2. Management Plans - Capital Resources

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Management Plans - Capital Resources

The Company reported operating losses of $114,939 and $394,021 and net losses of $303,070 and $688,289 for the nine months ended September 30, 2016 and 2015, respectively. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern through November 4, 2017.

The Company’s business strategy is summarized as follows.

On October 1, 2014, the Company hired an executive officer, who is now our Chief Operating Officer and is responsible for developing and implementing the strategic direction of the Company through improved operations, sales and marketing, product development, and overall collaboration across the enterprise.

Beginning in 2014, the Company performed vulnerability scans against internal and external networks using licensed software. In February 2015, the Company purchased proprietary cybersecurity reporting software and created a Director of Cybersecurity position with expertise in designing, developing, marketing, and selling network security assessment software and project assessments (see Note 7). The Company provides technical and executive summary reports of ongoing risks, identifies and prioritizes security vulnerabilities and communicates remediation recommendations. Since early 2015, the Company has developed new hardware and software that is a cybersecurity vulnerability management solution for small and medium sized businesses (SMBs), that is for sale through IGI’s channel partner program. The Company markets this patent pending product as “Nodeware”.

The Company's strategy is to build its business by delivering a wide range of IT solutions and services that address challenges common to many U.S. Government agencies, state and local governments and commercial companies including SMBs. The Company’s plans include continuing to provide cloud and large scale remote IT managed services and solutions and continued expansion into the commercial SMB sector. The Company also reviews potential acquisitions of IT assets and businesses. The Company is committed to remaining on the leading edge of technologies and trends in the IT service sector. The Company’s ability to succeed may depend on how successful it is in differentiating itself from competition at a time when competition in these markets is on the rise.

The Company has established four pillars or business groups to focus on:

● Cybersecurity solutions. The Company brings innovative solutions to market such as Nodeware and cybersecurity projects through its professional services organization (PSO);

● Commercial IT sales to SMB’s. The Company’s inside sales organization drives a channel strategy to the commercial SMB market by bringing IT solutions to its channel partners. The Company markets Nodeware, Webroot (antivirus/malware protection), and VMware solutions such as Airwatch.

● Managed services to enterprise customers. The Company provides optimization and continuity planning, operational support services, internal automation, platform management as a service, virtualization licensing and services, and management of server, network and mobile devices; and

● Software licenses and services reseller. As a VMware Enterprise level partner, the Company is a software licenses and services reseller that is focused on growing its direct to business revenue. This includes selling architecting, integration and support services while continuing to work with the VMware PSO as a subcontractor on multiple engagements.

Continue to Improve Operations and Capital Resources

The Company's goal is to increase sales and generate cash flow from operations on a consistent basis. The Company used ISO 9001-2008 practices as a tool for improvement that has aided expense reduction and internal performance.

On March 14, 2016, the Company entered into an unsecured financing agreement with a third party lender to provide working capital as discussed in Note 8. The Company intends to build the infrastructure to market its new cyber security product, Nodeware. Further, the Company’s business plans require improving the results of its operations in future periods.

On December 1, 2014, the Company entered into an unsecured line of credit financing agreement (the “LOC Agreement”) with a member of its board of directors. The LOC Agreement, as modified, provides for working capital of up to $400,000 through January 1, 2020. At September 30, 2016, there is $11,956 available on this line.

The Company believes the capital resources available under its factoring line of credit, cash from additional related party and third party loans and cash generated by improving the results of its operations provide sources to fund its ongoing operations and to support the internal growth of the Company. If the Company experiences significant growth in its sales, the Company believes that this may require it to increase its financing line, finance additional accounts receivable, or obtain additional working capital from other sources to support its sales growth.

The Company's primary source of liquidity is cash provided by collections of accounts receivable and its factoring line of credit. At September 30, 2016, the Company had approximately $203,000 of availability under this line. During the nine months ended September 30, 2016, the Company financed its business activities through sales with recourse of accounts receivable and a loan from a third party.

The Company’s working capital deficit increased from approximately $1,900,000 at December 31, 2015 to approximately $2,143,000 at September 30, 2016 principally due to the scheduled maturity on January 1, 2017 of notes payable of $146,300 to a related party and $264,000 to others which total $410,300. The Company plans to renegotiate the terms of its notes payable, seek funds to repay the notes or use a combination of both alternatives.