shares of deferred stock, par value of £1.These shares are non-voting, non-participating, redeemable and have been presented as a long-term liability. | The Company is authorized to issue 200 million shares of common stock, par value of $0.0001. | ||||||||||
Common Stock | On August 6, 2013, the shareholders approved the reduction of the authorized common stock to 200 million, with the par value remaining unchanged at $0.0001 per common share, and the consolidation of the issued and outstanding common stock on the basis of one new share for each 600 shares, effective upon approval of the regulatory authorities. The Company’s common stock was consolidated effective as of August 29, 2013 | ||||||||||
The Company is authorized to issue 200 million shares of common stock, par value of $0.0001. | The application of this stock consolidation has been shown retroactively in these consolidated financial statements. | ||||||||||
During the nine months ended September 30, 2014, the Company: | During the year ended December 31, 2013, the Company: | ||||||||||
● | issued 15,000 shares of common stock for services received with a fair value of $64,500. | · | issued 5,000 shares of common stock for services received with a fair value of $30,000 | ||||||||
● | issued 25,000 shares of common stock for services received, in connection with the $1 million private placement, with a fair value of $107,500 | · | issued 62,543 shares of common stock for services received with a fair value of $562,891. | ||||||||
● | issued 75,000 shares of common stock for services to be received with a fair value of $322,500 | · | issued 806,452 shares of common stock for $6 million cash. | ||||||||
· | issued 33,333 shares of common stock for services received with a fair value of $50,000. | ||||||||||
During the year ended December 31, 2013, the Company: | · | issued 1,167,600 shares of common stock upon the exercise of warrants with an exercise price of $nil | |||||||||
● | issued 5,000 shares of common stock for services received with a fair value of $30,000 | During the six months ended December 31, 2012, the Company: | |||||||||
● | issued 62,543 shares of common stock for services received with a fair value of $562,891. | ||||||||||
● | issued 806,452 shares of common stock for $6 million cash. | · | issued 195,573 shares of common stock for cash proceeds of $502,000 | ||||||||
● | issued 33,333 shares of common stock for services received with a fair value of $50,000. | · | issued 1,459,500 shares of common stock for subscription receivable of $500,000. | ||||||||
● | issued 1,167,600 shares of common stock upon the exercise of warrants with an exercise price of $nil | · | issued 3,502,800 shares of common stock for services received from related parties with a fair value of $1,200,000 | ||||||||
· | issued 145,950 shares of common stock for services received with a fair value of $50,000 | ||||||||||
Stock Purchase Warrants | · | accounted for the reverse acquisition of Intelligent Communication Enterprise Corporation and subsidiaries and the issued 1,160,051 shares of common stock with a fair value of $341,000. | |||||||||
· | returned to treasury for cancellation 70,000 shares of common stock with a fair value of $420,000 being proceeds received on the disposal of shares of Global Interactive Media Limited and the Modizo business. | ||||||||||
At September 30, 2014, the Company had reserved 1,426,435 shares of its common stock for the following outstanding warrants: | |||||||||||
During the year ended June 30, 2012, the Company: | |||||||||||
Number of Warrants | Exercise Price | Expiry | |||||||||
116,760 | $ | 0.86 | no expiry date | · | issued new shares of common stock for cash proceeds of $5,750,000 | ||||||
1,209,675 | 4.25 | Jan-19 | |||||||||
100,000 | 4 | Jul-16 | Stock Purchase Warrants | ||||||||
During the nine months ended September 30, 2014 there were 100,000 warrants issued in connection with the $1 million private placement. In connection with and as a consideration of closing of the $1 million private placement, 403,225 warrants issued in the financing of February 2013 were increased to 1,209,675 warrants; and the exercise price was reduced to $4.25 per share and the exercise period was extended to January 2019. There were no warrants exercised during the nine months ended September 30, 2014. | At December 31, 2013, the Company had reserved 519,986 shares of its common stock for the following outstanding warrants: | ||||||||||
Number of Warrants | Exercise Price | Expiry | |||||||||
116,760 | $0.86 | no expiry date | |||||||||
403,226 | 5.94 | Jan-18 | |||||||||
There were 403,226 warrants issued during the year ended December 31, 2013. In addition, 1,167,600 warrants were exercise with nil proceeds to the Company. | |||||||||||
An agreement entered into in May 2013, whereby 62,545 warrants with an exercise price of $7.20 per share were issued, has been terminated and all warrants cancelled. | |||||||||||
9_StockBased_Compensation
9. Stock-Based Compensation | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||
Stock-Based Compensation | ||||||||||||||||||||||||||||
9. Stock-Based Compensation | The shareholders approved a stock option plan on August 6, 2013, the 2013 Equity Incentive Plan. This stock option plan is for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company. | The shareholders approved a stock option plan on August 6, 2013, the 2013 Equity Incentive Plan. This stock option plan is for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, cash bonuses and other stock-based awards to employees, directors and consultants of the Company. | ||||||||||||||||||||||||||
There are 3,000,000 shares of common stock available for granting awards under the plan. Each year, commencing 2014, until 2016, the number of shares of common stock available for granting awards shall be increased by the lesser of 1,000,000 shares of common stock and 5% of the total number of shares of common stock outstanding. | There are 3,000,000 shares of common stock available for granting awards under the plan. Each year, commencing 2014, until 2016, the number of shares of common stock available for granting awards shall be increased by the lesser of 1,000,000 shares of common stock and 5% of the total number of shares of common stock outstanding. | |||||||||||||||||||||||||||
During the nine months ended September 30, 2014, the Company issued options to purchase 500,000 shares of common stock under the 2013 Equity Incentive Plan. The options become fully vested on January 15, 2017 and are exercisable, at an exercise price of $4.54 per common share, to January 15, 2024. On January 1, 2014, the number of shares available for granting awards under the 2013 Equity Incentive Plan was increased by 1,000,000 shares. | No shares were issued under this 2013 Equity Incentive Plan during the year ended December 31, 2013. As at December 31, 2013 3,000,000 shares of common stock have been reserved. | |||||||||||||||||||||||||||
A summary of the Company’s 2013 Equity Incentive Plan as of June 30, 2014, is as follows: | Prior to the 2013 Equity Incentive Plan the Company issued stock options to directors, employees, advisors, and consultants. | |||||||||||||||||||||||||||
Number of | Weighted Average | A summary of the Company’s stock options as of December 31, 2013, is as follows: | ||||||||||||||||||||||||||
Options | Exercise Price | |||||||||||||||||||||||||||
Outstanding at December 31, 2013 | - | $ | Number of | Weighted Average | ||||||||||||||||||||||||
Options issued | 500,000 | 4.54 | Options | Exercise Price | ||||||||||||||||||||||||
Outstanding at September 30, 2014 | 500,000 | 4.54 | ||||||||||||||||||||||||||
Outstanding at June 30, 2012 | 360,221 | $0.77 | ||||||||||||||||||||||||||
The fair value of these options, using the Black-Scholes option-pricing model, is estimated to be $2,200,000. This expense, less an estimated forfeiture rate of 30%, will be recognized over the three year vesting period. The amount of $387,000 has been recognized during the nine months ended September 30, 2014. As at September 30, 2014, there was unrecognized compensation expense of approximately $1.2 million to be recognized over a period of 2.25 years. | Options issued | 291,900 | 0.53 | |||||||||||||||||||||||||
Outstanding at December 31, 2012 | 652,121 | 0.66 | ||||||||||||||||||||||||||
Prior to the 2013 Equity Incentive Plan, the Company issued stock options to directors, employees, advisors, and consultants. | Options forfeited | 67,471 | 1.79 | |||||||||||||||||||||||||
Outstanding at December 31, 2013 | 584,650 | $0.53 | ||||||||||||||||||||||||||
A summary of the Company’s other stock options as of September 30, 2014, is as follows: | ||||||||||||||||||||||||||||
The following table summarizes stock options outstanding at December 31, 2013: | ||||||||||||||||||||||||||||
Number of | Weighted Average | |||||||||||||||||||||||||||
Options | Exercise Price | Number | Average | Number | Intrinsic | |||||||||||||||||||||||
Outstanding at December 31, 2013 | 584,650 | $ | 0.53 | Outstanding | Remaining | Exercisable | Value | |||||||||||||||||||||
Options forfeited | - | - | at | Contractual | at | at | ||||||||||||||||||||||
Outstanding at September 30, 2014 | 584,650 | $ | 0.53 | December 31, | Life | December 31, | December 31, | |||||||||||||||||||||
Exercise Price | 2013 | (Years) | 2013 | 2013 | ||||||||||||||||||||||||
$0.51 | 850 | 1.83 | 850 | $ 3,264 | ||||||||||||||||||||||||
Other than the options to purchase 500,000 common shares under the 2013 Equity Incentive Plan, there were no options issued, exercised or forfeited during the nine months ended September 30, 2014. | 0.53 | 291,900 | 6.5 | 291,900 | 1,115,058 | |||||||||||||||||||||||
0.53 | 291,900 | 9 | - | - | ||||||||||||||||||||||||
The following table summarizes stock options outstanding at September 30, 2014: | ||||||||||||||||||||||||||||
At December 31, 2013, 584,650 shares of common stock were reserved for outstanding options. | ||||||||||||||||||||||||||||
Number | Average | Number | Intrinsic | |||||||||||||||||||||||||
Outstanding | Remaining | Exercisable | Value | The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of the options granted were: risk-free interest rate of 5.0%, a 3 year expected life, a dividend yield of 0.0%, and a stock price volatility factor of 40% | ||||||||||||||||||||||||
at | Contractual | at | at | |||||||||||||||||||||||||
September 30, | Life | September 30, | September 30, | There were no options issued or exercised and 67,471 options forfeited during the year ended December 31, 2013 and 291,900 options issued during the six months ended December 31, 2012 | ||||||||||||||||||||||||
Exercise Price | 2014 | (Years) | 2014 | 2014 | ||||||||||||||||||||||||
$ | 0.51 | 850 | 1.08 | 850 | $ | 1,666 | ||||||||||||||||||||||
0.53 | 291,900 | 5.75 | 291,900 | 566,286 | ||||||||||||||||||||||||
0.53 | 291,900 | 8.25 | - | - | ||||||||||||||||||||||||
4.54 | 500,000 | 9.25 | - | - | ||||||||||||||||||||||||
At September 30, 2014, 4,584,650 shares of common stock were reserved for all outstanding options and future commitments under the 2013 Equity Incentive Plan. | ||||||||||||||||||||||||||||
The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of the options granted were: risk-free interest rate of 1.68%, a 3 year expected life, a dividend yield of 0.0%, and a stock price volatility factor of 192% | ||||||||||||||||||||||||||||
10_Commitments_and_Contingenci
10. Commitments and Contingencies | 9 Months Ended | 12 Months Ended | ||||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||||
Commitments And Contingencies | ||||||||||||||||
10. Commitments and Contingencies | The Company has an agreement with an employee to pay for certain services by the issuance of options to purchase 291,900 shares of common stock of the Company. | |||||||||||||||
Contractual Commitments | ||||||||||||||||
Contractual Commitments | ||||||||||||||||
The Company incurred total rent expense of $200,000; $103,000 and $191,000, for the year ended December 31, 2013, the six months ended December 31, 2012 and the year ended June 30, 2012, respectively. | ||||||||||||||||
The Company incurred total rent expense of $81,000 and $166,147, respectively, for the nine months ended September 30, 2014 and 2013. | ||||||||||||||||
Minimum contractual commitments, as of December 31, 2013,is as follows: | ||||||||||||||||
Minimum contractual commitments, as of September 30, 2014, are as follows: | ||||||||||||||||
Operating | Long-term | Operating | Long-term | |||||||||||||
leases | Financing | leases | Financing | |||||||||||||
2014 | $ | 64,000 | $ | 18,000 | ||||||||||||
2015 | 75,000 | 87,000 | 2014 | $ | 123,000 | $ | 65,000 | |||||||||
2016 | 75,000 | 48,000 | 2015 | 75,000 | 87,000 | |||||||||||
2017 | 75,000 | 45,000 | 2016 | 75,000 | 48,000 | |||||||||||
2018 | - | 4,000 | 2017 | 75,000 | 45,000 | |||||||||||
2018 | - | 4,000 | ||||||||||||||
11_Income_Taxes
11. Income Taxes | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||
11. Income Taxes | Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. | |||||||||||||
Income (loss) before income taxes consisted of the following (in thousands): | ||||||||||||||
31-Dec | 30-Jun | |||||||||||||
2013 | 2012 | 2012 | ||||||||||||
United States | $ | (1,164 | ) | $ | (22 | ) | $ | - | ||||||
International | 466 | 1,821 | (4,746) | |||||||||||
Total | $ | (698 | ) | $ | 1,799 | $ (4,746) | ||||||||
Deferred Tax Assets | ||||||||||||||
As of December 31, 2013, the Company had federal net operating losses of $1.5 million available for future deduction from taxable income derived in the United States. The Company’s United Kingdom subsidiary has non-capital losses of approximately $11.7 million available for future deductions from taxable income derived in the United Kingdom, which do not expire. The potential benefit of net operating loss carryforwards has not been recognized in the combined financial statements since the Company cannot determine that it is more likely than not that such benefit will be utilized in future years. The tax years 2006 through 2012 remain open to examination by federal authorities and other jurisdictions in which the Company operates. The components of the net deferred tax asset and the amount of the valuation allowance are as follows: (in thousands) | ||||||||||||||
31-Dec | 30-Jun | |||||||||||||
2013 | 2012 | 2012 | ||||||||||||
Deferred tax assets | ||||||||||||||
Net operating loss carryforwards – United States | $ | 508 | $ - | $ - | ||||||||||
Net operating loss carryforwards – International | 994 | 853 | 674 | |||||||||||
Valuation allowance | (1,502 | ) | (853) | (674) | ||||||||||
Net deferred tax assets | $ | - | $ - | $ - | ||||||||||
The increase in the valuation allowance was $141,000 for the year ended December 31, 2013, $179,000 for the six months ended December 31, 2012, and $674,000 for year ended June 30, 2012. | ||||||||||||||
A reconciliation of the Company’s effective tax income tax on income computed at the federal statutory rates to income tax expense is as follows: | ||||||||||||||
December 31, | June 30, | |||||||||||||
2013 | 2012 | 2012 | ||||||||||||
U.S. Federal statutory rates on net income (loss) | $ | (202 | ) | $ | 571 | $ | (1,614 | ) | ||||||
Effect of foreign statutory rate differences | (63 | ) | (230 | ) | 641 | |||||||||
Permanent differences | 124 | (520 | ) | 299 | ||||||||||
Change in valuation allowance | 141 | 179 | 674 | |||||||||||
$ | - | $ | - | $ | - | |||||||||
12_Segment_Information
12. Segment Information | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Segment Reporting [Abstract] | ||||||||||
13. Segment Information | The Company has one business segment, which is the development of software for licensing to the telecommunications industry. | |||||||||
The Company's revenues were generated in the following geographic areas: | ||||||||||
Year ended | Six months ended | Year ended | ||||||||
31-Dec-13 | 31-Dec-12 | 30-Jun-12 | ||||||||
Europe | $3.7 million | $5.6 million | $0.7 million | |||||||
Asia | $4.7 million | $1.4 million | $1.9 million | |||||||
Russia | $0.4 million | - | - | |||||||
USA | $0.3 million | - | - | |||||||
13_Subsequent_Events
13. Subsequent Events | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events [Abstract] | |
14. Subsequent Events | Subsequent to December 31, 2013 the Company issued, pursuant to the 2013 Equity Incentive Plan, options to acquire 500,000 shares of common stock. The options become fully vested on January 15, 2017 and are exercisable, at an exercise price of $4.54 per common share, to January 15, 2024. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||
Summary Of Significant Accounting Policies Policies | ||||||
Basis of Accounting and Presentation | These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States | These consolidated and combined financial statements have presented in conformity with accounting principles generally accepted in the United States. The Company changed its year end to December 31 and is presenting six-months operations for the period ended December 31, 2012. | ||||
The reporting currency of the Company is the United States dollar. Assets and liabilities of operations other than those denominated in U.S. dollars, primarily in Switzerland, the United Kingdom and China, are translated into United States dollars at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. | ||||||
Transaction gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the functional currency are included in general and administrative expenses. | ||||||
Reporting Currency and Currency Translation | The reporting currency of the Company is the United States dollar. Assets and liabilities of operations other than those denominated in U.S. dollars, primarily in Switzerland, the United Kingdom and China, are translated into United States dollars at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. | |||||
Transaction gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the functional currency are included in general and administrative expenses. | ||||||
Cash | Cash and cash equivalents include bank demand deposit accounts and highly liquid short term investments with maturities of three months or less when purchased. Cash consists of checking accounts held at financial institutions in the United Kingdom, Switzerland, Ireland, Singapore, Hong Kong and China which, at times, balances may exceed insured limits. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal. | Cash and cash equivalents include bank demand deposit accounts and highly liquid short term investments with maturities of three months or less when purchased. Cash consists of checking accounts held at financial institutions in the United Kingdom, Switzerland, Ireland, Singapore, Hong Kong and China which, at times, balances may exceed insured limits. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal. | ||||
Accounts Receivable | Accounts receivable result primarily from sale of software and licenses to customers and are recorded at their principal amounts. Receivables are considered past due once they exceed the terms of the sales transaction. When necessary, the Company provides an allowance for doubtful accounts that is based on a review of outstanding receivables, historical collection information, and current economic conditions. There was an allowance of $342,000 and $212,000 for doubtful accounts at September 30, 2014 and December 31, 2013, respectively. Receivables are generally unsecured. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. As at September 30, 2014 and December 31, 2013, two customers accounted for 22% and two customers accounted for 26%, respectively, of the accounts receivable balance. | Accounts receivable result primarily from sale of software licenses to customers and are recorded at their principal amounts as payments become due. Receivables are considered past due once they exceed the terms of the sales transaction. When necessary, the Company provides an allowance for doubtful accounts that is based on a review of outstanding receivables, historical collection information, and current economic conditions. There was an allowance of $212,000 and $218,000 for doubtful accounts at December 31, 2013 and December 31, 2012 respectively. Receivables are generally unsecured. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered. The Company does not have off-balance sheet credit exposure related to its customers. One customer accounted for 15 percent of accounts receivable as of December 31, 2013. Two customers accounted for 26 percent of revenue for the year ended December 31, 2013. | ||||
Property and Equipment | Property and equipment is primarily comprised of leasehold property improvements, motor vehicles and equipment that are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: motor vehicles – 5 years, equipment – between 3 and 5 years, leasehold property improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. | Property and equipment is primarily comprised of leasehold property improvements, motor vehicles and equipment that are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: motor vehicles – 5 years, equipment – between 3 and 5 years and leasehold property improvements, over the lesser of the estimated remaining useful life of the asset or the remaining term of the lease. | ||||
Repairs and maintenance are charged to expense as incurred. Expenditures that substantially increase the useful lives of existing assets are capitalized. | Repairs and maintenance are charged to expense as incurred. Expenditures that substantially increase the useful lives of existing assets are capitalized. | |||||
Fair Value Measurements | Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable: | Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable: | ||||
Level 1 – Quoted prices in active markets for identical assets or liabilities. | Level 1 – Quoted prices in active markets for identical assets or liabilities. | |||||
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||
Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities. | Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities. | |||||
Intangible Assets | Intangible assets include software development costs and customer lists and are amortized on a straight-line basis over the estimated useful lives of five years for customer lists and ten years for software development. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company. | Intangible assets include software development costs and customer relationships. Customer relationships are amortized on a straight-line basis over their estimated useful lives of five years. Amortization of capitalized software development costs is computed using the greater of (a) the ratio of the product’s current gross revenues to the total of current and expected gross revenues or (b) the straight-line method, computed by dividing the remaining unamortized cost by the estimated economic life of the product. The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life. | ||||
The Company expenses software development costs as incurred until technological feasibility has been established, at which time those costs are capitalized until the product in available for general release to customers. Judgement is required in determining when technological feasibility of a product is established. The Company has determined that after technological feasibility for software products is reached, the Company continues to address all high risk development issues through coding and testing prior to the release of the products to customers. The amortization of these costs is included in cost of revenue over the estimated life of the products. | The Company expenses all costs related to the development of software as incurred, other than those incurred after the achievement of technological feasibility during the application development stage. The Company expenses software development costs as incurred until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that after technological feasibility for software products is reached, the Company continues to address all high-risk development issues through coding and testing prior to the release of the products to customers. The amortization of these costs is included in cost of revenue over the estimated life of the products. During the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012, software development costs of $1,211,000, $486,000 and $3,466,000, respectively, have been capitalized. | |||||
During the nine months ended September 30, 2014 and 2013 software development costs of $874,000 and $831,000, respectively, have been capitalized. | ||||||
Impairment of Long-Lived Assets | The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. During the nine months ended September 30, 2014 and 2013 the Company identified no impairment losses related to the Company’s long-lived assets. | The Company evaluates the recoverability of its property and equipment and other long-lived assets including capitalized software development costs and customer relationships whenever events or changes in circumstances indicate impairment may have occurred. An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate. Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets. During the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012, the Company identified no impairment losses related to the Company’s long-lived assets. | ||||
Revenue Recognition | The Company recognizes revenue when it is realized or realizable and earned. The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer and that delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured. | The Company recognizes revenue when it is realized or realizable and earned. The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer and that delivery has occurred or services have been rendered, the price is fixed and determinable, and collectability is reasonably assured. | ||||
● | Software and licenses – revenue from sales of perpetual licenses to customers when payments are fixed is recognized at the inception of the arrangement, unless the payment term exceeds one year and then only if the presumption that the license fee is not fixed or determinable can be overcome, presuming all other relevant revenue recognition criteria are met. If the presumption cannot be overcome, revenue is recognized as payment from the customer becomes due. Revenue from sales of perpetual licenses are payable over a period exceeding a year, and those payments are variable based upon customer usage are recognized as payments from customers become due. | |||||
● | Software licenses – revenue from sales of perpetual licenses to customers when payments for the licenses are fixed is recognized at the inception of the arrangement, unless the payment term exceeds one year and then only if the presumption that the license fee is not fixed or determinable can be overcome, presuming all other relevant revenue recognition criteria are met. If the presumption cannot be overcome, revenue is recognized as payments from the customer become due. Revenue from sales of perpetual licenses when payments for the licenses are payable over a period exceeding a year, and those payments are variable based on customer usage, are recognized as payments from the customer become due. | |||||
● | Revenues for user licenses purchased by customers are recognized when the user license is delivered. | ● | Revenues for user licenses purchased by customers is recognized when the user license is delivered. | |||
● | Revenues for maintenance services are recognized over the period of delivery of the services. | ● | Revenues for maintenance services are recognized over the period of delivery of the services. | |||
We enter into arrangements in which a customer purchases a combination of software licenses, maintenance services and post-contract customer support (“PCS”). As a result, judgment is sometimes required to determine the appropriate accounting, including how the price should be allocated among the deliverable elements if there are multiple elements. PCS may include rights to upgrades, when and if available, support, updates and enhancements. When vendor specific objective evidence (“VSOE”) of fair value exists for all elements in a multiple element arrangement, revenue is allocated to each element based on the relative fair value of each of the elements. VSOE of fair value is established by the price charged when the same element is sold separately. Accordingly, the judgments involved in assessing the fair values of various elements of an agreement can impact the recognition of revenue in each period. Changes in the allocation of the sales price between deliverables might impact the timing of revenue recognition, but would not change the total revenue recognized on the contract. When elements such as software and services are contained in a single arrangement, or in related arrangements with the same customer, we allocate revenue to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. In the absence of fair value for a delivered element, revenue is first allocated to the fair value of the undelivered elements and then allocated to the residual delivered elements. In the absence of fair value for an undelivered element, the arrangement is accounted for as a single unit of accounting, resulting in a delay of revenue recognition for the delivered elements until the undelivered elements are fulfilled. No sales arrangements to date include undelivered elements for which VSOE does not exist. | The Company enters into arrangements under which a customer purchases a combination of software licenses, maintenance services and post-contract customer support (“PCS”). As a result, judgment is sometimes required to determine the appropriate accounting, including how the price should be allocated among the deliverable elements if there are multiple elements. PCS may include rights to upgrades, when and if available, support, updates and enhancements. When vendor specific objective evidence (“VSOE”) of fair value exists for all elements in a multiple element arrangement, revenue is allocated to each element based on the relative fair value of each of the elements. VSOE of fair value is established by the price charged when the same element is sold separately. Accordingly, the judgments involved in assessing the fair values of various elements of an agreement can impact the recognition of revenue in each period. Changes in the allocation of the sales price between deliverables might impact the timing of revenue recognition, but would not change the total revenue recognized on the contract. When elements such as software and services are contained in a single arrangement, or in related arrangements with the same customer, revenue is allocated to each element based on its relative fair value, provided that such element meets the criteria for treatment as a separate unit of accounting. In the absence of fair value for a delivered element, revenue is first allocated to the fair value of the undelivered elements and then allocated to the residual delivered elements. In the absence of fair value for an undelivered element, the arrangement is accounted for as a single unit of accounting, resulting in a delay of revenue recognition for the delivered elements until the undelivered elements are fulfilled. No sales arrangements to date include undelivered elements for which VSOE does not exist. | |||||
For purposes of revenue recognition for perpetual licenses, the Company considers payment terms exceeding one year as a presumption that the fee in the transaction is not fixed and determinable. This presumption however, may be overcome if persuasive evidence demonstrates that the Company has a business practice of extending payment terms and has been successful in collecting under the original terms, without providing any concessions. In doing so, the Company considers if the arrangement is sufficiently similar to historical arrangements in terms of similar customers and products is assessing whether there is evidence of a history of successful collection. | For purposes of revenue recognition for perpetual licenses, the Company considers payment terms exceeding one year as a presumption that the fee in the transaction is not fixed or determinable. This presumption however, may be overcome if persuasive evidence demonstrates that the Company has a business practice of extending payment terms and has been successful in collecting under the original terms, without providing any concessions. In doing so, the Company considers if the arrangement is sufficiently similar to historical arrangements in terms of similar customers and products is assessing whether there is evidence of a history of successful collection. | |||||
In order to determine if the company’s historical experience is based on sufficiently similar arrangements, the Company considers the various factors including the types of customers and products, product life cycle, elements included in the arrangement, length of payment terms and economics of license arrangement. | In order to determine the Company’s historical experience is based on sufficiently similar arrangements, the Company considers the various factor including the types of customers and products, product life cycle, elements included in the arrangement, length of payment terms and economics of license arrangement. | |||||
If the presumption cannot be overcome due to a lack of such evidence, revenue is recognized as payments become due, assuming all other revenue recognition criteria has been met. | If the presumption cannot be overcome due to a lack of such evidence, revenue is recognized as payments become due, assuming all other revenue recognition criteria has been met. Through December 31, 2013, the Company had no sales contracts for which revenue had been recognized since inception of the arrangements. | |||||
Leases | Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. | |||||
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. | ||||||
Assets held under finance leases are recognized as assets of the Company at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. | ||||||
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. | ||||||
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. | ||||||
Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. | ||||||
Advertising Expenses | It is the Company’s policy to expense advertising costs as incurred. No advertising costs were incurred during the three and nine months ended September 30, 2014 and 2013. | It is the Company’s policy to expense advertising costs as incurred. No advertising costs were incurred during each of the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012. | ||||
Research and Development Expenses | Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new products, significant enhancements to existing products, and the portion of costs of development of internal-use software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization. The Company incurred no research and development costs in the three and nine months ended September 30, 2014 and 2013. | Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new products, significant enhancements to existing products, and the portion of costs of development of software required to be expensed. Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization. The Company incurred no research and development costs in the year ended December 31, 2013, the six months ended December 31, 2012, and the year ended June 30, 2012, respectively. | ||||
Income Taxes | Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance. | Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled. Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction. The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized. The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence). The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance. | ||||
The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively. | The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively. | |||||
Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. | Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized. | |||||
Net Loss per Share | For the quarter ended September 30, 2013, there were no potential issuable shares included in the diluted earnings per share calculation as the conversion price of those instruments was all out-of-the-money. For the nine months period ended September 30, 2013, potential issuable shares were not included in the computation of diluted earnings per share under the treasury stock method because their effect would be anti-dilutive due to net losses incurred. For the three and nine months ended September 30, 2014, options, warrants and convertible debt were not included in the computation of diluted earnings per share because their effect would be anti-dilutive due to net losses incurred under the treasury stock method. | Basic earnings per share of common stock is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common and potential common shares outstanding during the period, which includes the additional dilution related to conversion of outstanding stock options and warrants computed under the treasury stock method. | ||||
Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations. (in thousands) | ||||||
31-Dec | 30-Jun | |||||
2013 | 2012 | 2012 | ||||
Basic | 31,661 | 27,331 | 22,695 | |||
Incremental shares under stock compensation plans | ||||||
95 | 1,937 | 1,528 | ||||
Fully Diluted | 31,756 | 29,268 | 24,223 | |||
Accumulated Other Comprehensive Income (Loss) | Other comprehensive income (loss), as defined, includes net income, foreign currency translation adjustment, and all changes in equity (net assets) during a period from non-owner sources. To date, the Company has not had any significant transactions that are required to be reported in other comprehensive income (loss), except for foreign currency translation adjustments. | Other comprehensive income (loss), as defined, includes net income, foreign currency translation adjustment, and all changes in equity (net assets) during a period from non-owner sources. To date, the Company has not had any significant transactions that are required to be reported in other comprehensive income (loss), except for foreign currency translation adjustments. | ||||
Use of Estimates | The preparation of consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, determining fair values of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred tax assets, allowances for doubtful accounts, and potential income tax assessments and other contingencies. The Company bases its estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions. | |||||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (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 consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, determining fair values of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred tax assets, allowances for doubtful accounts, and potential income tax assessments and other contingencies. The Company bases its estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions. | ||||||
Financial Instruments | The Company has the following financial instruments: cash, amounts due to related parties and long-term debt. The carrying value of these financial instruments approximates their fair value due to their liquidity or their short-term nature valued consistent with the use of level 2 inputs. The fair value of amounts due to related parties is not determinable. | The Company has the following financial instruments: cash, amounts due to related parties, and long-term debt. The carrying value of cash and long-term debt approximates their fair value due to their liquidity or their short-term nature valued consistent with the use of level 2 inputs. The fair value of amounts due to related parties is not determinable. | ||||
Share-Based Compensation | The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures. | The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures. | ||||
Recently Issued Accounting Standards | In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09 – Revenue From Contracts with Customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This ASU will be effective for us in our first quarter of 2018. Early adoption is not permitted. The ASU allows for either full retrospective or modified retrospective adoption. The Company is evaluating the transaction method that will be elected and the potential effects of the adoption of this ASU on its financial statements. |
2a_Restatement_of_Financial_St1
2a. Restatement of Financial Statements (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
A. Restatement Of Financial Statements Tables | |||||||||||||
Schedule of prior period restatements | |||||||||||||
The consolidated financial statements have been restated as follows. The errors had no impact on the Company's consolidated net cash flows from investing and financing activities. The Company has also reclassified amortization of software development costs from the prior presentation as operating expenses to cost of revenue. | |||||||||||||
Consolidated Balance Sheet | |||||||||||||
(in thousands) | |||||||||||||
As of December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Assets | |||||||||||||
Accounts receivable, current portion | $ | 5,899 | (4,922 | ) | $ | 977 | |||||||
Total current assets | 6,734 | (4,922 | ) | 1,812 | |||||||||
Accounts receivable, net of current portion | 26,263 | (26,263 | ) | - | |||||||||
Total assets | $ | 45,676 | (31,185 | ) | $ | 14,491 | |||||||
Liabilities and Stockholders' Equity | |||||||||||||
Current portion of deferred revenue | $ | 6,000 | (6,000 | ) | $ | - | |||||||
Incom Taxes | 1,332 | (1,238 | ) | 94 | |||||||||
Total current liabilities | 12,114 | (7,240 | ) | 4,874 | |||||||||
Deferred revenue | 16,000 | (16,000 | ) | - | |||||||||
Total liabilities | 28,868 | (23,240 | ) | 5,628 | |||||||||
Accumulated deficit | (4,780 | ) | (7,945 | ) | (12,725 | ) | |||||||
Total stockholders' equity | 16,808 | (7,945 | ) | 8,863 | |||||||||
Total liabilities and stockholders' equity | $ | 45,676 | (31,185 | ) | $ | 14,491 | |||||||
Consolidated Statements of Operations | |||||||||||||
(in thousands) | |||||||||||||
Six Months Ended December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Revenue | $ | 11,709 | (4,750 | ) | $ | 6,959 | |||||||
Cost of revenue | 121 | 873 | 994 | ||||||||||
Gross margin | 11,588 | 5,623 | 5,965 | ||||||||||
Expenses | 4,968 | (872 | ) | 4,096 | |||||||||
Income (loss) from operations | 6,620 | (4,751 | ) | 1,869 | |||||||||
Other income and expense | (70 | ) | - | (70 | ) | ||||||||
Income (loss) from continuing operations before income taxes | 6,550 | (4,751 | ) | 1,799 | |||||||||
Income taxes | 1,169 | (1,169 | ) | - | |||||||||
Income (loss) from continuing operations | 5,381 | (3,582 | ) | 1,799 | |||||||||
Loss from discontinued operations | (121 | ) | - | (121 | ) | ||||||||
Net income (loss) for the period | $ | 5,260 | (3,582 | ) | $ | 1,678 | |||||||
Earning per share: | |||||||||||||
Basic | $ | - | $ | 0.06 | |||||||||
Diluted | $ | - | $ | 0.05 | |||||||||
Consolidated Statements of Comprehensive Income | |||||||||||||
(in thousands) | |||||||||||||
Six months ended December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Net income | $ | 5,260 | $ | (3,582 | ) | $ | 1,678 | ||||||
Comprehensive income | 5,715 | (3,582 | ) | 2,133 | |||||||||
Consolidated Statements of Cash Flows | |||||||||||||
(in thousands) | |||||||||||||
Six months ended December 31, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Cash provided by (used in) operating activities: | |||||||||||||
Operating activities | |||||||||||||
Net income | $ | 5,260 | (3,582 | ) | 1,678 | ||||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | (8,395 | ) | 8,750 | 355 | |||||||||
Deferred revenue | 4,000 | (4,000 | ) | - | |||||||||
Income Taxes | 1,169 | (1,169 | ) | - | |||||||||
Net cash provided by (used in) operating activities | $ | (833 | ) | - | (833 | ) | |||||||
Consolidated Balance Sheet | |||||||||||||
(in thousands) | |||||||||||||
As of June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Assets | |||||||||||||
Accounts receivable, current portion | $ | 953 | 380 | $ | 1,333 | ||||||||
Total current assets | 1,074 | 380 | 1,454 | ||||||||||
Accounts receivable, net of current portion | 22,814 | (22,814 | ) | 0 | |||||||||
Total assets | $ | 36,549 | (22,434 | ) | $ | 14,115 | |||||||
Liabilities and Stockholders' Equity | |||||||||||||
Current portion of deferred revenue | $ | 4,600 | (4,600 | ) | $ | 0 | |||||||
Income taxes payable | 163 | (69 | ) | 94 | |||||||||
Total current liabilities | 12,988 | (4,669 | ) | 8,319 | |||||||||
Deferred revenue | 13,400 | (13,400 | ) | 0 | |||||||||
Total liabilities | 26,983 | (18,069 | ) | 8,619 | |||||||||
Accumulated deficit | (10,040 | ) | (4,365 | ) | (14,405 | ) | |||||||
Total stockholders' equity | 9,566 | (4,365 | ) | 5,201 | |||||||||
Total liabilities and stockholders' equity | $ | 36,549 | (22,434 | ) | $ | 14,115 | |||||||
Consolidated Statements of Operations | |||||||||||||
(in thousands) | |||||||||||||
Year Ended June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Revenue | $ | 5,222 | (2,610 | ) | $ | 2,612 | |||||||
Cost of revenue | 80 | 1,655 | 1,735 | ||||||||||
Gross margin | 5,142 | (4,265 | ) | 877 | |||||||||
Expenses | 7,109 | (1,655 | ) | 5,454 | |||||||||
Income (loss) from operations | (1,967 | ) | (2,610 | ) | (4,577 | ) | |||||||
Other income and expense | (169 | ) | - | (169 | ) | ||||||||
Income (loss) from income taxes | (2,205 | ) | (2,541 | ) | (4,746 | ) | |||||||
Income taxes | 69 | (69 | ) | - | |||||||||
Net income (loss) | $ | (2,205 | ) | (2,541 | ) | $ | (4,746 | ) | |||||
Earning per share: | |||||||||||||
Basic | $ | - | $ | (0.21 | ) | ||||||||
Diluted | $ | - | $ | (0.20 | ) | ||||||||
Consolidated Statements of Comprehensive Income | |||||||||||||
(in thousands) | |||||||||||||
Year ended June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Net loss | $ | (2,205 | ) | (2,541 | ) | $ | (4,746 | ) | |||||
Comprehensive loss | (2,205 | ) | (2,541 | ) | (4,746 | ) | |||||||
Consolidated Statements of Cash Flows | |||||||||||||
(in thousands) | |||||||||||||
Year ended June 30, 2012 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Cash provided by (used in) operating activities: | |||||||||||||
Operating activities | |||||||||||||
Net income (loss) | $ | (2,205 | ) | (2,541 | ) | (4,746 | ) | ||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | (20,734 | ) | 19,010 | (1,724 | ) | ||||||||
Deferred revenue | 16,400 | (16,400 | ) | - | |||||||||
Income taxes | (22 | ) | (69 | (91 | ) | ||||||||
Net cash provided by (used in) operating activities | $ | (2,895 | ) | - | (2,895 | ) | |||||||
Consolidated Balance Sheet | |||||||||||||
(in thousands) | |||||||||||||
As of June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Assets | |||||||||||||
Accounts receivable, current portion | $ | 212 | (29 | ) | $ | 183 | |||||||
Total current assets | 576 | (29 | ) | 547 | |||||||||
Accounts receivable, net of current portion | 2,821 | (2,821 | ) | 0 | |||||||||
Total assets | $ | 14,383 | (2,850 | ) | $ | 11,533 | |||||||
Liabilities and Stockholders' Equity | |||||||||||||
Deferred customer credit | $ | 0 | 575 | $ | 575 | ||||||||
Current portion of deferred revenue | 400 | (400 | ) | 0 | |||||||||
Total current liabilities | 7,033 | 125 | 7,158 | ||||||||||
Deferred revenue | 1,200 | (1,200 | ) | 0 | |||||||||
Total liabilities | 8,768 | (1,025 | ) | 7,743 | |||||||||
Accumulated deficit | (7,835 | ) | (1,825 | ) | (9,660 | ) | |||||||
Total stockholders' equity | 5,615 | (1,825 | ) | 3,790 | |||||||||
Total liabilities and stockholders' equity | $ | 14,383 | (2,850 | ) | $ | 11,533 | |||||||
Consolidated Statements of Operations | |||||||||||||
(in thousands) | |||||||||||||
Year Ended June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Revenue | $ | 2,726 | (1,825 | ) | $ | 901 | |||||||
Cost of revenue | 207 | 1,307 | 1,514 | ||||||||||
Gross margin | 2,519 | (3,132 | ) | (613 | ) | ||||||||
Expenses | 3,539 | (1,307 | ) | 2,232 | |||||||||
Income (loss) from operations | (1,020 | ) | (1,825 | ) | (2,845 | ) | |||||||
Other income and expense | 301 | 0 | 301 | ||||||||||
Income (loss) from income taxes | (403 | ) | (1,825 | ) | (2,228 | ) | |||||||
Income taxes | |||||||||||||
Net income (loss) | $ | (403 | ) | (1,825 | ) | $ | (2,228 | ) | |||||
Consolidated Statements of Comprehensive Income | |||||||||||||
(in thousands) | |||||||||||||
Year Ended June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Net loss | $ | (403 | ) | (1,825 | ) | $ | (2,228 | ) | |||||
Year ended June 30, 2011 | |||||||||||||
As previously | |||||||||||||
Reported | Adjustments | As Restated | |||||||||||
Cash provided by (used in) operating activities: | |||||||||||||
Operating activites | |||||||||||||
Net income (loss) | $ | (403 | ) | (1,825 | ) | $ | (2,228 | ) | |||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | 2,675 | 2,850 | 5,525 | ||||||||||
Deferred customer credit | 0 | 575 | 575 | ||||||||||
Deferred revenue | 1,600 | (1,600 | ) | 0 | |||||||||
Net cash provided by (used in) operating activities | $ | 5,363 | 0 | $ | 5,363 |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended | |||
Dec. 31, 2013 | ||||
Summary Of Significant Accounting Policies Tables | ||||
Net Income per Share | 31-Dec | 30-Jun | ||
2013 | 2012 | 2012 | ||
Basic | 31,661 | 27,331 | 22,695 | |
Incremental shares under stock compensation plans | ||||
95 | 1,937 | 1,528 | ||
Fully Diluted | 31,756 | 29,268 | 24,223 |
4_Property_and_Equipment_net_T
4. Property and Equipment, net (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||
Property And Equipment Net Tables | ||||||||||||||
Property and equipment | September 30 | 31-Dec | 31-Dec | |||||||||||
2014 | 2013 | |||||||||||||
Leasehold improvements | $ | 265 | $ | 265 | 2013 | 2012 | ||||||||
Motor vehicle | 120 | 120 | ||||||||||||
Equipment | 351 | 310 | ||||||||||||
736 | 695 | Leasehold improvements | $ 265 | $ 265 | ||||||||||
Less accumulated depreciation | (497 | ) | (380 | ) | Motor vehicle | 120 | 120 | |||||||
Equipment | 310 | 177 | ||||||||||||
Property and equipment, net | $ | 239 | $ | 315 | 695 | 562 | ||||||||
Less accumulated depreciation | -380 | ( 212 ) | ||||||||||||
Property and equipment, net | $ 315 | $ 350 |
5_Intangible_Assets_Tables
5. Intangible Assets (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||
Intangible Assets Tables | ||||||||||||||
Intangible Assets | 30-Sep | 31-Dec | ||||||||||||
2014 | 2013 | Intangible assets consist primarily of software development costs and customer relationships (in thousands) | ||||||||||||
Horizon software | $ | 17,332 | $ | 17,599 | ||||||||||
ZTEsoft Telecom software | 494 | 497 | 31-Dec | |||||||||||
Contractual relationships | 885 | 885 | ||||||||||||
18,711 | 18,981 | 2013 | 2012 | |||||||||||
Less accumulated amortization | (7,196 | ) | (6,221 | ) | ||||||||||
Capitalized software development costs | ||||||||||||||
Intangible assets, net | $ | 11,515 | $ | 12,760 | Horizon software | $ 17,599 | $ 16,085 | |||||||
ZTEsoft Telecom software | 497 | - | ||||||||||||
Customer relationships | 885 | 885 | ||||||||||||
18,981 | 16,970 | |||||||||||||
Less accumulated amortization | -6,221 | -4,641 | ||||||||||||
Intangible assets, net | $12,760 | $12,329 | ||||||||||||
6_Longterm_Debt_Tables
6. Long-term Debt (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||
Long-Term Debt Tables | ||||||||||||||
Long - term liabilities | September 30 | 31-Dec | 31-Dec | |||||||||||
2014 | 2013 | |||||||||||||
Vehicle loan | $ | 39 | $ | 51 | 2013 | 2012 | ||||||||
Equipment loan | 18 | 27 | ||||||||||||
Office term loan | 144 | 171 | ||||||||||||
201 | 249 | Horizon software | $ 17,599 | $ 16,085 | ||||||||||
Less current portion | (72 | ) | (65 | ) | ZTEsoft Telecom software | 497 | - | |||||||
Contractual relationships | 885 | 885 | ||||||||||||
Balance | $ | 129 | $ | 184 | 18,981 | 16,970 | ||||||||
Less accumulated amortization | -6,221 | -4,641 | ||||||||||||
Intangible assets, net | $12,760 | $12,329 |
7_RelatedParty_Transactions_Ta
7. Related-Party Transactions (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||
Related-Party Transactions Tables | ||||||||||||||
Related-Party Transactions | 30-Sep | 31-Dec | 31-Dec | 31-Dec | ||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||
Loans due to stockholders | $ | 3,500 | $ | 3,500 | ||||||||||
Loans due to stockholders | $ 3,500 | $ 3,500 |
8_Share_Capital_Tables
8. Share Capital (Tables) | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2014 | Dec. 31, 2013 | ||||||||||
Share Capital Tables | |||||||||||
Stock Purchase Warrants | Number of Warrants | Exercise Price | Expiry | Number of Warrants | Exercise Price | Expiry | |||||
116,760 | $ | 0.86 | no expiry date | ||||||||
1,209,675 | 4.25 | Jan-19 | 116,760 | $0.86 | no expiry date | ||||||
100,000 | 4 | Jul-16 | 403,226 | 5.94 | Jan-18 |
9_StockBased_Compensation_Tabl
9. Stock-Based Compensation (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||
Stock-Based Compensation Tables | ||||||||||||||||||||||||||||
Summary of the Company's stock options | A summary of the Company’s 2013 Equity Incentive Plan as of June 30, 2014, is as follows: | Number of | Weighted Average | |||||||||||||||||||||||||
Options | Exercise Price | |||||||||||||||||||||||||||
Number of | Weighted Average | |||||||||||||||||||||||||||
Options | Exercise Price | Outstanding at June 30, 2012 | 360,221 | $0.77 | ||||||||||||||||||||||||
Outstanding at December 31, 2013 | - | $ | Options issued | 291,900 | 0.53 | |||||||||||||||||||||||
Options issued | 500,000 | 4.54 | Outstanding at December 31, 2012 | 652,121 | 0.66 | |||||||||||||||||||||||
Outstanding at September 30, 2014 | 500,000 | 4.54 | Options forfeited | 67,471 | 1.79 | |||||||||||||||||||||||
Outstanding at December 31, 2013 | 584,650 | $0.53 | ||||||||||||||||||||||||||
A summary of the Company’s other stock options as of September 30, 2014, is as follows: | ||||||||||||||||||||||||||||
Number of | Weighted Average | |||||||||||||||||||||||||||
Options | Exercise Price | |||||||||||||||||||||||||||
Outstanding at December 31, 2013 | 584,650 | $ | 0.53 | |||||||||||||||||||||||||
Options forfeited | - | - | ||||||||||||||||||||||||||
Outstanding at September 30, 2014 | 584,650 | $ | 0.53 | |||||||||||||||||||||||||
Stock options outstanding | Number | Average | Number | Intrinsic | Number | Average | Number | Intrinsic | ||||||||||||||||||||
Outstanding | Remaining | Exercisable | Value | Outstanding | Remaining | Exercisable | Value | |||||||||||||||||||||
at | Contractual | at | at | at | Contractual | at | at | |||||||||||||||||||||
September 30, | Life | September 30, | September 30, | December 31, | Life | December 31, | December 31, | |||||||||||||||||||||
Exercise Price | 2014 | (Years) | 2014 | 2014 | Exercise Price | 2013 | (Years) | 2013 | 2013 | |||||||||||||||||||
$ | 0.51 | 850 | 1.08 | 850 | $ | 1,666 | $0.51 | 850 | 1.83 | 850 | $ 3,264 | |||||||||||||||||
0.53 | 291,900 | 5.75 | 291,900 | 566,286 | 0.53 | 291,900 | 6.5 | 291,900 | 1,115,058 | |||||||||||||||||||
0.53 | 291,900 | 8.25 | - | - | 0.53 | 291,900 | 9 | - | - | |||||||||||||||||||
4.54 | 500,000 | 9.25 | - | - |
10_Commitments_and_Contingenci1
10. Commitments and Contingencies (Tables) | 9 Months Ended | 12 Months Ended | ||||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | |||||||||||||||
Commitments And Contingencies Tables | ||||||||||||||||
Lease Commitments | Operating | Long-term | Operating | Long-term | ||||||||||||
leases | Financing | leases | Financing | |||||||||||||
2014 | $ | 64,000 | $ | 18,000 | ||||||||||||
2015 | 75,000 | 87,000 | 2014 | $ | 123,000 | $ | 65,000 | |||||||||
2016 | 75,000 | 48,000 | 2015 | 75,000 | 87,000 | |||||||||||
2017 | 75,000 | 45,000 | 2016 | 75,000 | 48,000 | |||||||||||
2018 | - | 4,000 | 2017 | 75,000 | 45,000 | |||||||||||
2018 | - | 4,000 | ||||||||||||||
11_Income_Taxes_Tables
11. Income Taxes (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2013 | ||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||
Income (loss) before income taxes | ||||||||||||||
31-Dec | 30-Jun | |||||||||||||
2013 | 2012 | 2012 | ||||||||||||
United States | $ | (1,164 | ) | $ | (22 | ) | $ | - | ||||||
International | 466 | 1,821 | (4,746) | |||||||||||
Total | $ | (698 | ) | $ | 1,799 | $ (4,746) | ||||||||
Deferred Tax Assets | ||||||||||||||
31-Dec | 30-Jun | |||||||||||||
2013 | 2012 | 2012 | ||||||||||||
Deferred tax assets | ||||||||||||||
Net operating loss carryforwards – United States | $ | 508 | $ - | $ - | ||||||||||
Net operating loss carryforwards – International | 994 | 853 | 674 | |||||||||||
Valuation allowance | (1,502 | ) | (853) | (674) | ||||||||||
Net deferred tax assets | $ | - | $ - | $ - | ||||||||||
Provision for income taxes from continuing operations | ||||||||||||||
December 31, | June 30, | |||||||||||||
2013 | 2012 | 2012 | ||||||||||||
U.S. Federal statutory rates on net income (loss) | $ | (202 | ) | $ | 571 | $ | (1,614 | ) | ||||||
Effect of foreign statutory rate differences | (63 | ) | (230 | ) | 641 | |||||||||
Permanent differences | 124 | (520 | ) | 299 | ||||||||||
Change in valuation allowance | 141 | 179 | 674 | |||||||||||
$ | - | $ | - | $ | - | |||||||||
Schedule of Effective Income Tax Rate Reconciliation | December 31, | June 30, | ||||||||||||
2013 | 2012 | 2012 | ||||||||||||
U.S. Federal statutory rates on net income (loss) | $ | (202 | ) | $ | 571 | $ | (1,614 | ) | ||||||
Effect of foreign statutory rate differences | (63 | ) | (230 | ) | 641 | |||||||||
Permanent differences | (49 | ) | (521 | ) | 333 | |||||||||
Change in valuation allowance | 313 | 180 | 640 | |||||||||||
$ | - | $ | - | $ | - |
12_Segment_Information_Tables
12. Segment Information (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2013 | ||||||||||
Segment Reporting [Abstract] | ||||||||||
Schedule of Segment Reporting Information | Year ended | Six months ended | Year ended | |||||||
31-Dec-13 | 31-Dec-12 | 30-Jun-12 | ||||||||
Europe | $3.7 million | $5.6 million | $0.7 million | |||||||
Asia | $4.7 million | $1.4 million | $1.9 million | |||||||
Russia | $0.4 million | - | - | |||||||
USA | $0.3 million | - | - | |||||||
2_Summary_of_Significant_Accou3
2. Summary of Significant Accounting Policies (Details) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2012 | Dec. 31, 2013 | Dec. 31, 2012 | |
Summary Of Significant Accounting Policies Details | |||
Basic | 22,695 | 31,661 | 27,331 |
Incremental shares under stock compensation plans | 1,528 | 95 | 1,937 |
Fully Diluted | 24,223 | 31,756 | 29,268 |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2013 |
In Thousands, unless otherwise specified | |||
Allowance doubtful accounts | $342 | $212 | |
2 Customers | |||
Percentage accounts receivable of customers | 22.00% | ||
2 Customers | |||
Percentage accounts receivable of customers | 26.00% |
4_Property_and_Equipment_net_D
4. Property and Equipment, net (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
In Thousands, unless otherwise specified | ||||
Property And Equipment Net Details | ||||
Leasehold improvements | $265 | $265 | $265 | |
Motor vehicles | 120 | 120 | 120 | |
Equipment | 351 | 310 | 177 | |
Property and equipment, gross | 736 | 695 | 562 | |
Less accumulated depreciation | -497 | -380 | -212 | |
Property and equipment, net | $239 | $315 | $350 | [1] |
[1] | Restated |
5_Intangible_Assets_Details
5. Intangible Assets (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Intangible Assets Details | |||
Horizon software | $17,332 | $17,599 | $16,085 |
ZTE software | 494 | 497 | 0 |
Contractual relationships | 885 | 885 | 885 |
Intangible assets, Gross | 18,711 | 18,981 | 16,970 |
Less accumulated amortization | -7,196 | -6,221 | -4,641 |
Intangible assets, net | $11,515 | $12,760 | $12,329 |
5_Intangible_Assets_Details_Na
5. Intangible Assets (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Intangible Assets Details Narrative | ||
Amortization expected over next five years | $1,900 | $1,900 |
6_Longterm_Debt_Details
6. Long-term Debt (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
In Thousands, unless otherwise specified | ||||
Long-Term Debt Details | ||||
Vehicle loan | $39 | $51 | $67 | |
Equipment loan | 18 | 27 | 0 | |
Office term loan | 144 | 171 | 211 | |
Total | 201 | 249 | 278 | |
Less current portion | -72 | -65 | -59 | [1] |
Balance | $129 | $184 | $219 | [1] |
[1] | Restated |
7_RelatedParty_Transactions_De
7. Related-Party Transactions (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | |||
Related-Party Transactions Details | |||
Loans due to stockholders | $3,500 | $3,500 | $3,500 |
8_Share_Capital_Details
8. Share Capital (Details) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Warrants A | ||
Number of warrants | 116,760 | 116,760 |
Exercise Price | $0.86 | $0.86 |
Expiry | No expiry date | no expiry date |
Warrants B | ||
Number of warrants | 1,209,675 | |
Exercise Price | $4.25 | |
Expiry | Jan-19 | |
Warrants C | ||
Number of warrants | 100,000 | 403,226 |
Exercise Price | $4 | $5.94 |
Expiry | Jul-16 | Jan-18 |
9_StockBased_Compensation_Deta
9. Stock-Based Compensation (Details) (USD $) | 6 Months Ended | 9 Months Ended | 12 Months Ended |
Jun. 30, 2012 | Sep. 30, 2014 | Dec. 31, 2013 | |
Number of Options | |||
Number of Options Outstanding, Beginning | 0 | ||
Number of Options Issued | 500,000 | ||
Number of Options, Forfeited | 0 | ||
Number of Options Outstanding, End | 500,000 | ||
Weighted Average Exercise Price | |||
Weighted Average Exercise Price Outstanding, Beginning | $0 | ||
Weighted Average Exercise Price Issued | $4.54 | ||
Weighted Average Exercise Price Forfeited | $0 | ||
Weighted Average Exercise Price Outstanding, Ending | $4.54 | ||
Other Stock Options | |||
Number of Options | |||
Number of Options Outstanding, Beginning | 360,221 | 584,650 | 652,121 |
Number of Options Issued | 291,900 | 0 | 67,471 |
Number of Options, Forfeited | 0 | ||
Number of Options Outstanding, End | 652,121 | 584,650 | 584,650 |
Weighted Average Exercise Price | |||
Weighted Average Exercise Price Outstanding, Beginning | $0.77 | $0.53 | $0.66 |
Weighted Average Exercise Price Issued | $0.53 | $0 | $0 |
Weighted Average Exercise Price Forfeited | $0 | $0 | $1.79 |
Weighted Average Exercise Price Outstanding, Ending | $0.66 | $0.53 | $0.53 |
9_StockBased_Compensation_Deta1
9. Stock-Based Compensation (Details 1) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Stock Option Plan 1 [Member] | ||
Exercise Price | $0.51 | $0.51 |
Number of options outstanding | 850 | 850 |
Average Contractual Life Remaining | 1 year 29 days | 1 year 9 months 29 days |
Number of options exercisable | 850 | 850 |
Intrinsic value | $1,666 | $3,264 |
Stock Option Plan 2 [Member] | ||
Exercise Price | $0.53 | $0.53 |
Number of options outstanding | 291,900 | 291,900 |
Average Contractual Life Remaining | 5 years 9 months | 6 years 9 months |
Number of options exercisable | 291,900 | 291,900 |
Intrinsic value | 566,286 | 1,115,058 |
Stock Option Plan 3 [Member] | ||
Exercise Price | $0.53 | $0.53 |
Number of options outstanding | 291,900 | 291,900 |
Average Contractual Life Remaining | 8 years 3 months | 9 years |
Number of options exercisable | 0 | 0 |
Intrinsic value | 0 | 0 |
Stock Option Plan 4 [Member] | ||
Exercise Price | $4.54 | |
Number of options outstanding | 500,000 | |
Average Contractual Life Remaining | 9 years 3 months | |
Number of options exercisable | 0 | |
Intrinsic value | $0 |
9_StockBased_Compensation_Deta2
9. Stock-Based Compensation (Details Narrative) | Dec. 31, 2013 |
Stock-Based Compensation Details Narrative | |
Common stock reserved | 584,650 |
10_Commitments_and_Contingenci2
10. Commitments and Contingencies (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Commitments And Contingencies Details | ||
2014 | $64,000 | $123,000 |
2015 | 75,000 | 75,000 |
2016 | 75,000 | 75,000 |
2017 | 75,000 | 75,000 |
2018 | 0 | 0 |
2014 | 18,000 | 65,000 |
2015 | 87,000 | 87,000 |
2016 | 48,000 | 48,000 |
2017 | 45,000 | 45,000 |
2018 | $4,000 | $4,000 |
10_Commitments_and_Contingenci3
10. Commitments and Contingencies (Details Narrative) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Commitments And Contingencies Details Narrative | ||
Rent expense | $81,000 | $166,147 |
11_Income_Taxes_Details
11. Income Taxes (Details) (USD $) | 6 Months Ended | 12 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2012 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Taxes Details | |||
United States | $0 | ($1,164) | ($22) |
International | -4,746 | 466 | 1,821 |
Total | ($4,746) | ($698) | $1,799 |
11_Income_Taxes_Details_1
11. Income Taxes (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2012 |
In Thousands, unless otherwise specified | |||
Deferred tax assets | |||
Net operating loss carryforwards - United States | $508 | $0 | $0 |
Net operating loss carryforwards - International | 994 | 853 | 674 |
Valuation allowance | -1,502 | 853 | 674 |
Net deferred tax assets | $0 | $0 | $0 |
11_Income_Taxes_Details_2
11. Income Taxes (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2012 | ||
Income Tax Disclosure [Abstract] | |||||||||||
U.S. Federal statutory rates on net income (loss) | ($1,614) | ($202) | $571 | ||||||||
Effect of foreign statutory rate differences | 641 | -63 | -230 | ||||||||
Permanent differences | 299 | 124 | -520 | ||||||||
Change in valuation allowance | 674 | 141 | 179 | ||||||||
Income taxes expense | ($54) | $0 | $0 | [1] | $0 | ($210) | $0 | $0 | $0 | $0 | [1] |
[1] | Restated |