ORGANIZATION AND BASIS OF PRESENTATION (Policies)

6 Months Ended

Jun. 30, 2014

ORGANIZATION AND BASIS OF PRESENTATION

Certain prior year amounts have been reclassified to conform to the current year presentation.

Revenue is recognized when all applicable recognition criteria have been met, which generally include: (a) persuasive evidence of an existing arrangement; (b) a fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) the collectability of the sales price is reasonably assured. For software and technology development contracts, where applicable, the Company recognizes revenues on a percentage of completion method based upon several factors including but not limited to: (a) an estimate of total hours and milestones to complete; (b) the total hours completed; (c) the delivery of services rendered; (d) the change in estimates; and (e) the collectability of the contract.

Licensing revenues for intangible assets, including intellectual property such as patents and trademarks, are recognized when all of the following criteria have been met: (a) persuasive evidence of an existing arrangement; (b) a fixed or determinable price; (c) the delivery has occurred or service has been rendered; and (d) the collectability of the sales price is reasonably assured. Licensing revenues are recognized over the term of the contract or, in the case of a perpetual license, revenues are recognized in the period the criteria have been met. In transactions where the Company engages in a non-cash exchange of a license of the Company for the license of the Company’s customer, the Company follows Accounting Standards Codification (“ASC”) 985-605 and ASC 985-845-10. The licenses received from the Company’s customers are sold, licensed or leased in a different line of business from the Company license delivered to the Company’s customers in the exchange. The fair value of the technology or products exchanged or received is determined within reasonable limits and used to determine vendor-specific objective evidence with the purpose to enhance product offerings for the sale or license to third parties. The Company uses fair value guidance of the vendor-specific objective evidence of fair value (“VSOE”) under ASC 985-605. The contracts are then evaluted for commercial substance, including that the licenses received by the Company in the exchange are expected, at the time of the exchange, to be deployed and used by the software vendor and the value ascribed to the transaction reasonably reflects such expected use.

In transactions where the Company engages in a non-cash exchange of a license of the Company for the services of the Company’s customer, the Company follows Accounting Standards Codification (“ASC”) 985-605 and ASC 985-845-10. The fair value of the technology or services exchanged or received is determined within reasonable limits and used to determine vendor-specific objective evidence. The Company uses fair value guidance of the vendor-specific objective evidence of fair value (“VSOE”) under ASC 985-605. The revenue under these transactions is recognized upon delivery of the license and the services received in exchange are recognized as a prepaid asset that is amortized to expense as the services are received. The Company evaluates whether the period over which the services are received requires treatment as extended payment terms under ASC 985-605-25-33 and the Company evaluates the collectibility of the services to be received under ASC 985-605.

For the three and six months ended June 30, 2014, the Company sold an aggregate of thirteen and seventeen licenses, respectively for $225,000 per license and exchanged the license with its customers for either a license to their intellectual property or prepaid services. The thirteen and seventeen licenses exhanged were determined to meet the aforementioned criteria. During the three and six months ended June 30, 2014, nonmmonetary revenue of $2,925,000 and $3,825,000, respectively, was recognized. This resulted in an increase to intangible assets and prepaid expenses of $675,000 and $3,150,000, respectively.

Total revenues for the three and six months ended June 30, 2014 and 2013 consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Revenues	$	86,908	$	182,232	$	216,669	$	406,529
Revenue from related party	1,125		18,000		4,250		18,000
Revenues from nonmonetary transactions	2,925,000		—		3,825,000		—
Total revenues	$	3,013,033	$	200,232	$	4,045,919	$	424,529

The nonmonetary transactions for the three and six months ended June 30, 2014 and 2013 supported by vendor-specific objective evidence of fair value are listed in the table below:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Revenues from license exchanges	$	—	$	—	$	675,000	$	—
Revenues from service exchanges	2,925,000		—		3,150,000		—
Revenues from nonmonetary transactions	$	2,925,000	$	—	$	3,825,000	$	—

- Definition

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

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