Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 14, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | Halo Companies, Inc. | |
Entity Central Index Key | 814,286 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 48,562,750 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 8,495 | $ 20,544 |
Trade accounts receivable, net of allowance for doubtful accounts of $0 and $0, respectively | 26,883 | 43,365 |
Total current assets | 35,378 | 63,909 |
PROPERTY, EQUIPMENT AND SOFTWARE, net | 43,102 | 47,172 |
OTHER ASSETS | 54,033 | 10,000 |
TOTAL ASSETS | 132,513 | 121,081 |
CURRENT LIABILITIES | ||
Accounts payable | 645,209 | 488,253 |
Accrued and other liabilities (including $398,975 and $177,724 to related parties, respectively) | 1,719,426 | 1,328,662 |
Deferred revenue | 0 | 20,000 |
Current portion of subordinated debt | 595,000 | 20,000 |
Current portion of note payable | 2,322,660 | 2,099,475 |
Current portion of notes payable to related parties | 2,563,956 | 2,822,452 |
Total current liabilities | 7,846,251 | 6,778,842 |
SUBORDINATED DEBT, LESS CURRENT PORTION | 50,000 | 65,000 |
NOTES PAYABLE TO RELATED PARTIES, LESS CURRENT PORTION | 267,569 | 0 |
DERIVATIVE LIABILITY | 651 | 2,434 |
Total liabilities | 8,164,471 | 6,846,276 |
SHAREHOLDERS' DEFICIT | ||
Common Stock, par value $0.001 per share; 375,000,000 shares authorized; 48,562,750 and 48,562,750 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 48,563 | 48,563 |
Additional paid-in capital | 6,871,298 | 6,871,298 |
Accumulated deficit | (14,952,616) | (13,645,853) |
Total shareholders' deficit | (8,031,958) | (6,725,195) |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | 132,513 | 121,081 |
Series Z Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | 0 | 0 |
Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | 0 | 0 |
Series X Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | 0 | 0 |
Series E Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | 70 | 70 |
Series A Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | 373 | 373 |
Series B Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | 230 | 230 |
Series C Convertible Preferred Stock [Member] | ||
SHAREHOLDERS' DEFICIT | ||
Preferred Stock | $ 124 | $ 124 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Allowance for doubtful accounts | $ 0 | $ 0 |
Accrued and other liabilities to related parties | $ 398,975 | $ 177,724 |
Common stock, par value | $ 0.001 | $ .001 |
Common stock, shares authorized | 375,000,000 | 375,000,000 |
Common stock, shares issued | 48,562,750 | 48,562,750 |
Common stock, shares outstanding | 48,562,750 | 48,562,750 |
Series Z Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 82,508 | 82,508 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 917,492 | 917,492 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series X Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 53,677 | 143,677 |
Preferred stock, shares issued | 0 | 143,677 |
Preferred stock, shares outstanding | 0 | 143,677 |
Preferred stock, liquidation preference | $ 0 | |
Series E Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 70,000 | 70,000 |
Preferred stock, shares outstanding | 70,000 | 70,000 |
Preferred stock, liquidation preference | $ 700,000 | |
Halo Group, Inc. Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Series A Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 372,999 | 372,999 |
Preferred stock, shares outstanding | 372,999 | 372,999 |
Preferred stock, liquidation preference | $ 826,298 | |
Series B Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 229,956 | 229,956 |
Preferred stock, shares outstanding | 229,956 | 229,956 |
Preferred stock, liquidation preference | $ 693,556 | |
Series C Convertible Preferred Stock [Member] | ||
Preferred stock, shares issued | 124,000 | 124,000 |
Preferred stock, shares outstanding | 124,000 | 124,000 |
Preferred stock, liquidation preference | $ 469,312 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
REVENUE | ||||
REVENUE (including $80, $104,153, $33,217 and $334,538 from related parties, respectively) | $ 215,275 | $ 1,024,960 | $ 669,551 | $ 3,023,625 |
OPERATING EXPENSES | ||||
Sales and marketing expenses | 118,184 | 366,006 | 224,809 | 1,244,843 |
General and administrative expenses (including $63,331, $111,780, $78,331 and $245,339 to related parties, respectively) | 273,111 | 200,067 | 644,817 | 642,429 |
Salaries, wages, and benefits | 282,892 | 307,619 | 563,095 | 1,952,782 |
Total operating expenses | 674,187 | 873,692 | 1,432,720 | 3,840,054 |
OPERATING INCOME (LOSS) | (458,912) | 151,268 | (763,169) | (816,429) |
OTHER INCOME (EXPENSE) | ||||
Gain on change in fair value of derivative | 659 | 0 | 1,783 | 0 |
Interest expense (including $74,450, $92,619, $221,250 and $215,875 to related parties, respectively) | (214,220) | (181,689) | (545,377) | (474,223) |
Net income (loss) from operations, before income tax provision | (672,473) | (30,421) | (1,306,763) | (1,290,652) |
INCOME TAX PROVISION | 0 | 0 | 0 | 13,144 |
NET INCOME (LOSS) | $ (672,473) | $ (30,421) | $ (1,306,763) | $ (1,303,796) |
Loss per share: Basic and Diluted | $ (0.01) | $ 0 | $ (.03) | $ (.02) |
Weighted Average Shares Outstanding: Basic & Diluted | 48,562,750 | 48,562,750 | 48,562,750 | 57,463,417 |
Consolidated Statements of Ope5
Consolidated Statements of Operations (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
REVENUE | ||||
Revenue from related parties | $ 80 | $ 104,153 | $ 33,217 | $ 334,538 |
OPERATING EXPENSES | ||||
General and administrative expenses to related parties | 63,331 | 111,780 | 78,331 | 245,339 |
OTHER INCOME (EXPENSE) | ||||
Interest expense to related parties | $ 74,450 | $ 92,619 | $ 221,250 | $ 215,875 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Deficit - USD ($) | Common Stock [Member] | Series X Convertible Preferred Stock [Member] | Series E Convertible Preferred Stock | Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning balance, shares at Dec. 31, 2014 | 66,364,083 | 143,677 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Beginning balance, value at Dec. 31, 2014 | $ 66,364 | $ 1,437 | $ 70 | $ 373 | $ 230 | $ 124 | $ 7,638,764 | $ (11,864,863) | $ (4,157,501) |
Issuance of common stock, shares | 6,667 | ||||||||
Issuance of common stock, value | $ 7 | 60 | 67 | ||||||
Redemption of Series X Convertible Preferred Stock per settlement agreement, shares | (90,000) | ||||||||
Redemption of Series X Convertible Preferred Stock per settlement agreement, value | $ (900) | (249,100) | (250,000) | ||||||
Cancellation of Common Shares per settlement agreement, shares | (17,808,000) | ||||||||
Cancellation of Common Shares per settlement agreement, value | $ (17,808) | 17,808 | 0 | ||||||
Net loss | (1,303,796) | (1,303,796) | |||||||
Ending balance, shares at Sep. 30, 2015 | 48,562,750 | 53,677 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Ending balance, value at Sep. 30, 2015 | $ 48,563 | $ 537 | $ 70 | $ 373 | $ 230 | $ 124 | 7,407,532 | (13,168,659) | (5,711,230) |
Beginning balance, shares at Dec. 31, 2014 | 66,364,083 | 143,677 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Beginning balance, value at Dec. 31, 2014 | $ 66,364 | $ 1,437 | $ 70 | $ 373 | $ 230 | $ 124 | 7,638,764 | (11,864,863) | (4,157,501) |
Ending balance, shares at Dec. 31, 2015 | 48,562,750 | 0 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Ending balance, value at Dec. 31, 2015 | $ 48,563 | $ 0 | $ 70 | $ 373 | $ 230 | $ 124 | 6,871,298 | (13,645,853) | (6,725,195) |
Beginning balance, shares at Sep. 30, 2015 | 48,562,750 | 53,677 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Beginning balance, value at Sep. 30, 2015 | $ 48,563 | $ 537 | $ 70 | $ 373 | $ 230 | $ 124 | 7,407,532 | (13,168,659) | (5,711,230) |
Redemption of Series X Convertible Preferred Stock per settlement agreement, shares | (53,677) | ||||||||
Redemption of Series X Convertible Preferred Stock per settlement agreement, value | $ (537) | (536,234) | (536,771) | ||||||
Net loss | (477,194) | (477,194) | |||||||
Ending balance, shares at Dec. 31, 2015 | 48,562,750 | 0 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Ending balance, value at Dec. 31, 2015 | $ 48,563 | $ 0 | $ 70 | $ 373 | $ 230 | $ 124 | 6,871,298 | (13,645,853) | (6,725,195) |
Net loss | (1,306,763) | (1,306,763) | |||||||
Ending balance, shares at Sep. 30, 2016 | 48,562,750 | 0 | 70,000 | 372,999 | 229,956 | 124,000 | |||
Ending balance, value at Sep. 30, 2016 | $ 48,563 | $ 0 | $ 70 | $ 373 | $ 230 | $ 124 | $ 6,871,298 | $ (14,952,616) | $ (8,031,958) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
CASH FLOWS FROM OPERATIONS | ||
Net (loss) income | $ (1,306,763) | $ (1,303,796) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation | 16,462 | 17,693 |
Amortization of loan origination costs | 18,625 | 10,000 |
Capitalization of interest into note payable and notes payable to related parties | 232,259 | 224,556 |
Bad debt expense | 0 | 116 |
Gain on change in fair value of derivative | (1,783) | 0 |
Note receivable write off | 0 | 125,000 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 16,483 | 50,565 |
Other assets | (28,158) | 0 |
Accounts payable | 156,956 | (110,639) |
Accrued and other liabilities | 390,764 | 1,026,050 |
Deferred revenue | (20,000) | 51,700 |
Net cash provided by (used in) operating activities | (525,156) | 91,245 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in affiliate | 0 | (125,000) |
Purchases of property and equipment | (12,393) | 0 |
Net cash used in investing activities | (12,393) | (125,000) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from notes payable to related parties | 0 | 100,000 |
Principal payments on notes payable to related parties | 0 | (25,000) |
Proceeds from subordinated debt | 540,500 | 0 |
Principal payments on subordinated debt | (15,000) | (26,250) |
Proceeds received from issuance of common stock | 0 | 67 |
Net cash provided by financing activities | 525,500 | 48,817 |
Net increase (decrease) in cash and cash equivalents | (12,049) | 15,062 |
CASH AND CASH EQUIVALENTS, beginning of period | 20,544 | 72,982 |
CASH AND CASH EQUIVALENTS, end of period | 8,495 | 88,044 |
SUPPLEMENTAL INFORMATION | ||
Cash paid for taxes - Texas Margin Tax | 0 | 13,144 |
Cash paid for interest | 106,589 | 92,858 |
NONCASH SUPPLEMENTAL INFORMATION | ||
Cancellation of stock for settlement payment | 0 | 250,000 |
Loan origination fees | $ 34,500 | $ 0 |
1. Organization and Recent Deve
1. Organization and Recent Developments | 9 Months Ended |
Sep. 30, 2016 | |
Organization And Recent Developments | |
Organization and Recent Developments | Halo Companies, Inc. (“Halo”, “HCI” or the “Company”) was incorporated under the laws of the State of Delaware on December 9, 1986. Its principal executive offices are located at 7800 N. Dallas Pkwy, Suite 320, Plano TX 75024. On August 1, 2016, the Company moved from its previous office location at 18451 N. Dallas Parkway, Suite 100, Dallas, Texas 75287. Unless otherwise provided in footnotes, all references from this point forward in this Report to “we,” “us,” “our company,” “our,” or the “Company” refer to the combined Halo Companies, Inc. entity, together with its subsidiaries. Halo has multiple wholly-owned subsidiaries including Halo Group Inc. (“HGI”), Halo Asset Management, LLC (“HAM”), Halo Portfolio Advisors, LLC (“HPA”), and Halo Benefits, Inc. (“HBI”). HGI is the management and shared services operating company. HAM provides asset management and mortgage servicing services to investors and asset owners including all aspects of buying and managing distressed real estate owned (“REO”) and non-performing loans. HPA exists to market the Company’s operations as a turnkey solution for strategic business to business opportunities with HAM’s investors and asset owners, major debt servicers and field service providers, lenders, and mortgage backed securities holders. HBI was originally established as an association benefit services to customers throughout the United States and although a non-operating entity, remains a subsidiary due to its historical net operating loss carryforward. Halo has determined that the asset management and portfolio services have threatened sustainability long term and need to shift its resources to pursue other lines of revenue. Fortunately, management has been analyzing this trend for some time and made moves to begin capitalizing on its internally developed technology assets. As further discussed in Note 2 below, Halo has successfully secured multiple software license and support agreements and will continue to evaluate the best method to deliver and monetize Halo’s technology assets in the market. |
2. Significant Accounting Polic
2. Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments considered necessary for fair presentation of the results of the interim periods have been included (consisting of normal recurring accruals). The accompanying consolidated financial statements as of September 30, 2016, and for the three and nine months ended September 30, 2016 and 2015, include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. The results of operations for the three and nine months ended September 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. Revenue Recognition, Accounts Receivable and Deferred Revenue The Company recognizes revenue in the period in which services are earned and realizable. To further understand the Company’s business, HAM earns fees from its clients for its boarding and initial asset management fee, success fees, and its monthly servicing fee. The boarding and initial asset management services are performed in the first 30-60 days of assets being boarded and include; IRR analysis of loans boarded, detailed asset level workout exit strategy analysis, boarding the assets onto HAM’s proprietary software platform and the integrated servicing platform, identification and oversight of custodial files, oversight of mortgage/deed assignment from previous servicer, oversight of title policy administration work, and delinquent property tax research and exposure review. HAM’s monthly success fees are earned for completing its default and asset disposition services including note sales, originating owner finance agreements, and cash sales of REO properties owned by the client. HAM’s servicing fees are earned monthly and are calculated on a monthly unit price for assets under management. The Company is currently exploring potential opportunities with several client relationships that would allow the Company to implement its internally developed asset management software platform as an external service for those customers. This is commonly known as Software as a Service (“SaaS”). Cash receipts from customers in advance of revenue recognized are recorded as deferred revenue and will be earned over the entire SaaS contract period. HAM and HPA receivables are typically paid the month following services performed. As of September 30, 2016, and December 31, 2015, the Company’s accounts receivable are made up of the following percentages; HAM at 30% and 47%, HPA at 59% and 53%, and HGI at 11% and 0% respectively. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer, current economic and industry trends, and changes in customer payment terms. The Company provides for estimated uncollectible amounts through an increase to the allowance for doubtful accounts and a charge to earnings based on actual historical trends and individual account analysis. Balances that remain outstanding after the Company has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts. The below table summarizes the Company’s allowance for doubtful accounts as of September 30, 2016 and December 31, 2015: Balance at Increase Accounts Balance Three and nine months ended September 30, 2016 Allowance for doubtful accounts $ 0 $ 0 $ 0 $ 0 Year ended December 31, 2015 Allowance for doubtful accounts $ 375,665 $ 0 $ 375,655 $ 0 Net Income (Loss) Per Common Share Basic net income (loss) per share is computed by dividing (i) net income (loss) available to common shareholders (numerator), by (ii) the weighted average number of common shares outstanding during the period (denominator). Diluted net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. At September 30, 2016 and 2015, there were 4,518,505 and 4,623,959 shares, respectively, underlying potentially dilutive convertible preferred stock and stock options outstanding. These shares were not included in dilutive weighted average shares outstanding for the three and nine months ended September 30, 2016 and 2015 because their effect is anti-dilutive due to the Company’s reported net loss. Use of Estimates and Assumptions The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the Company’s revenue recognition method and derivative liabilities. Principles of Consolidation The consolidated financial statements of the Company for the three and nine months ended September 30, 2016 and 2015 include the financial results of HCI, HGI, HBI, HPA and HAM. All significant intercompany transactions and balances have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all liquid investments with a maturity of 90 days or less to be cash equivalents. Property, Equipment and Software Property, equipment, and software are stated at cost. Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives, ranging from three to seven years. Provisions for depreciation are made using the straight-line method. Major additions and improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the cost of the property and equipment and the related accumulated depreciation are removed from the respective accounts, and any resulting gains or losses are credited or charged to other general and administrative expenses. Fair Value of Financial Instruments The carrying value of trade accounts receivable, accounts payable, and accrued and other liabilities approximate fair value due to the short maturity of these items. The estimated fair value of the notes payable and subordinated debt approximates the carrying amounts as they bear market interest rates. The Company considers the warrants related to its subordinated debt to be derivatives, and the Company records the fair value of the derivative liabilities in the consolidated balance sheets. Changes in fair value of the derivative liabilities are included in gain (loss) on change in fair value of derivative in the consolidated statements of operations. The Company’s derivative liability has been classified as a Level III valuation according to Accounting Standards Codification (“ASC”) 820. Internally Developed Software Internally developed legacy application software consisting of database, customer relations management, process management and internal reporting modules are used in each of the Company’s subsidiaries. The Company accounts for computer software used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended. Management has determined that a significant portion of costs incurred for internally developed software came from the preliminary project and post-implementation stages; as such, no costs for internally developed software were capitalized. Long-Lived Assets Long-lived assets are reviewed on an annual basis or whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by that asset. If it is determined that the carrying amount of an asset may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is the estimated value at which the asset could be bought or sold in a transaction between willing parties. There were no impairment charges for the three and nine months ended September 30, 2016 and 2015. Income Taxes The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740 requires the use of the asset and liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheets. The Company then assesses the likelihood of realizing benefits related to such assets by considering factors such as historical taxable income and the Company’s ability to generate sufficient taxable income of the appropriate character within the relevant jurisdictions in future years. Based on the aforementioned factors, if the realization of these assets is not likely a valuation allowance is established against the deferred tax assets. The Company accounts for its position in tax uncertainties under ASC 740-10. ASC 740-10 establishes standards for accounting for uncertainty in income taxes. ASC 740-10 provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. ASC 740-10 applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the three and nine months ended September 30, 2016 or 2015. The Company incurred no penalties or interest for taxes for the three and nine months ended September 30, 2016 or 2015. The Company is subject to a three-year statute of limitations by major tax jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction. Recent Accounting Standards In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018. On February 25, 2016, the FASB completed its Leases project by issuing (“ASU 2016-02”), Leases The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company will further study the implications of this statement in order to evaluate the expected impact on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 781), Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which amends and simplifies the accounting for share-based payment awards in three areas: (1) income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. For public companies, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company will further study the implications of this statement in order to evaluate the expected impact on its consolidated financial statements. |
3. Concentrations of Credit Ris
3. Concentrations of Credit Risk | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
Concentrations of Credit Risk | The Company maintains aggregate cash balances, at times, with financial institutions, which are in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). During the three and nine months ended September 30, 2016, the FDIC insured deposit accounts up to $250,000. At September 30, 2016, the Company’s cash accounts were all less than the $250,000 FDIC insured amount and as such were insured in full. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. In the normal course of business, the Company extends unsecured credit to its customers. Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its estimate of amounts which will eventually become uncollectible. In the event of complete non-performance by the Company’s customers, the maximum exposure to the Company is the outstanding accounts receivable balance at the date of non-performance. |
4. Operating Segments
4. Operating Segments | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Operating Segments | The Company has several operating segments as listed below and as defined in Note 1. The results for these operating segments are based on our internal management structure and review process. We define our operating segments by service industry. If the management structure and/or allocation process changes, allocations may change. See the following summary of operating segment reporting; Operating Segments For the Three Months Ended For the Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Revenue Halo Asset Management $ 80 $ 425,429 $ 38,319 $ 942,148 Halo Portfolio Advisors 1,200 569,531 44,632 1,947,583 Halo Group, Inc. 213,995 30,000 586,600 133,894 Net Revenue $ 215,275 $ 1,024,960 $ 669,551 $ 3,023,625 Operating income (loss): Halo Asset Management $ 80 $ 366,583 $ 37,514 $ 682,695 Halo Portfolio Advisors (601 ) 212,155 35,742 728,450 Other – – – – Less: Corporate expenses (a) (671,952 ) (609,159 ) (1,380,019 ) (2,714,941 ) Operating income (loss): $ (672,473 ) $ (30,421 ) $ (1,306,763 ) $ (1,303,796 ) a. Corporate expenses include salaries, benefits and other expenses, including rent and general and administrative expenses, related to corporate office overhead and functions that benefit all operating segments. Corporate expenses also include interest expense. Corporate expenses are expenses that the Company does not directly allocate to any segment above. Allocating these indirect expenses to operating segments would require an imprecise allocation methodology. Further, there are no material amounts that are the elimination or reversal of transactions between the above reportable operating segments. The assets of the Company consist primarily of cash, trade accounts receivable, and property, equipment and software. Cash is managed at the corporate level of the Company and not at the segment level. Each of the remaining primary assets have been discussed in detail, including the applicable operating segment for which the assets and liabilities reside, in the consolidated notes to the financial statements. As such, the duplication is not warranted in this footnote. All debt of the Company is recorded at the corporate parent companies HCI and HGI. All interest expense is included in corporate expenses above. Interest expense is discussed in further detail in Notes 8, 9, 10 and 11. For the three and nine months ended September 30, 2016 or 2015, there have been no material transactions between reportable units that would materially affect an operating segment profit or loss. Intercompany transactions are eliminated in the consolidated financial statements. |
5. Going Concern
5. Going Concern | 9 Months Ended |
Sep. 30, 2016 | |
Going Concern | |
Going Concern | The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the Company will need to manage additional asset units under contract and/or additional financing to fully implement its business plan, including continued growth and expansion to the Company’s software development and technology services. The Company is actively seeking growth of its asset units under management, both organically and via new client relationships. Management, in the ordinary course of business, is trying to raise additional capital through sales of common stock as well as seeking financing via equity or debt, or both from third parties. There are no assurances that additional financing will be available on favorable terms, or at all. If additional financing is not available, the Company will need to reduce, defer or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders, and incurring additional indebtedness could involve an increased debt service cash obligation, the imposition of covenants that restrict the Company operations or the Company’s ability to perform on its current debt service requirements. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company has incurred an accumulated deficit of $14,952,616 as of September 30, 2016. However, of the accumulated deficit, $2,110,748 of expense was incurred as stock-based compensation, $620,581 in depreciation expense, and $279,241 in impairment loss on investment in portfolio assets, all of which are noncash expenses. Further, $906,278 of the accumulated deficit is related to the issuance of stock dividends, also non cash reductions. The $3,916,848 total of these non-cash retained earnings reductions represents 26% of the total deficit balance. |
6. Property, Equipment and Soft
6. Property, Equipment and Software | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Equipment and Software | Property, equipment and software consist of the following as of September 30, 2016 and December 31, 2015, respectively: September 30, December 31, Computers and purchased software $ 115,577 $ 147,800 Furniture and equipment 214,227 203,427 329,804 351,227 Less: accumulated depreciation (286,702 ) (304,055 ) $ 43,102 $ 47,172 Depreciation totaled $5,973, $5,728, $16,462, and $17,693 for the three and nine months ended September 30, 2016 and 2015, respectively. |
7. Accrued and Other Liabilitie
7. Accrued and Other Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Payables and Accruals [Abstract] | |
Accrued and Other Liabilities | The Company had $1,719,426 in accrued liabilities at September 30, 2016. Included in this accrual is $660,895 in accrued interest ($261,920 of this balance is related to interest on the secured asset promissory note discussed in more detail in Note 11). The accrual also includes $954,143 in deferred compensation to several senior management personnel. The Company had $1,328,662 in accrued liabilities at December 31, 2015. Included in this accrual is $423,623 in accrued interest ($245,663 of this balance is related to interest on the secured asset promissory note discussed in more detail in Note 11). The accrual also includes $724,208 in deferred compensation to several senior management personnel. |
8. Notes Payable to Related Par
8. Notes Payable to Related Parties | 9 Months Ended |
Sep. 30, 2016 | |
Notes Payable To Related Parties | |
Notes Payable to Related Parties | During March 2011, the Company entered into one unsecured promissory note with a related party (a previous company director) in the amount of $250,000 (the “2011 Related Party Note”). The 2011 Related Party Note had a fixed interest amount of $50,000 and a maturity date of July 31, 2011. On September 20, 2011, the 2011 Related Party Note was amended to include the 2011 Related Party Note plus $52,426 of accrued interest for a total note balance of $302,426. The 2011 Related Party Note has a 6% interest rate and is a monthly installment note with final balloon payment at maturity in September 2014. At the time of the filing of these consolidated financial statements, the Company and the related party had not finalized an extended maturity date, and as such the entire $206,709 2011 Related Party Note balance is included in current portion of notes payable to related parties as of September 30, 2016. As of December 31, 2015, the 2011 Related Party Note was $197,636, all of which is included in current portion of notes payable to related parties. On September 1, 2011, several previous related party notes totaling $370,639 were amended and consolidated (“the 2011 Consolidated Related Party Note”). This note bears interest of 6% and has a maturity date of December 31, 2020. As of December 31, 2015, the 2011 Consolidated Related Party Note balance was $267,569, all of which is included in current portion of notes payable to related parties. In October 2016, the Company secured a renewal and extension of the 2011 Consolidated Related Party Note through December 31, 2020. As of September 30, 2016, the 2011 Consolidated Related Party Note balance was $267,569, all of which is included in long-term portion of notes payable to related parties. As of December 31, 2015, a Company director had an outstanding advance to the Company of $500,000 for short term capital. As of September 30, 2016, the outstanding advance balance was $500,000. The maturity date for the advance repayment has been extended through September 30, 2016, and as such the entire balance is included in current portion of notes payable to related parties. Through March 31, 2015, the advance accrued interest at a rate of 15%. Effective in April 2015 and through September 30, 2015, the advance began accruing interest at a flat rate of $25,000 per month ($300,000 annualized fixed rate). As part of the extension for repayment of the advance through September 30, 2016, the annualized fixed interest amount will apply. As of December 31, 2015, a Company director had an outstanding advance to the Company of $960,476 for short term capital. As of September 30, 2016, the outstanding advance balance was $960,476 and is due October 1, 2016; as such the entire balance is included in current portion of notes payable to related parties. The debt accrues interest at a rate of 15%. As of December 31, 2015, the Company’s CEO and Director of the Board had an outstanding advance balance of $515,000 for short term capital. As of September 30, 2016, the outstanding advance balance was $515,000 and is due December 28, 2016; as such the entire balance is included in current portion of notes payable to related parties. The debt accrues interest at a rate of 15%. As of December 31, 2015, the Company’s President and Chief Legal Officer had an outstanding advance balance of $345,000 for short term capital. As of September 30, 2016, the outstanding advance balance was $345,000 and is due December 28, 2016; as such the entire balance is included in current portion of notes payable to related parties. The debt accrues interest at a rate of 15%. As of September 30, 2016, the notes payable to related party balance totaled $2,831,525, $2,563,956 of which is included in current portion of notes payable to related parties in the consolidated financial statements. As of December 31, 2015, the notes payable to related party balance totaled $2,822,452, all of which is included in current portion of notes payable to related parties in the consolidated financial statements. The Company incurred $74,450, $92,619, $221,250, and $215,875 of interest expense to directors, officers, and other related parties during the three and nine months ended September 30, 2016 and 2015, respectively. Accrued interest due to directors and other related parties totaled $398,975 at September 30, 2016, all of which is included in accrued and other current liabilities. Accrued interest due to directors and other related parties totaled $177,724 at December 31, 2015, all of which is included in accrued and other current liabilities. |
9. Notes Payable
9. Notes Payable | 9 Months Ended |
Sep. 30, 2016 | |
Notes Payable [Abstract] | |
Notes Payable | In October 2013, the Company entered into a senior unsecured convertible promissory note agreement of $1,500,000. The terms of the note include an interest rate of 15% with a maturity date of October 10, 2016. The Company, although not required, is entitled to capitalize any accrued interest into the outstanding principal balance of the note up until maturity. At the maturity date, all unpaid principal and accrued interest is due. As part of the promissory note, the Company was required to pay origination fees and expenses associated with this note agreement (discussed in Other Assets Note 2), pay the subordinated debt originated in January 2010, pay $375,000 to a related party note held by a director, with the remaining use of proceeds for general corporate purposes including payment of deferred compensation to several management personnel. Additionally, the noteholder has the right, but not the obligation, to convert up to $1,000,000 of the principal balance of the note into common shares of the Company. The $1,000,000 maximum conversion ratio would entitle the noteholder to a maximum total of 10% of the then outstanding common stock of the Company, calculated on a fully diluted basis. Any conversion of the principal amount of this note into common stock would effectively lower the outstanding principal amount of the note. As of, October 31, 2016 the Company amended the promissory note agreement to extend the maturity date until November 20, 2016 and is continuing conversations with the Noteholder with regard to a long-term agreement. As of September 30, 2016, the note payable balance was $2,322,660, which includes capitalized interest of $822,660. As of December 31, 2015, the note payable balance was $2,099,475, which includes capitalized interest of $599,475. |
10. Subordinated Debt
10. Subordinated Debt | 9 Months Ended |
Sep. 30, 2016 | |
Subordinated Borrowings [Abstract] | |
Subordinated Debt | During January 2010, the Company authorized a $750,000 subordinated debt offering (“Subordinated Offering”), which consisted of the issuance of notes paying a 16% coupon with a 1% origination fee at the time of closing. The maturity date of the notes was December 31, 2013. In October 2013, the Company entered into a senior unsecured convertible promissory note (discussed in Note 9) which required the use of those financing proceeds to pay down the subordinated debt. As such, as of December 31, 2013, the remaining balance was $0. As part of the Subordinated Offering, t he Company granted to investors common stock purchase warrants (the “Warrants”) to purchase an aggregate of 200,000 shares of common stock of the Company at an exercise price of $0.01 per share. The 200,000 shares of common stock contemplated to be issued upon exercise of the Warrants are based on an anticipated cumulative debt raise of $750,000. The investors are granted the Warrants pro rata based on their percentage of investment relative to the $750,000 aggregate principal amount of notes contemplated to be issued in the Subordinated Offering. A total of 112,000 warrants were issued. The Warrants shall have a term of seven years, exercisable from January 31, 2015 to January 31, 2017. During 2015, 6,667 of the 112,000 warrants were purchased for $67 and converted to common stock. The Company follows the provisions of ASC 815, “Derivatives and Hedging”. ASC 815 requires freestanding contracts that are settled in a company’s own stock to be designated as an equity instrument, assets or liability. Under the provisions of ASC 815, a contract designated as an asset or liability must be initially recorded and carried at fair value until the contract meets the requirements for classification as equity, until the contract is exercised or until the contract expires. Accordingly, the Company determined that the warrants should be accounted for as derivative liabilities and has recorded the initial value as a debt discount which was amortized into interest expense using the effective interest method. As of December 31, 2013, the balance of the debt discount was $0 (fully amortized). Subsequent changes to the marked-to-market value of the derivative liability are recorded in earnings as derivative gains and losses. As of September 30, 2016 and December 31, 2015, there were 105,333 warrants outstanding, respectively, with a derivative liability of $651 and $2,434. The Warrants were valued using the Black-Scholes model, which resulted in the fair value of the warrants at $0.02 per share using the following assumptions: September 30, 2016 Risk-free rate 0.29% Expected volatility 308.26% Expected remaining life (in years) 0.33 Dividend yield 0.00% During October 2014, the Company entered into an additional $100,000 subordinated term note with the current holder of the Company’s subordinated debt. The note pays an 18% coupon rate with a maturity date of September 30, 2017. There are no warrants associated with this subordinated term note. Repayment terms of the note include interest only payments through March 31, 2015. Thereafter, level monthly payments of principal and interest are made as calculated on a 60-month payment amortization schedule with final balloon payment due at maturity. The rights of the holder of this note is subordinated to any and all liens granted by the Company to the As of September 30, 2016, the remaining balance of this note totals $70,000, of which $20,000 is included in current portion of subordinated debt. As of December 31, 2015, the remaining balance of this note totals $85,000, of which $20,000 is included in current portion of subordinated debt. During June 2016, the Company entered into a $425,000 subordinated term note. The note pays an 12% coupon rate with a maturity date of June 30, 2017. As part of the promissory note, the Company was required to pay origination fees and expenses associated with this note agreement (discussed in Other Assets Note 2) in the amount of $25,500 with the remaining $399,500 in proceeds to be used for general corporate purposes. There are no warrants associated with this subordinated term note. Repayment terms of the note include interest only payments through December 31, 2016. Thereafter, level monthly payments of principal and interest are made as calculated on a 36-month payment amortization schedule with final balloon payment due at maturity. The rights of the holder of this note is subordinated to any and all liens granted by the Company to the holder of the note payable discussed in Note 9 above. During July 2016, the note amount was increased by $150,000 with all other terms remaining the same. As part of principal increase, the Company was required to pay origination fees and expenses associated with this note agreement (discussed in Other Assets Note 2) in the amount of $9,000 with the remaining $141,000 in proceeds to be used for general corporate purposes. As of September 30, 2016, the remaining balance of this note totals $575,000, of which $575,000 is included in current portion of subordinated debt. |
11. Secured Asset Promissory No
11. Secured Asset Promissory Note | 9 Months Ended |
Sep. 30, 2016 | |
Secured Asset Promissory Note | |
Secured Asset Promissory Note | During December 2010, the Company authorized a debt offering to be secured by real estate assets purchased in connection with Equitas Housing Fund, LLC, (“Equitas Offering”). The Equitas Offering generated $1,200,000 in proceeds. Of the $1,200,000 in proceeds received in December 2010, $300,000 was used to acquire non-performing, residential mortgage notes and the balance was used for mortgage note workout expenses and operational expenses of Halo Asset Management. The Secured Asset Promissory Notes consisted of a 25% coupon. In May 2013, the Secured Asset Promissory Note was paid in full, along with $150,000 of the outstanding accrued interest balance. Halo and the secured asset promissory note holder agreed to include the remaining accrued interest in a promissory note due December 31, 2014. The promissory note will accrue interest at a 10% annual rate, with interest only payments due periodically and final balloon payment due at maturity. At the time of the filing of these consolidated financial statements, the Company and note holder have not finalized an extended maturity date. As such, as of September 30, 2016, the entire accrued interest balance of $261,920 is included in current portion of accrued interest. As of December 31, 2015, the entire accrued interest balance of $245,663 is included in current portion of accrued interest. For the three and nine months ended September 30, 2016 and 2015, the Company incurred $5,419, $5,419, $16,257, and $16,257, respectively, in interest expense on the note. |
12. Related Party Transactions
12. Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | For the three and nine months ended September 30, 2016 and 2015, HAM recognized monthly servicing fee revenue totaling $80, $33,217, $104,153 and $334,538, respectively, from an entity that is an affiliate of the Company. Further, facilities rent expense discussed in Note 14 was expensed and paid to the same affiliate. Additionally, for the three and nine months ended September 30, 2016 and 2015, the Company incurred $0, $0, $75,000, and $125,000, respectively, in the write off of a note receivable it invested during the three months ended June 30, 2015 in the same affiliate of the Company. The write offs are included in general and administrative expenses on the consolidated statements of operations and discussed further in section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below. For the three and nine months ended September 30, 2016 and 2015, the Company incurred interest expense to related parties (See Note 8). For the three and nine months ended September 30, 2016 and 2015, the Company incurred $0, $0, $0 and $20,000, respectively, in commission expense to an entity that is an affiliate of the Company. For the three and nine months ended September 30, 2016 and 2015, the Company incurred $0, $15,000, $15,000 and $35,000, respectively, in consulting expense to an entity that is an affiliate of the Company. |
13. Income Taxes
13. Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | For the three and nine months ended September 30, 2016 and 2015, the effective tax rate of 0% varies from the U.S. federal statutory rate primarily due to state income taxes, net losses, certain non-deductible expenses and an increase in the valuation allowance associated with the net operating loss carryforwards. Our deferred tax assets related to net operating loss carryforwards remain fully reserved due to uncertainty of utilization of those assets. Deferred tax assets and liabilities are computed by applying the effective U.S. federal and state income tax rate to the gross amounts of temporary differences and other tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At December 31, 2015 and September 30, 2016, the Company believed it was more likely than not that future tax benefits from net operating loss carry-forwards and other deferred tax assets would not be realizable through generation of future taxable income and are fully reserved. The Company has net operating loss (“NOL”) carry-forwards of approximately $8,000,000 available for federal income tax purposes, which expire from 2024 to 2035. Separately, because of the changes in ownership that occurred on June 30, 2004 and September 30, 2009, prior to GVC merging with HCI, and based on the Section 382 Limitation calculation, the Company will be allowed approximately $6,500 per year of GVC Venture Corp.’s federal NOLs generated prior to June 30, 2004 until they would otherwise expire. The Company would also be allowed approximately $159,000 per year of GVC Venture Corp.’s federal NOLs generated between June 30, 2004 and September 30, 2009 until they would otherwise expire. |
14. Commitments and Contingenci
14. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Company leases very limited office equipment, each under a non-cancelable operating lease providing for minimum monthly rental payments. In relation to its office facilities, the Company has entered into a 39 month office lease. Future minimum rental obligations as of September 30, 2016 are as follows: Years Ending December 31: 2016 $ 28,158 2017 115,813 2018 119,630 2019 120,267 2020 – Thereafter – Total minimum lease commitments $ 383,868 For the three and nine months ended September 30, 2016 and 2015, the Company incurred facilities rent expense totaling $0, $0, $21,780, and $65,339, respectively. In the ordinary course of conducting its business, the Company may be subject to loss contingencies including possible disputes or lawsuits. |
15. Stock Options
15. Stock Options | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | The Company granted stock options to certain employees under the HGI 2007 Stock Plan, as amended (the “Plan”). The Company was authorized to issue 2,950,000 shares subject to options, or stock purchase rights under the Plan. These options (i) vest over a period no greater than two years, (ii) are contingently exercisable upon the occurrence of a specified event as defined by the option agreements, and (iii) expire three months following termination of employment or five years from the date of grant depending on whether or not the options were granted as incentive options or non-qualified options. At September 30, 2009, pursuant to the terms of the merger, all options granted prior to the merger were assumed by the Company and any options available for issuance under the Plan but unissued, have been forfeited and consequently the Company has no additional shares subject to options or stock purchase rights available for issuance under the Plan. As of September 30, 2016, 438,300 option shares have been exercised. Total stock options outstanding as of September 30, 2016 total 170,000. The weighted average remaining contractual life of the outstanding options at September 30, 2016 is approximately 1 year. A summary of stock option activity in the Plan is as follows: Weighted Exercise Average Number of Price Exercise Options Per Option Price Outstanding at December 31, 2014 170,000 $ 0.01 $ 0.01 Granted – – – Exercised – – – Canceled – – – Outstanding at December 31, 2015 170,000 $ 0.01 $ 0.01 Granted – – – Exercised – – – Canceled – – – Outstanding at September 30, 2016 170,000 $ 0.01 $ 0.01 All stock options granted under the Plan became exercisable upon the occurrence of the merger that occurred on September 30, 2009. As such, equity-based compensation for the options was recognized in earnings from issuance date of the options over the vesting period of the options effective December 31, 2009. On July 19, 2010, the board of directors approved the Company’s 2010 Incentive Stock Plan (“2010 Stock Plan”). The 2010 Stock Plan allows for the reservation of 7,000,000 shares of the Company’s common stock for issuance under the plan. The 2010 Stock Plan became effective July 19, 2010 and terminates July 18, 2020. As of September 30, 2016, 20,000 shares had previously been granted (all granted in the year ended December 31, 2012) under the 2010 Stock Plan with an exercise price of $0.34 per option. These are the only shares that have been issued under the 2010 Stock Plan. The shares granted vested immediately and can become exercisable for so long as the Company remains a reporting company under the Securities Exchange Act of 1934. As of September 30, 2016, none of the shares issued under the 2010 Stock Plan have been exercised. |
16. Shareholders' (Deficit) Equ
16. Shareholders' (Deficit) Equity | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' (Deficit) Equity | Common Stock On December 13, 2010 (“the Closing”), the Company was party to an Assignment and Contribution Agreement (the “Agreement”). Pursuant to the terms of Agreement, the members of Equitas Asset Management, LLC, (“EAM”), a non Halo entity, which owned 100% of the interests of Equitas Housing Fund, LLC (“EHF”), assigned and contributed 100% of the interests of EAM to HAM (a Halo subsidiary) in exchange for shares of 21,200,000 shares of the Company’s Common Stock, $0.001 par value, of the Company. The Agreement did not constitute a business combination. The Company issued 7,500,000 shares of Halo common stock in exchange for $3,000,000 in debt or equity capital. The aggregate of 7,500,000 shares of Halo common stock will be subject to clawback (and cancellation) by Halo in the event that EAM does not generate at least three million dollars ($3,000,000) in new capital to Halo within twelve months following the closing. Halo shall have the right to claw back 2.5 shares of Halo common stock for every dollar not raised within the twelve months. Any cash generated by EAM will need to be designated for use in Halo’s general operations and not that of the EHF business to release the clawback rights. The Company issued 13,700,000 shares of Halo common stock for the purchase of intangible assets owned by EAM which included trade secrets and business processes used in the EHF business. The aggregate 13,700,000 shares of Halo common stock shall be subject to clawback (and cancellation) by Halo in the event that EAM fails to generate at least $10,000,000 of net operating cash flows from the EHF business within twenty-four months following the closing. Halo shall have the right to claw back 1.37 shares of Halo common for every dollar not generated from the net operating cash flows of the EHF business. Once the $10,000,000 in net operating cash flows from the EHF business is generated, the clawback rights will be released. In applying the guidance of ASC 505 “Equity” to the above transactions, the clawback provisions create a performance commitment that has not been met. As such, although the transaction did provide for a grant date at which time the equity shares are issued and outstanding, the equity shares have not met the measurement date requirements required by ASC 505. Accordingly, the par value of the shares issued and outstanding have been recorded at the grant date and as the clawback rights are released and the measurement dates established, the fair value of the transactions will be determined and recorded. The pro-rata fair value of equity issued in connection with fund raising efforts at each measurement date will be recorded as debt issuance costs or a reduction in the equity proceeds raised by the counter party. The pro-rata fair value of equity issued in connection with the purchase of intangible assets at the measurement date will be recorded as amortization expense because the amortization period of the underlining asset purchase and the clawback release rights are commensurate. As mentioned above, the Agreement provides for “clawback” provisions, pursuant to which all of the shares of Halo Common Stock issued to the member of EAM are subject to forfeiture in the event certain financial metrics are not timely achieved. The financial metrics call for significant cash generation by EHF within the first 12 months, and within the first 24 months following the closing date. We refer you to Section 2(b)(i) and (ii) of the Agreement, for the specifics of the clawback provisions. As of December 31, 2012, no cash was generated by EHF. The times to meet both the 12 month and 24 month financial metrics have lapsed and the metrics have not been met. Based upon the events that have transpired, and the lack of progress toward the financial metrics, the Company demanded that the recipients of the shares of Halo Common Stock give effect to both clawback provisions and immediately forfeit back all of the Halo shares issued to such recipients – an aggregate of 21,200,000 shares. Additionally, the Company has instructed the Company’s transfer agent to cancel all of the shares of Company Common Stock issued pursuant to the Agreement. As of December 31, 2014, the Company’s transfer agent had refused to cancel the shares without either (i) presentation of the physical certificates to the transfer agent, or (ii) a court order requiring the transfer agent to cancel. During March 2015, the Company entered into a $250,000 compromise and settlement agreement with the court appointed receivership holding 17,808,000 shares of the Company’s 21,200,000 common stock noted above. The physical stock certificate was sent to the Company’s transfer agent to immediately cancel those respective outstanding shares of that Agreement. Upon receipt by the transfer agent of the stock certificates noted above, the transfer agent did cancel the respective 21,200,000 shares of common stock. An additional 1,272,000 shares of the company’s common stock, all subject to the clawback provisions of the Agreement have also been sent to the Company’s transfer agent to immediately cancel those respective common shares of that Agreement but as of the time of this filing those shares have not yet been canceled. Some of the shares were returned to the Company by the Transfer Agent requiring a medallion guarantee. The Company expects to have these shares cancelled sometime in 2016. Secondarily, the Company is actively pursuing the procurement of an additional physical certificate from a respective individual still in possession of the common stock certificate. As of the time of these consolidated financials 3,392,000 of the 21,200,000 shares issued as part of the Agreement remain outstanding. The Company’s total common shares outstanding totaled 48,562,750 at September 30, 2016. Preferred Stock In connection with the 2009 merger, the Company authorized 1,000,000 shares of Series Z Convertible Preferred Stock with a par value of $0.01 per share (the “Series Z Convertible Preferred”). The number of shares of Series Z Preferred Stock may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series Z Preferred Shares to less than the number of shares then issued and outstanding. In the event any Series Z Preferred Shares shall be converted, (i) the Series Z Preferred Shares so converted shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series Z Preferred Shares set forth in this section shall be automatically reduced by the number of Series Z Preferred Shares so converted and the number of shares of the Corporation’s undesignated Preferred Stock shall be deemed increased by such number. The Series Z Convertible Preferred is convertible into common shares at the rate of 45 shares of common per one share of Series Z Convertible Preferred. The Series Z Convertible Preferred has liquidation and other rights in preference to all other equity instruments. Simultaneously upon conversion of the remaining Series A Preferred, Series B Preferred, and Series C Preferred and exercise of any outstanding stock options issued under the HGI 2007 Stock Plan into Series Z Convertible Preferred, they will automatically, without any action on the part of the holders, be converted into common shares of the Company. Since the merger, in connection with the exercise of stock options into common stock and converted Series A Preferred, Series B Preferred and Series C Preferred as noted above, 82,508 shares of Series Z Convertible Preferred were automatically authorized and converted into shares of the Company’s common stock leaving 917,492 shares of authorized undesignated Preferred Stock in the Company in accordance with the Series Z Convertible Preferred certificate of designation. The Company authorized 175,000 shares of Series X Convertible Preferred Stock with a par value of $0.01 per share (the “Series X Preferred”). The number of shares of Series X Preferred may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series X Preferred to less than the number of shares then issued and outstanding. In the event any Series X Preferred Shares shall be redeemed, (i) the Series X Preferred so redeemed shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series X Preferred Shares set forth in this section shall be automatically reduced by the number of Series X Preferred Shares so redeemed and the number of shares of the Corporation's undesignated Preferred Stock shall be deemed increased by such number. The Series X Preferred Shares rank senior to the Company’s common stock to the extent of $10.00 per Series X Preferred Shares and on a parity with the Company’s common stock as to amounts in excess thereof. The holders of Series X Preferred shall not have voting rights. Holders of the Series X Preferred shall be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash when declared by the board. Holders of Series X Preferred have a liquidation preference per share equal to $10.00. During March 2015, as part of the $250,000 compromise and settlement agreement with the court appointed receivership discussed above, the settlement agreement calls for a relinquishment and abandonment of any and all claims against Halo on 90,000 shares of the Company’s Series X Preferred stock belonging to the receivership. The liquidation preference was $536,770 as of September 30, 2015. During December 2015, the Company exercised its redemption right and redeemed the remaining issued and outstanding 53,677 shares in exchange for promissory notes. As such, as of September 30, 2016, there were no shares authorized, issued or outstanding. In April 2012, the Company authorized 100,000 shares of Series E Convertible Preferred Stock (the “Series E Preferred”) with a par value of $0.001 per share, at ten dollars ($10.00) per share with a conversion rate of fifty (50) shares of the Company’s common stock for one share of Series E Preferred. The number of shares of Series E Preferred may be decreased by resolution of the Board; provided, however, that no decrease shall reduce the number of Series E Preferred to less than the number of shares then issued and outstanding. In the event any Series E Preferred Shares shall be converted, (i) the Series E Preferred so converted shall be retired and cancelled and shall not be reissued and (ii) the authorized number of Series E Preferred Shares set forth shall be automatically reduced by the number of Series E Preferred Shares so converted and the number of shares of the Corporation's undesignated Preferred Stock shall be deemed increased by such number. The Series E Preferred Shares rank senior to the Company’s common stock to the extent of $10.00 per Series E Preferred Shares and on a parity with the Company’s common stock as to amounts in excess thereof. The holders of Series E Preferred shall not have voting rights. Holders of the Series E Preferred shall be entitled to receive, when and as declared by the board of directors, dividends at an annual rate of 9% payable in cash or common stock when declared by the board. Holders of Series E Preferred have a liquidation preference per share equal to $10.00. The liquidation preference was $700,000 as of September 30, 2015. Each share of Series E Preferred, if not previously converted by the holder, will automatically be converted into common stock at the then applicable conversion rate after thirty-six months from the date of purchase. As of September 30, 2016, there were 70,000 shares issued and outstanding with total cash consideration of $700,000, convertible into 3,500,000 shares of the Company’s common stock. The HGI Series A Convertible Preferred Stock (the “Series A Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series A Preferred would be entitled to upon conversion, as defined in the Series A Preferred certificate of designation. The liquidation preference was $826,298, of which $266,799 is an accrued (but undeclared) dividend as of September 30, 2016. Holders of the Series A Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series A Preferred is convertible into the Company’s common stock at a conversion price of $1.25 per share. The Series A Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series A Preferred is redeemable at the option of the Company at $1.80 per share prior to conversion. As of September 30, 2016, there have been 127,001 shares of Series A Preferred converted or redeemed. The Series A Preferred does not have voting rights. The Series A Preferred ranks senior to the following capital stock of the Company: (a) Series B Preferred, and (b) Series C Preferred. The HGI Series B Convertible Preferred Stock (the “Series B Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series B Preferred would be entitled to upon conversion. The liquidation preference was $693,556, of which $233,644 is an accrued (but undeclared) dividend as of September 30, 2016. Holders of the Series B Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series B Preferred is convertible into the Company’s common stock at a conversion price of $1.74 per share. The Series B Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series B Preferred is redeemable at the option of the Company at $2.30 per share prior to conversion. As of September 30, 2016, there have been 270,044 shares of Series B Preferred converted or redeemed. The Series B Preferred does not have voting rights. Series B Preferred ranks senior to the following capital stock of the Company: the Series C Preferred. The HGI Series C Convertible Preferred Stock (the “Series C Preferred”) has a par value of $0.001 per share and has a liquidation preference of the greater of (a) the consideration paid to the Company for such shares plus all accrued but unpaid dividends, if any or (b) the per share amount the holders of the Series C Preferred would be entitled to upon conversion. The liquidation preference was $469,312, of which $159,312 is an accrued (but undeclared) dividend as of September 30, 2016. Holders of the Series C Preferred are entitled to receive, if declared by the board of directors, dividends at a rate of 8% payable in cash or common stock of the Company. The Series C Preferred is convertible into the Company’s common stock at an initial conversion price of $2.27 per share. The Series C Preferred is convertible, either at the option of the holder or the Company, into shares of the Company’s Series Z Convertible Preferred Stock, and immediately, without any action on the part of the holder, converted into common stock of the Company. The Series C Preferred is redeemable at the option of the Company at $2.75 per share prior to conversion. As of September 30, 2016, there have been 28,000 shares of Series C Preferred converted or redeemed. The Series C Preferred does not have voting rights. Series C Preferred ranks senior to the following capital stock of the Company: None. The Company had issued and outstanding at September 30, 2016 372,999 shares of Series A Preferred, 229,956 shares of Series B Preferred, and 124,000 shares of Series C Preferred, all with a par value of $0.001. |
17. Subsequent Events
17. Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | There are no subsequent events to disclose. |
2. Significant Accounting Pol25
2. Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Revenue Recognition, Accounts Receivable and Deferred Revenue | Revenue Recognition, Accounts Receivable and Deferred Revenue The Company recognizes revenue in the period in which services are earned and realizable. To further understand the Company’s business, HAM earns fees from its clients for its boarding and initial asset management fee, success fees, and its monthly servicing fee. The boarding and initial asset management services are performed in the first 30-60 days of assets being boarded and include; IRR analysis of loans boarded, detailed asset level workout exit strategy analysis, boarding the assets onto HAM’s proprietary software platform and the integrated servicing platform, identification and oversight of custodial files, oversight of mortgage/deed assignment from previous servicer, oversight of title policy administration work, and delinquent property tax research and exposure review. HAM’s monthly success fees are earned for completing its default and asset disposition services including note sales, originating owner finance agreements, and cash sales of REO properties owned by the client. HAM’s servicing fees are earned monthly and are calculated on a monthly unit price for assets under management. The Company is currently exploring potential opportunities with several client relationships that would allow the Company to implement its internally developed asset management software platform as an external service for those customers. This is commonly known as Software as a Service (“SaaS”). Cash receipts from customers in advance of revenue recognized are recorded as deferred revenue and will be earned over the entire SaaS contract period. HAM and HPA receivables are typically paid the month following services performed. As of September 30, 2016, and December 31, 2015, the Company’s accounts receivable are made up of the following percentages; HAM at 30% and 47%, HPA at 59% and 53%, and HGI at 11% and 0% respectively. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: past transaction history with the customer, current economic and industry trends, and changes in customer payment terms. The Company provides for estimated uncollectible amounts through an increase to the allowance for doubtful accounts and a charge to earnings based on actual historical trends and individual account analysis. Balances that remain outstanding after the Company has used reasonable collection efforts are written-off through a charge to the allowance for doubtful accounts. The below table summarizes the Company’s allowance for doubtful accounts as of September 30, 2016 and December 31, 2015: Balance at Increase Accounts Balance Three and nine months ended September 30, 2016 Allowance for doubtful accounts $ 0 $ 0 $ 0 $ 0 Year ended December 31, 2015 Allowance for doubtful accounts $ 375,665 $ 0 $ 375,655 $ 0 |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share Basic net income (loss) per share is computed by dividing (i) net income (loss) available to common shareholders (numerator), by (ii) the weighted average number of common shares outstanding during the period (denominator). Diluted net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. At September 30, 2016 and 2015, there were 4,518,505 and 4,623,959 shares, respectively, underlying potentially dilutive convertible preferred stock and stock options outstanding. These shares were not included in dilutive weighted average shares outstanding for the three and nine months ended September 30, 2016 and 2015 because their effect is anti-dilutive due to the Company’s reported net loss. |
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the Company’s revenue recognition method and derivative liabilities. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements of the Company for the three and nine months ended September 30, 2016 and 2015 include the financial results of HCI, HGI, HBI, HPA and HAM. All significant intercompany transactions and balances have been eliminated in consolidation. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all liquid investments with a maturity of 90 days or less to be cash equivalents. |
Property, Equipment and Software | Property, Equipment and Software Property, equipment, and software are stated at cost. Depreciation is provided in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives, ranging from three to seven years. Provisions for depreciation are made using the straight-line method. Major additions and improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the cost of the property and equipment and the related accumulated depreciation are removed from the respective accounts, and any resulting gains or losses are credited or charged to other general and administrative expenses. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of trade accounts receivable, accounts payable, and accrued and other liabilities approximate fair value due to the short maturity of these items. The estimated fair value of the notes payable and subordinated debt approximates the carrying amounts as they bear market interest rates. The Company considers the warrants related to its subordinated debt to be derivatives, and the Company records the fair value of the derivative liabilities in the consolidated balance sheets. Changes in fair value of the derivative liabilities are included in gain (loss) on change in fair value of derivative in the consolidated statements of operations. The Company’s derivative liability has been classified as a Level III valuation according to Accounting Standards Codification (“ASC”) 820. |
Internally Developed Software | Internally Developed Software Internally developed legacy application software consisting of database, customer relations management, process management and internal reporting modules are used in each of the Company’s subsidiaries. The Company accounts for computer software used in the business in accordance with ASC 350 “Intangibles-Goodwill and Other”. ASC 350 requires computer software costs associated with internal use software to be charged to operations as incurred until certain capitalization criteria are met. Costs incurred during the preliminary project stage and the post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software. These costs generally consist of internal labor during configuration, coding, and testing activities. Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that the software will be used to perform the function intended. Management has determined that a significant portion of costs incurred for internally developed software came from the preliminary project and post-implementation stages; as such, no costs for internally developed software were capitalized. |
Long-Lived Assets | Long-Lived Assets Long-lived assets are reviewed on an annual basis or whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by that asset. If it is determined that the carrying amount of an asset may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is the estimated value at which the asset could be bought or sold in a transaction between willing parties. There were no impairment charges for the three and nine months ended September 30, 2016 and 2015. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740 “Income Taxes”. ASC 740 requires the use of the asset and liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheets. The Company then assesses the likelihood of realizing benefits related to such assets by considering factors such as historical taxable income and the Company’s ability to generate sufficient taxable income of the appropriate character within the relevant jurisdictions in future years. Based on the aforementioned factors, if the realization of these assets is not likely a valuation allowance is established against the deferred tax assets. The Company accounts for its position in tax uncertainties under ASC 740-10. ASC 740-10 establishes standards for accounting for uncertainty in income taxes. ASC 740-10 provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. ASC 740-10 applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the three and nine months ended September 30, 2016 or 2015. The Company incurred no penalties or interest for taxes for the three and nine months ended September 30, 2016 or 2015. The Company is subject to a three-year statute of limitations by major tax jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction. |
Recent Accounting Standards | Recent Accounting Standards In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018. On February 25, 2016, the FASB completed its Leases project by issuing (“ASU 2016-02”), Leases The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company will further study the implications of this statement in order to evaluate the expected impact on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 781), Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which amends and simplifies the accounting for share-based payment awards in three areas: (1) income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. For public companies, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company will further study the implications of this statement in order to evaluate the expected impact on its consolidated financial statements. |
2. Significant Accounting Pol26
2. Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Allowance for Doubtful Accounts | Balance at Increase Accounts Balance Three and nine months ended September 30, 2016 Allowance for doubtful accounts $ 0 $ 0 $ 0 $ 0 Year ended December 31, 2015 Allowance for doubtful accounts $ 375,665 $ 0 $ 375,655 $ 0 |
4. Operating Segments (Tables)
4. Operating Segments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Operating Segment Reporting | Operating Segments For the Three Months Ended For the Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Revenue Halo Asset Management $ 80 $ 425,429 $ 38,319 $ 942,148 Halo Portfolio Advisors 1,200 569,531 44,632 1,947,583 Halo Group, Inc. 213,995 30,000 586,600 133,894 Net Revenue $ 215,275 $ 1,024,960 $ 669,551 $ 3,023,625 Operating income (loss): Halo Asset Management $ 80 $ 366,583 $ 37,514 $ 682,695 Halo Portfolio Advisors (601 ) 212,155 35,742 728,450 Other – – – – Less: Corporate expenses (a) (671,952 ) (609,159 ) (1,380,019 ) (2,714,941 ) Operating income (loss): $ (672,473 ) $ (30,421 ) $ (1,306,763 ) $ (1,303,796 ) |
6. Property, Equipment and So28
6. Property, Equipment and Software (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property, Equipment and Software | September 30, December 31, Computers and purchased software $ 115,577 $ 147,800 Furniture and equipment 214,227 203,427 329,804 351,227 Less: accumulated depreciation (286,702 ) (304,055 ) $ 43,102 $ 47,172 |
10 Subordinated Debt (Tables)
10 Subordinated Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Subordinated Borrowings [Abstract] | |
Fair Value Assumptions | September 30, 2016 Risk-free rate 0.29% Expected volatility 308.26% Expected remaining life (in years) 0.33 Dividend yield 0.00% |
14. Commitments and Contingen30
14. Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Minimum Rental Obligations | Years Ending December 31: 2016 $ 28,158 2017 115,813 2018 119,630 2019 120,267 2020 – Thereafter – Total minimum lease commitments $ 383,868 |
15. Stock Options (Tables)
15. Stock Options (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Option Activity Summary | Weighted Exercise Average Number of Price Exercise Options Per Option Price Outstanding at December 31, 2014 170,000 $ 0.01 $ 0.01 Granted – – – Exercised – – – Canceled – – – Outstanding at December 31, 2015 170,000 $ 0.01 $ 0.01 Granted – – – Exercised – – – Canceled – – – Outstanding at September 30, 2016 170,000 $ 0.01 $ 0.01 |
2. Significant Accounting Pol32
2. Significant Accounting Policies (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts, beginning balance | $ 0 | $ 375,665 |
Increase in the provision | 0 | 0 |
Accounts receivable write-offs | 0 | 375,665 |
Allowance for doubtful accounts, ending balance | $ 0 | $ 0 |
2. Significant Accounting Pol33
2. Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Antidilutive shares, convertible preferred stock and stock options (in shares) | 4,518,505 | 4,623,959 | |
Asset impaiment charge | $ 0 | ||
Property and equipment useful lives | 3-7 years | ||
Halo Asset Management [Member] | Accounts Receivable [Member] | |||
Concentration risk percentage | 30.00% | 47.00% | |
Halo Portfolio Advisors [Member] | Accounts Receivable [Member] | |||
Concentration risk percentage | 59.00% | 53.00% | |
Halo Group [Member] | Accounts Receivable [Member] | |||
Concentration risk percentage | 11.00% | 0.00% |
4. Operating Segments (Details)
4. Operating Segments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue | $ 215,275 | $ 1,024,960 | $ 669,551 | $ 3,023,625 | |
Operating income (loss) | (672,473) | $ (477,194) | (30,421) | (1,306,763) | (1,303,796) |
Corporate Expenses [Member] | |||||
Operating income (loss) | (659,898) | (609,159) | (1,380,019) | (2,714,941) | |
Halo Asset Management [Member] | |||||
Revenue | 80 | 425,429 | 38,319 | 972,148 | |
Operating income (loss) | 80 | 366,583 | 37,514 | 682,695 | |
Halo Portfolio Advisors [Member] | |||||
Revenue | 1,200 | 569,531 | 44,632 | 1,947,583 | |
Operating income (loss) | (601) | 212,155 | 35,742 | 728,450 | |
Halo Group, Inc. [Member] | |||||
Revenue | 214,100 | 30,000 | 586,600 | 133,894 | |
Other [Member] | |||||
Operating income (loss) | $ 0 | $ 0 | $ 0 | $ 0 |
5. Going Concern (Details Narra
5. Going Concern (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accumulated deficit at end of period | $ (14,952,616) | $ (13,645,853) |
Total non-cash retained earnings reductions to total deficit balance | 26.00% | |
Deficit Related to Stock-Based Compensation [Member] | ||
Accumulated deficit at end of period | $ (2,110,748) | |
Deficit Related to Depreciation Expense [Member] | ||
Accumulated deficit at end of period | (620,581) | |
Deficit Related to Impairment Loss [Member] | ||
Accumulated deficit at end of period | (279,241) | |
Deficit Related to Issuance of Stock Dividends [Member] | ||
Accumulated deficit at end of period | (906,278) | |
Total Non-Cash Retained Earnings [Member] | ||
Accumulated deficit at end of period | $ (3,916,848) |
6. Property, Equipment and So36
6. Property, Equipment and Software (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Abstract] | ||
Computers and purchased software | $ 115,577 | $ 147,800 |
Furniture and equipment | 214,227 | 203,427 |
Property, equipment and software, gross | 329,804 | 351,227 |
Less: accumulated depreciation | (286,702) | (304,055) |
Property, equipment and software, net | $ 43,102 | $ 47,172 |
6. Property, Equipment and So37
6. Property, Equipment and Software (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense during the period | $ 5,973 | $ 5,728 | $ 16,462 | $ 17,693 |
7. Accrued and Other Liabilit38
7. Accrued and Other Liabilities (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accrued liabilities | $ 1,719,426 | $ 1,328,662 |
Accrued interest | 660,895 | 423,623 |
Accrued deferred compensation | 954,143 | 724,208 |
Secured Asset Promissory Note [Member] | ||
Accrued interest | $ 261,920 | $ 245,663 |
8. Notes Payable to Related P39
8. Notes Payable to Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Notes payable to related parties, current | $ 2,563,956 | $ 2,563,956 | $ 2,822,452 | ||
Notes payable to related parties | 2,831,525 | 2,831,525 | |||
Interest expense, related parties | 74,450 | $ 92,619 | 221,250 | $ 215,875 | |
Accrued interest, related parties | 324,760 | 324,760 | 177,724 | ||
Related Party 2011 Note [Member] | |||||
Notes payable to related parties, current | 197,636 | 197,636 | 197,636 | ||
2011 Consolidated Related Party Note [Member] | |||||
Notes payable to related parties, current | 267,569 | $ 267,569 | 267,569 | ||
Interest rate | 6.00% | ||||
Debt maturity date | Sep. 15, 2016 | ||||
Director [Member] | |||||
Notes payable to related parties, current | 960,476 | $ 960,476 | 960,476 | ||
Interest rate | 15.00% | ||||
Debt maturity date | Oct. 1, 2016 | ||||
President and Chief Legal Officer [Member] | |||||
Notes payable to related parties, current | 345,000 | $ 345,000 | 345,000 | ||
Interest rate | 15.00% | ||||
Debt maturity date | Dec. 28, 2016 | ||||
CEO and Director [Member] | |||||
Notes payable to related parties, current | $ 515,000 | $ 515,000 | $ 515,000 | ||
Interest rate | 15.00% | ||||
Debt maturity date | Dec. 28, 2016 |
9. Notes Payable (Details Narra
9. Notes Payable (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Note payable, current | $ 2,322,660 | $ 2,099,475 |
Senior Secured Convertible Promissory Note [Member] | ||
Note payable, current | $ 2,322,660 | $ 2,099,475 |
Maturity date | Oct. 10, 2016 | |
Debt stated interest rate | 15.00% | |
Accrued interest included in balance | $ 822,660 | $ 599,475 |
10. Subordinated Debt (Details)
10. Subordinated Debt (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Subordinated Borrowings [Abstract] | |
Risk-free rate | 0.29% |
Expected volatility | 308.26% |
Expected remaining life | 3 months 29 days |
Dividend yield | 0.00% |
10. Subordinated Debt (Details
10. Subordinated Debt (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Subordinated debt, current | $ 595,000 | $ 20,000 | |
Subordinated debt, noncurrent | 50,000 | 65,000 | |
Proceeds from subordinated debt | $ 540,500 | $ 0 | |
Subordinated Offering [Member] | |||
Subordinated debt, current | 0 | ||
Subordinated debt, noncurrent | $ 0 | ||
Warrants outstanding | 105,333 | 105,333 | |
Derivative liability | $ 651 | $ 2,434 | |
Subordinated Term Note [Member] | |||
Subordinated debt, current | 20,000 | 20,000 | |
Subordinated debt, noncurrent | 50,000 | $ 65,000 | |
Subordinated Term Note 2 [Member] | |||
Subordinated debt, current | 425,000 | ||
Subordinated debt, current and noncurrent | 425,000 | ||
Debt face amount | $ 425,000 | ||
Debt maturity date | Jun. 30, 2017 | ||
Debt origination fees | $ 25,500 | ||
Proceeds from subordinated debt | 399,500 | ||
Subordinated Term Note 3 [Member] | |||
Subordinated debt, current | 150,000 | ||
Subordinated debt, current and noncurrent | 150,000 | ||
Debt face amount | $ 150,000 | ||
Debt maturity date | Jun. 30, 2017 | ||
Debt origination fees | $ 9,000 | ||
Proceeds from subordinated debt | $ 141,000 |
11. Secured Asset Promissory 43
11. Secured Asset Promissory Note (Details Narrative) - Secured Asset Promissory Note [Member] - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Accrued interest | $ 261,920 | $ 261,920 | $ 245,663 | ||
Interest expense | $ 5,419 | $ 5,419 | $ 16,257 | $ 16,257 |
12. Related Party Transactions
12. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Related Party Transactions [Abstract] | ||||
Revenue from related party | $ 80 | $ 104,153 | $ 33,217 | $ 334,538 |
Commission expense | 0 | 0 | 0 | 20,000 |
Consulting fees | 0 | 15,000 | 15,000 | 35,000 |
Note receivable write off | $ 0 | $ 75,000 | $ 0 | $ 125,000 |
13. Income Taxes (Details Narra
13. Income Taxes (Details Narrative) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Effective tax rate | 0.00% |
Net operating loss carry-forwards | $ 8,000,000 |
Net operating loss carry-forwards expiration | Dec. 31, 2035 |
NOLs prior to June 2004 [Member] | |
GVC NOLs annual benefit | $ 6,500 |
NOLs between June 2004 and September 2009 [Member] | |
GVC NOLs annual benefit | $ 159,000 |
14. Commitments and Contingen46
14. Commitments and Contingencies (Details - Future rental obligations) | Sep. 30, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,016 | $ 28,158 |
2,017 | 115,813 |
2,018 | 119,630 |
2,019 | 120,267 |
2,020 | 0 |
Thereafter | 0 |
Total minimum lease commitments | $ 383,868 |
14. Commitments and Contingen47
14. Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Facilities rent expense | $ 0 | $ 21,780 | $ 0 | $ 65,339 |
15. Stock Options (Details)
15. Stock Options (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Options outstanding, beginning balance (in shares) | 170,000 | 170,000 |
Options granted (in shares) | ||
Options exercised (in shares) | ||
Options canceled (in shares) | ||
Options outstanding, ending balance (in shares) | 170,000 | 170,000 |
Options outstanding, beginning balance (weighted average exercise price) | $ 0.01 | $ .01 |
Options granted (weighted average exercise price) | ||
Options exercised (weighted average exercise price) | ||
Options canceled (weighted average exercise price) | ||
Options outstanding, ending balance (weighted average exercise price) | $ .01 | $ 0.01 |
15. Stock Options (Details Narr
15. Stock Options (Details Narrative) - $ / shares | 9 Months Ended | 12 Months Ended | 74 Months Ended | 84 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | Dec. 31, 2014 | |
Option shares exercised | |||||
Options granted | |||||
Stock options outstanding | 170,000 | 170,000 | 170,000 | 170,000 | 170,000 |
Exercise price of options granted | |||||
HGI 2007 Stock Plan [Member] | |||||
Shares authorized under Plan | 2,950,000 | 2,950,000 | 2,950,000 | ||
Option shares exercised | 438,300 | ||||
Stock options outstanding | 170,000 | 170,000 | 170,000 | ||
Weighted average remaining contractual life of outstanding options | 1 year | ||||
Options exercisable | 170,000 | 170,000 | 170,000 | ||
2010 Stock Plan [Member] | |||||
Shares authorized under Plan | 7,000,000 | 7,000,000 | 7,000,000 | ||
Option shares exercised | 0 | ||||
Options granted | 20,000 | ||||
Exercise price of options granted | $ .34 |
16. Shareholders' (Deficit) E50
16. Shareholders' (Deficit) Equity (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Series Z Convertible Preferred Stock [Member] | ||
Preferred shares authorized | 82,508 | 82,508 |
Preferred shares converted | 82,500 | |
Preferred shares issued | 0 | 0 |
Preferred shares outstanding | 0 | 0 |
Preferred Stock [Member] | ||
Preferred shares authorized | 917,492 | 917,492 |
Preferred shares issued | 0 | 0 |
Preferred shares outstanding | 0 | 0 |
Series X Convertible Preferred Stock [Member] | ||
Cancellation of Common Shares per settlement agreement, shares | 53,677 | |
Preferred shares authorized | 53,677 | 143,677 |
Preferred shares issued | 0 | 143,677 |
Preferred shares outstanding | 0 | 143,677 |
Liquidation preference | $ 0 | |
Series E Convertible Preferred Stock [Member] | ||
Preferred shares authorized | 100,000 | 100,000 |
Preferred shares issued | 70,000 | 70,000 |
Preferred shares outstanding | 70,000 | 70,000 |
Liquidation preference | $ 700,000 | |
Liquidation preference per share | $ 10 | |
Common shares issuable upon conversion | 3,500,000 | |
Series A Convertible Preferred Stock [Member] | ||
Preferred shares converted | 127,001 | |
Preferred shares issued | 372,999 | 372,999 |
Preferred shares outstanding | 372,999 | 372,999 |
Liquidation preference | $ 826,298 | |
Accrued dividends | $ 229,074 | $ 212,469 |
Series B Convertible Preferred Stock [Member] | ||
Preferred shares converted | 270,044 | |
Preferred shares issued | 229,956 | 229,956 |
Preferred shares outstanding | 229,956 | 229,956 |
Liquidation preference | $ 693,556 | |
Accrued dividends | $ 187,855 | $ 174,783 |
Series C Convertible Preferred Stock [Member] | ||
Preferred shares converted | 28,000 | |
Preferred shares issued | 124,000 | 124,000 |
Preferred shares outstanding | 124,000 | 124,000 |
Liquidation preference | $ 469,312 | |
Accrued dividends | $ 126,702 | $ 117,773 |
Compromise and Settlement Agreement [Member] | ||
Cancellation of Common Shares per settlement agreement, shares | 17,808,000 | |
Total amount of shares in receivership | 21,200,000 | |
Shares outstanding with regard to agreement | 3,392,000 |