Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 19-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | Lattice INC | |
Entity Central Index Key | 350644 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 46,652,707 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $334,801 | $255,954 |
Accounts receivable | 2,183,286 | 2,248,931 |
Inventories | 1,531 | 1,531 |
Note receivable - current | 120,000 | 90,000 |
Costs and gross profit in excess of billings | 408,288 | 449,129 |
Other current assets | 582,603 | 465,654 |
Total current assets | 3,630,509 | 3,511,199 |
Property and equipment, net | 633,899 | 692,198 |
Other intangibles, net | 617,512 | 650,012 |
Note receivable - long term | 417,750 | 485,000 |
Other assets | 76,071 | 76,071 |
Total assets | 5,375,741 | 5,414,480 |
Current liabilities: | ||
Accounts payable | 1,317,051 | 1,377,187 |
Accrued expenses | 2,602,543 | 2,475,140 |
Customer advances | 1,556,351 | 1,187,225 |
Notes payable - current, net of debt discount | 1,845,099 | 1,418,067 |
Derivative liability | 50,593 | 69,765 |
Deferred Revenue | 48,638 | 82,628 |
Total current liabilities | 7,420,275 | 6,610,012 |
Long term liabilities: | ||
Derivative liability | 443,961 | 771,198 |
Convertible note payable, net of debt discount | 423,114 | 378,364 |
Total long term liabilities | 867,075 | 1,149,562 |
Total liabilities | 8,287,350 | 7,759,574 |
Shareholders' equity (deficit) | ||
Common stock - .01 par value, 200,000,000 authorized, 55,593,628 and 53,879,348 issued and outstanding, respectively | 555,936 | 543,794 |
Additional paid-in capital | 45,618,141 | 45,485,245 |
Common stock subscribed - 500,000 shares | 5,000 | 0 |
Accumulated deficit | -48,606,191 | -47,893,655 |
Accumulated other comprehensive income | 434 | 2,451 |
Stockholders' Equity before Treasury Stock | -2,353,513 | -1,786,998 |
Stock held in treasury, at cost | -558,096 | -558,096 |
Total shareholders' equity (deficit) | -2,911,609 | -2,345,094 |
Total liabilities and shareholders' equity (deficit) | 5,375,741 | 5,414,480 |
Series A Preferred Stock | ||
Shareholders' equity (deficit) | ||
Preferred Stock, Value, Issued | 52,058 | 54,058 |
Series B Preferred Stock | ||
Shareholders' equity (deficit) | ||
Preferred Stock, Value, Issued | 10,000 | 10,000 |
Series C Preferred Stock | ||
Shareholders' equity (deficit) | ||
Preferred Stock, Value, Issued | 5,200 | 5,200 |
Series D Preferred Stock | ||
Shareholders' equity (deficit) | ||
Preferred Stock, Value, Issued | $5,909 | $5,909 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
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 | 55,593,628 | 53,879,348 |
Common stock, shares outstanding | 55,593,628 | 53,879,348 |
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 | 5,205,815 | 5,405,815 |
Preferred stock, shares outstanding | 5,205,815 | 5,405,815 |
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 | 502,160 |
Preferred stock, shares outstanding | 1,000,000 | 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 $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Revenue | $1,509,671 | $2,333,841 |
Cost of Revenue | 985,102 | 1,440,871 |
Gross Profit | 524,569 | 892,970 |
Operating expenses: | ||
Selling, general and administrative | 1,079,409 | 918,002 |
Research and development | 309,239 | 266,782 |
Total operating expenses | 1,388,648 | 1,184,784 |
Income (loss) from operations | -864,079 | -291,814 |
Other income (expense): | ||
Derivative income (expense) | 346,409 | -13,043 |
Amortization of deferred financing fees | -25,833 | -7,820 |
Write-off of note receivable | -37,250 | 0 |
Interest expense | -125,506 | -164,115 |
Total other income (expense) | 157,820 | -184,978 |
Income (Loss) before taxes | -706,259 | -476,792 |
Income taxes | 0 | 0 |
Net income (loss) | -706,259 | -476,792 |
Preferred stock dividends | -6,277 | -6,277 |
Net income (loss) attribuable to common shareholders | -712,536 | -483,069 |
Income (loss) per common share | ||
Basic | ($0.01) | ($0.01) |
Diluted | ($0.01) | ($0.01) |
Weighted average shares: | ||
Basic | 53,911,094 | 36,740,854 |
Diluted | 53,911,094 | 36,740,854 |
Comprehensive income (loss) | ||
Net income (loss) | -706,259 | -476,792 |
Foreign currency translation gain (loss) | -2,017 | 0 |
Comprehensive income (loss) | ($708,276) | ($476,792) |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Cash flow from operating activities: | ||
Net income (loss) | ($706,259) | ($476,792) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Write-off of note receivable | 37,250 | 0 |
Derivative (income) expense | -346,409 | 13,043 |
Amortization of intangible assets | 32,500 | 81,968 |
Stock issued for services | 15,000 | 0 |
Amortization of debt discount | 51,000 | 113,625 |
Amortization of deferred financing fees | 25,833 | 6,921 |
Share-based compensation | 58,038 | 58,039 |
Depreciation | 79,452 | 91,905 |
Bad debt expense | 21,680 | 0 |
(Increase) decrease in: | ||
Accounts receivable | 43,965 | -77,410 |
Costs in excess of billings | 40,841 | -8,393 |
Other assets | 30,218 | -42,063 |
Increase (decrease) in: | ||
Accounts payable and accrued liabilities | -9,010 | 239,425 |
Costs in excess of billings and gross profit | 0 | -45,796 |
Deferred Revenue | -33,990 | 0 |
Customer advances | 369,126 | -37,320 |
Total adjustments | 415,494 | 393,944 |
Net cash used in operating activities | -290,765 | -82,848 |
Cash Used in investing activities: | ||
Cash paid for equipment | -21,153 | -10,352 |
Net cash used in investing activities | -21,153 | -10,352 |
Cash flows from financing activities: | ||
Cash paid for financing fees | -78,000 | 0 |
Payments on notes payable | -29,218 | -303,636 |
Proceeds from the issuance of common stock issued | 796,441 | |
Proceeds from the issuance of note payable | 500,000 | 0 |
Net cash provided by financing activities | 392,782 | 492,805 |
Effect of exchange rate changes on cash | -2,017 | 0 |
Net increase (decrease) in cash and cash equivalents | 78,847 | 399,605 |
Cash and cash equivalents - beginning of period | 255,954 | 312,703 |
Cash and cash equivalents - end of period | 334,801 | 712,308 |
Supplemental cash flow information | ||
Interest paid in cash | 61,258 | 35,413 |
Summary of Non cash Investing and Financing activities | ||
Dividends declared but not paid | 6,277 | 0 |
Common stock issued as prepayment for services | 75,000 | 0 |
Common stock issued for deferred financing fees | 70,000 | 0 |
Conversion of Notes Payable and Accrued Interest into Common Stock | $0 | $312,818 |
1_Organization_and_summary_of_
1. Organization and summary of significant accounting policies | 3 Months Ended | ||
Mar. 31, 2015 | |||
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 owned 100% of the shares of CLR Group Limited. (“CLR”), a government contractor. Together, the SMEI, RTI and CLR acquisitions formed our federal government services business unit, Lattice Government Services (“LGS”). 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 Department of Defense agencies either as a prime contractor or as a subcontractor to another prime contractor. On April 2, 2013, we entered into an Asset Purchase Agreement (“Purchase Agreement”) with Blackwatch International, Inc. (“Blackwatch”), a Virginia corporation, pursuant to which we sold our government Department of Defense contract vehicles, as an asset sale, for approximately $1.2 million. These assets essentially comprised our federal government services segment operations. The Company retained certain and liabilities of LGS. These assets included approximately $1.2 million in incurred cost claims relative to cost recoverable type contract vehicles. | |||
On November 1, 2013 the Company purchased certain assets of Innovisit, LLC. The acquired assets mainly included: awarded contracts, customer lists, and its intellectual property rights to video visitation software assets. Under the agreement, the workforce and operating infrastructure supporting Innovisit’s business operations have been transferred to Lattice, including but not limited to certain employees, and leases. This acquisition complemented the product offering of our telecom services business. | |||
In 2013, the Company established a wholly owned subsidiary, Lattice Communications Inc., to enable us to operate in Canada. During 2014, we started operating a call center and collecting fee income for processing prepaid deposits for a large Canadian telecom provider which operates Lattice technology systems to provide call provisioning services to correctional facilities located in Canada. | |||
b) Basis of Presentation Going Concern | |||
At March 31, 2015, our working capital deficiency was approximately $3,790,000 which compared to a working capital deficiency of $3,099,000 at December 31, 2014. Cash from operations and available capacity on current credit facilities are insufficient to cover liabilities currently due and the liabilities which will mature over the next twelve months. Additionally, we are extended on payables with trade creditors. We have several payment arrangements in place but face continuing pressures with trade creditors regarding overdue payables. These conditions raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern is highly dependent upon our ability to improve our operating cash flow, maintain our credit lines and secure additional capital. Management is currently engaged in raising capital with a goal of raising approximately $4,000,000, the proceeds of which to be used to improve working capital and strengthen our balance sheet. During May 2015 we have secured a portion of the financing sought totaling $908,000 with net cash proceeds to the Company of 454,000. (See our 8K filing on May 20, 2015 for details) Securing the additional capital needed to support our liquidity needs may also reduce doubts about our ability to operate as a going concern. There is no assurance, however, that we will succeed in raising the additional financing needed to provide for all of our liquidity needs. In the event we fail to obtain the additional capital needed and/or restructure our existing debts with current creditors, we may be required to curtail our operations significantly. | |||
The condensed consolidated 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 consolidated financial position and operating results. | |||
c) Interim Condensed Consolidated Financial Statements | |||
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheet at December 31, 2014 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed consolidated financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed consolidated financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2014. | |||
d) Principles of Consolidation | |||
The condensed 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. | |||
e) 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 consolidated 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. | |||
f) 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), derivative financial instruments are carried at fair value. | |||
The carrying values of the Company’s long-term debts 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. | |||
g) Cash and Cash Equivalents | |||
The Company maintains its cash balances with various financial institutions. Balance at various times during the year may exceed Federal Deposit Insurance Corporation limits. | |||
h) Inventories | |||
Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. | |||
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. | |||
Direct Call Provisioning Services: | |||
Revenues related to collect and prepaid calling services generated by communication services 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. | |||
Wholesaled technology: | |||
We sell telephony systems with embedded proprietary software to other service providers. We recognize revenue when the equipment is shipped to the customer. | |||
Breakage: | |||
In compliance with regulatory tariffs, we recognize as income prepaid deposits which have aged beyond six to nine months and the customer has not requested a refund of the unused deposit. | |||
Prepaid Cards: | |||
We also sell prepaid phone cards to end user facilities on a wholesale basis. We recognize revenue on prepaid phone cards when they are either shipped or emailed to customer end user facilities. | |||
Software Maintenance: | |||
We offer software maintenance and support contracts to customers who purchase our technology systems. These are unbundled and invoiced separately and revenue is recognized ratably over the life of the contract. | |||
Revenue Recognition for Construction Projects: | |||
Revenues from construction contracts are included in contract revenue in the condensed 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. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized. | |||
Software and Software License Sales | |||
The Company recognizes revenue when a fixed fee order has been received and delivery has occurred to the customer. The Company assesses whether the fee is fixed or determinable and free of contingencies based upon signed agreements received from the customer confirming terms of the transaction. Software and licenses are delivered electronically to the customer. Revenue attributable to software licenses sold with extended payment terms in excess of twelve months are recognized ratably over the payment term. | |||
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 consolidated financial statements based on their fair values. | |||
For purposes of estimating fair value of stock options, we use the Black-Scholes-Merton valuation technique. At March 31, 2015, there was $394,667 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 $394,667 will be amortized over the remaining vesting periods of the grants. | |||
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. | ||
· | 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. Unobservable inputs reflect 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 March 31, 2015 and December 31, 2014, the derivative liabilities amounted to $494,554 and $840,963. 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 variables (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 require classification in stockholders' equity (deficit). See Note 4 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. 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 consolidated financial reports. Accordingly, the Company operated in one segment during the three months ended March 31, 2015 and 2014 (Telecom services). | |||
o) Basic and Diluted Income (Loss) Per Common Share | |||
The Company calculates income (loss) per common share in accordance with ASC Topic 260, “Earnings Per Share”. 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 69 million shares at March 31, 2015 and 2014. | |||
p) Recent Accounting Pronouncements | |||
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). The amendments in this Update provide guidance in accounting principles generally accepted in the United States of America about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This ASU is not expected to have a significant impact on the Company's consolidated financial statements. | |||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update's core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is evaluating the effect of adopting this new accounting Update. | |||
In April 2015, the FASB issued ASU No. 2015-03 (ASU 2015-03), Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. An entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The adoption of ASU 2015-03 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company's financial condition 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. |
2_Notes_payable
2. Notes payable | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Notes payable | Notes payable consists of the following as of March 31, 2015 and December 31, 2014: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Bank line of credit (a) | $ | – | $ | – | |||||
Notes payable to shareholder/director (b) | 192,048 | 192,048 | |||||||
Notes payable (c) | 1,522,269 | 1,066,019 | |||||||
Note payable, Innovisit (d) | 130,782 | 160,000 | |||||||
Total notes payable | 1,845,099 | 1,418,067 | |||||||
Less current maturities | (1,845,099 | ) | (1,418,067 | ) | |||||
Long term debt | $ | – | $ | – | |||||
(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 is obligated to pay Action Capital interest on the advances outstanding under the Action Agreement equal to the prime rate in effect on the last business day of the prior month plus 1%. In addition, the Company is obligated to pay a monthly fee to Action Capital equal to 0.75% of the total outstanding balance at the end of each month. | |||||||||
The outstanding balance owed on the line at March 31, 2015 and December 31, 2014 was $0 and $0 respectively. If the credit facility is drawn upon, the interest rate would be 13.25%. | |||||||||
(b) Notes Payable Shareholder/Former Director | |||||||||
There are two notes outstanding with a former 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 was to be paid. This note had an outstanding balance of $24,048 as of March 31, 2015 and December 31, 2014, respectively. 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 principal and interest payments. | |||||||||
The second note dated October 14, 2011 had a face value of $168,000 of which the Company received $151,200 in net proceeds during October 2011. The discount of $16,800 was 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 was due at maturity on October 14, 2014. This note had an outstanding balance of $168,000 as of March 31, 2015 and December 31, 2014, respectively. 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 principal and interest payments. | |||||||||
(c) Notes 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 difference between the face amount of the note and proceeds received 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 and 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. During 2014 the Company paid $100,000 each in April and July reducing the principal on this note to $781,655 as of December 31, 2014. As of March 31, 2015, there was $781,655 of unpaid principal remaining on this note. As of the date of this filing, the Company is currently in violation under terms of the note agreement requiring 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. As of December 31, 2014 and March 31, 2015, there was $200,000 of unpaid principal remaining on this note. The holder has not as of the date of this filing invoked his rights under the default provisions of the note. | |||||||||
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. 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. During the quarter ended March 31, 2014, the Company paid in cash the principal owed on two of the notes totaling $113,636 leaving a remaining balance owed of $84,364 as of December 31, 2014 and March 31, 2015. On January 23, 2014 the maturity date, the principal amounts of the notes were due along with any unpaid and accrued interest. As a result, Company is not in compliance with the terms of the note. We are current with interest payments; no default provision has been invoked. | |||||||||
During March 2015, the Company issued a secured note to an investor for $500,000 for which $422,000 of net proceeds were received. Of the $500,000; $50,000 was an original issue discount and $28,000 was used for placement fees and legal expenses. In addition, the Company was required to issue 1,000,000 shares of common stock ($70,000 based on the closing price of the stock on the date of closing) to the Lender. The original issue discount was recorded as a debt discount, while the placement and legal fees and the value of the 1,000,000 shares were recorded as deferred financing fees and included in prepaid expenses on the balance sheet. As of March 31, 2015, the stock has not yet been issued and the $70,000 is included in accrued expenses on the balance sheet. The debt discount is amortized using the effective interest method and was $43,750 at March 31, 2015, resulting in a finance charge of $6,250 for the quarter ended March 31, 2015. If the principal is not paid by June 17, 2015, the Company must make monthly payments of $5,833 beginning July 17, 2015 and will be charged an annual interest rate of 14%. If the Company defaults on this note by missing a potential scheduled payment date, the Company must issue the Lender 1,250,000 shares of common stock, while still being responsible for the outstanding principal and interest. The principal outstanding on this note as of March 31, 2015 was $500,000. | |||||||||
(d) Note Payable - Innovisit | |||||||||
In conjunction with the purchase of intellectual property and certain other assets of Innovisit 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 was 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 issued 500,000 common shares in lieu of the January 31, 2014 $60,000 installment payment under the note, and paid installments totaling $120,000 in cash in 2014, leaving a balance outstanding of $160,000 as of December 31, 2014. In 2015, the Company made cash payments on this note totaling $29,218 leaving $130,782 outstanding as of March 31, 2015. The Company is not in compliance with the terms of the note, but no default provision has been invoked. |
3_Convertible_Note
3. Convertible Note | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Convertible Note | On May 30, 2014, the Company entered into a Note Purchase and Security Agreement with Lattice Funding, LLC (“Lender”), a Pennsylvania limited liability company affiliated with Cantone Asset Management, LLC. The Company delivered a secured promissory note (the “Note”) in the principal sum of $1,500,000, bearing interest at 8% per annum and maturing on May 15, 2017. Interest on the Note is payable quarterly. Outstanding principal may be converted into restricted common stock. The Company also executed UCC financing statements, securing the Note with proceeds of certain agreements. | ||||||||
Each $10,000 of note principal is convertible into 75,000 common shares at an exercise price of $0.133333 per share any time after November 30, 2014, to be adjusted for splits, reorganizations, stock dividends and similar corporate events (anti-dilution provisions). If the market price of Lattice common equals or exceeds twice the exercise price and certain other conditions are met, the Company may call the Note at face value for the purpose of forcing conversion of the balance of the Note into common stock. | |||||||||
The Note contains a provision whereby the conversion price is adjustable upon the occurrence of certain events, including the issuance of common stock or common stock equivalents at a price which is lower than the current conversion price. Under FASB ASC 815-40-15-5, the embedded conversion feature is not considered indexed to the Company’s own stock and, therefore does not meet the scope exception in FASB ASC 815-10-15 and thus needs to be accounted for as a derivative liability. The initial fair value at May 30, 2014 of the embedded conversion feature was estimated at $1,223,923 and recorded as a derivative liability, resulting in a net carrying value of the note at May 30, 2014 of $276,077 ($1,500,000 face value less $1,223,923 debt discount). On March 31, 2015 the derivative was valued at $443,961 which resulted in derivative income of $327,237 for the quarter ended March 31, 2015. The debt discount was amortized using the effective interest method and was $1,076,886 at March 31, 2015 resulting in a finance charge of $44,750 for the quarter ended March 31, 2015. The fair value of the embedded conversion feature is estimated at the end of each quarterly reporting period using the Monte Carlo Valuation model. | |||||||||
Inherent in the Monte Carlo Valuation model are assumptions related to expected volatility, remaining life, risk-free rate and expected dividend yield. For the Convertible Notes using a Monte Carlo Valuation model, we estimate the probability and timing of potential future financing and fundamental transactions as applicable. The assumptions used by the Company are summarized below: | |||||||||
Convertible Note | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Closing stock price | $ | 0.07 | $ | 0.1 | |||||
Conversion price | $ | 0.13 | $ | 0.13 | |||||
Expected volatility | 125% | 125% | |||||||
Remaining term (years) | 2.13 | 2.38 | |||||||
Risk-free rate | 0.62% | 0.90% | |||||||
Expected dividend yield | 0% | 0% | |||||||
The convertible note consisted of the following at March 31, 2015 and December 31, 2014: | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Convertible note | $ | 1,500,000 | $ | 1,500,000 | |||||
Discount on convertible note | (1,223,923 | ) | (1,223,923 | ) | |||||
Accumulated amortization of discount | 147,037 | 102,287 | |||||||
Total convertible note | $ | 423,114 | $ | 378,364 |
4_Fair_Value_of_Derivative_fin
4. Fair Value of Derivative financial instruments | 3 Months Ended |
Mar. 31, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair value of derivative financial instruments | The condensed consolidated balance sheet caption derivative liability includes warrants and a convertible note. The warrants were 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 March 31, 2015 and December 31, 2014, and are carried at fair value. The balance at March 31, 2015 was $50,593 compared to $69,765 at December 31, 2014. The convertible note issued May 30, 2014 (See Note 3) is indexed to 11,250,028 shares of the Company’s common stock and is carried at fair value of $443,961 at March 31, 2015. |
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 March 31, 2015 included the March 31, 2015 publicly traded stock price of the Company of $0.07, the conversion or strike price of $0.10 per the agreement, a historical volatility factor of 211.88% based upon forward terms of instruments, and a risk free rate of 2.22% and remaining life 7.48 years. |
5_Litigation
5. Litigation | 3 Months Ended |
Mar. 31, 2015 | |
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 March 31, 2015 and December 31, 2014. |
6_Note_Receivable
6. Note Receivable | 3 Months Ended |
Mar. 31, 2015 | |
Receivables [Abstract] | |
Note Receivable | As part of the sale of Lattice Government assets on April 2, 2013, the Company received a promissory note from Blackwatch International, Inc. for $700,000, which carried a 3% annual interest rate payable in 12 equal quarterly installments of $61,216 over a 3 year period. The first installment was due July 31, 2013 and each successive payment was due on the 15th day of the month following close of each quarter. Blackwatch never made these payments; therefore, the Company filed a lawsuit in the Superior Court of New Jersey to collect the monies. On March 26, 2015, a verbal settlement was reached on a revised note receivable for $575,000 to be payable in 7 quarterly payments of $30,000 beginning on April 15, 2015, with the remaining balance of $335,000 being due in full on January 15, 2017. Previously, the note settlement was estimated at $575,000 based on preliminary negotiations. On April 7, 2015, the settlement was signed and the note receivable was settled for $537,750 ($37,250 lower than the previously estimated). The agreement calls for 7 quarterly payments of $30,000 after the April 15, 2015 payment, with the remaining balance of $297,750 being due in full on January 15, 2017. The Company received the first payment of $30,000 on April 15, 2015. |
7_Commitments
7. Commitments | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
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 through 2016. The leases generally provide that the Company pay the taxes, maintenance and insurance expenses related to the leased assets. | |||||
Future minimum lease commitments as of March 31, 2015 are approximately as follows: | |||||
For the Year Ending March 31,: | |||||
2016 | $ | 48,370 | |||
2017 | 7,967 | ||||
Total minimum lease payments | $ | 56,337 | |||
Total rent expense was $27,694 for the quarter ended March 31, 2015 compared to $29,404 in the prior year quarter. |
8_Net_Loss_Per_Share
8. Net Loss Per Share | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Net Loss Per Share | The following table sets forth the information needed to compute basic and diluted income (loss) per share: | ||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Basic net (loss) per common share | |||||||||
Net Loss | $ | (706,259 | ) | $ | (476,792 | ) | |||
Convertible Note - interest | $ | 82,250 | – | ||||||
Convertible Note - derivative income | $ | (327,237 | ) | – | |||||
Preferred stock dividends | (6,277 | ) | (6,277 | ) | |||||
Numerator for basic net (loss) | $ | (957,523 | ) | $ | (483,063 | ) | |||
Basic net (loss) per common share | |||||||||
Net income (loss) | $ | (0.01 | ) | $ | (0.01 | ) | |||
Diluted net (loss) per common share | |||||||||
Net income (loss) | $ | (0.01 | ) | $ | (0.01 | ) | |||
Weighted average common shares outstanding: | 53,911,094 | 36,740,854 | |||||||
Dilutive securities | |||||||||
Preferred Stock A, B, C, D | 34,695,043 | 37,003,336 | |||||||
Convertible Note | 11,250,281 | – | |||||||
Diluted weighted average common shares outstanding and assumed conversion | 99,856,418 | 73,744,190 | |||||||
For the three month period ended March 31, 2015 certain potential shares of common stock have been excluded from the calculation of diluted income per share because the exercise price was greater than the average market price of our common stock, and therefore, the effect on diluted income per share would have been anti-dilutive. The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income per share because their effect was anti-dilutive. | |||||||||
Warrants: | |||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
6,178,233 | 5,378,233 |
9_Conversion_of_Preferred_Stoc
9. Conversion of Preferred Stock | 3 Months Ended |
Mar. 31, 2015 | |
Equity [Abstract] | |
Conversion of Preferred Stock | On March 12, 2015, we issued 714,280 shares of our common stock to an investor upon the exercise of conversion rights associated with 200,000 shares of Series A Preferred Stock. |
10_Issuance_of_Common_Stock
10. Issuance of Common Stock | 3 Months Ended |
Mar. 31, 2015 | |
Equity [Abstract] | |
Issuance of Common Stock | On January 30, 2015 the Company entered into an agreement for a term of one year with a service provider, requiring 1,000,000 shares to be issued to the service provider in the form of compensation. The shares were valued at $90,000 based on the stock price on the date of the agreement. The stock compensation expense recorded for the quarter ended March 31, 2015 was $15,000. The remaining $75,000 is recorded on the balance sheet in prepaid expenses and will be expensed over the term of the agreement. |
11_Reclassifications
11. Reclassifications | 3 Months Ended |
Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reclassifications | Certain amounts from the prior year financial statements have been reclassified to conform to the current year presentation. |
12_Subsequent_Events
12. Subsequent Events | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | On April 3, 2015, we issued 1,571,416 shares of our common stock to an investor upon the exercise of conversion rights associated with 440,000 shares of Series A Preferred Stock. |
On May 14, 2015, Lattice closed on financing totaling $908,000 through the issuance of a convertible note to an investor. The cash proceeds to the Company were $454,000 after the repayment of a pro-rata portion of the outstanding $500,000 bridge note facility and placement fees. The note bears interest at an interest rate of 8% per year and is secured by a first priority security interest in the revenues from certain of the Company’s contracts and the equipment associated with such contracts. The note matures on April 30, 2020 and is convertible into shares of the Company’s common stock at a conversion price of $0.15 per share (See our 8K filing May 20, 2015 for a detailed discussion). |
1_Organization_and_summary_of_1
1. Organization and summary of significant accounting policies (Policies) | 3 Months Ended | ||
Mar. 31, 2015 | |||
Notes to Financial Statements | |||
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 owned 100% of the shares of CLR Group Limited. (“CLR”), a government contractor. Together, the SMEI, RTI and CLR acquisitions formed our federal government services business unit, Lattice Government Services (“LGS”). 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 Department of Defense agencies either as a prime contractor or as a subcontractor to another prime contractor. On April 2, 2013, we entered into an Asset Purchase Agreement (“Purchase Agreement”) with Blackwatch International, Inc. (“Blackwatch”), a Virginia corporation, pursuant to which we sold our government Department of Defense contract vehicles, as an asset sale, for approximately $1.2 million. These assets essentially comprised our federal government services segment operations. The Company retained certain and liabilities of LGS. These assets included approximately $1.2 million in incurred cost claims relative to cost recoverable type contract vehicles. | |||
On November 1, 2013 the Company purchased certain assets of Innovisit, LLC. The acquired assets mainly included: awarded contracts, customer lists, and its intellectual property rights to video visitation software assets. Under the agreement, the workforce and operating infrastructure supporting Innovisit’s business operations have been transferred to Lattice, including but not limited to certain employees, and leases. This acquisition complemented the product offering of our telecom services business. | |||
In 2013, the Company established a wholly owned subsidiary, Lattice Communications Inc., to enable us to operate in Canada. During 2014, we started operating a call center and collecting fee income for processing prepaid deposits for a large Canadian telecom provider which operates Lattice technology systems to provide call provisioning services to correctional facilities located in Canada. | |||
Basis of Presentation going concern | At March 31, 2015, our working capital deficiency was approximately $3,790,000 which compared to a working capital deficiency of $3,099,000 at December 31, 2014. Cash from operations and available capacity on current credit facilities are insufficient to cover liabilities currently due and the liabilities which will mature over the next twelve months. Additionally, we are extended on payables with trade creditors. We have several payment arrangements in place but face continuing pressures with trade creditors regarding overdue payables. These conditions raise substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern is highly dependent upon our ability to improve our operating cash flow, maintain our credit lines and secure additional capital. Management is currently engaged in raising capital with a goal of raising approximately $4,000,000, the proceeds of which to be used to improve working capital and strengthen our balance sheet. During May 2015 we have secured a portion of the financing sought totaling $908,000 with net cash proceeds to the Company of 454,000. (See our 8K filing on May 20, 2015 for details) Securing the additional capital needed to support our liquidity needs may also reduce doubts about our ability to operate as a going concern. There is no assurance, however, that we will succeed in raising the additional financing needed to provide for all of our liquidity needs. In the event we fail to obtain the additional capital needed and/or restructure our existing debts with current creditors, we may be required to curtail our operations significantly. | ||
The condensed consolidated 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 consolidated financial position and operating results. | |||
Interim Condensed Consolidated Financial Statements | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results of operations for the full year. The condensed consolidated balance sheet at December 31, 2014 was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these condensed consolidated financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These condensed consolidated financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2014. | ||
Principles of consolidation | The condensed 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. | ||
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 consolidated 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), derivative financial instruments are carried at fair value. | ||
The carrying values of the Company’s long-term debts 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 and Cash Equivalents | 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. | ||
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. | ||
Direct Call Provisioning Services: | |||
Revenues related to collect and prepaid calling services generated by communication services 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. | |||
Wholesaled technology: | |||
We sell telephony systems with embedded proprietary software to other service providers. We recognize revenue when the equipment is shipped to the customer. | |||
Breakage: | |||
In compliance with regulatory tariffs, we recognize as income prepaid deposits which have aged beyond six to nine months and the customer has not requested a refund of the unused deposit. | |||
Prepaid Cards: | |||
We also sell prepaid phone cards to end user facilities on a wholesale basis. We recognize revenue on prepaid phone cards when they are either shipped or emailed to customer end user facilities. | |||
Software Maintenance: | |||
We offer software maintenance and support contracts to customers who purchase our technology systems. These are unbundled and invoiced separately and revenue is recognized ratably over the life of the contract. | |||
Revenue Recognition for Construction Projects: | |||
Revenues from construction contracts are included in contract revenue in the condensed 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. Amounts are billed based on contractual terms. Billings in excess of costs and estimated earnings represent billings in excess of revenues recognized. | |||
Software and Software License Sales | |||
The Company recognizes revenue when a fixed fee order has been received and delivery has occurred to the customer. The Company assesses whether the fee is fixed or determinable and free of contingencies based upon signed agreements received from the customer confirming terms of the transaction. Software and licenses are delivered electronically to the customer. Revenue attributable to software licenses sold with extended payment terms in excess of twelve months are recognized ratably over the payment term. | |||
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 consolidated financial statements based on their fair values. | ||
For purposes of estimating fair value of stock options, we use the Black-Scholes-Merton valuation technique. At March 31, 2015, there was $394,667 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 $394,667 will be amortized over the remaining vesting periods of the grants. | |||
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. | ||
· | 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. Unobservable inputs reflect 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 March 31, 2015 and December 31, 2014, the derivative liabilities amounted to $494,554 and $840,963. 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 variables (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 require classification in stockholders' equity (deficit). See Note 4 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. 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 consolidated financial reports. Accordingly, the Company operated in one segment during the three months ended March 31, 2015 and 2014 (Telecom services). | ||
Basic and Diluted Income (Loss) Per Common Share | The Company calculates income (loss) per common share in accordance with ASC Topic 260, “Earnings Per Share”. 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 69 million shares at March 31, 2015 and 2014. | ||
Recent accounting pronouncements | In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). The amendments in this Update provide guidance in accounting principles generally accepted in the United States of America about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This ASU is not expected to have a significant impact on the Company's consolidated financial statements. | ||
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update's core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is evaluating the effect of adopting this new accounting Update. | |||
In April 2015, the FASB issued ASU No. 2015-03 (ASU 2015-03), Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. An entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The adoption of ASU 2015-03 in the first quarter of fiscal 2017 is not expected to have a material impact on the Company's financial condition 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. |
2_Notes_payable_Tables
2. Notes payable (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Summary of notes payable | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Bank line of credit (a) | $ | – | $ | – | |||||
Notes payable to shareholder/director (b) | 192,048 | 192,048 | |||||||
Notes payable (c) | 1,522,269 | 1,066,019 | |||||||
Note payable, Innovisit (d) | 130,782 | 160,000 | |||||||
Total notes payable | 1,845,099 | 1,418,067 | |||||||
Less current maturities | (1,845,099 | ) | (1,418,067 | ) | |||||
Long term debt | $ | – | $ | – |
3_Convertible_Note_Tables
3. Convertible Note (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Debt assumptions | 31-Mar-15 | 31-Dec-14 | |||||||
Closing stock price | $ | 0.07 | $ | 0.1 | |||||
Conversion price | $ | 0.13 | $ | 0.13 | |||||
Expected volatility | 125% | 125% | |||||||
Remaining term (years) | 2.13 | 2.38 | |||||||
Risk-free rate | 0.62% | 0.90% | |||||||
Expected dividend yield | 0% | 0% | |||||||
Schedule of convertible notes | 31-Mar-15 | 31-Dec-14 | |||||||
Convertible note | $ | 1,500,000 | $ | 1,500,000 | |||||
Discount on convertible note | (1,223,923 | ) | (1,223,923 | ) | |||||
Accumulated amortization of discount | 147,037 | 102,287 | |||||||
Total convertible note | $ | 423,114 | $ | 378,364 |
7_Commitments_Tables
7. Commitments (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
Future minimum lease payments operating leases | For the Year Ending March 31,: | ||||
2016 | $ | 48,370 | |||
2017 | 7,967 | ||||
Total minimum lease payments | $ | 56,337 |
8_Net_Loss_Per_Share_Tables
8. Net Loss Per Share (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Per Share [Abstract] | |||||||||
Schedule of Earnings Per Share, Basic and Diluted | Three Months Ended | ||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Basic net (loss) per common share | |||||||||
Net Loss | $ | (706,259 | ) | $ | (476,792 | ) | |||
Convertible Note - interest | $ | 82,250 | – | ||||||
Convertible Note - derivative income | $ | (327,237 | ) | – | |||||
Preferred stock dividends | (6,277 | ) | (6,277 | ) | |||||
Numerator for basic net (loss) | $ | (957,523 | ) | $ | (483,063 | ) | |||
Basic net (loss) per common share | |||||||||
Net income (loss) | $ | (0.01 | ) | $ | (0.01 | ) | |||
Diluted net (loss) per common share | |||||||||
Net income (loss) | $ | (0.01 | ) | $ | (0.01 | ) | |||
Weighted average common shares outstanding: | 53,911,094 | 36,740,854 | |||||||
Dilutive securities | |||||||||
Preferred Stock A, B, C, D | 34,695,043 | 37,003,336 | |||||||
Convertible Note | 11,250,281 | – | |||||||
Diluted weighted average common shares outstanding and assumed conversion | 99,856,418 | 73,744,190 | |||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Warrants: | ||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
6,178,233 | 5,378,233 |
1_Organization_and_summary_of_2
1. Organization and summary of significant accounting policies (Details Narrative) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Working capital | ($3,790,000) | ($3,099,000) |
Unrecognized compensation cost | 394,667 | |
Derivative liabilities | $494,554 | $840,963 |
2_Notes_payable_Details
2. Notes payable (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
Bank line-of-credit | $0 | $0 |
Notes payable to Stockholder/director | 192,048 | 192,048 |
Notes Payable | 1,522,269 | 1,066,019 |
Note Payable, Innovisit | 130,782 | 160,000 |
Total notes payable | 1,845,099 | 1,418,067 |
Less current maturities | -1,845,099 | -1,418,067 |
Long-term debt | $0 | $0 |
3_Convertible_Note_Details_Ass
3. Convertible Note (Details - Assumptions) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Debt Disclosure [Abstract] | ||
Closing stock price | $0.07 | $0.10 |
Conversion price | $0.13 | $0.13 |
Expected volatility | 125.00% | 125.00% |
Remaining term (years) | 2 years 1 month 17 days | 2 years 4 months 17 days |
Risk-free rate | 0.62% | 0.90% |
Expected dividend yield | 0.00% | 0.00% |
3_Convertible_Note_Details_Not
3. Convertible Note (Details - Notes outstanding) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
Convertible note | $1,500,000 | $1,500,000 |
Discount on convertible note | -1,223,923 | -1,223,923 |
Accumulated amortization of discount | 147,037 | 102,287 |
Total convertible note | $423,114 | $378,364 |
4_Fair_Value_of_Derivative_fin1
4. Fair Value of Derivative financial instruments (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | |
Fair Value Disclosures [Abstract] | ||
Derivative liability, current | $50,593 | $69,765 |
Derivative liability, noncurrent | $443,961 | $771,198 |
Assumptions used | ||
Strike price | $0.07 | |
Volatility rate | 211.88% | |
Risk free interest rate | 2.22% | |
Remaining life | 7 years 5 months 23 days |
7_Commitments_Details
7. Commitments (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
2016 | $48,370 | |
2017 | 7,967 | |
Total minimum lease payments | 56,337 | |
Rent expense | $27,694 | $29,404 |
8_Net_Loss_Per_Share_Details
8. Net Loss Per Share (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Basic net (loss) per common share | ||
Net Loss | ($706,259) | ($476,792) |
Convertible Note - interest | 82,250 | 0 |
Convertible Note - derivative income | -327,237 | 0 |
Preferred stock dividends | -6,277 | -6,277 |
Numerator for basic net (loss) | -957,523 | -483,063 |
Basic net (loss) per common share | ||
Net income (loss) | ($0.01) | ($0.01) |
Diluted net (loss) per common share | ||
Net income (loss) | ($0.01) | ($0.01) |
Weighted average common shares outstanding: | 53,911,094 | 36,740,854 |
Dilutive securities | ||
Preferred Stock A, B, C, D | $34,695,043 | $37,003,336 |
Convertible Note | 11,250,281 | 0 |
Diluted weighted average common shares outstanding and assumed conversion | 99,856,418 | 73,744,190 |
8_Net_Loss_Per_Share_Details_A
8. Net Loss Per Share (Details - Antidilutive shares) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Earnings Per Share [Abstract] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Warrants | 6,178,233 | 5,378,233 |
9_Conversion_of_Preferred_Stoc1
9. Conversion of Preferred Stock (Details Narrative) | 3 Months Ended |
Mar. 31, 2015 | |
Equity [Abstract] | |
Common stock issued upon exercise of conversion of preferred stock, common stock issued | 714,280 |
Common stock issued upon exercise of conversion of preferred stock, preferred shares converted | 200,000 |
10_Issuance_of_Common_Shares_D
10. Issuance of Common Shares (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Equity [Abstract] | ||
Stock issued during period, shares issued | 1,000,000 | |
Stock issued during period, value | $90,000 | |
Proceeds from issuance of common stock | $796,441 |