Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 24, 2020 | Jun. 30, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | INFINITE GROUP INC | ||
Entity Central Index Key | 0000884650 | ||
Document Type | 10-K/A | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | true | ||
Amendment Description | For the purposes of filing XBRL. | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | DE | ||
Entity File Number | 0-21816 | ||
Entity Common Stock, Shares Outstanding | 29,061,883 | ||
Entity Public Float | $ 580,000 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 6,398 | $ 29,716 |
Accounts receivable, net of allowances of $17,455 and $22,000 as of December 31, 2019 and 2018, respectively | 432,289 | 286,187 |
Prepaid expenses and other current assets | 65,285 | 2,906 |
Total current assets | 503,972 | 318,809 |
Right of use asset - operating lease, net | 195,441 | 0 |
Property and equipment, net | 5,915 | 8,627 |
Software, net | 184,676 | 0 |
Deposits | 6,937 | 6,667 |
Total assets | 896,941 | 334,103 |
Current liabilities: | ||
Accounts payable | 217,777 | 367,536 |
Accrued payroll | 218,352 | 218,328 |
Accrued interest payable | 939,440 | 839,189 |
Accrued retirement | 254,348 | 244,423 |
Accrued expenses - other and other current liabilities | 243,031 | 87,581 |
Current maturities of long-term obligations | 950,000 | 686,000 |
Operating lease liability - short-term | 74,373 | 0 |
Current maturities of long-term obligations - related parties | 512,935 | 34,350 |
Note payable | 332,500 | 332,500 |
Notes payable - related parties | 58,000 | 102,000 |
Total current liabilities | 3,800,756 | 2,911,907 |
Notes payable: | ||
Other | 486,890 | 744,335 |
Related parties | 394,000 | 677,955 |
Operating lease liability - long-term | 122,605 | 0 |
Total liabilities | 4,804,251 | 4,334,197 |
Commitments and contingencies | ||
Stockholders' deficiency: | ||
Common stock, $.001 par value, 60,000,000 shares authorized; issued and outstanding: 29,061,883 shares | 29,061 | 29,061 |
Additional paid-in capital | 30,638,173 | 30,593,366 |
Accumulated deficit | (34,574,544) | (34,622,521) |
Total stockholders' deficiency | (3,907,310) | (4,000,094) |
Total liabilities and stockholders' deficiency | $ 896,941 | $ 334,103 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowances for accounts receivable | $ 17,455 | $ 22,000 |
Common stock, par value | $ 0.001 | $ .001 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 29,061,883 | 29,061,883 |
Common stock, shares outstanding | 29,061,883 | 29,061,883 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Sales | $ 7,094,279 | $ 6,370,336 |
Cost of sales | 4,422,533 | 4,158,408 |
Gross profit | 2,671,746 | 2,211,928 |
Costs and expenses: | ||
General and administrative | 1,334,051 | 1,084,260 |
Selling | 1,008,558 | 917,975 |
Total costs and expenses | 2,342,609 | 2,002,235 |
Operating income | 329,137 | 209,693 |
Other income - (see Note 6 and Note 7) | 0 | 83,250 |
Interest expense: | ||
Related parties | (89,079) | (61,923) |
Other | (192,081) | (194,020) |
Total interest expense | (281,160) | (255,943) |
Net income | $ 47,977 | $ 37,000 |
Net income/loss per share - basic and diluted | $ 0 | $ .00 |
Weighted average shares outstanding - basic | 29,061,883 | 29,061,883 |
Weighted average shares outstanding - diluted | 29,811,883 | 29,061,883 |
STATEMENTS OF CHANGES IN STOCKH
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Common Stock | ||
Beginning balance, shares | 29,061,883 | 29,061,883 |
Beginning balance, amount | $ 29,061 | $ 29,061 |
Net income | ||
Ending balance, shares | 29,061,883 | 29,061,883 |
Ending balance, amount | $ 29,061 | $ 29,061 |
Additional Paid-in Capital | ||
Beginning balance, amount | 30,593,366 | 30,591,896 |
Stock based compensation | 44,807 | 1,470 |
Net income | ||
Ending balance, amount | 30,638,173 | 30,593,366 |
Accumulated Deficit | ||
Beginning balance, amount | (34,622,521) | (34,659,521) |
Net income | 47,977 | 37,000 |
Ending balance, amount | (34,574,544) | (34,622,521) |
Beginning balance, amount | (4,000,094) | (4,038,564) |
Stock based compensation | 44,807 | 1,470 |
Net income | 47,977 | 37,000 |
Ending balance, amount | $ (3,907,310) | $ (4,000,094) |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 47,977 | $ 37,000 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Stock based compensation | 44,807 | 1,470 |
Depreciation and amortization | 29,648 | 24,183 |
Bad debt recovery | 0 | (8,000) |
Gain on settlement of debt | 0 | (83,250) |
(Increase) decrease in assets: | ||
Accounts receivable | (146,102) | 201,107 |
Prepaid expenses and other current assets | (62,649) | 1,419 |
Increase (decrease) in liabilities: | ||
Accounts payable | (149,759) | (497,395) |
Accrued expenses and other current liabilities | 255,725 | 183,807 |
Accrued retirement | 9,925 | 9,537 |
Net cash provided by (used in) operating activities | 29,572 | (130,122) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (1,945) | (546) |
Capitalization of software development costs | (194,215) | 0 |
Net cash used in investing activities | (196,160) | (546) |
Cash flows from financing activities: | ||
Proceeds from note payable - related parties | 200,000 | 90,000 |
Repayments of notes payable - related parties | (56,730) | (3,350) |
Net cash provided by financing activities | 143,270 | 86,650 |
Net decrease in cash | (23,318) | (44,018) |
Cash - beginning of year | 29,716 | 73,734 |
Cash - end of year | 6,398 | 29,716 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash payments for interest | 152,908 | 121,522 |
Cash payments for income taxes | $ 0 | $ 0 |
BASIS OF PRESENTATION & BUSINES
BASIS OF PRESENTATION & BUSINESS | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION & BUSINESS | The accompanying financial statements consist of the financial statements of Infinite Group, Inc. (the Company). The Company operates in one segment, the field of information technology (IT) consulting services, with all operations based in the United States. The primary consulting services are in the cybersecurity and VMWare support services. There were no significant sales from customers in foreign countries during 2019 and 2018. All assets are located in the United States. |
MANAGEMENT PLANS
MANAGEMENT PLANS | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
MANAGEMENT PLANS | The Company reported operating income of $329,137 in 2019 and $209,693 in 2018, net income of $47,977 in 2019 and $37,000 in 2018, and stockholders’ deficiencies of $3,907,310 and $4,000,094 at December 31, 2019 and 2018, respectively. Accordingly and due to current working capital deficit of approximately $3.3 million, there is substantial doubt about the Company’s ability to continue as a going concern within one year of issuance of the financial statements. The Company’s mission is to drive shareholder value by developing and bringing to market automated, cost effective, and innovative cybersecurity technologies. The Company’s strategy is to build its business by designing, developing, and marketing IT security-based products and solutions that fill technology gaps in cybersecurity. The Company brought one product to market and intends to bring other proprietary products and solutions to market through a channel of partners and distributors. The products and solutions are designed to simplify the security needs in customer and partner environments, with a focus on Small and Medium-Sized Enterprises (SMEs). The Company enables its partners by providing recurring revenue-based business models that use its automated plug and play solutions. Products may be sold as standalone solutions or integrated into existing environments to further automate the management of security and related IT functions. The Company’s ability to succeed depends on how successful it is in differentiating itself in the market at a time when competition in these markets is on the rise. The Company works with its partner, Webroot, to increase its base of channel partners and to increase sales of Webroot’s cloud-based endpoint security solution, with the objective of growing its recurring revenue model. The Company’s cybersecurity services business is conducted within its professional services organization (PSO). The Company provides services and technical resources to support both its channel partners and end customers. The Company’s goal is to expand on these services throughout the United States via its growing partner network and salesperson team. The Company is working to expand its managed services business with its current federal enterprise customer and its customers. Nodeware® - Nodeware assesses vulnerabilities in a computer network using scanning technology to capture a comprehensive view of the security exposure of a network infrastructure. Users receive alerts and view network information through a proprietary dashboard. Continuous and automated internal scanning and external on demand scanning are available within this offering. Nodeware continues to release upgrades with the most recent one in August 2019. This upgrade provides a next generation of the Platform. The new platform’s features include integration of a new, cutting-edge scanning engine, a new reporting engine to easily access reports within the Dashboard, allowing users to securely archive every report and retrieve them instantly and greater technology enhancements around device identification and fingerprinting. Another new feature added to Nodeware was on-demand report generation, which enables IGI’s channel partners to easily pull reports for customers and run reports simultaneously for better cybersecurity management. Nodeware creates an opportunity for resellers, including managed service providers, managed security service providers, distributors, and value-added resellers. The Company sells Nodeware in the commercial sector through its channel partners and agents. Technology and Product Development - Cybersecurity Services - Continue to Improve Operations and Capital Resources The Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company uses a formal financial review and budgeting process as a tool for improvement that has aided expense reduction and internal performance. The Company’s business plans require improving the results of its operations in future periods. During 2019, the Company borrowed $200,000 from a related party under the terms of a note payable. At December 31, 2019, the Company had $300,000 available under this financing agreements. During 2018, the Company borrowed $90,000 from related parties under the terms of demand notes. During 2017, the Company originated lines of credit with related parties totaling $175,000 and borrowed $140,000. During 2018, the Company borrowed an additional $20,000. At December 31, 2019, the Company had approximately $15,000 available under these financing agreements. The Company believes the capital resources available under its factoring line of credit, cash from additional related party and third-party loans and cash generated by improving the results of its operations provide sources to fund its ongoing operations and to support the internal growth of the Company. Although the Company has no assurances, the Company believes that related parties, who have previously provided working capital, and third parties will continue to provide working capital loans on similar terms, as in the past, as may be necessary to fund its on-going operations for at least the next 12 months, however substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. If the Company experiences significant growth in its sales, the Company believes that this may require it to increase its financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support its sales growth. The Company plans to evaluate alternatives which may include renegotiating the terms of the notes, seeking conversion of the notes to shares of common stock and seeking funds to repay the notes. The Company continues to evaluate repayment of our notes payable based on its cash flow. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Accounts Receivable - Concentration of Credit Risk Loan Origination Fees Sale of Certain Accounts Receivable - These transactions qualify for a sale of assets since (1) the Company has transferred all of its right, title and interest in the selected accounts receivable invoices to the financial institution, (2) the Purchaser may pledge, sell or transfer the selected accounts receivable invoices, and (3) the Company has no effective control over the selected accounts receivable invoices since it is not entitled to or obligated to repurchase or redeem the invoices before their maturity and it does not have the ability to unilaterally cause the Purchaser to return the invoices. Under FASB ASC 860, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. Pursuant to the provisions of FASB ASC 860, the Company reflects the transactions as a sale of assets and establishes an accounts receivable from the Purchaser for the retained amount less the costs of the transaction and less any anticipated future loss in the value of the retained asset. The retained amount is equal to 10% of the total accounts receivable invoice sold to the Purchaser. The fee is charged at prime plus 3.6% (effective rate of 8.35% at December 31, 2019) against the average daily outstanding balance of funds advanced. The estimated future loss reserve for each receivable included in the estimated value of the retained asset is based on the payment history of the accounts receivable customer and is included in the allowance for doubtful accounts, if any. As collateral, the Company granted the Purchaser a first priority interest in accounts receivable and a blanket lien, which may be junior to other creditors, on all other assets. The financing line provides the Company the ability to finance up to $2,000,000 of selected accounts receivable invoices, which includes a sublimit for one of the Company’s customers of $1,500,000. During the year ended December 31, 2019, the Company sold approximately $4,742,933 ($5,181,140 - 2018) of its accounts receivable to the Purchaser. As of December 31, 2019, $324,125 ($363,213 - 2018) of these receivables remained outstanding. Additionally, as of December 31, 2019, the Company had $67,000 available under the financing line with the financial institution ($0 - 2018). After deducting estimated fees and advances from the Purchaser, the net receivable from the Purchaser amounted to $32,412 at December 31, 2019 ($36,321 - 2018) and is included in accounts receivable in the accompanying balance sheets as of that date. There were no gains or losses on the sale of the accounts receivable because all were collected. The cost associated with the financing line was approximately $53,600 for the year ended December 31, 2019 ($53,600 - 2018). These financing line fees are classified on the statements of operations as interest expense. Property and Equipment - Capitalization of Software for Resale - Accounting for the Impairment or Disposal of Long-Lived Assets - Revenue Recognition - The Company’s revenues are generated under both time and material and fixed price agreements. Managed Support services revenue is recognized when the associated costs are incurred, which coincides with the consulting services being provided. Time and materials service agreements are based on hours worked and are billed at agreed upon hourly rates for the respective position plus other billable direct costs. Fixed price service agreements are based on a fixed amount of periodic billings for recurring services of a similar nature performed according to the contractual arrangements with clients. These agreements are arrangements for monthly or weekly support services. Under both types of agreements, the delivery of services occurs when an employee works on a specific project or assignment as stated in the contract or purchase order. Based on historical experience, the Company believes that collection is reasonably assured. The Company sells licenses of Nodeware and third-party software, principally Webroot. Substantially all customers are invoiced monthly at fixed rates for license fees and revenue is recognized over time. The Company sells VMware software and service credits. Sales are recorded upon receipt of the software or credits by the customer. The Company does not take title to the software or credits. Accordingly, the Company accounts for these as agent sales and reduces its sales amount by the related cost of sales. The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects and software and Other IT consulting services. The categories depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. There were no material unsatisfied performance obligations at December 31, 2019 or 2018 for contracts with an expected original duration of more than one year. The following table summarizes the revenue recognized by the major services: Years Ended December 31, 2019 2018 Managed support services $ 4,986,217 $ 4,922,061 Cybersecurity projects and software 1,569,972 1,177,769 Other IT consulting services 538,090 270,506 Total sales $ 7,094,279 $ 6,370,336 Managed support services Managed support services consist of revenue primarily from our subcontracts for services to its end clients, principally a major establishment of the U.S. Government for which we manage one of the nation’s largest physical and virtual Microsoft Windows environments. ● We generate revenue primarily from these subcontracts through fixed price service and support agreements. Revenues are earned and billed weekly and are generally paid within 45 days. The revenues are recognized at time of service. Cyber security projects and software Cyber security projects and software revenue includes the selling of licenses of Nodeware™ and third-party software, principally Webroot™ as well as performing cybersecurity assessments, testing and consulting as a vCISO (Virtual Chief Information Security Officer). ● Nodeware™ and Webroot™ software offerings consist of fees generated from the use of the respective software by our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Substantially all customers are billed in the month of the service and is cancellable upon notice per the respective agreements. Substantially all payments are electronically billed, and the billed amounts are paid to the Company instantaneously via an online payment platform. If payments are made in advance, revenues related to the term associated with our software licenses is recognized ratably over the contractual period. ● Some of our customers have the option to purchase additional subscription and support services at a stated price. These options generally do not provide a material right as they are priced at our standalone selling price. ● Cybersecurity assessments, testing and vCISO services are considered distinct performance obligations when sold stand alone or with other products. These contracts generally have terms of one year or less. For substantially all these contracts, revenue is recognized when the specific performance obligation is satisfied. If the contract has multiple performance obligations, the revenue is recognized when the performance obligations are satisfied. Depending on the nature of the service, the amounts recognized are either based on an allocation of the transaction price to each performance obligation based on a relative standalone selling price of the products sold. ● In substantially all agreements, a 50% to 75% down payment is required before work is initiated. Down payments received are deferred until revenue is recognized. For the year ended December 31, 2019, we recognized revenue of $17,497 that was included in the accrued expenses-other liability balance at the beginning of the period presented. Deferred revenue that will be realized during the succeeding 12-month period is $168,824, and the remaining deferred revenue of $10,000 is scheduled to be realized in 2022. Other IT consulting services Other IT consulting services consists of services such as project management and general IT consulting services. ● We generate revenue via fixed price service agreements. These are based on periodic billings of a fixed dollar amount for recurring services of a similar nature performed according to the contractual arrangements with clients. The revenues are recognized at time of service. Based on historical experience, the Company believes that collection is reasonably assured. During 2019, sales to one client, including sales under subcontracts for services to several entities, accounted for 62.6% of total sales (69.7% - 2018) and 22.1% of accounts receivable at December 31, 2019 (10.5% - 2018). Sales and Cost of Sales - Stock Options - Income Taxes - The Company periodically reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination. The Company did not have any material unrecognized tax benefit at December 31, 2019 or 2018. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2019 and 2018, the Company recognized no interest and penalties. The Company files U.S. federal tax returns and tax returns in various states. The tax years 2016 through 2019 remain open to examination by the taxing jurisdictions to which the Company is subject. Fair Value of Financial Instruments - Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 is defined as unobservable inputs in which little or no market data exist and requires the Company to develop its own assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The carrying amounts of cash, accounts receivable and accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity. Based on the borrowing rates currently available to the Company for loans similar to its term debt and notes payable, the fair value approximates the carrying amounts. Earnings Per Share - The following table sets forth the computation of basic and diluted loss per share as of December 31, 2019 and 2018: Years ended December 31, 2019 2018 Numerator for basic and diluted net income per share: Net income $ 47,977 $ 37,000 Basic and diluted net income per share $ 0.00 $ 0.00 Weighted average common shares outstanding Basic shares 29,061,883 29,061,883 Diluted shares 29,811,883 29,061,883 Anti-dilutive shares excluded from net income per share 29,195,736 28,952,076 Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net income (loss) per share calculation because their inclusion is considered anti-dilutive because the exercise or conversion prices were greater than the average market price of the common shares or their inclusion would have been anti-dilutive. Reclassifications - Use of Estimates - Leases - |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment consists of: December 31, Depreciable Lives 2019 2018 Software 3 years $ 34,934 $ 34,934 Equipment 3 to 10 years 131,719 129,774 Furniture and fixtures 5 to 7 years 17,735 17,735 184,388 182,443 Accumulated depreciation (178,473 ) (173,816 ) $ 5,915 $ 8,627 Depreciation expense was $4,567 and $10,267 for the years ended December 31, 2019 and 2018, respectively. |
LOAN FEES
LOAN FEES | 12 Months Ended |
Dec. 31, 2019 | |
Loan Fees | |
LOAN FEES | On December 1, 2014, the Company entered into an unsecured line of credit financing agreement with a member of its Board. The Company paid an origination fee consisting of (i) 600,000 shares of its common stock valued at $30,000 and (ii) an immediately exercisable option to purchase 600,000 shares of its common stock at an exercise price of $.05 valued at $23,400 using the Black-Scholes option-pricing model, which was fully expensed through December 31, 2017. On September 30, 2016, the note maturity date was extended from December 31, 2017 to January 1, 2020. This note has not been extended as of the date of this filing. As consideration for extending the maturity date, the Company granted the lender an option to purchase 800,000 common shares at $.04 per share with an estimated fair value of $14,720 using the Black-Scholes option-pricing model, which is being amortized ratably over the period January 1, 2018 through December 31, 2019. On March 14, 2016, the Company entered into an unsecured financing agreement with a third-party lender (“2016 Note Payable”). In consideration for providing the financing, the Company paid the lender a fee consisting of 2,500,000 shares of its common stock valued at $37,500 on the date of the agreement based upon the closing bid quotation of its common stock on the OTC Bulletin Board on that date. These deferred financing fees are being amortized ratably through 2021. On July 18, 2017, the Company entered into an unsecured line of credit financing agreement with an officer and member of its Board. In consideration for providing the financing, the lender was granted an option to purchase 400,000 shares of common stock at $.04 per share with an estimated fair value of $9,960 using the Black-Scholes option-pricing model. The option expires on July 17, 2022. On September 21, 2017, the Company entered into an unsecured line of credit financing agreement with a related party. In consideration for providing the financing, the lender was granted an option to purchase 400,000 shares of common stock at $.04 per share with an estimated fair value of $4,080 using the Black-Scholes option-pricing model. The option expires on January 2, 2023. The unamortized deferred financing costs are recorded as a reduction of the principal owed and are expensed over the life of the debt or the extension period. At December 31, 2019, the Company has deferred financing costs of $52,220 less accumulated amortization expenses of $39,110 ($25,195 - 2018) with a net carrying value of $13,110 ($27,025 - 2018). These amounts are shown as a reduction to the debt. See Note 7. |
NOTES PAYABLE - CURRENT
NOTES PAYABLE - CURRENT | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable, Current [Abstract] | |
NOTES PAYABLE - CURRENT | Notes payable consist of: December 31, 2019 2018 Demand note payable, 10%, secured by Software (A) $ 12,500 $ 12,500 Demand note payable to former director, 10%, unsecured 30,000 30,000 Convertible demand note payable to former director, 12%, unsecured (B) 40,000 40,000 Convertible notes payable, 6% (C) 150,000 150,000 Convertible term note payable, 7%, secured (D) 100,000 100,000 $ 332,500 $ 332,500 (A) Demand Note payable, 10%, secured by Software (B) Convertible demand note payable to former director, 12%, unsecured - (C) Convertible notes payable, 6%, maturity date of December 31, 2016 - (D) Convertible term note payable, 7%, secured, maturity date of October 4, 2016 - Notes payable - related parties consist of: December 31, 2019 2018 Demand notes payable to officer and director, 6%, unsecured $ 38,000 $ 82,000 Demand note payable to director, 6%, unsecured 20,000 20,000 $ 58,000 $ 102,000 |
LONG-TERM OBLIGATIONS
LONG-TERM OBLIGATIONS | 12 Months Ended |
Dec. 31, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
LONG-TERM OBLIGATIONS | Notes Payable - Other - December 31 2019 2018 2016 note payable, 6%, unsecured, due December 31, 2021 (A) $ 500,000 $ 500,000 Convertible note payable, 6%, due January 1, 2020 (B) 264,000 264,000 Note payable, 10%, secured, due January 1, 2018 (C) 265,000 265,000 Convertible term note payable,12%, secured, due August 31, 2018 (D) 175,000 175,000 Term note payable - PBGC, 6%, secured (E) 246,000 246,000 1,450,000 1,450,000 Less: deferred financing costs 13,110 19,665 1,436,890 1,430,335 Less: current maturities 950,000 686,000 $ 486,890 $ 744,335 (A) 2016 note payable, 6%, unsecured, due December 31, 2021 - (B) Convertible note payable, 6%, due January 1, 2020 - (C) Note payable, 10%, secured, due January 1, 2018 - (D) Convertible term note payable, 12%, secured, due August 31, 2018 - (E) Term note payable - PBGC, 6%, secured - Notes Payable - Related Parties Notes payable - related parties consist of: December 31, 2019 2018 Note payable, up to $500,000, 7.5%, due August 31, 2026 (A) $ 200,000 0 Convertible notes payable, 6% (B) 155,300 $ 155,300 Note payable, $400,000 line of credit, 8.35%, unsecured (C) 366,635 379,365 Convertible note payable, 7%, due March 31, 2021 (D) 25,000 25,000 Note payable, $100,000 line of credit, 6%, unsecured (E) 90,000 90,000 Note payable, $75,000 line of credit, 6%, unsecured (F) 70,000 70,000 906,935 719,665 Less deferred financing costs 0 7,360 906,935 712,305 Less current maturities 512,935 34,350 $ 394,000 $ 677,955 (A) Note payable of up to $500,000, 7.5%, due August 31, 2026 - (B) Convertible notes payable, 6% - The Company executed collateral security agreements with the note holders providing for a subordinate security interest in all the Company’s assets. Generally, upon notice, prior to the note maturity date, the Company can prepay all or a portion of the outstanding notes. The Notes are convertible into shares of common stock subject to the following limitations: The Notes are not convertible to the extent that shares of common stock issuable upon the proposed conversion would result in a change in control of the Company which would limit the use of its net operating loss carryforwards; provided, however, if the Company closes a transaction with another third party or parties that results in a change of control which will limit the use of its net operating loss carryforwards, then the foregoing limitation shall lapse. Prior to any conversion by a requesting note holder, each note holder holding a note which is then convertible into 5% or more of the Company’s common stock shall be entitled to participate on a pari passu basis with the requesting note holder and upon any such participation the requesting note holder shall proportionately adjust his conversion request such that, in the aggregate, a change of control, which will limit the use of the Company’s net operating loss carryforwards, does not occur. (C) Note payable, $400,000 line of credit, 8.35%, unsecured - (D) Convertible note payable, 7%, due March 31, 2021 - (E) Note payable, $100,000 line of credit, 6%, unsecured - (F) Note payable, $75,000 line of credit, 6%, unsecured - Long-Term Obligations As of December 31, 2019, minimum future annual payments of long-term obligations and amortization of deferred financing costs are as follows: Annual Annual Payments Amortization Net Due Prior to 2020 $ 698,020 $ 0 $ 698,020 2020 764,915 0 764,915 2021 624,000 13,110 610,890 2022 0 0 0 2023 70,000 0 70,000 2024 0 0 0 2025 0 0 0 2026 200,000 0 200,000 Total long-term obligations $ 2,356,935 $ 13,110 $ 2,343,825 |
STOCKHOLDERS' DEFICIENCY
STOCKHOLDERS' DEFICIENCY | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' DEFICIENCY | Preferred Stock - 2005 Plan - 2009 Plan - 2019 Plan - |
STOCK OPTION PLANS AND AGREEMEN
STOCK OPTION PLANS AND AGREEMENTS | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
STOCK OPTION PLANS AND AGREEMENTS | The Company grants stock options to its key employees and independent service providers as it deems appropriate. Options expire from five to ten years after the grant date. Option Agreements - Loan Fees - The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions. Volatility is based on the Company’s historical volatility. The expected life of the options was determined using the simplified method for plain vanilla options as stated in FASB ASC 718 to improve the accuracy of this assumption while simplifying record keeping requirements until more detailed information about the Company’s exercise behavior is available. The risk-free rate for the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were used for the years ended December 31, 2019 and 2018. 2019 2018 Risk free interest rate 1.38% to 2.55% 2.86% to 2.95% Expected dividend yield 0 % 0 % Expected stock price volatility 100 % 100 % Expected life of options 2.75 to 3.90 years 2.75 years The following is a summary of stock option activity, including qualified and non-qualified options for the years ended December 31, 2019 and 2018: Number of Options Outstanding Weighted Average Exercise Price Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2017 8,031,000 $ 0.10 Granted 300,000 $ 0.02 Expired (411,000 ) $ 0.26 Outstanding at December 31, 2018 7,920,000 $ 0.09 Granted 4,203,500 $ 0.03 Expired (275,000 ) $ 0.07 Forfeited (938,000 ) $ 0.23 Outstanding at December 31, 2019 10,910,500 $ 0.05 4.1 years $ 165,600 Vested or expected to vest and exercisable at December 31, 2019 10,910,500 $ 0.05 4.1 years $ 165,600 At December 31, 2019, there was $0 of total unrecognized compensation cost related to outstanding non-vested options. The weighted average fair value of options granted was $.03 and $.01 per share for the years ended December 31, 2019 and 2018, respectively. The exercise price for all options granted equaled or exceeded the market value of the Company’s common stock on the date of grant. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The components of income tax expense (benefit) consists of the following: December 31, 2019 2018 Deferred: Federal $ 49,000 $ 158,000 State 6,000 170,000 55,000 328,000 Change in valuation allowance (55,000 ) (328,000 ) $ 0 $ 0 At December 31, 2019, the Company had federal net operating loss carryforwards of approximately $7,300,000 ($7,600,000 - 2018) and various state net operating loss carryforwards of approximately $3,200,000 ($3,400,000 - 2018) which expire from 2020 through 2039. These carryforwards exclude federal net operating loss carryforwards from inactive subsidiaries and net operating loss carryforwards from states that the Company does not presently operate in. Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating loss carryforwards before utilization. At December 31, 2019, a net deferred tax asset, representing the future benefit attributed primarily to the available net operating loss carryforwards and defined benefit plan expenses in the amount of approximately $1,943,000 ($1,998,000 - 2018), had been fully offset by a valuation allowance because management believes that the statutory limitations on utilization of the operating losses and concerns over achieving profitable operations diminish the Company’s ability to demonstrate that it is more likely than not that these future benefits will be realized before they expire. The following is a summary of the Company's temporary differences and carryforwards which give rise to deferred tax assets and liabilities. December 31, 2019 2018 Deferred tax assets (liabilities): Net operating loss carryforwards $ 1,650,000 $ 1,707,000 Defined benefit pension liability 60,000 60,000 Operating Lease ROU (48,000 ) 0 Operating Lease Liability 48,000 0 Reserves and accrued expenses payable 233,000 231,000 Gross deferred tax asset 1,943,000 1,998,000 Deferred tax asset valuation allowance (1,943,000 ) (1,998,000 ) Net deferred tax asset $ 0 $ 0 The differences between the U.S. statutory federal income tax rate and the effective income tax rate in the accompanying statements of operations are as follows: December 31, 2019 2018 Statutory U.S. federal tax rate 21.0 % 21.0 % Change in valuation allowance (115.6 ) (886.4 ) Net operating loss carryforward expiration 71.5 315.0 State taxes 12.8 458.4 Expired stock-based compensation 3.1 7.6 Note receivable reserve 0.0 77.7 Other permanent non-deductible items 7.2 6.7 Effective income tax rate 0.0 % 0.0 % |
EMPLOYEE RETIREMENT PLANS
EMPLOYEE RETIREMENT PLANS | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
EMPLOYEE RETIREMENT PLANS | Simple IRA Plan 401(k) Plan - |
LEASE
LEASE | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
LEASE | Beginning on August 1, 2016, the Company leases its headquarters facility under an operating lease agreement that expires on June 30, 2022. The Company has the right to terminate the lease upon six months prior notice after three years of occupancy. Rent expense is $80,000 annually during the first year of the lease term and increases by 1.5% annually thereafter. Upon adoption of the ASU on January 1, 2019, the Company recognized a right-of-use asset of $265,825 and a lease liability of $265,825 related to the existing office lease that is classified as an operating lease. Supplemental balance sheet information related to the operating lease was as follows: December 31, 2019 Right of use asset – lease, net $ 195,441 Operating lease liability - short-term $ 74,373 Operating lease liability - long-term 122,605 Total operating lease liability $ 196,978 Discount rate - operating lease 6.0 % |
RELATED PARTY ACCRUED INTEREST
RELATED PARTY ACCRUED INTEREST PAYABLE | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY ACCRUED INTEREST PAYABLE | Accrued Interest Payable - |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | In December 2019, a novel strain of coronavirus was reported in Wuhan, Hubei province, China. In the first several months of 2020, the virus, SARS-CoV-2, and resulting disease, COVID-19, spread to the United States, including New York State, the geographic location in which the Company’s headquarters operates. On March 21, 2020, New York Governor Andrew Cuomo issued an Executive Order entitled “New York State on PAUSE” (Policy that Assures Uniform Safety for Everyone) (the “Order”), pursuant to which, all non-essential employees (as defined by the State) must stay at home starting March 22, 2020 through April 19, 2020. The Company was deemed essential. On March 25, 2020, Colorado Governor Jared Polis announced an executive order for Coloradans to stay at home in order to help prevent the spread of coronavirus. The stay-at-home order went into effect Thursday, March 26, 2020 at 6 a.m. and will last through Saturday, April 11, 2020. Beginning March 16, 2020, prior to the Order, most of the Company’s New York employees began temporarily working remotely to ensure the safety and well-being of our employees and their families. The Colorado employees began working remotely on March 26, 2020. The Company’s technology infrastructure, for some time, has been set up to handle offsite seamless operations to address alternative disaster recovery disruption. As a result, all employees will continue to work remotely unless they report needing sick leave or family leave pursuant to regulated benefits. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Accounts Receivable | Accounts Receivable - |
Concentration of Credit Risk | Concentration of Credit Risk |
Loan Origination Fees | Loan Origination Fees |
Sale of Certain Accounts Receivable | Sale of Certain Accounts Receivable - These transactions qualify for a sale of assets since (1) the Company has transferred all of its right, title and interest in the selected accounts receivable invoices to the financial institution, (2) the Purchaser may pledge, sell or transfer the selected accounts receivable invoices, and (3) the Company has no effective control over the selected accounts receivable invoices since it is not entitled to or obligated to repurchase or redeem the invoices before their maturity and it does not have the ability to unilaterally cause the Purchaser to return the invoices. Under FASB ASC 860, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. Pursuant to the provisions of FASB ASC 860, the Company reflects the transactions as a sale of assets and establishes an accounts receivable from the Purchaser for the retained amount less the costs of the transaction and less any anticipated future loss in the value of the retained asset. The retained amount is equal to 10% of the total accounts receivable invoice sold to the Purchaser. The fee is charged at prime plus 3.6% (effective rate of 8.35% at December 31, 2019) against the average daily outstanding balance of funds advanced. The estimated future loss reserve for each receivable included in the estimated value of the retained asset is based on the payment history of the accounts receivable customer and is included in the allowance for doubtful accounts, if any. As collateral, the Company granted the Purchaser a first priority interest in accounts receivable and a blanket lien, which may be junior to other creditors, on all other assets. The financing line provides the Company the ability to finance up to $2,000,000 of selected accounts receivable invoices, which includes a sublimit for one of the Company’s customers of $1,500,000. During the year ended December 31, 2019, the Company sold approximately $4,742,933 ($5,181,140 - 2018) of its accounts receivable to the Purchaser. As of December 31, 2019, $324,125 ($363,213 - 2018) of these receivables remained outstanding. Additionally, as of December 31, 2019, the Company had $67,000 available under the financing line with the financial institution ($0 - 2018). After deducting estimated fees and advances from the Purchaser, the net receivable from the Purchaser amounted to $32,412 at December 31, 2019 ($36,321 - 2018) and is included in accounts receivable in the accompanying balance sheets as of that date. There were no gains or losses on the sale of the accounts receivable because all were collected. The cost associated with the financing line was approximately $53,600 for the year ended December 31, 2019 ($53,600 - 2018). These financing line fees are classified on the statements of operations as interest expense. |
Property and Equipment | Property and Equipment - |
Capitalization of Software for Resale | Capitalization of Software for Resale - |
Accounting for the Impairment or Disposal of Long-Lived Assets | Accounting for the Impairment or Disposal of Long-Lived Assets - |
Revenue Recognition | Revenue Recognition - The Company’s revenues are generated under both time and material and fixed price agreements. Managed Support services revenue is recognized when the associated costs are incurred, which coincides with the consulting services being provided. Time and materials service agreements are based on hours worked and are billed at agreed upon hourly rates for the respective position plus other billable direct costs. Fixed price service agreements are based on a fixed amount of periodic billings for recurring services of a similar nature performed according to the contractual arrangements with clients. These agreements are arrangements for monthly or weekly support services. Under both types of agreements, the delivery of services occurs when an employee works on a specific project or assignment as stated in the contract or purchase order. Based on historical experience, the Company believes that collection is reasonably assured. The Company sells licenses of Nodeware and third-party software, principally Webroot. Substantially all customers are invoiced monthly at fixed rates for license fees and revenue is recognized over time. The Company sells VMware software and service credits. Sales are recorded upon receipt of the software or credits by the customer. The Company does not take title to the software or credits. Accordingly, the Company accounts for these as agent sales and reduces its sales amount by the related cost of sales. The Company’s total revenue recognized from contracts from customers was comprised of three major services: Managed support services, Cybersecurity projects and software and Other IT consulting services. The categories depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. There were no material unsatisfied performance obligations at December 31, 2019 or 2018 for contracts with an expected original duration of more than one year. The following table summarizes the revenue recognized by the major services: Years Ended December 31, 2019 2018 Managed support services $ 4,986,217 $ 4,922,061 Cybersecurity projects and software 1,569,972 1,177,769 Other IT consulting services 538,090 270,506 Total sales $ 7,094,279 $ 6,370,336 Managed support services Managed support services consist of revenue primarily from our subcontracts for services to its end clients, principally a major establishment of the U.S. Government for which we manage one of the nation’s largest physical and virtual Microsoft Windows environments. ● We generate revenue primarily from these subcontracts through fixed price service and support agreements. Revenues are earned and billed weekly and are generally paid within 45 days. The revenues are recognized at time of service. Cyber security projects and software Cyber security projects and software revenue includes the selling of licenses of Nodeware™ and third-party software, principally Webroot™ as well as performing cybersecurity assessments, testing and consulting as a vCISO (Virtual Chief Information Security Officer). ● Nodeware™ and Webroot™ software offerings consist of fees generated from the use of the respective software by our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Substantially all customers are billed in the month of the service and is cancellable upon notice per the respective agreements. Substantially all payments are electronically billed, and the billed amounts are paid to the Company instantaneously via an online payment platform. If payments are made in advance, revenues related to the term associated with our software licenses is recognized ratably over the contractual period. ● Some of our customers have the option to purchase additional subscription and support services at a stated price. These options generally do not provide a material right as they are priced at our standalone selling price. ● Cybersecurity assessments, testing and vCISO services are considered distinct performance obligations when sold stand alone or with other products. These contracts generally have terms of one year or less. For substantially all these contracts, revenue is recognized when the specific performance obligation is satisfied. If the contract has multiple performance obligations, the revenue is recognized when the performance obligations are satisfied. Depending on the nature of the service, the amounts recognized are either based on an allocation of the transaction price to each performance obligation based on a relative standalone selling price of the products sold. ● In substantially all agreements, a 50% to 75% down payment is required before work is initiated. Down payments received are deferred until revenue is recognized. For the year ended December 31, 2019, we recognized revenue of $17,497 that was included in the accrued expenses-other liability balance at the beginning of the period presented. Deferred revenue that will be realized during the succeeding 12-month period is $168,824, and the remaining deferred revenue of $10,000 is scheduled to be realized in 2022. Other IT consulting services Other IT consulting services consists of services such as project management and general IT consulting services. ● We generate revenue via fixed price service agreements. These are based on periodic billings of a fixed dollar amount for recurring services of a similar nature performed according to the contractual arrangements with clients. The revenues are recognized at time of service. Based on historical experience, the Company believes that collection is reasonably assured. During 2019, sales to one client, including sales under subcontracts for services to several entities, accounted for 62.6% of total sales (69.7% - 2018) and 22.1% of accounts receivable at December 31, 2019 (10.5% - 2018). |
Sales and Cost of Sales | Sales and Cost of Sales - |
Stock Options | Stock Options - |
Income Taxes | Income Taxes - The Company periodically reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination. The Company did not have any material unrecognized tax benefit at December 31, 2019 or 2018. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2019 and 2018, the Company recognized no interest and penalties. The Company files U.S. federal tax returns and tax returns in various states. The tax years 2016 through 2019 remain open to examination by the taxing jurisdictions to which the Company is subject. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments - Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 is defined as unobservable inputs in which little or no market data exist and requires the Company to develop its own assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The carrying amounts of cash, accounts receivable and accounts payable and accrued expenses are reasonable estimates of their fair value due to their short maturity. Based on the borrowing rates currently available to the Company for loans similar to its term debt and notes payable, the fair value approximates the carrying amounts. |
Earnings Per Share | Earnings Per Share - The following table sets forth the computation of basic and diluted loss per share as of December 31, 2019 and 2018: Years ended December 31, 2019 2018 Numerator for basic and diluted net income per share: Net income $ 47,977 $ 37,000 Basic and diluted net income per share $ 0.00 $ 0.00 Weighted average common shares outstanding Basic shares 29,061,883 29,061,883 Diluted shares 29,811,883 29,061,883 Anti-dilutive shares excluded from net income per share 29,195,736 28,952,076 Certain common shares issuable under stock options and convertible notes payable have been omitted from the diluted net income (loss) per share calculation because their inclusion is considered anti-dilutive because the exercise or conversion prices were greater than the average market price of the common shares or their inclusion would have been anti-dilutive. |
Reclassifications | Reclassifications - |
Use of Estimates | Use of Estimates - |
Leases | Leases - |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Years Ended December 31, 2019 2018 Managed support services $ 4,986,217 $ 4,922,061 Cybersecurity projects and software 1,569,972 1,177,769 Other IT consulting services 538,090 270,506 Total sales $ 7,094,279 $ 6,370,336 |
Earnings per share, basic and diluted | Years ended December 31, 2019 2018 Numerator for basic and diluted net income per share: Net income $ 47,977 $ 37,000 Basic and diluted net income per share $ 0.00 $ 0.00 Weighted average common shares outstanding Basic shares 29,061,883 29,061,883 Diluted shares 29,811,883 29,061,883 Anti-dilutive shares excluded from net income per share 29,195,736 28,952,076 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | December 31, Depreciable Lives 2019 2018 Software 3 years $ 34,934 $ 34,934 Equipment 3 to 10 years 131,719 129,774 Furniture and fixtures 5 to 7 years 17,735 17,735 184,388 182,443 Accumulated depreciation (178,473 ) (173,816 ) $ 5,915 $ 8,627 |
NOTES PAYABLE - CURRENT (Tables
NOTES PAYABLE - CURRENT (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable, Current [Abstract] | |
Notes payable | December 31, 2019 2018 Demand note payable, 10%, secured by Software (A) $ 12,500 $ 12,500 Demand note payable to former director, 10%, unsecured 30,000 30,000 Convertible demand note payable to former director, 12%, unsecured (B) 40,000 40,000 Convertible notes payable, 6% (C) 150,000 150,000 Convertible term note payable, 7%, secured (D) 100,000 100,000 $ 332,500 $ 332,500 (A) Demand Note payable, 10%, secured by Software (B) Convertible demand note payable to former director, 12%, unsecured - (C) Convertible notes payable, 6%, maturity date of December 31, 2016 - (D) Convertible term note payable, 7%, secured, maturity date of October 4, 2016 - |
Notes payable - related parties | December 31, 2019 2018 Demand notes payable to officer and director, 6%, unsecured $ 38,000 $ 82,000 Demand note payable to director, 6%, unsecured 20,000 20,000 $ 58,000 $ 102,000 |
LONG-TERM OBLIGATIONS (Tables)
LONG-TERM OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Long-term Debt, Unclassified [Abstract] | |
Notes payable - other | December 31 2019 2018 2016 note payable, 6%, unsecured, due December 31, 2021 (A) $ 500,000 $ 500,000 Convertible note payable, 6%, due January 1, 2020 (B) 264,000 264,000 Note payable, 10%, secured, due January 1, 2018 (C) 265,000 265,000 Convertible term note payable,12%, secured, due August 31, 2018 (D) 175,000 175,000 Term note payable - PBGC, 6%, secured (E) 246,000 246,000 1,450,000 1,450,000 Less: deferred financing costs 13,110 19,665 1,436,890 1,430,335 Less: current maturities 950,000 686,000 $ 486,890 $ 744,335 (A) 2016 note payable, 6%, unsecured, due December 31, 2021 - (B) Convertible note payable, 6%, due January 1, 2020 - (C) Note payable, 10%, secured, due January 1, 2018 - (D) Convertible term note payable, 12%, secured, due August 31, 2018 - (E) Term note payable - PBGC, 6%, secured - |
Notes payable - related parties | December 31, 2019 2018 Note payable, up to $500,000, 7.5%, due August 31, 2026 (A) $ 200,000 0 Convertible notes payable, 6% (B) 155,300 $ 155,300 Note payable, $400,000 line of credit, 8.35%, unsecured (C) 366,635 379,365 Convertible note payable, 7%, due March 31, 2021 (D) 25,000 25,000 Note payable, $100,000 line of credit, 6%, unsecured (E) 90,000 90,000 Note payable, $75,000 line of credit, 6%, unsecured (F) 70,000 70,000 906,935 719,665 Less deferred financing costs 0 7,360 906,935 712,305 Less current maturities 512,935 34,350 $ 394,000 $ 677,955 (A) Note payable of up to $500,000, 7.5%, due August 31, 2026 - (B) Convertible notes payable, 6% - The Company executed collateral security agreements with the note holders providing for a subordinate security interest in all the Company’s assets. Generally, upon notice, prior to the note maturity date, the Company can prepay all or a portion of the outstanding notes. The Notes are convertible into shares of common stock subject to the following limitations: The Notes are not convertible to the extent that shares of common stock issuable upon the proposed conversion would result in a change in control of the Company which would limit the use of its net operating loss carryforwards; provided, however, if the Company closes a transaction with another third party or parties that results in a change of control which will limit the use of its net operating loss carryforwards, then the foregoing limitation shall lapse. Prior to any conversion by a requesting note holder, each note holder holding a note which is then convertible into 5% or more of the Company’s common stock shall be entitled to participate on a pari passu basis with the requesting note holder and upon any such participation the requesting note holder shall proportionately adjust his conversion request such that, in the aggregate, a change of control, which will limit the use of the Company’s net operating loss carryforwards, does not occur. (C) Note payable, $400,000 line of credit, 8.35%, unsecured - (D) Convertible note payable, 7%, due March 31, 2021 - (E) Note payable, $100,000 line of credit, 6%, unsecured - (F) Note payable, $75,000 line of credit, 6%, unsecured - |
Long-term obligations | Annual Annual Payments Amortization Net Due Prior to 2020 $ 698,020 $ 0 $ 698,020 2020 764,915 0 764,915 2021 624,000 13,110 610,890 2022 0 0 0 2023 70,000 0 70,000 2024 0 0 0 2025 0 0 0 2026 200,000 0 200,000 Total long-term obligations $ 2,356,935 $ 13,110 $ 2,343,825 |
STOCK OPTION PLANS AND AGREEM_2
STOCK OPTION PLANS AND AGREEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock option valuation assumptions | 2019 2018 Risk free interest rate 1.38% to 2.55% 2.86% to 2.95% Expected dividend yield 0 % 0 % Expected stock price volatility 100 % 100 % Expected life of options 2.75 to 3.90 years 2.75 years |
Stock options activity | Number of Options Outstanding Weighted Average Exercise Price Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2017 8,031,000 $ 0.10 Granted 300,000 $ 0.02 Expired (411,000 ) $ 0.26 Outstanding at December 31, 2018 7,920,000 $ 0.09 Granted 4,203,500 $ 0.03 Expired (275,000 ) $ 0.07 Forfeited (938,000 ) $ 0.23 Outstanding at December 31, 2019 10,910,500 $ 0.05 4.1 years $ 165,600 Vested or expected to vest and exercisable at December 31, 2019 10,910,500 $ 0.05 4.1 years $ 165,600 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Components of income tax expense (benefit) | December 31, 2019 2018 Deferred: Federal $ 49,000 $ 158,000 State 6,000 170,000 55,000 328,000 Change in valuation allowance (55,000 ) (328,000 ) $ 0 $ 0 |
Deferred tax assets and liabilities | December 31, 2019 2018 Deferred tax assets (liabilities): Net operating loss carryforwards $ 1,650,000 $ 1,707,000 Defined benefit pension liability 60,000 60,000 Operating Lease ROU (48,000 ) 0 Operating Lease Liability 48,000 0 Reserves and accrued expenses payable 233,000 231,000 Gross deferred tax asset 1,943,000 1,998,000 Deferred tax asset valuation allowance (1,943,000 ) (1,998,000 ) Net deferred tax asset $ 0 $ 0 |
Effective income tax rate reconciliation | December 31, 2019 2018 Statutory U.S. federal tax rate 21.0 % 21.0 % Change in valuation allowance (115.6 ) (886.4 ) Net operating loss carryforward expiration 71.5 315.0 State taxes 12.8 458.4 Expired stock-based compensation 3.1 7.6 Note receivable reserve 0.0 77.7 Other permanent non-deductible items 7.2 6.7 Effective income tax rate 0.0 % 0.0 % |
LEASE (Tables)
LEASE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Supplemental operating lease information | December 31, 2019 Right of use asset – lease, net $ 195,441 Operating lease liability - short-term $ 74,373 Operating lease liability - long-term 122,605 Total operating lease liability $ 196,978 Discount rate - operating lease 6.0 % |
MANAGEMENT PLANS (Details Narra
MANAGEMENT PLANS (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Operating income | $ 329,137 | $ 209,693 | |
Net income | 47,977 | 37,000 | |
Stockholders' deficiency | $ (3,907,310) | $ (4,000,094) | $ (4,038,564) |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Sales | $ 7,094,279 | $ 6,370,336 |
Managed Support Services | ||
Sales | 4,986,217 | 4,922,061 |
Cybersecurity Projects and Software | ||
Sales | 1,569,972 | 1,177,769 |
Other IT Consulting Services | ||
Sales | $ 538,090 | $ 270,506 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Net income | $ 47,977 | $ 37,000 |
Basic and diluted net income per share | $ 0 | $ .00 |
Weighted average common shares outstanding - basic | 29,061,883 | 29,061,883 |
Weighted average comon shares outstanding - diluted | 29,811,883 | 29,061,883 |
Anti-dilutive shares excluded from net loss per share | 29,195,736 | 28,952,076 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Allowance for doubtful accounts receivable | $ 17,455 | $ 22,000 |
Capitalized computer software, gross | 194,215 | 0 |
Capitalized computer software accumulated amortization | (9,539) | 0 |
Amortization of capitalized costs | 9,539 | 0 |
Development expense | 58,000 | 182,000 |
Agent sales | $ 238,136 | $ 488,314 |
Customer A | Sales | ||
Concentration risk | 62.60% | 69.70% |
Customer A | Accounts Receivable | ||
Concentration risk | 22.10% | 10.50% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, plant and equipment, gross | $ 184,388 | $ 182,443 |
Accumulated depreciation | (178,473) | (173,816) |
Property and equipment, net | 5,915 | 8,627 |
Software | ||
Property, plant and equipment, gross | $ 34,934 | 34,934 |
Depreciable lives | 3 years | |
Equipment | ||
Property, plant and equipment, gross | $ 131,719 | 129,774 |
Equipment | Minimum | ||
Depreciable lives | 3 years | |
Equipment | Maximum | ||
Depreciable lives | 10 years | |
Furniture and Fixtures | ||
Property, plant and equipment, gross | $ 17,735 | $ 17,735 |
Furniture and Fixtures | Minimum | ||
Depreciable lives | 5 years | |
Furniture and Fixtures | Maximum | ||
Depreciable lives | 7 years |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 4,567 | $ 10,267 |
LOAN FEES (Details Narrative)
LOAN FEES (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Loan Fees | ||
Deferred origination fees, gross | $ 52,220 | $ 52,220 |
Accumulated amortization expenses | (39,110) | (25,195) |
Deferred origination fees, net carrying value | $ 13,110 | $ 27,025 |
NOTES PAYABLE - CURRENT (Detail
NOTES PAYABLE - CURRENT (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Notes payable, current | $ 332,500 | $ 332,500 |
Note Payable 1 | ||
Notes payable, current | 12,500 | 12,500 |
Note Payable 2 | ||
Notes payable, current | 30,000 | 30,000 |
Note Payable 3 | ||
Notes payable, current | 40,000 | 40,000 |
Note Payable 4 | ||
Notes payable, current | 150,000 | 150,000 |
Note Payable 5 | ||
Notes payable, current | $ 100,000 | $ 100,000 |
NOTES PAYABLE - CURRENT (Deta_2
NOTES PAYABLE - CURRENT (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Notes payable, related parties, current | $ 58,000 | $ 102,000 |
Note Payable - Related Party 1 | ||
Notes payable, related parties, current | 38,000 | 82,000 |
Note Payable - Related Party 2 | ||
Notes payable, related parties, current | $ 20,000 | $ 20,000 |
LONG-TERM OBLIGATIONS (Details)
LONG-TERM OBLIGATIONS (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Long-term debt | $ 1,450,000 | $ 1,450,000 |
Less deferred financing costs | 13,110 | 19,665 |
Total | 1,436,890 | 1,430,335 |
Less current maturities | 950,000 | 686,000 |
Long-term debt, excluding current maturities | 486,890 | 744,335 |
Notes Payable - Other 1 | ||
Long-term debt | 500,000 | 500,000 |
Notes Payable - Other 2 | ||
Long-term debt | 264,000 | 264,000 |
Notes Payable - Other 3 | ||
Long-term debt | 265,000 | 265,000 |
Notes Payable - Other 4 | ||
Long-term debt | 175,000 | 175,000 |
Notes Payable - Other 5 | ||
Long-term debt | $ 246,000 | $ 246,000 |
LONG-TERM OBLIGATIONS (Details
LONG-TERM OBLIGATIONS (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Notes payable - related parties | $ 906,935 | $ 719,665 |
Less deferred financing costs | 0 | 7,360 |
Total | 906,935 | 712,305 |
Less current maturities | 512,935 | 34,350 |
Notes payable - related parties, excluding current maturities | 394,000 | 677,955 |
Note Payable - Related Party 1 | ||
Notes payable - related parties | 200,000 | 0 |
Note Payable - Related Party 2 | ||
Notes payable - related parties | 155,300 | 155,300 |
Note Payable - Related Party 3 | ||
Notes payable - related parties | 366,635 | 379,365 |
Note Payable - Related Party 4 | ||
Notes payable - related parties | 25,000 | 25,000 |
Note Payable - Related Party 5 | ||
Notes payable - related parties | 90,000 | 90,000 |
Note Payable - Related Party 6 | ||
Notes payable - related parties | $ 70,000 | $ 70,000 |
LONG-TERM OBLIGATIONS (Detail_2
LONG-TERM OBLIGATIONS (Details 2) | Dec. 31, 2019USD ($) |
Due Prior to 2020 | $ 698,020 |
2020 | 764,915 |
2021 | 610,890 |
2022 | 0 |
2023 | 70,000 |
2024 | 0 |
2025 | 0 |
2026 | 200,000 |
Total long-term obligations | 2,343,825 |
Annual Payments | |
Due Prior to 2020 | 698,020 |
2020 | 764,915 |
2021 | 624,000 |
2022 | 0 |
2023 | 70,000 |
2024 | 0 |
2025 | 0 |
2026 | 200,000 |
Total long-term obligations | 2,356,935 |
Annual Amortization | |
Due Prior to 2020 | 0 |
2020 | 0 |
2021 | 13,110 |
2022 | 0 |
2023 | 0 |
2024 | 0 |
2025 | 0 |
2026 | 0 |
Total long-term obligations | $ 13,110 |
STOCKHOLDERS' DEFICIENCY (Detai
STOCKHOLDERS' DEFICIENCY (Details Narrative) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Stockholders' Equity Note [Abstract] | ||
Preferred stock, par or stated value per share | $ .01 | $ .01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
STOCK OPTION PLANS AND AGREEM_3
STOCK OPTION PLANS AND AGREEMENTS (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | |
Expected stock price volatility | 100.00% | |
Expected life of options | 2 years 9 months | |
Minimum | ||
Risk-free interest rate | 1.38% | 2.86% |
Expected life of options | 2 years 9 months | |
Maximum | ||
Risk-free interest rate | 2.55% | 2.95% |
Expected dividend yield | 0.00% | |
Expected stock price volatility | 100.00% | |
Expected life of options | 3 years 10 months 24 days |
STOCK OPTION PLANS AND AGREEM_4
STOCK OPTION PLANS AND AGREEMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Number of options outstanding, beginning | 7,920,000 | 8,031,000 |
Number of options granted | 4,203,500 | 300,000 |
Number of options expired | (275,000) | (411,000) |
Number of options forfeited | (938,000) | |
Number of options outstanding, ending | 10,910,500 | 7,920,000 |
Number of options vested or expected to vest | 10,910,500 | |
Weighted average exercise price outstanding, beginning | $ 0.09 | $ .10 |
Weighted average exercise price granted | .03 | 0.02 |
Weighted average exercise price expired | .07 | 0.26 |
Weighted average exercise price forfeited | .23 | |
Weighted average exercise price outstanding, ending | .05 | $ 0.09 |
Weighted average exercise price vested or expected to vest | $ .05 | |
Weighted-average remaining contractual term outstanding | 4 years 1 month 6 days | |
Weighted-average remaining contractual term vested or expected to vest | 4 years 1 month 6 days | |
Aggregate intrinsic value outstanding | $ 165,600 | |
Aggregate intrinsic value vested or expected to vest | $ 165,600 |
Disclosure - STOCK OPTION PLANS
Disclosure - STOCK OPTION PLANS AND AGREEMENTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Total unrecognized compensation cost | $ 0 | |
Weighted average fair value of options granted | $ .03 | $ 0.01 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Deferred: | ||
Federal | $ 49,000 | $ 158,000 |
State | 6,000 | 170,000 |
Deferred income tax expense (benefit) | 55,000 | 328,000 |
Change in valuation allowance | (55,000) | (328,000) |
Income tax expense (benefit) | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets (liabilities): | ||
Net operating loss carryforwards | $ 1,650,000 | $ 1,707,000 |
Defined benefit pension liability | 60,000 | 60,000 |
Operating lease ROU | (48,000) | 0 |
Operating lease liability | 48,000 | 0 |
Reserves and accrued expenses payable | 233,000 | 231,000 |
Gross deferred tax asset | 1,943,000 | 1,998,000 |
Deferred tax asset valuation allowance | (1,943,000) | (1,998,000) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Statutory U.S. federal tax rate | 21.00% | 21.00% |
Change in valuation allowance | (115.60%) | (886.40%) |
Net operating loss carryforward expiration | 71.50% | 315.00% |
State income taxes | 12.80% | 458.40% |
Expired stock-based compensation | 3.10% | 7.60% |
Note receivable reserve | 0.00% | 77.70% |
Other permanent non-deductible items | 7.20% | 6.70% |
Effective income tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets, valuation allowance | $ 1,943,000 | $ 1,998,000 |
Federal | ||
Operating loss carryforwards | 7,300,000 | 7,600,000 |
State | ||
Operating loss carryforwards | $ 3,200,000 | $ 3,400,000 |
EMPLOYEE RETIREMENT PLANS (Deta
EMPLOYEE RETIREMENT PLANS (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Retirement Benefits [Abstract] | ||
Defined contribution plan, accrued liability | $ 254,348 | $ 244,423 |
LEASE (Details)
LEASE (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Right of use asset - lease, net | $ 195,441 | $ 0 |
Operating lease liability - short-term | 74,373 | 0 |
Operating lease liability - long-term | 122,605 | $ 0 |
Total operating lease liability | $ 196,978 | |
Discount rate - operating lease | 6.00% |
RELATED PARTY ACCRUED INTERES_2
RELATED PARTY ACCRUED INTEREST PAYABLE (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Related Party Transactions [Abstract] | ||
Accrued interest payable, related parties, current | $ 157,067 | $ 148,703 |