☒
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
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Nevada
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65-0783722
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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18851 NE 29th
Avenue, Suite 700
Aventura,
FL 33180
Telephone:
(305)-560-5355
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(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive
offices)
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
(Do not check if a smaller reporting
company)
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☐
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Smaller reporting company
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☒
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Page
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PART
I: FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
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1
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1
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2
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3
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4
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18
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30
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30
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PART
II. OTHER INFORMATION
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31
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31
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31
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31
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31
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31
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31
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32
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September
30,
2016
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December
31,
2015
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ASSETS
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(unaudited)
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Current
assets:
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Cash
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$118,248
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$963,329
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Accounts
receivable, net
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144,857
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116,718
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Inventory
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350,719
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251,518
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Unbilled
revenue
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48,347
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65,762
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Prepaid
expenses - current portion
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162,500
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191,677
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Other
current assets
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45,253
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43,345
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Total
current assets
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869,925
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1,632,349
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Property
and equipment, net
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2,067,698
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2,218,693
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Intangible
assets, net
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256,250
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275,000
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Prepaid
expenses - long term portion
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39,178
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189,968
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Total
assets
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$3,233,051
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$4,316,010
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable and accrued liabilities
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$719,053
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$610,232
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Deferred
revenue
|
2,724
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16,661
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Related
party payable
|
131,857
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74,051
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Derivative
liabilities – current portion
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1,540
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311,373
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Convertible
note payable – current portion, net of unamortized
discount
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--
|
2,486
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Liabilities
from discontinued operations
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112,397
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112,397
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Total
current liabilities
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967,571
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1,127,200
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Derivative
liabilities – long term portion
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--
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307,018
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Total
Liabilities
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967,571
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1,434,218
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Stockholders'
Equity:
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Preferred
Stock, $0.0001 par value; 50,000,000 shares authorized
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Series
A ($0.0001 par value; 20,000 shares authorized, and no shares
issued and outstanding as of September 30, 2016 and December 31,
2015, respectively)
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--
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--
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Series
B ($0.0001 par value; 30,000 shares authorized, 6,667 and 6,667
shares issued and outstanding as of September 30, 2016 and December
31, 2015, respectively)
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1
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1
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Series
C ($0.0001 par value; 4,000,000 shares authorized,
3,090,365 and 3,337,442 shares issued and outstanding as of
September 30, 2016 and December 31, 2015,
respectively)
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309
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334
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Series
D ($0.0001 par value; 5,000,000 shares authorized, 3,613,984 and
4,673,010 shares issued and outstanding as of September 30, 2016
and December 31, 2015, respectively)
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361
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467
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Series
E ($0.0001 par value; 8,746,000 shares authorized, 8,370,127 and
8,621,589 shares issued and outstanding as of September 30, 2016
and December 31, 2015, respectively)
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837
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862
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Series F ($0.0001 par value; 1,100,000 shares authorized,
1,099,998 issuedand outstanding as of
September 30, 2016 and December 31, 2015,
respectively)
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110
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110
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Series G ($0.0001 par value;
10,090,000 shares authorized, 10,083,351 issuedand outstanding as of September 30, 2016 and
December 31, 2015, respectively)
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1,008
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--
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Common
Shares, $0.0001 par value; 750,000,000 shares authorized,
46,004,604 and 19,252,082 outstanding as of September 30, 2016 and
December 31, 2015, respectively
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4,600
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1,925
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Additional
paid-in capital
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5,716,950
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4,901,839
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Accumulated
(deficit)
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(3,4 63,946)
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(2,011,483)
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Accumulated
other comprehensive income (loss)
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5,250
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(12,263)
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Total
stockholder’s equity
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2,265,480
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2,881,792
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Total
liabilities and stockholders' equity
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$3,233,051
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$4,316,010
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Three
Months
Ended
September
30,
2016
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Three
Months
Ended
September
30,
2015
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Nine
Months
Ended
September
30,
2016
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Nine
Months
Ended
September
30,
2015
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Net
sales
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$1,299,373
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$982,775
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$3,783,230
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$2,955,453
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Cost
of sales
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1,003,026
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697,862
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2,842,986
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2,130,271
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Gross
profit
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296,347
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284,913
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940,244
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825,182
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Operating
expenses:
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Selling
and general administrative
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182,276
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(27,638)
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549,526
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429,991
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Salaries,
wages and payroll taxes
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158,720
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338,533
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503,556
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479,251
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Stock
based compensation
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-
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-
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-
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149,999
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Professional
fees
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192,834
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151,603
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881,318
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409,605
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Depreciation
and amortization
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70,219
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118,931
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216,375
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293,226
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Total
operating expenses
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604,049
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581,428
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2,150,776
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1,762,072
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Loss
before other expenses and income taxes
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(307,702)
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(296,515)
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(1,210,532)
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(936,890)
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Other
(income) expense
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Change
in fair value of derivative instruments, net
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(944)
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(180)
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(425,790)
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(342)
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Interest
expense
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441
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1,075
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603,427
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3,396
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Foreign
currency exchange rate variance
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31,473
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3,174
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64,295
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15,241
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Total
other expense
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30,971
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4,069
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241,933
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18,295
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Net
loss
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$(338,672)
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$(300,584)
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$(1,452,463)
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$(955,185)
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Comprehensive
Income:
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Net
loss
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(338,672)
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(300,584)
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(1,452,463)
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(955,185)
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Foreign
currency translation adjustments
|
19,888
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2,530
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17,513
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8,172
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Comprehensive
loss
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(318,785)
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(298,054)
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(1,434,951)
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(947,013)
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NET
INCOME LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
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Weighted
number of common shares outstanding - basic
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39,545,787
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11,456,612
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29,272,457
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9,711,044
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Weighted
number of common shares outstanding - diluted
|
39,545,787
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11,456,612
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29,272,457
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9,711,044
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Basic
net (loss) per share
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$(0.01)
|
$(0.03)
|
$(0.05)
|
$(0.10)
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Diluted
net (loss) per share
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$(0.01)
|
$(0.03)
|
$(0.05)
|
$(0.10)
|
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September
30,
|
September
30,
|
|
2016
|
2015
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
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|
Net
loss
|
$(1,452,463)
|
$(955,185)
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Adjustments to reconcile net loss to net cash used in operating
activities:
|
||
Change
in fair value of derivative liabilities
|
(425,790)
|
(342)
|
Depreciation
expense
|
197,625
|
53,908
|
Amortization
of intangible asset
|
18,750
|
18,750
|
Amortization
of notes payable discount
|
602,515
|
--
|
Amortization
of license fee
|
--
|
166,667
|
Stock
based compensation
|
--
|
149,999
|
Amortization
of prepaid expense in connection
|
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Amortization of prepaid expense in connection with the
issuance of common stock issued for prepaid services
|
164,608
|
53,901
|
Imputed
interest
|
912
|
3,396
|
Change
in operating assets and liabilities:
|
|
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Accounts
receivable
|
(28,139)
|
(20,361)
|
Inventory
|
(99,202)
|
(29,821)
|
Unbilled
revenue
|
17,415
|
(34,910)
|
Prepaid
expenses
|
115,359
|
--
|
Other
current assets
|
(1,909)
|
(16,710)
|
Accounts
payable and accrued liabilities
|
131,321
|
161,670
|
Deferred
revenue
|
(13,937)
|
(28,891)
|
Net
cash used in operating activities
|
(772,935)
|
(477,929)
|
|
|
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CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Cash
acquired from acquisition
|
--
|
30,934
|
Purchase
of property and equipment
|
(34,967)
|
(64,338)
|
Cash
paid per Share Exchange Agreement
|
--
|
(375,000)
|
Net
cash used in investing activities
|
(34,967)
|
(408,404)
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds
from common stock and preferred stock sales
|
--
|
1,097,500
|
Payments
of convertible notes payable
|
(100,834)
|
-
|
Proceeds
of note payable, related party, net
|
57,807
|
(67,406)
|
Net
cash (used in) provided by financing activities
|
(43,027)
|
1,030,094
|
|
|
|
Effect
of exchange rate on cash
|
5,849
|
8,172
|
|
|
|
Net
increase (decrease) in cash
|
(845,081)
|
151,934
|
Cash
beginning of period
|
963,329
|
65,982
|
Cash
end of period
|
$118,248
|
$217,826
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
Cash
paid during the period for
|
|
|
Interest
|
$--
|
$--
|
Income
tax
|
$3,898
|
$--
|
|
|
|
NON
CASH FINANCE AND INVESTING ACTIVITY
|
|
|
|
|
|
Notes
payable issued per Share Exchange Agreement
|
$--
|
$122,536
|
Common
stock issued for intellectual property
|
$--
|
$50,000
|
Common
stock issued for prepaid services
|
$100,000
|
$153,312
|
Common
stock issued for payment of accounts payable
|
$22,500
|
$--
|
Preferred
stock issued for conversion of debt
|
$650,670
|
$175,000
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
1.
|
Significant underperformance relative to expected historical or
projected future operating results;
|
2.
|
Significant changes in the manner of use of the acquired assets or
the strategy for the overall business; and
|
3.
|
Significant negative industry or economic trends.
|
|
Years
|
Office furniture and fixtures
|
4
|
Computer equipment
|
4
|
Appliques
|
10
|
Website development
|
2
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
|
Conversion Feature Derivative Liability
|
Warrant Liability
|
Total
|
Balance
at January 1, 2016
|
$614,036
|
$4,355
|
$618,391
|
Change
in fair value included in earnings
|
(422,974)
|
(2,815)
|
(425,789)
|
Net
effect on additional paid in capital
|
(191,062)
|
-
|
(191,062)
|
Balance
September 30, 2016
|
$-
|
$1,540
|
$1,540
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
|
September
30,
|
September
30,
|
|
2016
|
2015
|
Convertible
preferred stock
|
199,074,615
|
220,517,750
|
Stock
options
|
2,850,000
|
2,150,000
|
Stock
warrants
|
5,000
|
5,000
|
Total
|
201,229,615
|
222,672,750
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
Property
and equipment
|
$4,973
|
Accounts
receivable
|
34,585
|
Cash
in bank
|
30,934
|
Prepaid
expenses
|
2,219,677
|
Inventory
|
40,161
|
Intangible
asset
|
250,000
|
Current
liabilities
|
(469,643)
|
Due
to related party
|
(2,174)
|
Derivative
liability
|
(4,936)
|
Liabilities
of discontinued operations
|
(112,397)
|
Total
purchase price/assets acquired
|
$1,991,180
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
|
Number of Options
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (Years)
|
Balance
at January 1, 2016
|
2,850,000
|
$0.05
|
7.08
|
Granted
|
—
|
—
|
—
|
Exercised
|
—
|
—
|
—
|
Forfeited
|
—
|
—
|
—
|
Cancelled
|
|
—
|
—
|
Balance
outstanding and exercisable at September 30, 2016
|
2,850,000
|
$0.05
|
6.34
|
Weighted
average fair value of options granted during the
period
|
|
$0.05
|
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
|
Number of
Warrants
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
||
Balance at January 1, 2016
|
5,000
|
|
$
|
4.50
|
|
|
|
1.36
|
|
Granted
|
—
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
—
|
|
Cancelled
|
—
|
|
|
—
|
|
|
|
—
|
|
Balance outstanding at September 30, 2016
|
5,000
|
|
$
|
4.50
|
|
|
|
0.61
|
|
Warrants Outstanding
|
Warrants Exercisable
|
||||
Exercise
Price
|
Number Outstanding at
September 30, 2016
|
Weighted Average Remaining Contractual Life
|
Weighted Average Exercise Price
|
Number Exercisable at
September 30, 2016
|
Weighted Average Exercise Price
|
4.50
|
5,000
|
0.61
Years
|
4.50
|
5,000
|
4.50
|
$4.50
|
5,000
|
0.61
Years
|
$4.50
|
5,000
|
$4.50
|
2016
|
$6,250
|
2017
|
25,000
|
2018
|
25,000
|
2019
|
25,000
|
2020
and thereafter
|
125,000
|
Total
|
$206,250
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
|
September
30,
|
December
31,
|
|
2016
|
2015
|
Office
furniture and fixtures
|
$114,092
|
$95,434
|
Computer
equipment
|
25,284
|
24,766
|
Appliques
|
2,160,096
|
2,160,096
|
Website
development
|
108,706
|
92,399
|
|
|
|
Less
accumulated depreciation
|
(339,963)
|
(154,002)
|
|
|
|
Total
|
$2,067,698
|
$2,218,693
|
|
September
30,
|
December
31,
|
|
2016
|
2015
|
Finished
goods
|
$350,719
|
$251,518
|
Less
reserve for obsolete inventory
|
-
|
-
|
Total
|
$350,719
|
$251,518
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
|
September
30, 2016
|
Expected
volatility
|
221%
|
Expected
term - years
|
0.61
|
Risk-free
interest rate
|
0.77%
|
Expected
dividend yield
|
0%
|
|
September
30,
2016
|
|
September
30,
2015
|
|
|
|
|
|
|
Cygnus
Telecom
|
$368,254
|
18.2%
|
$-
|
|
DeLorme
|
$259,275
|
12.8%
|
$-
|
|
Globalstar
Europe
|
$231,323
|
11.5%
|
$-
|
|
Network
Innovations
|
$588,901
|
29.2%
|
$300,212
|
15.9%
|
ORBITAL
TRACKING CORP AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED FOOTNOTES
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
|
●
|
an obligation under a guarantee contract, although we do have
obligations under certain sales arrangements including purchase
obligations to vendors
|
●
|
a retained or contingent interest in assets transferred to the
unconsolidated entity or similar arrangement that serves as credit,
liquidity or market risk support to such entity for such
assets,
|
●
|
any obligation, including a contingent obligation, under a contract
that would be accounted for as a derivative instrument,
or
|
●
|
any obligation, including a contingent obligation, arising out of a
variable interest in an unconsolidated entity that is held by us
and material to us where such entity provides financing, liquidity,
market risk or credit risk support to, or engages in leasing,
hedging or research and development services with
us.
|
|
Years
|
Office
furniture and fixtures
|
4
|
Computer
equipment
|
4
|
Appliques
|
10
|
Website
development
|
2
|
|
Conversion
feature
Derivative
Liability
|
Warrant
liability
|
Total
|
Balance
at January 1, 2016
|
$614,036
|
$4,355
|
$618,391
|
Change
in fair value included in earnings
|
(422,974)
|
(2,815)
|
(425,789)
|
Net
effect on additional paid in capital
|
(191,062)
|
-
|
(191,062)
|
Balance
at September 30, 2016
|
$-
|
$1,540
|
$1,540
|
31.1
|
Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002*
|
31.2
|
Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002*
|
32.1
|
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
|
101.ins
|
XBRL Instance Document
|
101.sch
|
XBRL Taxonomy Schema Document
|
101.cal
|
XBRL Taxonomy Calculation Document
|
101.def
|
XBRL Taxonomy Linkbase Document
|
101.lab
|
XBRL Taxonomy Label Link base Document
|
101.pre
|
XBRL Taxonomy Presentation Link base Document
|
Dated: November 10, 2016
|
ORBITAL TRACKING CORP.
|
|
|
|
|
|
|
|
By:
|
/s/
David Phipps
|
|
|
|
David Phipps
|
|
|
|
Chief Executive Officer and Chairman
(Principal Executive Officer)
|
|
|
|
/s/
Theresa Carlise
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting
Officer)
|
|
|
a)
|
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its condensed consolidated subsidiaries, is
made known to us by others within those entities, particularly for
the period in which this quarterly report is being
prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation;
|
|
d)
|
disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial
reporting;
|
|
a)
|
all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant’s
ability to record, process, summarize and report financial data and
have identified for the registrant’s auditors any material
weaknesses in internal controls; and
|
|
b)
|
any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant’s internal controls over financial
reporting.
|
Dated: November 10, 2016
|
|
|
|
|
|
|
|
|
By:
|
/s/
David Phipps
|
|
|
|
David Phipps
|
|
|
|
Chief Executive Officer, and Chairman (Principal Executive
Officer)
|
|
|
a)
|
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its condensed consolidated subsidiaries, is
made known to us by others within those entities, particularly for
the period in which this quarterly report is being
prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation;
|
|
d)
|
disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial
reporting;
|
|
a)
|
all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant’s
ability to record, process, summarize and report financial data and
have identified for the registrant’s auditors any material
weaknesses in internal controls; and
|
|
|
b)
|
any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant’s internal controls over financial
reporting.
|
|
Dated: November 10, 2016
|
|
|
|
|
|
|
|
|
By:
|
/s/
Theresa Carlise
|
|
|
|
Theresa Carlise
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting
Officer)
|
|
|
(The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and)
|
|
(The information contained in the Report fairly presents, in all
material respects, the financial condition and results operations
of the Company.)
|
Dated: November 10, 2016
|
|
|
|
|
|
|
|
|
By:
|
/s/
David Phipps
|
|
|
|
David Phipps
|
|
|
|
Chief Executive Officer, and Chairman
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/
Theresa Carlise
|
|
|
|
Theresa Carlise
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
|
|
(Principal Financial Officer and Principal Accounting
Officer)
|
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 10, 2016 |
|
Document And Entity Information | ||
Entity Registrant Name | ORBITAL TRACKING CORP. | |
Entity Central Index Key | 0001058307 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 48,986,354 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2016 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Net sales | $ 1,299,373 | $ 982,775 | $ 3,783,230 | $ 2,955,453 |
Cost of sales | 1,003,026 | 697,862 | 2,842,986 | 2,130,271 |
Gross profit | 296,347 | 284,913 | 940,244 | 825,182 |
Operating Expenses | ||||
Selling, general and administrative | 182,276 | (27,638) | 549,526 | 429,991 |
Salaries, wages and payroll taxes | 158,720 | 338,533 | 503,556 | 479,251 |
Stock based compensation | 0 | 0 | 0 | 149,999 |
Professional fees | 192,834 | 151,603 | 881,318 | 409,605 |
Depreciation and amortization | 70,219 | 118,931 | 216,375 | 293,226 |
Total operating expenses | 604,049 | 581,428 | 2,150,776 | 1,762,072 |
Loss before other expenses and income taxes | (307,702) | (296,515) | (1,210,532) | (936,890) |
Other (income) expense | ||||
Change in fair value of derivative instruments, net | (944) | (180) | (425,790) | (342) |
Interest expense | 441 | 1,075 | 603,427 | 3,396 |
Foreign currency exchange rate variance | 31,473 | 3,174 | 64,295 | 15,241 |
Total other (income) expense | 30,971 | 4,069 | 241,933 | 18,295 |
Net loss | (338,672) | (300,584) | (1,452,463) | (955,185) |
Comprehensive Income (loss): | ||||
Net (loss) income | (338,672) | (300,584) | (1,452,463) | (955,185) |
Foreign currency translation adjustments | 19,888 | 2,530 | 17,513 | 8,172 |
Comprehensive loss | $ (318,785) | $ (298,054) | $ (1,434,951) | $ (947,013) |
NET INCOME (LOSS) ATTRIBUTABLE TO COMON STOCKHOLDERS | ||||
Weighted average number of common shares outstanding - basic | 39,545,787 | 11,456,612 | 29,272,457 | 9,711,044 |
Weighted average number of common shares outstanding - diluted | 39,545,787 | 11,456,612 | 29,272,457 | 9,711,044 |
Basic net (loss) per share | $ (0.01) | $ (0.03) | $ (0.05) | $ (0.10) |
Diluted net (loss) per share | $ (0.01) | $ (0.03) | $ (0.05) | $ (0.10) |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The consolidated financial statements as of December 31, 2015 have been audited by an independent registered public accounting firm. The accounting policies and procedures employed in the preparation of these condensed consolidated financial statements have been derived from the audited financial statements of the Company for the year ended December 31, 2015, which are contained in Form 10-K as filed with the Securities and Exchange Commission on March 30, 2016. The consolidated balance sheet as of December 31, 2015 was derived from those financial statements.
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP") and the rules and regulations of the U.S Securities and Exchange Commission for Interim Financial Information. All intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring items) necessary to present fairly the Company's financial position as of September 30, 2016, and the results of operations and cash flows for the nine months ended September 30, 2016 have been included. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year.
Description of Business
Orbital Tracking Corp. (the “Company”) was formerly Great West Resources, Inc., a Nevada corporation. The Company, through its wholly owned subsidiaries, Global Telesat Communications Limited (“GTCL”) and Orbital Satcom Corp. (“Orbital Satcom”) is a provider of satellite based hardware, airtime and related services both in the United States and internationally. The Company’s principal focus is on growing the Company’s existing satellite based hardware, airtime and related services business line and developing the Company’s own tracking devices for use by retail customers worldwide.
Going Concern Considerations
The accompanying unaudited condensed consolidated financial statements are prepared assuming the Company will continue as a going concern. At September 30,2016, the Company had an accumulated deficit of approximately $3.5 million. For the nine months ended September 30, 2016, the Company incurred a net loss of approximately $1,452,463 and had cash flows used in operations in the amount of $772,935. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon obtaining additional capital and financing. Management intends to attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect.
The condensed consolidated financial statements do not include any adjustments relating to classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Use of Estimates
In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate stock-based compensation, derivative liabilities, preferred deemed dividend and common stock issued for services.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of nine months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.
Accounts receivable and allowance for doubtful accounts
The Company has a policy of reserving for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2016, and December 31, 2015, there is an allowance for doubtful accounts of $11,229 and $0.
Foreign Currency Translation
The Company’s reporting currency is US Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, (Great British Pound) GTCL as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the statements of operations.
The relevant translation rates are as follows: for the three and nine months ended September 30, 2016 closing rate at 1.29820 US$: GBP, average rate at 1.31320 and 1.39353 US$: GBP, for the three and nine months ended September 30, 2015 closing rate at 1.5164 US$: GBP, average rate at 1.55048 and 1.5322 and for the year ended 2015 closing rate at 1.47373 US$: GBP.
Revenue Recognition and Unearned Revenue
The Company recognizes revenue from satellite services when earned, as services are rendered or delivered to customers. Equipment sales revenue is recognized when the equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically, the Company has not incurred significant expenses for warranties.
The Company’s customers generally purchase a combination of our products and services as part of a multiple element arrangement. The Company’s assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve significant judgment. This assessment has a significant impact on the amount and timing of revenue recognition.
Revenue is recognized when all of the following criteria have been met:
In accordance with ASC 605-25, Revenue Recognition — Multiple-Element Arrangements, based on the terms and conditions of the product arrangements, the Company believes that its products and services can be accounted for separately as its products and services have value to the Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue is allocated to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services are provided over the term of the customer contract.
Goodwill and other intangible assets
In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Factors the Company considers to be important which could trigger an impairment review include the following:
When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Property and Equipment
Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred.
The estimated useful lives of property and equipment are generally as follows:
Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods ended September 30, 2016 and December 31, 2015, respectively.
Fair value of financial instruments
The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3) from January 1, 2016 to September 30, 2016:
The Company did not identify any other assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued expenses approximate their estimated fair market value based on the short-term maturity of the instruments.
Stock Based Compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.
Income Taxes
The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.
U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain tax positions recognized during the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively.
Earnings per Common Share
Net income (loss) per common share is calculated in accordance with ASC Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. For the nine months ended September 30, 2016 and September 30, 2015, periods where the Company has a net loss, all dilutive securities are excluded.
The following are dilutive common stock equivalents during the period ended:
Related Party Transactions
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements.
|
ORBITAL TRACKING CORP AND GLOBAL TELESAT COMMUNICATIONS LIMITED SHARE EXCHANGE, REVERSE ACQUISITION AND RECAPITALIZATION |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2 - TRACKING CORP AND GLOBAL TELESAT COMMUNICATIONS LIMITED SHARE EXCHANGE, REVERSE ACQUISITION AND RECAPITALIZATION | On February 19, 2015, the Company entered into a Share Exchange Agreement with Global Telesat Communications Limited, a Private Limited Company formed under the laws of England and Wales (“GTCL”) and all of the holders of the outstanding equity of GTCL (the “GTCL Shareholders”). Upon closing of the transactions contemplated under the Exchange Agreement the GTCL Shareholders (7 members) transferred all of the issued and outstanding equity of GTCL to the OTC in exchange for (i) an aggregate of 2,540,000 shares of the common stock of the OTC and 8,746,000 shares of the newly issued Series E Convertible Preferred Stock of the OTC with each share of Series E Convertible Preferred Stock convertible into ten shares of common stock, (ii) a cash payment of $375,000 and (iii) a one-year promissory note in the amount of $122,536. Such exchange caused GTCL to become a wholly owned subsidiary of the Company.
For accounting purposes, this transaction is being accounted for as a reverse acquisition and has been treated as a recapitalization of Orbital Tracking Corp. with Global Telesat Communications Limited considered the accounting acquirer, and the financial statements of the accounting acquirer became the financial statements of the registrant. The completion of the Share Exchange resulted in a change of control. The Share Exchange was accounted for as a reverse acquisition and re-capitalization. The GTCL Shareholders obtained approximately 39% of voting control on the date of Share Exchange. GTCL was the acquirer for financial reporting purposes and the Orbital Tracking Corp. was the acquired company. The consolidated financial statements after the acquisition include the balance sheets of both companies at historical cost, the historical results of GTCL and the results of the Company from the acquisition date. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization. As part of agreement, OTC shareholders retained 5,383,172 shares of the Common Stock, 20,000 shares of series A Convertible Preferred Stock, 6,666 shares of series B Convertible Preferred Stock, 1,197,442 shares of series C Convertible Preferred Stock and 5,000,000 shares of series D Convertible Preferred Stock.
|
STOCKHOLDERS' EQUITY (DEFICIT) |
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Note 3 - STOCKHOLDERS' (DEFICIT) | Preferred Stock
As of September 30, 2016, there were 50,000,000 shares of Preferred Stock authorized.
As of September 30, 2016, there were 20,000 shares of Series A Convertible Preferred Stock authorized and -0- shares issued and outstanding, due to the conversion of 20,000 shares of Series A into 20,000 shares of common stock.
As of September 30, 2016, there were 30,000 shares of Series B Convertible Preferred Stock authorized and 6,667 shares issued and outstanding.
As of September 30, 2016, there were 4,000,000 shares of Series C Convertible Preferred Stock authorized and 3,090,365 shares issued and outstanding, due to the conversion of 147,077 shares of Series C into 1,470,770 shares of common stock.
As of September 30, 2016, there were 5,000,000 shares of Series D Convertible Preferred Stock authorized and 3,613,984 shares issued and outstanding, due to the conversion of 609,167 shares of Series D into 12,183,340 shares of common stock.
As of September 30, 2016, there were 8,746,000 shares of Series E Convertible Preferred Stock authorized and 8,370,127 shares issued and outstanding, due to the conversion of 117,020 shares of Series E into 1,170,200 shares of common stock.
As of September 30, 2016, there were 1,100,000 shares of Series F shares authorized and 1,099,998 shares issued and outstanding.
As of September 30, 2016, there were 10,090,000 shares of Series G shares authorized and 10,083,351 shares issued and outstanding, upon the conversion of convertible notes in the amount of $504,168 into 10,083,351 shares of common stock.
Common Stock
As of September 30, 2016, there were 750,000,000 shares of Common Stock authorized and 46,004,604 shares issued and outstanding.
On January 4, 2016, the Company issued an aggregate of 75,000 shares of common stock upon the conversion of 7,500 shares of Series E Preferred Stock.
On January 29, 2016, the Company issued an aggregate of 850,000 shares of common stock upon the conversion of 42,500 shares of Series D Preferred Stock.
On February 1, 2016, the Company issued an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.
On February 2, 2016, the Company issued an aggregate of 900,000 shares of common stock upon the conversion of 45,000 shares of Series D Preferred Stock.
On February 5, 2016, the Company issued an aggregate of 1,600 shares of common stock upon the conversion of 160 shares of Series E Preferred Stock.
On February 11, 2016, the Company issued an aggregate of 136,612 shares of common stock calculated by the average closing price of the Company’s common stock on its principal exchange for the 10 (ten) trading days immediately prior to the execution of the Agreement, or $100,000, to an investor relations consultant as compensation for services, which is amortized over the period of service.
On February 16, 2016, the Company issued an aggregate of 100,000 shares of common stock upon the conversion of 10,000 shares of Series E Preferred Stock.
On March 1, 2016, the Company issued an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.
On March 8, 2016, the Company issued an aggregate of 73,320 shares of common stock upon the conversion of 3,666 shares of Series D Preferred Stock.
On March 11, 2016, the Company issued an aggregate of 1,600 shares of common stock upon the conversion of 160 shares of Series E Preferred Stock.
On April 1, 2016, the Company issued an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.
On April 5, 2016, the Company issued an aggregate of 208,530 shares of common stock upon the conversion of 20,853 shares of Series C Preferred Stock.
On April 12, 2016, the Company issued an aggregate of 125,000 shares of common stock upon the conversion of 6,250 shares of Series D Preferred Stock.
On April 18, 2016, the Company issued an aggregate of 650,000 shares of common stock upon the conversion of 32,500 shares of Series D Preferred Stock.
On April 21, 2016, the Company issued an aggregate of 400,000 shares of common stock upon the conversion of 20,000 shares of Series D Preferred Stock.
On April 22, 2016, the Company issued an aggregate of 900,000 shares of common stock upon the conversion of 45,000 shares of Series D Preferred Stock.
On April 27, 2016, the Company issued an aggregate of 200,000 shares of common stock upon the conversion of 10,000 shares of Series D Preferred Stock.
On May 2, 2016, the Company issued an aggregate of 92,840 shares of common stock upon the conversion of 9,284 shares of Series E Preferred Stock.
On May 4, 2016, the Company issued an aggregate of 5,560 shares of common stock upon the conversion of 556 shares of Series E Preferred Stock.
On May 17, 2016, the Company issued an aggregate of 1,376,470 shares of common stock upon the conversion of 64,147 shares of Series C Preferred Stock and 36,750 shares of Series D Preferred Stock.
On May 18, 2016, the Company issued an aggregate of 2,420,770 shares of common stock upon the conversion of 62,077 shares of Series C Preferred Stock and 90,000 shares of Series D Preferred Stock. Also, on May 18, 2016 the Company issued an aggregate of 10,083,351 shares of Series G Preferred Stock upon the conversion of convertible notes of $504,168. Upon the conversion, additional paid in capital increased $649,662 from the decrease in convertible notes payable of $504,168, decrease in derivative liabilities of $146,502 and increase in Preferred Stock Series G of $1,008.
On May 20, 2016, the Company issued an aggregate of 760,000 shares of common stock upon the conversion of 38,000 shares of Series D Preferred Stock.
On May 23, 2016, the Company issued an aggregate of 250,000 shares of common stock upon the conversion of 12,500 shares of Series D Preferred Stock.
On May 25, 2016, the Company issued an aggregate of 950,000 shares of common stock upon the conversion of 47,500 shares of Series D Preferred Stock.
On June 1, 2016, the Company issued an aggregate of 98,400 shares of common stock upon the conversion of 9,840 shares of Series E Preferred Stock.
On June 6, 2016, the Company issued an aggregate of 1,531,020 shares of common stock upon the conversion of 76,551 shares of Series D Preferred Stock.
On June 8, 2016, the Company issued an aggregate of 1,000,000 shares of common stock upon the conversion of 50,000 shares of Series D Preferred Stock.
On June 13, 2016, the Company issued an aggregate of 500,000 shares of common stock upon the conversion of 25,000 shares of Series D Preferred Stock.
On June 30, 2016, the Company issued an aggregate of 500,000 shares of common stock upon the conversion of 50,000 shares of Series E Preferred Stock.
On July 5, 2016, the Company issued an aggregate of 1,058,400 shares of common stock upon the conversion of 48,000 shares of Series D Preferred Stock and 9,840 shares of Series E Preferred Stock.
On July 12, 2016, the Company issued an aggregate of 750,000 shares of common stock upon the conversion of 37,500 shares of Series D Preferred Stock.
On August 1, 2016, the Company issued an aggregate of 123,010 shares of common stock upon the conversion of 12,301 shares of Series E Preferred Stock.
On August 10, 2016, the Company issued an aggregate of 4,787,180 shares of common stock upon the conversion of 239,359 shares of Series D Preferred Stock.
On August 11, 2016, the Company issued an aggregate of 500,000 shares of common stock upon the conversion of 50,000 shares of Series E Preferred Stock.
On August 12, 2016, the Company issued an aggregate of 450,000 shares of common stock for payment of accounts payable.
On August 22, 2016, the Company issued an aggregate of 1,000,000 shares of common stock upon the conversion of 50,000 shares of Series D Preferred Stock.
On September 1, 2016, the Company issued an aggregate of 123,010 shares of common stock upon the conversion of 12,301 shares of Series E Preferred Stock.
On September 21, 2016, the Company issued an aggregate of 500,000 shares of common stock upon the conversion of 50,000 shares of Series E Preferred Stock.
On September 23, 2016, the Company issued an aggregate of 1,500,000 shares of common stock upon the conversion of 75,000 shares of Series D Preferred Stock.
On September 26, 2016, the Company issued an aggregate of 1,000,000 shares of common stock upon the conversion of 100,000 shares of Series C Preferred Stock.
Stock Options
2014 Equity Incentive Plan
On January 21, 2014, the Board approved the adoption of a 2014 Equity Incentive Plan (the “2014 Plan”). The purpose of the 2014 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. The 2014 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other types of stock-based awards to the Company’s employees, officers, directors and consultants. Pursuant to the terms of the 2014 Plan, either the Board or a board committee is authorized to administer the plan, including by determining which eligible participants will receive awards, the number of shares of common stock subject to the awards and the terms and conditions of such awards. Unless earlier terminated by the Board, the Plan shall terminate at the close of business on January 21, 2024. Up to 226,667 shares of common stock are issuable pursuant to awards under the 2014 Plan, as adjusted in a single adjustment for an issuance no later than sixty (60) days following the date of shareholder approval of the Plan in connection with (i) a private placement of the Company’s securities in which the Corporation receives gross proceeds of at least $1,000,000 and (ii) an acquisition of at least 50 mining leases and/or claims in the Holbrook Basin.
On February 19, 2015, the Company issued to Mr. Rector, the former Chief Executive Officer, Chief Financial Officer and director of the Company, a seven-year option to purchase 2,150,000 shares of common stock as compensation for services provided to the Company. The options have an exercise price of $0.05 per share, were fully vested on the date of grant and shall expire in February 2022. The 2,150,000 options were valued on the grant date at approximately $0.05 per option or a total of $107,500 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.05 per share (based on the sale of common stock in a private placement), volatility of 380%, expected term of 7 years, and a risk free interest rate of 1.58%. In connection with the stock option grant, the Company recorded stock based compensation for the for the year ended December 31, 2015 of $107,500.
On December 28, 2015, the Company issued Ms. Carlise, Chief Financial Officer, a ten-year option to purchase 500,000 shares of common stock as compensation for services provided to the Company. The options have an exercise price of $0.05 per share, were fully vested on the date of grant and shall expire in December 2025. The 500,000 options were valued on the grant date at approximately $1.30 per option or a total of $650,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $1.30 per share (based on the closing price of the Company’s common stock of the date of issuance), volatility of 992%, expected term of 10 years, and a risk free interest rate of 1.05%. In connection with the stock option grant, the Company recorded stock based compensation for the nine months ended September 30, 2016 and for the year ended December 31, 2015 of $0 and $650,000, respectively.
Also on December 28, 2015, the Company issued Mr. Delgado, its Director, a ten-year option to purchase 200,000 shares of common stock as compensation for services provided to the Company. The options have an exercise price of $0.05 per share, were fully vested on the date of grant and shall expire in December 2025. The 200,000 options were valued on the grant date at approximately $1.30 per option or a total of $260,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $1.30 per share (based on the closing price of the Company’s common stock of the date of issuance), volatility of 992%, expected term of 10 years, and a risk free interest rate of 1.05%. In connection with the stock option grant, the Company recorded stock based compensation for the nine months ended September 30, 2016 and for the year ended December 31, 2015 of $0 and $260,000, respectively.
Stock options outstanding at September 30, 2016 as disclosed in the table below have approximately $57,000 of intrinsic value at the end of the period.
A summary of the status of the Company’s outstanding stock options and changes during the nine months ended September 30, 2016 is as follows:
Stock Warrants
A summary of the status of the Company’s outstanding stock warrants and changes during the nine months ended September 30, 2016 is as follows:
The following table summarizes the Company’s stock warrants outstanding at September 30, 2016:
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PREPAID EXPENSES |
9 Months Ended |
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Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Note 4 - PREPAID EXPENSES | Prepaid expenses amounted to $201,678 at September 30, 2016. Prepaid expenses include prepayments in cash for professional fees, prepayments in equity instruments which are being amortized over the terms of their respective agreements. Amortization of the prepaid expense will be included in professional fees. The current portion consists primarily of costs paid for future services which will occur within a year. Prepaid expense current portion and long-term portion were $162,500 and $39,178, as of September 30, 2016. As of December 31, 2015, prepaid expense current portion and long-term portion were $191,677 and $189,968, respectively.
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INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Note 5 - INTANGIBLE ASSETS | On February 19, 2015, the Company purchased an intangible asset valued at $250,000 for 1,000,000 shares of common stock. Amortization of customer contracts will be included in general and administrative expenses. The Company began amortizing the customer contracts in January 2015. Amortization expense for the three and nine months ended September 30, 2016 was $6,250 and $18,750, respectively. Future amortization of intangible assets is as follows:
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PROPERTY AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - PROPERTY AND EQUIPMENT | Property and equipment consisted of the following:
Depreciation expense was $197,625 for the nine months ended September 30, 2016. For the nine months ended September 30, 2015 depreciation expense was $53,908. |
INVENTORIES |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Note 7 - INVENTORIES | At September 30, 2016 and December 31, 2015, inventories consisted of the following:
For the nine months ended September 30, 2016 and the year ended December 31, 2015, the Company did not make any change to reserve for obsolete inventory. |
RELATED PARTY TRANSACTIONS |
9 Months Ended |
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Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Note 8 - RELATED PARTY TRANSACTIONS |
The Company has received financing from the Company’s Chief Executive Officer. No formal repayment terms or arrangements existed prior to February 19, 2015, when as part of the Share Exchange Agreement, the Company entered into a note with David Phipps where the stockholder loans bear no interest and are due February 19, 2017. The accounts payable due to related party includes advances for inventory due to David Phipps and compensation. Total payments due to David Phipps as of September 30, 2016 and December 31, 2015 are $131,857 and $74,051, respectively.
Also, as part of the Share Exchange Agreement entered into on February 19, 2015, Mr. Phipps received a payment of $25,000 as compensation for transition services that he provided.
The Company employs two individuals who are related to Mr. Phipps, of which earned gross wages totaling $45,164 for the nine months ended September 30, 2016.
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Note 9 - COMMITMENTS AND CONTINGENCIES | Employment Agreements
On February 19, 2015, Orbital Satcom entered into an employment agreement with Mr. Phipps, whereby Mr. Phipps agreed to serve as the President of Orbital Satcom for a period of two years, subject to renewal, in consideration for an annual salary of $180,000. Additionally, under the terms of the employment agreement, Mr. Phipps shall be eligible for an annual bonus if the Company meets certain criteria, as established by the Board of Directors. Mr. Phipps remains the sole director of GTCL following the closing of the Share Exchange. Mr. Phipps and the Company entered into an Indemnification Agreement at the closing.
The Company entered into an employment agreement with Ms. Carlise on September 9, 2015. The agreement has a term of one year, and shall automatically be extended for additional terms of one year each. The agreement provides for an annual base salary of $72,000. In addition to the base salary Ms. Carlise shall be eligible to receive an annual cash bonus if the Company meets or exceeds criteria adopted by the Compensation Committee of the Board of Directors and shall be eligible for grants of awards under stock option or other equity incentive plans of the Company.
On December 28, 2015, the Company amended her employment agreement. Effective December 1, 2015, the term of Ms. Carlise’s employment was extended to December 1, 2016 from June 9, 2016, her annual salary was increased to $140,000 from $72,000 and she agreed to devote her full business time to the Company. The term of the Original Agreement, as amended by the Amendment, shall automatically extend for additional terms of one year each, unless either party gives prior written notice of non-renewal to the other party no later than 60 days prior to the expiration of the initial term or the then current renewal term, as applicable.
On February 26, 2016, the Board of Directors of Orbital Tracking Corp., a Nevada corporation (“Orbital” or the “Company”), entered into a new executive employment agreement, (Employment Agreement) with its Chief Executive Officer and President, David Phipps and terminated the original employment agreement dated February 19, 2015, at a base salary of $144,000 and £48,000 per annum, to be effective as of January 20, 2016, for a term of two years from effective date. In addition to the base salary Executive shall be entitled to receive an annual cash bonus in an amount equal to up to fifty (50%) percent of his then-current Base Salary, if the Company meets or exceeds criteria adopted by the Compensation Committee of the Board of the Company.
Litigation
From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. The Company is not currently involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and operating results. |
DERIVATIVE LIABILITIES |
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Notes to Financial Statements | ||||||||||||||||||||||||||
Note 10 - DERIVATIVE LIABILITIES | In June 2008, a FASB approved guidance related to the determination of whether a freestanding equity-linked instrument should be classified as equity or debt under the provisions of FASB ASC Topic No. 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Stock. The adoption of this requirement will affect accounting for convertible instruments and warrants with provisions that protect holders from declines in the stock price (“down-round” provisions). Warrants with such provisions are no longer recorded in equity and are reclassified as a liability.
Instruments with down-round protection are not considered indexed to a company’s own stock under ASC Topic 815, because neither the occurrence of a sale of common stock by the company at market nor the issuance of another equity-linked instrument with a lower strike price is an input to the fair value of a fixed-for-fixed option on equity shares.
In connection with the issuance of its 6% convertible debentures and related warrants, the Company has determined that the terms of the convertible warrants include down-round provisions under which the exercise price could be affected by future equity offerings. Accordingly, the warrants are accounted for as liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. On May 17, 2016, the Company entered into exchange agreements with holders of the Company's outstanding $504,168 convertible notes originally issued on December 28, 2015 pursuant to which the Notes were cancelled and the exchanging holders were issued an aggregate of 10,083,351 shares of newly designated Series G Convertible Preferred. Upon the conversion, additional paid in capital increased $649,662 from the decrease in convertible notes payable of $504,168, decrease in derivative liabilities of $146,502 and increase in Preferred Stock Series G of $1,008.
The convertible notes were accounted for as liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. The Company recorded amortization for the discount to the convertible notes of $602,515 at September 30, 2016. As of September 30, 2016 and December 31, 2015, the Company has unamortized discount balance of $0 and $602,515, respectively. The Company has recognized derivative liabilities of $0 and $614,036 at September 30, 2016 and December 31, 2015, respectively. The gain (loss) resulting from the decrease (increase) in fair value of this convertible instrument was $422,974 and ($64,035) for the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively.
The Company has recognized derivative liabilities for related warrants of $1,540 and $4,355 at September 30, 2016 and December 31, 2015, respectively. The gain resulting from the decrease in fair value of this convertible instrument was $2,815 and $580 for the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively. Weighted average term is 0.61 years.
The Company used the following assumptions for determining the fair value of the convertible instruments granted under the Black-Scholes option pricing model:
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CONCENTRATIONS |
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Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 11 - CONCENTRATIONS | Customers:
No customer accounted for 10% or more of the Company’s revenues during the nine months ended September 30, 2016 and 2015.
Suppliers:
The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the nine months ended September 30, 2016 and 2015.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Note 12 - SUBSEQUENT EVENTS | On October 26, 2016, the Company entered separate subscription agreements with accredited investors relating to the issuance and sale of $350,000, out of a maximum of $800,000, of shares of Series H convertible preferred stock at a purchase price of $4.00 per share. The initial conversion price is $0.04 per share, subject to adjustment as set forth in the Series H certificate of designation. The Company is prohibited from effecting a conversion of the Series H Preferred Stock to the extent that, because of such conversion, the investor would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series H Preferred Stock. Each Series H Preferred Stock entitles the holder to cast one vote per share of Series H Preferred Stock owned as of the record date for the determination of shareholders entitled to vote, subject to the 4.99% beneficial ownership limitation. The Company received the necessary consents as required from prior subscription agreements, Preferred Series C, Preferred Series G and Preferred Series H, as well as antidilution rights. Certain shareholders have waived their right to adjustment, equal treatment, most favored nations and other rights to which they were entitled pursuant to the Prior Offerings, including without limitation, certain rights granted to holders of our Series C Preferred Stock, Series F Preferred Stock and G Preferred Stock. The Company was required to issue 550,000 shares of its Preferred Series C, which is convertible into 5,500,000 shares of the Company’s common stock and 114,944 shares of Preferred Series I, which is convertible into 11,494,400 shares of the Company’s common stock. Preferred Series I was issued to certain holders in lieu of Preferred Series G and Preferred Series H.
On October 1, 2016, the Company issued an aggregate of 123,010 shares of common stock upon the conversion of 12,301 shares of Series E Preferred Stock.
On October 31, 2016, the Company issued an aggregate of 640,000 shares of common stock upon the conversion of 64,000 shares of Series E Preferred Stock.
On October 31, 2016, the Company issued an aggregate of 87,500 shares of Preferred Series H, upon execution of a subscription agreement for proceeds of $350,000.
On October 31, 2016, the Company issued an aggregate of 550,000 shares of Preferred Series C, and 114,944 shares of Preferred Series I, upon the execution of the subscription agreement for Preferred Series H, in accordance with their anti-dilution rights under their prior subscriptions. The Preferred Series C and Preferred Series I is convertible into 5,500,000 and 11,494,400 shares of the Company’s common stock, respectively, subject to the 4.99% beneficial ownership limitation.
On November 1, 2016, the Company issued an aggregate of 123,010 shares of common stock upon the conversion of 12,301 shares of Series E Preferred Stock.
On November 2, 2016, the Company issued an aggregate of 1,395,730 shares of common stock upon the conversion of 139,573 shares of Series E Preferred Stock.
On November 2, 2016, the Company, upon notice from the holder, rescinded and reissued 40,000 shares Series D Preferred for an aggregate of 800,000 shares of common stock.
On November 2, 2016, the Company issued an aggregate of 500,000 shares of common stock upon the conversion of 50,000 shares of Series E Preferred Stock.
On November 4, 2016, the Company issued an aggregate of 1,000,000 shares of common stock upon the conversion of 100,000 shares of Series C Preferred Stock. |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Principles of Consolidation | The unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP") and the rules and regulations of the U.S Securities and Exchange Commission for Interim Financial Information. All intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring items) necessary to present fairly the Company's financial position as of September 30, 2016, and the results of operations and cash flows for the nine months ended September 30, 2016 have been included. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year.
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Description of Business | Orbital Tracking Corp. (the “Company”) was formerly Great West Resources, Inc., a Nevada corporation. The Company, through its wholly owned subsidiaries, Global Telesat Communications Limited (“GTCL”) and Orbital Satcom Corp. (“Orbital Satcom”) is a provider of satellite based hardware, airtime and related services both in the United States and internationally. The Company’s principal focus is on growing the Company’s existing satellite based hardware, airtime and related services business line and developing the Company’s own tracking devices for use by retail customers worldwide.
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Going Concern Considerations | The accompanying unaudited condensed consolidated financial statements are prepared assuming the Company will continue as a going concern. At September 30,2016, the Company had an accumulated deficit of approximately $3.5 million. For the nine months ended September 30, 2016, the Company incurred a net loss of approximately $1,452,463 and had cash flows used in operations in the amount of $772,935. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon obtaining additional capital and financing. Management intends to attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to raise additional funds, there can be no assurances to that effect.
The condensed consolidated financial statements do not include any adjustments relating to classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
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Use of Estimates | In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate stock-based compensation, derivative liabilities, preferred deemed dividend and common stock issued for services. |
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Cash and Cash Equivalents | The Company considers all highly liquid investments with a maturity of nine months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. |
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Accounts receivable and allowance for doubtful accounts | The Company has a policy of reserving for questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2016, and December 31, 2015, there is an allowance for doubtful accounts of $11,229 and $0.
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Foreign Currency Translation | The Company’s reporting currency is US Dollars. The accounts of one of the Company’s subsidiaries is maintained using the appropriate local currency, (Great British Pound) GTCL as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders' equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the statements of operations.
The relevant translation rates are as follows: for the three and nine months ended September 30, 2016 closing rate at 1.29820 US$: GBP, average rate at 1.31320 and 1.39353 US$: GBP, for the three and nine months ended September 30, 2015 closing rate at 1.5164 US$: GBP, average rate at 1.55048 and 1.5322 and for the year ended 2015 closing rate at 1.47373 US$: GBP. |
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Revenue Recognition and Unearned Revenue | The Company recognizes revenue from satellite services when earned, as services are rendered or delivered to customers. Equipment sales revenue is recognized when the equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically, the Company has not incurred significant expenses for warranties.
The Company’s customers generally purchase a combination of our products and services as part of a multiple element arrangement. The Company’s assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve significant judgment. This assessment has a significant impact on the amount and timing of revenue recognition.
Revenue is recognized when all of the following criteria have been met:
In accordance with ASC 605-25, Revenue Recognition — Multiple-Element Arrangements, based on the terms and conditions of the product arrangements, the Company believes that its products and services can be accounted for separately as its products and services have value to the Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue is allocated to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services are provided over the term of the customer contract. |
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Goodwill and other intangible assets | In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Factors the Company considers to be important which could trigger an impairment review include the following:
When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. |
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Property and Equipment | Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred.
The estimated useful lives of property and equipment are generally as follows:
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Impairment of long-lived assets | The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods ended September 30, 2016 and December 31, 2015, respectively. |
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Fair value of financial instruments | The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis using significant unobservable input (Level 3) from January 1, 2016 to September 30, 2016:
The Company did not identify any other assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued expenses approximate their estimated fair market value based on the short-term maturity of the instruments.
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Stock Based Compensation | Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. |
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Income Taxes | The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC740-10”) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.
U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain tax positions recognized during the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively. |
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Earnings per Common Share | Net income (loss) per common share is calculated in accordance with ASC Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. For the nine months ended September 30, 2016 and September 30, 2015, periods where the Company has a net loss, all dilutive securities are excluded.
The following are dilutive common stock equivalents during the period ended:
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Related party transactions | A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. |
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Recent Accounting Pronouncements | Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements. |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated useful life of property and equipment |
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Reconciliation of the derivative liability measured at fair value |
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Dilutive securities |
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ORBITAL TRACKING CORP AND GLOBAL TELESAT COMMUNICATIONS LIMITED SHARE EXCHANGE, REVERSE ACQ AND RECAPITALIZATION (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition |
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STOCKHOLDERS' EQUITY (DEFICIT) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding stock options |
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Stock warrants outstanding |
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Warrants outstanding by exercise price |
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INTANGIBLE ASSETS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Future amortization of intangible assets |
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PROPERTY AND EQUIPMENT (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment |
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INVENTORIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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DERIVATIVE LIABILITIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||
Assumptions for fair value of convertible instruments granted under Black-Scholes option pricing model |
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CONCENTRATIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration risk |
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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) |
9 Months Ended |
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Sep. 30, 2016 | |
Computer Equipment [Member] | |
Estimated useful life | 4 years |
Website Development [Member] | |
Estimated useful life | 2 years |
Appliques [Member] | |
Estimated useful life | 10 years |
Office Furniture and Fixtures [Member] | |
Estimated useful life | 4 years |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
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Balance at Beginning of Period | $ 618,391 | |
Change in fair value included in earnings | 422,974 | $ (64,035) |
Net effect on additional paid in capital | (191,062) | |
Balance at End of Period | 1,540 | 618,391 |
Conversion Feature Derivative Liability | ||
Balance at Beginning of Period | 614,036 | |
Change in fair value included in earnings | (422,974) | |
Net effect on additional paid in capital | (191,062) | |
Balance at End of Period | 0 | 614,036 |
Warrant Liability | ||
Balance at Beginning of Period | 4,355 | |
Change in fair value included in earnings | (2,815) | |
Net effect on additional paid in capital | 0 | |
Balance at End of Period | $ 1,540 | $ 4,355 |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - shares |
9 Months Ended | 12 Months Ended | |
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Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
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Dilutive common stock equivalents | 201,229,615 | 222,672,750 | |
Convertible notes payable [Member] | |||
Dilutive common stock equivalents | |||
Convertible Preferred Stock [Member] | |||
Dilutive common stock equivalents | 199,074,615 | 220,517,750 | |
Stock Option [Member] | |||
Dilutive common stock equivalents | 2,850,000 | 2,150,000 | |
Stock Warrant [Member] | |||
Dilutive common stock equivalents | 5,000 | 5,000 |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) |
Sep. 30, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Sep. 30, 2015 |
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Basis Of Presentation And Summary Of Significant Accounting Policies Details Narrative | |||
Insurance by the FDIC, maximum | $ 250,000 | $ 250,000 | |
Allowance for doubtful accounts | $ 11,229 | $ 0 | |
Foreign current translation rates | 1.29820 | 1.47373 | 1.5164 |
ORBITAL TRACKING CORP AND GLOBAL TELESAT COMMUNICATIONS LIMITED SHARE EXCHANGE, REVERSE ACQ AND RECAP (Details) |
Sep. 30, 2016
USD ($)
|
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Business Combinations [Abstract] | |
Property and equipment | $ 4,973 |
Accounts receivable | 34,585 |
Cash in bank | 30,934 |
Prepaid expenses | 2,219,677 |
Inventory | 40,161 |
Intangible asset | 250,000 |
Current liabilities | (469,643) |
Due to related party | (2,174) |
Derivative liability | (4,936) |
Liabilities of discontinued operations | (112,397) |
Total purchase price/assets acquired | $ 1,991,180 |
STOCKHOLDERS' EQUITY (DEFICIT) (Details 1) |
9 Months Ended |
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Sep. 30, 2016
$ / shares
shares
| |
Warrants | |
Balance at beginning of period | shares | 5,000 |
Granted | shares | 0 |
Exercised | shares | 0 |
Forfeited | shares | 0 |
Cancelled | shares | 0 |
Options, Outstanding, Number | shares | 5,000 |
Stock option/warrant outstanding, Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 4.50 |
Weighted Average Exercise Price, Granted | $ / shares | 0 |
Weighted Average Exercise Price, Exercised | $ / shares | 0 |
Weighted Average Exercise Price, Forfeited | $ / shares | 0 |
Weighted Average Exercise Price, Cancelled | $ / shares | 0 |
Weighted average fair value of options granted during the period | $ / shares | $ 4.50 |
Weighted Average Remaining Contractual Life (Years), Granted options | 1 year 4 months 10 days |
Weighted Average Remaining Contractual Life (Years), outstanding | 7 months 10 days |
STOCKHOLDERS' EQUITY (DEFICIT) (Details 2) |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Weighted Average Remaining Contractual Life | 7 months 10 days |
Warrant $4.50 [Member] | |
Warrant exercise price | $ 4.50 |
Warrants outstanding at end of period | shares | 5,000 |
Weighted Average Exercise Price | $ 4.50 |
Number exercisable at end of period | shares | 5,000 |
Weighted Average Exercise Price | $ 4.50 |
PREPAID EXPENSES (Details Narrative) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses, current | $ 162,500 | $ 191,677 |
Prepaid expenses, noncurrent | $ 39,178 | $ 189,968 |
INTANGIBLE ASSETS (Details) |
Sep. 30, 2016
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2016 | $ 6,250 |
2017 | 25,000 |
2018 | 25,000 |
2019 | 25,000 |
2020 and thereafter | 125,000 |
Total | $ 206,250 |
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 6,250 | $ 6,250 | $ 18,750 | $ 18,750 |
PROPERTY AND EQUIPMENT (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Office furniture and fixtures | $ 114,092 | $ 95,434 |
Computer equipment | 25,284 | 24,766 |
Appliques | 2,160,096 | 2,160,096 |
Website development | 108,706 | 92,399 |
Less accumulated depreciation | (339,963) | (154,002) |
Total | $ 2,067,698 | $ 2,218,693 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 197,625 | $ 53,908 |
INVENTORIES (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 350,719 | $ 251,518 |
Less reserve for obsolete inventory | 0 | 0 |
Total | $ 350,719 | $ 251,518 |
RELATED PARTY TRANSACTIONS (Details Narrative) - Phipps [Member] - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Payable to related party | $ 131,857 | $ 74,051 |
Related Party [Member] | ||
Compensation | $ 25,000 |
DERIVATIVE LIABILITIES (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
| |
Derivative Instruments Details | |
Expected volatility | 221.00% |
Expected term - years | 7 months 10 days |
Risk-free interest rate | 0.77% |
Expected dividend yield | $ 0.00 |
DERIVATIVE LIABILITIES (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Notes to Financial Statements | ||
Derivative liabilities | $ 1,540 | $ 311,373 |
Gain (loss) resulting from increase in fair value of convertible instrument | $ 422,974 | $ (64,035) |
CONCENTRATIONS - (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
CygnusTelecom | ||
Purchases | $ 368,254 | |
Delorme | ||
Purchases | 259,275 | |
Globalstar Europe | ||
Purchases | 231,323 | |
Network Innovations | ||
Concentration risk | 15.90% | |
Purchases | $ 588,901 | $ 300,212 |
CONCENTRATIONS - (Details Narrative) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Risks and Uncertainties [Abstract] | ||
Concentration risk | 10.00% | 10.00% |
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