Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2012 | Jun. 07, 2013 | Jun. 30, 2012 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'UNIVERSAL DETECTION TECHNOLOGY | ' | ' |
Entity Central Index Key | '0000763950 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-12 | ' | ' |
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 | ' | ' | $504,866 |
Entity Common Stock, Shares Outstanding | ' | 1,502,284 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2012 | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
CURRENT ASSETS: | ' | ' |
Cash and cash equivalents | $2,074 | $2,062 |
Accounts Receivable,net | 1,099 | 1,099 |
Other Receivable | 22,500 | ' |
Inventory | 999 | 28,560 |
Total current assets | 26,672 | 31,721 |
Deposits | 21,300 | 21,300 |
Equipment, net | 2,485 | 3,374 |
Total assets | 50,457 | 56,395 |
CURRENT LIABILITIES: | ' | ' |
Accounts payable, trade | 1,219,614 | 1,165,976 |
Accrued liabilities | 619,981 | 632,960 |
Unearned revenue | 5,075 | 11,878 |
Accrued payroll - officers | 775,481 | 902,481 |
Notes payable - related party | 11,867 | 466,869 |
Notes payable, net of discount of $104,298 and $0 respectively | 550,375 | 443,514 |
Derivative liabilities (restated) | 1,016,341 | 1,043,639 |
Accrued interest expense | 881,812 | 745,110 |
Total current liabilities (restated) | 5,080,546 | 5,412,427 |
Long term notes payable, net of discount of $314,325 and $272,103 respectively (restated) | 167,175 | 37,522 |
Total liabilities (restated) | 5,247,721 | 5,449,949 |
STOCKHOLDERS' DEFICIT: | ' | ' |
Preferred stock, $.01 par value, 20,000,000 shares authorized, -0- issued and outstanding | ' | ' |
Common stock, no par value, 20,000,000,000 shares authorized, 1,222,954 and 382,951 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively | 39,590,889 | 38,112,311 |
Additional paid-in-capital | 5,613,089 | 5,313,089 |
Accumulated deficit (restated) | -50,401,242 | -48,818,954 |
Total stockholders' deficit (restated) | -5,197,264 | -5,393,554 |
Total liabilities and stockholders' deficit | $50,457 | $56,395 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred stock par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock par value | $0 | $0 |
Common stock shares authorized | 20,000,000,000 | 20,000,000,000 |
Common stock shares issued | 1,222,954 | 382,951 |
Common stock shares outstanding | 1,222,954 | 382,951 |
Discount on notes payable, current | $104,298 | $0 |
Discount on notes payable, noncurrent | $314,325 | $272,103 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Income Statement [Abstract] | ' | ' |
REVENUE, NET | $75,470 | $245,109 |
COST OF GOODS SOLD | 60,067 | 225,146 |
GROSS PROFIT | 15,403 | 19,963 |
OPERATING EXPENSES: | ' | ' |
Selling, general and administrative | 1,261,592 | 1,112,458 |
Marketing | 115,870 | 45,554 |
Depreciation and amortization | 890 | 3,512 |
Total expenses | 1,378,352 | 1,161,524 |
LOSS FROM OPERATIONS | -1,362,949 | -1,141,561 |
OTHER INCOME (EXPENSE): | ' | ' |
Interest expense (restated) | -464,694 | -78,382 |
Debt issuance cost (restated) | -1,119,680 | -464,262 |
Other income | ' | 42,500 |
Loss on settlement of debt | -110,446 | -1,459,320 |
Gain/(loss) in change of FV of derivative (restated) | 1,475,481 | -284,378 |
Total other expenses (restated) | -219,339 | -2,243,842 |
NET LOSS (restated) | ($1,582,288) | ($3,385,403) |
NET LOSS PER SHARE - BASIC AND DILUTED: | ($1.73) | ($13.47) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 912,671 | 251,247 |
CONSOLIDATED_STATEMENT_OF_STOC
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY / DEFICIT (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2010 | $35,601,080 | $5,313,089 | ($45,433,551) | ($4,519,382) |
Beginning Balance, Shares at Dec. 31, 2010 | 112,651 | ' | ' | ' |
Stock issued for conversion of debt, Shares | 199,800 | ' | ' | ' |
Stock issued for conversion of debt, Amount | 1,934,642 | ' | ' | 1,934,642 |
Stock issued for services, Shares | 70,500 | ' | ' | ' |
Stock issued for services, Amount | 576,589 | ' | ' | 576,589 |
Net loss | ' | ' | ' | -3,385,403 |
Ending Balance, Amount at Dec. 31, 2011 | 38,112,311 | 5,313,089 | -48,818,954 | -5,393,554 |
Ending Balance, Shares at Dec. 31, 2011 | 382,951 | ' | ' | ' |
Stock issued for conversion of debt, Shares | 35,268 | ' | ' | ' |
Stock issued for conversion of debt, Amount | 141,071 | ' | ' | 141,071 |
Stock issued for services, Shares | 354,335 | ' | ' | ' |
Stock issued for services, Amount | 503,720 | ' | ' | 503,720 |
Stock issued for services - related party, Shares | 225,000 | ' | ' | ' |
Stock issued for services - related party, Amount | 450,000 | ' | ' | 450,000 |
Stock issued for debt - related party, Share | 160,000 | ' | ' | ' |
Stock issued for debt - related party, Amount | 320,000 | ' | ' | 320,000 |
Stock issued for loan fees, Shares | 65,400 | ' | ' | ' |
Stock issued for loan fees, Amount | 63,786 | ' | ' | 63,786 |
Value of beneficial conversion feature & warrants issued with notes | ' | 300,000 | ' | 300,000 |
Net loss | ' | ' | -1,582,288 | -1,582,288 |
Ending Balance, Amount at Dec. 31, 2012 | $39,590,889 | $5,613,089 | ($50,401,242) | ($5,197,264) |
Ending Balance, Shares at Dec. 31, 2012 | 1,222,954 | ' | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($1,582,288) | ($3,385,403) |
Adjustments to reconcile net loss to net cash used in operations: | ' | ' |
Stocks issued for services | 503,720 | 576,588 |
Stocks issued for loan fees | 63,786 | ' |
(Gain)/Loss on change in FV of debt (restated) | -1,475,481 | 284,378 |
Loss on settlement of debt | 110,446 | 1,459,320 |
Debt issuance cost (restated) | 1,119,680 | 464,262 |
Depreciation | 889 | 3,512 |
Amortization of note discount and loan fees (restated) | 240,436 | 22,897 |
Changes in operating assets and liabilities: | ' | ' |
Inventory | 27,561 | -27,624 |
Unearned Revenue | -6,803 | 11,878 |
Accounts payable and accrued liabilities | 504,568 | 147,906 |
Net cash used in operating activities | -493,486 | -442,286 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchase of equipment | ' | -1,435 |
Net cash used in investing activities | ' | -1,435 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from notes with beneficial conversion and warrants | 300,000 | ' |
Proceeds from notes payable-related party | 224,801 | 592,256 |
Proceeds from notes payable | 328,500 | 318,000 |
Payments on notes payable - related party | -359,803 | -465,460 |
Net cash provided by financing activities | 493,498 | 444,796 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 12 | 1,075 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 2,062 | 987 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 2,074 | 2,062 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ' | ' |
Income tax | ' | 3,200 |
Interest Paid | 1,769 | ' |
SUPPLEMENTAL DISCLOSURES FOR NON CASH INVESTING AND FINANCING ACTIVITIES: | ' | ' |
Shares issued for settlement of debt and accrued interest | 141,071 | 1,934,642 |
Shares issued for settlement of debt - related party | $320,000 | ' |
1_BUSINESS_ACTIVITY
1. BUSINESS ACTIVITY | 12 Months Ended |
Dec. 31, 2012 | |
Accounting Policies [Abstract] | ' |
1. BUSINESS ACTIVITY | ' |
Universal Detection Technology, a California corporation, primarily designs, manufactures and markets air pollution monitoring instruments. Beginning in 2002, the Company has focused its research and development efforts in developing a real time biological weapon detection device. To accelerate development of its initial biological weapon detection device, the Company has developed and is implementing a collaborative partnering strategy. Under this strategy, the Company identifies and partners with researchers and developers. The Company has expanded its services to include security related consulting, event security and counterterrorism training. | |
The Company is a reseller of a range of products, which include rapid anthrax detection test kits, training courses for first responders, event security, threat evaluation and consulting, radiation detection systems, anti-microbial products, and DVDs aimed at providing information and training regarding combating terrorism and managing emergency situations. | |
GOING CONCERN AND MANAGEMENT'S PLANS | |
As of December 31, 2012, the Company had a working capital deficit of $5,053,873. During the year ended December 31, 2012, the Company incurred net losses of $1,582,288 and had an accumulated deficit of $50,401,242 as of December 31, 2012. These conditions raise substantial doubt about its ability to continue as a going concern. Its ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and ultimately achieve profitable operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. | |
Management has taken certain steps to provide the Company with necessary capital to continue its operations. These steps include: 1) actively seeking additional funding in the form of unsecured indebtedness and 2) seeking to increase revenues from product sales. | |
During 2011 and 2012, the Company entered into various agreements to sell shares of its common stock to third parties in order to convert its debts to the respective parties. In 2011, 199,800 shares were issued in the aggregate amount of $1,934,642. In 2012, 35,268 shares were issued in the aggregate amount of $141,071. | |
During 2012, the Company issued 160,000 shares in the aggregate amount of $320,000 as payment of debt to its President and CEO. |
2_SUMMARY_OF_SIGNIFICANT_ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
PRINCIPLES OF CONSOLIDATION | |||||||||
The consolidated financial statements include the accounts of Universal Detection Technology and its wholly-owned subsidiaries Nutek, Inc. (“Nutek”) and Logan Medical Devices, Inc. (“Logan”). The two subsidiaries are currently inactive. All significant intercompany balances and transactions have been eliminated in consolidation. | |||||||||
REVENUE RECOGNITION | |||||||||
Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Service revenue is recognized when services are performed and amounts are due. | |||||||||
INVENTORIES | |||||||||
Inventories, consisting of finished goods, are stated at the lower of cost (first-in first-out) basis or market. | |||||||||
RECLASSIFICATIONS | |||||||||
Certain prior year amounts have been reclassified to conform to the current year’s presentation, none of which had an impact on total assets, stockholders’ deficit, net loss, or net loss per share. | |||||||||
ADVERTISING EXPENSES | |||||||||
The Company expenses advertising costs as incurred. During the years ended December 31, 2012 and 2011, the Company did not have significant advertising costs. | |||||||||
PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION | |||||||||
Property and equipment, consisting of office furniture and equipment, leasehold improvements and lab testing equipment, is recorded at cost less accumulated amortization and depreciation respectively. Depreciation and amortization is provided for on the straight-line method over the estimated useful lives of the assets, generally three to five years or over the term of the lease. | |||||||||
2012 | 2011 | ||||||||
Equipment | $ | 4,448 | $ | 4,448 | |||||
Accumulated Depreciation | (1,963 | ) | (1,074 | ) | |||||
Fixed Assets, Net of Depreciation | $ | 2,485 | $ | 3,374 | |||||
Total depreciation expense was $890 and $3,512 for the years ended December 31, 2012 and 2011, respectively. During 2011, the Company wrote off $142,112 in fixed assets no longer in service. The accumulated depreciation on the assets was $142,112 and no gain or loss was recognized on the disposal. | |||||||||
STOCK BASED COMPENSATION TO OTHER THAN EMPLOYEES | |||||||||
Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | |||||||||
EARNINGS PER COMMON SHARE | |||||||||
Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding. The computation of diluted loss per share is similar to the basic loss per share computation except the denominator is increased to include the number of additional shares that would have been outstanding if the dilutive potential common shares had been issued. In addition, the numerator is adjusted for any changes in income or loss that would result from the assumed conversions of those potential shares. However, such presentation is not required if the effect is antidilutive. Accordingly, the diluted per share amounts do not reflect the impact of warrants and options or convertible debt outstanding for 122,000 and 2 shares at December 31, 2012 and 2011, respectively, because the effect of each is antidilutive. | |||||||||
CASH EQUIVALENTS | |||||||||
For purposes of reporting cash flows, the Company considers all short term, interest bearing deposits with original maturities of three months or less to be cash equivalents. | |||||||||
IMPAIRMENT OF PATENTS AND LONG-LIVED ASSETS | |||||||||
Patents and other intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives. In accordance with ASC 350 (previously Statement of Financial Accounting Standard No. 142), GOODWILL AND OTHER INTANGIBLE ASSETS ("ASC 350"), the Company periodically evaluates its long-lived assets by measuring the carrying amounts of assets against the estimated undiscounted future cash flows associated with them. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144 (ASC 360). SFAS 144 (ASC 360) requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. | |||||||||
As per the Statement of Financial Accounting Standards (“SFAS”) No. 142 (ASC 350), “Goodwill and Other Intangible Assets (“SFAS 142”) (ASC 350),” the Company assess finite-lived intangible assets and other long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of intangible assets or other long-lived assets may not be recoverable, the impairment is measured by using the projected discounted cash-flow method. | |||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||
The carrying amounts of cash, accounts receivable, notes receivable, accounts payable, accrued expenses and notes payable approximate fair value because of the short maturity of these items. | |||||||||
INCOME TAXES | |||||||||
Deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial statement amounts at the end of each reporting period. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the current period and the change during the period in deferred tax assets and liabilities. The deferred tax assets and liabilities have been netted to reflect the tax impact of temporary differences. At December 31, 2012, a full valuation allowance has been established for the deferred tax asset as management believes that it is more likely than not that a tax benefit will not be realized. | |||||||||
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS | |||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets. | |||||||||
CONCENTRATION OF CREDIT RISK | |||||||||
Generally, the Company required no collateral when it extends credit to its customers. The Company's credit losses in the aggregate have not exceeded managements' expectations. The Company maintains all cash in bank accounts, which at times may exceed federally insured limits. The Company has not experienced a loss in such accounts. | |||||||||
SEGMENT REPORTING | |||||||||
ASC 280 (previously SFAS No. 131), Disclosures about segments of an enterprise and related information, which superseded statement of financial accounting standards No. 14, Financial reporting for segments of a business enterprise, establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. In 2012 and 2011, the Company operated as one segment. | |||||||||
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |||||||||
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-02, which requires entities to present information about significant items reclassified out of accumulated other comprehensive income (loss) by component either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. This ASU is effective for the Company in the first quarter of fiscal 2014. We do not expect the adoption will have a significant impact on our consolidated financial statements. | |||||||||
In July 2012, the FASB issued ASU 2012-02, which amends how companies test for impairment of indefinite-lived intangible assets. The new guidance permits a company to assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the annual impairment test. The ASU is effective for the Company in the first quarter of fiscal 2014. We do not expect the adoption will have a significant impact on our consolidated financial statements. | |||||||||
3_ACCRUED_LIABILITIES
3. ACCRUED LIABILITIES | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
3. ACCRUED LIABILITIES | ' | ||||||||
The accrued liabilities consist of the following at December 31, 2012 and 2011: | |||||||||
2012 | 2011 | ||||||||
Loan Fees Payable | $ | 68,600 | $ | 68,600 | |||||
Deferred Rent | – | 2,827 | |||||||
Accrued expenses | 139,881 | 150,033 | |||||||
Accrued Settlement (Refer to Note 10) | 411,500 | 411,500 | |||||||
TOTAL ACCRUED LIABILITIES | $ | 619,981 | $ | 632,960 | |||||
Loan fees payable consists of the following: $68,600 was the value of 15 shares payable to third parties in connection with certain loan fees at the original note date. |
4_ACCRUED_PAYROLL_OFFICERS
4. ACCRUED PAYROLL - OFFICERS | 12 Months Ended |
Dec. 31, 2012 | |
Accrued Payroll - Officers | ' |
4. ACCRUED PAYROLL - OFFICERS | ' |
Accrued payroll – officers as of December 31, 2012 and 2011 is comprised of accrued payroll to the officers of the company amounting to $775,481 and $902,481, respectively. This payable is interest-free, unsecured and due on demand. | |
During 2012, the Company issued 225,000 shares of common stock to its president and CEO to convert $450,000 of accrued but unpaid salary. |
5_NOTES_PAYABLE_RELATED_PARTY
5. NOTES PAYABLE, RELATED PARTY | 12 Months Ended |
Dec. 31, 2012 | |
Related Party Transactions [Abstract] | ' |
5. NOTES PAYABLE, RELATED PARTY | ' |
During the year ended December 31, 2012, the Company borrowed a total of $224,801 from its president and chief executive officer under various written and oral promissory note agreements executed by the Company. The notes had interest rates of 0%. The Company repaid notes totaling $679,803 and interest of $1,769. A total of $359,803 was repaid in cash and $320,000 was repaid through the issuance of 160,000 shares of its common stock. As of December 31, 2012, $11,867 in principal and $0 in interest was due under the above loans. | |
During the year ended December 31, 2011, the Company borrowed a total of $592,256 from its president and chief executive officer under promissory notes executed by the Company. The notes had interest rates of 0%. The Company repaid notes totaling $465,460 and interest of $0. As of December 31, 2011, $466,869 in principal and $1,392 in interest was due. | |
6_NOTES_PAYABLE
6. NOTES PAYABLE | 12 Months Ended | ||||||||||||
Dec. 31, 2012 | |||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||
6. NOTES PAYABLE | ' | ||||||||||||
Notes payable consisted of the following at December 31, 2012: | |||||||||||||
Gross | Unamortized | Net | |||||||||||
Discount | |||||||||||||
Notes payable to individuals, subject to contingent settlement agreement and summary judgment, interest at 11.67% per annum, principal and interest due January 1, 2006, in default, unsecured | $ | 95,740 | – | 95,740 | |||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due July 2005, in default, unsecured | 161,000 | – | 161,000 | ||||||||||
Note payable, subject to settlement agreement, interest at 9.17% per annum, principal and interest due July 2005, unsecured | 71,500 | – | 71,500 | ||||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due December 2005, unsecured | 100,000 | – | 100,000 | ||||||||||
Note payable, interest at 12.5%, due June 2007, verbally extended, unsecured | 1,500 | – | 1,500 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 9,940 | – | 9,940 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,638 | – | 1,638 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,420 | – | 1,420 | ||||||||||
Note payable, interest at 12% per annum, due September 2010, verbally extended, unsecured | 776 | – | 776 | ||||||||||
Note payable, interest at 12% per annum, due July 2014 | 36,500 | 26,095 | 10,405 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 40,000 | 21,387 | 18,613 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 35,000 | 18,969 | 16,031 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 36,734 | 23,266 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 37,828 | 22,172 | ||||||||||
Note payable, interest at 12% per annum, due December 2014 | 50,000 | 32,847 | 17,153 | ||||||||||
Note payable, interest at 12% per annum, due January 2015 | 50,000 | 34,535 | 15,465 | ||||||||||
Note payable, interest at 12% per annum, due January 2015 | 50,000 | 34,763 | 15,237 | ||||||||||
Note payable, interest at 12% per annum, due February 2015 | 60,000 | 42,591 | 17,409 | ||||||||||
Gross | Unamortized Discount | Net | |||||||||||
Note payable, interest at 12% per annum, due February 2015 | 40,000 | 28,577 | 11,423 | ||||||||||
Note payable, interest at 5% per annum, due July 2012, verbally extended, unsecured | 30,000 | – | 30,000 | ||||||||||
Note payable, interest at 8% per annum, due April 2013, verbally extended, unsecured | 27,500 | 10,672 | 16,828 | ||||||||||
Note payable, interest at 8% per annum, due August 2013, verbally extended, unsecured (net of discount of $26,503) | 18,311 | 6,423 | 11,888 | ||||||||||
Note payable, interest at 8% per annum, due May 2013, verbally extended, unsecured (net of discount of $27,075) | 17,721 | 6,423 | 11,298 | ||||||||||
Note payable, interest at 8% per annum, due May 2013, verbally extended, unsecured | 32,500 | 17,247 | 15,253 | ||||||||||
Note payable, interest at 8% per annum, due September 2013, verbally extended, unsecured (net of discount of $87,536) | 38,318 | 29,077 | 9,242 | ||||||||||
Note payable, interest at 8% per annum, due August 2013, verbally extended, unsecured | 16,000 | 13,149 | 2,851 | ||||||||||
Note payable, interest at 8% per annum, due November 2013, verbally extended, unsecured (net of discount of $37,243) | 8,939 | – | 8,939 | ||||||||||
Note payable, interest at 8% per annum, due September 2013, verbally extended, unsecured | 22,500 | 21,938 | 562 | ||||||||||
Total Notes Payable | 1,136,803 | 419,253 | 717,550 | ||||||||||
Less: Current Portion | 655,303 | 104,928 | 550,375 | ||||||||||
Long-Term Notes Payable | $ | 481,500 | $ | 314,325 | $ | 167,175 | |||||||
Notes payable consisted of the following at December 31, 2011: | |||||||||||||
Gross | Unamortized Discount | Net | |||||||||||
Notes payable to individuals, subject to contingent settlement agreement and summary judgment, interest at 11.67% per annum, principal and interest due January 1, 2006, in default, unsecured | $ | 95,740 | – | 95,740 | |||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due July 2005, in default, unsecured | 161,000 | – | 161,000 | ||||||||||
Note payable, subject to settlement agreement, interest at 9.17% per annum, principal and interest due July 2005, unsecured | 71,500 | – | 71,500 | ||||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due December 2005, unsecured | 100,000 | – | 100,000 | ||||||||||
Note payable, interest at 12.5%, due June 2007, verbally extended, unsecured | 1,500 | – | 1,500 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 9,940 | – | 9,940 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,638 | – | 1,638 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,420 | – | 1,420 | ||||||||||
Note payable, interest at 12% per annum, due September 2010, verbally extended, unsecured | 776 | – | 776 | ||||||||||
Note payable, interest at 12% per annum, due April 2014 | 14,625 | – | 14,625 | ||||||||||
Note payable, interest at 12% per annum, due July 2014 | 50,000 | 42,746 | 7,254 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 40,000 | 34,708 | 5,292 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 35,000 | 30,625 | 4,375 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 56,715 | 3,285 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 57,810 | 2,190 | ||||||||||
Note payable, interest at 12% per annum, due December 2014 | 50,000 | 49,498 | 502 | ||||||||||
Total Notes Payable | 753,139 | 272,103 | 481,036 | ||||||||||
Less: Current Portion | 443,514 | – | 443,514 | ||||||||||
Long-Term Notes Payable | $ | 309,625 | $ | 272,103 | $ | 37,522 | |||||||
The interest expense for the years ended December 31, 2012 and December 31, 2011 is $464,694 and $78,382, respectively. | |||||||||||||
The Company entered into a contingent settlement agreement on July 26, 2004 related to $440,765 of notes payable to individuals and related accrued interest. In July 2004, the Company paid a total of $73,333 towards the debt and agreed to pay a total of $298,667, including interest through January 2006 in full payment. The Settlement Agreement provides for an accelerated payment schedule at the Company's option, which would reduce the total payment made by the Company by approximately $12,000. The Company defaulted on the two remaining payments totaling $80,000 at which time the entire remaining balance became due, including default interest and legal fees. The Company currently has accrued $566,189 for interest and legal fees (included in the accrued interest of $881,812 as of December 31, 2012) in addition to the $95,740 principal balance (included in the notes payable of $717,550 as of December 31, 2012). | |||||||||||||
During August 2004, the Company entered into an agreement to settle a note payable in the amount of $200,000 plus accrued interest. The parties agreed to settle the debt for $261,000 payable as follows: Twelve consecutive payments of $12,500 payable monthly commencing August 31, 2004 and ending July 31, 2005; a lump-sum payment of $95,000 payable on July 31, 2005; and a one-time interest payment of $16,000 on July 31, 2005. This agreement includes an additional $7,500 as inducement to the note holder to enter into the extended agreement, which was amortized as a loan fee over the term of the agreement. Scheduled payments were not made on the note and the company is currently in default. The Company currently has accrued $125,165 for interest (included in the accrued interest of $881,812 as of December 31, 2012) in addition to the $161,000 principal balance (included in the notes payable of $717,550 as of December 31, 2012. | |||||||||||||
During August 2004, the Company entered into an agreement to settle a note payable in the amount of $100,000 plus accrued interest. The parties agreed to settle the debt for $130,800 payable as follows: Twelve consecutive payments of $6,000 payable monthly commencing August 31, 2004 and ending July 31, 2005; a lump-sum payment of $50,500 payable on July 31, 2005; and a one-time interest payment of $8,300 on July 31, 2005. The Company has recognized a $38,610 gain on forgiveness of accrued interest related to this transaction. Scheduled payments were not made on the note and the company is currently in default. The Company currently has accrued $34,709 for interest (included in the accrued interest of $881,812 as of December 31, 2012) in addition to the $71,500 principal balance (included in the notes payable of $717,550 as of December 31, 2012. | |||||||||||||
During the year ended December 31, 2012, the Company entered into various note agreements to issue convertible notes and detachable warrants. The notes call for outstanding principal and interest to be converted into the Company’s common stock at $0.50 per share. During 2012, the Company issued the following convertible notes: | |||||||||||||
Issue Date | Principal | Warrants to be Granted | Notes Payable – Beneficial Conversion Feature as of Issue Date | ||||||||||
8/14/12 | 50,000 | 10,000 | 41,623 | ||||||||||
8/21/12 | 50,000 | 10,000 | 41,848 | ||||||||||
9/26/12 | 150,000 | 50,000 | 120,435 | ||||||||||
11/12/12 | 50,000 | 10,000 | 42,867 | ||||||||||
$ | 300,000 | 80,000 | 246,773 | ||||||||||
7_FAIR_VALUE_OF_FINANCIAL_INST
7. FAIR VALUE OF FINANCIAL INSTRUMENTS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2012 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
7. FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||||||||||
Fair value is determined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels: | |||||||||||||||||
Level one — Quoted market prices in active markets for identical assets or liabilities; | |||||||||||||||||
Level two — Inputs other than level one inputs that are either directly or indirectly observable; and | |||||||||||||||||
Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. | |||||||||||||||||
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. | |||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
Fair value measurement using inputs | Carrying amount at | ||||||||||||||||
Financial instruments | Level 1 | Level 2 | Level 3 | 12/31/12 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative instruments | $ | – | $ | 1,016,341 | $ | – | $ | 1,016,341 | |||||||||
Total | $ | – | $ | 1,016,341 | $ | – | $ | 1,016,341 | |||||||||
Fair value measurement using inputs | Carrying amount at | ||||||||||||||||
Financial instruments | Level 1 | Level 2 | Level 3 | 12/31/11 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative instruments | $ | – | $ | 1,043,639 | $ | – | $ | 1,043,639 | |||||||||
Total | $ | – | $ | 1,043,639 | $ | – | $ | 1,043,639 | |||||||||
During the year ended December 31, 2012, the Company entered into various note agreements. At the option of the holder, these notes are convertible into the Company’s shares of common stock at various conversion prices. | |||||||||||||||||
Issue Date | Conversion Price Clause | ||||||||||||||||
1/26/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
1/31/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
2/16/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
2/21/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
6/6/12 | Lower of (i) $0.50 or (ii) 50% of average closing bid price 3 trading days preceding conversion date | ||||||||||||||||
7/20/12 | 55% of Market Price / average of the lowest 3 trading prices, 10 trading days preceding conversion date | ||||||||||||||||
8/23/12 | 55% of Market Price / average of the lowest 3 trading prices, 10 trading days preceding conversion date | ||||||||||||||||
11/12/12 | 31% of Market Price / lowest trading price, 120 days preceding conversion date | ||||||||||||||||
12/24/12 | 55% of Market Price / lowest trading price, 120 days preceding conversion date | ||||||||||||||||
As per ASC 815 Derivatives & Hedging, these convertible notes payable do not meet the definition of a “conventional convertible debt instrument” since the debt is not convertible into a fixed number of shares. The debt can be converted into common stock at a conversions price that is a percentage of the market price; therefore the number of shares that could be required to be delivered upon “net-share settlement” is essentially indeterminate. Therefore, the convertible debenture is considered “non-conventional,” which means that the conversion feature must be bifurcated from the debt and shown as a separate derivative liability. | |||||||||||||||||
The fair value of the conversion liability will be adjusted to fair value each balance sheet date with the change being shown as a component of net income. | |||||||||||||||||
The fair value of the derivative liability at the inception of these convertible notes payable were shown as a debt discount with any discount greater than the face amount of the debt being as financing costs in the year ended December 31, 2012. | |||||||||||||||||
Funding Date | Amount of Debt | Fair Value of Derivative Liability | Amount Applied to Debt Discount | Recorded as Debt Issuance Cost | |||||||||||||
1/26/12 | 50,000 | 199,842 | 50,000 | 149,842 | |||||||||||||
1/31/12 | 50,000 | 99,901 | 50,000 | 49,901 | |||||||||||||
2/16/12 | 60,000 | 239,871 | 60,000 | 179,871 | |||||||||||||
2/21/12 | 40,000 | 79,937 | 40,000 | 39,937 | |||||||||||||
6/6/12 | 30,000 | 93,875 | 30,000 | 63,875 | |||||||||||||
7/20/12 | 27,500 | 212,706 | 27,500 | 185,206 | |||||||||||||
8/23/12 | 32,500 | 53,870 | 32,500 | 21,370 | |||||||||||||
11/12/12 | 16,000 | 195,202 | 16,000 | 179,202 | |||||||||||||
12/24/12 | 22,500 | 272,976 | 22,500 | 250,476 | |||||||||||||
328,500 | 1,448,180 | 328,500 | 1,119,680 | ||||||||||||||
At December 31, 2012, the fair value of the conversion liabilities was $1,016,341. During the year ended December 31, 2012, the gain due to the change in the fair value of these derivative liabilities was recorded as $1,475,481. | |||||||||||||||||
At December 31, 2011, the fair value of the conversion liabilities was $1,043,639. During the year ended December 31, 2011, the loss due to the change in the fair value of these derivative liabilities was recorded as $284,378. |
8_STOCKHOLDERS_DEFICIT
8. STOCKHOLDERS' DEFICIT | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2012 | |||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||
8. STOCKHOLDERS' DEFICIT | ' | ||||||||||||||||||
PREFERRED STOCK | |||||||||||||||||||
The Company is authorized to issue up to 20,000,000 shares of preferred stock, $0.01 par value per share in series to be designated by the Board of Directors. There were no shares issued and outstanding as of December 31, 2012 and 2011. | |||||||||||||||||||
Stock Split | |||||||||||||||||||
A majority of shareholders approved a resolution providing the Company’s Board of Directors with the authority to effect a one-for-twenty-thousand (1:20,000) reverse stock split for stockholders of record as of March 13, 2012. The reverse split took effect July 5, 2012, resulting in 919,219 shares outstanding. All figures have been presented on the basis of reverse split where ever applicable for all the periods presented in these financial statements. | |||||||||||||||||||
COMMON STOCK | |||||||||||||||||||
CONVERSION OF DEBT | |||||||||||||||||||
During 2012, the Company entered into various agreements to convert $28,125 of principal and $2,500 of accrued interest into 35,268 shares of common stock. The fair market value of the stock on the dates of agreement and issuance was $141,071. The Company recorded a loss on settlement of debt of $110,446. | |||||||||||||||||||
During 2011, the Company entered into various agreements to convert $439,255 of principal and $36,019 of accrued interest into 199,800 shares of common stock. The fair market value of the stock on the dates of agreement and issuance was $1,934,642. The Company recorded a loss on settlement of debt of $1,459,321. | |||||||||||||||||||
STOCK ISSUED FOR SERVICES | |||||||||||||||||||
During the year ended December 31, 2012, the Company issued an aggregate of 196,110 shares of its common stock to various employees of the Company as compensation. The shares were valued at a total of $390,815. A total of 225,000 shares of its common stock were issued to the Company’s president and CEO. The fair market value of the shares issued to the Company’s president and CEO was $450,000. | |||||||||||||||||||
During the year ended December 31, 2012, the Company entered into various agreements for strategic business planning, financial advisory, investor relations, and professional and public relations services. As compensation for the services rendered, the Company issued 158,225 shares of common stock, valued at $112,905, the fair market value of the stock on the day of issuance. | |||||||||||||||||||
In addition to the above issuances, the Company also issued 160,000 shares of common stock to its president and CEO for payment of outstanding debt, during 2012, valued at $320,000. | |||||||||||||||||||
During the year ended December 31, 2011, the Company issued an aggregate of 57,451 shares of its common stock to various employees of the Company as compensation. The shares were valued at a total of $438,678. | |||||||||||||||||||
During the year ended December 31, 2011, the Company entered into various agreements for strategic business planning, financial advisory, investor relations, and professional and public relations services. As compensation for the services rendered, the Company issued 13,049 shares of common stock, valued at $137,912, the fair market value of the stock on the day of issuance. | |||||||||||||||||||
STOCK OPTION PLAN | |||||||||||||||||||
On February 11, 2008, the Board of Directors adopted the 2008 Equity Incentive Plan (“the Plan”). The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company reserved 15,000 shares of common stock for awards to be made under the Plan. 15,000 shares reserved under this plan have been issued. | |||||||||||||||||||
On April 29, 2008, the Board of Directors adopted the 2008-2 Equity Incentive Plan (“the Plan”). The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company reserved 16,500 shares of common stock for awards to be made under the Plan. 16,343 of the shares reserved under this plan have been issued. | |||||||||||||||||||
On July 1, 2008, the Board of Directors adopted the 2008-3 Equity Incentive Plan (“the Plan”). The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company reserved 125 shares of common stock for awards to be made under the Plan. 125 of the shares reserved under this plan have been issued. | |||||||||||||||||||
On September 2, 2008, the Board of Directors adopted the 2008-4 Equity Incentive Plan (“the Plan”). The Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital-raising transaction. The Company reserved 190 shares of common stock for awards to be made under the Plan. 190 of the shares reserved under this plan have been issued. | |||||||||||||||||||
On February 15, 2009, the Board of Directors adopted the 2009 Equity Incentive Plan (the “Plan.”) The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are no it connection with the offer and sale of securities in a capital raising transactions. The company initially reserved 500 shares of its common stock for awards to be made under the Plan. 500 of the shares reserved under this plan have been issued. | |||||||||||||||||||
On May 15, 2009, the Board of Directors adopted the 2009-2 Equity Incentive Plan (The “Plan”.) The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital raising transaction. The Company initially reserved 3,000 shares of its common stock for awards to be made under the Plan. 2,980 of the shares under this plan have been issued. | |||||||||||||||||||
On November 6, 2009, the Board of Directors adopted the 2009-3 Equity Incentive Plan (The “Plan”.) The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital raising transaction. The Company initially reserved 10,000 shares of its common stock for awards to be made under the Plan. 10,000 of the shares under this plan have been issued. | |||||||||||||||||||
The Company recognized marketing expenses over a straight-line basis over the vesting periods based on the market price of their stock at grant date. | |||||||||||||||||||
The Company granted 5,040 restricted shares during the year ended December 31, 2009. Of the shares granted, 5,000 shares vested immediately and 40 shares vest over a six-month period. The Company recognized marketing expense on a straight-line basis over the vesting periods based on the market price of their stock on the grant date. | |||||||||||||||||||
On May 6, 2011, the Board of Directors adopted the 2011 Equity Incentive Plan (The “Plan”.) The Plan provides for the granting of the nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to their employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital raising transaction. The Company initially reserved 30,000 shares of its common stock for awards to be made under the Plan. 30,000 of the shares under this plan have been issued. | |||||||||||||||||||
On October 27, 2011, the Board of Directors adopted the 2011 Equity Incentive Plan II (the “2011-II Plan”). The 2011-II Plan provides for the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance Units, and Performance Shares, to our employees, officers, directors, consultants, independent contractors, advisors, or other service providers, provided that such services are not in connection with the offer and sale of securities in a capital raising transaction. The Company initially reserved 60,000 shares of its common stock for awards to be made under the 2011-II Plan. 48,750 of the shares under this plan have been issued. | |||||||||||||||||||
WARRANTS | |||||||||||||||||||
There were 80,000 warrants granted during 2012 and 0 in 2011. | |||||||||||||||||||
The following table summarizes the activity of options and warrants under all agreements and plans for the two years ended December 31, 2012 and 2011: | |||||||||||||||||||
Weighted | |||||||||||||||||||
Average | Aggregate | ||||||||||||||||||
Number of | Exercise | Intrinsic | |||||||||||||||||
Options | Warrants | Price | Value | ||||||||||||||||
Outstanding, December 31, 2010 | 27 | – | 140,000 | – | |||||||||||||||
Granted | – | – | – | – | |||||||||||||||
Exercised | – | – | – | – | |||||||||||||||
Expired/cancelled | (25 | ) | – | – | – | ||||||||||||||
Outstanding, December 31, 2011 | 2 | 0 | 2,244,000 | – | |||||||||||||||
Granted | – | – | – | – | |||||||||||||||
Exercised | – | 80,000 | 1 | – | |||||||||||||||
Expired/cancelled | – | – | – | – | |||||||||||||||
Outstanding, December 31, 2012 | 2 | 80,000 | 19.7 | – | |||||||||||||||
Options: | |||||||||||||||||||
The Company adopted ASC 718 (previously SFAS No. 123-R) effective July 1, 2006 using the modified prospective method. Under this transition method, stock compensation expense recognized in the year ended December 31, 2011 includes compensation expense for all stock-based compensation awards vested during year ended December 31, 2011 based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123-R. | |||||||||||||||||||
Methods of estimating fair value: | |||||||||||||||||||
Under ASC 718 (previously SFAS No. 123-R), the fair value of stock options is determined using the Black-Scholes model. The Company’s expected volatility assumption is based on the historical volatility of the Company’s stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted average assumptions used in the model were as follows: | |||||||||||||||||||
2012 | 2011 | ||||||||||||||||||
Risk-free interest rate | 0.19% | N/A | |||||||||||||||||
Volatility | 320% | N/A | |||||||||||||||||
Expected life | One Year | N/A | |||||||||||||||||
Dividend yield | 0% | 0% | |||||||||||||||||
The following table summarizes information about stock options and warrants outstanding at December 31, 2012: | |||||||||||||||||||
OPTIONS | |||||||||||||||||||
OUTSTANDING | EXERCISABLE | ||||||||||||||||||
RANGE OF EXERCISE PRICES | NUMBER OUTSTANDING | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE-YEARS | WEIGHTED AVERAGE EXERCISE PRICE | NUMBER EXERCISABLE | |||||||||||||||
$1,320,000 | 2 | 0.63 | 1,320,000 | 2 | |||||||||||||||
– | – | ||||||||||||||||||
2 | 0.63 | 1,320,000 | 2 | ||||||||||||||||
WARRANTS | |||||||||||||||||||
OUTSTANDING | EXERCISABLE | ||||||||||||||||||
RANGE OF EXERCISE PRICES | NUMBER OUTSTANDING | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE-YEARS | WEIGHTED AVERAGE EXERCISE PRICE | NUMBER EXERCISABLE | |||||||||||||||
$1 | 80,000 | 8.73 | 1 | 80,000 | |||||||||||||||
– | – | ||||||||||||||||||
80,000 | 8.73 | 1 | 80,000 |
9_INCOME_TAXES
9. INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
9. INCOME TAXES | ' | ||||||||
The income tax provision (benefit) for the years ended December 31, 2012 and 2011 differs from the computed expected provision (benefit) at the federal statutory rate for the following reasons: | |||||||||
2012 | 2011 | ||||||||
Computed expected income tax provision (benefit) | $ | (537,978 | ) | $ | (851,053 | ) | |||
Increase in allowance for doubtful accounts | – | – | |||||||
Net operating loss carryforward | 576,606 | 826,141 | |||||||
Increased | |||||||||
Accrued liabilities | (39,478 | ) | 40,484 | ||||||
Allowance for doubtful accounts | – | (17,000 | ) | ||||||
Non-deductible meals & entertainment | 850 | 1,428 | |||||||
Depreciation | – | – | |||||||
Income tax provision (benefit) | $ | – | $ | – | |||||
The components of the deferred tax assets and (liabilities) as of December 31, 2012 and 2011 were as follows: | |||||||||
2012 | 2011 | ||||||||
Deferred tax assets: | |||||||||
Temporary differences: | |||||||||
Accrued liabilities | $ | 3,652 | $ | (46,757 | ) | ||||
Allowance for bad debt | – | – | |||||||
Net operating loss carryforward | 16,149,854 | 15,471,495 | |||||||
Valuation allowance | (16,153,507 | ) | (15,424,738 | ) | |||||
Net long-term deferred tax asset | $ | – | $ | – | |||||
The components of the deferred tax (expense) benefit were as follows for the years ended December 31, 2012 and 2011: | |||||||||
2012 | 2011 | ||||||||
Deferred tax assets: | |||||||||
Accrued expenses | $ | 50,410 | $ | 47,628 | |||||
Allowance for bad debt | – | 21,200 | |||||||
Accumulated Depreciation | – | 2,180 | |||||||
Increase in net operating loss carryforward | 678,360 | 971,830 | |||||||
Change in valuation allowance | (627,950 | ) | (1,042,939 | ) | |||||
$ | – | $ | – | ||||||
As of December 31, 2012, the Company had net operating loss carryforwards of approximately $32,600,000 expiring from 2012 through 2026. | |||||||||
10_COMMITMENTS_AND_CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended | ||||||
Dec. 31, 2012 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
10. COMMITMENTS AND CONTINGENCIES | ' | ||||||
LITIGATION | |||||||
a) | On May 15, 2002, Walt Disney World Co. commenced action in the Los Angeles Superior Court against the Company and a former wholly-owned subsidiary (WALT DISNEY WORLD CO. V. POLLUTION RESEARCH AND CONTROL CORP. AND DASIBI ENVIRONMENTAL CORP. (Case No. BC 274013 Los Angeles Superior Court) for amounts due in connection with unpaid rent. A judgment was entered for $411,500. No amounts have been paid in connection with the judgment. As of December 31, 2012, $411,500 has been accrued. | ||||||
b) | Sean Rose, Claire F. Rose and Mark Rose v. Universal Detection Technology, fka Pollution Research and Control Corporation (Superior Court of the State of California for the County of Los Angeles, North Central District, Case No. EC042040) | ||||||
On or about April 16, 2004, Plaintiffs commenced an action against the Company (Case No. EC 038824) for amounts allegedly due pursuant to four unpaid promissory notes. On August 2, 2004, the parties executed a Confidential Settlement Agreement and Mutual Releases (the “Agreement”). On December 30, 2005, Plaintiffs commenced the above-referenced action against the Company, alleging the Company breached the Agreement and seeking approximately $205,000 in damages. A judgment was entered on April 11, 2006. The Company has accrued for this settlement. The Company entered into a settlement agreement in the third quarter of 2004 with each of these three parties. Pursuant to this agreement, at June 30, 2005, the Company was required to pay an additional $80,000 as full payment of our obligations. The Company did not make this payment and are in default of these notes. As of December 31, 2012 and 2011, the Company has $661,929 and $610,621, including interest, accrued for this matter. | |||||||
c) | On June 2, 2006, Plaintiff Trilogy Capital Partners instituted an action in the Los Angeles Superior Court (Trilogy Capital Partners v. Universal Detection Technology, et. al., Case No. SC089929) against the Company. Plaintiff’s Complaint alleged damages against UDT for breach of an engagement letter in the amount of $93,449. Also, Plaintiff alleged that UDT had failed to issue warrants to it pursuant to a written agreement. After completing the initial stages of litigation and conducting extensive mediation, Plaintiff and UDT reached a settlement wherein commencing December 15, 2006, UDT would make monthly payments to Plaintiff of $2,000 until a debt of $90,000 plus accrued interest at six percent per annum was fully paid. In exchange, Plaintiff would release all of its claims against UDT. UDT has been current on all of its agreed payments to Plaintiff. As of December 31, 2011, $28,098 was due under the agreement and included in accounts payable in the accompanying balance sheet as of December 31, 2012. | ||||||
d) | On November 15, 2006, Plaintiff NBGI, Inc. instituted an action in the Los Angeles Superior Court (NBGI, Inc. v. Universal Detection Technology, et. al., Case No. BC361979) against the Company. NBGI, Inc.’s Complaint alleged breach of contract, and requested damages in the amount of $111,014 plus interest at the legal rate and for costs of suit. A Summary Judgment was granted in NBGI’s favor and Judgment has been entered. No payments have been made on this judgment and no actions to enforce the judgment have been taken against the Company. | ||||||
e) | On November 1, 2010 the accounting firm of A.J. Robbins, P.C. filed a lawsuit in the District Court, City and County of Denver, Colorado, seeking recovery of fees allegedly owed for accounting services performed during 2004 to 2008. The claims have been asserted against the Company, a second corporate defendant, and our CEO, as a result of a personal guarantee. On December 15, 2010, Defendants filed an Answer which asserted several defenses. The parties exchanged initial disclosures, and the matter was set for trial commencing on December 5, 2011. On August 3, 2011 the parties entered into a settlement agreement whereby the Defendants in the case will jointly pay $85,000 to the plaintiffs and the Company will issue $45,000 of the Company’s stock to the plaintiffs. The Company was responsible to pay 50% of the cash payments, the other 50% of which was the responsibility of a second defendant. The cash payments were scheduled to be made in equal monthly payments over 7 months commencing on August 31, 2011. In consideration of the settlement, the parties have executed a mutual release and have agreed to withdraw the lawsuit. The releases and withdrawal are contingent upon the Company's full performance of the settlement agreement terms. The Company issued stock with a fair market value of $36,000 on the date of the agreement in full payment of the stock portion of the settlement agreement. As of November 11, 2012, the Company and the second corporate defendant have fulfilled all the obligations with respect to this liability and all of the $85,000 has been paid to the plaintiffs. | ||||||
From time to time, the Company is a party to a number of lawsuits arising in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company's operations, cash flows or financial position. | |||||||
EMPLOYMENT AGREEMENTS | |||||||
In September 2001, the Company entered into an employment agreement with its President and Chief Executive Officer. Under the agreement, base salary is $250,000 to be adjusted on an annual basis. The Company granted options to purchase 5,750 shares of its common stock exercisable at $60 per share. | |||||||
On January 1, 2011, the Company entered into an amendment of the employment agreement with its President and Chief Executive Officer. Under the amendment, base salary is $320,000. The agreement also provides for salary increases of 5% per year commencing January 1, 2012, and an extension of the term of the agreement until December 31, 2016. In addition, automobile cost is limited to a maximum of $2,500 per month and the Company will reimburse the officer for individual life insurance premiums and for health insurance premiums and related expenses. | |||||||
The Company is obligated to make certain minimum salary payments as follows: | |||||||
YEAR ENDING DECEMBER 31, | |||||||
2013 | $ | 352,800 | |||||
2014 | 370,440 | ||||||
2015 | 388,962 | ||||||
2016 | 408,410 | ||||||
$ | 1,520,612 | ||||||
LICENSE AGREEMENT | |||||||
On September 30, 2003, the Company entered into a license agreement with CalTech whereby CalTech granted the Company an exclusive, royalty-bearing license to make, use, and sell all products that incorporate the technology that was developed under the Technology Affiliates Agreement with JPL and is covered by related patents. In addition, the grant includes a nonexclusive, royalty-bearing license to make derivative works of the technology. The Company is required to make quarterly royalty payments to CalTech, ranging from 2% to 4% of net revenues for each licensed product made, sold, licensed, distributed, or used by the Company and 35% of net revenues that the Company receives from sublicensing the licensed products. A minimum annual royalty of $10,000 was due and paid to CalTech on August 1, 2005 and each anniversary thereof. The minimum royalty will be offset by the above mentioned royalty payments, if any. | |||||||
To maintain its license with Cal Tech, a minimum annual royalty of $10,000 was due Caltech on August 1, 2005, and is due on each anniversary thereof, regardless of product sales. Any royalties paid from product sales for the 12-month period preceding the date of payment of the minimum royalty will be credited against the annual minimum. Pursuant to the terms of the license, the Company must pay four percent royalties on product sales in countries where a patent is issued and two percent royalties on product sales in countries where a patent is not issued, as well as 35 percent of net revenues received from sub-licensees. As of the date of this report the Company has not paid the $10,000 royalty due Caltech on August 1, 2007. The Company and Caltech entered into a second amendment to the Company’s license agreement, dated December 1, 2006, and which provides that the overdue amounts shall be paid to Caltech in ten monthly installments of $8,631,85. To date, the Company has made four of the monthly installments called for in the second amendment to its license agreement with Caltech. On June 23, 2009, Caltech sent a letter to the Company asserting certain breaches by the Company of the License Agreement between Caltech and the Company and attempting to terminate the Agreement. The Company disagrees with the various assertions made by Caltech in the letter and has requested that Caltech submit to arbitration all matters in dispute. To date, no further action has been taken and the Company does not continue to perform under the License Agreement. | |||||||
OPERATING LEASES | |||||||
On June 1, 2009, the Company entered into a lease agreement to lease office space commencing June 1, 2009 through May, 31, 2012. The Company further extended the lease to November 30, 2012, and is currently on a “month-to-month” term. | |||||||
Rent expense was $84,399 and $79,059 for 2012 and 2011, respectively. |
11_SUBSEQUENT_EVENTS
11. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2012 | |
Subsequent Events [Abstract] | ' |
11. SUBSEQUENT EVENTS | ' |
During the first quarter of 2013, the company issued 277,552 shares of common stock valued at $156,339 in order to convert debt of $44,600. | |
On January 9, 2013 the Board of Directors adopted a resolution to enter into a securities purchase agreement in connection with the issuance of an 8% Convertible Note of the Company in the aggregate principal amount of $12,500, convertible into share of common stock, no par value per share, of the Company. The Company also executed an irrevocable letter agreement with Worldwide Stock Transfer, LLC, the Company’s transfer agent, with respect to the reserve of shares of common stock of the Company to be issued upon any conversion of the above Note. | |
On June 11, 2013 the Board of Directors adopted a resolution to enter into a securities purchase agreement in connection with the issuance of an 8% Convertible Note of the Company in the aggregate principal amount of $53,000, convertible into share of common stock, no par value per share, of the Company. The Company also executed an irrevocable letter agreement with Worldwide Stock Transfer, LLC, the Company’s transfer agent, with respect to the reserve of shares of common stock of the Company to be issued upon any conversion of the above Note. | |
On August 7, 2013 the Board of Directors adopted a resolution to enter into a securities purchase agreement in connection with the issuance of an 8% Convertible Note of the Company in the aggregate principal amount of $6,000, convertible into share of common stock, no par value per share, of the Company. The Company also executed an irrevocable letter agreement with Worldwide Stock Transfer, LLC, the Company’s transfer agent, with respect to the reserve of shares of common stock of the Company to be issued upon any conversion of the above Note. |
12_RESTATEMENT_OF_FINANCIAL_ST
12. RESTATEMENT OF FINANCIAL STATEMENTS | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Restatement of Prior Year Income [Abstract] | ' | ||||||||
12. RESTATEMENT OF FINANCIAL STATEMENTS | ' | ||||||||
The management of Universal Detection Technology has determined that the previously issued financial statements contained in the Company’s annual Report on Form 10-K for the year ended December 31, 2011 required restatement to properly account for certain derivative transactions. | |||||||||
The Company issued 2 secured convertible promissory notes to Beauvoir Capital, LTD on July 25, 2011 and August 8, 2011 for total proceeds to the Company of $90,000 (“Beauvoir Notes”). Beauvoir Notes could be converted into shares of the Company’s common stock at a conversion price of the lower of (i) $0.0003 or (ii) eight percent (80%) of the lowest closing bid price of the Common Stock during the 30 trading days preceding the date the Conversion Notice is delivered to the Company. | |||||||||
The Company issued 4 secured convertible promissory notes to Sendero Capital on August 16, 2011, November 1, 2011, November 21, 2011, and December 20, 2011 for total proceeds of $205,000 (“Sendero Notes”). Sendero Notes could be converted into shares of the Company’s common stock at a conversion price of the lower of (i) $0.0001 or (ii) fifty percent (50%) of the lowest closing bid price of the Common Stock during the 30 trading days preceding the date the Conversion Notice is delivered to the Company. | |||||||||
Because the conversion prices of the notes were variable, the Company should have recorded derivative liabilities against these notes as of their issuance dates. The Company calculated the derivative liabilities and determined that the amount is material. | |||||||||
Below is a comparative presentation of the balance sheet and income statement as of and for the year ended December 31, 2011 as restated in this report and as reported in the Company’s Report on Form 10K previously filed with the Securities and Exchange Commission. | |||||||||
As Reported | As Restated | ||||||||
12/31/11 | 12/31/11 | ||||||||
BALANCE SHEET: | |||||||||
Derivative liabilities | – | 1,043,639 | |||||||
Total current liabilities | 4,368,787 | 5,412,427 | |||||||
Long term notes payable, net | 309,625 | 37,522 | |||||||
Total liabilities | 4,678,412 | 5,449,949 | |||||||
Accumulated deficit | (48,047,417 | ) | (48,818,954 | ) | |||||
Total stockholders' deficit | (4,622,017 | ) | (5,393,554 | ) | |||||
STATEMENT OF OPERATIONS: | |||||||||
Interest expense | (55,485 | ) | (78,382 | ) | |||||
Debt issuance cost | – | (464,262 | ) | ||||||
Gain/(loss) in change of FV of derivative | – | (284,378 | ) | ||||||
Total other expenses | (1,472,305 | ) | (2,243,842 | ) | |||||
NET LOSS | (2,613,866 | ) | (3,385,403 | ) |
2_SUMMARY_OF_SIGNIFICANT_ACCOU1
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Summary Of Significant Accounting Policies Policies | ' | ||||||||
PRINCIPLES OF CONSOLIDATION | ' | ||||||||
PRINCIPLES OF CONSOLIDATION | |||||||||
The consolidated financial statements include the accounts of Universal Detection Technology and its wholly-owned subsidiaries Nutek, Inc. (“Nutek”) and Logan Medical Devices, Inc. (“Logan”). The two subsidiaries are currently inactive. All significant intercompany balances and transactions have been eliminated in consolidation. | |||||||||
REVENUE RECOGNITION | ' | ||||||||
REVENUE RECOGNITION | |||||||||
Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Service revenue is recognized when services are performed and amounts are due. | |||||||||
INVENTORIES | ' | ||||||||
INVENTORIES | |||||||||
Inventories, consisting of finished goods, are stated at the lower of cost (first-in first-out) basis or market. | |||||||||
RECLASSIFICATIONS | ' | ||||||||
RECLASSIFICATIONS | |||||||||
Certain prior year amounts have been reclassified to conform to the current year’s presentation, none of which had an impact on total assets, stockholders’ deficit, net loss, or net loss per share. | |||||||||
ADVERTISING EXPENSES | ' | ||||||||
ADVERTISING EXPENSES | |||||||||
The Company expenses advertising costs as incurred. During the years ended December 31, 2012 and 2011, the Company did not have significant advertising costs. | |||||||||
PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION | ' | ||||||||
PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION | |||||||||
Property and equipment, consisting of office furniture and equipment, leasehold improvements and lab testing equipment, is recorded at cost less accumulated amortization and depreciation respectively. Depreciation and amortization is provided for on the straight-line method over the estimated useful lives of the assets, generally three to five years or over the term of the lease. | |||||||||
2012 | 2011 | ||||||||
Equipment | $ | 4,448 | $ | 4,448 | |||||
Accumulated Depreciation | (1,963 | ) | (1,074 | ) | |||||
Fixed Assets, Net of Depreciation | $ | 2,485 | $ | 3,374 | |||||
Total depreciation expense was $890 and $3,512 for the years ended December 31, 2012 and 2011, respectively. During 2011, the Company wrote off $142,112 in fixed assets no longer in service. The accumulated depreciation on the assets was $142,112 and no gain or loss was recognized on the disposal. | |||||||||
STOCK BASED COMPENSATION TO OTHER THAN EMPLOYEES | ' | ||||||||
STOCK BASED COMPENSATION TO OTHER THAN EMPLOYEES | |||||||||
Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | |||||||||
EARNINGS PER COMMON SHARE | ' | ||||||||
EARNINGS PER COMMON SHARE | |||||||||
Basic loss per share is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding. The computation of diluted loss per share is similar to the basic loss per share computation except the denominator is increased to include the number of additional shares that would have been outstanding if the dilutive potential common shares had been issued. In addition, the numerator is adjusted for any changes in income or loss that would result from the assumed conversions of those potential shares. However, such presentation is not required if the effect is antidilutive. Accordingly, the diluted per share amounts do not reflect the impact of warrants and options or convertible debt outstanding for 122,000 and 2 shares at December 31, 2012 and 2011, respectively, because the effect of each is antidilutive | |||||||||
CASH EQUIVALENTS | ' | ||||||||
CASH EQUIVALENTS | |||||||||
For purposes of reporting cash flows, the Company considers all short term, interest bearing deposits with original maturities of three months or less to be cash equivalents. | |||||||||
IMPAIRMENT OF PATENTS AND LONG-LIVED ASSETS | ' | ||||||||
IMPAIRMENT OF PATENTS AND LONG-LIVED ASSETS | |||||||||
Patents and other intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives. In accordance with ASC 350 (previously Statement of Financial Accounting Standard No. 142), GOODWILL AND OTHER INTANGIBLE ASSETS ("ASC 350"), the Company periodically evaluates its long-lived assets by measuring the carrying amounts of assets against the estimated undiscounted future cash flows associated with them. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144 (ASC 360). SFAS 144 (ASC 360) requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. | |||||||||
As per the Statement of Financial Accounting Standards (“SFAS”) No. 142 (ASC 350), “Goodwill and Other Intangible Assets (“SFAS 142”) (ASC 350),” the Company assess finite-lived intangible assets and other long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of intangible assets or other long-lived assets may not be recoverable, the impairment is measured by using the projected discounted cash-flow method. | |||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||
The carrying amounts of cash, accounts receivable, notes receivable, accounts payable, accrued expenses and notes payable approximate fair value because of the short maturity of these items. | |||||||||
INCOME TAXES | ' | ||||||||
INCOME TAXES | |||||||||
Deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial statement amounts at the end of each reporting period. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the current period and the change during the period in deferred tax assets and liabilities. The deferred tax assets and liabilities have been netted to reflect the tax impact of temporary differences. At December 31, 2012, a full valuation allowance has been established for the deferred tax asset as management believes that it is more likely than not that a tax benefit will not be realized. | |||||||||
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS | ' | ||||||||
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS | |||||||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets. | |||||||||
CONCENTRATION OF CREDIT RISK | ' | ||||||||
CONCENTRATION OF CREDIT RISK | |||||||||
Generally, the Company required no collateral when it extends credit to its customers. The Company's credit losses in the aggregate have not exceeded managements' expectations. The Company maintains all cash in bank accounts, which at times may exceed federally insured limits. The Company has not experienced a loss in such accounts. | |||||||||
SEGMENT REPORTING | ' | ||||||||
SEGMENT REPORTING | |||||||||
ASC 280 (previously SFAS No. 131), Disclosures about segments of an enterprise and related information, which superseded statement of financial accounting standards No. 14, Financial reporting for segments of a business enterprise, establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performances. In 2012 and 2011, the Company operated as one segment. | |||||||||
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | ' | ||||||||
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |||||||||
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-02, which requires entities to present information about significant items reclassified out of accumulated other comprehensive income (loss) by component either on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. This ASU is effective for the Company in the first quarter of fiscal 2014. We do not expect the adoption will have a significant impact on our consolidated financial statements. | |||||||||
In July 2012, the FASB issued ASU 2012-02, which amends how companies test for impairment of indefinite-lived intangible assets. The new guidance permits a company to assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the annual impairment test. The ASU is effective for the Company in the first quarter of fiscal 2014. We do not expect the adoption will have a significant impact on our consolidated financial statements. | |||||||||
2_SUMMARY_OF_SIGNIFICANT_ACCOU2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Summary Of Significant Accounting Policies Tables | ' | ||||||||
Schedule of property and equipment | ' | ||||||||
2012 | 2011 | ||||||||
Equipment | $ | 4,448 | $ | 4,448 | |||||
Accumulated Depreciation | (1,963 | ) | (1,074 | ) | |||||
Fixed Assets, Net of Depreciation | $ | 2,485 | $ | 3,374 |
3_ACCRUED_LIABILITIES_Tables
3. ACCRUED LIABILITIES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Accrued Liabilities Tables | ' | ||||||||
Schedule of accrued liabilities | ' | ||||||||
The accrued liabilities consist of the following at December 31, 2012 and 2011: | |||||||||
2012 | 2011 | ||||||||
Loan Fees Payable | $ | 68,600 | $ | 68,600 | |||||
Deferred Rent | – | 2,827 | |||||||
Accrued expenses | 139,881 | 150,033 | |||||||
Accrued Settlement (Refer to Note 10) | 411,500 | 411,500 | |||||||
TOTAL ACCRUED LIABILITIES | $ | 619,981 | $ | 632,960 | |||||
6_NOTES_PAYABLE_Tables
6. NOTES PAYABLE (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2012 | |||||||||||||
Notes Payable Tables | ' | ||||||||||||
Schedule of Notes Payable | ' | ||||||||||||
Notes payable consisted of the following at December 31, 2012: | |||||||||||||
Gross | Unamortized Discount | Net | |||||||||||
Notes payable to individuals, subject to contingent settlement agreement and summary judgment, interest at 11.67% per annum, principal and interest due January 1, 2006, in default, unsecured | $ | 95,740 | – | 95,740 | |||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due July 2005, in default, unsecured | 161,000 | – | 161,000 | ||||||||||
Note payable, subject to settlement agreement, interest at 9.17% per annum, principal and interest due July 2005, unsecured | 71,500 | – | 71,500 | ||||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due December 2005, unsecured | 100,000 | – | 100,000 | ||||||||||
Note payable, interest at 12.5%, due June 2007, verbally extended, unsecured | 1,500 | – | 1,500 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 9,940 | – | 9,940 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,638 | – | 1,638 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,420 | – | 1,420 | ||||||||||
Note payable, interest at 12% per annum, due September 2010, verbally extended, unsecured | 776 | – | 776 | ||||||||||
Note payable, interest at 12% per annum, due July 2014 | 36,500 | 26,095 | 10,405 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 40,000 | 21,387 | 18,613 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 35,000 | 18,969 | 16,031 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 36,734 | 23,266 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 37,828 | 22,172 | ||||||||||
Note payable, interest at 12% per annum, due December 2014 | 50,000 | 32,847 | 17,153 | ||||||||||
Note payable, interest at 12% per annum, due January 2015 | 50,000 | 34,535 | 15,465 | ||||||||||
Note payable, interest at 12% per annum, due January 2015 | 50,000 | 34,763 | 15,237 | ||||||||||
Note payable, interest at 12% per annum, due February 2015 | 60,000 | 42,591 | 17,409 | ||||||||||
Gross | Unamortized Discount | Net | |||||||||||
Note payable, interest at 12% per annum, due February 2015 | 40,000 | 28,577 | 11,423 | ||||||||||
Note payable, interest at 5% per annum, due July 2012, verbally extended, unsecured | 30,000 | – | 30,000 | ||||||||||
Note payable, interest at 8% per annum, due April 2013, verbally extended, unsecured | 27,500 | 10,672 | 16,828 | ||||||||||
Note payable, interest at 8% per annum, due August 2013, verbally extended, unsecured (net of discount of $26,503) | 18,311 | 6,423 | 11,888 | ||||||||||
Note payable, interest at 8% per annum, due May 2013, verbally extended, unsecured (net of discount of $27,075) | 17,721 | 6,423 | 11,298 | ||||||||||
Note payable, interest at 8% per annum, due May 2013, verbally extended, unsecured | 32,500 | 17,247 | 15,253 | ||||||||||
Note payable, interest at 8% per annum, due September 2013, verbally extended, unsecured (net of discount of $87,536) | 38,318 | 29,077 | 9,242 | ||||||||||
Note payable, interest at 8% per annum, due August 2013, verbally extended, unsecured | 16,000 | 13,149 | 2,851 | ||||||||||
Note payable, interest at 8% per annum, due November 2013, verbally extended, unsecured (net of discount of $37,243) | 8,939 | – | 8,939 | ||||||||||
Note payable, interest at 8% per annum, due September 2013, verbally extended, unsecured | 22,500 | 21,938 | 562 | ||||||||||
Total Notes Payable | 1,136,803 | 419,253 | 717,550 | ||||||||||
Less: Current Portion | 655,303 | 104,928 | 550,375 | ||||||||||
Long-Term Notes Payable | $ | 481,500 | $ | 314,325 | $ | 167,175 | |||||||
Notes payable consisted of the following at December 31, 2011: | |||||||||||||
Gross | Unamortized Discount | Net | |||||||||||
Notes payable to individuals, subject to contingent settlement agreement and summary judgment, interest at 11.67% per annum, principal and interest due January 1, 2006, in default, unsecured | $ | 95,740 | – | 95,740 | |||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due July 2005, in default, unsecured | 161,000 | – | 161,000 | ||||||||||
Note payable, subject to settlement agreement, interest at 9.17% per annum, principal and interest due July 2005, unsecured | 71,500 | – | 71,500 | ||||||||||
Note payable, subject to settlement agreement, interest at 12% per annum, principal and interest due December 2005, unsecured | 100,000 | – | 100,000 | ||||||||||
Note payable, interest at 12.5%, due June 2007, verbally extended, unsecured | 1,500 | – | 1,500 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 9,940 | – | 9,940 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,638 | – | 1,638 | ||||||||||
Note payable, interest at 12% per annum, due March 2010, verbally extended, unsecured | 1,420 | – | 1,420 | ||||||||||
Note payable, interest at 12% per annum, due September 2010, verbally extended, unsecured | 776 | – | 776 | ||||||||||
Note payable, interest at 12% per annum, due April 2014 | 14,625 | – | 14,625 | ||||||||||
Note payable, interest at 12% per annum, due July 2014 | 50,000 | 42,746 | 7,254 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 40,000 | 34,708 | 5,292 | ||||||||||
Note payable, interest at 12% per annum, due August 2014 | 35,000 | 30,625 | 4,375 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 56,715 | 3,285 | ||||||||||
Note payable, interest at 12% per annum, due November 2014 | 60,000 | 57,810 | 2,190 | ||||||||||
Note payable, interest at 12% per annum, due December 2014 | 50,000 | 49,498 | 502 | ||||||||||
Total Notes Payable | 753,139 | 272,103 | 481,036 | ||||||||||
Less: Current Portion | 443,514 | – | 443,514 | ||||||||||
Long-Term Notes Payable | $ | 309,625 | $ | 272,103 | $ | 37,522 | |||||||
Schedule of convertible notes | ' | ||||||||||||
Issue Date | Principal | Warrants to be Granted | Notes Payable – Beneficial Conversion Feature as of Issue Date | ||||||||||
8/14/12 | 50,000 | 10,000 | 41,623 | ||||||||||
8/21/12 | 50,000 | 10,000 | 41,848 | ||||||||||
9/26/12 | 150,000 | 50,000 | 120,435 | ||||||||||
11/12/12 | 50,000 | 10,000 | 42,867 | ||||||||||
$ | 300,000 | 80,000 | 246,773 | ||||||||||
7_FAIR_VALUE_OF_FINANCIAL_INST1
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2012 | |||||||||||||||||
Fair Value Of Financial Instruments Tables | ' | ||||||||||||||||
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis | ' | ||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis are summarized as follows: | |||||||||||||||||
Fair value measurement using inputs | Carrying amount at | ||||||||||||||||
Financial instruments | Level 1 | Level 2 | Level 3 | 12/31/12 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative instruments | $ | – | $ | 1,016,341 | $ | – | $ | 1,016,341 | |||||||||
Total | $ | – | $ | 1,016,341 | $ | – | $ | 1,016,341 | |||||||||
Fair value measurement using inputs | Carrying amount at | ||||||||||||||||
Financial instruments | Level 1 | Level 2 | Level 3 | 12/31/11 | |||||||||||||
Liabilities: | |||||||||||||||||
Derivative instruments | $ | – | $ | 1,043,639 | $ | – | $ | 1,043,639 | |||||||||
Total | $ | – | $ | 1,043,639 | $ | – | $ | 1,043,639 | |||||||||
Schedule of options convertible into common shares | ' | ||||||||||||||||
Issue Date | Conversion Price Clause | ||||||||||||||||
1/26/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
1/31/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
2/16/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
2/21/12 | Lower of (i) $2.00 or (ii) 50% of lowest closing bid price 30 trading days preceding conversion date | ||||||||||||||||
6/6/12 | Lower of (i) $0.50 or (ii) 50% of average closing bid price 3 trading days preceding conversion date | ||||||||||||||||
7/20/12 | 55% of Market Price / average of the lowest 3 trading prices, 10 trading days preceding conversion date | ||||||||||||||||
8/23/12 | 55% of Market Price / average of the lowest 3 trading prices, 10 trading days preceding conversion date | ||||||||||||||||
11/12/12 | 31% of Market Price / lowest trading price, 120 days preceding conversion date | ||||||||||||||||
12/24/12 | 55% of Market Price / lowest trading price, 120 days preceding conversion date | ||||||||||||||||
Schedule of fair value of the derivative liability | ' | ||||||||||||||||
Funding Date | Amount of Debt | Fair Value of Derivative Liability | Amount Applied to Debt Discount | Recorded as Debt Issuance Cost | |||||||||||||
1/26/12 | 50,000 | 199,842 | 50,000 | 149,842 | |||||||||||||
1/31/12 | 50,000 | 99,901 | 50,000 | 49,901 | |||||||||||||
2/16/12 | 60,000 | 239,871 | 60,000 | 179,871 | |||||||||||||
2/21/12 | 40,000 | 79,937 | 40,000 | 39,937 | |||||||||||||
6/6/12 | 30,000 | 93,875 | 30,000 | 63,875 | |||||||||||||
7/20/12 | 27,500 | 212,706 | 27,500 | 185,206 | |||||||||||||
8/23/12 | 32,500 | 53,870 | 32,500 | 21,370 | |||||||||||||
11/12/12 | 16,000 | 195,202 | 16,000 | 179,202 | |||||||||||||
12/24/12 | 22,500 | 272,976 | 22,500 | 250,476 | |||||||||||||
328,500 | 1,448,180 | 328,500 | 1,119,680 | ||||||||||||||
8_STOCKHOLDERS_DEFICIT_Tables
8. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2012 | |||||||||||||||||||
Stockholders Deficit Tables | ' | ||||||||||||||||||
Common stock purchase options | ' | ||||||||||||||||||
The following table summarizes the activity of options and warrants under all agreements and plans for the two years ended December 31, 2012 and 2011: | |||||||||||||||||||
Weighted | |||||||||||||||||||
Average | Aggregate | ||||||||||||||||||
Number of | Exercise | Intrinsic | |||||||||||||||||
Options | Warrants | Price | Value | ||||||||||||||||
Outstanding, December 31, 2010 | 27 | – | 140,000 | – | |||||||||||||||
Granted | – | – | – | – | |||||||||||||||
Exercised | – | – | – | – | |||||||||||||||
Expired/cancelled | (25 | ) | – | – | – | ||||||||||||||
Outstanding, December 31, 2011 | 2 | 0 | 2,244,000 | – | |||||||||||||||
Granted | – | – | – | – | |||||||||||||||
Exercised | – | 80,000 | 1 | – | |||||||||||||||
Expired/cancelled | – | – | – | – | |||||||||||||||
Outstanding, December 31, 2012 | 2 | 80,000 | 19.7 | – | |||||||||||||||
Schedule of weighted average assumptions | ' | ||||||||||||||||||
2012 | 2011 | ||||||||||||||||||
Risk-free interest rate | 0.19% | N/A | |||||||||||||||||
Volatility | 320% | N/A | |||||||||||||||||
Expected life | One Year | N/A | |||||||||||||||||
Dividend yield | 0% | 0% | |||||||||||||||||
Schedule of stock options and warrants | ' | ||||||||||||||||||
The following table summarizes information about stock options and warrants outstanding at December 31, 2012: | |||||||||||||||||||
OPTIONS | |||||||||||||||||||
OUTSTANDING | EXERCISABLE | ||||||||||||||||||
RANGE OF EXERCISE PRICES | NUMBER OUTSTANDING | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE-YEARS | WEIGHTED AVERAGE EXERCISE PRICE | NUMBER EXERCISABLE | |||||||||||||||
$1,320,000 | 2 | 0.63 | 1,320,000 | 2 | |||||||||||||||
– | – | ||||||||||||||||||
2 | 0.63 | 1,320,000 | 2 | ||||||||||||||||
WARRANTS | |||||||||||||||||||
OUTSTANDING | EXERCISABLE | ||||||||||||||||||
RANGE OF EXERCISE PRICES | NUMBER OUTSTANDING | WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE-YEARS | WEIGHTED AVERAGE EXERCISE PRICE | NUMBER EXERCISABLE | |||||||||||||||
$1 | 80,000 | 8.73 | 1 | 80,000 | |||||||||||||||
– | – | ||||||||||||||||||
80,000 | 8.73 | 1 | 80,000 |
9_INCOME_TAXES_Tables
9. INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Income Taxes Tables | ' | ||||||||
Schedule of federal statutory rate | ' | ||||||||
The income tax provision (benefit) for the years ended December 31, 2012 and 2011 differs from the computed expected provision (benefit) at the federal statutory rate for the following reasons: | |||||||||
2012 | 2011 | ||||||||
Computed expected income tax provision (benefit) | $ | (537,978 | ) | $ | (851,053 | ) | |||
Increase in allowance for doubtful accounts | – | – | |||||||
Net operating loss carryforward | 576,606 | 826,141 | |||||||
Increased | |||||||||
Accrued liabilities | (39,478 | ) | 40,484 | ||||||
Allowance for doubtful accounts | – | (17,000 | ) | ||||||
Non-deductible meals & entertainment | 850 | 1,428 | |||||||
Depreciation | – | – | |||||||
Income tax provision (benefit) | $ | – | $ | – | |||||
Schedule of deferred assets and liabilities | ' | ||||||||
The components of the deferred tax assets and (liabilities) as of December 31, 2012 and 2011 were as follows: | |||||||||
2012 | 2011 | ||||||||
Deferred tax assets: | |||||||||
Temporary differences: | |||||||||
Accrued liabilities | $ | 3,652 | $ | (46,757 | ) | ||||
Allowance for bad debt | – | – | |||||||
Net operating loss carryforward | 16,149,854 | 15,471,495 | |||||||
Valuation allowance | (16,153,507 | ) | (15,424,738 | ) | |||||
Net long-term deferred tax asset | $ | – | $ | – | |||||
The components of the deferred tax (expense) benefit were as follows for the years ended December 31, 2012 and 2011: | |||||||||
2012 | 2011 | ||||||||
Deferred tax assets: | |||||||||
Accrued expenses | $ | 50,410 | $ | 47,628 | |||||
Allowance for bad debt | – | 21,200 | |||||||
Accumulated Depreciation | – | 2,180 | |||||||
Increase in net operating loss carryforward | 678,360 | 971,830 | |||||||
Change in valuation allowance | (627,950 | ) | (1,042,939 | ) | |||||
$ | – | $ | – |
10_COMMITMENTS_AND_CONTINGENCI1
10. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended | ||||||
Dec. 31, 2012 | |||||||
Commitments And Contingencies Tables | ' | ||||||
Schedule of minimum salary payments | ' | ||||||
YEAR ENDING DECEMBER 31, | |||||||
2013 | $ | 352,800 | |||||
2014 | 370,440 | ||||||
2015 | 388,962 | ||||||
2016 | 408,410 | ||||||
$ | 1,520,612 |
12_RESTATEMENT_OF_FINANCIAL_ST1
12. RESTATEMENT OF FINANCIAL STATEMENTS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2012 | |||||||||
Restatement Of Financial Statements Tables | ' | ||||||||
Schedule of restatement of financial statements | ' | ||||||||
As Reported | As Restated | ||||||||
12/31/11 | 12/31/11 | ||||||||
BALANCE SHEET: | |||||||||
Derivative liabilities | – | 1,043,639 | |||||||
Total current liabilities | 4,368,787 | 5,412,427 | |||||||
Long term notes payable, net | 309,625 | 37,522 | |||||||
Total liabilities | 4,678,412 | 5,449,949 | |||||||
Accumulated deficit | (48,047,417 | ) | (48,818,954 | ) | |||||
Total stockholders' deficit | (4,622,017 | ) | (5,393,554 | ) | |||||
STATEMENT OF OPERATIONS: | |||||||||
Interest expense | (55,485 | ) | (78,382 | ) | |||||
Debt issuance cost | – | (464,262 | ) | ||||||
Gain/(loss) in change of FV of derivative | – | (284,378 | ) | ||||||
Total other expenses | (1,472,305 | ) | (2,243,842 | ) | |||||
NET LOSS | (2,613,866 | ) | (3,385,403 | ) |
1_BUSINESS_ACTIVITY_Details_Na
1. BUSINESS ACTIVITY (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Business Activity Details Narrative | ' | ' |
Working capital deficit | ($5,053,873) | ' |
Net loss | ($1,582,288) | ($3,385,403) |
2_SUMMARY_OF_SIGNIFICANT_ACCOU3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Summary Of Significant Accounting Policies Details | ' | ' |
Equipment | $4,448 | $4,448 |
Accumulated Depreciation | -1,963 | -1,074 |
Fixed Assets, Net of Depreciation | $2,485 | $3,374 |
2_SUMMARY_OF_SIGNIFICANT_ACCOU4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Summary Of Significant Accounting Policies Details Narrative | ' | ' |
Depreciation Expense | $890 | $3,512 |
3_ACCRUED_LIABILITIES_Details
3. ACCRUED LIABILITIES (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Accrued Liabilities Details | ' | ' |
Loan Fees Payable | $68,600 | $68,600 |
Deferred Rent | ' | 2,827 |
Accrued expenses | 139,881 | 150,033 |
Accrued Settlement (Refer to Note 10) | 411,500 | 411,500 |
Total accrued liabilities | $619,981 | $632,960 |
4_ACCRUED_PAYROLL_OFFICERS_Det
4. ACCRUED PAYROLL - OFFICERS (Details Narrative) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Accrued Payroll - Officers Details Narrative | ' | ' |
Accrued Payroll | $775,481 | $902,481 |
6_NOTES_PAYABLE_Details
6. NOTES PAYABLE (Details) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Principal | $300,000 |
Warrants to be Granted | 80,000 |
Notes Payable - Beneficial Conversion Feature as of Issue Date | 246,773 |
Convertible Notes 2 | ' |
Issue Date | 21-Aug-12 |
Principal | 50,000 |
Warrants to be Granted | 10,000 |
Notes Payable - Beneficial Conversion Feature as of Issue Date | 41,848 |
Convertible Notes 3 | ' |
Issue Date | 26-Sep-12 |
Principal | 150,000 |
Warrants to be Granted | 50,000 |
Notes Payable - Beneficial Conversion Feature as of Issue Date | 120,435 |
Convertible Notes 4 | ' |
Issue Date | 12-Nov-12 |
Principal | 50,000 |
Warrants to be Granted | 10,000 |
Notes Payable - Beneficial Conversion Feature as of Issue Date | 42,867 |
Convertible Notes 1 | ' |
Issue Date | 14-Aug-12 |
Principal | 50,000 |
Warrants to be Granted | 10,000 |
Notes Payable - Beneficial Conversion Feature as of Issue Date | $41,623 |
7_FAIR_VALUE_OF_FINANCIAL_INST2
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
Liabilities: | ' | ' |
Derivative instruments | $1,016,341 | $1,043,639 |
Total | 1,016,341 | 1,043,639 |
Level 3 | ' | ' |
Liabilities: | ' | ' |
Derivative instruments | ' | ' |
Total | ' | ' |
Level 2 | ' | ' |
Liabilities: | ' | ' |
Derivative instruments | 1,016,341 | 1,043,639 |
Total | 1,016,341 | 1,043,639 |
Level 1 | ' | ' |
Liabilities: | ' | ' |
Derivative instruments | ' | ' |
Total | ' | ' |
7_FAIR_VALUE_OF_FINANCIAL_INST3
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Amount of Debt | $328,500 | ' |
Fair Value of Derivative Liability | 1,448,180 | ' |
Amount Applied to Debt Discount | 328,500 | ' |
Recorded as Debt Issuance Cost | 1,119,680 | 464,262 |
Derivative Liability 2 | ' | ' |
Funding Date | '1/31/12 | ' |
Amount of Debt | 50,000 | ' |
Fair Value of Derivative Liability | 99,901 | ' |
Amount Applied to Debt Discount | 50,000 | ' |
Recorded as Debt Issuance Cost | 49,901 | ' |
Derivative Liability 3 | ' | ' |
Funding Date | '2/16/12 | ' |
Amount of Debt | 60,000 | ' |
Fair Value of Derivative Liability | 239,871 | ' |
Amount Applied to Debt Discount | 60,000 | ' |
Recorded as Debt Issuance Cost | 179,871 | ' |
Derivative Liability 4 | ' | ' |
Funding Date | '2/21/12 | ' |
Amount of Debt | 40,000 | ' |
Fair Value of Derivative Liability | 79,937 | ' |
Amount Applied to Debt Discount | 40,000 | ' |
Recorded as Debt Issuance Cost | 39,937 | ' |
Derivative Liability 5 | ' | ' |
Funding Date | '6/6/12 | ' |
Amount of Debt | 30,000 | ' |
Fair Value of Derivative Liability | 93,875 | ' |
Amount Applied to Debt Discount | 30,000 | ' |
Recorded as Debt Issuance Cost | 63,875 | ' |
Derivative Liability 6 | ' | ' |
Funding Date | '7/20/12 | ' |
Amount of Debt | 27,500 | ' |
Fair Value of Derivative Liability | 212,706 | ' |
Amount Applied to Debt Discount | 27,500 | ' |
Recorded as Debt Issuance Cost | 185,206 | ' |
Derivative Liability 7 | ' | ' |
Funding Date | '8/23/12 | ' |
Amount of Debt | 32,500 | ' |
Fair Value of Derivative Liability | 53,870 | ' |
Amount Applied to Debt Discount | 32,500 | ' |
Recorded as Debt Issuance Cost | 21,370 | ' |
Derivative Liability 8 | ' | ' |
Funding Date | '11/12/12 | ' |
Amount of Debt | 16,000 | ' |
Fair Value of Derivative Liability | 195,202 | ' |
Amount Applied to Debt Discount | 16,000 | ' |
Recorded as Debt Issuance Cost | 179,202 | ' |
Derivative Liability 9 | ' | ' |
Funding Date | '12/24/12 | ' |
Amount of Debt | 22,500 | ' |
Fair Value of Derivative Liability | 272,976 | ' |
Amount Applied to Debt Discount | 22,500 | ' |
Recorded as Debt Issuance Cost | 250,476 | ' |
Derivative Liability 1 | ' | ' |
Funding Date | '01/26/12 | ' |
Amount of Debt | 50,000 | ' |
Fair Value of Derivative Liability | 199,842 | ' |
Amount Applied to Debt Discount | 50,000 | ' |
Recorded as Debt Issuance Cost | $149,842 | ' |
8_STOCKHOLDERS_EQUITY_Details
8. STOCKHOLDERS' EQUITY (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Weighted Average Exercise Price | ' | ' |
Outstanding and exercisable, beginning balance | $2,244,000 | $140,000 |
Granted | ' | ' |
Exercised | $1 | ' |
Expired | ' | ' |
Outstanding and exercisable, ending balance | $19.70 | $2,244,000 |
Aggregated Intrinsic Value | ' | ' |
Outstanding and exercisable, beginning balance | ' | ' |
Granted | ' | ' |
Exercised | ' | ' |
Expired | ' | ' |
Outstanding and exercisable, ending balance | ' | ' |
Warrants | ' | ' |
Options: | ' | ' |
Outstanding and exercisable, beginning balance | 0 | ' |
Granted | ' | ' |
Exercised | 80,000 | ' |
Expired | ' | ' |
Outstanding and exercisable, ending balance | 80,000 | 0 |
Options | ' | ' |
Options: | ' | ' |
Outstanding and exercisable, beginning balance | 2 | 27 |
Granted | ' | ' |
Exercised | ' | ' |
Expired | ' | -25 |
Outstanding and exercisable, ending balance | 2 | 2 |
8_STOCKHOLDERS_DEFICIT_Details
8. STOCKHOLDERS' DEFICIT (Details 1) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Stockholders Deficit Details 1 | ' | ' |
Risk-free interest rate | 0.19% | ' |
Volatility | 320.00% | ' |
Expected life | '1 year | ' |
Dividend yield | 0.00% | 0.00% |
8_STOCKHOLDERS_DEFICIT_Details1
8. STOCKHOLDERS' DEFICIT (Details 2) (USD $) | Dec. 31, 2012 |
Warrants1Member | ' |
RANGE OF EXERCISE PRICES | $1 |
NUMBER OUTSTANDING | 80,000 |
WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE-YEARS | '8 years 8 months 23 days |
WEIGHTED AVERAGE EXERCISE PRICE | $1 |
NUMBER EXERCISABLE | 80,000 |
Options | ' |
RANGE OF EXERCISE PRICES | $1,320,000 |
NUMBER OUTSTANDING | 2 |
WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE-YEARS | '7 months 17 days |
WEIGHTED AVERAGE EXERCISE PRICE | $1,320,000 |
NUMBER EXERCISABLE | 2 |
9_INCOME_TAXES_Details
9. INCOME TAXES (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Income Taxes Details | ' | ' |
Computed expected income tax provision (benefit) | ($537,978) | ($851,053) |
Increase in allowance for doubtful accounts | ' | ' |
Net operating loss carryforward | 576,606 | 826,141 |
Accrued liabilities | -39,478 | 40,484 |
Allowance for doubtful accounts | ' | -17,000 |
Non-deductible meals & entertainment | 850 | 1,428 |
Depreciation | ' | ' |
Income tax provision (benefit) | ' | ' |
9_INCOME_TAXES_Details_1
9. INCOME TAXES (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
Deferred tax assets: | ' | ' |
Accrued liabilities | $3,652 | ($46,757) |
Allowance for bad debt | ' | ' |
Net operating loss carryforward | 16,149,854 | 15,471,495 |
Valuation allowance | -16,153,507 | -15,424,738 |
Net long-term deferred tax asset | ' | ' |
Deferred tax assets: | ' | ' |
Accrued expenses | 50,800 | 47,628 |
Allowance for bad debt | ' | 21,200 |
Accumulated Depreciation | ' | 2,180 |
Increase in net operating loss carryforward | 678,360 | 971,830 |
Change in valuation allowance | -627,950 | -1,042,939 |
Net deferred tax asset | ' | ' |
9_INCOME_TAXES_Details_Narrati
9. INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2012 | |
Income Taxes Details Narrative | ' |
Net operating loss carryforward | $32,600,000 |
Dates expiring | 'Expiring from 2012 through 2026. |
10_COMMITMENTS_AND_CONTINGENCI2
10. COMMITMENTS AND CONTINGENCIES (Details) (USD $) | Dec. 31, 2012 |
Commitments And Contingencies Details | ' |
2013 | $352,800 |
2014 | 370,440 |
2015 | 388,962 |
2016 | 408,410 |
Total | $1,520,612 |
12_RESTATEMENT_OF_FINANCIAL_ST2
12. RESTATEMENT OF FINANCIAL STATEMENTS (Details) (USD $) | Dec. 31, 2012 | Dec. 31, 2011 |
BALANCE SHEET: | ' | ' |
Derivative liabilities | $1,016,341 | $1,043,639 |
Total current liabilities | 5,080,546 | 5,412,427 |
Long term notes payable, net | 167,175 | 37,522 |
Total liabilities | 5,247,721 | 5,449,949 |
Accumulated deficit | -50,401,242 | -48,818,954 |
Total stockholders' deficit | -5,197,264 | -5,393,554 |
As Reported | ' | ' |
BALANCE SHEET: | ' | ' |
Derivative liabilities | ' | ' |
Total current liabilities | ' | 4,368,787 |
Long term notes payable, net | ' | 309,625 |
Total liabilities | ' | 4,678,412 |
Accumulated deficit | ' | -48,047,417 |
Total stockholders' deficit | ' | -4,622,017 |
As Restated | ' | ' |
BALANCE SHEET: | ' | ' |
Derivative liabilities | ' | 1,043,639 |
Total current liabilities | ' | 5,412,427 |
Long term notes payable, net | ' | 37,522 |
Total liabilities | ' | 5,449,949 |
Accumulated deficit | ' | -48,818,954 |
Total stockholders' deficit | ' | ($5,393,554) |
12_RESTATEMENT_OF_FINANCIAL_ST3
12. RESTATEMENT OF FINANCIAL STATEMENTS (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2012 | Dec. 31, 2011 | |
STATEMENT OF OPERATIONS: | ' | ' |
Interest expense | $464,694 | $78,382 |
Debt issuance cost | 1,119,680 | 464,262 |
Gain/(loss) in change of FV of derivative | 1,475,481 | -284,378 |
Total other expenses | -219,339 | -2,243,842 |
Net loss | -1,582,288 | -3,385,403 |
As Reported | ' | ' |
STATEMENT OF OPERATIONS: | ' | ' |
Interest expense | ' | -55,485 |
Debt issuance cost | ' | ' |
Gain/(loss) in change of FV of derivative | ' | ' |
Total other expenses | ' | -1,472,305 |
Net loss | ' | -2,613,866 |
As Restated | ' | ' |
STATEMENT OF OPERATIONS: | ' | ' |
Interest expense | ' | -78,382 |
Debt issuance cost | ' | -464,262 |
Gain/(loss) in change of FV of derivative | ' | -284,378 |
Total other expenses | ' | -2,243,842 |
Net loss | ' | ($3,385,403) |