Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Mar. 28, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Lattice INC | ' |
Entity Central Index Key | '0000350644 | ' |
Document Type | '10-K | ' |
Document Period End Date | 31-Dec-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Public Float | ' | $6,750,326 |
Entity Common Stock, Shares Outstanding | ' | 37,501,813 |
Document Fiscal Period Focus | 'FY | ' |
Document Fiscal Year Focus | '2013 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current assets: | ' | ' |
Cash and cash equivalents | $312,703 | $30,368 |
Accounts receivable | 1,897,856 | 2,420,737 |
Note receivable - current | 350,000 | 0 |
Inventories | 9,330 | 0 |
Other current assets | 73,940 | 109,698 |
Total current assets | 2,643,829 | 2,560,803 |
Property and equipment, net | 861,712 | 518,444 |
Other intangibles, net | 895,439 | 910,008 |
Note receivable - long term | 350,000 | 0 |
Other assets | 12,812 | 2,812 |
Assets to be disposed of: goodwill and Intangibles | 0 | 923,381 |
Total assets | 4,763,792 | 4,915,448 |
Current liabilities: | ' | ' |
Accounts payable | 1,075,651 | 1,854,009 |
Accrued expenses | 2,264,260 | 1,499,526 |
Customer advances | 1,023,966 | 456,930 |
Notes payable - current, net of discounts $227,251 and $19,484, respectively | 2,601,724 | 2,033,312 |
Derivative liability | 122,698 | 57,634 |
Billings in excess of costs and estimated earnings | 45,797 | 0 |
Liability to be disposed of | 0 | 225,104 |
Total current liabilities | 7,134,096 | 6,126,515 |
Long term liabilities: | ' | ' |
Long term liability to be disposed of | 0 | 56,352 |
Notes Payable - long term, net of discounts $0 and $5,158, respectively | 100,000 | 360,840 |
Deferred tax liabilities | 0 | 94,184 |
Total long term liabilities | 100,000 | 511,376 |
Total liabilities | 7,234,096 | 6,637,891 |
Shareholders' Deficit | ' | ' |
Common stock - .01 par value, 200,000,000 authorized, 38,569,714 and 33,116,509 issued and 35,304,714 and 32,313,522 outstanding respectively as of December 31, 2013 and 2012 | 353,047 | 326,166 |
Additional paid-in capital | 43,714,377 | 43,338,352 |
Accumulated deficit | -46,066,499 | -45,039,065 |
Stockholders' Equity before Treasury Stock | -1,912,208 | -1,284,480 |
Stock held in treasury, at cost | -558,096 | -558,096 |
Equity Attributable to shareowners of Lattice Incorporated | -2,470,304 | -1,842,576 |
Equity Attributable to noncontrolling interest | 0 | 120,133 |
Total liabilities and shareholders' deficit | 4,763,792 | 4,915,448 |
Series A Preferred Stock | ' | ' |
Shareholders' Deficit | ' | ' |
Preferred Stock - .01 par value | 65,758 | 68,958 |
Series B Preferred Stock | ' | ' |
Shareholders' Deficit | ' | ' |
Preferred Stock - .01 par value | 10,000 | 10,000 |
Series C Preferred Stock | ' | ' |
Shareholders' Deficit | ' | ' |
Preferred Stock - .01 par value | 5,200 | 5,200 |
Series D Preferred Stock | ' | ' |
Shareholders' Deficit | ' | ' |
Preferred Stock - .01 par value | $5,909 | $5,909 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Shareholders' equity | ' | ' |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 38,569,714 | 33,116,509 |
Common stock, shares outstanding | 35,304.71 | 32,313,522 |
Discounts on notes, current portion | $227,251 | $19,484 |
Discount on notes, noncurrent portion | $0 | $5,158 |
Series A Preferred Stock | ' | ' |
Shareholders' equity | ' | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 9,000,000 | 9,000,000 |
Preferred stock, shares issued | 6,575,815 | 6,895,815 |
Preferred stock, shares outstanding | 6,575,815 | 6,895,815 |
Series B Preferred Stock | ' | ' |
Shareholders' equity | ' | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 1,000,000 | 1,000,000 |
Preferred stock, shares outstanding | 502,160 | 502,160 |
Series C Preferred Stock | ' | ' |
Shareholders' equity | ' | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 520,000 | 520,000 |
Preferred stock, shares issued | 520,000 | 520,000 |
Preferred stock, shares outstanding | 520,000 | 520,000 |
Series D Preferred Stock | ' | ' |
Shareholders' equity | ' | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 636,400 | 636,400 |
Preferred stock, shares issued | 590,910 | 590,910 |
Preferred stock, shares outstanding | 590,910 | 590,910 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Condensed Consolidated Statements Of Operation | ' | ' |
Revenue | $8,269,834 | $7,530,216 |
Cost of Revenue | 5,460,873 | 5,094,031 |
Gross Profit | 2,808,961 | 2,436,185 |
Operating expenses: | ' | ' |
Selling, general and administrative | 2,769,176 | 2,250,457 |
Research and development | 659,178 | 659,787 |
Total operating expenses | 3,428,354 | 2,910,244 |
Loss from operations | -619,393 | -474,059 |
Other income (expense): | ' | ' |
Derivative income (expense) | -65,064 | 38,733 |
Financing fees | -53,035 | 0 |
Gain on extinguishment of debt | 29,658 | 0 |
Other income | 46,713 | 255,613 |
Interest expense | -356,915 | -298,599 |
Total other income (expense) | -398,643 | -4,253 |
Loss before taxes | -1,018,036 | -478,312 |
Income taxes | 2,000 | 0 |
Net Loss from continuing operations | -1,020,036 | -478,312 |
Net Loss from operations of discontinued component | -503,733 | -92,460 |
Gain on sale of assets discontinued component | 521,443 | 0 |
Net income (loss) from operations of discontinued component | 17,710 | -92,460 |
Net loss | -1,002,326 | -570,772 |
Reconciliation of net income (loss) to income applicable to common shareholder: | ' | ' |
Net loss | -1,002,326 | -570,772 |
Preferred stock dividend | -25,108 | -25,108 |
Loss applicable to common stockholders | ($1,027,434) | ($595,880) |
Basic Net Loss per common share - From continuing operations | ($0.03) | ($0.02) |
Basic Net Loss per common share - From Discontinued operations | $0 | $0 |
Net Loss per common share | ($0.03) | ($0.02) |
Diluted Net Loss per common share - From continuing operations | ($0.03) | ($0.02) |
Diluted Net Loss per common share - From Discontinued operations | $0 | $0 |
Net Loss per common share | ($0.03) | ($0.02) |
Weighted average shares: | ' | ' |
Basic | 33,582,936 | 30,633,941 |
Diluted | 33,582,936 | 30,633,941 |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated deficit | Treasury Stock | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $96,416 | $298,516 | $43,313,969 | ($44,443,185) | ($558,096) | ($1,292,380) |
Beginning Balance, Shares at Dec. 31, 2011 | 9,641,592 | 29,851,509 | ' | ' | 302,987 | ' |
Common stock issued for services, Shares | ' | 500,000 | ' | ' | ' | ' |
Common stock issued for services, Amount | ' | 5,000 | 35,000 | ' | ' | 40,000 |
Common stock issue for conversions of Series A Preferred Stock, Shares | -634,866 | 2,265,000 | ' | ' | ' | ' |
Common stock issue for conversions of Series A Preferred Stock, Amount | -6,349 | 22,650 | -16,301 | ' | ' | 0 |
Share-based compensation | ' | ' | 5,684 | ' | ' | 5,684 |
Dividends for Series B Preferred | ' | ' | -25,108 | ' | ' | -25,108 |
Net income (loss) | ' | ' | ' | -570,772 | ' | -570,772 |
Ending Balance, Amount at Dec. 31, 2012 | 90,067 | 326,166 | 43,338,352 | -45,039,065 | -558,096 | -1,842,576 |
Ending Balance, Shares at Dec. 31, 2012 | 9,006,726 | 32,616,509 | ' | ' | 302,987 | ' |
Common stock issued for services, Shares | ' | 578,333 | ' | ' | ' | ' |
Common stock issued for services, Amount | ' | 5,783 | 68,617 | ' | ' | 74,400 |
Common stock issue for conversions of Series A Preferred Stock, Shares | -320,000 | 1,142,848 | ' | ' | ' | ' |
Common stock issue for conversions of Series A Preferred Stock, Amount | -3,200 | 11,428 | -8,228 | ' | ' | ' |
Share-based compensation | ' | ' | 82,481 | ' | ' | 82,481 |
Dividends for Series B Preferred | ' | ' | -25,108 | ' | ' | -25,108 |
Common stock issued for financing fees, Shares | ' | 145,000 | ' | ' | ' | ' |
Common stock issued for financing fees, Amount | ' | 1,450 | 20,300 | ' | ' | 21,750 |
Common stock issued for exchange of warrants, Shares | ' | 822,024 | ' | ' | ' | ' |
Common stock issued for exchange of warrants, Amount | ' | 8,220 | -8,220 | ' | ' | 0 |
Common stock warrants issued with debt financing (1,950,000 warrants issued) | ' | ' | 221,075 | ' | ' | 221,075 |
Net income (loss) | ' | ' | ' | -1,002,326 | ' | -1,002,326 |
Ending Balance, Amount at Dec. 31, 2013 | $86,867 | $353,047 | $43,714,377 | ($46,066,499) | ($558,096) | ($2,470,304) |
Ending Balance, Shares at Dec. 31, 2013 | 8,686,726 | 35,304,714 | ' | ' | 302,987 | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flow from operating activities: | ' | ' |
Net Loss | ($1,002,326) | ($570,772) |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Operating activities discontinued operations | 48,050 | 114,504 |
Gain on disposition of discontinued Government segment assets | -521,443 | 0 |
Derivative income (expense) | 65,064 | -38,733 |
Amortization of intangible assets | 162,963 | 129,996 |
Stock issued for service | 74,400 | 40,000 |
Amortization of debt discount | 64,547 | 0 |
Gain on extinguishment of debt | -76,371 | 0 |
Financing fees | 53,035 | 0 |
Share-based compensation | 84,799 | 5,684 |
Depreciation | 263,511 | 254,522 |
(Increase) decrease in: | ' | ' |
Accounts receivable | 518,936 | 280,122 |
Other current assets | 183,581 | 15,510 |
Increase (decrease) in: | ' | ' |
Accounts payable and accrued liabilities | 43,784 | -117,083 |
Billing in excess of cost and estimated earnings | 45,797 | -50,000 |
Customer advances | 567,036 | 332,664 |
Total adjustments | 1,577,689 | 967,186 |
Net cash provided by operating activities | 575,363 | 396,414 |
Cash Used in investing activities: | ' | ' |
Purchase of equipment | -304,184 | -160,255 |
Cash received sale of discontinued operations | 231,670 | 0 |
Net cash used in investing activities | -72,514 | -160,255 |
Cash flows from financing activities: | ' | ' |
Revolving credit facility (payments) borrowings, net | -232,807 | -179,966 |
Payments on capital equipment lease | -25,371 | -21,675 |
Payments on Notes Payable - discontinued operations | -56,352 | -282,456 |
Payments on notes payable | -940,000 | -35,882 |
Proceeds from the issuance of note payable, net of discount | 1,085,000 | 175,000 |
Payments on Director Loans | -50,984 | -53,098 |
Net cash used in financing activities | -220,514 | -398,077 |
Net increase (decrease) in cash and cash equivalents | 282,335 | -161,918 |
Cash and cash equivalents - beginning of period | 30,368 | 192,286 |
Cash and cash equivalents - end of period | 312,703 | 30,368 |
Supplemental cash flow information | ' | ' |
Interest paid in cash | $311,826 | $399,796 |
1_Organization_and_summary_of_
1 - Organization and summary of significant accounting policies | 12 Months Ended | ||
Dec. 31, 2013 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||
Organization and summary of significant accounting policies | ' | ||
a) Organization | |||
Lattice Incorporated (the “Company”) was incorporated in the State of Delaware May 1973 and commenced operations in July 1977. The Company began as a provider of specialized solutions to the telecom industry. Throughout its history Lattice has adapted to the changes in this industry by reinventing itself to be more responsive and open to the dynamic pace of change experienced in the broader converged communications industry of today. Currently Lattice provides advanced solutions for several vertical markets. The greatest change in operations is in the shift from being a component manufacturer to a solution provider focused on developing applications through software on its core platform technology. To further its strategy of becoming a solutions provider, the Company acquired a majority interest in “SMEI” in February 2005. In September 2006 the Company purchased all of the issued and outstanding shares of the common stock of Lattice Government Services, Inc., (“LGS”) (formerly Ricciardi Technologies Inc. (“RTI”)). LGS was founded in 1992 and provides software consulting and development services for the command and control of biological sensors and other Department of Defense requirements to United States federal governmental agencies either directly or through prime contractors of such governmental agencies. LGS’s proprietary products include SensorView, which provides clients with the capability to command, control and monitor multiple distributed chemical, biological, nuclear, explosive and hazardous material sensors. In December 2009 we changed RTI’s name to Lattice Government Services Inc. In January 2007, we changed our name from Science Dynamics Corporation to Lattice Incorporated. On May 16, 2011 we acquired 100% of the shares of Cummings Creek Capital, a holding Company which itself owns 100% of the shares of CLR Group Limited. (“CLR”). CLR is a government contractor which complements our Government Services business by expanding markets and service offerings. Together the SMEI, RTI and CLR acquisitions formed our federal government services business unit. Through 2012 we operated in two segments, our federal government services unit and our telecommunication services business. | |||
As part of the Company’s strategy to focus on its higher growth potential communications business, the Company decided during the first quarter of 2013 to exit the Government services segment which derived its revenues mainly from contracts with federal government Dept of Defense agencies either as prime contractor or as a subcontractor to another prime contractor. On April 2, 2013, we entered an Asset Purchase Agreement (“Purchase Agreement”) with Blackwatch International, Inc. (“Blackwatch”), a Virginia corporation, pursuant to which we primarily sold our government Dept. of Defense (DoD) contract vehicles for approximately $1.2 million. These assets essentially comprised our Federal Government services segment operations. The Company retained the residual assets and liabilities of Lattice Government services, Inc. We ceased operations of the federal government business back in April, 2013 coinciding with the sale of assets to Blackwatch. For the years ended 2013 and 2012 the financial results of the government services business are being reported as discontinued operations. | |||
On November 1, 2013 we closed on the purchase of certain of assets with Innovisit, LLC. The assets mainly acquired included; awarded contracts, customer lists, and its intellectual property rights to the Video Visitation software assets. Under the agreement, the workforce and operating infrastructure supporting Innovisit’s business operations are being transferred to Lattice, including but not limited to certain employees, and leases. This acquisition complimented the product offering of our telecom services business. | |||
b) Basis of Presentation going concern | |||
At December 31, 2013 the Company had a working capital deficiency of $4,607,000. This compared to a working capital deficiency of $3,566,000 at December 31. 2012. The Company’s working capital deficiency and constrained liquidity raises substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is highly dependent upon (i) management’s ability to achieve its planned operating cashflows (ii), maintain continued availability on its line of credit and the ability to obtain alternative financing to fund capital requirements and/or debt obligations coming due. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty. During March 2014, the Company is in the process of raisining capital from the issuance of common stock. To date, we have received and closed on approximately $1.0 million of funding from issuing common stock to various accredited investors. These activities continue as of the date of this filing. The proceeds will be used for general working capital reasons to improve our balance sheet and accommodate strategic growth plans in our telecommunication business. | |||
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. | |||
c) Principles of consolidation | |||
The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. All significant inter-company accounts and transactions have been eliminated in consolidation. For those consolidated subsidiaries where Company ownership is less than 100%, the outside stockholders’ interests are shown as non-controlling interest. Investments in affiliates over which the Company has significant influence but not a controlling interest are carried on the equity basis of accounting. | |||
d) Use of estimates | |||
The preparation of these financial statements in accordance with accounting principles generally accepted in the United States (US GAAP) requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and judgments are based on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustment. US GAAP requires estimates and judgments in several areas, including those related to impairment of goodwill and equity investments, revenue recognition, recoverability of inventory and receivables, the useful lives, long lived assets such as property and equipment, the future realization of deferred income tax benefits and the recording of various accruals. The ultimate outcome and actual results could differ from the estimates and assumptions used. | |||
e) Fair Value Disclosures | |||
Management believes that the carrying values of financial instruments, including, cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value as a result of the short-term maturities of these instruments. As discussed in Note 1(m), below, derivative financial instruments are carried at fair value. | |||
The carrying values of the Company’s long term debts and capital lease obligations approximates their fair values based upon a comparison of the interest rates and terms of such debt to the rates and terms of debt currently available to the Company. | |||
f) Cash | |||
The Company maintains its cash balances with various financial institutions. Balance at various times during the year may exceed Federal Deposit Insurance Corporation limits. | |||
g) Inventories | |||
Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. | |||
h) Income Taxes | |||
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. At December 31, 2013 and 2012, deferred tax liabilities were $0 and $94,184, respectively. | |||
We account for uncertain tax positions using a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, based on the technical merits. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. We did not recognize any additional tax benefit or additional charges to our tax provision during 2013 and 2012. As of December 31, 2013 and 2012, the Company has no liability related to uncertain tax positions. | |||
The Company’s 2010, 2011, 2012 and 2013 federal and state tax returns remain subject to examination by the respective taxing authorities. In addition, net operating losses and research tax credits arising from prior years are also subject to examination at the time that they are utilized in future years. Neither the Company’s federal or state tax returns are currently under examination. | |||
i) Revenue Recognition | |||
Revenue is recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Revenue from product sales is recognized when the goods are shipped and title passes to the customer. | |||
The company applies the guidance of SOP-97-2 with regards to its software products sold. Under this guidance, the Company determined that its product sales do not contain multiple deliverables for an extended period beyond delivery where bifurcation of multiple elements is necessary. The software is embedded in the products sold and shipped. Revenue is recognized upon delivery, installation and acceptance by the customer. PCS (post-contract support) and upgrades are billed separately and when rendered or delivered and not contained in the original arrangement with the customer. Installation services are included with the original customer arrangement but are rendered at the time of delivery of the product and invoicing. | |||
In our Government Services segment (Discontinued operations), our revenues are derived from IT and business process outsourcing services under cost-plus, time-and-material, and fixed-price contracts, which may extend up to 5 years. Under our fixed-price contracts, revenues are generally recorded as delivery is made. For time-and-material contracts, revenues are computed by multiplying the number of direct labor-hours expended in the performance of the contract by the contract billing rates and adding other billable direct costs. Under cost-plus contracts, revenues are recognized as costs are incurred and include an estimate of applicable fees earned. Services provided over the term of these arrangements may include, network engineering, architectural guidance, database management, expert programming and functional area expert analysis Revenue is generally recognized when the service is provided and the amount earned is not contingent upon any further event. | |||
Our fixed price contracts are primarily based on unit pricing (labor hours) or level of effort. The Company recognizes revenue for the number of units delivered in any given fiscal period. Accordingly, these contracts do not fall within the scope of SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts , where revenue is recognized on the percentage-of-completion method using costs incurred in relation to total estimated costs. | |||
Under cost reimbursable contracts, the Company is reimbursed for allowable costs, and paid a fee, which may be fixed or performance-based. Revenues on cost reimbursable contracts are recognized as costs are incurred plus an estimate of applicable fees earned. The Company considers fixed fees under cost reimbursable contracts to be earned in proportion of the allowable costs incurred in performance of the contract. For cost reimbursable contracts that include performance based fee incentives, the Company recognizes the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as the Company’s prior award experience and communications with the customer regarding performance. | |||
The allowability of certain costs under government contracts is subject to audit by the government. Certain indirect costs are charged to contracts using provisional or estimated indirect rates, which are subject to later revision based on government audits of those costs. Management is of the opinion that costs subsequently disallowed, if any, would not be significant. | |||
Revenues related to collect and prepaid calling services generated by the communication services segment are recognized during the period in which the calls are made. In addition, during the same period, the Company records the related telecommunication costs for validating, transmitting, billing and collection, and line and long distance charges, along with commissions payable to the facilities and allowances for uncollectible calls, based on historical experience. | |||
Government claims: Unapproved claims relate to contracts where costs have exceeded the customer’s funded value of the task ordered on our cost reimbursement type contract vehicles. The unapproved claims are considered to be probable of collection and have been recognized as revenue in previous years. Unapproved claims included as a component of our Accounts Receivable totaled approximately $1,244,000 and $1,555,000 as of December 31, 2013 and December 31, 2012. Consistent with industry practice, we classify assets and liabilities related to these claims as current, even though some of these amounts may not be realized within one year. | |||
Revenues recognition for Innovisit: | |||
Revenues from construction contracts are included in contract revenue in the consolidated statements of operations and are recognized under the percentage-of-completion accounting method. The percent complete is measured by the cost incurred to date compared to the estimated total cost of each project. This method is used as management considers expended cost to be the best available measure of progress on these contracts, the majority of which are completed within one year, but may occasionally extend beyond one year. Inherent uncertainties in estimating costs make it at least reasonably possible that the estimates used will change within the near term and over the life of the contracts. | |||
Contract costs include all direct material and labor costs and those indirect costs related to contract performance and completion. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. General and administrative costs are charged to expense as incurred. | |||
Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. An amount equal to contract costs incurred that are attributable to claims is included in revenue when realization is probable and the amount can be reliably estimated. | |||
Costs and estimated earnings in excess of billings are comprised principally of revenue recognized on contracts (on the percentage-of-completion method) for which billings had not been presented to customers because the amount were not billable under the contract terms at the balance sheet date. In accordance with the contract terms, the unbilled receivables at December 31, 2013 will be billed in 2014. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized. | |||
Service Revenues are recorded when the service is provided and when collection can be reasonably assured | |||
j) Share-based payments | |||
On January 1, 2006, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification 718-10, Accounting for Share-based payment , to account for compensation costs under its stock option plans and other share-based arrangements. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. | |||
For purposes of estimating fair value of stock options, we use the Black-Scholes-Merton valuation technique. For the twelve months ended December 31, 2013 and 2012, there was approximately $706,000 and $10,248 of total unrecognized compensation cost related to unvested share-based compensation awards granted under the equity compensation plans which do not include the effect of future grants of equity compensation, if any. The $706,000 will be amortized over the weighted average remaining service period. | |||
k) Depreciation, amortization and long-lived assets: | |||
Long-lived assets include: | |||
Property, plant and equipment - These assets are recorded at original cost. The Company depreciates the cost evenly over the assets’ estimated useful lives. For tax purposes, accelerated depreciation methods are used as allowed by tax laws. | |||
Goodwill- Goodwill represents the difference between the purchase price of an acquired business and the fair value of the net assets acquired and the liabilities assumed at the date of acquisition. Goodwill is not amortized. The Company tests goodwill for impairment annually ( or in interim periods if events or changes in circumstances indicate that its carrying amount may not be recoverable) by comparing the fair value of each reporting unit, as measured by discounted cash flows, to the carrying value to determine if there is an indication that potential impairment may exist. Absent an indication of fair value from a potential buyer or similar specific transactions, the Company believes that the use of this income approach method provides reasonable estimates of the reporting unit’s fair value. Fair value computed by this method is arrived at using a number of factors, including projected future operating results, economic projections and anticipated future cash flows. The Company reviews its assumptions each time goodwill is tested for impairment and makes appropriate adjustments, if any, based on facts and circumstances available at that time. There are inherent uncertainties, however, related to these factors and to management’s judgment in applying them to this analysis. Nonetheless, management believes that this method provides a reasonable approach to estimate the fair value of the Company’s reporting units. | |||
The income approach, which is used for the goodwill impairment testing, is based on projected future debt-free cash flow that is discounted to present value using factors that consider the timing and risk of the future cash flows. Management believes that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating and cash flow performance. This approach also mitigates most of the impact of cyclical downturns that occur in the reporting unit’s industry. The income approach is based on a reporting unit’s five year projection of operating results and cash flows that is discounted using a buildup approach. The projection is based upon management’s best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future capital expenditures and changes in future working capital requirements based on management projections. | |||
Identifiable intangible assets - The Company amortizes the cost of other intangibles over their useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment and written down to fair value as required. | |||
At least annually, The Company reviews all long-lived assets for impairment. When necessary, charges are recorded for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets. | |||
l) Fair Value of Financial Instruments | |||
In accordance with FASB ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. | |||
In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: | |||
● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | ||
● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. | ||
● | Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value. | ||
As of December 31, 2013 and December 31, 2012, the derivative liabilities amounted to $122,698 and $57,634. In accordance with the accounting standards the Company determined that the carrying value of these derivatives approximated the fair value using the level 3 inputs. | |||
m) Derivative Financial Instruments and Registration Payment Arrangements | |||
Derivative financial instruments, as defined in Financial Accounting Standard, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets. The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into various types of financing arrangements to fund its business capital requirements, including convertible debt and other financial instruments indexed to the Company’s own stock. These contracts require careful evaluation to determine whether derivative features embedded in host contracts require bifurcation and fair value measurement or, in the case of freestanding derivatives (principally warrants) whether certain conditions for equity classification have been achieved. In instances where derivative financial instruments require liability classification, the Company is required to initially and subsequently measure such instruments at fair value. Accordingly, the Company adjusts the fair value of these derivative components at each reporting period through a charge to income until such time as the instruments acquire classification in stockholders’ equity. See Note 9 for additional information. | |||
As previously stated, derivative financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, management considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, dividend yield, estimated terms and risk free rates) necessary to fair value these instruments. For complex derivative instruments, such as embedded conversion options, the Company generally uses the Flexible Monte Carlo valuation technique because it embodies all of the requisite assumptions (including credit risk, interest-rate risk and exercise/conversion behaviors) that are necessary to fair value these more complex instruments. For forward contracts that contingently require net-cash settlement as the principal means of settlement, the Company projects and discounts future cash flows applying probability-weightings to multiple possible outcomes. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our income (loss) will reflect the volatility in these estimate and assumption changes. | |||
n) Segment Reporting | |||
FASB ASC 280-10-50, “Disclosure about Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company exited its Government services business in April 2013 and is reporting the operating results of that unit as discontinued operations in the financial reports. Accordingly, the Company operates in one segments during the year ended December 31, 2013 (Telecom services). | |||
o) Basic and diluted income (loss) per common share: | |||
The Company calculates income (loss) per common share in accordance with Statements on Financial Accounting Standards ASC Topic 260, Earnings Per Share (“ASC 260”). Basic and diluted income (loss) per common share is computed based on the weighted average number of common shares outstanding. Common share equivalents (which consist of convertible preferred stock, options and warrants) are excluded from the computation of diluted loss per share since the effect would be anti-dilutive. Common share equivalents which could potentially dilute basic earnings per share in the future, and which were excluded from the computation of diluted loss per share, totaled approximately 58 million shares and 54 million shares at December 31, 2013 and 2012, respectively. | |||
p) Recent accounting pronouncements | |||
In July, 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force), or ASU 2013-11. The amendments in ASU 2013-11 provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in ASU No. 2013-11 do not require new recurring disclosures. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments in ASU No. 2013-11 are not expected to have a material impact on our consolidated financial statements. | |||
In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, or ASU 2012-02. ASU 2012-02 gives entities an option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the long-lived intangible asset are impaired. If, based on its qualitative assessment, an entity concludes that it is more likely than not that the fair value of an indefinite lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if an entity concludes otherwise, quantitative impairment testing is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. ASU 2012-02 is not expected to have a material impact on our financial position or results of operations. | |||
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities, or ASU 2011-11. ASU 2011-11 enhances current disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position. Entities are required to provide both net and gross information for these assets and liabilities in order to facilitate comparability between financial statements prepared in conformity with GAAP and financial statements prepared on the basis of International Financial Reporting Standards. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those years. ASU 2011-11 is not expected to have a material impact on our financial position or results of operations. | |||
We do not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. | |||
q) Reclassifications | |||
Certain 2012 amounts have been reclassified to conform to current year presentation |
2_Accounts_Receivable
2 - Accounts Receivable | 12 Months Ended |
Dec. 31, 2013 | |
Receivables [Abstract] | ' |
Accounts Receivable | ' |
The Company evaluates its accounts receivable on a customer-by-customer basis and has determined that an allowance for doubtful accounts is necessary at December 31, 2013 related to its incurred cost claim receivables attributable to the Company’s discontinued Federal government operations. These claims with Federal Dept. of Defense agencies relate to prior year contracts where costs have exceeded the customer’s funded value of the task ordered on our cost reimbursement type contract vehicles. Unapproved claims included as a component of our Accounts Receivable totaled approximately $1,555,000 before a reserve allowance of $311,000 as of December 31, 2013. As of December 31, 2012, the receivable balance was $1,555,000. These unapproved claims represent the additional costs recoverable on our cost recoverable type contract vehicles as supported by our actual incurred cost submissions or actual rate filings with the DCAA (Defense Contract Audit Agency) compared to the provisional (budgetary) rates used for billing under these contracts. We are engaged with the Defense Contract Audit Agency (DCAA) in the review of these claims. Based on evaluations by management and information regarding the backlog for DCAA audits of incurred cost submissions and recent communications with DCAA, management believes that a reserve allowance estimate of 20% of these receivables is appropriate. Accordingly, the Company recorded bad debt expense of $311,000 which is included as a component of loss from discontinued operations in the Profit and Loss statement. | |
Consistent with industry practice and since we are currently engaged in the closing out these claims with DCAA, we have classified the remaining $1,244,000 of receivables as current assets. |
3_Property_and_Equipment
3 - Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment | ' | ||||||||
A summary of the major components of property and equipment is as follows: | |||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Computers, fixtures and equipment | $ | 3,157,729 | $ | 2,641,947 | |||||
Less : accumulated depreciation | (2,295,820 | ) | (2.123,503 | ) | |||||
Total | $ | 861,712 | $ | 518,444 | |||||
Depreciation expense for December 31, 2013 and 2012 was $263,511 and $254,522 respectively. |
4_Notes_payable
4 - Notes payable | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Notes payable | ' | ||||||||
Notes payable consists of the following as of December 31, 2013 and December 31, 2012: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Bank line-of-credit (a) | $ | – | $ | 232,807 | |||||
Notes payable to Stockholder/director (b) | 192,048 | 243,315 | |||||||
Capital lease payable (c) | – | 25,089 | |||||||
Notes Payable (d) | 1,999,676 | 1,892,941 | |||||||
Note Payable, Innovisit (e) | 510,000 | – | |||||||
Notes payable Cummings Creek/CLR (f) (disposed of liability) | – | 281,456 | |||||||
Total notes payable | 2,701,724 | 2,675,608 | |||||||
Less current maturities | (2,601,724 | ) | (2,258,416 | ) | |||||
Long-term debt | $ | 100,000 | $ | 417,192 | |||||
(a) Bank Line-of-Credit | |||||||||
On July 17, 2009, the Company and its wholly-owned subsidiary, Lattice Government Services (formally “RTI”), entered into a Financing and Security Agreement (the “Action Agreement”) with Action Capital Corporation (“Action Capital”). | |||||||||
Pursuant to the terms of the Action Agreement, Action Capital agreed to provide the Company with advances of up to 90% of the net amount of certain acceptable account receivables of the Company (the “Acceptable Accounts”). The maximum amount eligible to be advanced to the Company by Action Capital under the Action Agreement is $3,000,000. The Company will pay Action Capital interest on the advances outstanding under the Action Agreement equal to the prime rate of Wachovia Bank, N.A. in effect on the last business day of the prior month plus 1%. In addition, the Company will pay a monthly fee to Action Capital equal to 0.75% of the total outstanding balance at the end of each month. | |||||||||
In addition, pursuant to the Action Agreement, the Company granted Action Capital a security interest in certain assets of the Company including all, accounts receivable, contract rights, rebates and books and records pertaining to the foregoing (the “Action Lien”). On June 11, 2010, Action Capital and an accredited investor entered into an agreement under which $1,250,000 of the collateral otherwise securing advances covered by the Action Agreement are subordinated to a new security interest securing an additional loan from the accredited investor. During November 2011, $268,345 of the collateral was collected by Action, escrowed and paid directly to the accredited investor reducing the collateral and outstanding balance on the loan to $981,655 at September 30, 2013. See (d) below. | |||||||||
The outstanding balance owed on the line at December 31, 2013 and December 31, 2012 was $0 and $232,807 respectively. At December 31, 2013 and December 31, 2012 our interest rate was approximately 13.25%. | |||||||||
(b) Notes Payable Stockholders/Director | |||||||||
The first note bears interest at 21.5% per annum. During December 2010, the note was amended to flat monthly payments of $6,000 until maturity, December 31, 2013, at which time any remaining interest and or principal will be paid. This note has an outstanding balance of $24,048 and $75,315 as of December 31, 2013 and December 31, 2012, respectively. Payment of the note is past due however the note holder has not invoked his rights under the default provisions of the note. | |||||||||
The second note dated October 14, 2011 has a face value of $168,000 of which the Company received $151,200 in net proceeds during October 2011. The discount of $16,800 is being amortized to interest expense over the term of the note. The note carries an annual interest rate of 10% payable quarterly at the rate of $4,200 per quarter. The entire principal on the note of $168,000 is due at maturity on October 14, 2014. The Company is in arrears on interest payments that were due but has accrued the interest costs on the note. The holder has not as of the date of this filing invoked his rights under the default provisions of the note related to the past due interest payments. | |||||||||
(c) Capital Lease Payable | |||||||||
On June 16, 2009 Lattice entered an equipment lease financing agreement with Royal Bank America Leasing to purchase approximately $130,000 in equipment for our communication services. The terms of which included monthly payments of $5,196 per month over 32 months and a $1.00 buy-out at end of the lease term. On July 15, 2011 we signed an addendum to this lease and received additional equipment financing for $58,122 payable over 30 months at $2,211 per month. As of December 31, 2013 and December 31, 2012, the outstanding balance was $0 and $25,089, respectively. | |||||||||
(d) Note Payable | |||||||||
On June 11, 2010, Lattice closed on a Note Payable for $1,250,000. The net proceeds to the Company were $1,100,000. The $150,000 was amortized over the life of the note as additional interest expense. The note matured June 30, 2012 and payment of principal was due at that time in the lump sum value of $981,655 including any unpaid interest. On June 30, 2012 the holder of the note agreed to an extension for payment in full of the note to October 31, 2012. In addition to the maturity extension the Company agreed to increase the collateral by $250,000 the note was secured by certain receivables totaling $981,655, the new secured total is approximately $1,232,000. Until maturity, Lattice is required to make quarterly interest payments (calculated in arrears) at 12% stated interest with the first quarter interest payment of $37,500 due September 30, 2010 and $37,500 due each quarter end thereafter until the final payment comes due October 31, 2012 totaling $1,019,155 including the final interest payment. Concurrent with the note, an intercreditor agreement was signed between Action Capital and Holder where Action Capital has agreed to subordinate the Action Lien on certain government contracts, task orders and accounts receivable totaling $981,655. During November 2011, $268,345 of the original $1,250,000 accounts receivable securing the note was collected, escrowed and paid directly to the note holder by Action Capital thereby reducing the outstanding balance on the note and the collateral to $981,655 at December 31, 2013 and 2012. As of the date of this filing, the Company is currently in violation under this note agreement from not paying the principal due at the October 31, 2012 maturity date. The Company is current with quarterly interest payments. The holder has not as of the date of this filing invoked his rights under the default provisions of the note. | |||||||||
During the quarter ended June 30, 2011, we issued a two year promissory note payable for $200,000 to a shareholder of the Company. The Note bears interest of 12% per year. The Company is required to pay interest quarterly on a calendar basis starting with a pro-rata interest payment on June 30, 2011. On May 15, 2013 the maturity date, the principal amount of $200,000 became due along with any unpaid and accrued interest. The Company is not in compliance with the terms of the note. We have accrued interest at current rate; no default provision has been invoked. | |||||||||
During the quarter ended September 30, 2011, we issued a two year promissory note payable for $227,272 to an investor. The Note bears interest of 12% per year. The Company is required to pay interest quarterly on a calendar basis starting with a pro-rata interest payment on September 30, 2011. On August 3, 2013 the maturity date, the principal amount of the note will be due along with any unpaid and accrued interest. The Company is not in compliance with the terms of the note. We have accrued interest at current rate; no default provision has been invoked. | |||||||||
On December 13, 2011, we converted outstanding invoices that we owed a vendor by converting the liability to a promissory note in the amount of $416,533. The note is payable quarterly over a two year term with principal payments due as follows: December 31, 2011 of $10,000, January 15, 2012 of $50,000, March 31, 2012 of $20,000, June 30, 2012 of $30,000, September 30, 2012 of $30,000, December 31, 2012 of $45,000, March 31, 2013 of $45,000, June 30, 2013 of $55,000, September 30, 2013 of $55,000 and December 31, 2013 of $76,533. The note carries a 12% annual interest rate calculated on the outstanding principal balance payable monthly. As of December 31, 2013, the outstanding balance of the note is $20,000. The Company was in default under this note agreement in that it did not pay certain principal payments when due. In June 2013, the Company was served a writ of Garnishment against the note receivable of $700,000 from Blackwatch International Inc. for the outstanding balance due for which we are in default. In October 2013, the Company reached a settlement arrangement whereby the holder agreed to forbear any further collection actions against the Company in exchange for $280,000 payable as follows; $240,000 on October 10, 2013 and then $10,000 payable monthly over four months starting November 10, 2013. The October, November and December payments totaling $260,000 were paid as of December 31, 2013 leaving a remaining balance of $20,000 under the note at December 31, 2013. The Company recorded a gain on extinguishment of $29,658 representing the difference between the loan balance before the settlement of $309,658 and the settlement amount of $280,000. | |||||||||
On January 23, 2012, we issued several promissory notes to private investors with face values totaling $198,000. The proceeds from the notes totaled $175,000 used for working capital. The discount of $23,000 has been recorded as a deferred financing fee and amortized over the life of the note. The Notes bear interest of 12% per year. The Company is required to pay interest quarterly on a calendar basis starting with a pro-rata interest payment on March 31, 2012. On January 23, 2014 the maturity date, the principal amount of the notes were due along with any unpaid and accrued interest. | |||||||||
On February 26, 2013, the Company issued a note to an investor for $600,000 for which $580,400 of net proceeds were received. The note bears interest of 12% payable monthly and is due in full to investor by the earlier of (i) September 1, 2013 or (ii) the date the customer pays for the system. The note was issued to finance the costs associated with a purchase order transaction with a large telecommunications customer. In addition to the interest we agreed to deliver warrants to the lender for the purchase of up to 800,000 shares of common stock at an exercise price of $0.08 per share, with anti-dilution provisions covering capital stock changes affecting all stockholders, exercisable for four years from the date of issuance. A debt discount of $64,547 was recorded representing the fair value of the warrants issued and was fully amortized to interest expense during the nine months ended September 30, 2013. The fair value of the warrants was determined using the Black Scholes pricing model with the following assumptions; No dividend yield, expected volatility of 159%, a risk free rate of 0.73% and an expected life of 4 years. The Company also recorded amortization of deferred financing fees of $19,600 representing agency fees which has been fully amortized to expense. The Company paid this note in full on July 27, 2013. | |||||||||
On October 7, 2013, we issued a promissory note with a face value of $110,000 and 150,000 warrants to an investor. The net proceeds from the note totaled $94,700 and were used for working capital. A debt discount totaling $27,185 had been recorded comprised of an original issue discount of 10% or $11,000 and the fair value of the warrants issued of $16,185. Also being deducted from proceeds were $4,300 in placement agent fees and expenses which was expensed as financing fees. The Notes bear interest of 12% per year, however no interest charged if paid off before January 1, 2014. On December 31, 2013, the principal amount of the note was paid in full from the December 31, 2013 financing with the same investor (See paragraph below). Accordingly, the unamortized debt discount of $27,185 was recorded as interest expense. | |||||||||
On December 31, 2013, the Company issued a note to an investor for $600,000 for which $411,000 of net proceeds were received. Of the 600,000; $60,000 was an original issue discount of 10% or $60,000, $110,000 was used to pay-off the October 2013 note held by the same investor and $19,000 was used for placement fees and legal expenses. Zero interest payable if $600,000 principal is paid within three months from the date of this Note; 12% annual interest accrues on the principal sum beginning March 30, 2014 if the principal remains outstanding, with interest paid monthly, in arrears, on the last day of the month, $6000 per month with first cash payment due April 30, 2014, and will continue until the Amount Due is paid. The net proceeds of $411,000 were used for working capital purposes. In addition to the interest we agreed to deliver warrants to the lender for the purchase of up to 1,000,000 shares of common stock at an exercise price of $0.11 per share, with anti-dilution provisions covering capital stock changes affecting all stockholders, exercisable for four years from the date of issuance. In addition, the Company issued 145,000 shares of common stock. A debt discount of $162,093 was recorded representing the fair value of the warrants and the common stock issued and is being amortized over the term of the note which matures June 30, 2014. The fair value of the warrants was determined using the Black Scholes pricing model with the following assumptions; No dividend yield, expected volatility of 176.04%, a risk free rate of 1.72% and an expected life of 4 years. The Company also recorded amortization of deferred financing fees of $19,600 representing agency fees which has been fully amortized to expense. The carrying value at December 31, 2013 was $377,907 comprised of the face value of the loan of $600,000 less original issue discount of $60,000; less the debt discount of $140,343 and $21,750 representing the fair values of the warrants and stock issued respectively. | |||||||||
(e) Notes payable - Innovisit | |||||||||
In conjunction with the purchase of intellectual property and certain other assets of Innovisit (See Note #6) on November 1, 2013, Lattice issued a promissory note for $590,000 to Icotech LLC, the owner of Innovisit. Lattice agreed to pay to Icotech; (a) $250,000 on November 30, 2013, and four payments of $60,000 on each of January 1, 2014, April 30, 2014, July 31, 2014, and October 31, 2014; and final Payment of $100,000 due and payable on January 31, 2015. The note bears no interest on the unpaid principal amount and is secured with the intellectual property acquired. . The Company had paid $80,000 on December 30, 2013 leaving a balance outstanding of $510,000 at December 31, 2013. The Company is in arrears on payments but is in discussion with the principals of Icotech on modifying the timing of payments. Icotech has not invoked any of the default provisions under the note. | |||||||||
(f) Notes payable Cummings Creek / CLR | |||||||||
In conjunction with the Cumming Creek Capital / CLR acquisition, Lattice assumed notes totaling $676,925 comprised of three notes each with the former principles of CLR Group. The notes bear interest on the unpaid principal amount until paid in full, at a rate of four percent (4.0%) per annum payable quarterly. The Company will pay the unpaid principal amount as follows: beginning on May 31, 2011, the Company will make equal payments of principal on the first day of each calendar quarter totaling $58,275 (i.e., February 28, May 31, August 30 and November 30), until February 15, 2014. The unpaid balances of the notes were assumed by Purchaser as part of the sale of our Government assets transaction on April 2, 2013. Accordingly, there is no balance owing as of December 31, 2013 on these notes. |
5_Stockholders_Deficit
5 - Stockholders' Deficit | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Equity [Abstract] | ' | ||||||||||||
Stockholders' Deficit | ' | ||||||||||||
Common Stock | |||||||||||||
General | |||||||||||||
The preferred shares have a par value of $.01 per share, and the Company is authorized to issue 11,156,400 shares. The preferred stock of the Company shall be issued by the board of directors of the Company in one or more classes or one or more series within an class, and such classes or Series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the board of directors of the Company may determine, from time to time. Currently issued and outstanding are designated Series A, B, C and D. | |||||||||||||
The common stock shares have a par value of $.01 per share and the Company is authorized to issue 200,000,000 shares, each share shall be entitled to cast one vote for each share held at all stockholders’ meeting for all purposes, including the election of directors. The common stock does not have cumulative voting rights. | |||||||||||||
2012 issuances: | |||||||||||||
On October 15, 2012, Barron Partners L.P. converted 262,202 shares of Series A Preferred Stock into 940,000 Common Shares. Subsequent to this conversion event, Barron Partners owned 5,443,866 shares of Series A Preferred Stock and 1,569,147 Common Shares. | |||||||||||||
On July 5, 2012, Barron Partners L.P. converted 371,003 shares of Series A Preferred Stock into 1,325,000 Common Shares. Subsequent to this conversion event, Barron Partners owned 5,707,068 shares of Series A Preferred Stock and 1,478,753 Common Shares. | |||||||||||||
2013 issuances: | |||||||||||||
On April 24, 2013, we issued 1,142,848 common shares to Barron Partners L.P. Such shares were issuable upon the March 20, 2013 exercise of conversion rights associated with 320,000 shares of Series A Preferred Stock owned by Barron Partners. | |||||||||||||
During fiscal year 2013 we issued 578,333 Common shares for services valued at $74,400. | |||||||||||||
On December 30, 2013, we issued 145,000 Common shares as compensation to placement agent for financing fees | |||||||||||||
On December 30, 2013, we issued 822,024 Common shares in exchange and cancelation of 950,000 warrants outstanding, the fair value of the exchanged warrants was less than the fair value of stock issued. | |||||||||||||
2013 Warrant issuances: | |||||||||||||
In February 2013 we issued 800,000 warrants with a 4 year term and a strike price of $0.11 per share in conjunction with $600,000 debt financing with an investor. These warrants were canceled in exchange for common shares issued December 2013 (see 2013 issuances above). These warrants had a fair value of $64,547. | |||||||||||||
In October 2013, we issued 150,000 warrants with a 4 year term and a strike price of $0.11 per share in conjunction with $110,000 debt financing with an investor. These warrants had a fair value of $16,185. These warrants were canceled in exchange for common shares issued December 2013 (see 2013 issuances above). | |||||||||||||
In December 2013, we issued 1,000,000 warrants with a 4 year term and a strike price of $0.11 per share in conjunction with $600,000 debt financing with an investor. These warrants had a fair value of $140,343. | |||||||||||||
Summary of our warrant activity and related information for 2013 and 2012 | |||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate Intrinsic Value | ||||||||||
Outstanding at December 31, 2011 | 3,778,233 | $ | 0.81 | 3 | $ | – | |||||||
Granted | - | – | - | – | |||||||||
Exercised | - | – | - | – | |||||||||
Cancelled/expired | - | – | - | – | |||||||||
Outstanding at December 31, 2012 | 3,778,233 | $ | 0.08 | 2 | $ | – | |||||||
Granted | 1,950,000 | $ | 0.11 | 4 | |||||||||
Exercised | - | ||||||||||||
Cancelled/expired | -950,000 | $ | 0.1 | - | |||||||||
Outstanding at December 31, 2013 | 4,778,233 | $ | 0.67 | 3.5 | $ | – | |||||||
Vested and exercisable at December 31, 2013 | 4,778,233 | ||||||||||||
Vested and exercisable at December 31, 2012 | 3,778,223 | ||||||||||||
2013 | 2012 | ||||||||||||
Weighted average fair value | $ 0.08 - $ 0.14 | – | |||||||||||
Risk-free interest rate | .73% - 1.72% | – | |||||||||||
Volatility | 159.1% - 179.2% | – | |||||||||||
Terms in years | 4 - 4.2 | – | |||||||||||
Dividend yield | 0% | – |
6_Asset_Purchase_Innovisit
6 - Asset Purchase - Innovisit | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Business Combinations [Abstract] | ' | ||||
Asset Purchase - Innovisit | ' | ||||
On November 1, 2013, we acquired certain assets which included; awarded contracts, customer lists, and intellectual property rights to Video Visitation software from Innovisit LLC (“Innovisit”), an Alabama limited liability company. Under the asset purchase agreement, the workforce and operating infrastructure supporting Innovisit’s business operations are being transferred to Lattice, including but not limited to certain employees, and leases. | |||||
As part of the consideration, we delivered a $590,000 secured promissory note, payable in several installments between November 30, 2013 and January 31, 2015. We also entered an employment agreement with Scott Pritchett, who has joined our organization as a manager. Under his three year employment contract, Mr. Pritchett is compensated at a base salary of $100,000 as well as commissions based upon realization of agreed upon revenue targets. | |||||
The total purchase price of $590,000 was allocated to Innovisit’s net tangible and intangible assets based upon their estimated fair values as of November 1, 2013. | |||||
The table below summarizes the preliminary allocation of the purchase price to the acquired net assets based on their estimated fair values as of Novemeber 1, 2013and the associated estimated useful lives at that date. | |||||
Amount | |||||
Purchase price: | |||||
Note Payable | $ | 590,000 | |||
Preliminary Allocation of Purchase Price: | |||||
Intangible assets: | |||||
Software (Video conferencing) | $ | 302,794 | |||
Contract backlog | 148,406 | ||||
Tangible assets: | |||||
Cash | 5 | ||||
Inventory | 138,795 | ||||
Total purchase price allocation | $ | 590,000 |
7_Intangible_assets
7 - Intangible assets | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||||
Intangible assets | ' | ||||||||||||||||||
In accordance with the Goodwill and Other Intangibles Topic of the ASC, goodwill and indefinite-lived intangible assets are tested for impairment annually, and interim impairment tests are performed whenever an event occurs or circumstances change that indicate that it is more likely than not that an impairment has occurred. December 31 has been established for the annual impairment review. | |||||||||||||||||||
Determining the fair value of intangible assets is judgmental in nature and requires the use of significant estimates and assumptions including, but not limited to, revenue growth rates, future market conditions and strategic plans. The Company cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. Such events may include, but are not limited to, the impact of the economic environment, a material negative change in relationships with significant customers; or strategic decisions made in response to economic and competitive conditions. | |||||||||||||||||||
The tables below present amortizable intangible assets as of December 31, 2013 and 2012: | |||||||||||||||||||
Gross | Accumulated | Impairment | Net | Weighted | |||||||||||||||
Carrying | Carrying | average | |||||||||||||||||
remaining | |||||||||||||||||||
amortization | |||||||||||||||||||
Amount | Amortization | charge | Amount | period | |||||||||||||||
31-Dec-13 | |||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||
IP Rights Agreement | 1,300,000 | (519,988 | ) | – | 780,012 | 3.86 years | |||||||||||||
Customer contracts | 148,406 | (32,979 | ) | – | 115,427 | 0.58 years | |||||||||||||
$ | 1,448,406 | $ | (552,967 | ) | $ | – | $ | 895,439 | |||||||||||
Gross | Accumulated | Impairment | Net | Weighted | |||||||||||||||
Carrying | Carrying | average | |||||||||||||||||
remaining | |||||||||||||||||||
amortization | |||||||||||||||||||
Amount | Amortization | charge | Amount | period | |||||||||||||||
31-Dec-12 | |||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||
IP Rights Agreement | 1,300,000 | (389,992 | ) | – | 910,008 | 4.86 years | |||||||||||||
Total intangible amortization expense was $162,979 and $130,000 for the year ended December 31, 2013 and 2012, respectively. | |||||||||||||||||||
Estimated annual intangibles amortization expense as of December 31, 2013 is as follows: | |||||||||||||||||||
2014 | 245,427 | ||||||||||||||||||
2015 | 130,000 | ||||||||||||||||||
2016 | 130,000 | ||||||||||||||||||
2017 | 130,000 | ||||||||||||||||||
2018 | 130,000 | ||||||||||||||||||
Thereafter | 130,012 | ||||||||||||||||||
Total | $ | 895,439 |
8_Recurring_Fair_Value_Measure
8 - Recurring Fair Value Measurements | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Recurring Fair Value Measurements | ' | ||||||||||||||||
On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows: | |||||||||||||||||
● | Level 1 – Inputs to the valuation methodology are quoted market prices for identical assets or liabilities. | ||||||||||||||||
● | Level 2 – Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs. | ||||||||||||||||
● | Level 3 – Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk. | ||||||||||||||||
Quoted Prices In Active Markets for Identical Assets | Significant | ||||||||||||||||
Other | Significant | ||||||||||||||||
Fair Value at | Observable | Unobservable | |||||||||||||||
Inputs | Inputs | ||||||||||||||||
December 31, 2013 | ( Level 1) | ( Level 2) | ( Level 3) | ||||||||||||||
Liabilities | |||||||||||||||||
Derivative liabilities | $ | 122,698 | – | – | $ | 122,698 | |||||||||||
Fair Value at | |||||||||||||||||
December 31, 2012 | |||||||||||||||||
Liabilities | |||||||||||||||||
Derivative liabilities | $ | 57,634 | – | – | $ | 57,634 | |||||||||||
9_Derivative_financial_instrum
9 - Derivative financial instruments | 12 Months Ended |
Dec. 31, 2013 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' |
Derivative financial instruments | ' |
The balance sheet caption derivative liabilities consist of Warrants, issued in connection with the 2005 Laurus Financing Arrangement, and the 2006 Omnibus Amendment and Waiver Agreement with Laurus. These derivative financial instruments are indexed to an aggregate of 758,333 shares of the Company’s common stock as of December 31, 2013 and December 31, 2012 and are carried at fair value. The balance at December 31, 2013 of $122,698 compared to $57,634 at December 31, 2012. | |
The valuation of the derivative warrant liabilities is determined using a Black Scholes Merton Model. Freestanding derivative instruments, consisting of warrants and options that arose from the Laurus financing are valued using the Black-Scholes-Merton valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in the Black Scholes models as of December 31, 2013 included conversion or strike price of $0.10; historical volatility factor of 181% based upon forward terms of instruments, and a risk free rate of 2.8% and remaining life 8.72 years. |
10_Dividends
10 - Dividends | 12 Months Ended |
Dec. 31, 2013 | |
Dividends [Abstract] | ' |
Dividends | ' |
The Company accrued and recorded dividends payable on the 520,160 shares of 5% Series B Preferred Stock for the period ended December 31, 2013 and 2012. Dividends have not been declared and cannot be paid as long as the Company has an outstanding balance on its revolving line of credit. |
11_Income_Taxes
11 - Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Income Taxes | ' | ||||||||
The tax provision (benefit) for the years ended December 31, 2013 and 2012 consists of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Current | – | – | |||||||
Deferred | – | (129,588 | ) | ||||||
The components of the deferred tax assets (liability) as of: | |||||||||
Net operating loss carryforward | $ | 7,721,735 | $ | 7,486,772 | |||||
Stock base compensation | 455,984 | 430,305 | |||||||
Executive compensation | 40,200 | 40,200 | |||||||
Total Deferred tax Asset | 8,217,919 | 7,957,277 | |||||||
Valuation allowance for Deferred tax asset | (8,217,919 | ) | (7,957,277 | ) | |||||
Deferred tax asset | – | – | |||||||
Deferred tax liability: | |||||||||
Intangible Assets | – | (94,184 | ) | ||||||
Sec 481c | – | – | |||||||
Net deferred tax long term | (94,184 | ) | |||||||
Net deferred tax | $ | – | $ | (94,184 | ) | ||||
As of December 31, 2013 and 2012, the Company generated a net operating loss carry forwards of approximately $23,000,000 available expiring 2013-2030. | |||||||||
The provision for income taxes reported for the year ended December 31, 2013 and 2012. | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Provision (benefit) for taxes using statutory rate | $ | (340,791 | ) | $ | (235,236 | ) | |||
State taxes, net of federal tax benefit | 102,543 | 12,838 | |||||||
Permanent differences: | |||||||||
Non-deductible expense | 236,248 | 92,810 | |||||||
Provision (Benefit) for income taxes | $ | 2,000 | $ | (129,588 | )* | ||||
__________ | |||||||||
* included in Discontinued operations |
12_Commitments
12 - Commitments | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Commitments | ' | ||||
a) Operating Leases | |||||
The Company leases its office, sales and manufacturing facilities under non-cancelable operating leases with varying terms expiring in 2013 to 2015. The leases generally provide that the Company pay the taxes, maintenance and insurance expenses related to the leased assets. | |||||
We currently have two leases for office facilities located in the United States with lease expirations occurring December 31, 2013 to March 31, 2015. The total average monthly rent for these leases in 2013 is approximately $9,000 per month. | |||||
Future minimum lease commitments as of December 31, 2013 as follows: | |||||
Operating | |||||
Leases | |||||
2014 | $ | 67,413 | |||
2015 | 51,211 | ||||
2016 | – | ||||
Total minimum lease payments | $ | 118,624 | |||
Total rent expense was $110,826 and $117,517 for the year ended December 31, 2013 and 2012 respectively. | |||||
b) Capital Lease Payable | |||||
On July 15, 2011 the Company entered an equipment lease financing agreement with Royal Bank America Leasing to purchase approximately $58,122 in equipment for our communication services. The terms of which included monthly payments of $2,211 per month over 30 months and a $1.00 buy-out at end of the lease term. As of December 31, 2013, the outstanding balance was $0 and accumulated depreciation associated with the assets under capital lease was $28,248. |
13_ShareBased_Payments
13 - Share-Based Payments | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||
Share-Based Payments | ' | ||||||||||||||
a) 2002 Employee Stock Option Plan | |||||||||||||||
On November 6, 2002 the stockholders approved the adoption of The Company’s 2002 Employee Stock Option Plan. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“Non-ISOs”) intended to qualify as Incentive Stock Options thereunder. The maximum number of options made available for issuance under the Plan are two million (2,000,000) options. The options may be granted to officers, directors, employees or consultants of the Company and its subsidiaries at not less than 100% of the fair market value of the date on which options are granted. The term of each Option granted under the Plan shall be contained in a stock option agreement between the Optionee and the Company. | |||||||||||||||
b) 2008 Employee Stock Option Plan | |||||||||||||||
The Company’s board of directors approved the adoption of the Company’s 2008 Incentive Stock Option Plan. The maximum number of shares available for issuance under the Plan is 10,000,000. The options may be granted to officers, directors, employees or consultants of the Company and its subsidiaries at not less than 100% of the fair market value of the date on which options are granted. The term of each Option granted under the Plan shall be contained in a stock option agreement between the optionee and the Company. | |||||||||||||||
The board approved the issuance of options to purchase an aggregate 9,670,000 shares of the Company’s common stock to various employees, officers and directors of the company during December 31, 2013. No options were approved or issued in 2012. The Company recorded stock base compensation expense of $77,877 and $5,684 for the year ended December 31, 2013 and 2012, respectively under both plans. | |||||||||||||||
We use the Black-Scholes option pricing model to estimate on the grant date the fair value of share-based awards in determining our share-base compensation. The following weighted-average assumptions were used for grants made under the stock options plans for the years ended December 31, 2013. No options issued in 2012. | |||||||||||||||
2013 | |||||||||||||||
Expected Volatility | 174% | ||||||||||||||
Expected term | 10 years | ||||||||||||||
Fisk-Free interest rate | 2.86% | ||||||||||||||
Dividend yield | 0% | ||||||||||||||
Annual forfeiture rate | 10% | ||||||||||||||
Weighted-average estimated fair value of options granted | $ | 0.1094 | |||||||||||||
Transactions involving stock options awarded under the Plan described above during the years ended December 31, 2013 and 2012 | |||||||||||||||
Number of | Weighted | Weighted | Aggregate | ||||||||||||
shares | Average | Average | Intrinsic | ||||||||||||
Exercise | Remaining Contractual | Value | |||||||||||||
price | term in Years | ||||||||||||||
Outstanding at December 31, 2011 | 7,436,500 | $ | 0.08 | 5.6 | $ | 282,000 | |||||||||
Granted | |||||||||||||||
Exercised | |||||||||||||||
Cancelled/expired | (70,000 | ) | $ | 0.08 | |||||||||||
Outstanding at December 31, 2012 | 7,366,500 | $ | 0.08 | 4.7 | $ | – | |||||||||
Granted | 9,670,000 | $ | 0.12 | 10 | |||||||||||
Exercised | – | ||||||||||||||
Cancelled/expired | (92,000 | ) | $ | 0.1 | |||||||||||
Outstanding at December 31, 2013 | 16,944,500 | $ | 0.1 | 2.1 | $ | – | |||||||||
Vested and exercisable at December 31, 2013 | 7,994,500 | ||||||||||||||
Vested and exercisable at December 31, 2012 | 7,193,167 | ||||||||||||||
c) Employee Stock Purchase Plan | |||||||||||||||
In 2002 the Company established an Employee Stock Purchase Plan. The Plan is to provide eligible Employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions and to enhance such Employees ’ sense of participation in the affairs of the Company and its Designated Subsidiaries. It is the intention of the Company to have the Plan qualify as an “ Employee Stock Purchase Plan ” under Section 423 of the Internal Revenue Code of 1986. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. The maximum number of shares of the Company ’ s Common Stock which shall be made available for sale under the Plan shall be two million (2,000,000) shares. There were no shares issued under the plan in 2013 or 2012. |
14_Benefit_Plan
14 - Benefit Plan | 12 Months Ended |
Dec. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | ' |
Benefit Plan | ' |
The Company has 401K plan which covers all eligible employees. The Company has a discretionary match of employee contributions. Pension expense for the years ended December 31, 2013 and 2012 was $0 and $86,953, respectively. |
15_Major_Customers_and_Concent
15 - Major Customers and Concentrations | 12 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
Major Customers and Concentrations | ' |
The company’s telecom service revenues for 2013 include approximately $1.6 million or 19% of total revenues derived from a wholesale contractual relationship with a large Tier 1 telecom provider serving several end-user correctional facilities. The underlying facility contracts are up for renewal during the 2nd quarter of 2014 and there is no assurance that Lattice will renew the contracts with the end user facilities as a direct provider or that the wholesale customer will renew its contract(s) with Lattice. In the event that these revenues terminate the approximate impact to annual revenues and operating cashflows would be negative $1.6 million revenues and $300,000 in operating cashflows. In 2012, the revenues and operating cashflows derived from this contract were also approximately $1.6 million and $300,000 respectively. |
16_Patent_Licensing_Agreement
16 - Patent Licensing Agreement | 12 Months Ended |
Dec. 31, 2013 | |
Patent Licensing Agreement | ' |
Patent Licensing Agreement | ' |
On January 4, 2010 the Company entered into a Patent Licensing agreement supporting its communication services products. In conjunction with the agreement the Company paid $1,300,000 as follows; $50,000 on the first of each month starting on January 1, 2010 and ending June 1, 2010 and a lump sum payment due of $1,000,000 on June 30, 2010. The $1,300,000 was paid in full pursuant to the licensing agreement as of June 30, 2010. The $1,300,000 was accounted for as intangible property and is being amortized over 120 months. Accordingly $130,000 of amortization expense was included as a component of the communication segment’s cost of sales for the years ended December 31, 2013 and December 31, 2012 respectively. |
17_Litigation
17 - Litigation | 12 Months Ended |
Dec. 31, 2013 | |
Litigation | ' |
Litigation | ' |
From time to time, lawsuits are threatened or filed against us in the ordinary course of business. Such lawsuits typically involve claims from customers, former or current employees, and vendors related to issues common to our industry. Such threatened or pending litigation also can involve claims by third-parties, either against customers or ourselves, involving intellectual property, including patents. A number of such claims may exist at any given time. In certain cases, derivative claims may be asserted against us for indemnification or contribution in lawsuits alleging use of our intellectual property, as licensed to customers, infringes upon intellectual property of a third-party. Per FASB ASC 450-20-25; recognition of a contingency loss may only be made if the event is (1) probable and (2) the amount of the loss can be reasonably estimated. There were no liabilities of this type at December 31, 2013. In June 2013, the Company was served a writ of Garnishment with respect to our note receivable from the sale of our Governmental services segment due to a default on the December 13, 2011 note payable (see footnote 2(d). In October 2013, the Company reached a settlement arrangement whereby the holder agreed to forbear any further collection actions against the Company in exchange for $280,000 payable as follows; $240,000 on October 10 2013 and then $10,000 payable monthly over four months starting November 10, 2013. $280,000 was paid by the Company as of the date of this filing. However, the holder has asserted that the payments were late, and that the holder is entitled to an additional $80,000 payment. The Company is defending. | |
18_Sale_of_Assets_of_Discontin
18 - Sale of Assets of Discontinued Operations | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | ||||||||
Sale of Assets of Discontinued Operations | ' | ||||||||
As part of the Company’s strategy to focus on its higher growth potential communications business, the Company decided during the first quarter to exit the Government services segment which derived its revenues mainly from contracts with federal government Dept of Defense agencies either as prime contractor or as a subcontractor to another prime contractor. On April 2, 2013, we entered an Asset Purchase Agreement (“Purchase Agreement”) with Blackwatch International, Inc. (“Blackwatch”), a Virginia corporation, pursuant to which we primarily sold our government Dept. of Defense (DoD) contract vehicles for approximately $1.2 million. These assets essentially comprised our Government services segment operations. The Company retained the residual assets and liabilities of Lattice Government services, Inc. The Company recorded a gain of to $521,443 on the sale of these assets during the quarter ended June 30 2013, which represents the excess of the sales price over the book or carrying value of the assets sold detailed in tabular form below: | |||||||||
On April 2, 2013 Company entered into an Asset Purchase agreement With Blackwatch International, Inc as follows : | |||||||||
Consideration received from sale of Government assets: | |||||||||
Cash | $ | 200,000 | |||||||
Seller notes assumed by buyer | 282,456 | ||||||||
Note receivable from buyer** | 700,000 | ||||||||
Total consideration | $ | 1,182,456 | |||||||
Other Contingencies considerations: | |||||||||
3% of gross revenues on Phase II of an SBIR contract for 24 months if awarded. | – | ||||||||
Pay up to $100,000 for each of the next two years in the event that certain contract are rebid and funded | – | ||||||||
Total consideration received on sale of assets | 1,182,456 | ||||||||
Carrying value of Lattice Government assets sold (see below) | 661,013 | ||||||||
Gain (loss) on sale of Government segment assets | $ | 521,443 | |||||||
Carrying value of assets disposed of: | |||||||||
Goodwill and intangibles | $ | 842,933 | |||||||
Non-controlling interest | (120,133 | ) | |||||||
Deferred tax liability | (61,787 | ) | |||||||
$ | 661,013 | ||||||||
** 3% annum interest rate, 12 equal quarterly installments payments of $61,216.03 over a 3 year period first installment being 7/31/2013 with each successive payment being on the 15th day of the month following close each calendar quarter. | |||||||||
With the Company’s decision to exit the Government services business, the results of operations and cash flows from this business have been classified as discontinued operations. | |||||||||
The following table shows the results of operations of Lattice Government Services segment for the twelve months ended December 31, 2013 and 2012 which are included in the net income (loss) from discontinued operations: | |||||||||
Twelve Months Ended | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Revenue | $ | 603,616 | $ | 3,243,377 | |||||
Cost of Revenue | 300,033 | 1,901,592 | |||||||
Gross Profit | 303,583 | 1,341,785 | |||||||
50.30% | 41.50% | ||||||||
Selling, general and administrative expenses | 749,086 | 1,107,967 | |||||||
Amortization expense | 80,448 | 321,792 | |||||||
Income (loss) from operations | (525,951 | ) | (87,974 | ) | |||||
Interest expense | (10,179 | ) | (134,073 | ) | |||||
Gain on sale of discontinue operation | 521,443 | – | |||||||
Income (Loss) before taxes | (14,687 | ) | (222,047 | ) | |||||
Income taxes (benefit) | (32,397 | ) | (129,587 | ) | |||||
Net income (loss) from Discontinued operations | $ | 17,710 | $ | (92,460 | ) | ||||
As a result of the decision to exit the Government services business, the assets and liabilities to be disposed of are comprised of the following: | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Goodwill | – | 690,871 | |||||||
Intangible assets, net | – | 232,510 | |||||||
Note payable | – | 281,456 | |||||||
Deferred tax liability | – | 94,184 | |||||||
Non-controlling interest | – | 120,133 |
19_Note_Receivable
19 - Note Receivable | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Note Receivable | ' |
As part of sale of Lattice Government assets on April 2, 2013, the Company received a promissory note from purchaser for $700,000 which carries 3% annum interest rate payable in 12 equal quarterly installments payments of $61,216.03 over a 3 year period first installment being 7/31/2013 with each successive payment being on the 15th day of the month following close each calendar quarter. The note is secured by personal guarantee by the principal owner of Purchaser. As of the filing date, note, see note 4(d). the Company has not received the initial three installments due to the writ of garnishment issued with regards to the default on the December 13, 2011 note, See note 4(d). |
20_Subsequent_Event
20 - Subsequent Event | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Subsequent Event | ' |
Management is currently engaged in financing activities to properly capitalize and position the Company to execute its strategic growth plans. As a part of these activities, to date, during February and March, 2014, the Company issued 8,860,489 restricted common shares at a price of $0.12 per share in a series of private placements for a gross financing amount of $1,063,259. Of which, net cash proceeds of $794,441 were received and $268,818 was derived from the conversion of principal and accrued interest on existing notes with several investors. |
1_Organization_and_summary_of_1
1 - Organization and summary of significant accounting policies (Policies) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Organization And Summary Of Significant Accounting Policies Policies | ' | ||
Organization | ' | ||
Lattice Incorporated (the “Company”) was incorporated in the State of Delaware May 1973 and commenced operations in July 1977. The Company began as a provider of specialized solutions to the telecom industry. Throughout its history Lattice has adapted to the changes in this industry by reinventing itself to be more responsive and open to the dynamic pace of change experienced in the broader converged communications industry of today. Currently Lattice provides advanced solutions for several vertical markets. The greatest change in operations is in the shift from being a component manufacturer to a solution provider focused on developing applications through software on its core platform technology. To further its strategy of becoming a solutions provider, the Company acquired a majority interest in “SMEI” in February 2005. In September 2006 the Company purchased all of the issued and outstanding shares of the common stock of Lattice Government Services, Inc., (“LGS”) (formerly Ricciardi Technologies Inc. (“RTI”)). LGS was founded in 1992 and provides software consulting and development services for the command and control of biological sensors and other Department of Defense requirements to United States federal governmental agencies either directly or through prime contractors of such governmental agencies. LGS’s proprietary products include SensorView, which provides clients with the capability to command, control and monitor multiple distributed chemical, biological, nuclear, explosive and hazardous material sensors. In December 2009 we changed RTI’s name to Lattice Government Services Inc. In January 2007, we changed our name from Science Dynamics Corporation to Lattice Incorporated. On May 16, 2011 we acquired 100% of the shares of Cummings Creek Capital, a holding Company which itself owns 100% of the shares of CLR Group Limited. (“CLR”). CLR is a government contractor which complements our Government Services business by expanding markets and service offerings. Together the SMEI, RTI and CLR acquisitions formed our federal government services business unit. Through 2012 we operated in two segments, our federal government services unit and our telecommunication services business. | |||
As part of the Company’s strategy to focus on its higher growth potential communications business, the Company decided during the first quarter of 2013 to exit the Government services segment which derived its revenues mainly from contracts with federal government Dept of Defense agencies either as prime contractor or as a subcontractor to another prime contractor. On April 2, 2013, we entered an Asset Purchase Agreement (“Purchase Agreement”) with Blackwatch International, Inc. (“Blackwatch”), a Virginia corporation, pursuant to which we primarily sold our government Dept. of Defense (DoD) contract vehicles for approximately $1.2 million. These assets essentially comprised our Federal Government services segment operations. The Company retained the residual assets and liabilities of Lattice Government services, Inc. We ceased operations of the federal government business back in April, 2013 coinciding with the sale of assets to Blackwatch. For the years ended 2013 and 2012 the financial results of the government services business are being reported as discontinued operations. | |||
On November 1, 2013 we closed on the purchase of certain of assets with Innovisit, LLC. The assets mainly acquired included; awarded contracts, customer lists, and its intellectual property rights to the Video Visitation software assets. Under the agreement, the workforce and operating infrastructure supporting Innovisit’s business operations are being transferred to Lattice, including but not limited to certain employees, and leases. This acquisition complimented the product offering of our telecom services business. | |||
Basis of Presentation going concern | ' | ||
At December 31, 2013 the Company had a working capital deficiency of $4,607,000. This compared to a working capital deficiency of $3,566,000 at December 31. 2012. The Company’s working capital deficiency and constrained liquidity raises substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is highly dependent upon (i) management’s ability to achieve its planned operating cashflows (ii), maintain continued availability on its line of credit and the ability to obtain alternative financing to fund capital requirements and/or debt obligations coming due. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty. During March 2014, the Company is in the process of raisining capital from the issuance of common stock. To date, we have received and closed on approximately $1.0 million of funding from issuing common stock to various accredited investors. These activities continue as of the date of this filing. The proceeds will be used for general working capital reasons to improve our balance sheet and accommodate strategic growth plans in our telecommunication business. | |||
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. | |||
Principles of consolidation | ' | ||
The consolidated financial statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. All significant inter-company accounts and transactions have been eliminated in consolidation. For those consolidated subsidiaries where Company ownership is less than 100%, the outside stockholders’ interests are shown as non-controlling interest. Investments in affiliates over which the Company has significant influence but not a controlling interest are carried on the equity basis of accounting. | |||
Use of estimates | ' | ||
The preparation of these financial statements in accordance with accounting principles generally accepted in the United States (US GAAP) requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and judgments are based on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustment. US GAAP requires estimates and judgments in several areas, including those related to impairment of goodwill and equity investments, revenue recognition, recoverability of inventory and receivables, the useful lives, long lived assets such as property and equipment, the future realization of deferred income tax benefits and the recording of various accruals. The ultimate outcome and actual results could differ from the estimates and assumptions used. | |||
Fair Value Disclosures | ' | ||
Management believes that the carrying values of financial instruments, including, cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value as a result of the short-term maturities of these instruments. As discussed in Note 1(m), below, derivative financial instruments are carried at fair value. | |||
The carrying values of the Company’s long term debts and capital lease obligations approximates their fair values based upon a comparison of the interest rates and terms of such debt to the rates and terms of debt currently available to the Company. | |||
Cash | ' | ||
The Company maintains its cash balances with various financial institutions. Balance at various times during the year may exceed Federal Deposit Insurance Corporation limits. | |||
Inventories | ' | ||
Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. | |||
Income Taxes | ' | ||
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. At December 31, 2013 and 2012, deferred tax liabilities were $0 and $94,184, respectively. | |||
We account for uncertain tax positions using a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, based on the technical merits. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various possible outcomes. We re-evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. We did not recognize any additional tax benefit or additional charges to our tax provision during 2013 and 2012. As of December 31, 2013 and 2012, the Company has no liability related to uncertain tax positions. | |||
The Company’s 2010, 2011, 2012 and 2013 federal and state tax returns remain subject to examination by the respective taxing authorities. In addition, net operating losses and research tax credits arising from prior years are also subject to examination at the time that they are utilized in future years. Neither the Company’s federal or state tax returns are currently under examination. | |||
Revenue Recognition | ' | ||
Revenue is recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable is reasonably assured. Revenue from product sales is recognized when the goods are shipped and title passes to the customer. | |||
The company applies the guidance of SOP-97-2 with regards to its software products sold. Under this guidance, the Company determined that its product sales do not contain multiple deliverables for an extended period beyond delivery where bifurcation of multiple elements is necessary. The software is embedded in the products sold and shipped. Revenue is recognized upon delivery, installation and acceptance by the customer. PCS (post-contract support) and upgrades are billed separately and when rendered or delivered and not contained in the original arrangement with the customer. Installation services are included with the original customer arrangement but are rendered at the time of delivery of the product and invoicing. | |||
In our Government Services segment (Discontinued operations), our revenues are derived from IT and business process outsourcing services under cost-plus, time-and-material, and fixed-price contracts, which may extend up to 5 years. Under our fixed-price contracts, revenues are generally recorded as delivery is made. For time-and-material contracts, revenues are computed by multiplying the number of direct labor-hours expended in the performance of the contract by the contract billing rates and adding other billable direct costs. Under cost-plus contracts, revenues are recognized as costs are incurred and include an estimate of applicable fees earned. Services provided over the term of these arrangements may include, network engineering, architectural guidance, database management, expert programming and functional area expert analysis Revenue is generally recognized when the service is provided and the amount earned is not contingent upon any further event. | |||
Our fixed price contracts are primarily based on unit pricing (labor hours) or level of effort. The Company recognizes revenue for the number of units delivered in any given fiscal period. Accordingly, these contracts do not fall within the scope of SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts , where revenue is recognized on the percentage-of-completion method using costs incurred in relation to total estimated costs. | |||
Under cost reimbursable contracts, the Company is reimbursed for allowable costs, and paid a fee, which may be fixed or performance-based. Revenues on cost reimbursable contracts are recognized as costs are incurred plus an estimate of applicable fees earned. The Company considers fixed fees under cost reimbursable contracts to be earned in proportion of the allowable costs incurred in performance of the contract. For cost reimbursable contracts that include performance based fee incentives, the Company recognizes the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as the Company’s prior award experience and communications with the customer regarding performance. | |||
The allowability of certain costs under government contracts is subject to audit by the government. Certain indirect costs are charged to contracts using provisional or estimated indirect rates, which are subject to later revision based on government audits of those costs. Management is of the opinion that costs subsequently disallowed, if any, would not be significant. | |||
Revenues related to collect and prepaid calling services generated by the communication services segment are recognized during the period in which the calls are made. In addition, during the same period, the Company records the related telecommunication costs for validating, transmitting, billing and collection, and line and long distance charges, along with commissions payable to the facilities and allowances for uncollectible calls, based on historical experience. | |||
Government claims: Unapproved claims relate to contracts where costs have exceeded the customer’s funded value of the task ordered on our cost reimbursement type contract vehicles. The unapproved claims are considered to be probable of collection and have been recognized as revenue in previous years. Unapproved claims included as a component of our Accounts Receivable totaled approximately $1,244,000 and $1,555,000 as of December 31, 2013 and December 31, 2012. Consistent with industry practice, we classify assets and liabilities related to these claims as current, even though some of these amounts may not be realized within one year. | |||
Revenues recognition for Innovisit | |||
Revenues from construction contracts are included in contract revenue in the consolidated statements of operations and are recognized under the percentage-of-completion accounting method. The percent complete is measured by the cost incurred to date compared to the estimated total cost of each project. This method is used as management considers expended cost to be the best available measure of progress on these contracts, the majority of which are completed within one year, but may occasionally extend beyond one year. Inherent uncertainties in estimating costs make it at least reasonably possible that the estimates used will change within the near term and over the life of the contracts. | |||
Contract costs include all direct material and labor costs and those indirect costs related to contract performance and completion. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. General and administrative costs are charged to expense as incurred. | |||
Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income. Such revisions are recognized in the period in which they are determined. An amount equal to contract costs incurred that are attributable to claims is included in revenue when realization is probable and the amount can be reliably estimated. | |||
Costs and estimated earnings in excess of billings are comprised principally of revenue recognized on contracts (on the percentage-of-completion method) for which billings had not been presented to customers because the amount were not billable under the contract terms at the balance sheet date. In accordance with the contract terms, the unbilled receivables at December 31, 2013 will be billed in 2014. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized. | |||
Service Revenues are recorded when the service is provided and when collection can be reasonably assured | |||
Share-based payments | ' | ||
On January 1, 2006, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification 718-10, Accounting for Share-based payment , to account for compensation costs under its stock option plans and other share-based arrangements. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. | |||
For purposes of estimating fair value of stock options, we use the Black-Scholes-Merton valuation technique. For the twelve months ended December 31, 2013 and 2012, there was approximately $706,000 and $10,248 of total unrecognized compensation cost related to unvested share-based compensation awards granted under the equity compensation plans which do not include the effect of future grants of equity compensation, if any. The $706,000 will be amortized over the weighted average remaining service period. | |||
Depreciation, amortization and long-lived assets | ' | ||
Long-lived assets include: | |||
Property, plant and equipment - These assets are recorded at original cost. The Company depreciates the cost evenly over the assets’ estimated useful lives. For tax purposes, accelerated depreciation methods are used as allowed by tax laws. | |||
Goodwill- Goodwill represents the difference between the purchase price of an acquired business and the fair value of the net assets acquired and the liabilities assumed at the date of acquisition. Goodwill is not amortized. The Company tests goodwill for impairment annually ( or in interim periods if events or changes in circumstances indicate that its carrying amount may not be recoverable) by comparing the fair value of each reporting unit, as measured by discounted cash flows, to the carrying value to determine if there is an indication that potential impairment may exist. Absent an indication of fair value from a potential buyer or similar specific transactions, the Company believes that the use of this income approach method provides reasonable estimates of the reporting unit’s fair value. Fair value computed by this method is arrived at using a number of factors, including projected future operating results, economic projections and anticipated future cash flows. The Company reviews its assumptions each time goodwill is tested for impairment and makes appropriate adjustments, if any, based on facts and circumstances available at that time. There are inherent uncertainties, however, related to these factors and to management’s judgment in applying them to this analysis. Nonetheless, management believes that this method provides a reasonable approach to estimate the fair value of the Company’s reporting units. | |||
The income approach, which is used for the goodwill impairment testing, is based on projected future debt-free cash flow that is discounted to present value using factors that consider the timing and risk of the future cash flows. Management believes that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating and cash flow performance. This approach also mitigates most of the impact of cyclical downturns that occur in the reporting unit’s industry. The income approach is based on a reporting unit’s five year projection of operating results and cash flows that is discounted using a buildup approach. The projection is based upon management’s best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future capital expenditures and changes in future working capital requirements based on management projections. | |||
Identifiable intangible assets - The Company amortizes the cost of other intangibles over their useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are not amortized; however, they are tested annually for impairment and written down to fair value as required. | |||
At least annually, The Company reviews all long-lived assets for impairment. When necessary, charges are recorded for impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets. | |||
Fair Value of Financial Instruments | ' | ||
In accordance with FASB ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. | |||
In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: | |||
● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | ||
● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. | ||
● | Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value. | ||
As of December 31, 2013 and December 31, 2012, the derivative liabilities amounted to $122,698 and $57,634. In accordance with the accounting standards the Company determined that the carrying value of these derivatives approximated the fair value using the level 3 inputs. | |||
Derivative Financial Instruments and Registration Payment Arrangements | ' | ||
Derivative financial instruments, as defined in Financial Accounting Standard, consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g. interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets. The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has entered into various types of financing arrangements to fund its business capital requirements, including convertible debt and other financial instruments indexed to the Company’s own stock. These contracts require careful evaluation to determine whether derivative features embedded in host contracts require bifurcation and fair value measurement or, in the case of freestanding derivatives (principally warrants) whether certain conditions for equity classification have been achieved. In instances where derivative financial instruments require liability classification, the Company is required to initially and subsequently measure such instruments at fair value. Accordingly, the Company adjusts the fair value of these derivative components at each reporting period through a charge to income until such time as the instruments acquire classification in stockholders’ equity. See Note 9 for additional information. | |||
As previously stated, derivative financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. The Company estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, management considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, dividend yield, estimated terms and risk free rates) necessary to fair value these instruments. For complex derivative instruments, such as embedded conversion options, the Company generally uses the Flexible Monte Carlo valuation technique because it embodies all of the requisite assumptions (including credit risk, interest-rate risk and exercise/conversion behaviors) that are necessary to fair value these more complex instruments. For forward contracts that contingently require net-cash settlement as the principal means of settlement, the Company projects and discounts future cash flows applying probability-weightings to multiple possible outcomes. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our income (loss) will reflect the volatility in these estimate and assumption changes. | |||
Segment Reporting | ' | ||
FASB ASC 280-10-50, “Disclosure about Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company exited its Government services business in April 2013 and is reporting the operating results of that unit as discontinued operations in the financial reports. Accordingly, the Company operates in one segments during the year ended December 31, 2013 (Telecom services). | |||
Basic and diluted income (loss) per common share | ' | ||
The Company calculates income (loss) per common share in accordance with Statements on Financial Accounting Standards ASC Topic 260, Earnings Per Share (“ASC 260”). Basic and diluted income (loss) per common share is computed based on the weighted average number of common shares outstanding. Common share equivalents (which consist of convertible preferred stock, options and warrants) are excluded from the computation of diluted loss per share since the effect would be anti-dilutive. Common share equivalents which could potentially dilute basic earnings per share in the future, and which were excluded from the computation of diluted loss per share, totaled approximately 58 million shares and 54 million shares at December 31, 2013 and 2012, respectively. | |||
Recent accounting pronouncements | ' | ||
In July, 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force), or ASU 2013-11. The amendments in ASU 2013-11 provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in ASU No. 2013-11 do not require new recurring disclosures. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments in ASU No. 2013-11 are not expected to have a material impact on our consolidated financial statements. | |||
In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, or ASU 2012-02. ASU 2012-02 gives entities an option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the long-lived intangible asset are impaired. If, based on its qualitative assessment, an entity concludes that it is more likely than not that the fair value of an indefinite lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if an entity concludes otherwise, quantitative impairment testing is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. ASU 2012-02 is not expected to have a material impact on our financial position or results of operations. | |||
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities, or ASU 2011-11. ASU 2011-11 enhances current disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position. Entities are required to provide both net and gross information for these assets and liabilities in order to facilitate comparability between financial statements prepared in conformity with GAAP and financial statements prepared on the basis of International Financial Reporting Standards. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those years. ASU 2011-11 is not expected to have a material impact on our financial position or results of operations. | |||
We do not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period. | |||
Reclassification | ' | ||
Certain 2012 amounts have been reclassified to conform to current year presentation |
3_Property_and_Equipment_Table
3 - Property and Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment | ' | ||||||||
31-Dec-13 | 31-Dec-12 | ||||||||
Computers, fixtures and equipment | $ | 3,157,729 | $ | 2,641,947 | |||||
Less : accumulated depreciation | (2,295,820 | ) | (2.123,503 | ) | |||||
Total | $ | 861,712 | $ | 518,444 |
4_Notes_payable_Tables
4 - Notes payable (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Notes payable | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Bank line-of-credit (a) | $ | – | $ | 232,807 | |||||
Notes payable to Stockholder/director (b) | 192,048 | 243,315 | |||||||
Capital lease payable (c) | – | 25,089 | |||||||
Notes Payable (d) | 1,999,676 | 1,892,941 | |||||||
Note Payable, Innovisit (e) | 510,000 | – | |||||||
Notes payable Cummings Creek/CLR (f) (disposed of liability) | – | 281,456 | |||||||
Total notes payable | 2,701,724 | 2,675,608 | |||||||
Less current maturities | (2,601,724 | ) | (2,258,416 | ) | |||||
Long-term debt | $ | 100,000 | $ | 417,192 |
5_Stockholders_Deficit_Tables
5 - Stockholder's Deficit (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Equity [Abstract] | ' | ||||||||||||
Summary of warrant | ' | ||||||||||||
Number of shares under warrants | Weighted Average Exercise price | Weighted Average Remaining Contractual term in Years | Aggregate Intrinsic Value | ||||||||||
Outstanding at December 31, 2011 | 3,778,233 | $ | 0.81 | 3 | $ | – | |||||||
Granted | - | – | - | – | |||||||||
Exercised | - | – | - | – | |||||||||
Cancelled/expired | - | – | - | – | |||||||||
Outstanding at December 31, 2012 | 3,778,233 | $ | 0.08 | 2 | $ | – | |||||||
Granted | 1,950,000 | $ | 0.11 | 4 | |||||||||
Exercised | - | ||||||||||||
Cancelled/expired | -950,000 | $ | 0.1 | - | |||||||||
Outstanding at December 31, 2013 | 4,778,233 | $ | 0.67 | 3.5 | $ | – | |||||||
Vested and exercisable at December 31, 2013 | 4,778,233 | ||||||||||||
Vested and exercisable at December 31, 2012 | 3,778,223 | ||||||||||||
2013 | 2012 | ||||||||||||
Weighted average fair value | $ 0.08 - $ 0.14 | – | |||||||||||
Risk-free interest rate | .73% - 1.72% | – | |||||||||||
Volatility | 159.1% - 179.2% | – | |||||||||||
Terms in years | 4 - 4.2 | – | |||||||||||
Dividend yield | 0% | – |
6_Asset_Purchase_Innovisit_Tab
6 - Asset Purchase - Innovisit (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Business Combinations [Abstract] | ' | ||||
Purchase price to acquired net assets | ' | ||||
Amount | |||||
Purchase price: | |||||
Note Payable | $ | 590,000 | |||
Preliminary Allocation of Purchase Price: | |||||
Intangible assets: | |||||
Software (Video conferencing) | $ | 302,794 | |||
Contract backlog | 148,406 | ||||
Tangible assets: | |||||
Cash | 5 | ||||
Inventory | 138,795 | ||||
Total purchase price allocation | $ | 590,000 |
7_Intangible_assets_Tables
7 - Intangible assets (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||||
Amortizable assets | ' | ||||||||||||||||||
Gross | Accumulated | Impairment | Net | Weighted | |||||||||||||||
Carrying | Carrying | average | |||||||||||||||||
remaining | |||||||||||||||||||
amortization | |||||||||||||||||||
Amount | Amortization | charge | Amount | period | |||||||||||||||
31-Dec-13 | |||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||
IP Rights Agreement | 1,300,000 | (519,988 | ) | – | 780,012 | 3.86 years | |||||||||||||
Customer contracts | 148,406 | (32,979 | ) | – | 115,427 | 0.58 years | |||||||||||||
$ | 1,448,406 | $ | (552,967 | ) | $ | – | $ | 895,439 | |||||||||||
Gross | Accumulated | Impairment | Net | Weighted | |||||||||||||||
Carrying | Carrying | average | |||||||||||||||||
remaining | |||||||||||||||||||
amortization | |||||||||||||||||||
Amount | Amortization | charge | Amount | period | |||||||||||||||
31-Dec-12 | |||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||
IP Rights Agreement | 1,300,000 | (389,992 | ) | – | 910,008 | 4.86 years | |||||||||||||
Total intangible amortization expense | ' | ||||||||||||||||||
2014 | 245,427 | ||||||||||||||||||
2015 | 130,000 | ||||||||||||||||||
2016 | 130,000 | ||||||||||||||||||
2017 | 130,000 | ||||||||||||||||||
2018 | 130,000 | ||||||||||||||||||
Thereafter | 130,012 | ||||||||||||||||||
Total | $ | 895,439 |
8_Recurring_Fair_Value_Measure1
8 - Recurring Fair Value Measurements (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Recurring Fair Value Measurements of liability | ' | ||||||||||||||||
Quoted Prices In Active Markets for Identical Assets | Significant | ||||||||||||||||
Other | Significant | ||||||||||||||||
Fair Value at | Observable | Unobservable | |||||||||||||||
Inputs | Inputs | ||||||||||||||||
December 31, 2013 | ( Level 1) | ( Level 2) | ( Level 3) | ||||||||||||||
Liabilities | |||||||||||||||||
Derivative liabilities | $ | 122,698 | – | – | $ | 122,698 | |||||||||||
Fair Value at | |||||||||||||||||
December 31, 2012 | |||||||||||||||||
Liabilities | |||||||||||||||||
Derivative liabilities | $ | 57,634 | – | – | $ | 57,634 |
11_Income_Taxes_Tables
11 - Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Tax Provision Benefit | ' | ||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Current | – | – | |||||||
Deferred | – | (129,588 | ) | ||||||
The components of the deferred tax assets (liability) as of: | |||||||||
Net operating loss carryforward | $ | 7,721,735 | $ | 7,486,772 | |||||
Stock base compensation | 455,984 | 430,305 | |||||||
Executive compensation | 40,200 | 40,200 | |||||||
Total Deferred tax Asset | 8,217,919 | 7,957,277 | |||||||
Valuation allowance for Deferred tax asset | (8,217,919 | ) | (7,957,277 | ) | |||||
Deferred tax asset | – | – | |||||||
Deferred tax liability: | |||||||||
Intangible Assets | – | (94,184 | ) | ||||||
Sec 481c | – | – | |||||||
Net deferred tax long term | (94,184 | ) | |||||||
Net deferred tax | $ | – | $ | (94,184 | ) | ||||
Provision for income taxes | ' | ||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Provision (benefit) for taxes using statutory rate | $ | (340,791 | ) | $ | (235,236 | ) | |||
State taxes, net of federal tax benefit | 102,543 | 12,838 | |||||||
Permanent differences: | |||||||||
Non-deductible expense | 236,248 | 92,810 | |||||||
Provision (Benefit) for income taxes | $ | 2,000 | $ | (129,588 | )* | ||||
_________ | |||||||||
* included in Discontinued operations |
12_Commitments_Tables
12 - Commitments (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Future minimum lease payments operating leases | ' | ||||
Operating | |||||
Leases | |||||
2014 | $ | 67,413 | |||
2015 | 51,211 | ||||
2016 | – | ||||
Total minimum lease payments | $ | 118,624 |
13_ShareBased_Payments_Tables
13 - Share-Based Payments (Tables) | 12 Months Ended | ||||||||||||||
Dec. 31, 2013 | |||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||
Stock option weighted-average assumptions | ' | ||||||||||||||
2013 | |||||||||||||||
Expected Volatility | 174% | ||||||||||||||
Expected term | 10 years | ||||||||||||||
Fisk-Free interest rate | 2.86% | ||||||||||||||
Dividend yield | 0% | ||||||||||||||
Annual forfeiture rate | 10% | ||||||||||||||
Weighted-average estimated fair value of options granted | $ | 0.1094 | |||||||||||||
Stock Option Award Plan | ' | ||||||||||||||
Number of | Weighted | Weighted | Aggregate | ||||||||||||
shares | Average | Average | Intrinsic | ||||||||||||
Exercise | Remaining Contractual | Value | |||||||||||||
price | term in Years | ||||||||||||||
Outstanding at December 31, 2011 | 7,436,500 | $ | 0.08 | 5.6 | $ | 282,000 | |||||||||
Granted | |||||||||||||||
Exercised | |||||||||||||||
Cancelled/expired | (70,000 | ) | $ | 0.08 | |||||||||||
Outstanding at December 31, 2012 | 7,366,500 | $ | 0.08 | 4.7 | $ | – | |||||||||
Granted | 9,677,000 | $ | 0.12 | 10 | |||||||||||
Exercised | – | ||||||||||||||
Cancelled/expired | (92,000 | ) | $ | 0.1 | |||||||||||
Outstanding at December 31, 2013 | 16,944,500 | $ | 0.1 | 2.1 | $ | – | |||||||||
Vested and exercisable at December 31, 2013 | 7,994,500 | ||||||||||||||
Vested and exercisable at December 31, 2012 | 7,193,167 |
18_Sale_of_Assets_of_Discontin1
18 - Sale of Assets of Discontinued Operations (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | ||||||||
Asset Purchase agreement | ' | ||||||||
Consideration received from sale of Government assets: | |||||||||
Cash | $ | 200,000 | |||||||
Seller notes assumed by buyer | 282,456 | ||||||||
Note receivable from buyer** | 700,000 | ||||||||
Total consideration | $ | 1,182,456 | |||||||
Other Contingencies considerations: | |||||||||
3% of gross revenues on Phase II of an SBIR contract for 24 months if awarded. | – | ||||||||
Pay up to $100,000 for each of the next two years in the event that certain contract are rebid and funded | – | ||||||||
Total consideration received on sale of assets | 1,182,456 | ||||||||
Carrying value of Lattice Government assets sold (see below) | 661,013 | ||||||||
Gain (loss) on sale of Government segment assets | $ | 521,443 | |||||||
Carrying value of assets disposed of: | |||||||||
Goodwill and intangibles | $ | 842,933 | |||||||
Non-controlling interest | (120,133 | ) | |||||||
Deferred tax liability | (61,787 | ) | |||||||
$ | 661,013 | ||||||||
Services segment included in the net income (loss) from discontinued operations | ' | ||||||||
Twelve Months Ended | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Revenue | $ | 603,616 | $ | 3,243,377 | |||||
Cost of Revenue | 300,033 | 1,901,592 | |||||||
Gross Profit | 303,583 | 1,341,785 | |||||||
50.30% | 41.50% | ||||||||
Selling, general and administrative expenses | 749,086 | 1,107,967 | |||||||
Amortization expense | 80,448 | 321,792 | |||||||
Income (loss) from operations | (525,951 | ) | (87,974 | ) | |||||
Interest expense | (10,179 | ) | (134,073 | ) | |||||
Gain on sale of discontinue operation | 521,443 | – | |||||||
Income (Loss) before taxes | (14,687 | ) | (222,047 | ) | |||||
Income taxes (benefit) | (32,397 | ) | (129,587 | ) | |||||
Net income (loss) from Discontinued operations | $ | 17,710 | $ | (92,460 | ) | ||||
The assets and liabilities to be disposed | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
(unaudited) | |||||||||
Goodwill | – | 690,871 | |||||||
Intangible assets, net | – | 232,510 | |||||||
Note payable | – | 282,456 | |||||||
Deferred tax liability | – | 61,787 | |||||||
Non-controlling interest | – | 120,133 |
1_Organization_and_summary_of_2
1 - Organization and summary of significant accounting policies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Working capital deficit | ($4,490,000) | ($3,561,000) |
Deferred tax liabilities | 0 | 94,184 |
Unrecognized compensation cost | 706,000 | 10,248 |
Derivative liabilities | 122,698 | 57,634 |
Anitdilutive shares excluded from EPS | 58,000,000 | 54,000,000 |
Unapproved claims | ' | ' |
Accounts Receivable | $1,244,000 | $1,555,000 |
2_Accounts_Receivable_Details_
2 - Accounts Receivable (Details Narrative) (Unapproved claims, USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Unapproved claims | ' | ' |
Accounts Receivable | $1,244,000 | $1,555,000 |
Reserve allowance | $311,000 | ' |
3_Property_and_Equipment_Detai
3 - Property and Equipment (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Property, Plant and Equipment [Abstract] | ' | ' |
Computers, fixtures and equipment | $3,157,729 | $2,641,947 |
Less : accumulated depreciation | -2,295,820 | -2,123,503 |
Total Property and Equipment | $861,712 | $518,444 |
3_Property_and_Equipment_Detai1
3 - Property and Equipment (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Property, Plant and Equipment [Abstract] | ' | ' |
Depreciation expense | $263,511 | $254,522 |
4_Notes_payable_Details
4 - Notes payable (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Debt Disclosure [Abstract] | ' | ' |
Bank line-of-credit | $0 | $232,807 |
Notes payable to Stockholder/director | 192,048 | 243,315 |
Capital lease payable | 0 | 25,089 |
Notes Payable | 1,999,676 | 1,892,941 |
Note Payable, Innovisit | 510,000 | 0 |
Notes payable Cummings Creek/CLR (disposed of liability) | 0 | 281,456 |
Total notes payable | 2,701,724 | 2,675,608 |
Less current maturities | -2,601,724 | -2,033,312 |
Long-term debt | $100,000 | $422,350 |
5_Stockholders_Deficit_Details
5 - Stockholders' Deficit (Details-Warrant activity) (Warrant [Member], USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Warrant [Member] | ' | ' |
Number of shares under warrants outstanding, Beginning | 3,778,233 | 3,778,233 |
Number of shares under warrants, Granted | 1,950,000 | ' |
Number of shares under warrants, Exercised | ' | ' |
Number of shares under warrants, Cancelled/expired | -950,000 | ' |
Number of shares under warrants outstanding, Ending | 4,778,233 | 3,778,233 |
Number of shares under warrant, Vested and exercisable | 4,778,233 | 3,778,223 |
Weighted Average Exercise price, Warrants outstanding Beginning | 0.08 | 0.81 |
Weighted Average Exercise price, Warrants Granted | $0.11 | ' |
Weighted Average Exercise price, Warrants Exercised | ' | ' |
Weighted Average Exercise price, Warrants Cancelled/expired | $0.10 | ' |
Weighted Average Exercise price, Warrants outstanding Ending | 0.67 | 0.08 |
Weighted Average Remaining Contractual term in Years, Warrants outstanding | '3 years 6 months | '2 years |
Weighted Average Remaining Contractual term in Years, Warrants granted | '4 years | ' |
Aggregate Intrinsic Value, Warrants outstanding Beginning | $0 | $0 |
Aggregate Intrinsic Value, Warrants outstanding Ending | $0 | $0 |
5_Stockholders_Deficit_Details1
5 - Stockholders' Deficit (Details-Assumptions) (Warrant [Member]) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Warrant [Member] | ' | ' |
Weighted average fair value minimum | ' | 8.00% |
Weighted average fair value maximum | ' | 14.00% |
Risk-free interest rate minimum | ' | 73.00% |
Risk-free interest rate maximum | ' | 172.00% |
Volatility minimum | ' | 15910.00% |
Volatility maximum | ' | 17920.00% |
Terms in years minimum | ' | '10 years |
Terms in years maximum | ' | '4 years 2 months 12 days |
Dividend yield | ' | 0.00% |
6_Asset_Purchase_Innovisit_Det
6 - Asset Purchase - Innovisit (Details) (USD $) | Dec. 31, 2013 |
Business Combinations [Abstract] | ' |
Purchase price: Note Payable | $590,000 |
Preliminary Allocation of Purchase Price: | ' |
Intangible assets: Software (Video conferencing) | 302,794 |
Intangible assets: Contract backlog | 148,406 |
Tangible assets: Cash | 5 |
Tangible assets: Inventory | 138,795 |
Total purchase price allocation | $590,000 |
7_Intangible_assets_DetailsAmo
7 - Intangible assets (Details-Amortization table) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Gross Carrying Amount | $1,448,406 | ' |
Accumulated Amortization | -552,967 | ' |
Impairment charge | 0 | ' |
Net Carrying Amount | 895,439 | 910,008 |
IP Rights Agreement | ' | ' |
Gross Carrying Amount | 1,300,000 | 1,300,000 |
Accumulated Amortization | -519,988 | -389,992 |
Impairment charge | 0 | 0 |
Net Carrying Amount | 780,012 | 910,008 |
Weighted average remaining amortization period | '3 years 10 months 10 days | '4 years 10 months 10 days |
Customer contracts | ' | ' |
Gross Carrying Amount | 148,406 | ' |
Accumulated Amortization | -32,979 | ' |
Impairment charge | 0 | ' |
Net Carrying Amount | $115,427 | ' |
Weighted average remaining amortization period | '6 months 29 days | ' |
7_Intangible_assets_DetailsAnn
7 - Intangible assets (Details-Annual amortization schedule) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' |
2014 | $245,427 | ' |
2015 | 130,000 | ' |
2016 | 130,000 | ' |
2017 | 130,000 | ' |
2018 | 130,000 | ' |
Thereafter | 130,012 | ' |
Total | $895,439 | $910,008 |
7_Intangible_assets_Details_Na
7 - Intangible assets (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' |
Total intangible amortization expense | $162,963 | $129,996 |
8_Recurring_Fair_Value_Measure2
8 - Recurring Fair Value Measurements (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Liabilities | ' | ' |
Derivative liabilities | $122,698 | $57,634 |
Total Liabilities | 122,698 | 57,634 |
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | ' | ' |
Liabilities | ' | ' |
Derivative liabilities | ' | ' |
Significant Other Observable Inputs Level 2 [Member] | ' | ' |
Liabilities | ' | ' |
Derivative liabilities | ' | ' |
Significant Unobservable Inputs [Level 3] | ' | ' |
Liabilities | ' | ' |
Derivative liabilities | $122,698 | $57,634 |
9_Derivative_financial_instrum1
9. Derivative financial instruments (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ' |
Derivative liability | $122,698 | $57,634 |
11_Income_Taxes_DetailsDeferre
11 - Income Taxes (Details-Deferred taxes) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax Disclosure [Abstract] | ' | ' |
Current | $0 | $0 |
Deferred | 0 | -129,588 |
The components of the deferred tax assets (liability) as of: | ' | ' |
Net operating loss carryforward | 7,721,735 | 7,486,772 |
Stock base compensation | 455,984 | 430,305 |
Executive compensation | 40,200 | 40,200 |
Total Deferred tax Asset | 8,217,919 | 7,957,277 |
Valuation allowance for Deferred tax asset | -8,217,919 | -7,957,277 |
Deferred tax asset | 0 | 0 |
Deferred tax liability: | ' | ' |
Intangible Assets | 0 | -94,184 |
Sec 481c | 0 | 0 |
Net deferred tax long term | 0 | -94,184 |
Net deferred tax | $0 | ($94,184) |
11_Income_Taxes_DetailsTax_pro
11 - Income Taxes (Details-Tax provision) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Provision (benefit) for taxes using statutory rate | ($340,791) | ($235,236) |
State taxes, net of federal tax benefit | 102,543 | 12,838 |
Permanent differences: | ' | ' |
Non-deductible expense | 236,248 | 92,810 |
Provision (Benefit) for income taxes | $2,000 | ($129,588) |
12_Commitments_Details
12 - Commitments (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $67,413 |
2015 | 51,211 |
2016 | ' |
Total minimum lease payments | $118,624 |
12_Commitments_Details_Narrati
12. Commitments (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Commitments and Contingencies Disclosure [Abstract] | ' | ' |
Rent expense | $110,826 | $117,517 |
Accumulated depreciation for assets under capital lease | $28,248 | ' |
13_ShareBased_Payments_Details
13 - Share-Based Payments (Details-Assumptions) (Employee Stock Option [Member], USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Employee Stock Option [Member] | ' |
Expected Volatility | 174.00% |
Expected term | '10 years |
Fisk-Free interest rate | 2.86% |
Dividend yield | $0 |
Annual forfeiture rate | 10.00% |
Weighted-average estimated fair value of options granted | $0.11 |
13_ShareBased_Payments_Details1
13 - Share-Based Payments (Details-Option activity) (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ' |
Number of shares Outstanding, Beginning Balance | 7,366,500 | 7,436,500 | ' |
Number of shares Granted | 9,670,000 | ' | ' |
Number of shares Exercised | ' | ' | ' |
Number of shares Cancelled/expired | -92,000 | -70,000 | ' |
Number of shares Outstanding, Ending Balance | 16,944,500 | 7,366,500 | 7,436,500 |
Number of shares Vested and exercisable | 7,994,500 | 7,193,167 | ' |
Weighted average exercise price Outstanding, Beginning Balance | $0.08 | $0.08 | ' |
Weighted average exercise price Granted | $0.12 | ' | ' |
Weighted average exercise price Cancelled/expired | $0.10 | $0.08 | ' |
Weighted average exercise price Outstanding, Ending Balance | $0.10 | $0.08 | $0.08 |
Weighted average remaining contractual life Outstanding, Ending Balance | '2 years 1 month 6 days | '4 years 8 months 12 days | '5 years 7 months 6 days |
Weighted average remaining contractual life Granted | '10 years | ' | ' |
Aggregate intrinsic value Outstanding, Ending Balance | ' | ' | $282,000 |
14_Benefit_Plan_Details_Narrat
14 - Benefit Plan (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Compensation and Retirement Disclosure [Abstract] | ' | ' |
Pension expense | $0 | $86,953 |
18_Sale_of_Assets_of_Discontin2
18. Sale of Assets of Discontinued Operations: (Details-Income discontinued operations) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Discontinued Operations and Disposal Groups [Abstract] | ' | ' |
Revenue | $603,616 | $3,243,377 |
Cost of Revenue | 300,033 | 1,901,592 |
Gross Profit | 303,583 | 1,341,785 |
Selling, general and administrative expenses | 749,086 | 1,107,967 |
Amortization expense | 80,448 | 321,792 |
Income (loss) from operations | -525,951 | -87,974 |
Interest expense | -10,179 | -134,073 |
Gain on sale of discontinued operation | 521,443 | 0 |
Income (Loss) before taxes | -14,687 | -222,047 |
Income taxes (benefit) | -32,397 | -129,587 |
Net income (loss) from Discontinued operations | $17,710 | ($92,460) |
18_Sale_of_Assets_of_Discontin3
18 .Sale of Assets of Discontinued Operations: (Details-Disposition of assets) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Discontinued Operations and Disposal Groups [Abstract] | ' | ' |
Goodwill | $0 | $690,871 |
Intangible assets, net | 0 | 232,510 |
Note payable | 0 | 281,456 |
Deferred tax liability | 0 | 94,184 |
Non-controlling interest | $0 | $120,133 |