3. Investment in Equity Securities

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Investment in Equity Securities

During 2014 and 2013, the Company purchased 280,000 shares of the authorized but unissued shares of Series A Convertible Preferred Stock (“Series A stock”), $.001 par value, of Sudo.me Corporation (goSudo) for an aggregate purchase price of $280,000 pursuant to the terms and conditions of a preferred stock purchase agreement.  goSudo is a customer of the Company.  As a result, at September 30, 2014, the Company owns approximately 8.8% of the total outstanding shares of goSudo. The initial investment in May 2013 of $100,000 included settlement of accounts receivable of $84,167 which is considered a non-cash investing activity of $84,167.

The investment is accounted for using the equity method since Company management exercises significant influence over the operating and financial policies of goSudo.  Since 2012, certain officers and directors of the Company made loans to goSudo and converted loans to Series A stock.  In addition, one former Company employee is one of three members of the board of directors of goSudo and during his employment, which extended through June 30, 2014, was active in managing goSudo's business.  One Company employee is an officer of goSudo.  As a result of the foregoing, the Company is deemed to have significant influence upon goSudo's policy and operating decisions.  The investment was written down by $53,000 during the nine months ended September 30, 2014 and $23,000 through December 31, 2013 based on the Company's interest in the net loss of goSudo from May 7, 2013 (date of initial investment).  The investment has a carrying value of $204,000 at September 30, 2014 ($247,000  –  December 31, 2013).

Unaudited financial information for goSudo as of and for the nine months ended September 30, 2014 reflects total assets of $14,891, total liabilities of $601,462, and net loss of $605,204.  goSudo is a development stage enterprise and has had no revenues since inception.