Oklahoma
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73-1518725
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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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1717 South Boulder Ave. Suite 700
Tulsa, Oklahoma
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74119 (918) 388-3528
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(Address of principal executive office)
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(Zip Code) (Registrant’s telephone number,
including area code)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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competition in the market for mobile computing products and services;
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our ability to develop brand awareness and industry reputation;
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our ability to adapt to rapid evolution in technology and industry standards;
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our ability to attract and retain management and skilled personnel;
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our growth and marketing strategies;
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anticipated trends in our business;
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our future results of operations;
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our lack of profitable operations in recent periods;
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market conditions in the mobile solutions for business industry;
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the impact of government regulation;
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emerging viable and sustainable markets for wireless and mobile computing services;
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significant errors or security flaws in our products and services;
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insufficient protection for our intellectual property;
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Our ability to enforce our intellectual property;
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claims of infringement on third party intellectual property;
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pricing pressures in the mobile software and technology market
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our financial position, business strategy and other plans and objectives for future operations;
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economic conditions in the U.S. and worldwide; and
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the ability of our management team to execute its plans to meet its goals
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·
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Identify and support mobile app ventures with advisory services and patent protection, building a portfolio of market leading solutions which generate near term revenue and substantial earnings at liquidity for the Company.
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·
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Generate high margin potential, passive revenue by extending affordable patent protection to small and medium sized app developers through partnerships.
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Continue enforcing current intellectual property.
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Increase intellectual property portfolio via continuation filings.
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Visioning and Concepting – Exploring an app idea, its problem to solve and potential business models;
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Competitive Analysis – Thorough examination of the market place and funding sources growing the competition;
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Technology Evaluation – Discovery of best practices and platforms for mobile and web development;
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Customer Economics Modeling – Quantification of initial and long term costs to acquire and grow customer segments;
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Go-to-Market Strategy – Sales, marketing, channel, business and strategic partnership options review;
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Financial Planning – Assumption modeling and creation of balance sheet, income and cash flow statements;
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Funding Presentation and Coaching – Creation of PowerPoint and other communications materials in preparation for investor meetings;
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Intellectual Property Advisory – Analysis of IP and options to protect and grow; and,
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Management Team Evaluation and Augmentation – Review of strengths of management team along with growth plans. Virtual executive management team recommendations for interim periods.
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growth in sales of handheld devices, smart phones and other mobile computing devices;
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emergence of a viable and sustainable market for wireless and mobile computing services;
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our product and services differentiation and quality;
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the development of technologies that facilitate interactive communication between organizations;
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the growth in access to, and market acceptance of, new interactive technologies;
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the effectiveness of our marketing strategy and efforts;
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our industry reputation; and
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general industry and economic conditions such as slowdowns in the computer or software markets or the economy.
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● | dilution caused by our issuance of additional shares of Common Stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies; | |
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our results of operations and the performance of our competitors;
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the public’s reaction to our press releases, our other public announcements and our filings with the Securities and Exchange Commission;
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changes in earnings estimates or recommendations by research analysts who follow, or may follow, us or other companies in our industry;
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changes in general economic conditions;
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changes in the valuation of similarly situated companies, both in our industry and in other industries;
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actions of our historical equity investors, including sales of common stock by our directors and executive officers;
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actions by institutional investors trading in our stock;
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disruption of our operations;
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any major change in our management team;
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significant sales of our common stock;
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other developments affecting us, our industry or our competitors; and
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U.S. and international economic, legal and regulatory factors unrelated to our performance.
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that a broker or dealer approve a person's account for transactions in penny stocks; and
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the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
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obtain financial information and investment experience objectives of the person; and
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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sets forth the basis on which the broker or dealer made the suitability determination; and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Filing Date
|
Defendant
|
Case Number
|
Status
|
Date of Disposition (if any)
|
8-Jun-11
|
Air2Web Inc.
|
6:11-CV-287
|
(a)
|
11/2/2012
|
8-Jun-11
|
Xora, Inc.
|
6:11-CV-287
|
(b)
|
12/13/2012
|
8-Jun-11
|
Spring Wireless USA, Inc.
|
6:11-CV-287
|
(b)
|
11/16/2012
|
8-Jun-11
|
The DataMax Software Group Inc.
|
6:11-CV-287
|
(b)
|
11/28/2012
|
15-Sep-11
|
Citigroup Inc.
|
6:11-CV-490
|
Open
|
N/A
|
3-Oct-11
|
Whoop, Inc.
|
6:11-CV-523
|
Open
|
N/A
|
21-Dec-11
|
American Airlines, Inc.
|
6:11-CV-685
|
Open
|
N/A
|
21-Dec-11
|
Avis Rent A Car System, LLC
|
6:11-CV-686
|
(b)
|
2/6/2013
|
30-Jan-12
|
Facebook, Inc.
|
6:12-CV-44
|
(b)
|
11/16/2012
|
30-Jan-12
|
Newegg Inc.
|
6:12-CV-46
|
Open
|
N/A
|
17-Feb-12
|
GEICO Casualty Company and Government Employees Insurance Company
|
6:12-CV-74
|
Open
|
N/A
|
17-Feb-12
|
GEICO Insurance Agency, Inc.
|
6:12-CV-74
|
Open
|
N/A
|
23-Mar-12
|
MovieTickets.com
|
6:12-CV-194
|
(b)
|
11/30/2012
|
18-Jun-12
|
LinkedIn Corporation
|
6:12-CV-385
|
Open
|
N/A
|
19-Jun-12
|
Jetblue Airways Corporation
|
6:12-CV-387
|
Open
|
N/A
|
19-Jun-12
|
Cumulus Media, Inc.
|
6:12-CV-389
|
(b)
|
12/14/2012
|
26-Jun-12
|
Fareportal, Inc.
|
6:12-CV-416
|
Open
|
N/A
|
26-Jun-12
|
Target Corporation
|
6:12-CV-418
|
(b)
|
pending
|
5-Oct-12
|
American Express Company
|
6:12-CV-743
|
(b)
|
1/30/2013
|
5-Oct-12
|
Redbox Automated Retail, LLC
|
6:12-CV-744
|
Open
|
N/A
|
4-Dec-12
|
Bed Bath & Beyond Inc.
|
6:12-CV-915
|
Open
|
N/A
|
4-Dec-12
|
Sears Holdings Management Corporation et al
|
6:12-CV-916
|
Open
|
N/A
|
4-Dec-12
|
Starwood Hotels & Resorts Worldwide, Inc.
|
6:12-CV-917
|
(b)
|
2/25/2013
|
21-Dec-12
|
Walgreen Co.
|
6:12-CV-975
|
Open
|
N/A
|
21-Dec-12
|
Home Depot U.S.A., Inc.
|
6:12-CV-976
|
Open
|
N/A
|
21-Dec-12
|
SkyMall, Inc.
|
6:12-CV-977
|
Open
|
N/A
|
21-Dec-12
|
SuperShuttle International Corp.
|
6:12-CV-978
|
Open
|
N/A
|
21-Dec-12
|
Dollar Thrifty Automotive Group, Inc. et al
|
6:12-CV-979
|
Open
|
N/A
|
21-Dec-12
|
CVS Pharmacy, Inc.
|
6:12-CV-980
|
Open
|
N/A
|
25-Feb-13
|
Costco Wholesale Corporation
|
6:13-CV-198
|
Open
|
N/A
|
25-Feb-13
|
Fandango, Inc. et al
|
6:13-CV-199
|
Open
|
N/A
|
25-Feb-13
|
GameStop Corp, et al
|
6:13-CV-200
|
Open
|
N/A
|
25-Feb-13
|
Gilt Groupe Holdings, Inc. et al
|
6:13-CV-201
|
Open
|
N/A
|
25-Feb-13
|
Kohl's Department Stores, Inc. et al
|
6:13-CV-202
|
Open
|
N/A
|
25-Feb-13
|
The Kroger Co.
|
6:13-CV-203
|
Open
|
N/A
|
26-Feb-13
|
Nordstrom, Inc. et al
|
6:13-CV-204
|
Open
|
N/A
|
26-Feb-13
|
Pandora Media, Inc.
|
6:13-CV-205
|
Open
|
N/A
|
26-Feb-13
|
RueLaLa, Inc. et al
|
6:13-CV-206
|
Open
|
N/A
|
26-Feb-13
|
Staples, Inc. et al
|
6:13-CV-207
|
Open
|
N/A
|
(a)
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Lawsuit dismissed without prejudice.
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(b)
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Lawsuit dismissed with prejudice pursuant to a settlement agreement.
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2012
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2011
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|||||||||||||||
Sales Price
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Sales Price
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|||||||||||||||
High
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Low
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High
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Low
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|||||||||||||
Quarter Ended
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||||||||||||||||
March 31
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$
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0. 14
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$
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0. 06
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$
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0.26
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$
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0.18
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||||||||
June 30
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0. 12
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0. 05
|
0.24
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0.09
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||||||||||||
September 30
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0. 06
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0. 02
|
0.18
|
0.10
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||||||||||||
December 31
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0 .06
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0. 01
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0.17
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0.03
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Plan category
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Number of securities to be issued upon exercise of outstanding options
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Weighted-average exercise price of outstanding options
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Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
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||||||
(a)
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(b)
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(c)
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|||||||
Equity compensation plans approved by security holders
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15,441,703
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$
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0.35
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40,100,000
|
|||||
Equity compensation plans not approved by security holders
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-
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-
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15,207,958
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||||||
Total
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15,441,703
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$
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0.35
|
55,307,958
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Years Ended Dec 31,
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||||||||
2012
|
2011
|
|||||||
Cash flows (used in) operating activities
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$
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(595,128
|
)
|
$
|
(1,364,479
|
)
|
||
Cash flows provided by (used in) investing activities
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7,707
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(613,101)
|
||||||
Cash flows provided by financing activities
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973,493
|
2,063,717
|
||||||
Net increase in cash and cash equivalents
|
$
|
386,072
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$
|
86,137
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Name
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Age
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Position
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||
James C. McGill
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69
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Chairman of the Board of Directors, Chief Executive Officer and President
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||
John Clerico
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71
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Director and Chairman of the Compensation Committee
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||
David R. Lawson
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61
|
Director and Chairman of the Audit Committee
|
||
Kendall Carpenter
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56
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Executive Vice President, Secretary and Chief Financial Officer
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1.
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any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
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2.
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any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
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3.
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being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
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|
4.
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being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
5.
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being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
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|
6.
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being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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Name and Principal Position
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Year
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Salary
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Bonus
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Option and Warrant Awards (5)
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Non-Equity Incentive Plan Compen- sation
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Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($)
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All other Compen- sation (6)
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Total
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|||||||||||||||||||||
James McGill,
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2012
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$ | 13,100 | $ | 0 | $ | $0 | $ | 0 | $ | $0 | $ | 5,498 | $ | 18,598 | ||||||||||||||
Chief Executive Officer,
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2011
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$ | 12,000 | 0 | 0 | 0 | 0 | $ | 3,241 | $ | 15,241 | ||||||||||||||||||
President and Director (1)
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|||||||||||||||||||||||||||||
Kendall Carpenter, Executive Vice
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2012
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$ | 133,075 | $ | 0 | $ | $0 | $ | 0 | $ | $0 | $ | 2,915 | $ | 135,990 | ||||||||||||||
President, Chief Financial Officer
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2011
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$ | 114,750 | 0 | 0 | 0 | 0 | $ | 2,648 | $ | 117,398 | ||||||||||||||||||
and Secretary (2)
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Steve Signoff,
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2012
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$ | 106,200 | 0 | $ | $0 | $ | 0 | $ | $0 | $ | 44,083 | $ | 150,283 | |||||||||||||||
Former Chief Executive Officer,
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2011
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$ | 75,386 | 0 | 0 | 0 | 0 | $ | 932 | $ | 76,318 | ||||||||||||||||||
President and Director (3)
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Randy Ritter,
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2012
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$ | 74,212 | $ | 0 | $ | $0 | $ | 0 | $ | $0 | $ | 32,379 | $ | 106,591 | ||||||||||||||
Former Chief OperatingOfficer (4)
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(1)
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For services in 2011, Mr. McGill received 872,823 shares of restricted stock valued between $.001 and $.002 per share upon vesting of restricted stock awards. Mr. McGill received 39,733 shares of S-8 registered stock in 2011 valued between $.001 and $.20 per share upon vesting of 2008, 2009 and 2010 stock bonus plans. For services in 2012, Mr. McGill received 2,395,783 shares of restricted stock valued between $.001and $.01 per share upon vesting of restricted stock awards. Mr. McGill received 58,778 shares of S8 registered stock in 2012 valued at $.001 per share upon vesting of 2009 and 2010 stock bonus plans. Mr. McGill received an option in 2011 under the 2011 Key Employee Stock Incentive Plan to acquire 400,000 shares of common stock at the price of $.50 per share which vest ratably in five increments based on the Company stock trading from $1.00 to $5.00 per share over five trading days. This option was cancelled in 2012 and replaced with an option under the same plan to acquire 1,250,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $.25, $.40 and$.60 per share over five trading days at the price of $.125, $.25 and $.40, respectively.
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(2)
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For services in 2011, Ms. Carpenter received 496,267 shares of restricted stock valued between $.001and $.002 per share upon vesting of restricted stock awards. Ms. Carpenter received 46,833 shares of S8 registered stock in 2011 valued between $.001 and $.20 per share upon vesting of 2008, 2009 and 2010 stock bonus plans. For services in 2012, Ms. Carpenter received 1,162,379 shares of restricted stock valued between $.001and $.01 per share upon vesting of restricted stock awards. Ms. Carpenter received 112,500 shares of S8 registered stock in 2012 valued at $.001 per share upon vesting of 2009 and 2010 stock bonus plans. Ms. Carpenter received an option in 2011 under the 2011 Key Employee Stock Incentive Plan to acquire 200,000 shares of common stock at the price of $.50 per share which vest ratably in five increments based on the Company stock trading from $1.00 to $5.00 per share over five trading days. This option was cancelled in 2012 and replaced with an option under the same plan to acquire 1,250,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $.25, $.40 and$.60 per share over five trading days at the price of $.125, $.25 and $.40, respectively.
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(3)
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For services in 2011, Mr. Signoff received 183,824 shares of restricted stock valued at $.002 per share upon vesting of restricted stock awards. As an incentive bonus at employment in 2011, Mr. Signoff received 100,000 shares of restricted stock valued at $.002 per share upon vesting of restricted stock awards. For services in 2012, Mr. Signoff received 1,715,539 shares of restricted stock valued between $.001and $.01 per share upon vesting of restricted stock awards. Mr. Signoff received an option under the 2011 Key Employee Stock Incentive Plan to acquire 1,500,000 shares of common stock at the price of $.50 per share which vest ratably in five increments based on the Company stock trading from $1.00 to $5.00 per share over five trading days. This option was cancelled in 2012 and replaced with an option under the same plan to acquire 10,000,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $.25, $.40 and$.60 per share over five trading days at the price of $.125, $.25 and $.40, respectively. This option was cancelled in August 2012 upon Mr. Signoff’s resignation. Between August 1 and December 31, 2012, the Company paid Mr. Signoff $39,091 in consulting fees.
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(4)
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For services in 2012, Mr. Ritter received 1,239,843 shares of restricted stock valued between $.001 and $.01 per share upon vesting of restricted stock awards. Mr. Ritter received an option under the 2011 Key Employee Stock Incentive Plan to acquire 1,200,000 shares of common stock at the price of $.50 per share which vest ratably in five increments based on the Company stock trading from $1.00 to $5.00 per share over five trading days. This option was cancelled in 2012 and replaced with an option under the same plan to acquire 7,500,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $.25, $.40 and $.60 per share over five trading days at the price of $.125, $.25 and $.40, respectively. This option was cancelled in August 2012 upon Mr. Ritter’s’ resignation. Between August 1 and December 31, 2012, the Company paid Mr. Ritter $28,408 in consulting fees.
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(5)
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In accordance with FASB ASC Topic 718, Company management has determined that the options and warrants granted have no cash value and as such are calculated as zero dollars ($0.00) toward each executive’s compensation.
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(6)
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Fair market value of stock awards based on individual tax elections and consulting fees.
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Grants of Plan-Based Awards
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|||||||||||||||||||||
Est Possible Payout under Non-Equity
|
|||||||||||||||||||||
Incentive Plan Award
|
|||||||||||||||||||||
Name
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Grant Date
|
Date of Approved Equity Award
|
Threshold ($)
|
Target
($)
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Maximum ($)
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All Other Stock Awards: Number of Share of Stock or Units (#)
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All Other Option Awards: Number of Securities Underlying Options (#)
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Exercise or Base Price of Option Awards ($/Share)
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Grant Date Fair Value of Stock and Option Awards ($)
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||||||||||||
James McGill
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5/18/2012
|
5/18/2012
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- | 416,667 | $ | 0.125 | $ | - | |||||||||||||
5/18/2012
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5/18/2012
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416,667 | $ | 0.250 | $ | - | |||||||||||||||
5/18/2012
|
5/18/2012
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416,666 | $ | 0.400 | $ | - | |||||||||||||||
Kendall Carpenter
|
5/18/2012
|
5/18/2012
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- | 416,667 | $ | 0.125 | $ | - | |||||||||||||
5/18/2012
|
5/18/2012
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416,667 | $ | 0.250 | $ | - | |||||||||||||||
5/18/2012
|
5/18/2012
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416,666 | $ | 0.400 | $ | - |
OPTION AWARDS
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STOCK AWARDS
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||||||||||||||||
Name
|
Option
Grant
Date
|
Number of Securities Underlying Unexercised Options (#) Exercisable
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Number of Securities Underlying Unexercised Options (#) Unexer-cisable
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Option
Exercise Price ($)
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Option
Expiration
Date
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Number of Shares or Units of Stock That Have Not Vested (#)
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MarketValue of Shares or Units of Stock That Have Not Vested | ||||||||||
James McGill
|
2012
|
416,667
|
$ |
0.125
|
5/18/2018
|
1,405,668
|
$ |
28,113
|
|||||||||
James McGill
|
2012
|
416,667
|
$ |
0.25
|
5/18/2018
|
||||||||||||
James McGill
|
2012
|
416,666
|
$ |
0.40
|
5/18/2018
|
||||||||||||
James McGill
|
2010
|
25,666
|
$ |
513
|
|||||||||||||
James McGill
|
2009
|
96,808
|
11,200
|
$ |
.53 - $2.21
|
9/11/2014
|
33,111
|
$ |
662
|
||||||||
James McGill
|
2008
|
129,804
|
$ |
.60 - $2.50
|
9/11/2014
|
||||||||||||
James McGill
|
2007
|
216,640
|
$ |
0.60
|
9/11/2014
|
||||||||||||
James McGill
|
2006
|
236,640
|
$ |
0.60
|
9/11/2014
|
||||||||||||
James McGill
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2005
|
324,720
|
$ |
0.43
|
9/11/2014
|
||||||||||||
James McGill
|
2004
|
337,360
|
$ |
0.43
|
9/11/2014
|
||||||||||||
James McGill
|
2003
|
235,280
|
$ |
0.43
|
9/11/2014
|
||||||||||||
James McGill
|
2002
|
145,340
|
$ |
0.34
|
9/11/2014
|
||||||||||||
Kendall Carpenter
|
2012
|
416,667
|
$ |
0.125
|
5/18/2018
|
602,824
|
$ |
12,056
|
|||||||||
Kendall Carpenter
|
2012
|
416,667
|
$ |
0.25
|
5/18/2018
|
||||||||||||
Kendall Carpenter
|
2012
|
416,666
|
$ |
0.40
|
5/18/2018
|
||||||||||||
Kendall Carpenter
|
2010
|
32,500
|
$ |
650
|
|||||||||||||
Kendall Carpenter
|
2009
|
43,860
|
8,400
|
$ |
.53 - $2.21
|
9/11/2014
|
80,000
|
$ |
1,600
|
||||||||
Kendall Carpenter
|
2008
|
23,946
|
$ |
.60 - $2.50
|
9/11/2014
|
||||||||||||
Kendall Carpenter
|
2007
|
14,400
|
$ |
0.60
|
9/11/2014
|
||||||||||||
Kendall Carpenter
|
2006
|
26,600
|
$ |
0.60
|
9/11/2014
|
Name
|
Fees Earned
or Paid in Cash
|
Stock Awards
($) (1)
|
Total ($)
|
|||||||||
Howard Janzen (resigned 5-22-2012)
|
$
|
-
|
$
|
4,000
|
$
|
4,000
|
||||||
David L. Humphrey (resigned 10-3-2012)
|
$
|
-
|
$
|
12,000
|
$
|
12,000
|
||||||
John Clerico
|
$
|
-
|
$
|
16,000
|
$
|
16,000
|
||||||
Dale A. Schoenfeld (resigned 10-3-2012)
|
$
|
-
|
$
|
12,000
|
$
|
12,000
|
||||||
David R. Lawson
|
$
|
-
|
$
|
16,000
|
$
|
16,000
|
||||||
Total:
|
$
|
-
|
$
|
60,000
|
$
|
60,000
|
(1)
|
Each director received $4,000 per quarter served on the Board of Directors, paid in restricted common stock based on a five day VWAP at the end of each quarter.
|
●
|
all directors and nominees, naming them,
|
●
|
our executive officers,
|
●
|
our directors and executive officers as a group, without naming them, and
|
●
|
persons or groups known by us to own beneficially 5% or more of our Common Stock or our Preferred Stock having voting rights:
|
Title of Class
|
Number of Shares Beneficially Owned
(1)
|
Percentage of Class
(2)
|
||||
James C. McGill (3)
|
Common Stock
|
26,836,558
|
12.84%
|
|||
Kendall Carpenter (4)
|
Common Stock
|
5,042,832
|
2.69%
|
|||
John C. Clerico (5)
|
Common Stock
|
50,683,760
|
21.77%
|
|||
David R. Lawson (6)
|
Common Stock
|
5,790,851
|
3.08%
|
|||
Officers and Directors as a Group
|
Common Stock
|
88,354,001
|
32.66%
|
(1)
|
This column represents the total number of votes each named stockholder is entitled to vote upon matters presented to the shareholders for a vote.
|
(2)
|
The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on February 28, 2013. On February 28, 2013, there were 182,163,869 shares of our common stock outstanding. To calculate a stockholder's percentage of beneficial ownership, we include in the numerator and denominator the common stock outstanding and all shares of our common stock issuable to that person in the event of the exercise of outstanding options and other derivative securities owned by that person which are exercisable within 60 days of February 28, 2013. Common stock options and derivative securities held by other stockholders are disregarded in this calculation. Therefore, the denominator used in calculating beneficial ownership among our stockholders may differ. Unless we have indicated otherwise, each person named in the table below has sole voting power and investment power for the shares listed opposite such person's name.
|
(3)
|
Represents (i) 18,184,893 shares of common stock owned; (ii) 4,237,532 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants; (iii) 1,733,792 shares of common stock that may be acquired within 60 days through the exercise of outstanding options; and (iv) 2,680,341 shares of common stock issued under restrictive stock grants with voting rights.
|
(4)
|
Represents (i) 4,549,515 shares of common stock owned; (ii) 131,546 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants; (iii) 117,206 shares of common stock that may be acquired within 60 days through the exercise of outstanding options; and (iv) 244,565 shares of common stock issued under restrictive stock grants with voting rights.
|
(5)
|
Represents (i) 35,142,526 shares of common stock owned; (ii) 15,261,234 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants; and (iii) 280,000 shares of common stock that may be acquired within 60 days through the exercise of outstanding options.
|
(6)
|
Represents (i) 4,256,064 shares of common stock owned; (ii) 1,454,787 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants; and (iii) 80,000 shares of common stock that may be acquired within 60 days through the exercise of outstanding options.
|
The following documents are filed as a part of this report or incorporated herein by reference:
|
(1)
|
Our Financial Statements are listed on page F-1 of this Annual Report.
|
|
(2)
|
Financial Statement Schedules: None.
|
3.01 | Articles of Incorporation, filed as an exhibit to the Registration Statement on Form S-1, filed with the Securities and Exchange Commission (“Commission”) on April 18, 2008 and incorporated herein by reference. |
3.02 | Bylaws, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference. |
3.03 |
Certificate of Amendment to the Articles of Incorporation, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2009 and incorporated herein by reference.
|
3.03 |
Certificate of Amendment to the Articles of Incorporation, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 28, 2011 and incorporated herein by reference.
|
10.01 |
Form of Subscription and Investor Representation Agreement, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.02 |
Form of Warrant to Purchase Common Stock, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.03
|
Form of Convertible Note Subscription Agreement, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.04
|
Form of Convertible Note, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.05
|
Form of Director Non-Statutory Stock Option Agreement, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.06
|
Form of Non-Statutory Stock Option Agreement, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.07
|
Form of Warrant to Purchase Common Stock issued in connection with Series A Preferred Stock, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.08
|
Form of Warrant to Purchase Common Stock issued in connection with Series B Preferred Stock, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
10.9 |
Form of Securities Purchase Agreement, dated July 20, 2009, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on July 24, 2009 and incorporated herein by reference.
|
10.10 |
Form of Debenture, dated July 20, 2009, filed as an exhibit to the Annual Report on Form 10-K, filed with the Commission on March 13, 2012 and incorporated herein by reference.
|
10.11 |
Form of Warrant, dated July 20, 2009, filed as an exhibit to the Annual Report on Form 10-K, filed with the Commission on March 13, 2012 and incorporated herein by reference.
|
10.12 |
Form of Securities Purchase Agreement, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2009 and incorporated herein by reference.
|
10.13 |
2009 Stock Compensation Plan, filed as an exhibit to the Registration Statement on Form S-8, filed with the Commission on October 13, 2009 and incorporated herein by reference.
|
10.14 |
Employment Agreement, effective August 1, 2011, by and between MacroSolve, Inc. and Steve Signoff, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 3, 2011 and incorporated herein by reference.
|
10.15 |
Form of 2010 Convertible Debenture Subscription Agreement, filed as an exhibit to the Quarterly Report on Form 10-Q, filed with the Commission on August 15, 2011 and incorporated herein by reference.
|
10.16 |
Form of 2010 Debenture, filed as an exhibit to the Quarterly Report on Form 10-Q, filed with the Commission on August 15, 2011 and incorporated herein by reference.
|
10.17 |
Form of Class B Warrant, filed as an exhibit to the Quarterly Report on Form 10-Q, filed with the Commission on August 15, 2011 and incorporated herein by reference.
|
10.18 |
Form of 2011 Convertible Debenture Subscription Agreement, filed as an exhibit to the Quarterly Report on Form 10-Q, filed with the Commission on August 15, 2011 and incorporated herein by reference.
|
10.19 |
Form of 2011 Debenture, filed as an exhibit to the Quarterly Report on Form 10-Q, filed with the Commission on August 15, 2011 and incorporated herein by reference.
|
10.20 |
Form of Class A Warrant, filed as an exhibit to the Quarterly Report on Form 10-Q, filed with the Commission on August 15, 2011 and incorporated herein by reference.
|
10.21 |
Form of Subscription Agreement, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2011 and incorporated herein by reference.
|
10.22 |
Form of Summary of Terms, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2011 and incorporated herein by reference.
|
10.23 |
Form of Convertible Debenture, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2011 and incorporated herein by reference.
|
10.24 |
Form of Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2011 and incorporated herein by reference.
|
10.25 | Employment Agreement, effective November 1, 2011, by and between MacroSolve, Inc. and Randy Ritter, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on November 9, 2011 and incorporated herein by reference. |
10.26 | Form of Subscription Agreement, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 21, 2012 and incorporated herein by reference. |
10.27 | Form of Convertible Debenture, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 21, 2012 and incorporated herein by reference. |
10.28 | Form of Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 21, 2012 and incorporated herein by reference. |
10.29 | Form of Subscription Agreement, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on March 29, 2012 and incorporated herein by reference. |
10.30 | Form of Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on March 29, 2012 and incorporated herein by reference. |
10.31 | Asset Purchase Agreement, dated as of July 31, 2012, by and between MacroSolve, Inc. and DecisionPoint Systems, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 6, 2012 and incorporated herein by reference. |
10.32 |
License Agreement, dated as of July 31, 2012, by and between MacroSolve, Inc. and DecisionPoint Systems, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 6, 2012 and incorporated herein by reference.
|
10.33 | Non-Competition and Non-Solicitation Agreement, dated as of July 31, 2012, by and between MacroSolve, Inc. and DecisionPoint Systems, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 6, 2012 and incorporated herein by reference. |
10.34 | Employment Agreement, dated as of October 23, 2012, by and between MacroSolve, Inc. and Kendall Carpenter, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 24, 2012 and incorporated herein by reference. |
23.01 | Consent of Independent Registered Public Accounting Firm |
14.01 | Code of Business Conduct and Ethics, filed as an exhibit to the Annual Report on Form 10-K, filed with the Commission on March 30, 2010 and incorporated herein by reference. |
31.01 | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.02 | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.01 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 INS | XBRL Instance Document* |
101 SCH | XBRL Taxonomy Extension Schema Document* |
101 CAL | XBRL Taxonomy Calculation Linkbase Document* |
101 LAB | XBRL Taxonomy Labels Linkbase Document* |
101 PRE | XBRL Taxonomy Presentation Linkbase Document* |
101 DEF | XBRL Taxonomy Extension Definition Linkbase Document* |
MACROSOLVE, INC.
|
|||
Date March 5, 2013
|
By:
|
/s/ JAMES C. McGILL
|
|
James C. McGill
|
|||
Chief Executive Officer (Principal Executive Officer)
|
|||
Date: March 5, 2013
|
By:
|
/s/ KENDALL CARPENTER
|
|
Kendall Carpenter
|
|||
Chief Financial Officer (Principal Accounting Officer)
|
Name
|
Position
|
Date
|
||
/s/ JAMES C. MCGILL
|
Director
|
March 5, 2013
|
||
James C. McGill
|
||||
/s/ JOHN CLERICO
|
Director
|
March 5, 2013
|
||
John Clerico
|
||||
/s/ DAVID R. LAWSON
|
Director
|
March 5, 2013
|
||
David R. Lawson
|
||||
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
MACROSOLVE, INC.
|
||||||||
12/31/2012
|
12/31/2011
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash
|
$ | 659,204 | $ | 273,132 | ||||
Accounts receivable - trade
|
74,056 | 288,201 | ||||||
Prepaid expenses and other
|
519,330 | 240,388 | ||||||
Total current assets
|
1,252,590 | 801,721 | ||||||
PROPERTY AND EQUIPMENT, at cost:
|
21,651 | 285,976 | ||||||
Less - accumulated depreciation and amortization
|
(19,462 | ) | (188,016 | ) | ||||
Net property and equipment
|
2,189 | 97,960 | ||||||
OTHER ASSETS:
|
||||||||
Investment in DecisionPoint Systems, Inc.
|
579,875 | - | ||||||
Note receivable
|
- | 135,577 | ||||||
Software development costs, net of accumulated amortization
|
||||||||
of $398,715 as of December 31, 2011
|
- | 1,280,903 | ||||||
Other assets
|
64,227 | 83,329 | ||||||
Total other assets
|
644,102 | 1,499,809 | ||||||
TOTAL ASSETS
|
$ | 1,898,881 | $ | 2,399,490 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Current maturities of long-term debt
|
$ | 90,000 | $ | - | ||||
Revolving Line of Credit
|
- | 100,000 | ||||||
Note Payable - Shareholders
|
- | 169,306 | ||||||
Accounts payable - trade and accrued liabilities
|
84,062 | 631,419 | ||||||
Unearned income
|
500,000 | 31,400 | ||||||
Total current liabilities
|
674,062 | 932,125 | ||||||
LONG-TERM DEBT, less current maturities
|
||||||||
Note Payable - Shareholders
|
541,752 | - | ||||||
Oklahoma Technology Commercialization Center
|
125,000 | 237,500 | ||||||
Convertible debentures
|
150,000 | 2,621,161 | ||||||
Total long-term debt, less current maturities
|
816,752 | 2,858,661 | ||||||
COMMITMENTS AND CONTINGENCIES
|
- | - | ||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Common stock, $.01 par value; authorized 500,000,000 shares;
|
||||||||
issued and outstanding 179,831,987 and122,386,894 shares, at
|
||||||||
December 31, 2012 and 2011, respectively
|
1,798,320 | 1,223,869 | ||||||
Additional paid-in capital
|
13,230,111 | 10,059,029 | ||||||
Accumulated other comprehensive income
|
(170,125 | ) | - | |||||
Accumulated deficit
|
(14,450,239 | ) | (12,674,194 | ) | ||||
Total stockholders' equity (deficit)
|
408,067 | (1,391,296 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 1,898,881 | $ | 2,399,490 | ||||
The accompanying notes are an integral part of these statements.
|
MACROSOLVE, INC.
|
||||||||
For the Years Ended December 31,
|
2012
|
2011
|
||||||
|
||||||||
REVENUES:
|
||||||||
Software products and licensing
|
$ | 2,529,663 | $ | 1,141,332 | ||||
Solution services
|
458,730 | 262,871 | ||||||
Net revenues
|
2,988,393 | 1,404,203 | ||||||
COST OF REVENUES:
|
||||||||
Software products and licensing
|
1,031,005 | 433,515 | ||||||
Solution services
|
274,848 | 145,413 | ||||||
Total cost of revenues
|
1,305,853 | 578,928 | ||||||
Gross profit
|
1,682,540 | 825,275 | ||||||
OPERATING EXPENSES:
|
||||||||
Solution services
|
323,167 | 144,542 | ||||||
Depreciation and amortization
|
491,176 | 125,285 | ||||||
Marketing and sales
|
816,273 | 348,969 | ||||||
General and administrative
|
1,394,455 | 1,519,779 | ||||||
Total operating expenses
|
3,025,071 | 2,138,575 | ||||||
Income from operations
|
(1,342,531 | ) | (1,313,300 | ) | ||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest income
|
164 | 134 | ||||||
Interest expense
|
(150,951 | ) | (170,675 | ) | ||||
Loss on sale of asset
|
(4,247 | ) | (235 | ) | ||||
Stock based compensation
|
(83,872 | ) | (97,506 | ) | ||||
Total other expense
|
(238,906 | ) | (268,282 | ) | ||||
LOSS FROM CONTINUNIG OPERATIONS BEFORE INCOME TAXES
|
(1,581,437 | ) | (1,581,582 | ) | ||||
INCOME TAXES
|
- | - | ||||||
NET LOSS FROM CONTINUING OPERATIONS
|
$ | (1,581,437 | ) | $ | (1,581,582 | ) | ||
DISCONTINUED OPERATIONS (NOTE 16)
|
||||||||
Loss from operations of discontinued Illume Mobile operations
|
||||||||
(including loss on disposal of $54,538)
|
(194,608 | ) | (952,832 | ) | ||||
NET LOSS
|
(1,776,045 | ) | (2,534,414 | ) | ||||
OTHER COMPREHENSIVE INCOME, net of tax
|
||||||||
Unrealized holding loss arising during the period
|
(170,125 | ) | - | |||||
COMPREHENSIVE INCOME
|
(1,946,170 | ) | (2,534,414 | ) | ||||
LOSS ALLOCABLE TO COMMON STOCKHOLDERS:
|
||||||||
Net loss
|
$ | (1,776,045 | ) | $ | (2,534,414 | ) | ||
Loss allocable to common stockholders
|
$ | (1,776,045 | ) | $ | (2,534,414 | ) | ||
Basic and diluted loss per share
|
$ | (0.01 | ) | $ | (0.02 | ) | ||
The accompanying notes are an integral part of these statements.
|
MACROSOLVE, INC.
|
||||||||||||||||||||
For the Years Ended December 31, 2012 and 2011
|
||||||||||||||||||||
Accumulated
|
||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||
Common
|
Paid-in
|
Comprehensive
|
Accumulated
|
|||||||||||||||||
Stock
|
Capital
|
Income
|
Deficit
|
Total
|
||||||||||||||||
BALANCE, at December 31, 2010
|
$ | 986,905 | $ | 9,303,920 | $ | - | $ | (10,139,750 | ) | $ | 151,075 | |||||||||
Net Loss
|
- | - | - | (2,534,414 | ) | (2,534,414 | ) | |||||||||||||
Common Stock issued for Services
|
174,675 | 572,275 | - | - | 746,950 | |||||||||||||||
Common Stock issued to Investors
|
23,042 | 126,958 | - | - | 150,000 | |||||||||||||||
Compensation expense related to
|
||||||||||||||||||||
stock awards
|
39,247 | 55,876 | - | 30 | 95,153 | |||||||||||||||
BALANCE, at December 31, 2011
|
$ | 1,223,869 | $ | 10,059,029 | $ | - | $ | (12,674,134 | ) | $ | (1,391,236 | ) | ||||||||
Comprehensive Income (Loss)
|
- | - | (170,125 | ) | (1,776,045 | ) | (1,946,170 | ) | ||||||||||||
Common Stock issued for Services
|
28,000 | 195,500 | - | - | 223,500 | |||||||||||||||
Common Stock issued to Investors
|
429,033 | 2,779,555 | - | - | 3,208,588 | |||||||||||||||
Common Stock issued for Debenture Interest
|
14,126 | 202,204 | - | - | 216,330 | |||||||||||||||
Compensation expense related to
|
||||||||||||||||||||
stock awards
|
103,292 | (6,177 | ) | - | (60 | ) | 97,055 | |||||||||||||
BALANCE, at December 31, 2012
|
$ | 1,798,320 | $ | 13,230,111 | $ | (170,125 | ) | $ | (14,450,239 | ) | $ | 408,067 | ||||||||
The accompanying notes are an integral part of these statements.
|
||||||||||||||||||||
MACROSOLVE, INC.
|
||||||||
For the Years Ended December 31,
|
2012
|
2011
|
||||||
OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$ | (1,776,045 | ) | $ | (2,534,414 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
(used in) operating activities:
|
||||||||
Depreciation and amortization
|
517,507 | 243,319 | ||||||
Stock based compensation
|
97,084 | 95,123 | ||||||
Issuance of stock for services
|
223,500 | 746,950 | ||||||
Changes in current assets and liabilities:
|
||||||||
Decrease (increase) in accounts receivable - trade
|
226,620 | (256,666 | ) | |||||
Decrease in inventory
|
- | 11,840 | ||||||
Decrease (increase) in prepaid expenses and other
|
240,795 | (201,906 | ) | |||||
Decrease in note receivable
|
135,577 | - | ||||||
(Decrease) increase in accounts payable - trade and
|
||||||||
accrued liabilities
|
(377,924 | ) | 363,798 | |||||
Increase in accrued debenture interest
|
112,187 | 144,600 | ||||||
Increase in unearned income
|
5,571 | 22,877 | ||||||
Net cash (used in) operating activities
|
(595,128 | ) | (1,364,479 | ) | ||||
INVESTING ACTIVITIES:
|
||||||||
Purchase of equipment
|
(8,580 | ) | (33,775 | ) | ||||
Cash received from sale of Illume Mobile
|
250,000 | - | ||||||
Disposal of equipment
|
4,245 | 237 | ||||||
Software development costs
|
(233,390 | ) | (579,563 | ) | ||||
Patent application fees
|
(4,568 | ) | - | |||||
Net cash provided by (unsed in) investing activities
|
7,707 | (613,101 | ) | |||||
FINANCING ACTIVITIES:
|
||||||||
Net proceeds from debenture financing
|
500,000 | 1,525,000 | ||||||
Common stock issued for debenture conversions
|
- | 150,000 | ||||||
Reduction of accrued debenture interest
|
(233,782 | ) | - | |||||
Common stock issued for accrued debenture interest
|
216,330 | - | ||||||
Proceeds from shareholder loans, including accrued interest
|
769,300 | 398,305 | ||||||
Repayment of shareholder loans, including accrued interest
|
(85,855 | ) | (57,839 | ) | ||||
Shareholder loans converted to debentures
|
(320,000 | ) | - | |||||
Proceeds from sale of common stock
|
250,000 | - | ||||||
Repayments of notes payable
|
(22,500 | ) | (34,176 | ) | ||||
Deferred offering costs
|
- | (17,573 | ) | |||||
Proceeds from bank line of credit
|
- | 300,000 | ||||||
Repayment of bank line of credit
|
(100,000 | ) | (200,000 | ) | ||||
Net cash provided by financing activities
|
973,493 | 2,063,717 | ||||||
NET INCREASE IN CASH
|
386,072 | 86,137 | ||||||
CASH, beginning of period
|
273,132 | 186,995 | ||||||
CASH, end of period
|
$ | 659,204 | $ | 273,132 | ||||
The accompanying notes are an integral part of these statements.
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2012
|
2011
|
|||||||
Hardware
|
$ | 16,197 | $ | 128,990 | ||||
Furniture and fixtures
|
5,454 | 109,413 | ||||||
Office equipment
|
- | 24,904 | ||||||
Leasehold improvements
|
- | 22,669 | ||||||
21,651 | 285,976 | |||||||
Less - accumulated depreciation
|
19,462 | 188,016 | ||||||
$ | 2,189 | $ | 97,960 |
2.
|
MANAGEMENT’S PLAN
|
3.
|
NOTE RECEIVABLE
|
Note receivable at December 31, 2012 and 2011 consist of the following: | 2012 | 2011 | ||||||
Convertible promissory note with a customer negotiated as part of a strategic alliance. Under the Master Services Agreement, customer may borrow up to $150,000 to finance development work with interest accrued monthly at prime rate plus 5% (8.25% at September 30, 2009), due June 30, 2011. The Company has written the note off as uncollectible due to collection costs, its change in focus and the unavailability of key personnel due to the sale of Illume Mobile in July 2012. | $ | - | $ | 135,577 |
4.
|
INVESTMENT IN DECISIONPOINT SYSTEMS, INC.
|
DPSI stock
|
FMV
|
Number of Shares
|
December 31, 2012
|
December 31, 2011
|
||||||||||||
Basis at acquisition July 31, 2012
|
$
|
1.215
|
617,284
|
$
|
750,000
|
-
|
||||||||||
Year ended December 31, 2012
|
$
|
0.940
|
617,284
|
$
|
579,875
|
-
|
||||||||||
Unrealized market loss
|
$
|
170,125
|
-
|
|
5.
|
DEBENTURES AND NOTES PAYABLE
|
Notes payable at December 31, 2012 and 2011 consist of the following: | 2012 | 2011 | ||||||
On February 17, 2012, the Company began offering the Putable-Callable Debenture Series 2012 and Series C Warrants to raise working capital for the expansion of its marketing of products and services. The debentures bear interest at 8% per annum. Each debenture is accompanied by a warrant to purchase, no later than December 31, 2017, common stock equal to 50% of the then unpaid principal amount of the debenture. On that date, the Company sold $500,000 of debentures to four directors who converted $320,000 of short term promissory notes and invested $180,000 in new proceeds. On April 23, 2012, the directors converted $500,000 of debentures and $7,243 in accrued interest to 5,790,452 shares of restricted common stock and 2,500,000 Series C warrants were cancelled. | $ | - | $ | - | ||||
On July 17, 2011, the Company began offering its Convertible Debentures Series 2011 and Series B Warrants to purchase common stock to accredited investors. The Debentures mature on December 31, 2016. The Company has not established a minimum or maximum offering size; its goal is $1,000,000 in aggregate subscriptions exclusive of the exchange of previously issued debentures. The $725,000 proceeds from this offering have been used by the Company for working capital to increase its market share from the sale of mobile apps in dining and other vertical markets and may include working capital for acquired companies. On December 31, 2011, three Directors converted a total of $171,161 in short term promissory notes to the offering. The offering was closed as of December 31, 2011. |
The 2011 Debentures earn interest at the annual rate of 12% which will be paid quarterly exclusively from the Debenture Account at management’s discretion. Principal on the Debentures will be prepaid quarterly as the Debenture Account permits. The Debenture Account will be set up with a financial institution for the deposit of 25% of any recovery it receives from any judgment or settlement in any infringement case or claim it prosecutes. The Debentures may be converted to common stock by the holder into the number of shares that could have been purchased with 200% of the principal amount of the Debenture, together with accrued and unpaid interest and the shares valued using the weighted average price for a five-day trading period preceding the Debenture investment provided however, that the conversion price shall not be less than ten cents per share at any time and the conversion price shall not be more than ten cents per share for investments made prior to October 1, 2011. By resolution of the Board on December 16, 2011, the ten cent conversion price per share was extended to investments made after October 1, 2011. The Investors will also acquire Common Stock Series B Warrants in an amount equal to the shares of common stock that could be purchased at the Debenture conversion price. Each warrant has a term of five years. | ||||||||
During 2012, eighteen of the nineteen investors elected to convert a total of $846,161 Debenture Series 2011 plus Series B Warrants into 16,923,227 shares of common stock. A total of $45,941 in accrued interest on the converted debentures was settled with 459,412 shares of common stock. Accrued interest as December 31, 2012 is $7,200. | $ | 50,000 | $ | 896,161 | ||||
On April 11, 2011, the Company began offering its Convertible Debentures Series 2011 and Series A Warrants to purchase common stock to accredited investors. The Debentures mature on December 31, 2016. The Company has not established a minimum or maximum offering size; its goal is $1,000,000 in aggregate subscriptions exclusive of the exchange of previously issued debentures. The proceeds from this offering will be used by the Company for working capital to increase its market share from the sale of mobile apps in dining and other vertical markets and may include working capital for acquired companies. The offering will continue until December 31, 2011 unless terminated by the Company at an earlier date. The offering was closed on July 13, 2011 with a total of $950,000 in new investments and $725,000 in converted investments. | ||||||||
The 2011 Debentures earn interest at the annual rate of 12% which will be paid quarterly exclusively from the Debenture Account. Principal on the Debentures will be prepaid quarterly as the Debenture Account permits. The Debenture Account will be set up with a financial institution for the deposit of 25% of any recovery it receives from any judgment or settlement in any infringement case or claim it prosecutes. The Debentures may be converted to common stock by the holder into the number of shares that could have been purchased with 200% of the principal amount of the Debenture, together with accrued and unpaid interest and the shares valued using the weighted average price for a five-day trading period preceding the Debenture investment. The Investors will also acquire Common Stock Series A Warrants in an amount equal to the shares of common stock that could be purchased at 50% of the Debenture conversion price. Each warrant has a term of five years. |
During 2012, fifteen of the sixteen investors elected to convert a total of $1,575,000,000 Debenture Series 2011 plus Series A Warrants into 16,831,553 shares of common stock. A total of $179,312 in accrued interest on the converted debentures was settled, $16,167 in cash and $163,145 with 870,543 shares of common stock. Accrued interest as of December 31, 2012 is $18,396. | $ | 100,000 | $ | 1,675,000 | ||||
On November 8, 2010, the Company began selling Convertible Debentures Series 2010 plus Series B Warrants. The Company has not established a minimum or maximum offering size; however, it exceeded its goal of $750,000 in aggregate subscriptions. The debentures accrue interest at 2.0% per annum with interest paid at maturity. The offering was closed on November 17, 2010. | ||||||||
The debentures may be prepaid in full for one hundred and fifty percent (150%) of the face amount of the debenture if notice of prepayment is given by the Company before July 1, 2011. Prepayment may be made in cash or shares of common stock at the election of the Company. If the prepayment is made in shares of common stock the shares will be valued at the volume weighted average price of the shares for the five-day trading period before the notice of prepayment. | ||||||||
The Debentures may be converted into Common Stock by the holders after June 30, 2011, or upon notice of prepayment by the Company if notice is given before that date. Upon conversion the holder will be entitled to receive the number of shares of Common Stock that could be purchased with two hundred percent (200%) of the face amount of the Debentures together with accrued interest and with the Common Stock valued using the weighted average price for the five-day trading period before the notice of conversion. | ||||||||
Investors acquired common stock purchase warrants, designated by the Company as Class B Warrants, in an amount equal to fifty percent (50%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The Warrants have a termination date of December 31, 2015 and have an initial exercise price equal to the weighted average price of the common stock upon grant of the Warrants. | ||||||||
During 2011, eleven of the fifteen investors elected to convert a total of $725,000 Debenture Series 2010 plus Series B Warrants to Debenture Series 2011 and Series A Warrants simultaneously with their purchase of the new offering and three of the investors elected to convert a total of $150,000 debentures into 2,304,203 shares of common stock. During 2012, the remaining investor elected to convert a total of $50,000 Debenture Series 2010 plus Series B Warrants into 940,734 shares of common stock. Accrued interest of $1,285 was settled in full during September, 2012. | $ | - | $ | 50,000 | ||||
Advancing term loan with a financial institution of up to $100,000 with interest only payable monthly at the greater of 5.75% or prime rate plus 1.0% (4.25% at September 30, 2012), until September 2012, and secured by substantially all assets of the company and the personal guarantees of a company director. In exchange for the guaranty, the director receives a $3,000 commitment fee and a five year warrant to purchase $100,000 of stock with a strike price of ten cents ($0.10) per share. The loan was repaid in October 2012 and was not renewed. | $ | - | $ | 100,000 | ||||
Note from the State of Oklahoma Technology Business Finance Program (OTCC loan) represented by a $150,000 refundable award to be repaid at two times the amount of the award. The balance includes accrued interest (imputed at 14.27%), through September 2007. The monthly payments were suspended in October 2008 and resumed in October 2012 in the amount of $7,500 per month. | $ | 215,000 | $ | 237,500 |
2013
|
$ | 90,000 | ||
2014
|
$ | 35,000 | ||
2015
|
$ | 571,752 | ||
2016
|
$ | 150,000 | ||
2017
|
$ | - | ||
Thereafter
|
$ | - | ||
Total
|
$ | 816,752 |
6.
|
SHAREHOLDER LOANS
|
7.
|
EMPLOYEE STOCK PLANS
|
|
Stock Options and Restricted Stock Awards
|
|
The Company adopted the MacroSolve, Inc. Compensation and Stock Option Plan 2008-2010 on December 16, 2008. The Plan includes use of stock options for compensation of officers and directors. At the adoption date, 2,674,420 options which have been approved by shareholders between 2002 and 2005 remained available for use by the Compensation Committee of the Board of Directors. During 2011, 1,761,569 options were issued, respectively, as follows:
|
At Adoption
|
Issued
|
Issued
|
Issued
|
|||||||||||||||||
Date
|
2011
|
2010
|
2009
|
Remaining
|
||||||||||||||||
Incentive Stock Options for Key Managers
|
1,300,000 | (1,076,000 | ) | - | (224,000 | ) | - | |||||||||||||
Director Stock Options
|
400,000 | (80,000 | ) | (160,000 | ) | (160,000 | ) | - | ||||||||||||
Other Awards and Reserves
|
974,420 | (605,569 | ) | (175,000 | ) | (193,851 | ) | - | ||||||||||||
Total
|
2,674,420 | (1,761,569 | ) | (335,000 | ) | (577,851 | ) | - | ||||||||||||
|
The Plan also involves three separate incentive awards: (1) The Employee Bonus awards involve annual (or quarterly) payments of cash or restricted stock for attainment of goals. All employees will participate in the Employee Bonus program; (2) The Management Incentive Stock Option Plan awards involve annual issuance of stock options for attainment of goals. Only officers of the Company will participate in these awards; and, (3) The Senior Executive Incentive Stock Option Plan awards involve issuance of stock options for attainment of specific goals associated with public financing of the Corporation and public trading of its shares. Only the Chairman of the Board and the Chief Executive Officer will participate in these awards. As of December 31, 2012, all awards in the MacroSolve, Inc. Compensation and Stock Option Plan 2008-2010 had been granted. Furthermore, the balance of 536,924 shareholder approved options expired unissued in May 2012.
|
|
On September 23, 2011, shareholders approved 10,000,000 shares of restricted common stock for management incentive plans. On September 23, 2011, the Company adopted the 2011 MacroSolve, Inc. Key Employee Stock Incentive Plan. Subsequently on April 10, 2012, shareholders approved an additional 40,350,000 shares bringing the total to 50,350,000 shares of restricted common stock for management incentive plans. On that date, the Company amended the 2011 Plan to incorporate the increased number of shares. The purpose of this Plan is to provide competitive incentives that will enable the Company to attract, retain, motivate, and reward Key Employees of the Company. The approved shares may be granted as Stock Bonus Awards, Performance Unit Awards, or Restricted Stock Awards, and/or Options, which may be Incentive Stock Options or Non-Statutory Stock Options. During 2012, 27,700,000 options were issued and 17,540,000 were cancelled. During 2011, 4,368,431 options were issued and 4,278,431 were cancelled in 2012, as follows:
|
At Adoption
|
Issued
|
Cancelled
|
Issued
|
Cancelled
|
Remaining
|
|||||||||||||||||||
Date
|
2011
|
2011
|
2012
|
2012
|
||||||||||||||||||||
Beginning Balance
|
10,000,000 |
|
||||||||||||||||||||||
2012 increase
|
40,350,000 | |||||||||||||||||||||||
Director Stock Options
|
(1,720,000 | ) | 1,640,000 | (5,200,000 | ) | 40,000 | ||||||||||||||||||
Incentive Stock Options for Key Managers
|
(2,126,564 | ) | 2,618,431 | (22,500,000 | ) | 17,500,000 | ||||||||||||||||||
Non-Statutory Stock Options for Key Managers
|
(491,867 | ) | - | - | - | |||||||||||||||||||
Incentive Stock Options for Key Employees
|
(30,000 | ) | 20,000 | - | - | |||||||||||||||||||
Ending Balance December 31, 2012
|
50,350,000 | (4,368,431 | ) | 4,278,431 | (27,700,000 | ) | 17,540,000 | 40,100,000 | ||||||||||||||||
|
At the end of the second quarter 2010, employees were granted 941,500 shares of registered compensation shares under the 2010 Employee Bonus award plan. These shares will be distributed on a three year vesting schedule to employees who remain with the Company as of the distribution dates. The Company valued these awards at $942 which was the amount of compensation employees elected to take within 30 days of the grant on 83(b) elections filed with the Internal Revenue Service. The restricted stock award agreements bear a substantial risk of forfeiture by the employee in the event of their voluntary termination. Since grant, 213,166 shares have been forfeited by terminated employees. On July 12, 2012, 228,585 shares vested to twelve employees. On July 12, 2011, 271,168 shares vested to fourteen employees. Remaining unvested shares are 228,581 which will vest on July 12, 2013.
|
|
Prior to going public, the company used the calculated value method to account for the options. Under this method, a nonpublic entity that is unable to estimate the expected volatility of the price of its underlying share may measure awards based on a “calculated value,” which substitutes the volatility of an appropriate index for the volatility of the entity’s own share price. Although the Company became publicly traded in August 2008, the stock has been subject to significant swings in trading volume and periods of thin trading; therefore, management determined it was unable to estimate the expected volatility of the stock price. In addition, management has not been able to identify a similar publicly held entity that can be used as a benchmark. Therefore, as a substitute for volatility, the Company used the historical volatility of the Technology Select Sector (XLK) index which is representative of the Company’s industry. The Company has used the historical closing values of that index to estimate volatility for the valuation of options in 2012 and 2011.
|
Stock Options | Restricted
Stock
|
|||||||||||
Options
|
Weighted
Average
Exercise Price
|
Shares
|
||||||||||
Outstanding – December 31, 2011
|
11,829,507 | $ | 0.52 | 2,990,356 | ||||||||
Exercisable – December 31, 2011
|
5,801,057 | $ | 0.52 | - | ||||||||
Granted
|
27,700,000 | $ | 0.26 | 8,684,293 | ||||||||
Exercised or Vested
|
(211,600 | ) | $ | 0.64 | (7,409,485 | ) | ||||||
Forfeited or Expired
|
(24,087,804 | ) | $ | 0.33 | (30,000 | ) | ||||||
Outstanding – December 31, 2012
|
15,441,703 | $ | 0.35 | 4,235,164 | ||||||||
Exercisable – December 31, 2012
|
5,394,503 | $ | 0.51 | - |
Stock Options | ||||||||||||
Nonvested Shares
|
Options
|
Weighted-
Average Grant
Date.Calculated Value
|
Restricted
Stock
|
|||||||||
Nonvested - Beginning of Year 2012
|
6,028,450 | $ | - | 2,990,356 | ||||||||
Granted
|
27,700,000 | $ | - | 8,684,293 | ||||||||
Vested
|
(211,600 | ) | $ | - | (7,409,485 | ) | ||||||
Forfeited
|
(23,469,650 | ) | $ | - | ( 30,000 | ) | ||||||
Nonvested- End of Year 2012
|
10,047,200 | $ | - | 4,235,164 |
8.
|
COMMON STOCK WARRANTS
|
|
|
Investors in the 2011 Convertible Debenture plus Series A Warrants acquired 18,475,927 common stock purchase warrants, in an amount equal to one hundred percent (100%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The Warrants remain outstanding and expire on December 31, 2016 and bear strike prices ranging from $0.063 to $0.109.
|
|
Investors in the Convertible Debentures Series 2010 plus Series B Warrants acquired 1,535,160 common stock purchase warrants, designated by the Company as Class B Warrants, in an amount equal to fifty percent (50%) of the shares of common stock that would be issued upon conversion of the Debentures upon issue. The warrants expire on December 31, 2015 and bear strike prices ranging from $0.26180 to $0.32972. In 2011, eleven of the original fifteen investors elected to convert their investment to the convertible Debenture Series 2011 plus Series A Warrant, and as a result 1,191,569 of these warrants were cancelled and 343,591 remaining outstanding.
|
|
The Company engaged a financial advisory firm in 2011 and three of their associates received warrants to purchase an aggregate of 1,050,000 shares of common stock at a strike price of $.115. The warrants remain outstanding and will expire October 31, 2015.
|
|
In September 2011, the company placed a $100,000 credit facility with a bank, secured by the personal guarantee on one director. In exchange for the guaranty, the director received a warrant to purchase 1,000,000 shares of common stock at a strike price of $0.10. The warrant remains outstanding and will expire on September 30, 2015.
|
|
|
|
The following table summarizes information about outstanding warrants at December 31, 2012:
|
Year Issued
|
Number
Outstanding
|
Remaining Contractual Life in Years
|
Number Currently Exercisable
|
Weighted Average Exercise
Price
|
||||||||||||
2009
|
21,682,372
|
1.6
|
21,682,372
|
$
|
0.10
|
|||||||||||
2010
|
10,236,227
|
2.0
|
10,236,227
|
$
|
0.10
|
|||||||||||
2011
|
29,680,086
|
3.8
|
29,680,086
|
$
|
0.10
|
|||||||||||
2012
|
2,500,000
|
5.0
|
2,500,000
|
$
|
0.15
|
|||||||||||
Total
|
64,098,685
|
3.1
|
64,098,685
|
$
|
0.10
|
|
The Company issued a total of 22,362,715 common shares and cancelled a total of 62,666 in the quarter ended March 31, 2012, described further as follows:
|
|
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 363,635 shares of restricted stock on January 1, 2012 for their fourth quarter 2011 compensation.
|
|
|
The Company issued 3,120,833 shares of common stock to management employees in lieu of $171,646 cash compensation for services rendered in the fourth quarter of 2011 which had been recorded at a value of $3,121 in stock based compensation based upon individual tax elections made by each recipient. The shares vest six months after issuance and are subject to forfeiture upon voluntary termination of employment. During the first quarter of 2012, 62,666 compensation shares previously issued for services were forfeited.
|
|
The Company issued 1,850,000 shares of restricted stock to its national public relations firm in exchange for $168,500 in services to be rendered from February 7, 2012 to August 7, 2012. Of the total shares, 1,350,000 serve as a retainer and the balance of 500,000 are earned 100,000 per month.
|
|
The Company issued 2,250,000 shares of restricted stock in a 2012 Private Stock Sale to five qualified investors for $225,000. The shares were accompanied by an equal number of warrants with a $0.15 strike price and termination date of December 31, 2017.
|
|
During the first quarter of 2012, six of the nineteen investors elected to convert a total of $325,000 Debenture Series 2010 plus Series B Warrants into 6,500,000 shares of common stock. . A total of $17,909 in accrued interest on the converted debentures was settled with 179,097 shares of common stock.
|
|
During the first quarter of 2012, five of the sixteen investors elected to convert a total of $650,000 Debenture Series 2010 plus Series B Warrants into 6,884,791 shares of common stock. A total of $68,046 in accrued interest on the converted debentures was settled, $16,167 in cash and $51,879 with 273,625 shares of common stock.
|
|
During the first quarter of 2012, the remaining investor elected to convert a total of $50,000 Debenture Series 2010 plus Series B Warrants into 940,734 shares of common stock.
|
|
The Company issued a total of 30,265,835 common shares in the quarter ended June 30, 2012, described further as follows:
|
|
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 194,175 shares of restricted stock on April 1, 2012 for their first quarter 2012 compensation.
|
|
|
The Company issued 1,783,986 shares of common stock to management employees in lieu of $173,750 cash compensation for services rendered in the first quarter of 2012 which had been recorded at a value of $17,840 in stock based compensation based upon individual tax elections made by each recipient. The Company issued 50,000 shares of common stock as a bonus to the Vice President of Operations which was recorded at a value of $500 in stock based compensation based upon the individual’s tax election. The shares vest six months after issuance and are subject to forfeiture upon voluntary termination of employment.
|
|
The Company issued 750,000 shares of restricted stock to a financial advisory firm in exchange for $45,000 in services to be rendered from May 10, 2012 to October 18, 2012. The agreement calls for an additional payment of 750,000 shares of restricted stock in the event the Company files another form S-1. The Company issued 200,000 shares of restricted stock to its securities law firm in exchange for $10,000 in additional services.
|
|
The Company issued 250,000 shares of restricted stock in a 2012 Private Stock Sale to one qualified investor for $25,000. The shares were accompanied by an equal number of warrants with a $0.15 strike price and termination date of December 31, 2017.
|
|
During the second quarter of 2012, twelve of the nineteen investors elected to convert a total of $521,161 Debenture Series 2011 plus Series B Warrants into 10,423,227 shares of common stock. . A total of $28,031 in accrued interest on the converted debentures was settled with 280,315 shares of common stock.
|
|
During the second quarter of 2012, ten of the sixteen investors elected to convert a total of $925,000 Debenture Series 2011 plus Series A Warrants into 9,946,762 shares of common stock. A total of $111,266 in accrued interest on the converted debentures was settled with 596,918 shares of common stock.
|
|
During the second quarter of 2012, all four investors elected to convert a total of $500,000 Debenture Series 2012 plus Series C Warrants into 5,707,764 shares of common stock. A total of $7,243 in accrued interest on the converted debentures was settled with 82,688 shares of common stock.
|
|
The Company issued a total of 3,515,105 common shares in the quarter ended September 30, 2012, described further as follows:
|
|
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 280,700 shares of restricted stock on July 1, 2012 for their second quarter 2012 compensation.
|
|
|
The Company issued 3,234,405 shares of common stock to management employees in lieu of $141,938 cash compensation for services rendered in the second quarter of 2012 which had been recorded at a value of $2,713.17 in stock based compensation based upon individual tax elections made by each recipient. The shares vest six months after issuance and are subject to forfeiture upon voluntary termination of employment.
|
|
The Company issued a total of 1,364,132 common shares in the quarter ended December 31, 2012, described further as follows:
|
|
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the directors 347,828 shares of restricted stock on October 1, 2012 for their third quarter 2012 compensation.
|
|
10.
|
EARNINGS (LOSS) PER SHARE
|
|
The Company has calculated the loss allocable to the common shareholders for the 2012 and 2011 as follows:
|
|
||||||||
2012
|
2011
|
|||||||
Numerator:
|
||||||||
Net Loss
|
$ | (1,776,045 | ) | $ | (2,534,414 | ) | ||
Numerator for basic and diluted
|
$ | (1,776,045 | ) | $ | (2,534,414 | ) | ||
Denominator:
|
||||||||
Weighted-average number of
|
||||||||
common shares outstanding
|
166,118,472 | 108,447,365 | ||||||
$ | (0.01 | ) | $ | (0.02 | ) |
11.
|
INCOME TAXES
|
|
At December 31, 2012 and 2011, the components of the Company’s net deferred taxes are as follows:
|
2012
|
2011
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carry forwards
|
$ | 5,191,000 | $ | 2,459,000 | ||||
Stock-based compensation
|
84,000 | 98,000 | ||||||
Total deferred tax assets
|
$ | 5,275,000 | 2,557,000 | |||||
Valuation allowance
|
(5,270,000 | ) | (1,977,000 | ) | ||||
Net deferred tax assets
|
5,000 | 580,000 | ||||||
Deferred tax liabilities:
|
||||||||
Property, equipment and software
|
||||||||
development costs
|
5,000 | 580,000 | ||||||
Total deferred tax liabilities
|
5,000 | 580,000 | ||||||
Net deferred tax asset
|
$ | - | $ | - |
|
At December 31, 2012 and 2011, the Company had approximately $13,757,000 and $12,089,000, respectively, of net operating loss carryforwards, which begin expiring in 2023. Realization of the deferred tax asset is dependent on generating sufficient future taxable income. A valuation allowance on the net deferred tax asset has been provided due to the uncertainty of future taxable income.
|
12.
|
401(k) PLAN
|
13
|
.RELATED PARTY TRANSACTION
|
|
There were no related party transactions other than the shareholder loans discussed in footnote six and conveyance of MoBiz360 discussed in footnote one, Software Development Costs.
|
14
|
.COMMITMENTS AND CONTINGENCIES
|
|
At December 31, 2012, the Company has no obligation under any operating leases.
|
15
|
.CONCENTRATIONS
|
|
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade receivables. The Company performs ongoing credit evaluations of its customers and generally does not require collateral related to its receivables. At December 31, 2012, accounts receivable from three patent licensees comprised approximately 74% of the Company’s total accounts receivable-trade. Revenues from twenty-eight customers approximated 77% of total revenues for 2012. At December 31, 2011, accounts receivable from seven customers comprised approximately 87% of the Company’s total accounts receivable – trade. Revenues from twelve customer approximated 79% of total revenues for 2011.
|
16.
|
DISCONTINUED OPERATIONS PURSUANT TO THE SALE OF ILLUME MOBILE ASSETS
|
17.
|
SUBSEQUENT EVENTS
|
|
The Company’s independent directors annual compensation is $16,000 to be paid quarterly in restricted stock. The Company issued the two directors a total of 423,280 shares of restricted stock on January 1, 2013 for their fourth quarter 2012 compensation. The Company recorded $4,000 in stock based compensation for each of its two independent directors.
|
18.
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
2012 |
2011
|
||||||
Interest
|
$ | 54,932 | $ | 20,789 | ||||
Income taxes
|
$ | - | $ | - | ||||
Noncash investing and financing activities for the years ended December 31:
|
||||||||
2012 | 2011 | |||||||
Stock based compensation
|
$ | 97,084 | $ | 95,123 | ||||
Stock issued for services
|
$ | 223,500 | $ | 746,950 | ||||
Stock issued for debenture interest
|
$ | 216,330 | $ | 50,000 | ||||
Stock received from DecisionPoint Systems
|
||||||||
for sale of Illume Mobile assets, less unrealized
|
||||||||
accumulated market loss of $170,125
|
$ | 579,875 | $ | - | ||||
Debentures converted to common stock
|
$ | 2,471,161 | $ | 150,000 | ||||
1.
|
I have reviewed this annual report on Form 10-K of MacroSolve, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(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 consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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; and
|
(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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; 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.
|
1.
|
I have reviewed this annual report on Form 10-K of MacroSolve, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(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 consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this 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; and
|
(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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; 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.
|
By:
|
/s/ JAMES C. McGILL
|
|||
Date: March 5, 2013
|
Name:
|
James C. McGill
|
||
Title:
|
Chief Executive Officer
|
By:
|
/s/ KENDALL CARPENTER
|
|||
Date: March 5, 2013
|
Name:
|
Kendall Carpenter
|
||
Title:
|
Chief Financial Officer
|
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals 3) (USD $)
|
12 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2012
Patents
|
Dec. 31, 2011
Patents
|
Dec. 31, 2012
Mobiz 360
|
Jul. 31, 2012
Decision Point System
|
Dec. 31, 2012
Illume Mobile Development
|
Dec. 31, 2011
Illume Mobile Development
|
|
Finite-Lived Intangible Assets [Line Items] | ||||||||
Amortization period | 3 years | |||||||
Capitalized computer software, gross | $ 1,213,550 | |||||||
Amortization expenses of capitalized computer software | 194,070 | |||||||
Capitalized computer software, net | 293,000 | 1,019,480 | ||||||
Amortization of capitalized computer software | $ 500,910 | $ 215,845 | $ 2,814 | $ 2,814 | $ 337,059 | $ 161,037 | $ 213,031 |
EMPLOYEE STOCK PLANS - Summary of options issued (Details 1)
|
12 Months Ended | 12 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2010
|
Dec. 31, 2009
|
Dec. 31, 2012
Stock Options
|
Dec. 31, 2011
Stock Options
|
May 31, 2012
Stock Options
|
Dec. 16, 2008
Stock Options
|
Dec. 31, 2012
Stock Options
Director
|
Dec. 31, 2011
Stock Options
Director
|
Dec. 31, 2012
Non-Statutory Stock Options
Key Managers
|
Dec. 31, 2011
Non-Statutory Stock Options
Key Managers
|
Dec. 31, 2012
Incentive Stock Options
Key Managers
|
Dec. 31, 2011
Incentive Stock Options
Key Managers
|
Dec. 31, 2012
Incentive Stock Options
Key Employees
|
Dec. 31, 2011
Incentive Stock Options
Key Employees
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of shares approved | 50,350,000 | 536,924 | 10,000,000 | |||||||||||
Additional number of shares approved | 40,350,000 | |||||||||||||
Number of options issued | (335,000) | (577,851) | (27,700,000) | (4,368,431) | (5,200,000) | (1,720,000) | (491,867) | (22,500,000) | (2,126,564) | (30,000) | ||||
Number of options cancelled | 17,540,000 | 4,278,431 | 40,000 | 1,640,000 | 17,500,000 | 2,618,431 | 20,000 | |||||||
Remaining number of shares | 40,100,000 |
DEBENTURES AND NOTES PAYABLE (Parenthetical 1) (Details) (USD $)
|
3 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
Debenture Series 2011 Plus Series B Warrants
Investor
|
Dec. 31, 2012
Debenture Series 2011 Plus Series B Warrants
Investor
|
Jul. 13, 2011
Convertible Debentures Series 2011 and Series A Warrants
|
Apr. 11, 2011
Convertible Debentures Series 2011 and Series A Warrants
|
Dec. 31, 2011
2011 Debentures
|
Dec. 31, 2011
2011 Debenture
|
Jul. 17, 2011
Convertible Debentures Series 2011 and Series B Warrants
Director
|
Dec. 31, 2011
Convertible Debentures Series 2011 and Series B Warrants
|
|
Debt Instrument [Line Items] | ||||||||
Rate of interest on debentures | 12.00% | 12.00% | ||||||
Conversion of short term promissory notes | $ 846,161 | $ 171,161 | ||||||
Original debt converted into common stock | 16,923,227 | |||||||
Number of total investors | 19 | |||||||
Exchange of previously issued debentures | 1,000,000 | 1,000,000 | ||||||
Percentage of recovery from settlement | 25.00% | 25.00% | ||||||
Percentage of principal amount of debenture | 200.00% | 200.00% | ||||||
Number of trading period | 5 days | 5 days | ||||||
Term period of warrant | 5 years | 5 years | ||||||
Converted investments | 725,000 | |||||||
New proceeds | 950,000 | 725,000 | ||||||
Debt instrument convertible, interest expense settlement (in shares) | 280,315 | 459,412 | ||||||
Percentage on conversion price | 50.00% | 50.00% | ||||||
Number of directors | 3 | |||||||
Number of investors elected to convert debentures into common stock | 12 | 18 | ||||||
Accrued interest on converted debentures | 45,941 | |||||||
Accrued interest | $ 7,200 |
SHAREHOLDERS' EQUITY (Detail Textuals 2) (USD $)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common Stock issued to Investors | $ 3,208,588 | $ 150,000 |
Cash compensation for shares issued for services | 223,500 | 746,950 |
Restricted Stock
|
||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued for services | 1,908,602 | |
Cash compensation for shares issued for services | 35,500 | |
National Public Relations Firm | Restricted Stock
|
||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued for services | 1,850,000 | |
Cash compensation for shares issued for services | $ 168,500 | |
Number of shares serve as retainer | 1,350,000 | |
Number of shares balanced, issued for services | 500,000 | |
Number of shares issued for services per month | 100,000 |
INCOME TAXES - Summary of components of the company's net deferred taxes (Details) (USD $)
|
Dec. 31, 2012
|
Dec. 31, 2011
|
---|---|---|
Deferred tax assets: | ||
Net operating loss carry forwards | $ 5,191,000 | $ 2,459,000 |
Stock-based compensation | 84,000 | 98,000 |
Total deferred tax assets | 5,275,000 | 2,557,000 |
Valuation allowance | (5,270,000) | (1,977,000) |
Net deferred tax assets | 5,000 | 580,000 |
Deferred tax liabilities: | ||
Property, equipment and software development costs | 5,000 | 580,000 |
Total deferred tax liabilities | 5,000 | 580,000 |
Net deferred tax asset |
DEBENTURES AND NOTES PAYABLE - Aggregate minimum maturities of notes payable (Details 1) (USD $)
|
Dec. 31, 2012
|
Dec. 31, 2011
|
---|---|---|
Debt Disclosure [Abstract] | ||
2013 | $ 90,000 | |
2014 | 35,000 | |
2015 | 571,752 | |
2016 | 150,000 | |
2017 | ||
Thereafter | ||
Total long-term debt, less current maturities | $ 816,752 | $ 2,858,661 |
INCOME TAXES (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of the Company's net deferred taxes |
|
INCOME TAXES (Detail Textuals) (USD $)
|
Dec. 31, 2012
|
Dec. 31, 2011
|
---|---|---|
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 13,757,000 | $ 12,089,000 |
EMPLOYEE STOCK PLANS (Detail Textuals)
|
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2011
|
Dec. 31, 2010
|
Dec. 31, 2009
|
Dec. 16, 2008
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares issued | (335,000) | (577,851) | ||
Compensation and Stock Option Plan 2008-2010
|
||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares approved | 2,674,420 | |||
Number of shares issued | (1,761,569) | (335,000) | (577,851) |
SHAREHOLDERS' EQUITY (Detail Textuals 8) (USD $)
|
12 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | |||||
---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2012
Restricted Stock
|
Oct. 31, 2012
Restricted Stock
Director
|
Jul. 31, 2012
Restricted Stock
Director
|
Mar. 31, 2012
Restricted Stock
Director
|
Dec. 31, 2012
Restricted Stock
Director
|
Sep. 30, 2012
Common Stock
Management
|
Jun. 30, 2012
Common Stock
Management
|
Dec. 31, 2011
Common Stock
Management
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Independent directors annual compensation to be paid quarterly | $ 16,000 | |||||||||
Number of shares issued for compensation | 347,828 | 280,700 | 194,175 | |||||||
Stock based compensation | 83,872 | 97,506 | 3,121 | |||||||
Number of shares issued for services | 1,908,602 | 1,016,304 | 3,234,405 | 3,120,833 | ||||||
Cash compensation for shares issued for services | 223,500 | 746,950 | 35,500 | 46,750 | 141,938 | 171,646 | ||||
Stock based compensation based upon individual tax elections by each recipient | $ 16,000 | $ 1,016.30 | $ 2,713.17 | |||||||
Vesting period | 6 months |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Parenthenticals) (Details) (USD $)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Supplemental Cash Flow Elements [Abstract] | ||
Unrealized accumulated market loss | $ (170,125) |
COMMITMENTS AND CONTINENGENCIES (Detail Textuals) (USD $)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 110,462 | $ 149,536 |
EARNINGS (LOSS) PER SHARE - Summary of loss allocable to the common shareholders (Details) (USD $)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Numerator: | ||
Net Loss | $ (1,776,045) | $ (2,534,414) |
Numerator for basic and diluted | $ (1,776,045) | $ (2,534,414) |
Denominator: | ||
Weighted-average number of common shares outstanding (in shares) | 166,118,472 | 108,447,365 |
Earnings per share, basic and diluted (in dollars per share) | $ (0.01) | $ (0.02) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. |
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Segment Reporting | Segment Reporting
The Company has determined it has one reporting unit. |
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Cash Equivalents | Cash Equivalents
Cash equivalents are represented by operating accounts or money market accounts maintained with insured financial institutions.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable and Credit Policies | Accounts Receivable and Credit Policies
Trade accounts receivable consist of amounts due from the sale of solution services and software licenses. Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days of receipt of the invoice. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts based on historical collection experience and a review of the current status of trade accounts receivable. At December 31, 2012 and 2011, the Company deems all amounts recorded as collectible and, thus has not provided an allowance for uncollectible amounts. |
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Property and Equipment | Property and Equipment
Property and equipment is recorded at cost when acquired. Depreciation is provided principally on the straight-line method over the estimated useful lives of the related assets, which is 3-7 years for equipment, furniture and fixtures, hardware and software. Leasehold improvements are being amortized over a 7 year estimated useful life. A majority of the company’s fixed assets were associated with Illume Mobile, a division which was sold to DecisionPoint Systems, Inc. on July 31, 2012. Property and equipment consists of the following at December 31, 2012 and 2011:
Expenditures for maintenance and repairs are charged to expense as incurred, whereas expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. |
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Revenue Recognition and Unearned Revenue | Revenue Recognition and Unearned Revenue
Revenues from intellectual property licenses are recognized upon receipt. When intellectual property licenses are received under a contingent fee agreement with the law firm of Antonelli, Harrington & Thompson LLP, the applicable contingent legal expense is recorded as a cost of sale. In the event a non-exclusive intellectual property license is granted within the scope of a contracted project, ten percent (10%) of the contract amount is deemed to be payment for the license. Revenue from software product licensing is recognized ratably over the license period. Unearned income associated with Illume Mobile contracts of $36,971 was transferred to DecisionPoint Systems as part of the Illume Mobile asset sale in July 2012. The $500,000 in unearned income at December 31, 2012 consists of the total potential earn-out payment from DecisionPoint Systems from the sale of Illume Mobile assets.
Solution services revenues, including advisory services, consist primarily of professional services contracted to third party customers or clients under contract for specific projects. Contracted projects that are fixed price are accounted for under the percentage-of-completion method of accounting. Revenue from contracted projects that are for provision of services is recognized at the time the service is provided. The Company no longer offers solutions services after the sale of Illume Mobile in July 2012. |
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Software Development Costs | Software Development Costs
The Company accounts for software development costs in accordance with ASC 985-20, “Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”. Costs incurred prior to the establishment of technological feasibility are expensed as incurred as research and development costs. Costs incurred after establishing technological feasibility and before the product is released for sale to customers are capitalized. These costs are amortized over three years and are reviewed for impairment at each period end. The Company sold a total of $1,213,550 in gross capitalized software development costs and associated $194,070 in accumulated amortization, or a net of $1,019,480, to DecisionPoint Systems in July 2012. Amortization expense in 2012 totaled $500,910 and consisted of $161,037 in Illume Mobile development costs, $2,814 in patent costs and $337,059 related to Mobiz360, including a one-time amortization of $293,000 net capitalized development costs, In May 2012, MoBiz360, an incomplete prototype website marketplace, was conveyed to Clint Parr, our former president and CEO, as consideration for an undetermined equity interest in Mr. Parr’s new company. As of December 31, 2012, Mr. Parr’s new company is still not operational. At such time as it becomes operational, we will record the value of our investment associated with the conveyance of MoBiz360. Amortization expense in 2011 totaled $215,845 and consisted of $213,031 in Illume Mobile development costs and $2,814 in patent costs. The Company is not presently developing software. |
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Income Taxes Costs | Income Taxes Costs
The Company accounts for income taxes utilizing ASC 740, “Income Taxes” (SFAS No. 109). SFAS No. 109 requires the measurement of deferred tax assets for deductible temporary differences and operating loss carryforwards, and of deferred tax liabilities for taxable temporary differences. Measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax law. The effects of future changes in tax laws or rates are not included in the measurement. The Company recognizes the amount of taxes payable or refundable for the current year and recognizes deferred tax liabilities and assets for the expected future tax consequences of events and transactions that have been recognized in the Company’s financial statements or tax returns. The Company currently has substantial net operating loss carryforwards. The Company has recorded a 100% valuation allowance against net deferred tax assets due to uncertainty of their ultimate realization. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. |
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Stock-Based Compensation: | Stock-Based Compensation:
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.
The Company uses the Black-Sholes model for determining the value of the options. One of the factors required to compute the options price is volatility of the stock price. The Company’s own stock commenced public trading in August, 2008; however due to initially thin trading activity, management determined that the technology sector fund XLK and it’s standard deviation would continue to be used to provide the volatility factor required to compute the option value. |
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Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Fair value of financial instruments | Fair value of financial instruments
The carrying amount of cash and cash equivalents approximates fair value due to the short-term maturity of these instruments. The carrying amounts of accounts receivable and accounts payable approximate fair value due to their short maturities. The carrying value of the Company’s convertible debentures approximates fair value since the interest rate is stated in the instrument. Management believes that the carrying value of the Company's borrowings approximate fair value based on credit terms currently available for similar debt. |
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Long-Lived Assets | Long-Lived Assets
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, “Impairment or Disposal of Long-lived Assets”. This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment charges were incurred during the periods ended December 31, 2012 and 2011. |
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Impact of Recently Issued Accounting | Impact of Recently Issued Accounting
In October 2012, the FASB issued Accounting Standards Update No. 2012-04, “Technical Corrections and Improvements” which makes technical corrections and improvements to a variety of topics in the Codification. The changes include source literature amendments, guidance clarification, reference corrections and relocated guidance. The ASU also includes amendments to the codification to reflect ASC 820’s fair value measurement and disclosure requirements. The Company is currently evaluating the update which is effective for fiscal periods beginning after 15 December 2012, but does not expect it to have a material effect on our financial statements.
In December 2011, the FASB issued Accounting Standards Update No. 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities.” The Boards initially proposed a joint model describing when it is appropriate to offset financial assets and liabilities on the balance sheet that would have been close to the more restrictive IFRS approach, but instead decided to focus on developing common disclosure requirements. New disclosures are required to enable users of financial statements to understand significant quantitative differences in balance sheets prepared under US GAAP and IFRS related to the offsetting of financial instruments. The existing US GAAP guidance allowing balance sheet offsetting, including industry-specific guidance, remains unchanged. The Company does not offset financial instruments and therefore does not expect the adoption of ASU 2011-11 to have a material effect on our financial statements. In January 2013, ASU 2013-013, “Balance Sheet (Topic 210), “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” was issued by the FASB. The ASU addresses offsetting derivative assets and liabilities and will affect comparative financial statements as disclosures will be applied retrospectively. The ASU is effective for fiscal years beginning on or after January 1, 2013 with no early adoption. The Company is currently evaluating the affect but does not anticipate it having a material effect on our financial statements.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income”. In December 2011, the FASB issued Accounting Standards Update No. 2011-12 deferring the effective date of ASU 2011-05. ASU 2022-05 amends the guidance in ASC 220 “Comprehensive Income” by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now requires entities to present all non owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. In February 2013, the FASB issued Accounting Standards Update No. 2013-02, “Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, effective for periods beginning after December 15, 2012. The Company is currently evaluating the update but does not expect it have a material effect on our financial statements.
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement”. This guidance amends the application of the “highest and best use” concept to be used only in the measurement of fair value of nonfinancial assets, clarifies that the measurement of the fair value of equity-classified financial instruments should be performed from the perspective of a market participant who holds the instrument as an asset, clarifies that an entity that manages a group of financial assets and liabilities on the basis of its net risk exposure can measure those financial instruments on the basis of its net exposure to those risks, and clarifies when premiums and discounts should be taken into account when measuring fair value. The fair value disclosure requirements also were amended. |
DEBENTURES AND NOTES PAYABLE (Parenthetical 3) (Details) (USD $)
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Interest Rate Calculation Greater Of [Abstract] | |
Strike price of warrants | 0.10 |
Advancing term loan with a financial institution
|
|
Debt Instrument [Line Items] | |
Advancing term loan | $ 100,000 |
Interest Rate Calculation Greater Of [Abstract] | |
Increase accrued interest rate | 5.75% |
Description of variable rate basis | prime rate plus 1.0% |
Basis spread on variable rate | 1.00% |
Rate charged on interest payable on loan | 4.25% |
Commitment fee amount | 3,000 |
Term period of warrant | 5 years |
Purchase of stock | $ 100,000 |
Strike price of warrants | 0.10 |
NOTE RECEIVABLE - Summary of note receivable (Parentheticals) (Details) (Convertible Promissory Note Receivable, USD $)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Sep. 30, 2009
|
|
Convertible Promissory Note Receivable
|
||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Borrowing limit | $ 150,000 | |
Description of interest rate | prime rate plus 5% | |
Basis spread on interest rate | 5.00% | 8.25% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals 1)
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Accounting Policies [Abstract] | |
Period of threshold limit for payment | 30 days |
Percentage of contract amount for payment for license | 10.00% |
Amortization period | 3 years |
Percentage of valuation allowance | 100.00% |
SHAREHOLDER LOAN (Detail Textuals) (Shareholder Loan, USD $)
|
1 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|---|---|
Jul. 31, 2012
Promissory Note
Director
|
Jun. 30, 2012
Promissory Note
Director
|
May 31, 2012
Promissory Note
Director
|
Sep. 30, 2012
Promissory Note
|
Dec. 31, 2012
Advancing Term Loan
Director
|
Dec. 31, 2011
Advancing Term Loan
Director
|
Sep. 30, 2012
New Promissory Notes
Director
|
Dec. 31, 2012
New Promissory Notes
|
|
Debt Instrument [Line Items] | ||||||||
Number of directors | 3 | 4 | 4 | 2 | 2 | 4 | ||
Total amount loaned by directors to the company for working capital | $ 50,000 | $ 449,300 | $ 449,300 | $ 533,681 | ||||
Amount owed by directors for guaranteeing advancing term loans | 9,000 | 9,000 | ||||||
Percentage of patent settlement license fees | 75.00% | 75.00% | ||||||
Percentage of accrued interest payable | 12.00% | 6.00% | ||||||
Accrued interest | $ 25,381 | $ 8,071 |
COMMON STOCK WARRANTS (Detail Textuals 3) (USD $)
|
Dec. 31, 2012
|
Sep. 30, 2011
Warrant
Credit facility
Director
|
---|---|---|
Class of Warrant or Right [Line Items] | ||
Amount of credit facility | $ 100,000 | |
Number of common stock called by warrants | 1,000,000 | |
Strike price of warrants | 0.10 | 0.10 |
EMPLOYEE STOCK PLANS (Detail Textuals 4) (USD $)
|
12 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2010
|
Dec. 31, 2009
|
Dec. 31, 2012
Increment One
Directors and Management
|
Dec. 31, 2012
Increment Two
Directors and Management
|
Dec. 31, 2012
Increment Three
Directors and Management
|
Dec. 31, 2012
Stock Options
|
Dec. 31, 2011
Stock Options
|
Dec. 31, 2012
Stock Options
Directors and Management
|
Dec. 31, 2012
Stock Options
Director
|
Dec. 31, 2011
Stock Options
Director
|
Dec. 31, 2012
Stock Options
Employees
|
Dec. 31, 2012
Stock Options
Directors for Annual Board Service
|
Dec. 31, 2012
Stock Options
Related Party
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||
Number of options issued | (335,000) | (577,851) | (27,700,000) | (4,368,431) | 10,000,000 | (5,200,000) | (1,720,000) | 10,000 | 160,000 | 27,700,000 | |||
Number of options cancelled | 17,540,000 | 4,278,431 | 40,000 | 1,640,000 | |||||||||
Exercise price, lower range | $ 0.125 | $ 0.25 | $ 0.40 | $ 0.10 | |||||||||
Exercise price, upper range | $ 0.25 | $ 0.40 | $ 0.60 | ||||||||||
Number of trading days | 5 days | ||||||||||||
Number of shares issued | (335,000) | (577,851) | |||||||||||
Vesting period | 5 years |
DEBENTURES AND NOTES PAYABLE (Parenthetical) (Details) (USD $)
|
1 Months Ended | 3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Apr. 23, 2012
Putable Callable Debenture Series 2012 and Series C Warrants
|
Feb. 17, 2012
Putable Callable Debenture Series 2012 and Series C Warrants
Director
|
Jun. 30, 2012
Debenture Series 2011 Plus Series A Warrants
Investor
|
Dec. 31, 2012
Debenture Series 2011 Plus Series A Warrants
Investor
|
Dec. 31, 2011
Debenture Series 2011 Plus Series A Warrants
Investor
|
|
Debt Instrument [Line Items] | |||||
Rate of interest on debentures | 8.00% | ||||
Percentage common stock issued upon conversion | 50.00% | ||||
Number of directors | 4 | ||||
Debentures sold to directors | $ 500,000 | ||||
Conversion of short term promissory notes | 320,000 | 1,575,000,000 | |||
Original debt converted into common stock | 16,831,553 | ||||
New proceeds | 180,000 | ||||
Shares issued for conversion of debenture and warrants (in shares) | 5,790,452 | 500,000 | 596,918 | 870,543 | |
Stock issued for settlement of debt instrument convertible, accrued interest | 7,243 | 111,266 | 179,312 | ||
Number of warrants cancelled | 2,500,000 | 1,191,569 | |||
Number of total investors | 16 | 15 | |||
Number of investors elected to convert debentures into common stock | 10 | 15 | 11 | ||
Accrued interest on converted debentures settlement with cash | 16,167 | ||||
Accrued interest on converted debentures other than cash settlement | 163,145 | ||||
Accrued interest | $ 18,396 |
NOTE RECEIVABLE
|
12 Months Ended | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | ||||||||||||||||||||||||||||||
NOTE RECEIVABLE |
|
EMPLOYEE STOCK PLANS (Detail Textuals 5) (USD $)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract] | ||
Weighted-average grant-date value | $ 0 | $ 0 |
Intrinsic value of options outstanding | $ 0 | |
Weighted-average remaining contractual term of options outstanding | 2 years 2 months 12 days | |
Intrinsic value of options exercisable | 0 | |
Weighted-average remaining contractual term of options exercisable | 2 years | |
Unrecognized compensation cost | $ 0 | |
Weighted-average remaining vesting period | 2 years 10 months 24 days |