10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2016

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to _________

Commission file number: 000-53981

BLUE CALYPSO, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-8610073
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

101 W Renner Rd, Suite 200

Richardson, Texas 75082

(Address of principal executive offices) (Zip Code)

(800) 378-2297

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,”  “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 13, 2016, there were 7,164,364 shares of registrant’s common stock outstanding.

BLUE CALYPSO, INC.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
	ITEM 1.	Financial Statements	3
		Condensed consolidated balance sheets as of March 31, 2016 (unaudited) and December 31, 2015	3
		Condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015 (unaudited)	4
		Condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2016 (unaudited)	5
		Condensed consolidated statements of cash flows for the three months ended March 31, 2016 and 2015 (unaudited)	6
		Notes to condensed consolidated financial statements (unaudited)	7-17
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-24
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	25
	ITEM 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION
	ITEM 1.	Legal Proceedings	26-27
	ITEM 1A.	Risk Factors	27
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	ITEM 3.	Defaults Upon Senior Securities	27
	ITEM 4.	Mine Safety Disclosures	27
	ITEM 5.	Other Information	27
	ITEM 6.	Exhibits	28-31
	SIGNATURES		32

PART I –  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLUE CALYPSO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	March 31,			December 31,
	2016			2015
	(unaudited)
ASSETS
Current assets:
Cash	$	212,150		$	730,482
Accounts receivable		352,796			247,131
Inventory		41,615			41,653
Prepaid expenses and other		40,676			42,370
Total current assets		647,237			1,061,636
Property and equipment, net		6,298			6,682
Other assets:
Accounts receivable, long term portion		47,627			71,440
Capitalized software development costs, net of accumulated amortization of $1,455,549 and $1,344,672 as of March 31, 2016 and December 31, 2015, respectively		810,373			817,548
Total assets	$	1,511,535		$	1,957,306
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	108,582		$	103,936
Accrued expenses		42,062			44,190
Settlement payable, short term portion		95,253			119,066
Convertible note payable, net of debt discounts of $-0- and $119,115, respectively		-			180,885
Deferred rent, short term portion		2,048			2,048
Derivative liabilities		-			170,497
Total current liabilities		247,945			620,622
Long term debt:
Settlement payable, long term		47,627			71,440
Deferred rent, long term portion		793			1,211
Total liabilities		296,365			693,273
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized: Series A convertible preferred stock, $0.0001 par value; 1,700,000 shares designated; none issued and outstanding		-			-
Common stock, $0.0001 par value; 13,600,000 shares authorized, 6,029,553 and 5,522,146 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively		602			552
Additional paid in capital		37,569,180			36,733,865
Accumulated deficit		(36,354,612	)		(35,470,384	)
Total stockholders' equity		1,215,170			1,264,033
Total liabilities and stockholders' equity	$	1,511,535		$	1,957,306

See the accompanying notes to these unaudited condensed consolidated financial statements

3

BLUE CALYPSO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended March 31,
	2016			2015
REVENUE	$	263,338		$	115,725
OPERATING EXPENSES:
Cost of sales		90,400			55,112
Sales and marketing		135,639			48,574
General and administrative		797,461			535,547
Depreciation and amortization		111,261			84,621
Total operating expenses		1,134,761			723,854
Loss from operations		(871,423	)		(608,129	)
Other income (expense):
Change in fair value of derivative liabilities		101,381			-
Interest expense		(114,186	)		(716	)
Total other income (expense)		(12,805	)		(716	)
NET LOSS	$	(884,228	)	$	(608,845	)
Net loss per common share, basic and diluted	$	(0.16	)	$	(0.12	)
Weighted average common shares outstanding, basic and diluted		5,667,751			4,917,672

See the accompanying notes to these unaudited condensed consolidated financial statements

4

BLUE CALYPSO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

THREE MONTHS ENDED MARCH 31, 2016

					Additional					Total
	Common Stock				Paid in		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Equity
Balance, December 31, 2015		5,522,146	$	552	$	36,733,865	$	(35,470,384	)	$	1,264,033
Sale of common stock and warrants at $0.85 per share, net of issuance costs of $14,692		470,591		47		385,263		-			385,310
Shares issued for services rendered		36,816		3		51,987		-			51,990
Reclass derivative liability to equity upon note payment		-		-		69,117		-			69,117
Stock based compensation		-		-		328,948		-			328,948
Net loss		-		-		-		(884,228	)		(884,228	)
Balance, March 31, 2016 (unaudited)		6,029,553	$	602	$	37,569,180	$	(36,354,612	)	$	1,215,170

See the accompanying notes to these unaudited condensed consolidated financial statements

5

BLUE CALYPSO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three months ended March 31,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(884,228	)	$	(608,845	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		111,261			84,621
Bad debt expense		-			18,476
Amortization of debt discounts		119,115			-
Change in fair value of derivative liabilities		(101,381	)		-
Stock based compensation		328,948			56,154
Common stock issued for services rendered		51,990			59,879
Changes in operating assets and liabilities:
Accounts receivable		(105,665	)		42,299
Inventory		38			-
Prepaid expenses and other current assets		1,694			12,536
Accounts payable		4,647			8,510
Accrued expenses		(25,941	)		(54,213	)
Deferred rent		(418	)		-
Net cash used in operating activities		(499,940	)		(380,583	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		-			(5,144	)
Software development costs		(103,702	)		(77,231	)
Net cash used in investing activities		(103,702	)		(82,375	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock and warrants		385,310			-
Repayments of convertible notes payable		(300,000	)		-
Net cash provided by financing activities		85,310			-
Net decrease in cash		(518,332	)		(462,958	)
Cash at beginning of period		730,482			1,103,201
Cash at end of period	$	212,150		$	640,243
SUPPLEMENTAL INFORMATION
Cash paid for interest	$	2,340		$	27,976
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:		-			-

See the accompanying notes to these unaudited condensed consolidated  financial statements

6

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Blue Calypso, Inc., a Delaware corporation (the "Company”), is engaged in the development, sales, delivery, licensing and enforcement of technology and intellectual property focused on mobile shopper engagement and digital word-of-mouth marketing and advertising. In January 2014, the Company transitioned from a development stage enterprise to an operating company.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2016 and for the three months ended March 31, 2016 and 2015. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the operating results for the full year ending December 31, 2016, or any other period.  These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2015 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on March 22, 2016.

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of March 31, 2016, the Company had cash of $212,150 and working capital of $399,292. During the three months ended March 31, 2016, the Company used net cash in operating activities of $499,940. The Company has incurred net losses since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In March 2016, the Company sold shares of common stock and warrants for net proceeds, after commissions and other costs, of approximately $385,000.  It is anticipated that the proceeds from this note and the sale of its common stock and warrants will provide the Company with cash sufficient to fund operations through December 2016. 

The Company's primary source of operating funds since inception has been cash proceeds from private placements of common stock, preferred stock, convertible debentures and the exercise of warrants.  The Company intends to raise additional capital through private issuances of debt and equity instruments, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully execute on its business plan or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

7

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, debt discounts, derivative liabilities, and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Concentrations of Credit Risk

As of March 31, 2016, excluding the impact of the allowance for doubtful accounts, two customers represented 61% and 27% of the Company’s accounts receivable. As of December 31, 2015, three customers represented 10%, 30% and 39% of the Company’s accounts receivable.

During the three months ended March 31, 2016, two customers represented 82% and 11% of total revenue.

During the three months ended March 31, 2015, three customers represented 11%, 64% and 15% of total revenue.

Net Loss per Share

The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period, adjusted to give effect to the 50-for-1 reverse stock split, which was effective in the market on July 2, 2015, and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted loss per share for the three months ended March 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:  

	March 31, 2016		March 31, 2015
Options to purchase common stock		863,123		447,305
Warrants to purchase common stock		821,061		220,913
Restricted stock units		-		21,810
Totals		1,684,184		690,028

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable ASC 480-10.

8

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

Until February 16, 2016, the date on which the convertible note was repaid in full, the Company’s free standing derivatives consisted of embedded conversion options with a convertible note. The Company evaluated these derivatives to assess their proper classification in the condensed consolidated balance sheet as of December 31, 2015 using the applicable classification criteria enumerated under ASC 815-Derivatives and Hedging. The Company determined that certain embedded conversion features do not contain fixed settlement provisions. The convertible note contained a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

At February 16, 2016, the Company was required to record the debt derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the date of payoff.  On February 16, 2016, (date of payoff) the Company reclassified the fair value of $69,116 from liabilities to equity.  See Note 5.

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed below.

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

9

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

ASC 820 describes three levels of inputs that may be used to measure fair value:

  Level 1 —  quoted prices in active markets for identical assets or liabilities

  Level 2 —  quoted prices for similar assets and liabilities in active markets or inputs that are observable

  Level 3 —  inputs that are unobservable based on an entity’s own assumptions, as there is little, if any, related market activity (for example, cash flow modeling inputs based on assumptions)

Financial liabilities as of December 31, 2015 measured at fair value on a recurring basis are summarized below:

	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	170,497	$	--	$	--	$	170,497

At March 31, 2016, the Company did not have any financial liabilities requiring measurement at fair value on a recurring basis.

The Company determined that certain conversion option related to a convertible note did not have fixed settlement provisions and are deemed to be derivative financial instruments, since the exercise price was subject to adjustment based on certain changes in market price of the Company’s common stock. Accordingly, the Company was required to record such conversion option as a liability and mark such derivative to fair value each reporting period. Such instrument was classified within Level 3 of the valuation hierarchy.  On February 16, 2016, the Company paid off the convertible note.  As such, the Company reclassified the fair value from liability to equity.  See Note 5.

The fair value of the conversion option was calculated using a binomial lattice formula with the following weighted average assumptions at February 16, 2016:

	February 16,
	2016
Common Stock Closing Price	$	0.96
Conversion Price per Share	$	1.1402
Conversion Shares		263,118
Call Option Value		0.2627
Dividend Yield		0.00	%
Volatility		129.93	%
Risk-free Interest Rate		0.42	%
Term	0.43 years

The risk-free interest rate is the United States Treasury rate on the measurement date having a term equal to the remaining contractual life of the instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate.  The dividend yield is 0% as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future.

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures.

10

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.

Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in volatility or interest free rate, in isolation, can significantly increase or decrease the fair value of the derivative liabilities. Changes in the values of the derivative liabilities are recorded as a component of other income (expense) on the Company’s condensed consolidated statements of operations.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis using significant unobservable input for the three months ended March 31, 2016:

Balance – January 1, 2016	$	170,497
Change in fair value of derivative liabilities		(101,381	)
Reclassified to equity upon note payoff		(69,116	)
Balance – March 31, 2016	$	-0-

NOTE 5 – CONVERTIBLE NOTE PAYABLE

On July 20, 2015, the Company issued a senior convertible note (the “July 2015 Note”), in the principal amount of $550,000 due one year from the date of issuance. The total net proceeds the Company received from this note was $415,123, net of fees and original interest discount (“OID”) of $50,000. At any time commencing one hundred and eighty one days from issuance, the July 2015 Note is convertible into shares of the Company’s common stock at the option of the holder at a conversion price of $7.6335 with certain reset provisions should certain default conditions occur.  These certain default conditions were deemed to be outside the Company’s control.

If the $550,000 principal amount of the July 2015 Note and all accrued but unpaid interest thereof is not paid in full on or before January 16, 2016, the July 2015 Note shall amortize in four equal payments payable on January 20, 2016, February 20, 2016, March 20, 2016 and April 20, 2016. These payments shall be paid (i) in cash at a 120% premium, and/or (ii) in shares of the Company's common stock at a 20% discount to the average of the three daily volume weighted average prices of the Company’s common stock for the prior three trading days, provided the Company is in compliance with certain equity conditions as defined in the July 2015 Note.

The Company identified an embedded derivative related to a conversion option in the July 2015 Note. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivative as of the inception date of the Secured Convertible Debentures and to fair value the derivative as of each subsequent reporting date.

At the inception of the July 2015 Note, the Company determined the aggregate fair value of the embedded derivatives to be $302,287.

11

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

The Company has issued debt for which total proceeds were allocated to individual instruments based on the fair value of the each instrument at the time of issuance. Such value of the debt was recorded as discount on debt and is being amortized over the term of the respective debt.

On December 18, 2015, the Company modified certain terms of the July 2015 Note. Pursuant to the modification, the Company agreed to repay the lender $300,000 in consideration for the extinguishment of $250,000 of the principal amount outstanding as of the December 18, 2015. The Company and the lender also agreed to reduce the guaranteed interest on the note from 10% to 5%, to delay the guaranteed interest start date by thirty days until February 20, 2016 and to delay the first installment payment by thirty days until February 20, 2016.

In addition, the Company and the lender also agreed reduce the conversion price from $7.6335 to $4.25 per share, modify certain equity conditions (as defined in the July 2015 Note) and events of default (as defined in the July 2015 Note).

In accordance with ASC 470-20, the change in fair value of the debt modification was recognized as an expense on the date was accepted by the holder. In connection with the modification, in 2015, the Company recorded a loss of $41,434 representing the difference between the fair value of the conversion feature under the new conversion price and under the original conversion feature. 

On February 16, 2016, the Company paid off the remaining balance of the July 2015 Note of $300,000.

For the three months ended March 31, 2016, amortization of debt discount was $119,115. The July 2015 Note balance was $180,885 net of discount of $119,115 at December 31, 2015.

NOTE 6 – STOCKHOLDERS’ EQUITY

On June 26, 2015, the Company filed an amendment to its Articles of Incorporation and effected a 50-for-1 reverse stock split of its issued and outstanding shares of common stock, whereby 250,666,631 outstanding shares of the Company’s common stock were converted into 5,013,366 shares of the Company's common stock.  In addition, the Company reduced its number of authorized common shares from 680,000,000 to 13,600,000.  The reverse stock split was effective in the market commencing on July 2, 2015. All per share amounts and number of shares in the condensed consolidated financial statements, related notes and other items throughout this Form 10-Q have been retroactively restated to reflect the reverse stock split.

During the three months ended March 31, 2016, the Company issued 27,155 shares of its common stock as consideration for investor relations services valued at $38,340.

During the three months ended March 31, 2016, the Company issued 9,661 shares of its common stock as consideration for legal services valued at $13,650.

In March 2016, pursuant to a securities purchase agreement, the Company sold an aggregate of 470,591 shares of its common stock together with warrants to purchase an aggregate of 117,648 shares of its common stock for net proceeds, after commissions and other costs, of $385,310. The warrants are exercisable at an exercise price of $1.25 for a term of five years.

The Company paid the placement agent cash commissions of $10,000 and also costs and expenses of $4,692.

12

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

Options

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices for 2015. Prior to 2015, the Company derived the volatility figure from an index of historical stock prices for comparable entities. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla" options, as defined in the accounting standards codification.

The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. 

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

The Company estimated forfeitures related to option grants at a weighted average annual rate of  0% per year, as the Company does not yet have adequate historical data, for options granted during the three months ended March 31, 2016 and 2015.

The following assumptions were used in determining the fair value of employee and vesting non-employee options during the three months ended March 31, 2016 and 2015:

	March 31, 2016			March 31, 2015
Risk-free interest rate		1.54% - 1.73	%		1.68% - 1.94	%
Dividend yield		0	%		0	%
Stock price volatility		129.41%-130.97	%		140.67% -145.24	%
Expected life	5 – 9.2 years			7-10  years
Weighted average grant date fair value	$	1.07		$	5.50

On January 4, 2016, the Company awarded options to purchase an aggregate of 233,495 shares of common stock to the Company’s Chief Executive Officer, Andrew Levi.  These options vest immediately and have a term of 10 years. 60,000 of the options have an exercise price of $1.375 per share and  173,495 of the options are exercisable at $1.25 per share.  The options had an aggregate grant date fair value of $250,000.

The following table summarizes the stock option activity for the three months ended March 31, 2016:

	Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		629,628	$	7.59		4.5
Granted		233,495	$	1.28		10.0
Canceled/expired
Outstanding at March 31, 2016		863,123	$	5.89		5.76	$	272,554
Exercisable at March 31, 2016		758,979	$	5.89		5.3	$	265,654

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BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

The following table presents information related to stock options at March 31, 2016:

Options Outstanding				Options Exercisable
Exercise     Price		Number of Options		Weighted Average Remaining Life In Years		Exercisable Number of Options
$	0.00-5.00		456,440		7.2		431,126
	5.01-12.50		382,675		4.1		303,845
	12.51-25.00		15,008		4.0		15,008
	25.01-45.00		9,000		3.6		9,000
			863,123		5.8		758,979

As of March 31, 2016, stock-based compensation of $453,351 remains unamortized and is expected to be amortized over the weighted average remaining period of 1.08 years.

The stock-based compensation expense related to option grants was $328,948 and $56,154 during the three months ended March 31, 2016 and 2015, respectively.

Warrants

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at March 31, 2016: 

Exercise Price		Number Outstanding		Expiration Date
$	1.25	$	117,648	March 2021
	4.75		482,500	Sept/Oct 2020
	5.00		220,913	August 2016
			821,061

The following table summarizes the warrant activity for the three months ended March 31, 2016:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		703,413	$	4.83		3.5
Grants		117,648	$	1.25		5.0
Exercised		-
Forfeitures or expirations		-
Outstanding at March 31, 2016		821,061	$	4.32		3.5	$	136,472
Exercisable at March 31, 2016		821,061	$	4.32		3.5	$	136,472

In connection with the sale of common stock, the Company issued an aggregate of 117,648 warrants to purchase the Company’s common stock at $1.25 per share expiring five years from the date of issuance.

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BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

NOTE 7 – RELATED PARTY TRANSACTIONS

The Company appointed a new Chief Financial Officer during August 2014. The Company utilizes Assure Professional, LLC (“Assure”) to provide certain outsourced accounting services. The Company’s current Chief Financial Officer is a partial owner of Assure.  The Company incurred expense of $10,000 and $6,750 in exchange for these services for the three months ended March 31, 2016 and 2015, respectively.  Included in accounts payable and due to Assure at March 31, 2016 and 2015 was approximately $8,000 and $2,250, respectively.

Jonathan Merriman was appointed to the Company’s Board of Directors during December 2014.  Mr. Merriman is the CEO of Merriman Capital, Inc. (“Merriman”).  Merriman provides capital market advisory services to the Company for which we incurred expense of $45,000 and $30,000 during the three months ended March 31, 2016 and 2015, respectively. The Company primarily issues common stock in exchange for monthly services and $6,660 was due to Merriman at March 31, 2016. In addition, Merriman Capital advised the Company in connection with its March 2016 private placement and received an advisory fee of $10,000 and acted as the Company’s placement agent during its most recent offering.  

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Litigation

On July 31, 2012, the Company filed suit against Groupon, Inc. in the Eastern District of Texas in Civil Action No. 6:12-cv-00486. The Company filed additional suits against IZEA, Inc. on October 17, 2012, Yelp, Inc. on October 17, 2012, and Foursquare Labs, Inc. on October 31, 2012 in Civil Action Nos. 6:12-cv-786, 6:12-cv-788, 6:12-cv-837, respectively. Each of these cases alleges that the defendants infringe U.S. Patent Nos. 7,664,516 entitled "Method and System for Peer-to-Peer Advertising Between Mobile Communication Devices" and 8,155,679 entitled "System and Method for Peer-to-Peer Advertising Between Mobile Communication Devices." The Company subsequently added U.S. Patent Nos. 8,438,055, 8,452,646, and 8,457,670 to the cases, alleging each defendant infringed the newly added patents. Each of the defendants have answered, denying infringement and claiming that the asserted patents are invalid. Groupon, Yelp, and Foursquare filed counterclaims for declaratory judgment that the asserted patents are invalid and not infringed. Yelp filed an additional counterclaim for declaratory judgment that the asserted patens are unenforceable. The Court subsequently consolidated the actions for at least pre-trial purposes. Groupon filed a motion to transfer the case against it to the U.S. District Court for the Northern District of Illinois, which the Court denied on September 27, 2013.  On February 3, 2014, Groupon filed a petition to the U.S. Court of Appeals for the Federal Circuit for mandamus on the district court's denial of its motion to transfer. On April 23, 2014, the petition was denied by the Federal Circuit.

Between July 19, 2013 and October 3, 2013, Groupon filed petitions with the Patent Trial & Appeals Board (“PTAB”) requesting institution of Covered Business Method Review (“CBMR”) of all asserted claims. On December 19, 2013 and January 17, 2014, the PTAB issued decisions instituting review on all but four of the asserted claims. On January 14, 2014, the Company and all defendants filed a joint motion to stay the district court litigation. The Court granted the motion and stayed the case on January 16, 2014 pending a decision by the PTAB. Trial on the CBMR at the PTAB occurred during September 2014.

On December 17, 2014, the Patent Trial and Appeal Board issued final decisions in Covered Business Method Review proceedings CBM2013-00035, CBM2013-00033, CBM2013-00034, CBM2013-00046 and CBM2013-00044. In each case, certain claims of each patent were held to be invalid for various reasons. With respect to the ‘516, ‘679, ‘055 and ‘646 patents, many of the claims survived and the patents remain enforceable. All of the claims of the ‘670 patent were held invalid. The Company appealed each of the final decisions to the United States Federal Circuit Court of Appeals.  The Company appealed the unpatentability determinations including the decision of invalidity based on anticipation of several claims of the patents by prior art (the “Paul reference”).  The Company also appealed the decision to review its patents under the provisions for CBMR and that the ‘516 patent lacked sufficient written description under § 112 to support the claims.  Groupon appealed the Board’s decision that the patents were not valid under § 103 and the determination by the PTAB that the Ratismor reference was not publically available prior art. 

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BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

On April 2, 2015, the District Court lifted the stay and required the parties to file a joint docket control order.  On April 6, 2015, the Court set a Markman Hearing for June 29, 2015, and jury selection for December 14, 2015.  On April 15, 2015, the parties filed their joint docket control order.  The Court entered its docket control order on April 23, 2015.  Due to an apparent scheduling conflict, the Court rescheduled the Markman Hearing to July 8, 2015. 

On April 22, 2015, the Company filed its third amended complaint against all defendants.  The defendants timely answered on May 11, 2015.  Each of the defendant’s answers included a counterclaim for invalidity of the patents.  The Company responded to these invalidity contentions on June 1, 2015.

On May 13, 2015, the Company filed a motion for entry of an order focusing patent claims and prior art.  That motion requested that the Court narrow the number of claims at issue and the number of prior art references that defendants could use in an attempt to invalidate the Company’s patents.  On May 27, 2015, the Court held a hearing on the motion and ordered defendants to reduce the number of references in support of any invalidity contention against the patents. 

On June 25, 2015, the Company attended mediation with Yelp in an effort to settle the case.  That mediation was recessed to explore settlement options.

On July 8, 2015, the Company attended the Markman Hearing in order to construe the claims of the patents.  On July 14, 2015, the Court entered its Memorandum Opinion and Order regarding claim construction.  In that Order, the Court analyzed eleven claim terms.  The Court agreed with Blue Calypso’s proffered construction as to seven terms, chose its own construction as to three terms and agreed with defendants’ proffered construction as to only one term.  The Court also expressly rejected defendants’ argument that the term “testimonial tag” was indefinite.  

On July 13, 2015, the Court entered an order severing the non-active claims out of the case and consolidating claims regarding those patents into a separate set of cases.  These new cases address the claims which were held invalid by the PTAB and which are now on appeal to the Federal Circuit Court of Appeals.

On July 14, 2015, the Company attended court-ordered mediation with Groupon.  The result of that mediation was an impasse.

On July 16, 2015, the Company attended court-ordered mediation with IZEA. The parties reached a settlement.

On July 20, 2015, the Company attended court-ordered mediation with Foursquare. The result of that mediation was an impasse.

As part of the Company's settlement with Living Social, the Company's attorney is entitled to additional compensation for the value of certain non-monetary arrangements.

On August 17, 2015, the Company entered into a settlement agreement with IZEA, pursuant to which it settled all outstanding litigation with IZEA. Under the Agreement, IZEA has agreed to pay the Company a royalty fee of 4.125% of revenue from IZEA’s discontinued legacy platforms SocialSpark, Sponsored Tweets and WeReward. The remaining terms of the settlement are confidential.  Legal costs due to our attorneys associated with the IZEA settlement are classified as a settlement payable on our consolidated balance sheet.

On September 21, 2015, the Company entered into a settlement agreement with Yelp, pursuant to which all outstanding litigation with Yelp was settled.  Under the agreement, Yelp has agreed to purchase 4,000 KIOSentrix beacons.

On March 1, 2016, the Federal Circuit overturned the PTAB decision as to insufficient written description but upheld the decision that the Ratismor reference was not publically available prior art.  However, the Federal Circuit confirmed the Board’s decision to institute the CBMR process on the basis that Blue Calypso’s patent portfolio qualified as a business method patent which was financial in nature.  The Federal Circuit also upheld the decision of invalidity based on anticipation of several claims of the patents by the prior art Paul reference.  

16

BLUE CALYPSO, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(unaudited)

The reversal of the written description matter is significant as it re-establishes the ‘516 parent patent issue date of February 2010 as the date that damages begin to accrue.  Prior to this reversal the first date of infringement was relegated to the later issue date of the ‘679 patent on April 2012.

The Company requested an En Banc review by the Federal Circuit of the holding with respect to anticipation by the Paul reference on March 31, 2016.   The Company has the option of requesting that the Supreme Court review the Federal Circuit’s decision.  The option for appeal to the Supreme Court must be filed by June 1, 2016.

On April 20, 2016, the District Court set a hearing date of May 6, 2016 at 9:00 am in Marshall, Texas.  The items to be discussed will be the Federal Circuit’s Decision issued on March 1, 2016 and the pending Motion for Judgment of lack of subject matter eligibility.

On May 4, 2016, the Federal Circuit denied the request for En Banc review.  

On May 5, 2016, the Company entered into a memorandum of settlement with Groupon pursuant to which it has in principal settled all outstanding litigation with Groupon.  The terms of the settlement are confidential.

On May 6, 2016, the Court held a hearing regarding the Federal Circuits decision issued on March 1, 2016 and the pending motion for summary judgment related to subject matter eligibility.  The Court heard arguments of the Company and Four Square Labs and took the matter under advisement.  The Court also set a trial date of September 12, 2016.  The Court also required the parties to submit briefing on certain collateral estoppel issues and a joint docket control order within 15 days, or by May 21, 2016.

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable.

NOTE 9 – SUBSEQUENT EVENTS

On April 22, 2016, Blue Calypso, Inc. entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a strategic investor Harold M. Brierley (“Brierley”), pursuant to which the Company issued and sold 609,756 shares of the Company’s common stock (the “Shares”) and warrants to purchase an additional 609,756 shares of the Company’s common stock (the “Warrants”) to Brierley for aggregate gross proceeds of $1,000,000.

Pursuant to the Purchase Agreement, the Company granted piggyback registration rights with respect to the Shares and the shares of Common Stock issuable upon exercise of the Warrants to Brierley. In addition, Brierley was granted the right to submit the name of one individual for nomination to the Company’s Board of Directors in accordance with the Company’s Bylaws and applicable laws.

The Warrants are exercisable at an exercise price of $2.13 per share for a term of five years. The exercise price and the number of shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events, including stock dividends, stock splits, combinations and reclassifications of the Company’s common stock.

In connection with the private placement, the Company entered into agreements with Brierley, pursuant to which Brierley will act as a senior advisor to the Company. As consideration for his services as a senior advisor to the Company, Brierley was granted options to purchase 50,000 shares of the Company’s Common Stock (the “Options”).  The Options are exercisable at an exercise price of $2.08 per share and vest pro rata quarterly over a term of two years.

On April 26, 2016, in conjunction with the Brierley transaction, the Compensation Committee of the Board of Directors of the Company granted a restricted stock award of 500,000 shares of the Company’s Common Stock to the Company’s Chief Executive Officer Andrew Levi. The shares vest and become issuable on the tenth anniversary of the grant date provided that upon a change of control or upon a termination other than for cause, the shares shall vest 100%.

During May 2016, the Company issued 25,055 shares of its common stock as consideration for investor relations and capital markets services valued at $66,660.

On May 5, 2016, the Company entered into a memorandum of settlement with Groupon pursuant to which it has in principal settled all outstanding litigation with Groupon.  The terms of the settlement are confidential.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains  "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").  All statements other than statements of historical facts included or incorporated by reference in this quarterly report on Form 10-Q, including without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objective of management for future operations, are forward-looking statements.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative thereof or any variation thereon or similar terminology or expressions.

We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to: 

· our ability to raise additional capital;

· minimal operating history or revenue; 

· our ability to attract and retain qualified personnel; 

· market acceptance of our platform;

· our limited experience in a relatively new industry;

· regulatory and competitive developments;

· intense competition with larger companies;

· general economic conditions

· failure to adequately protect our intellectual property;

· technological obsolescence of our products and services;  

· technical problems with our products and services;

· loss or retirement of key executives, and

· other factors set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.  Except as required by law, we assume no duty to update or revise our forward-looking statements.

Business Overview 

Blue Calypso develops and delivers location-centric mobile shopper marketing, engagement, influence and analytics solutions for the brick-and-mortar retail sector by leveraging mobile, social media, gamification and our intellectual property portfolio. We have developed a patented technology platform that enables product brands and retailers to engage with shoppers when they are on the path-to-purchase goods and services. Our technology also allows brands to leverage customer relationships to increase brand loyalty and drive revenue through sharing, affinity and influencer marketing programs. We generate revenue from the cloud-based consumption of our technology platform, consulting/services fees, and licensing and/or enforcement of our patented technologies. Our intellectual property portfolio consists of six US patents and eleven pending patent applications that generally cover methods and systems for communicating advertisements and electronic offers and gamification between mobile communication devices.

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All of the patents and patent applications that cover the core of our business, i.e., a “System and method for peer-to-peer advertising between mobile communication devices”, have been developed internally by our Founder and Chief Executive Officer, Andrew Levi, and our Director of Innovation, Bradley Bauer, and assigned to our wholly owned subsidiary, Blue Calypso, LLC. In September 2013, we acquired proprietary mobile gamification technology and subsequently applied for two additional patents based upon the enhancement and integration of this technology into our platform of which one has recently issued.

Our proprietary technology platform, KIOSentrix® enables retailers and product manufacturers to harness the power and adoption that today’s mobile devices bring to the consumer shopping experience. We connect brands with store visitors when they are on the path-to-purchase and enable those customers to engage with, and redeem brand content as well as syndicate their brand affinity across the most popular social media channels. Our platform drives activation, facilitates engagement, tracks performance, manages attribution and delivers robust, real-time analytics that provide acute insight regarding the adoption, conversion and return on investment of our client’s promotions and location-based content. Our technology is designed to help clients target their marketing messages, attract new customers, increase awareness and drive product sales. For example, campaigns facilitated through our platform can encourage consumers to learn more about products, watch promotional videos about particular products, see product reviews and comparative pricing or click to buy products.  All delivered through a highly engaging mobile “kiosk” or “digital concierge” type experience.

Over the last five years, the world has seen mobile, social media, and digital advertising evolve dramatically and actually converge. Through this technological evolution, a sociological shift has occurred in how influential digital media can be when deployed strategically with hyper-targeted and personalized content.

Today, retailers are aggressively exploring mobile shopper engagement as the next frontier of the physical shopping experience. According to the Consumer Electronics Association, more than half of all consumers use their mobile devices at some point while shopping, however retailers have yet to find a comfortable way of co-existing in this ecosystem of traditional consumer engagement.

Through mobile and social media, consumers and brands have their own unique and significant digital audience. According to Facebook, the average user has 130 friends; Twitter states the average user has 300 followers; and on average an individual has 25 unique frequent contacts they communicate with weekly via text messages or mobile calls. Active participation in LinkedIn, Google+, Tumblr and/or a personal blog can further extend one’s direct social reach significantly. With our platform, brand content is not bound by any single app, social media community, website, carrier, device or method of activation such as beacons, NFC or short codes. As a result, brand influencers have the capability to immediately reach hundreds or even thousands of people through their direct personal and digital social relationships.

As a by-product of campaign delivery and recipient interaction, we deliver real-time analytics and business intelligence capabilities, which provide brands the ability to see how campaigns are deployed, where they are getting the most traction, and which are seeing the most activity. The platform also allows brands to assess the conversational response and sentiment to their messages which enables them to adjust their campaigns based on performance.

 Recent Developments

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows.  See Note 3 to the condensed consolidated financial statements included elsewhere in this document.

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Litigation

On July 31, 2012, the Company filed suit against Groupon, Inc. in the Eastern District of Texas in Civil Action No. 6:12-cv-00486. The Company filed additional suits against IZEA, Inc. on October 17, 2012; Yelp, Inc. on October 17, 2012; and Foursquare Labs, Inc. on October 31, 2012 in Civil Action Nos. 6:12-cv-786, 6:12-cv-788, 6:12-cv-837, respectively. Each of these cases alleges that the defendants infringe U.S. Patent Nos. 7,664,516 entitled "Method and System for Peer-to-Peer Advertising Between Mobile Communication Devices" and 8,155,679 entitled "System and Method for Peer-to-Peer Advertising Between Mobile Communication Devices." The Company subsequently added U.S. Patent Nos. 8,438,055, 8,452,646, and 8,457,670 to the cases, alleging each defendant infringed the newly added patents. Each of the defendants have answered, denying infringement and claiming that the asserted patents are invalid. Groupon, Yelp, and Foursquare filed counterclaims for declaratory judgment that the asserted patents are invalid and not infringed. Yelp filed an additional counterclaim for declaratory judgment that the asserted patens are unenforceable. The Court subsequently consolidated the actions for at least pre-trial purposes. Groupon filed a motion to transfer the case against it to the U.S. District Court for the Northern District of California, which the Court denied on September 27, 2013.

Between July 19, 2013 and October 3, 2013, Groupon filed petitions with the Patent Trial & Appeals Board (“PTAB”) requesting institution of Covered Business Method Review of all asserted claims. On December 19, 2013 and January 17, 2014, the PTAB issued decisions instituting review on all but four of the asserted claims. On January 14, 2014,  the Company and all defendants filed a joint motion to stay the district court litigation. The Court granted the motion and stayed the case on January 16, 2014 pending a decision by the PTAB. Trial on the Covered Business Method Reviews at the PTAB occurred during September 2014. On February 3, 2014, Groupon filed a petition to the U.S. Court of Appeals for the Federal Circuit for mandamus on the district court's denial of its motion to transfer, which remains pending as of the date of this report.  

On December 17, 2014, the Patent Trial and Appeal Board issued final decisions in Covered Business Method Review proceedings CBM2013-00035, CBM2013-00033, CBM2013-00034, CBM2013-00046 and CBM2013-00044. In each case, certain claims of each patent were held to be invalid for various reasons. With respect to the ‘516, ‘679, ‘055 and ‘646 patents, many of the claims survived and the patents remain enforceable. All of the claims of the ‘670 patent were held invalid. The Company appealed each of the final decisions to the United States Federal Circuit Court of Appeals.  The Company appealed the unpatentability determinations including the decision of invalidity based on anticipation of several claims of the patents by prior art (the Paul reference).  The Company also appealed the decision to review its patents under the provisions for CBMR and that the ‘516 patent lacked sufficient written description under § 112 to support the claims.  Groupon appealed the Board’s decision that the patents were not valid under § 103 and the determination by the PTAB that a certain reference (the Ratismor reference) was not publically available prior art.  

On March 1, 2016, the Federal Circuit overturned the PTAB decision as to insufficient written description but upheld the decision that the Ratismor reference was not publically available prior art.  However, the Federal Circuit confirmed the Board’s decision to institute the CBMR process on the basis that Blue Calypso’s patent portfolio qualified as a business method patent which was financial in nature.  The Federal Circuit also upheld the decision of invalidity based on anticipation of several claims of the patents by the prior art Paul reference.   

The reversal of the written description matter is significant as it re-establishes the ‘516 parent patent issue date of February 2010 as the date that damages begin to accrue.  Prior to this reversal the first date of infringement was relegated to the later issue date of the ‘679 patent on April 2012.

The Company requested an En Banc review by the Federal Circuit of the holding with respect to anticipation by the Paul reference on March 31, 2016.  The Company has the option of requesting that the Supreme Court review the Federal Circuit’s decision.  The option for appeal to the Supreme Court must be filed by June 1, 2016.

On April 20, 2016, the District Court set a hearing date of May 6, 2016 at 9:00am in Marshall, Texas.  The items to be discussed will be the Federal Circuit’s Decision issued on March 1, 2016 and the pending Motion for Judgment of lack of subject matter eligibility.

On May 4, 2016, the Federal Circuit denied the request for En Banc review.  

On May 5, 2016, the Company entered into a memorandum of settlement with Groupon pursuant to which it has in principal settled all outstanding litigation with Groupon.  The terms of the settlement are confidential.

On May 6, 2016, the Court held a hearing regarding the Federal Circuits decision issued on March 1, 2016 and the pending motion for summary judgment related to subject matter eligibility.  The Court heard arguments of the Company and Four Square Labs and took the matter under advisement.  The Court also set a trial date of September 12, 2016.  The Court also required the parties to submit briefing on certain collateral estoppel issues and a joint docket control order within 15 days, or by May 21, 2016.

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The court dockets for each case, including the parties’ briefs are publicly available on the Public Access to Court Electronic Records website, or PACER, www.pacer.gov, which is operated by the Administrative Office of the U.S. Courts.

Other than as noted above, the Company is not a party to any pending legal proceeding nor is its property the subject of any pending legal proceeding that is not in the ordinary course of business or otherwise material to the financial condition of its business. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to us.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, debt discounts, derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, all obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and collectability is reasonably assured. Revenue includes fees received from customers for advertising and marketing services. In each case, revenue is recognized when services are performed or licenses are granted to customers.

Revenue from the licensing of the Company’s intellectual property and settlements reached from legal enforcement of the Company’s patent rights is recognized when the arrangement with the licensee has been signed and the license has been delivered and made effective, provided license fees are fixed or determinable and collectability is reasonably assured. The fair value of licenses achieved by ordinary business negotiations is recognized as revenue.

The amount of consideration received upon any settlement or judgment is allocated to each element of the settlement based on the fair value of each element. Elements related to licensing agreements, royalty revenues, net of contingent legal fees, are recognized as revenue in the consolidated statement of operations. Elements that are not related to license agreements and royalty revenue in nature will be reflected as a separate line item within the other income section of the consolidated statements of operations. Elements provided in either settlement agreements or judgments include: the value of a license, legal release, and interest. When settlements or judgments are achieved at discounts to the fair value of a license, the Company allocates the full settlement or judgment, excluding specifically named elements as mentioned above, to the value of the license agreement or royalty revenue under the residual method. Legal release as part of a settlement agreement is recognized as a separate line item in the consolidated statements of operations when value can be allocated to the legal release. When the Company reaches a settlement with a defendant, no value is allocated to the legal release since the existence of a settlement removes legal standing to bring a claim of infringement and without a legal claim, the legal release has no economic value. The element that is applicable to interest income will be recorded as a separate line item in other income. The Company does not assume future performance obligations in its license arrangements.

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The Company also has revenue from information technology consulting services. Revenue is recognized in the periods that satisfactory performance of services is delivered to customers. Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the service has occurred, all obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and collectability is reasonably assured.

Cost of Revenue

Cost of revenue includes technical service costs directly associated with initiating and supporting a customer social media program, technical service costs directly associated with providing IT consulting and legal fees directly related to the settlement of intellectual property claims that result in licensing and royalty revenue.

Intangible Assets

The Company capitalizes certain software development costs as well as purchased software upon achieving technological feasibility of the related products. Software development costs incurred and software purchased prior to achieving technological feasibility are charged to engineering and product development expense as incurred. Commencing upon initial product release, capitalized costs are amortized to cost of software licenses using the straight-line method over the estimated life of the product (which approximates the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product), which is generally up to five years.

Impairment of Long-Lived Assets

The Company reviews the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or asset group is expected to generate. If the undiscounted cash flows of such assets are less than the carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value. No impairment was deemed to exist as of March 31, 2016 and 2015. The Company re-evaluates the carrying amounts of its amortizable intangibles at least quarterly to identify any triggering events. As described above, if triggering events require us to undertake an impairment review, it is not possible at this time to determine whether it would be necessary to record a charge or if such charge would be material.

Fair Value Measurements

We have adopted ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations, as if such amounts were paid in cash.

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Results of Operations

Comparison of Three Months Ended March 31, 2016 and 2015

Results of Operations 

Net Loss.  For the three months ended March 31, 2016, we had a net loss of $884,228, as compared to a net loss of $608,845 for the three months ended March 31, 2015. The increase in net loss resulted primarily from an increase in our general and administrative costs of $261,914 and interest costs of $113,470, net with a gain on change in derivative liabilities of $101,381.

Revenue.   Revenue for the three months ended March 31, 2016 was $263,338, as compared to $115,725 in revenues for the same period in 2015.  The increase in revenue is from our project based revenue primarily and is subject to timing of development projects. 

Cost of Revenue.  Our cost of revenue was $90,400 for the three months ended March 31, 2016, as compared to $55,112 for the same period in 2015.  The increase in cost of revenue is primarily attributable to costs operating our labs.

Sales and Marketing.  For the three months ended March 31, 2016, sales and marketing expenses increased by $87,065 to $135,639 as compared to the same period in 2015. Sales and marketing expenses increased as the Company added sales personnel.

General and Administrative. For the three months ended March 31, 2016, general and administrative expenses were $797,461 as compared to $535,547 for the three months ended March 31, 2015.  This was primarily due to an increase of $264,905 in stock based compensation primarily associated with options granted during the three months ended March 31, 2016. 

Depreciation and Amortization.  Depreciation and amortization expenses relate primarily to the amortization of capitalized software development.  Depreciation and amortization expenses were $111,261 for the three months ended March 31, 2016 as compared to $84,621 for the three months ended March 31, 2015, representing an increase of $26,640 which was primarily due to an increase in additional capitalized software during the period.  For the three months ended March 31, 2016, we incurred $103,702 of capitalized software development costs associated with improvements to our commercial platform. This compares to $77,231 of capitalized software development costs for the quarter ended March 31, 2015.  The Company continues to invest in the ongoing improvements to its core platform.

Change in fair value of derivative liabilities.  We issued convertible debt that contains certain reset provisions in connection with financing.  As such, we were required to record these reset provisions as a liability and mark them to market each reporting period.  For the three months ended March 31, 2016, we recorded a gain of $101,381 in change in the fair value of these reset provisions versus $-0- for the three months ended March 31, 2015.  In February 2016, we paid off the remaining convertible debt.

Interest Expense.  Interest expense was $114,186 for the three months ended March 31, 2016 as compared to $716 for the three months ended March 31, 2015. Interest expense for the current period represents primarily amortization of beneficial conversion features on our convertible note of $119,115 with the remainder credit card and vendor financing, net with a reduction of prior period interest accrual.  In comparison, interest for 2015 related to credit card and vendor financing.   

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Cash Flows

Net cash used in operating activities during the three months ended March 31, 2016 was $499,940 as compared to $380,583 for the three months ended March 31, 2015. Cash used in operations for the three months ended March 31, 2016 was comprised of a net loss of $884,228 offset primarily by certain non-cash items:  (i) stock based compensation expenses (including common stock issued in exchange for services) of $380,938; (ii) depreciation and amortization of $111,261 and (iii) amortization of debt discounts of $119,115, with net change in operating assets and liabilities of $125,645 and with gain in change in fair value of derivative liabilities of $101,381.

Net cash used in investing activities during the three months ended March 31, 2016 was $103,702, as compared to $82,375 for the three months ended March 31, 2015. This increase was primarily attributable to additional expenditures on the development of our software. 

During the three months ended March 31, 2016, net cash provided by financing activities was $85,310 as compared to $-0- for the same period in 2015.  For the three months ended March 31, 2016, we received $385,310 from the sale of its common stock and warrants and paid $300,000 in full settlement of our outstanding convertible note. 

Off Balance Sheet Arrangements

None  

Liquidity and Capital Resources

As of March 31, 2016, the Company had cash of $212,150 and working capital of $399,292.  During the three months ended March 31, 2016, the Company used net cash in operating activities of $499,940.  The Company has incurred net losses since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. 

            In March 2016, the Company raised approximately $385,000 from the sale of its common stock and warrants. It is anticipated that the proceeds from the sale of its common stock and warrants will provide the Company with cash sufficient to fund operations through December 2016. 

On April 22, 2016, Blue Calypso, Inc. entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a strategic investor, pursuant to which the Company issued and sold 609,756 shares of the Company’s common stock and warrants to purchase an additional 609,756 shares of the Company’s common stock to Brierley for aggregate gross proceeds of $1,000,000.

The Company's primary source of operating funds since inception has been cash proceeds from private placements of common stock, preferred stock, convertible debentures and the exercise of warrants.

There can be no assurance that the follow-on offering will be completed, that our application to the national securities exchange will be accepted or that funds associated with this potential offering will be available on terms acceptable to the Company, or that the funds from such offering will be sufficient to enable the Company to fully execute its business plan or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2016, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 31, 2012, the Company filed suit against Groupon, Inc. in the Eastern District of Texas in Civil Action No. 6:12-cv-00486. The Company filed additional suits against IZEA, Inc. on October 17, 2012; Yelp, Inc. on October 17, 2012; and Foursquare Labs, Inc. on October 31, 2012 in Civil Action Nos. 6:12-cv-786, 6:12-cv-788, 6:12-cv-837, respectively. Each of these cases alleges that the defendants infringe U.S. Patent Nos. 7,664,516 entitled "Method and System for Peer-to-Peer Advertising Between Mobile Communication Devices" and 8,155,679 entitled "System and Method for Peer-to-Peer Advertising Between Mobile Communication Devices." The Company subsequently added U.S. Patent Nos. 8,438,055, 8,452,646, and 8,457,670 to the cases, alleging each defendant infringed the newly added patents. Each of the defendants have answered, denying infringement and claiming that the asserted patents are invalid. Groupon, Yelp, and Foursquare filed counterclaims for declaratory judgment that the asserted patents are invalid and not infringed. Yelp filed an additional counterclaim for declaratory judgment that the asserted patens are unenforceable. The Court subsequently consolidated the actions for at least pre-trial purposes. Groupon filed a motion to transfer the case against it to the U.S. District Court for the Northern District of California, which the Court denied on September 27, 2013.

Between July 19, 2013 and October 3, 2013, Groupon filed petitions with the Patent Trial & Appeals Board (“PTAB”) requesting institution of Covered Business Method Review of all asserted claims. On December 19, 2013 and January 17, 2014, the PTAB issued decisions instituting review on all but four of the asserted claims. On January 14, 2014, the Company and all defendants filed a joint motion to stay the district court litigation. The Court granted the motion and stayed the case on January 16, 2014 pending a decision by the PTAB. Trial on the Covered Business Method Reviews at the PTAB occurred during September 2014. On February 3, 2014, Groupon filed a petition to the U.S. Court of Appeals for the Federal Circuit for mandamus on the district court's denial of its motion to transfer, which remains pending as of the date of this report.  

On December 17, 2014, the Patent Trial and Appeal Board issued final decisions in Covered Business Method Review proceedings CBM2013-00035, CBM2013-00033, CBM2013-00034, CBM2013-00046 and CBM2013-00044. In each case, certain claims of each patent were held to be invalid for various reasons. With respect to the ‘516, ‘679, ‘055 and ‘646 patents, many of the claims survived and the patents remain enforceable. All of the claims of the ‘670 patent were held invalid. The Company appealed each of the final decisions to the United States Federal Circuit Court of Appeals.  The Company appealed the unpatentability determinations including the decision of invalidity based on anticipation of several claims of the patents by prior art (the Paul reference).  The Company also appealed the decision to review its patents under the provisions for CBMR and that the ‘516 patent lacked sufficient written description under § 112 to support the claims.  Groupon appealed the Board’s decision that the patents were not valid under § 103 and the determination by the PTAB that a certain reference (the Ratismor reference) was not publically available prior art.  

On March 1, 2016, the Federal Circuit overturned the PTAB decision as to insufficient written description but upheld the decision that the Ratismor reference was not publically available prior art.  However, the Federal Circuit confirmed the Board’s decision to institute the CBMR process on the basis that Blue Calypso’s patent portfolio qualified as a business method patent which was financial in nature.  The Federal Circuit also upheld the decision of invalidity based on anticipation of several claims of the patents by the prior art Paul reference.   

The reversal of the written description matter is significant as it re-establishes the ‘516 parent patent issue date of February 2010 as the date that damages begin to accrue.  Prior to this reversal the first date of infringement was relegated to the later issue date of the ‘679 patent on April 2012.

The Company requested an En Banc review by the Federal Circuit of the holding with respect to anticipation by the Paul reference on March 31, 2016.   The Company also has the option of requesting that the Supreme Court review the Federal Circuit’s decision.  The option for appeal to the Supreme Court must be filed by June 1, 2016.

On April 20, 2016, the District Court set a hearing date of May 6, 2016 at 9:00 am in Marshall, Texas.  The items to be discussed will be the Federal Circuit’s Decision issued on March 1, 2016 and the pending Motion for Judgment of lack of subject matter eligibility.

On May 4, 2016, the Federal Circuit denied the request for En Banc review.  

On May 5, 2016, the Company entered into a memorandum of settlement with Groupon pursuant to which it has in principal settled all outstanding litigation with Groupon.  The terms of the settlement are confidential.

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On May 6, 2016, the Court held a hearing regarding the Federal Circuits decision issued on March 1, 2016 and the pending motion for summary judgment related to subject matter eligibility.  The Court heard arguments of the Company and Four Square Labs and took the matter under advisement.  The Court also set a trial date of September 12, 2016.  The Court also required the parties to submit briefing on certain collateral estoppel issues and a joint docket control order within 15 days, or by May 21, 2016.

The court dockets for each case, including the parties’ briefs are publicly available on the Public Access to Court Electronic Records website, or PACER, www.pacer.gov, which is operated by the Administrative Office of the U.S. Courts.

Other than as noted above, the Company is not a party to any pending legal proceeding nor is its property the subject of any pending legal proceeding that is not in the ordinary course of business or otherwise material to the financial condition of its business. Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to us.

ITEM 1A. RISK FACTORS

Not required 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.  

On January 4, 2016, the Company granted options to purchase an aggregate of 233,495 shares of the Company’s common stock to the Company’s Chief Executive Officer, Andrew Levi. The options were fully vested as of the grant date and have a term of ten years. 60,000 of the options are exercisable at an exercise price of $1.375 per share and 173,495 of the options are exercisable at an exercise price of $1.25 per share. The options were issued pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act.

In March 2016, pursuant to a securities purchase agreement, the Company sold an aggregate of 470,591 shares of its common stock together with warrants to purchase an aggregate of 117,648 shares of its common stock for net proceeds, after commissions and other costs, of $385,310. The warrants are exercisable at an exercise price of $1.25 for a term of five years.  The securities were issued in a private placement transaction solely to a limited number of accredited investors pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D thereunder, without engaging in any advertising or general solicitation of any kind.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

                None

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ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit Number	Description
2.1	Agreement and Plan of Merger and Reorganization, dated as of September 1, 2011, by and among Blue Calypso, Inc., Blue Calypso Acquisition Corp., and Blue Calypso Holdings, Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
2.2	Agreement and Plan of Merger, dated September 9, 2011, by and between Blue Calypso, Inc., a Nevada corporation, and Blue Calypso, Inc., a Delaware corporation (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2011).
3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2011).
3.2	Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2011).
3.3	Bylaws of Blue Calypso, Inc., a Delaware corporation, adopted September 9, 2011 (incorporated by reference to Exhibit 3.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2011).

3.4	Certificate of Amendment (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on July 2, 2015).
3.5	Certificate of Correction (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2016).
10.1	2011 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.2	Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.3	Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.4	Form Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.5	Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, dated as of September 1, 2011 (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.6	Stock Purchase Agreement, by and between Blue Calypso, Inc. and Deborah Flores, dated as of September 1, 2011 (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.7	Securities Purchase Agreement, dated as of September 1, 2011, by and among Blue Calypso, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).

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10.8	Registration Rights Agreement, dated as of September 1, 2011, by and among Blue Calypso, Inc. and certain purchasers set forth therein (incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.9	Form of Warrant (incorporated by reference to Exhibit 10.10 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 8, 2011).
10.10	Letter Agreement, dated January 16, 2012, by and between Blue Calypso, Inc. and Aztec Systems, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 20, 2012).
10.11	Promissory Note, dated January 17, 2012, issued by Blue Calypso, Inc. to Aztec Systems, Inc. (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 20, 2012).
10.12	Securities Purchase Agreement, dated April 19, 2012, by and between Blue Calypso, Inc. and the Buyer thereto (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.13	Senior Secured Convertible Note issued April 19, 2012 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.14	Common Stock Purchase Warrant issued April 19, 2012 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.15	Security Agreement, dated April 19, 2012, by and between the Company, Blue Calypso, LLC and the Buyer (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.16	Intellectual Property Security Agreement, dated April 19, 2012, by and between the Company, Blue Calypso, LLC, and the Buyer (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.17	Subsidiary Guarantee, dated April 19, 2012, by Blue Calypso, LLC, in favor of the Buyer (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).

10.18	Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.19	Amendment No. 1 to Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.20	Stockholder Agreement, dated April 19, 2012, by and between Andrew Levi and the Company (incorporated by reference to Exhibit 10.9 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012).
10.21	Letter Agreement dated June 1, 2012, between Blue Calypso, Inc. and Bill Ogle effective as of June 1, 2012 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 4, 2012).

10.22	Form of Subscription Agreement - June 2012 Private Placement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2012).
10.23	Form of Warrant - June 2012 Private Placement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2012).

29

10.24	Exchange Agreement dated November 9, 2012 between Blue Calypso, Inc. and Aztec Systems, Inc. (incorporated by reference to Exhibit 10.24 to our Quarterly Report on Form 10-Q for the period ended September 30, 2012 filed with the Securities and Exchange Commission on November 19, 2012).
10.25	8% Convertible Note dated November 9, 2012 (incorporated by reference to Exhibit 10.24 to our Quarterly Report on Form 10-Q for the period ended September 30, 2012 filed with the Securities and Exchange Commission on November 19, 2012).
10.25	Amendment No. 1 to 8% Senior Secured Convertible Debentures between Blue Calypso, Inc. and the Holder dated April 29, 2013 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2013).
10.26	Amendment No. 2 to Common Stock Purchase Warrants between the Company and the Holder dated April 29, 2013 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2013).
10.27	Amendment No. 2 to Common Stock Purchase Warrants between the Company and the Holder dated April 29, 2013 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2013).
10.28	Securities Purchase Agreement dated May 6, 2013 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2013).
10.29	10% Convertible Debenture dated May 6, 2013 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2013).
10.30	10% Convertible Debenture dated May 6, 2013 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2013).

10.31	Amendment No. 1 to 10% Convertible Debenture between Blue Calypso, Inc. and the Holder dated September 13, 2013 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2013).
10.32	Amendment No. 3 to Common Stock Purchase Warrants between the Company and the Holder dated September 13, 2013 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2013).
10.33	Amendment No. 2 to Common Stock Purchase Warrant between the Company and the Holder dated September 13, 2013 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 16, 2013).
10.34	Securities Purchase Agreement dated October 7, 2013 (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2013).

10.35	Amendment No. 4 to Common Stock Purchase Warrants between the Company and the Holder dated January 9, 2014 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 2014).
10.36	Amendment No. 3 to Common Stock Purchase Warrant between the Company and the Holder dated January 9, 2014 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 10, 2014).
10.37	Settlement and Standstill Agreement dated September 26, 2014 by and between Blue Calypso, Inc., Ronald L. Chez, and Individual Retirement Accounts for the benefit of Ronald L. Chez (incorporated by reference to Exhibit 10.1 on Form 8-K filed with the Securities and Exchange Commission on October 2, 2014).

30

10.38	Form of note purchase agreement dated as of July 20, 2015 by and between the lender, Blue Calypso, Inc., Blue Calypso Holdings, Inc., Blue Calypso LLC and Blue Calypso Latin America, S.A. (incorporated by reference to Exhibit 10.1 to Current Report as form 8-k filed with the Securities and Exchange Commission on July 24, 2015).
10.39	Form of Senior Convertible Note issued on July 20, 2015 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on July 24, 2015).
10.40	Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2015).
10.41	Form of Warrant (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 29, 2015).
10.42	Form of Securities Purchase Agreement – February 2016 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2016).
10.43	Form of Warrant - February 2016 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2016).
10.44	Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 28, 2016).
10.45	Form of Warrant (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the Securities and Exchange Commission on April 28, 2016).
16.1	Letter dated December 30, 2015 addressed to the Securities and Exchange Commission from Marcum LLP (incorporated by reference to Exhibit 16.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on December 30, 2015).
21.1	List of subsidiaries (incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 16, 2012).
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer 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 Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES  

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		BLUE CALYPSO, INC.
Date:	May 16, 2016	By:	/s/ Andrew Levi
		Name:	Andrew Levi
		Title:	Chief Executive Officer
			(Principal Executive Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14a AND 15d-14a

OF THE SECURITIES AND EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Andrew Levi, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Blue Calypso, 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(s) 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(s) 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 reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 16, 2016	By:	/s/ Andrew Levi
		Andrew Levi
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13a-14a AND 15d-14a

OF THE SECURITIES AND EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Chris Fameree, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Blue Calypso, 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(s) 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(s) 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 reasonably 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 control over financial reporting.

Date:  May 16, 2016	By:	/s/Chris Fameree
		Chris Fameree
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF BLUE CALYPSO, INC.

PURSUANT TO 18 U.S.C. SECTION 1350

                In connection with the Quarterly Report on Form 10-Q of Blue Calypso, Inc. (the "Company") for the period ended March 31, 2016, as filed with the Securities and Exchange Commission (the "Report"), I, Andrew Levi, Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 16, 2016	By:	/s/ Andrew Levi
		Andrew Levi
		Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF BLUE CALYPSO, INC.

PURSUANT TO 18 U.S.C. SECTION 1350

                In connection with the Quarterly Report on Form 10-Q of Blue Calypso, Inc. (the "Company") for the period ended March 31, 2016, as filed with the Securities and Exchange Commission (the "Report"), I, Chris Fameree, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 16, 2016	By:	/s/ Chris Fameree
		Chris Fameree
		Chief Financial Officer

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Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 13, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	BLUE CALYPSO, INC.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		7,164,364
Amendment Flag	false
Entity Central Index Key	0001399587
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash	$ 212,150	$ 730,482
Accounts receivable	352,796	247,131
Inventory	41,615	41,653
Prepaid expenses and other	40,676	42,370
Total current assets	647,237	1,061,636
Property and equipment, net	6,298	6,682
Other assets:
Accounts receivable, long term portion	47,627	71,440
Capitalized software development costs, net of accumulated amortization of $1,455,549 and $1,344,672 as of March 31, 2016 and December 31, 2015, respectively	810,373	817,548
Total assets	1,511,535	1,957,306
Current liabilities:
Accounts payable	108,582	103,936
Accrued expenses	42,062	44,190
Settlement payable, short term portion	95,253	119,066
Convertible note payable, net of debt discounts of $-0- and $119,115, respectively	0	180,885
Deferred rent, short term portion	2,048	2,048
Derivative liabilities	0	170,497
Total current liabilities	247,945	620,622
Long term debt:
Settlement payable, long term	47,627	71,440
Deferred rent, long term portion	793	1,211
Total liabilities	296,365	693,273
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized: Series A convertible preferred stock, $0.0001 par value; 1,700,000 shares designated; none issued and outstanding	0	0
Common stock, $0.0001 par value; 13,600,000 shares authorized, 6,029,553 and 5,522,146 shares issued and outstanding as of March 31, 2016 and December 31, 2015, respectively	602	552
Additional paid in capital	37,569,180	36,733,865
Accumulated deficit	(36,354,612)	(35,470,384)
Total stockholders' equity	1,215,170	1,264,033
Total liabilities and stockholders' equity	$ 1,511,535	$ 1,957,306

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parentheticals) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Capitalized software development costs, accumulated amortization (in Dollars)	$ 1,455,549	$ 1,344,672
Convertible Debt Discounts (in Dollars)	$ 0	$ 119,115
Preferred stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	13,600,000	13,600,000
Common stock, shares issued	6,029,553	5,522,146
Common stock, shares outstanding	6,029,553	5,522,146
Series A Convertible Preferred Stock [Member]
Preferred stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	1,700,000	1,700,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
REVENUE	$ 263,338	$ 115,725
OPERATING EXPENSES:
Cost of sales	90,400	55,112
Sales and marketing	135,639	48,574
General and administrative	797,461	535,547
Depreciation and amortization	111,261	84,621
Total operating expenses	1,134,761	723,854
Loss from operations	(871,423)	(608,129)
Other income (expense):
Change in fair value of derivative liabilities	101,381	0
Interest expense	(114,186)	(716)
Total other income (expense)	(12,805)	(716)
NET LOSS	$ (884,228)	$ (608,845)
Net loss per common share, basic and diluted (in Dollars per share)	$ (0.16)	$ (0.12)
Weighted average common shares outstanding, basic and diluted (in Shares)	5,667,751	4,917,672

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2016 - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2015	$ 552	$ 36,733,865	$ (35,470,384)	$ 1,264,033
Balance (in Shares) at Dec. 31, 2015	5,522,146
Sale of common stock and warrants at $0.85 per share, net of issuance costs of $14,692	$ 47	385,263		385,310
Sale of common stock and warrants at $0.85 per share, net of issuance costs of $14,692 (in Shares)	470,591
Shares issued for services rendered	$ 3	51,987		51,990
Shares issued for services rendered (in Shares)	36,816
Reclass derivative liability to equity upon note payment		69,117		69,117
Stock based compensation		328,948		328,948
Net loss			(884,228)	(884,228)
Balance at Mar. 31, 2016	$ 602	$ 37,569,180	$ (36,354,612)	$ 1,215,170
Balance (in Shares) at Mar. 31, 2016	6,029,553

XML

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Parentheticals) - Additional Paid-in Capital [Member]	3 Months Ended
	Mar. 31, 2016 USD ($) $ / shares
Sale of common stock and warrants per share | $ / shares	$ 0.85
Sale of common stock and warrants, issuance costs | $	$ 14,692

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (884,228)	$ (608,845)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	111,261	84,621
Bad debt expense	0	18,476
Amortization of debt discounts	119,115	0
Change in fair value of derivative liabilities	(101,381)	0
Stock based compensation	328,948	56,154
Common stock issued for services rendered	51,990	59,879
Changes in operating assets and liabilities:
Accounts receivable	(105,665)	42,299
Inventory	38	0
Prepaid expenses and other current assets	1,694	12,536
Accounts payable	4,647	8,510
Accrued expenses	(25,941)	(54,213)
Deferred rent	(418)	0
Net cash used in operating activities	(499,940)	(380,583)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets	0	(5,144)
Software development costs	(103,702)	(77,231)
Net cash used in investing activities	(103,702)	(82,375)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock and warrants	385,310	0
Repayments of convertible notes payable	(300,000)	0
Net cash provided by financing activities	85,310	0
Net decrease in cash	(518,332)	(462,958)
Cash at beginning of period	730,482	1,103,201
Cash at end of period	212,150	640,243
SUPPLEMENTAL INFORMATION
Cash paid for interest	$ 2,340	$ 27,976
Cash paid for income taxes
Non-cash investing and financing activities:	$ 0	$ 0

XML

NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2016

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Blue Calypso, Inc., a Delaware corporation (the "Company”), is engaged in the development, sales, delivery, licensing and enforcement of technology and intellectual property focused on mobile shopper engagement and digital word-of-mouth marketing and advertising. In January 2014, the Company transitioned from a development stage enterprise to an operating company.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2016 and for the three months ended March 31, 2016 and 2015. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the operating results for the full year ending December 31, 2016, or any other period.  These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2015 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on March 22, 2016.

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NOTE 2 - GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Substantial Doubt about Going Concern [Text Block]

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of March 31, 2016, the Company had cash of $212,150 and working capital of $399,292. During the three months ended March 31, 2016, the Company used net cash in operating activities of $499,940. The Company has incurred net losses since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In March 2016, the Company sold shares of common stock and warrants for net proceeds, after commissions and other costs, of approximately $385,000.  It is anticipated that the proceeds from this note and the sale of its common stock and warrants will provide the Company with cash sufficient to fund operations through December 2016. 

The Company's primary source of operating funds since inception has been cash proceeds from private placements of common stock, preferred stock, convertible debentures and the exercise of warrants.  The Company intends to raise additional capital through private issuances of debt and equity instruments, but there can be no assurance that these funds will be available on terms acceptable to the Company, or will be sufficient to enable the Company to fully execute on its business plan or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, debt discounts, derivative liabilities, and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Concentrations of Credit Risk

As of March 31, 2016, excluding the impact of the allowance for doubtful accounts, two customers represented 61% and 27% of the Company’s accounts receivable. As of December 31, 2015, three customers represented 10%, 30% and 39% of the Company’s accounts receivable.

During the three months ended March 31, 2016, two customers represented 82% and 11% of total revenue.

During the three months ended March 31, 2015, three customers represented 11%, 64% and 15% of total revenue.

Net Loss per Share

The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period, adjusted to give effect to the 50-for-1 reverse stock split, which was effective in the market on July 2, 2015, and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted loss per share for the three months ended March 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:  

	March 31, 2016		March 31, 2015
Options to purchase common stock		863,123		447,305
Warrants to purchase common stock		821,061		220,913
Restricted stock units		-		21,810
Totals		1,684,184		690,028

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable ASC 480-10.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

Until February 16, 2016, the date on which the convertible note was repaid in full, the Company’s free standing derivatives consisted of embedded conversion options with a convertible note. The Company evaluated these derivatives to assess their proper classification in the condensed consolidated balance sheet as of December 31, 2015 using the applicable classification criteria enumerated under ASC 815-Derivatives and Hedging. The Company determined that certain embedded conversion features do not contain fixed settlement provisions. The convertible note contained a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

At February 16, 2016, the Company was required to record the debt derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the date of payoff.  On February 16, 2016, (date of payoff) the Company reclassified the fair value of $69,116 from liabilities to equity.  See Note 5.

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed below.

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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

ASC 820 describes three levels of inputs that may be used to measure fair value:

  Level 1 —  quoted prices in active markets for identical assets or liabilities

  Level 2 —  quoted prices for similar assets and liabilities in active markets or inputs that are observable

  Level 3 —  inputs that are unobservable based on an entity’s own assumptions, as there is little, if any, related market activity (for example, cash flow modeling inputs based on assumptions)

Financial liabilities as of December 31, 2015 measured at fair value on a recurring basis are summarized below:

	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	170,497	$	--	$	--	$	170,497

At March 31, 2016, the Company did not have any financial liabilities requiring measurement at fair value on a recurring basis.

The Company determined that certain conversion option related to a convertible note did not have fixed settlement provisions and are deemed to be derivative financial instruments, since the exercise price was subject to adjustment based on certain changes in market price of the Company’s common stock. Accordingly, the Company was required to record such conversion option as a liability and mark such derivative to fair value each reporting period. Such instrument was classified within Level 3 of the valuation hierarchy.  On February 16, 2016, the Company paid off the convertible note.  As such, the Company reclassified the fair value from liability to equity.  See Note 5.

The fair value of the conversion option was calculated using a binomial lattice formula with the following weighted average assumptions at February 16, 2016:

	February 16,
	2016
Common Stock Closing Price	$	0.96
Conversion Price per Share	$	1.1402
Conversion Shares		263,118
Call Option Value		0.2627
Dividend Yield		0.00	%
Volatility		129.93	%
Risk-free Interest Rate		0.42	%
Term	0.43 years

The risk-free interest rate is the United States Treasury rate on the measurement date having a term equal to the remaining contractual life of the instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate.  The dividend yield is 0% as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future.

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures.

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.

Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in volatility or interest free rate, in isolation, can significantly increase or decrease the fair value of the derivative liabilities. Changes in the values of the derivative liabilities are recorded as a component of other income (expense) on the Company’s condensed consolidated statements of operations.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis using significant unobservable input for the three months ended March 31, 2016:

Balance – January 1, 2016	$	170,497
Change in fair value of derivative liabilities		(101,381	)
Reclassified to equity upon note payoff		(69,116	)
Balance – March 31, 2016	$	-0-

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NOTE 5 - CONVERTIBLE NOTE PAYABLE

3 Months Ended

Mar. 31, 2016

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

NOTE 5 – CONVERTIBLE NOTE PAYABLE

On July 20, 2015, the Company issued a senior convertible note (the “July 2015 Note”), in the principal amount of $550,000 due one year from the date of issuance. The total net proceeds the Company received from this note was $415,123, net of fees and original interest discount (“OID”) of $50,000. At any time commencing one hundred and eighty one days from issuance, the July 2015 Note is convertible into shares of the Company’s common stock at the option of the holder at a conversion price of $7.6335 with certain reset provisions should certain default conditions occur.  These certain default conditions were deemed to be outside the Company’s control.

If the $550,000 principal amount of the July 2015 Note and all accrued but unpaid interest thereof is not paid in full on or before January 16, 2016, the July 2015 Note shall amortize in four equal payments payable on January 20, 2016, February 20, 2016, March 20, 2016 and April 20, 2016. These payments shall be paid (i) in cash at a 120% premium, and/or (ii) in shares of the Company's common stock at a 20% discount to the average of the three daily volume weighted average prices of the Company’s common stock for the prior three trading days, provided the Company is in compliance with certain equity conditions as defined in the July 2015 Note.

The Company identified an embedded derivative related to a conversion option in the July 2015 Note. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivative as of the inception date of the Secured Convertible Debentures and to fair value the derivative as of each subsequent reporting date.

At the inception of the July 2015 Note, the Company determined the aggregate fair value of the embedded derivatives to be $302,287.

The Company has issued debt for which total proceeds were allocated to individual instruments based on the fair value of the each instrument at the time of issuance. Such value of the debt was recorded as discount on debt and is being amortized over the term of the respective debt.

On December 18, 2015, the Company modified certain terms of the July 2015 Note. Pursuant to the modification, the Company agreed to repay the lender $300,000 in consideration for the extinguishment of $250,000 of the principal amount outstanding as of the December 18, 2015. The Company and the lender also agreed to reduce the guaranteed interest on the note from 10% to 5%, to delay the guaranteed interest start date by thirty days until February 20, 2016 and to delay the first installment payment by thirty days until February 20, 2016.

In addition, the Company and the lender also agreed reduce the conversion price from $7.6335 to $4.25 per share, modify certain equity conditions (as defined in the July 2015 Note) and events of default (as defined in the July 2015 Note).

In accordance with ASC 470-20, the change in fair value of the debt modification was recognized as an expense on the date was accepted by the holder. In connection with the modification, in 2015, the Company recorded a loss of $41,434 representing the difference between the fair value of the conversion feature under the new conversion price and under the original conversion feature. 

On February 16, 2016, the Company paid off the remaining balance of the July 2015 Note of $300,000.

For the three months ended March 31, 2016, amortization of debt discount was $119,115. The July 2015 Note balance was $180,885 net of discount of $119,115 at December 31, 2015.

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NOTE 6 - STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 6 – STOCKHOLDERS’ EQUITY

On June 26, 2015, the Company filed an amendment to its Articles of Incorporation and effected a 50-for-1 reverse stock split of its issued and outstanding shares of common stock, whereby 250,666,631 outstanding shares of the Company’s common stock were converted into 5,013,366 shares of the Company's common stock.  In addition, the Company reduced its number of authorized common shares from 680,000,000 to 13,600,000.  The reverse stock split was effective in the market commencing on July 2, 2015. All per share amounts and number of shares in the condensed consolidated financial statements, related notes and other items throughout this Form 10-Q have been retroactively restated to reflect the reverse stock split.

During the three months ended March 31, 2016, the Company issued 27,155 shares of its common stock as consideration for investor relations services valued at $38,340.

During the three months ended March 31, 2016, the Company issued 9,661 shares of its common stock as consideration for legal services valued at $13,650.

In March 2016, pursuant to a securities purchase agreement, the Company sold an aggregate of 470,591 shares of its common stock together with warrants to purchase an aggregate of 117,648 shares of its common stock for net proceeds, after commissions and other costs, of $385,310. The warrants are exercisable at an exercise price of $1.25 for a term of five years.

The Company paid the placement agent cash commissions of $10,000 and also costs and expenses of $4,692.

Options

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices for 2015. Prior to 2015, the Company derived the volatility figure from an index of historical stock prices for comparable entities. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla" options, as defined in the accounting standards codification.

The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. 

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

The Company estimated forfeitures related to option grants at a weighted average annual rate of  0% per year, as the Company does not yet have adequate historical data, for options granted during the three months ended March 31, 2016 and 2015.

The following assumptions were used in determining the fair value of employee and vesting non-employee options during the three months ended March 31, 2016 and 2015:

	March 31, 2016			March 31, 2015
Risk-free interest rate		1.54% - 1.73	%		1.68% - 1.94	%
Dividend yield		0	%		0	%
Stock price volatility		129.41%-130.97	%		140.67% -145.24	%
Expected life	5 – 9.2 years			7-10  years
Weighted average grant date fair value	$	1.07		$	5.50

On January 4, 2016, the Company awarded options to purchase an aggregate of 233,495 shares of common stock to the Company’s Chief Executive Officer, Andrew Levi.  These options vest immediately and have a term of 10 years. 60,000 of the options have an exercise price of $1.375 per share and  173,495 of the options are exercisable at $1.25 per share.  The options had an aggregate grant date fair value of $250,000.

The following table summarizes the stock option activity for the three months ended March 31, 2016:

	Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		629,628	$	7.59		4.5
Granted		233,495	$	1.28		10.0
Canceled/expired
Outstanding at March 31, 2016		863,123	$	5.89		5.76	$	272,554
Exercisable at March 31, 2016		758,979	$	5.89		5.3	$	265,654

The following table presents information related to stock options at March 31, 2016:

Options Outstanding				Options Exercisable
Exercise     Price		Number of Options		Weighted Average Remaining Life In Years		Exercisable Number of Options
$	0.00-5.00		456,440		7.2		431,126
	5.01-12.50		382,675		4.1		303,845
	12.51-25.00		15,008		4.0		15,008
	25.01-45.00		9,000		3.6		9,000
			863,123		5.8		758,979

As of March 31, 2016, stock-based compensation of $453,351 remains unamortized and is expected to be amortized over the weighted average remaining period of 1.08 years.

The stock-based compensation expense related to option grants was $328,948 and $56,154 during the three months ended March 31, 2016 and 2015, respectively.

Warrants

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at March 31, 2016: 

Exercise Price		Number Outstanding		Expiration Date
$	1.25	$	117,648	March 2021
	4.75		482,500	Sept/Oct 2020
	5.00		220,913	August 2016
			821,061

The following table summarizes the warrant activity for the three months ended March 31, 2016:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		703,413	$	4.83		3.5
Grants		117,648	$	1.25		5.0
Exercised		-
Forfeitures or expirations		-
Outstanding at March 31, 2016		821,061	$	4.32		3.5	$	136,472
Exercisable at March 31, 2016		821,061	$	4.32		3.5	$	136,472

In connection with the sale of common stock, the Company issued an aggregate of 117,648 warrants to purchase the Company’s common stock at $1.25 per share expiring five years from the date of issuance.

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NOTE 7 - RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 7 – RELATED PARTY TRANSACTIONS

The Company appointed a new Chief Financial Officer during August 2014. The Company utilizes Assure Professional, LLC (“Assure”) to provide certain outsourced accounting services. The Company’s current Chief Financial Officer is a partial owner of Assure.  The Company incurred expense of $10,000 and $6,750 in exchange for these services for the three months ended March 31, 2016 and 2015, respectively.  Included in accounts payable and due to Assure at March 31, 2016 and 2015 was approximately $8,000 and $2,250, respectively.

Jonathan Merriman was appointed to the Company’s Board of Directors during December 2014.  Mr. Merriman is the CEO of Merriman Capital, Inc. (“Merriman”).  Merriman provides capital market advisory services to the Company for which we incurred expense of $45,000 and $30,000 during the three months ended March 31, 2016 and 2015, respectively. The Company primarily issues common stock in exchange for monthly services and $6,660 was due to Merriman at March 31, 2016. In addition, Merriman Capital advised the Company in connection with its March 2016 private placement and received an advisory fee of $10,000 and acted as the Company’s placement agent during its most recent offering.  

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NOTE 8 - COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Litigation

On July 31, 2012, the Company filed suit against Groupon, Inc. in the Eastern District of Texas in Civil Action No. 6:12-cv-00486. The Company filed additional suits against IZEA, Inc. on October 17, 2012, Yelp, Inc. on October 17, 2012, and Foursquare Labs, Inc. on October 31, 2012 in Civil Action Nos. 6:12-cv-786, 6:12-cv-788, 6:12-cv-837, respectively. Each of these cases alleges that the defendants infringe U.S. Patent Nos. 7,664,516 entitled "Method and System for Peer-to-Peer Advertising Between Mobile Communication Devices" and 8,155,679 entitled "System and Method for Peer-to-Peer Advertising Between Mobile Communication Devices." The Company subsequently added U.S. Patent Nos. 8,438,055, 8,452,646, and 8,457,670 to the cases, alleging each defendant infringed the newly added patents. Each of the defendants have answered, denying infringement and claiming that the asserted patents are invalid. Groupon, Yelp, and Foursquare filed counterclaims for declaratory judgment that the asserted patents are invalid and not infringed. Yelp filed an additional counterclaim for declaratory judgment that the asserted patens are unenforceable. The Court subsequently consolidated the actions for at least pre-trial purposes. Groupon filed a motion to transfer the case against it to the U.S. District Court for the Northern District of Illinois, which the Court denied on September 27, 2013.  On February 3, 2014, Groupon filed a petition to the U.S. Court of Appeals for the Federal Circuit for mandamus on the district court's denial of its motion to transfer. On April 23, 2014, the petition was denied by the Federal Circuit.

Between July 19, 2013 and October 3, 2013, Groupon filed petitions with the Patent Trial & Appeals Board (“PTAB”) requesting institution of Covered Business Method Review (“CBMR”) of all asserted claims. On December 19, 2013 and January 17, 2014, the PTAB issued decisions instituting review on all but four of the asserted claims. On January 14, 2014, the Company and all defendants filed a joint motion to stay the district court litigation. The Court granted the motion and stayed the case on January 16, 2014 pending a decision by the PTAB. Trial on the CBMR at the PTAB occurred during September 2014.

On December 17, 2014, the Patent Trial and Appeal Board issued final decisions in Covered Business Method Review proceedings CBM2013-00035, CBM2013-00033, CBM2013-00034, CBM2013-00046 and CBM2013-00044. In each case, certain claims of each patent were held to be invalid for various reasons. With respect to the ‘516, ‘679, ‘055 and ‘646 patents, many of the claims survived and the patents remain enforceable. All of the claims of the ‘670 patent were held invalid. The Company appealed each of the final decisions to the United States Federal Circuit Court of Appeals.  The Company appealed the unpatentability determinations including the decision of invalidity based on anticipation of several claims of the patents by prior art (the “Paul reference”).  The Company also appealed the decision to review its patents under the provisions for CBMR and that the ‘516 patent lacked sufficient written description under § 112 to support the claims.  Groupon appealed the Board’s decision that the patents were not valid under § 103 and the determination by the PTAB that the Ratismor reference was not publically available prior art. 

On April 2, 2015, the District Court lifted the stay and required the parties to file a joint docket control order.  On April 6, 2015, the Court set a Markman Hearing for June 29, 2015, and jury selection for December 14, 2015.  On April 15, 2015, the parties filed their joint docket control order.  The Court entered its docket control order on April 23, 2015.  Due to an apparent scheduling conflict, the Court rescheduled the Markman Hearing to July 8, 2015. 

On April 22, 2015, the Company filed its third amended complaint against all defendants.  The defendants timely answered on May 11, 2015.  Each of the defendant’s answers included a counterclaim for invalidity of the patents.  The Company responded to these invalidity contentions on June 1, 2015.

On May 13, 2015, the Company filed a motion for entry of an order focusing patent claims and prior art.  That motion requested that the Court narrow the number of claims at issue and the number of prior art references that defendants could use in an attempt to invalidate the Company’s patents.  On May 27, 2015, the Court held a hearing on the motion and ordered defendants to reduce the number of references in support of any invalidity contention against the patents. 

On June 25, 2015, the Company attended mediation with Yelp in an effort to settle the case.  That mediation was recessed to explore settlement options.

On July 8, 2015, the Company attended the Markman Hearing in order to construe the claims of the patents.  On July 14, 2015, the Court entered its Memorandum Opinion and Order regarding claim construction.  In that Order, the Court analyzed eleven claim terms.  The Court agreed with Blue Calypso’s proffered construction as to seven terms, chose its own construction as to three terms and agreed with defendants’ proffered construction as to only one term.  The Court also expressly rejected defendants’ argument that the term “testimonial tag” was indefinite.  

On July 13, 2015, the Court entered an order severing the non-active claims out of the case and consolidating claims regarding those patents into a separate set of cases.  These new cases address the claims which were held invalid by the PTAB and which are now on appeal to the Federal Circuit Court of Appeals.

On July 14, 2015, the Company attended court-ordered mediation with Groupon.  The result of that mediation was an impasse.

On July 16, 2015, the Company attended court-ordered mediation with IZEA. The parties reached a settlement.

On July 20, 2015, the Company attended court-ordered mediation with Foursquare. The result of that mediation was an impasse.

As part of the Company's settlement with Living Social, the Company's attorney is entitled to additional compensation for the value of certain non-monetary arrangements.

On August 17, 2015, the Company entered into a settlement agreement with IZEA, pursuant to which it settled all outstanding litigation with IZEA. Under the Agreement, IZEA has agreed to pay the Company a royalty fee of 4.125% of revenue from IZEA’s discontinued legacy platforms SocialSpark, Sponsored Tweets and WeReward. The remaining terms of the settlement are confidential.  Legal costs due to our attorneys associated with the IZEA settlement are classified as a settlement payable on our consolidated balance sheet.

On September 21, 2015, the Company entered into a settlement agreement with Yelp, pursuant to which all outstanding litigation with Yelp was settled.  Under the agreement, Yelp has agreed to purchase 4,000 KIOSentrix beacons.

On March 1, 2016, the Federal Circuit overturned the PTAB decision as to insufficient written description but upheld the decision that the Ratismor reference was not publically available prior art.  However, the Federal Circuit confirmed the Board’s decision to institute the CBMR process on the basis that Blue Calypso’s patent portfolio qualified as a business method patent which was financial in nature.  The Federal Circuit also upheld the decision of invalidity based on anticipation of several claims of the patents by the prior art Paul reference.  

The reversal of the written description matter is significant as it re-establishes the ‘516 parent patent issue date of February 2010 as the date that damages begin to accrue.  Prior to this reversal the first date of infringement was relegated to the later issue date of the ‘679 patent on April 2012.

The Company requested an En Banc review by the Federal Circuit of the holding with respect to anticipation by the Paul reference on March 31, 2016.   The Company has the option of requesting that the Supreme Court review the Federal Circuit’s decision.  The option for appeal to the Supreme Court must be filed by June 1, 2016.

On April 20, 2016, the District Court set a hearing date of May 6, 2016 at 9:00 am in Marshall, Texas.  The items to be discussed will be the Federal Circuit’s Decision issued on March 1, 2016 and the pending Motion for Judgment of lack of subject matter eligibility.

On May 4, 2016, the Federal Circuit denied the request for En Banc review.  

On May 5, 2016, the Company entered into a memorandum of settlement with Groupon pursuant to which it has in principal settled all outstanding litigation with Groupon.  The terms of the settlement are confidential.

On May 6, 2016, the Court held a hearing regarding the Federal Circuits decision issued on March 1, 2016 and the pending motion for summary judgment related to subject matter eligibility.  The Court heard arguments of the Company and Four Square Labs and took the matter under advisement.  The Court also set a trial date of September 12, 2016.  The Court also required the parties to submit briefing on certain collateral estoppel issues and a joint docket control order within 15 days, or by May 21, 2016.

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable.

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NOTE 9 - SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 9 – SUBSEQUENT EVENTS

On April 22, 2016, Blue Calypso, Inc. entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a strategic investor Harold M. Brierley (“Brierley”), pursuant to which the Company issued and sold 609,756 shares of the Company’s common stock (the “Shares”) and warrants to purchase an additional 609,756 shares of the Company’s common stock (the “Warrants”) to Brierley for aggregate gross proceeds of $1,000,000.

Pursuant to the Purchase Agreement, the Company granted piggyback registration rights with respect to the Shares and the shares of Common Stock issuable upon exercise of the Warrants to Brierley. In addition, Brierley was granted the right to submit the name of one individual for nomination to the Company’s Board of Directors in accordance with the Company’s Bylaws and applicable laws.

The Warrants are exercisable at an exercise price of $2.13 per share for a term of five years. The exercise price and the number of shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events, including stock dividends, stock splits, combinations and reclassifications of the Company’s common stock.

In connection with the private placement, the Company entered into agreements with Brierley, pursuant to which Brierley will act as a senior advisor to the Company. As consideration for his services as a senior advisor to the Company, Brierley was granted options to purchase 50,000 shares of the Company’s Common Stock (the “Options”).  The Options are exercisable at an exercise price of $2.08 per share and vest pro rata quarterly over a term of two years.

On April 26, 2016, in conjunction with the Brierley transaction, the Compensation Committee of the Board of Directors of the Company granted a restricted stock award of 500,000 shares of the Company’s Common Stock to the Company’s Chief Executive Officer Andrew Levi. The shares vest and become issuable on the tenth anniversary of the grant date provided that upon a change of control or upon a termination other than for cause, the shares shall vest 100%.

During May 2016, the Company issued 25,055 shares of its common stock as consideration for investor relations and capital markets services valued at $66,660.

On May 5, 2016, the Company entered into a memorandum of settlement with Groupon pursuant to which it has in principal settled all outstanding litigation with Groupon.  The terms of the settlement are confidential.

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Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, debt discounts, derivative liabilities, and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk

As of March 31, 2016, excluding the impact of the allowance for doubtful accounts, two customers represented 61% and 27% of the Company’s accounts receivable. As of December 31, 2015, three customers represented 10%, 30% and 39% of the Company’s accounts receivable.

During the three months ended March 31, 2016, two customers represented 82% and 11% of total revenue.

During the three months ended March 31, 2015, three customers represented 11%, 64% and 15% of total revenue.

Earnings Per Share, Policy [Policy Text Block]

Net Loss per Share

The Company computes basic net loss per share by dividing net loss per share available to common stockholders by the weighted average number of common shares outstanding for the period, adjusted to give effect to the 50-for-1 reverse stock split, which was effective in the market on July 2, 2015, and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted loss per share for the three months ended March 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:  

	March 31, 2016		March 31, 2015
Options to purchase common stock		863,123		447,305
Warrants to purchase common stock		821,061		220,913
Restricted stock units		-		21,810
Totals		1,684,184		690,028

Convertible Instrument [Policy Text Block]

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable ASC 480-10.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

Until February 16, 2016, the date on which the convertible note was repaid in full, the Company’s free standing derivatives consisted of embedded conversion options with a convertible note. The Company evaluated these derivatives to assess their proper classification in the condensed consolidated balance sheet as of December 31, 2015 using the applicable classification criteria enumerated under ASC 815-Derivatives and Hedging. The Company determined that certain embedded conversion features do not contain fixed settlement provisions. The convertible note contained a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

At February 16, 2016, the Company was required to record the debt derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the date of payoff.  On February 16, 2016, (date of payoff) the Company reclassified the fair value of $69,116 from liabilities to equity.  See Note 5.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company's financial position, results of operations or cash flows.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed below.

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

	March 31, 2016		March 31, 2015
Options to purchase common stock		863,123		447,305
Warrants to purchase common stock		821,061		220,913
Restricted stock units		-		21,810
Totals		1,684,184		690,028

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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

Financial liabilities as of December 31, 2015 measured at fair value on a recurring basis are summarized below:

	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Derivative liability	$	170,497	$	--	$	--	$	170,497

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Table Text Block]

The fair value of the conversion option was calculated using a binomial lattice formula with the following weighted average assumptions at February 16, 2016:

	February 16,
	2016
Common Stock Closing Price	$	0.96
Conversion Price per Share	$	1.1402
Conversion Shares		263,118
Call Option Value		0.2627
Dividend Yield		0.00	%
Volatility		129.93	%
Risk-free Interest Rate		0.42	%
Term	0.43 years

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis using significant unobservable input for the three months ended March 31, 2016:

Balance – January 1, 2016	$	170,497
Change in fair value of derivative liabilities		(101,381	)
Reclassified to equity upon note payoff		(69,116	)
Balance – March 31, 2016	$	-0-

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NOTE 6 - STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The following assumptions were used in determining the fair value of employee and vesting non-employee options during the three months ended March 31, 2016 and 2015:

	March 31, 2016			March 31, 2015
Risk-free interest rate		1.54% - 1.73	%		1.68% - 1.94	%
Dividend yield		0	%		0	%
Stock price volatility		129.41%-130.97	%		140.67% -145.24	%
Expected life	5 – 9.2 years			7-10  years
Weighted average grant date fair value	$	1.07		$	5.50

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

The following table summarizes the stock option activity for the three months ended March 31, 2016:

	Shares		Weighted-Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		629,628	$	7.59		4.5
Granted		233,495	$	1.28		10.0
Canceled/expired
Outstanding at March 31, 2016		863,123	$	5.89		5.76	$	272,554
Exercisable at March 31, 2016		758,979	$	5.89		5.3	$	265,654

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

The following table presents information related to stock options at March 31, 2016:

Options Outstanding				Options Exercisable
Exercise     Price		Number of Options		Weighted Average Remaining Life In Years		Exercisable Number of Options
$	0.00-5.00		456,440		7.2		431,126
	5.01-12.50		382,675		4.1		303,845
	12.51-25.00		15,008		4.0		15,008
	25.01-45.00		9,000		3.6		9,000
			863,123		5.8		758,979

Schedule of Outstanding Warrants [Table Text Block]

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at March 31, 2016:

Exercise Price		Number Outstanding		Expiration Date
$	1.25	$	117,648	March 2021
	4.75		482,500	Sept/Oct 2020
	5.00		220,913	August 2016
			821,061

Schedule of Warrants Activity [Table Text Block]

The following table summarizes the warrant activity for the three months ended March 31, 2016:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		703,413	$	4.83		3.5
Grants		117,648	$	1.25		5.0
Exercised		-
Forfeitures or expirations		-
Outstanding at March 31, 2016		821,061	$	4.32		3.5	$	136,472
Exercisable at March 31, 2016		821,061	$	4.32		3.5	$	136,472

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NOTE 2 - GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS (Details) - USD ($)	1 Months Ended	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2016	Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Cash	$ 212,150	$ 212,150
Working Capital	399,292	399,292
Net Cash Provided by (Used in) Operating Activities		(499,940)	$ (380,583)
Proceeds from Issuance or Sale of Equity	$ 385,310	$ 385,310	$ 0

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Customer 1 [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage	61.00%		10.00%
Customer 1 [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage	82.00%	11.00%
Customer 2 [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage	27.00%		30.00%
Customer 2 [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage	11.00%	64.00%
Customer 3 [Member] | Accounts Receivable [Member] | Credit Concentration Risk [Member]
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage			39.00%
Customer 3 [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Concentration Risk, Percentage		15.00%

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	1,684,184	690,028
Employee Stock Option [Member] | Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	863,123	447,305
Warrant [Member] | Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	821,061	220,913
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	0	21,810

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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details)		3 Months Ended
	Feb. 16, 2016	Mar. 31, 2016
Fair Value Disclosures [Abstract]
Fair Value Assumptions, Expected Dividend Rate	0.00%	0.00%

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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis	Dec. 31, 2015 USD ($)
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative liability	$ 170,497
Fair Value, Inputs, Level 1 [Member]
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative liability
Fair Value, Inputs, Level 2 [Member]
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative liability
Fair Value, Inputs, Level 3 [Member]
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items]
Derivative liability	$ 170,497

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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques		3 Months Ended
	Feb. 16, 2016 $ / shares	Mar. 31, 2016
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Abstract]
Common Stock Closing Price (in Dollars per share)	$ 0.96
Conversion Price per Share (in Dollars per share)	$ 1.1402
Conversion Shares	263,118
Call Option Value (in Dollars per share)	$ 0.2627
Dividend Yield	0.00%	0.00%
Volatility	129.93%
Risk-free Interest Rate	0.42%
Term	156 days

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NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation	3 Months Ended
	Mar. 31, 2016 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Abstract]
Balance	$ 170,497
Change in fair value of derivative liabilities	(101,381)
Reclassified to equity upon note payoff	(69,116)
Balance	$ 0

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NOTE 5 - CONVERTIBLE NOTE PAYABLE (Details) - USD ($)				3 Months Ended
	Feb. 16, 2016	Dec. 18, 2015	Jul. 20, 2015	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
NOTE 5 - CONVERTIBLE NOTE PAYABLE (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 1.1402
Derivative Liability						$ 170,497
Repayments of Convertible Debt				$ 300,000	$ 0
Amortization of Debt Discount (Premium)				$ 119,115	0
July 2015 Debenture [Member]
NOTE 5 - CONVERTIBLE NOTE PAYABLE (Details) [Line Items]
Debt Instrument, Face Amount		$ 300,000	$ 550,000
Debt Instrument, Term			1 year
Proceeds from Issuance of Debt			$ 415,123
Debt Instrument, Unamortized Discount			$ 50,000			119,115
Debt Instrument, Convertible, Terms of Conversion Feature			At any time commencing one hundred and eighty one days from issuance, the July 2015 Note is convertible into shares of the Company’s common stock at the option of the holder at a conversion price
Debt Instrument, Convertible, Conversion Price (in Dollars per share)			$ 7.6335
Debt Instrument, Payment Terms		delay the guaranteed interest start date by thirty days until February 20, 2016 and to delay the first installment payment by thirty days until February 20, 2016	If the $550,000 principal amount of the July 2015 Note and all accrued but unpaid interest thereof is not paid in full on or before January 16, 2016, the July 2015 Note shall amortize in four equal payments payable on January 20, 2016, February 20, 2016, March 20, 2016 and April 20, 2016. These payments shall be paid (i) in cash at a 120% premium, and/or (ii) in shares of the Company's common stock at a 20% discount to the average of the three daily volume weighted average prices of the Company’s common stock for the prior three trading days, provided the Company is in compliance with certain equity conditions as defined in the July 2015 Note.
Debt Instrument, Maturity Date			Jan. 16, 2016
Derivative Liability			$ 302,287
Extinguishment of Debt, Amount		$ 250,000
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Gain (Loss) on Debt Modifcation and Conversion Inducement		$ (41,434)
Repayments of Convertible Debt	$ 300,000
Amortization of Debt Discount (Premium)					$ 119,115
Notes Payable						$ 180,885
Minimum [Member] | July 2015 Debenture [Member]
NOTE 5 - CONVERTIBLE NOTE PAYABLE (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price (in Dollars per share)		$ 7.6335
Maximum [Member] | July 2015 Debenture [Member]
NOTE 5 - CONVERTIBLE NOTE PAYABLE (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price (in Dollars per share)		$ 4.25

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NOTE 6 - STOCKHOLDERS' EQUITY (Details) - USD ($)			1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 04, 2016	Jun. 26, 2015	Mar. 31, 2016	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Jun. 25, 2015
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Stockholders' Equity, Reverse Stock Split		50-for-1
Conversion of Stock, Shares Converted		250,666,631
Conversion of Stock, Shares Issued		5,013,366
Common Stock, Shares Authorized		13,600,000	13,600,000	13,600,000		13,600,000	680,000,000
Stock Issued During Period, Value, Issued for Services (in Dollars)				$ 51,990
Stock Issued During Period, Shares, New Issues			470,591
Share-Based Compensation Arrangement by Share-Based Payment Award, Warrants, Grants in Period, Gross			117,648
Proceeds from Issuance or Sale of Equity (in Dollars)			$ 385,310	$ 385,310	$ 0
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)			$ 1.25	$ 1.25
Warrant Term						5 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				233,495
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)				$ 1.28
Share-based Compensation (in Dollars)				$ 328,948	$ 56,154
Private Placement [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)			$ 1.25	$ 1.25
Warrant Term				5 years
Payments of Stock Issuance Costs (in Dollars)			$ 4,692
Class of Warrant or Rights, Granted				117,648
Investor Relations Services [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services				27,155
Stock Issued During Period, Value, Issued for Services (in Dollars)				$ 38,340
Legal Services [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services				9,661
Stock Issued During Period, Value, Issued for Services (in Dollars)				$ 13,650
Private Placement Agent Commision [Member] | Private Placement [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Payments of Stock Issuance Costs (in Dollars)			10,000
Employee Stock Option [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Share-based Compensation by Share-based Payment Award, Options, Forfeiture Rate				0.00%	0.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options (in Dollars)			$ 453,351	$ 453,351
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				1 year 29 days
Share-based Compensation (in Dollars)				$ 328,948	$ 56,154
Employee Stock Option [Member] | Chief Executive Officer [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	233,495
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	10 years
Share Based Compensation Arrangement By Share Based Payment Award Options Grant Date Intrinsic Value (in Dollars)	$ 250,000
Employee Stock Option [Member] | Chief Executive Officer [Member] | Options Exercise Price at $1.375 [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	60,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)	$ 1.375
Employee Stock Option [Member] | Chief Executive Officer [Member] | Options Exercise Price at $1.25 [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	173,495
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)	$ 1.25

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NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Line Items]
Dividend yield	0.00%	0.00%
Weighted average grant date fair value (in Dollars per share)	$ 1.07	$ 5.50
Minimum [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Line Items]
Risk-free interest rate	1.54%	1.68%
Stock price volatility	129.41%	140.67%
Expected life	5 years	7 years
Maximum [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Line Items]
Risk-free interest rate	1.73%	1.94%
Stock price volatility	130.97%	145.24%
Expected life	9 years 73 days	10 years

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NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Share-based Compensation, Stock Options, Activity - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Schedule of Share-based Compensation, Stock Options, Activity [Abstract]
Options Outstanding	863,123	629,628
Options Outstanding, Weighted Average Exercise Price	$ 5.89	$ 7.59
OptionsOutstanding, Weighted Average Remaining Contractual Term	5 years 277 days	4 years 6 months
Options Outstanding, Aggregate Intrinsic Value	$ 272,554	$ 0
Exercisable at March 31, 2016	758,979
Exercisable at March 31, 2016	$ 5.89
Exercisable at March 31, 2016	5 years 109 days
Exercisable at March 31, 2016	$ 265,654
Granted	233,495
Granted	$ 1.28
Granted	10 years
Granted	$ 0

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NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range	3 Months Ended
	Mar. 31, 2016 $ / shares shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number of Options	863,123
Options Exercisable, Weighted Average Remaining Life in Years	5 years 292 days
Exercisable Number of Options	758,979
Exercise Price Range $0.00 - $5.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Limit (in Dollars per share) | $ / shares	$ 0.00
Options Outstanding, Number of Options	456,440
Options Exercisable, Weighted Average Remaining Life in Years	7 years 73 days
Exercise Price, Upper Limit (in Dollars per share) | $ / shares	$ 5.00
Exercisable Number of Options	431,126
Exercise Price Range $5.01 - $12.50 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Limit (in Dollars per share) | $ / shares	$ 5.01
Options Outstanding, Number of Options	382,675
Options Exercisable, Weighted Average Remaining Life in Years	4 years 36 days
Exercise Price, Upper Limit (in Dollars per share) | $ / shares	$ 12.50
Exercisable Number of Options	303,845
Exercise Price Range $12.51 - $25.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Limit (in Dollars per share) | $ / shares	$ 12.51
Options Outstanding, Number of Options	15,008
Options Exercisable, Weighted Average Remaining Life in Years	4 years
Exercise Price, Upper Limit (in Dollars per share) | $ / shares	$ 25.00
Exercisable Number of Options	15,008
Exercise Price Range $25.01 - $45.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Limit (in Dollars per share) | $ / shares	$ 25.01
Options Outstanding, Number of Options	9,000
Options Exercisable, Weighted Average Remaining Life in Years	3 years 219 days
Exercise Price, Upper Limit (in Dollars per share) | $ / shares	$ 45.00
Exercisable Number of Options	9,000

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NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Outstanding Warrants	3 Months Ended
	Mar. 31, 2016 $ / shares shares
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Outstanding Warrants [Line Items]
Warrant Exercise Price (in Dollars per share) | $ / shares	$ 1.25
Number of Warrants Outstanding | shares	821,061
Warrants Exercisable at $1.25 [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Outstanding Warrants [Line Items]
Warrant Exercise Price (in Dollars per share) | $ / shares	$ 1.25
Number of Warrants Outstanding | shares	117,648
Warrant Expiration Date	March 2021
Warrants Exercisable at $4.75 [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Outstanding Warrants [Line Items]
Warrant Exercise Price (in Dollars per share) | $ / shares	$ 4.75
Number of Warrants Outstanding | shares	482,500
Warrant Expiration Date	Sept/Oct 2020
Warrants Exercisable at $5.00 [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Outstanding Warrants [Line Items]
Warrant Exercise Price (in Dollars per share) | $ / shares	$ 5.00
Number of Warrants Outstanding | shares	220,913
Warrant Expiration Date	August 2016

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NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Warrants Activity - USD ($)	1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Warrants Activity [Line Items]
Warrants Outstanding	821,061	821,061
Warrants Outstanding, Weighted-Average Exercise Price	$ 1.25	$ 1.25
Grants	117,648
Warrant [Member]
NOTE 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Warrants Activity [Line Items]
Warrants Outstanding	821,061	821,061	703,413
Warrants Outstanding, Weighted-Average Exercise Price	$ 4.32	$ 4.32	$ 4.83
Warrants Outstanding, Weighted-Average Remaining Contractual Term		3 years 6 months	3 years 6 months
Warrants Outstanding, Aggregate Intrinsic Value	$ 136,472	$ 136,472	$ 0
Exercisable at March 31, 2016	821,061	821,061
Exercisable at March 31, 2016	$ 4.32	$ 4.32
Exercisable at March 31, 2016		3 years 6 months
Exercisable at March 31, 2016	$ 136,472	$ 136,472
Grants		117,648
Grants		$ 1.25
Grants		5 years
Grants		$ 0
Exercised		0
Exercised		$ 0
Forfeitures or expirations		0
Forfeitures or expirations		$ 0

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NOTE 7 - RELATED PARTY TRANSACTIONS (Details) - Affiliated Entity [Member] - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Outsourced Accounting Services [Member]
NOTE 7 - RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Expenses from Transactions with Related Party	$ 10,000	$ 6,750
Due to Related Parties	8,000	2,250
Capital Market Advisory Services [Member]
NOTE 7 - RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Expenses from Transactions with Related Party	45,000	$ 30,000
Due to Related Parties	6,660
Payments of Stock Issuance Costs	$ 10,000

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NOTE 8 - COMMITMENTS AND CONTINGENCIES (Details)	Sep. 21, 2015	Aug. 14, 2015
IZEA [Member]
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Royalty Fee, Percentage		4.125%
Yelp [Member]
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Details) [Line Items]
Settlement Agreement, Purchase Terms	Yelp has agreed to purchase 4,000 KIOSentrix beacons

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NOTE 9 - SUBSEQUENT EVENTS (Details) - USD ($)			1 Months Ended	3 Months Ended		12 Months Ended
	May. 13, 2016	Apr. 22, 2016	Mar. 31, 2016	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
NOTE 9 - SUBSEQUENT EVENTS (Details) [Line Items]
Stock Issued During Period, Shares, New Issues			470,591
Share-Based Compensation Arrangement by Share-Based Payment Award, Warrants, Grants in Period, Gross			117,648
Proceeds from Issuance or Sale of Equity (in Dollars)			$ 385,310	$ 385,310	$ 0
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)			$ 1.25	$ 1.25
Warrant Term						5 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				233,495
Stock Issued During Period, Value, Issued for Services (in Dollars)				$ 51,990
Subsequent Event [Member]
NOTE 9 - SUBSEQUENT EVENTS (Details) [Line Items]
Stock Issued During Period, Shares, New Issues		609,756
Share-Based Compensation Arrangement by Share-Based Payment Award, Warrants, Grants in Period, Gross		609,756
Proceeds from Issuance or Sale of Equity (in Dollars)		$ 1,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)		$ 2.13
Warrant Term		5 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		50,000
Option Exercise Price (in Dollars per share)		$ 2.08
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		2 years
Stock Issued During Period, Shares, Restricted Stock Award, Gross		500,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights		The shares vest and become issuable on the tenth anniversary of the grant date provided that upon a change of control or upon a termination other than for cause, the shares shall vest 100%
Investor Relations Services [Member] | Subsequent Event [Member]
NOTE 9 - SUBSEQUENT EVENTS (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services	25,055
Stock Issued During Period, Value, Issued for Services (in Dollars)	$ 66,660