6. Investment

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Investment

During 2014 and 2013, the Company purchased an aggregate of 300,000 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 $300,000 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, 2015 and December 31, 2014, the Company owns approximately 9.4% of the total outstanding shares of goSudo.

The investment is accounted for using the equity method since Company management exercises significant influence over the operating and financial policies of goSudo.  Beginning in 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, whose employment extended through June 30, 2014, is one of four members of the board of directors of goSudo and, was active in managing goSudo's business.  The Company’s chief executive officer is a member of the board of directors and is President of goSudo.  As a result of the foregoing, the Company is deemed to have significant influence upon goSudo's policy and operating decisions.  During the nine months ended September 30, 2015, the investment was written down using the equity method because of the net losses recorded by goSudo.  In addition, the remaining carrying value of the investment was considered impaired at September 30, 2015 due to continued net losses of goSudo.  At September 30, 2015, the accounts receivable balance of $110,000 due from goSudo was converted to a demand note with interest at 10% and was fully reserved upon conversion, due to continued net losses of goSudo.  As a result, a loss on investment of $109,000 ($53,000 – September 30, 2014) and bad debt expense of $110,000 was recorded during the nine months ended September 30, 2015.

Unaudited financial information for goSudo as of and for the nine months ended September 30, 2015 reflects total assets of $45,377, total liabilities of $881,643, and a net loss of $160,838.  goSudo is a development stage enterprise.  During the nine months ended September 30, 2015, goSudo earned consulting fees of $76,776 for services provided to the Company.