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Financial Condition
9 Months Ended
Sep. 30, 2015
Financial Condition [Abstract]  
Financial Condition

Note 1. Financial Condition

 

As reflected in the accompanying condensed consolidated financial statements, the Company reported net income / (loss) of $(4,156,337) and $3,240,408 for the three and nine month periods ended September 30, 2015, respectively, and had an accumulated deficit of $(247,388,888) as of September 30, 2015.

 

The Company's financial statements through September 30, 2015 were materially impacted by two events; the June 12, 2015 settlement and termination agreement with Grupo Iusacell S.A., and the modification of the November 17, 2014 Atalaya/Corbin Capital credit agreement, which had been in default since March 2015, and was amended on July 9, 2015.

 

The termination of the relationship with Iusacell resulted in a settlement agreement on June 12, 2015, which provided the Company with net proceeds of $12.6 million. The termination of the Iusacell contract resulted in the loss of approximately $3.9 million of anticipated future quarterly cash flow (based on historical monthly billings), and impacted the Company's results for the three months ended September 30, 2015 by approximately the same amount. In response, the Company implemented an expense reduction plan expected to reduce cash operating expenses by approximately $5 million per year compared to 2014 levels.

 

As required, on June, 22, 2015, the Company repaid Atalaya/Corbin $10.1 million from the $12.6 million Iusacell settlement. On July 14, 2015, the Atalaya/Corbin credit agreement was amended to provide the Company additional net proceeds of $4.2 million. At September 30, 2015, the Company owed Atalaya/Corbin $6.5 million. Based on the Company's financial results for the three months ended September 30, 2015, largely resulting from the termination of the Iusacell contract, the Company believes it will be in breach of certain financial covenants of the Atalaya/Corbin credit agreement as amended, and therefore will be in default, although Atalaya/Corbin has not yet notified the Company of such default. However, the Company has reclassified the Atalaya debt from a long term to a short term liability.

 

The Company's cash balance at September 30, 2015 was $858,911, and additional capital is required in the near term in order to continue the existing level of operations. The Company is currently in discussions with several investment groups, including Atalaya, regarding providing additional capital. In addition, the Company is in discussions with regard to the sale of all or a portion of its holdings in ValidSoft. In order for the Company to have sufficient cash to fund its operations for the next 12 months, the Company believes an additional $5-$7 million of funding is required, depending on actual operating results achieved versus projected, and whether or not a ValidSoft transaction is concluded.

 

Although we have previously been able to raise capital as needed, there can be no assurance that additional capital will be available at all, or if available, on reasonable terms. Further, the terms of such financing may be dilutive to our existing stockholders or otherwise on terms not favorable to us, or our existing stockholders. If we are unable to secure additional capital, and/or do not succeed in meeting our sales objectives, the Company will be materially and negatively impacted, and we may have to significantly reduce our operations.

 

As of September 30, 2015, these conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.