Background and Basis of Presentation

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Business Description and Basis of Presentation [Text Block]

Note 1 – Background and Basis of Presentation

Organization

Document Capture Technologies, Inc. ("DCT" or "Company") develops, designs and delivers various USB-powered image-scanning solutions to all types and sizes of enterprises. The Company’s patented and proprietary page-imaging devices facilitate the way information is stored, shared and managed, and are designed to reduce organizations’ operating costs, improve information accuracy and security, and speed processing time. End users include governmental agencies, large and small corporations, small office-home offices (“SOHO”), professional practices, as well as consumers.

To date, DCT offers more than 40 variations of its imaging platforms sold primarily to original equipment manufacturers (“OEM”), private label brands and value added resellers (“VAR”). DCT’s image-scanning products can be found in a variety of applications, including:

· Document and information management;

· Identification card and driver license scanners;

· Passport security scanners;

· Bank note and check verification;

· Business card readers;

· Barcode scanning; and

· Optical mark readers used in lottery terminals.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of DCT have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company’s financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”).

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates. The results of operations for the period ended March 31, 2013 are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2013. The interim financial statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission (“SEC”) on April 15, 2013.

The consolidated financial statements include the accounts of DCT and its one subsidiary - Syscan. All significant intercompany transactions and balances have been eliminated. DCT’s functional currency is the United States (U.S.) dollar. As such, DCT does not have any translation adjustments. Monetary accounts denominated in non-U.S. currencies, such as cash or payables to vendors, have been re-measured to the U.S. dollar. Gains and losses resulting from foreign currency transactions are included in the results of operations. To date, DCT has not entered into hedging activities to offset the impact of foreign currency fluctuations.

Liquidity

As shown in the financial statements, during the three months ended March 31, 2013, DCT incurred a net loss of $794,000. During the years ended December 31, 2012 and 2011, DCT incurred net losses of $676,000 and $356,000, respectively. As of March 31, 2013, accumulated deficit was $34,669,000. Management believes that current cash and other sources of liquidity are sufficient to fund normal operations through the next 12 months.

Executive Management Restructuring

In January 2013, we restructured (“2013 Restructure”) our executive management team and terminated both our chief executive officer and president.  In connection with the 2013 Restructure, our former CEO resigned from the Board of Directors.  Concurrently, we entered into an employment agreement with Michael Campbell to become our new CEO and President.  The purpose of the 2013 Restructure is to enhance and strengthen DCT’s strategic leadership and reduce overhead expenses.  Mr. Campbell has twenty-three years of experience in the technology industry, has been the CEO of four companies in the technology industry and is a seasoned business development and marketing executive.  Mr. Campbell will focus on mapping DCT’s existing technology and human assets to emerging market opportunities and accelerating financial strength through focused business initiatives.

One-time expenses associated with the 2013 Restructure, including severance payments to terminated executives, totaled $306,000, which were recorded as Selling, general and administrative expense during the three months ended March 31, 2013.