Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Dec. 31, 2016 | Feb. 06, 2017 | |
Document And Entity Information Abstract | ||
Entity Registrant Name | E DIGITAL CORP | |
Entity Central Index Key | 886,328 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
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 | 293,678,330 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Dec. 31, 2016 | Mar. 31, 2016 |
Current | ||
Cash and cash equivalents | $ 232,048 | $ 701,481 |
Accounts receivable, net | 68,000 | 0 |
Deposits and prepaid expenses | 42,142 | 31,189 |
Total current assets | 342,190 | 732,670 |
Property, equipment and intangibles, net of accumulated depreciation and amortization of $114,151 and $128,950, respectively | 20,114 | 26,772 |
Total assets | 362,304 | 759,442 |
Current | ||
Accounts payable, trade | 59,260 | 120,744 |
Accrued and other liabilities | 76,256 | 109,072 |
Total current liabilities | 135,516 | 229,816 |
Commitments and Contingencies (Note 8) | ||
Stockholders' equity | ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized None issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, authorized 350,000,000, 293,678,330 issued and outstanding each period | 293,678 | 293,678 |
Additional paid-in capital | 83,055,470 | 83,018,638 |
Accumulated deficit | (83,122,360) | (82,782,690) |
Total stockholders' equity | 226,788 | 529,626 |
Total liabilities and stockholders' equity | $ 362,304 | $ 759,442 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Dec. 31, 2016 | Mar. 31, 2016 |
ASSETS | ||
Accumulated depreciation | $ 114,151 | $ 128,950 |
Stockholders' equity | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 293,678,330 | 293,678,330 |
Common stock, shares outstanding | 293,678,330 | 293,678,330 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues: | ||||
Products and services | $ 0 | $ 0 | $ 0 | $ 16,031 |
Patent licensing | 151,000 | 0 | 744,366 | 693,500 |
Total Revenues | 151,000 | 0 | 744,366 | 709,531 |
Cost of revenues: | ||||
Products and services | 0 | 0 | 0 | 8,256 |
Patent licensing and litigation costs | 65,000 | 112,500 | 282,500 | 337,500 |
Contingent legal fees expenses and recaptures | (263,552) | 5,261 | (41,050) | 292,156 |
Contingent royalties | 1,139 | 0 | 16,164 | 0 |
Selling and administrative | 189,561 | 176,366 | 570,064 | 657,549 |
Research and related expenditures | 85,487 | 70,542 | 256,358 | 253,396 |
Total operating costs and expenses | 77,635 | 364,669 | 1,084,036 | 1,548,857 |
Income (loss) before other income and provision for income taxes | 73,365 | (364,669) | (339,670) | (839,326) |
Other income: | ||||
Other income | 0 | 800 | 0 | 800 |
Total other income | 0 | 800 | 0 | 800 |
Income (loss) before provision for income taxes | 73,365 | (363,869) | (339,670) | (838,526) |
Income tax benefit (expense) | 0 | 0 | 0 | 0 |
Net income (loss) for the period | $ 73,365 | $ (363,869) | $ (339,670) | $ (838,526) |
Income (loss) per common share - basic and diluted | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted average common shares outstanding - Basic and Diluted | 293,678,330 | 293,678,330 | 293,678,330 | 293,564,512 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
OPERATING ACTIVITIES | ||
Net loss for period | $ (339,670) | $ (838,526) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 9,610 | 3,050 |
Stock-based compensation | 36,832 | 67,961 |
Changes in assets and liabilities: | ||
Accounts receivable | (68,000) | 10,756 |
Deposits and prepaid expenses | (10,953) | 1,509 |
Accounts payable, trade | (61,484) | (38,389) |
Accrued and other liabilities | (32,816) | (57,629) |
Cash used in operating activities | (466,481) | (851,268) |
INVESTING ACTIVITIES | ||
Purchase of equipment and intangibles | (2,952) | (25,157) |
Cash used in investing activities | (2,952) | (25,157) |
FINANCING ACTIVITIES | ||
Proceeds from sale of common stock | 0 | 6,600 |
Cash provided by financing activities | 0 | 6,600 |
Net decrease in cash and cash equivalents | (469,433) | (869,825) |
Cash and cash equivalents, beginning of period | 701,481 | 1,952,981 |
Cash and cash equivalents, end of period | $ 232,048 | $ 1,083,156 |
1. NATURE OF OPERATIONS AND BAS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION | 9 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS AND BASIS OF PRESENTATION | e.Digital Corporation is a holding company incorporated under the laws of Delaware that operates through a wholly-owned California subsidiary of the same name. The Company is developing and marketing an intellectual property portfolio consisting of context and interpersonal awareness systems (“Nunchi®” technology), advanced data security technologies (“microSignet™” technology), secure communication technologies (“Synap™” technology) and other technologies. Unaudited Interim Financial Statements These unaudited condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These interim condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments considered necessary for a fair statement of the Company's financial position at December 31, 2016, and the results of its operations and cash flows for the periods presented, consisting only of normal and recurring adjustments. All significant intercompany transactions have been eliminated in consolidation. Operating results for the nine months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2017. For further information, refer to the Company's consolidated financial statements and footnotes thereto for the year ended March 31, 2016 filed on Form 10-K. Going Concern/ Liquidity/Correction of Error The Company has incurred significant losses and negative cash flow from operations and has an accumulated deficit of $83,122,360 at December 31, 2016. Other than cash on hand, the Company has no other sources of financing currently available as of December 31, 2016. The Company may incur additional losses in the future until licensing or other revenues are sufficient to sustain continued profitability. Until the Company can demonstrate sustained profitability, its ability to continue as a going concern is in doubt and may be dependent upon obtaining additional financing in the future. There is no assurance that the Company will be successful in generating or raising funds, if necessary, to sustain its operations for twelve months or beyond. Should the Company be unable to generate funds or obtain required financing, it may have to curtail operations, which may have a material adverse effect on its financial position and results of operations. Uncertainty as to the outcome of these factors raises substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not give effect to any adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements. The Company has not identified any trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in a material increase or decrease in liquidity. The termination of eVU operations in the second quarter of fiscal 2016 and the loss of eVU revenues did not have a material impact on liquidity, results of operations or financial condition of the Company. During the three months ended December 31, 2016 the Company determined that it had overstated accounts payable related to contingent legal fees expenses and recaptures. The Company assessed the materiality of this error on previously issued financial statements in accordance with the ASC 250, Presentation of Financial Statements Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
2. RECENT ACCOUNTING PRONOUNCEM
2. RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Dec. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU 2016-02, Leases In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation Compensation — Stock Compensation. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments The Company is currently evaluating the impact that ASU 2016-15 will have on its consolidated financial statements. Other Accounting Standards Updates not effective until after December 31, 2016 are not expected to have a material effect on the Company’s financial position or results of operations. |
3. LOSS PER SHARE
3. LOSS PER SHARE | 9 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
LOSS PER SHARE | Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities consist of stock options. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. At December 31, 2016 and 2015, stock options exercisable into 5,000,000 and 4,500,000 shares of common stock were outstanding, respectively. These securities were not included in the computation of diluted loss per share because they had no effect or were antidilutive, but they could potentially dilute earnings per share in future periods. There was no difference in basic and diluted loss per share or basic and diluted weighted average shares outstanding for the periods presented. |
4. STOCK-BASED COMPENSATION COS
4. STOCK-BASED COMPENSATION COSTS | 9 Months Ended |
Dec. 31, 2016 | |
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | |
STOCK-BASED COMPENSATION COSTS | The Company accounts for stock-based compensation under the provisions of ASC 718, Share-Based Payment Equity-Based Payments to Non-Employees. Three Months Ended Nine Months Ended December 31, December 31, 2016 2015 2016 2015 $ $ $ $ Research and development – 2,782 5,534 13,270 Selling and administrative 5,085 4,358 31,298 54,691 Total stock-based compensation expense 5,085 7,140 36,832 67,961 As of December 31, 2016 total estimated compensation cost of stock options granted but not yet vested was $14,517 and is expected to be recognized over the weighted average period of 1.3 years. The following table sets forth the weighted-average key assumptions and fair value results for stock options granted during the nine-month period ended December 31, 2016 (annualized percentages). No options were granted during the nine months ended December 31, 2015. December 31, 2016 Volatility 107% Risk-free interest rate 0.90% Forfeiture rate 0.0% Dividend yield 0.0% Expected life in years 3.0 Weighted-average fair value of options granted $0.046 The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. Expected volatility is based on the historical volatility of the common stock over the period commensurate with the expected life of the options. The Company has a small number of option grants and limited exercise history and accordingly has for all new option grants applied the simplified method prescribed by SEC Staff Accounting Bulletin 110, Share-Based Payment: Certain Assumptions Used in Valuation Methods - Expected Term See Note 5 for further information on outstanding stock options. |
5. STOCKHOLDERS' EQUITY
5. STOCKHOLDERS' EQUITY | 9 Months Ended |
Dec. 31, 2016 | |
Stockholders' equity | |
STOCKHOLDERS' EQUITY | The following table summarizes stockholders’ equity transactions during the nine-month period ended December 31, 2016: Common stock Additional Accumulated Total stockholders' Shares Amount capital deficit equity $ $ $ $ Balance, April 1, 2016 293,678,330 293,678 83,018,638 (82,782,690 ) 529,626 Stock-based compensation – – 36,832 – 36,832 Loss for the period – – – (339,670 ) (339,670 ) Balance, December 31 , 2016 293,678,330 293,678 83,055,470 (83,122,360 ) 226,788 Options The following table summarizes stock option activity for the period: Weighted average Aggregate Shares exercise price Intrinsic Value # $ $ Outstanding April 1, 2016 4,500,000 0.0799 Granted 500,000 0.071 Exercised – – Canceled/expired – – Outstanding December 31, 2016 5,000,000 0.079 $ – Exercisable at December 31, 2016 4,625,000 0.0797 $ – (1) Options outstanding are exercisable at prices ranging from $0.055 to $0.11 and expire over the period from 2018 to 2020. (2) Aggregate intrinsic value is based on the closing price of our common stock on December 31, 2016 of $0.040 and all options outstanding were not in-the-money. Since the Company has a net operating loss carryforward as of December 31, 2016, no excess tax benefit for the tax deductions related to stock-based awards was recognized for the nine months ended December 31, 2016. |
6. FAIR VALUE MEASUREMENTS
6. FAIR VALUE MEASUREMENTS | 9 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | Cash and cash equivalents are measured at fair value in the Company’s consolidated financial statements. Accounts receivable are financial assets with carrying values that approximate fair value due to the short-term nature of these assets. Accounts payable, and accrued and other liabilities are financial liabilities with carrying values that approximate fair value due to the short-term nature of these liabilities. Effective April 1, 2008 the Company adopted and follows ASC 820, Fair Value Measurements and Disclosures The Company’s cash and cash equivalents are valued using unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs under ASC 820). |
7. SEGMENT INFORMATION
7. SEGMENT INFORMATION | 9 Months Ended |
Dec. 31, 2016 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
SEGMENT INFORMATION | Through September 30, 2015, the Company had two operating segments: (1) patent licensing and (2) products and services. Patent licensing consists of intellectual property revenues from the Company’s patent portfolio. Products and services consisted of sales of the Company’s eVU products and related services. The Company ceased providing eVU services at September 30, 2015, effectively ending this segment’s operations. Reportable segment information for the three and nine months ended December 31, 2016 and 2015 is as follows: For the three months ended For the nine months ended 2016 2015 2016 2015 $ $ $ $ SEGMENT REVENUES: Products and services – – – 16,031 Patent licensing 151,000 – 744,366 693,500 Total revenue 151,000 – 744,366 709,531 SEGMENT COST OF REVENUES: Products and services – – – 8,256 Patent licensing and litigation costs 65,000 112,500 282,500 337,500 Contingent legal fees expenses and recaptures (263,552 ) 5,261 (41,050 ) 292,156 Contingent royalties 1,139 – 16,164 – Total cost of revenues (197,413 ) 117,761 257,614 637,912 RECONCILIATION: Segment income (loss) before corporate costs 348,413 (117,761 ) 486,752 71,619 Other corporate operating costs 275,048 246,908 826,422 910,945 Operating income (loss) before other income and provision for income taxes 73,365 (364,669 ) (339,670 ) (839,326 ) The Company did not have significant assets employed in the product and services segment during the periods and does not track capital expenditures or assets by reportable segment. Consequently it is not practicable to show this information. Revenue by geographic region is determined based on the location of the Company’s direct customers or distributors for product sales and services. Patent license revenue is considered United States revenue as payments are for licenses for United States operations irrespective of the location of the licensee’s home domicile. For the three months ended For the nine months ended December 31, December 31, 2016 2015 2016 2015 $ $ $ $ United States 151,000 – 744,366 693,500 International – – – 16,031 Total revenue 151,000 – 744,366 709,531 Revenues from three licensees comprised 67%, 14% and 12% of revenue for the nine months ended December 31, 2016, with no other licensee or customer accounting for more than 10% of revenues. Revenues from three licensees comprised 25%, 21% and 14% of revenue for the nine months ended December 31, 2015, with no other licensee accounting for more than 10% of revenues. Accounts receivable from one licensee comprised 100% of net accounts receivable at December 31, 2016. Accounts receivable from one licensee comprised 100% of net accounts receivable at December 31, 2015. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Legal Matters Intellectual Property Litigation As of December 31, 2015, the Company had settled or dismissed all complaints with respect to its Flash-R patent portfolio. The Company commenced legal action with regards to its Nunchi portfolio of patents in July 2014 and currently has two active complaints in the U.S. District Court for the Northern District of California and four in the U.S. District Court for the Southern District of California. The Company entered into two new Nunchi license agreements during the third quarter of fiscal 2017, and during the first quarter of fiscal 2017, the Company entered into two new license agreements covering three defendants. Commitment Related to Intellectual Property Legal Services In September 2012, the Company engaged Handal and Associates (“Handal”) to provide IP legal services in connection with licensing and prosecuting claims of infringement of the Company’s patent portfolio. From September 2012 through August 2016, pursuant to a partial contingent fee arrangement, the Company paid a monthly retainer fee of $30,000 to Handal creditable against future contingency recoveries and a fee ranging from 33% to 40% of license fees. A new agreement, which supersedes and replaces all previous agreements, was executed effective September 1, 2016, reducing the monthly retainer fee to $22,500 so long as Handal is simultaneously litigating ten or fewer cases. Parties agreed to meet and discuss an increase in the amount of the monthly retainer should the number of cases exceed ten. Monthly retainers paid are creditable against future contingency recoveries. The Company has agreed to reimburse Handal for pre-approved expenditures advanced on behalf of the Company and to pay Handal a fee of 40% of any net license fee or settlement. Commitment Related to Intellectual Property Royalties The Company is obligated for inventor royalties of 4% of net Nunchi license revenues for the term of related patents, currently 2030. Facility Lease In January 2012, the Company entered into a sixty-two month facility lease for its corporate office location, commencing May 1, 2012, for approximately 3,253 square feet at 16870 West Bernardo Drive, Suite 120, San Diego, California. The aggregate monthly payment is $7,157 excluding utilities and costs. Future minimum lease commitments at December 31, 2016 total $42,940. The Company recognizes rent expense by the straight-line method over the lease term. As of December 31, 2016, deferred rent totaled $7,319. The Company is negotiating with the landlord an early exit from this lease. In December 2016, the Company entered into a twelve-month sub lease agreement for an executive suite in the same building as its corporate office location, commencing January 2, 2017. The monthly payment is $1,100 excluding utilities and costs. Future minimum lease commitments at December 31, 2016 total $13,156. Concentration of Credit Risk and Sources of Supply Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalent accounts with Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Certain of the Company’s accounts are each insured up to $250,000 by the FDIC. The Company had exposure in excess of FDIC insured limits of $17,269 at December 31, 2016. The Company has not experienced any losses in such accounts. The Company does not believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. The Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company has not experienced any significant losses on its cash equivalents. Concentrations of credit risk with respect to trade accounts receivable are limited due to the number and nature of customers comprising the Company’s customer base and their geographic dispersion. The Company has not incurred any significant credit related losses. Guarantees and Indemnifications The Company enters into standard indemnification agreements in the ordinary course of business. Some of the Company’s product sales and services agreements include a limited indemnification provision for claims from third parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASC 450, Contingencies Employee Benefit – 401K Plan In September 2012, the Company adopted a defined contribution plan (401(k)) covering its employees. Matching contributions are made on behalf of all participants, according to the Safe Harbor provision. The Company matches 100% (dollar for dollar) on deferrals of up to 4% of employee compensation deferred. During the nine months ended December 31, 2016, the Company made matching contributions totaling $7,343. |
9. INCOME TAXES
9. INCOME TAXES | 9 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | There is no provision for income taxes for the nine months ended December 31, 2016 and 2015 as the Company currently estimates its effective tax rate to be zero due to uncertainty of income in future interim quarters of the current year and due to net operating loss carryforwards. At December 31, 2016 and 2015, the Company had deferred tax assets associated with federal net operating losses (“NOLs”), related state NOLs, foreign tax credits and certain Federal and California research and development tax credits, but recorded a corresponding full valuation allowance as it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. At December 31, 2016, the Company has no liabilities for uncertain tax positions. |
1. NATURE OF OPERATIONS AND B15
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Unaudited Interim Financial Statements | Unaudited Interim Financial Statements These unaudited condensed consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These interim condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments considered necessary for a fair statement of the Company's financial position at December 31, 2016, and the results of its operations and cash flows for the periods presented, consisting only of normal and recurring adjustments. All significant intercompany transactions have been eliminated in consolidation. Operating results for the nine months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2017. For further information, refer to the Company's consolidated financial statements and footnotes thereto for the year ended March 31, 2016 filed on Form 10-K. |
Going Concern/Liquidity/Correction of Error | Going Concern/ Liquidity/Correction of Error The Company has incurred significant losses and negative cash flow from operations and has an accumulated deficit of $83,122,360 at December 31, 2016. Other than cash on hand, the Company has no other sources of financing currently available as of December 31, 2016. The Company may incur additional losses in the future until licensing or other revenues are sufficient to sustain continued profitability. Until the Company can demonstrate sustained profitability, its ability to continue as a going concern is in doubt and may be dependent upon obtaining additional financing in the future. There is no assurance that the Company will be successful in generating or raising funds, if necessary, to sustain its operations for twelve months or beyond. Should the Company be unable to generate funds or obtain required financing, it may have to curtail operations, which may have a material adverse effect on its financial position and results of operations. Uncertainty as to the outcome of these factors raises substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not give effect to any adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements. The Company has not identified any trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in a material increase or decrease in liquidity. The termination of eVU operations in the second quarter of fiscal 2016 and the loss of eVU revenues did not have a material impact on liquidity, results of operations or financial condition of the Company. During the three months ended December 31, 2016 the Company determined that it had overstated accounts payable related to contingent legal fees expenses and recaptures. The Company assessed the materiality of this error on previously issued financial statements in accordance with the ASC 250, Presentation of Financial Statements |
Estimates | Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
4. STOCK-BASED COMPENSATION C16
4. STOCK-BASED COMPENSATION COSTS (Tables) | 9 Months Ended |
Dec. 31, 2016 | |
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | |
Stock-based compensation cost allocation table | Three Months Ended Nine Months Ended December 31, December 31, 2016 2015 2016 2015 $ $ $ $ Research and development – 2,782 5,534 13,270 Selling and administrative 5,085 4,358 31,298 54,691 Total stock-based compensation expense 5,085 7,140 36,832 67,961 |
Assumptions | December 31, 2016 Volatility 107% Risk-free interest rate 0.90% Forfeiture rate 0.0% Dividend yield 0.0% Expected life in years 3.0 Weighted-average fair value of options granted $0.046 |
5. STOCKHOLDERS' EQUITY (Tables
5. STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Dec. 31, 2016 | |
Stockholders' equity | |
Summary of stockholders' equity transactions | Common stock Additional Accumulated Total stockholders' Shares Amount capital deficit equity $ $ $ $ Balance, April 1, 2016 293,678,330 293,678 83,018,638 (82,782,690 ) 529,626 Stock-based compensation – – 36,832 – 36,832 Loss for the period – – – (339,670 ) (339,670 ) Balance, December 31 , 2016 293,678,330 293,678 83,055,470 (83,122,360 ) 226,788 |
Stock option activity table | Weighted average Aggregate Shares exercise price Intrinsic Value # $ $ Outstanding April 1, 2016 4,500,000 0.0799 Granted 500,000 0.071 Exercised – – Canceled/expired – – Outstanding December 31, 2016 5,000,000 0.079 $ – Exercisable at December 31, 2016 4,625,000 0.0797 $ – (1) Options outstanding are exercisable at prices ranging from $0.055 to $0.11 and expire over the period from 2018 to 2020. (2) Aggregate intrinsic value is based on the closing price of our common stock on December 31, 2016 of $0.040 and all options outstanding were not in-the-money. |
7. SEGMENT INFORMATION (Tables)
7. SEGMENT INFORMATION (Tables) | 9 Months Ended |
Dec. 31, 2016 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Reportable segment information | For the three months ended For the nine months ended 2016 2015 2016 2015 $ $ $ $ SEGMENT REVENUES: Products and services – – – 16,031 Patent licensing 151,000 – 744,366 693,500 Total revenue 151,000 – 744,366 709,531 SEGMENT COST OF REVENUES: Products and services – – – 8,256 Patent licensing and litigation costs 65,000 112,500 282,500 337,500 Contingent legal fees expenses and recaptures (263,552 ) 5,261 (41,050 ) 292,156 Contingent royalties 1,139 – 16,164 – Total cost of revenues (197,413 ) 117,761 257,614 637,912 RECONCILIATION: Segment income (loss) before corporate costs 348,413 (117,761 ) 486,752 71,619 Other corporate operating costs 275,048 246,908 826,422 910,945 Operating income (loss) before other income and provision for income taxes 73,365 (364,669 ) (339,670 ) (839,326 ) |
Revenue by geographic region | For the three months ended For the nine months ended December 31, December 31, 2016 2015 2016 2015 $ $ $ $ United States 151,000 – 744,366 693,500 International – – – 16,031 Total revenue 151,000 – 744,366 709,531 |
1. NATURE OF OPERATIONS AND B19
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2016 | |
Accumulated deficit | $ (83,122,360) | $ (83,122,360) | $ (82,782,690) | ||
Decrease in accounts payable | (61,484) | $ (38,389) | |||
Contingent legal fees | $ (263,552) | $ 5,261 | (41,050) | $ 292,156 | |
Contingent Legal Fees Expenses and Recaptures [Member] | |||||
Decrease in accounts payable | (265,139) | ||||
Contingent legal fees | $ (265,139) |
3. LOSS PER SHARE (Details Narr
3. LOSS PER SHARE (Details Narrative) - shares | 9 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Earnings Per Share [Abstract] | ||
Potentially dilutive securities outstanding at period end excluded from diluted computation as they were antidilutive | 5,000,000 | 4,500,000 |
4. STOCK-BASED COMPENSATION C21
4. STOCK-BASED COMPENSATION COSTS (Details - Stock-based Compensation) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Total stock-based compensation expense | $ 5,085 | $ 7,140 | $ 36,832 | $ 67,961 |
Research and Development Expense [Member] | ||||
Total stock-based compensation expense | 0 | 2,782 | 5,534 | 13,270 |
Selling and Administrative Expenses [Member] | ||||
Total stock-based compensation expense | $ 5,085 | $ 4,358 | $ 31,298 | $ 54,691 |
4. STOCK-BASED COMPENSATION C22
4. STOCK-BASED COMPENSATION COSTS (Details - Assumptions) | 9 Months Ended |
Dec. 31, 2016$ / shares | |
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | |
Volatility | 107.00% |
Risk-free interest rate | 0.90% |
Forfeiture rate | 0.00% |
Dividend yield | 0.00% |
Expected life in years | 3 years |
Weighted-average fair value of options granted | $ .046 |
4. STOCK-BASED COMPENSATION C23
4. STOCK-BASED COMPENSATION COSTS (Details Narrative) | 9 Months Ended |
Dec. 31, 2016USD ($) | |
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract] | |
Compensation cost of options granted but not yet vested | $ 14,517 |
Nonvested weighted average period | 1 year 3 months 18 days |
5. STOCKHOLDERS EQUITY (Details
5. STOCKHOLDERS EQUITY (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2016 | Dec. 31, 2016 | |
Common Stock | ||
Beginning balance, shares | 293,678,330 | |
Beginning balance, value | $ 293,678 | |
Ending balance, shares | 293,678,330 | 293,678,330 |
Ending balance, value | $ 293,678 | $ 293,678 |
Additional Paid-In Capital | ||
Beginning balance, value | 83,018,638 | |
Stock-based compensation | 36,832 | |
Ending balance, value | 83,055,470 | 83,055,470 |
Accumulated Deficit | ||
Beginning balance, value | (82,782,690) | |
Loss for the period | (339,670) | |
Ending balance, value | (83,122,360) | (83,122,360) |
Beginning balance, value | 529,626 | |
Stock-based compensation | 36,832 | |
Loss for the period | 73,365 | (339,670) |
Ending balance, value | $ 226,788 | $ 226,788 |
5. STOCKHOLDERS' EQUITY (Detail
5. STOCKHOLDERS' EQUITY (Details-Stock Option Activity) | 9 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Shares | |
Options Outstanding, beginning balance | shares | 4,500,000 |
Granted | shares | 500,000 |
Exercised | shares | 0 |
Canceled/expired | shares | 0 |
Outstanding, ending balance | shares | 5,000,000 |
Exercisable | shares | 4,625,000 |
Weighted average exercise price | |
Options Outstanding, beginning balance | $ / shares | $ .0799 |
Granted | $ / shares | .071 |
Exercised | $ / shares | |
Canceled/expired | $ / shares | |
Outstanding, ending balance | $ / shares | .079 |
Exercisable | $ / shares | $ .0797 |
Aggregate Intrinsic Value | |
Outstanding, ending balance | $ | $ 0 |
Exercisable | $ | $ 0 |
5. STOCKHOLDERS' EQUITY (Deta26
5. STOCKHOLDERS' EQUITY (Details Narrative) | 9 Months Ended |
Dec. 31, 2016$ / shares | |
Stockholders' equity | |
Options outstanding exercisable at prices range Minimum | $ .055 |
Options outstanding exercisable at prices range Maximum | $ 0.11 |
Weighted average contractual life of options exercisable | 2 years |
Aggregate intrinsic value per share | $ .040 |
7. SEGMENT INFORMATION (Details
7. SEGMENT INFORMATION (Details - Segment info) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Total revenue | $ 151,000 | $ 0 | $ 744,366 | $ 709,531 |
Total cost of revenues | (197,413) | 117,761 | 257,614 | 637,912 |
Segment income (loss) before corporate costs | 348,413 | (117,761) | 486,752 | 71,619 |
Other corporate operating costs | 275,048 | 246,908 | 826,422 | 910,945 |
Operating income (loss) before other income and provision for income taxes | 73,365 | (364,669) | (339,670) | (839,326) |
Products And Services [Member] | ||||
Total revenue | 0 | 0 | 0 | 16,031 |
Total cost of revenues | 0 | 0 | 0 | 8,256 |
Patent Licensing [Member] | ||||
Total revenue | 151,000 | 0 | 744,366 | 693,500 |
Patent licensing and litigation costs [Member] | ||||
Total cost of revenues | 65,000 | 112,500 | 282,500 | 337,500 |
Contingent Legal Fees Expenses and Recaptures [Member] | ||||
Total cost of revenues | (263,552) | 5,261 | (41,050) | 292,156 |
Contingent Royalties [Member] | ||||
Total cost of revenues | $ 1,139 | $ 0 | $ 16,164 | $ 0 |
7. SEGMENT INFORMATION (Detai28
7. SEGMENT INFORMATION (Details - Revenue by Geographic Region) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Total revenue | $ 151,000 | $ 0 | $ 744,366 | $ 709,531 |
UNITED STATES [Member] | ||||
Total revenue | 151,000 | 0 | 744,366 | 693,500 |
International [Member] | ||||
Total revenue | $ 0 | $ 0 | $ 0 | $ 16,031 |
7. SEGMENT INFORMATION (Detai29
7. SEGMENT INFORMATION (Details Narrative) | 9 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue [Member] | Customer 1 [Member] | ||
Concentration percentage | 67.00% | 25.00% |
Revenue [Member] | Customer 2 [Member] | ||
Concentration percentage | 14.00% | 21.00% |
Revenue [Member] | Customer 3 [Member] | ||
Concentration percentage | 12.00% | 14.00% |
Accounts Receivable [Member] | One Licensee [Member] | ||
Concentration percentage | 100.00% | 100.00% |
8. COMMITMENTS AND CONTINGENC30
8. COMMITMENTS AND CONTINGENCIES (Details Narrative) | 9 Months Ended |
Dec. 31, 2016USD ($) | |
Monthly retainer fee against future contingency recoveries | $ 22,500 |
Settlement percentage related to patent enforcement matters | 40% |
Inventor royalty percentage fee | 4.00% |
Cash in excess of FDIC insured limits | $ 17,269 |
Company matching contributions to 401K Plan | 7,343 |
Facility Lease [Member] | |
Future lease commitments | 42,940 |
Deferred rent | 7,319 |
Executive Suite [Member] | |
Future lease commitments | $ 13,156 |
9. INCOME TAXES (Details Narrat
9. INCOME TAXES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 0 | $ 0 | $ 0 | $ 0 |
Effective tax rate | 0.00% | |||
Liabilities for uncertain tax positions | $ 0 | $ 0 |