Oklahoma
|
73-1518725
|
(State or other jurisdiction of incorporation
or organization)
|
(I.R.S. Employer Identification No.)
|
9521-B Riverside Parkway, #134
Tulsa, Oklahoma
|
74137 (918) 932-2000
|
(Address of principal executive office)
|
(Zip Code) (Registrant’s telephone number,
including area code)
|
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company x
|
(Do not check if a smaller reporting company)
|
PAGE
|
|||||
PART I
|
|||||
4
|
|||||
7
|
|||||
13
|
|||||
13
|
|||||
13
|
|||||
14
|
|||||
PART II
|
|||||
15
|
|||||
16
|
|||||
16
|
|||||
20
|
|||||
F-1- F-24
|
|||||
21
|
|||||
21
|
|||||
22
|
|||||
PART III
|
|||||
23
|
|||||
26
|
|||||
29
|
|||||
30
|
|||||
31
|
|||||
PART IV
|
|||||
32
|
|||||
34
|
•
|
competition in the market for mobile computing products and services;
|
|
•
|
our ability to develop brand awareness and industry reputation;
|
|
•
|
our ability to adapt to rapid evolution in technology and industry standards;
|
|
•
|
our ability to attract and retain management and skilled personnel;
|
|
•
|
our growth and marketing strategies;
|
|
•
|
anticipated trends in our business;
|
|
•
|
our future results of operations;
|
|
•
|
our lack of profitable operations in recent periods;
|
|
•
|
market conditions in the mobile solutions for business industry;
|
|
•
|
the impact of government regulation;
|
|
•
|
emerging viable and sustainable markets for wireless and mobile computing services;
|
|
•
|
significant errors or security flaws in our products and services;
|
|
•
|
insufficient protection for our intellectual property;
|
|
•
|
Our ability to enforce our intellectual property, including a favorable resolution of the recent decision of the USPTO to reject the claims of our ‘816 patent;
|
|
•
|
claims of infringement on third party intellectual property;
|
|
•
|
our financial position, business strategy and other plans and objectives for future operations;
|
|
•
|
economic conditions in the U.S. and worldwide; and
|
|
•
|
the ability of our management team to execute its plans to meet its goals
|
·
|
Identify and support mobile app ventures with advisory services and patent protection, building a portfolio of market leading solutions which generate near term revenue and substantial earnings at liquidity for the Company;
|
·
|
Generate high margin potential, passive revenue by extending affordable patent protection to small and medium sized app developers through partnerships;
|
·
|
Subject to favorable resolution of the USPTO Office Action, continue enforcing current intellectual property; and
|
·
|
Subject to favorable resolution of the USPTO Office Action, increase intellectual property portfolio via continuation filings.
|
·
|
Visioning and Concepting – Exploring an app idea, its problem to solve and potential business models;
|
·
|
Competitive Analysis – Thorough examination of the market place and funding sources growing the competition;
|
·
|
Technology Evaluation – Discovery of best practices and platforms for mobile and web development;
|
·
|
Customer Economics Modeling – Quantification of initial and long term costs to acquire and grow customer segments;
|
·
|
Go-to-Market Strategy – Sales, marketing, channel, business and strategic partnership options review;
|
·
|
Financial Planning – Assumption modeling and creation of balance sheet, income and cash flow statements;
|
·
|
Funding Presentation and Coaching – Creation of PowerPoint and other communications materials in preparation for investor meetings;
|
·
|
Intellectual Property Advisory – Analysis of IP and options to protect and grow;
|
·
|
Management Team Evaluation and Augmentation – Review of strengths of management team along with growth plans. Virtual executive management team recommendations for interim periods;
|
·
|
Digital and Social Marketing – Pre-launch and post-launch messaging and communications channel management; and
|
·
|
Strategic Business Development – Focus on closing very large deals with strategic partners and/or clients which significantly enhance cash flow.
|
•
|
growth in sales of handheld devices, smart phones and other mobile computing devices;
|
|
•
|
emergence of a viable and sustainable market for wireless and mobile computing services;
|
|
•
|
our product and services differentiation and quality;
|
|
•
|
the development of technologies that facilitate interactive communication between organizations;
|
|
•
|
the growth in access to, and market acceptance of, new interactive technologies;
|
|
•
|
the effectiveness of our marketing strategy and efforts;
|
|
•
|
our industry reputation; and
|
|
•
|
general industry and economic conditions such as slowdowns in the computer or software markets or the economy.
|
•
|
dilution caused by our issuance of additional shares of Common Stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and business plans, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;
|
|
•
|
our results of operations and the performance of our competitors;
|
|
•
|
the public’s reaction to our press releases, our other public announcements and our filings with the Securities and Exchange Commission;
|
|
•
|
changes in earnings estimates or recommendations by research analysts who follow, or may follow, us or other companies in our industry;
|
|
•
|
changes in general economic conditions;
|
|
•
|
changes in the valuation of similarly situated companies, both in our industry and in other industries;
|
|
•
|
actions of our historical equity investors, including sales of common stock by our directors and executive officers;
|
|
•
|
actions by institutional investors trading in our stock;
|
|
•
|
disruption of our operations;
|
|
•
|
any major change in our management team;
|
|
•
|
significant sales of our common stock;
|
|
•
|
other developments affecting us, our industry or our competitors; and
|
|
•
|
U.S. and international economic, legal and regulatory factors unrelated to our performance.
|
·
|
that a broker or dealer approve a person's account for transactions in penny stocks; and
|
·
|
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
|
·
|
obtain financial information and investment experience objectives of the person; and
|
·
|
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
|
·
|
sets forth the basis on which the broker or dealer made the suitability determination; and
|
·
|
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
|
Filing
Date
|
Defendant
|
Cas e Number
|
Status
|
Date of
Dis pos itio n (if any)
|
21-Dec-11
|
American Airlines , Inc.
|
6:11-CV-685
|
(a)
|
3/24/2014
|
30-Jan-12
|
Newegg Inc.
|
6:12-CV-46
|
(b)
|
3/13/2014
|
17-Feb-12
|
GEICO Cas ualty Company and Government
Employees Ins urance Company
|
6:12-CV-74
|
(b)
|
3/13/2014
|
17-Feb-12
|
GEICO Ins urance Agency, Inc.
|
6:12-CV-74
|
(b)
|
3/13/2014
|
4-Dec-12
|
Sears Holdings Management Corporation et al
|
6:12-CV-916
|
(b)
|
9/25/2013
|
21-Dec-12
|
SkyMall, Inc.
|
6:12-CV-977
|
(b)
|
9/11/2013
|
25-Feb-13
|
Cos tco Wholes ale Corporation
|
6:13-CV-198
|
(b)
|
1/2/2014
|
25-Feb-13
|
GameStop Corp, et al
|
6:13-CV-200
|
(b)
|
12/13/2013
|
25-Feb-13
|
Gilt Groupe Holdings , Inc. et al
|
6:13-CV-201
|
(b)
|
12/3/2013
|
25-Feb-13
|
Kohl's Department Stores , Inc. et al
|
6:13-CV-202
|
(b)
|
1/2/2014
|
26-Feb-13
|
Nords trom, Inc. et al
|
6:13-CV-204
|
(b)
|
12/13/2013
|
26-Feb-13
|
Pandora Media, Inc.
|
6:13-CV-205
|
(b)
|
1/2/2014
|
26-Feb-13
|
Staples , Inc. et al
|
6:13-CV-207
|
(b)
|
1/7/2014
|
12-Sep-13
|
Box, Inc.
|
6:13-CV-665
|
(b)
|
2/20/2014
|
12-Sep-13
|
Carls on Hotels , Inc., et al
|
6:13-CV-666
|
(a)
|
3/19/2014
|
12-Sep-13
|
Chipotle Mexican Grill, Inc. et al
|
6:13-CV-667
|
(a)
|
3/17/2014
|
12-Sep-13
|
Comcas t Corporation et al
|
6:13-CV-668
|
(a)
|
1/6/2014
|
12-Sep-13
|
Dis cover Financial Services , Inc. et al
|
6:13-CV-669
|
(b)
|
3/27/14
|
12-Sep-13
|
Dropbox, Inc.
|
6:13-CV-670
|
(a)
|
3/17/2014
|
12-Sep-13
|
Five Guys Enterpris es , LLC et al
|
6:13-CV-671
|
(a)
|
3/17/2014
|
12-Sep-13
|
Home Box Office, Inc.
|
6:13-CV-672
|
(a)
|
3/17/2014
|
12-Sep-13
|
MediaFire, LLC
|
6:13-CV-673
|
(a)
|
3/17/2014
|
12-Sep-13
|
Meetup, Inc.
|
6:13-CV-674
|
(a)
|
3/17/2014
|
12-Sep-13
|
Wyndham Hotel Group, LLC et al
|
6:13-CV-675
|
(b)
|
1/15/2014
|
(a)
|
Lawsuit dismissed without prejudice.
|
(b)
|
Lawsuit dismissed with prejudice pursuant to a settlement agreement.
|
2013
|
2012
|
|||||||||||||||
Sales Price
|
Sales Price
|
|||||||||||||||
High
|
Low
|
High
|
Low
|
|||||||||||||
Quarter Ended
|
||||||||||||||||
March 31
|
$
|
0.04
|
$
|
0.01
|
$
|
0. 14
|
$
|
0. 06
|
||||||||
June 30
|
0.06
|
0.02
|
0. 12
|
0. 05
|
||||||||||||
September 30
|
0.04
|
0.01
|
0. 06
|
0. 02
|
||||||||||||
December 31
|
0.04
|
0.02
|
0 .06
|
0. 01
|
Plan category
|
Number of securities to be issued upon exercise of outstanding options
|
Weighted-average exercise price of outstanding options
|
Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
||||||
(a)
|
(b)
|
(c)
|
|||||||
Equity compensation plans approved by security holders
|
12,870,584
|
$
|
0.37
|
42,528,000
|
|||||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
||||||
Total
|
12,870,584
|
$
|
0.37
|
42,528,000
|
Years Ended Dec 31,
|
||||||||
2013
|
2012
|
|||||||
Cash flows provided by (used in) operating activities
|
$
|
127,238
|
$
|
(588,190
|
)
|
|||
Cash flows provided by investing activities
|
2,269
|
3.462
|
||||||
Cash flows (used in) provided by financing activities
|
(82.500
|
)
|
970.800
|
|||||
Net increase in cash and cash equivalents
|
$
|
47,007
|
$
|
386,072
|
·
|
Financial Reporting Systems: We did not maintain a fully integrated financial consolidation and reporting system throughout the period and as a result, extensive manual analysis, reconciliation and adjustments were required in order to produce financial statements for external reporting purposes; and
|
·
|
Segregation of Duties: We do not currently have a sufficient complement of technical accounting and external reporting personnel commensurate to support standalone external financial reporting under public company or SEC requirements. Specifically, the Company did not effective segregate certain accounting duties due to the small size of its accounting staff, and maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting and the closing process. In addition, there were inadequate reviews and approvals by the Company’s personnel of certain reconciliations and other processes in day-to-day operations due to the lack of a full complement of accounting staff.
|
Name
|
Age
|
Position
|
||
James C. McGill
|
70
|
Chairman of the Board of Directors, Chief Executive Officer and President
|
||
John Clerico
|
72
|
Director
|
||
David Humphrey
|
58
|
Director
|
||
Kendall Carpenter
|
58
|
Executive Vice President, Secretary and Chief Financial Officer
|
1.
|
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
|
2.
|
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
|
|
4.
|
being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
5.
|
being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
6.
|
being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Option and Warrant Awards (5)
|
Non-Equity Incentive Plan Compen- sation
|
Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($)
|
All other Compen- sation (6)
|
Total
|
|||||||||||||||||||||
James McGill,
|
2013
|
$ | 30,000 | $ | $0 | $ | $16,637 | $ | $0 | $ | $0 | $ | 124,000 | $ | 170,637 | ||||||||||||||
Chief Executive Officer,
|
2012
|
$ | 13,100 | 0 | 16,668 | 0 | 0 | $ | 142,000 | $ | 171,768 | ||||||||||||||||||
President and Director (1)
|
|||||||||||||||||||||||||||||
Kendall Carpenter, Executive Vice
|
2013
|
$ | 150,000 | $ | $0 | $ | $17,290 | $ | $0 | $ | $0 | $ | 0 | $ | 167,290 | ||||||||||||||
President, Chief Financial Officer
|
2012
|
$ | 133,075 | 0 | 15,771 | 0 | 0 | $ | 51,376 | $ | 200,222 | ||||||||||||||||||
and Secretary (2)
|
|||||||||||||||||||||||||||||
Steve Signoff, Former Chief Executive
|
2012
|
$ | 106,200 | $ | $0 | $ | $0 | $ | $0 | $ | $0 | $ | 114,091 | $ | 220,291 | ||||||||||||||
Officer, President and Director (3)
|
|||||||||||||||||||||||||||||
Randy Ritter,
|
2012
|
$ | 74,212 | $ | 0 | $ | $0 | $ | $0 | $ | $0 | $ | 90,908 | $ | 165,120 | ||||||||||||||
former Chief Operating Officer (4)
|
|||||||||||||||||||||||||||||
(1)
|
For services in 2013, Mr. McGill received 5,369,814 shares of restricted stock valued between $0.02 and $0.03 per share upon vesting of restricted stock awards. For services in 2012, Mr. McGill received 3,658,930 shares of restricted stock valued between $0.02 and $0.10 per share upon vesting of restricted stock awards. Mr. McGill received an option in 2012 under the 2011 Key Employee Stock Incentive Plan to acquire 1,250,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $0.25, $0.40 and$0.60 per share over five trading days at the price of $0.125, $0.25 and $0.40, respectively. The option has not vested and expires on December 31, 2018.
|
(2)
|
For services in 2012, Ms. Carpenter received 797,606 shares of restricted stock valued between $0.05 and $0.10 per share upon vesting of restricted stock awards. Ms. Carpenter received an option in 2012 under the 2011 Key Employee Stock Incentive Plan to acquire 1,250,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $0.25, $0.40 and $0.60 per share over five trading days at the price of $0.125, $0.25 and $0.40, respectively. The option has not vested and expires on December 31, 2018.
|
(3)
|
For services in 2012, Mr. Signoff received 1,033,721 shares of restricted stock valued between $0.06 and $0.10 per share upon vesting of restricted stock awards. Mr. Signoff received an option in 2012 under the 2011 Key Employee Stock Incentive Plan to acquire 10,000,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $0.25, $0.40 and $0.60 per share over five trading days at the price of $0.125, $0.25 and $0.40, respectively. This option had not vested and was cancelled in August 2012 upon Mr. Signoff’s resignation. Between August 1 and December 31, 2012, the Company paid Mr. Signoff $39,091 in consulting fees.
|
(4)
|
Mr. Ritter received 861,434 shares of restricted stock valued between $0.06 and $0.10 per share upon vesting of restricted stock awards. Mr. Ritter received an option in 2012 under the 2011 Key Employee Stock Incentive Plan to acquire 7,500,000 shares of common stock which vest ratably in three increments based on the Company stock trading at $0.25, $0.40 and $0.60 per share over five trading days at the price of $0.125, $0.25 and $0.40, respectively. This option had not vested and was cancelled in August 2012 upon Mr. Ritter’s resignation. Between August 1 and December 31, 2012, the Company paid Mr. Ritter $28,408 in consulting fees.
|
(5)
|
In accordance with FASB ASC Topic 718, options granted and vested in 2013 and 2012 were expensed at $90,020 and $94,738, respectively.
|
(6)
|
Fair market value of stock awards based on the value-weighted volume average (VWAP) for the last five trading days in each calendar quarter and consulting fees.
|
OPTION AWARDS
|
STOCK AWARDS
|
|||||||||||||||
Name
|
Option Grant Date
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
Number of Securities Underlying Unexercised Options (#) Unexer-cisable
|
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
Market Value of Shares or Units of Stock That Have Not Vested
|
|||||||||
James McGill
|
2013
|
4,350,583
|
$ |
87,012
|
||||||||||||
James McGill
|
2012
|
416,667
|
$ |
0.125
|
5/18/2018
|
|||||||||||
James McGill
|
2012
|
416,667
|
$ |
0.25
|
5/18/2018
|
|||||||||||
James McGill
|
2012
|
416,666
|
$ |
0.40
|
5/18/2018
|
|||||||||||
James McGill
|
2010
|
|||||||||||||||
James McGill
|
2009
|
108,008
|
$ |
.53 - $2.21
|
9/11/2014
|
|||||||||||
James McGill
|
2008
|
129,804
|
$ |
.60 - $2.50
|
9/11/2014
|
|||||||||||
James McGill
|
2007
|
216,640
|
$ |
0.60
|
9/11/2014
|
|||||||||||
James McGill
|
2006
|
236,640
|
$ |
0.60
|
9/11/2014
|
|||||||||||
James McGill
|
2005
|
324,720
|
$ |
0.43
|
9/11/2014
|
|||||||||||
James McGill
|
2004
|
337,360
|
$ |
0.43
|
9/11/2014
|
|||||||||||
James McGill
|
2003
|
235,280
|
$ |
0.43
|
9/11/2014
|
|||||||||||
James McGill
|
2002
|
145,340
|
$ |
0.34
|
9/11/2014
|
|||||||||||
Kendall Carpenter
|
2012
|
416,667
|
$ |
0.125
|
5/18/2018
|
|||||||||||
Kendall Carpenter
|
2012
|
416,667
|
$ |
0.25
|
5/18/2018
|
|||||||||||
Kendall Carpenter
|
2012
|
416,666
|
$ |
0.40
|
5/18/2018
|
|||||||||||
Kendall Carpenter
|
2010
|
|||||||||||||||
Kendall Carpenter
|
2009
|
52,260
|
$ |
.53 - $2.21
|
9/11/2014
|
|||||||||||
Kendall Carpenter
|
2008
|
23,946
|
$ |
.60 - $2.50
|
9/11/2014
|
|||||||||||
Kendall Carpenter
|
2007
|
14,400
|
$ |
0.60
|
9/11/2014
|
|||||||||||
Kendall Carpenter
|
2006
|
26,600
|
$ |
0.60
|
9/11/2014
|
Name
|
Fees Earned
or Paid in Cash
|
Stock Awards
($) (1)
|
Total ($)
|
|||||||||
John Clerico
|
$ | 8,000 | $ | 8,000 | $ | 16,000 | ||||||
David R. Lawson, former Director
|
$ | 8,000 | $ | 8,000 | $ | 16,000 | ||||||
Total:
|
$ | 16,000 | $ | 16,000 | $ | 32,000 |
(1)
|
Each director received $4,000 per quarter served on the Board of Directors, paid in either cash or restricted common stock based on a five day VWAP at the end of each quarter.
|
·
|
all directors and nominees, naming them,
|
·
|
our executive officers,
|
·
|
our directors and executive officers as a group, without naming them, and
|
·
|
persons or groups known by us to own beneficially 5% or more of our Common Stock or our Preferred Stock having voting rights:
|
Title of Class
|
Number of Shares Beneficially Owned (1)
|
Percentage of Class (2)
|
||||
James C. McGill (3)
|
Common Stock
|
35,814,247
|
15.81%
|
|||
Kendall Carpenter (4)
|
Common Stock
|
4,895,314
|
2.50%
|
|||
John Clerico (5)
|
Common Stock
|
53,049,198
|
21.76%
|
|||
David Humphrey (6)
|
Common Stock
|
1,703,362
|
*
|
|||
Officers and Directors as a Group
|
Common Stock
|
95,462,121
|
33.35%
|
|||
(1)
|
This column represents the total number of votes each named stockholder is entitled to vote upon matters presented to the shareholders for a vote.
|
(2)
|
The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on March 24, 2014. On March 24, 2014, there were 190,764,559 shares of our common stock outstanding. To calculate a stockholder's percentage of beneficial ownership, we include in the numerator and denominator the common stock outstanding and all shares of our common stock issuable to that person in the event of the exercise of outstanding options and other derivative securities owned by that person which are exercisable within 60 days of March 24, 2014. Common stock options and derivative securities held by other stockholders are disregarded in this calculation. Therefore, the denominator used in calculating beneficial ownership among our stockholders may differ. Unless we have indicated otherwise, each person named in the table below has sole voting power and investment power for the shares listed opposite such person's name.
|
(3)
|
Represents (i) 22,753,318 shares of common stock owned, (ii) 6,153,933 shares of common stock underlying outstanding warrants, (iii) 1,733,792 shares of common stock underlying options which are currently exercisable or become exercisable within 60 days, (iv) 3,481,731 shares of common stock issued under restrictive stock grants with voting rights, (v) 1,189,313 shares of common stock held by the Jean B. McGill Revocable Living Trust, and (vi) 502,160 shares of common stock underlying outstanding warrants held by the Jean B. McGill Revocable Living Trust. Mr. McGill, as the Executor Trustee of the Jean B. McGill Revocable Living Trust, has investment and voting control over the shares held by this entity.
|
(4)
|
Represents (i) 4,646,562 shares of common stock owned, (ii) 131,546 shares of common stock underlying outstanding warrants, and (iii) 117,206 shares of common stock underlying options which are currently exercisable or become exercisable within 60 days.
|
(5)
|
Represents (i) 35,507,964 shares of common stock owned; (ii) 17,261,234 shares of common stock underlying outstanding warrants; and (iii) 280,000 shares of common stock underlying options which are currently exercisable or become exercisable within 60 days.
|
(6)
|
Represents (i) 928,362 shares of common stock owned; (ii) 240,000 shares of common stock underlying outstanding warrants; and (iii) 535,000 shares of common stock underlying options which are currently exercisable or become exercisable within 60 days.
|
The following documents are filed as a part of this report or incorporated herein by reference:
|
(1)
|
Our Financial Statements are listed on page F-1 of this Annual Report.
|
|
(2)
|
Financial Statement Schedules: None.
|
3.01
|
Articles of Incorporation, filed as an exhibit to the Registration Statement on Form S-1, filed with the Securities and Exchange Commission (“Commission”) on April 18, 2008 and incorporated herein by reference.
|
|
|
3.02
|
Bylaws, filed as an exhibit to the Registration Statement on Form S-1, filed with the Commission on April 18, 2008 and incorporated herein by reference.
|
|
|
3.03
|
Certificate of Amendment to the Articles of Incorporation, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 6, 2009 and incorporated herein by reference.
|
|
|
3.03
|
Certificate of Amendment to the Articles of Incorporation, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 28, 2011 and incorporated herein by reference.
|
|
|
10.01
|
2009 Stock Compensation Plan, filed as an exhibit to the Registration Statement on Form S-8, filed with the Commission on October 13, 2009 and incorporated herein by reference.
|
10.02
|
Form of Subscription Agreement, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 21, 2012 and incorporated herein by reference.
|
|
|
10.03
|
Form of Convertible Debenture, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 21, 2012 and incorporated herein by reference.
|
|
|
10.04
|
Form of Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on February 21, 2012 and incorporated herein by reference.
|
10.05
|
Form of Subscription Agreement, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on March 29, 2012 and incorporated herein by reference.
|
|
|
10.06
|
Form of Warrant, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on March 29, 2012 and incorporated herein by reference.
|
|
|
10.07
|
Asset Purchase Agreement, dated as of July 31, 2012, by and between MacroSolve, Inc. and DecisionPoint Systems, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 6, 2012 and incorporated herein by reference.
|
|
|
10.08
|
License Agreement, dated as of July 31, 2012, by and between MacroSolve, Inc. and DecisionPoint Systems, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 6, 2012 and incorporated herein by reference.
|
|
|
10.09
|
Non-Competition and Non-Solicitation Agreement, dated as of July 31, 2012, by and between MacroSolve, Inc. and DecisionPoint Systems, Inc., filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on August 6, 2012 and incorporated herein by reference.
|
|
|
10.10
|
Employment Agreement, dated as of October 23, 2012, by and between MacroSolve, Inc. and Kendall Carpenter, filed as an exhibit to the Current Report on Form 8-K, filed with the Commission on October 24, 2012 and incorporated herein by reference.
|
|
|
14.01
|
Code of Business Conduct and Ethics, filed as an exhibit to the Annual Report on Form 10-K, filed with the Commission on March 30, 2010 and incorporated herein by reference.
|
|
|
31.01
|
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.02
|
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.01
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted 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 Calculation Linkbase Document
|
|
|
101 LAB
|
XBRL Taxonomy Labels Linkbase Document
|
|
|
101 PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
|
|
101 DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
MACROSOLVE, INC.
|
|||
Date March 28, 2014
|
By:
|
/s/ JAMES C. McGILL
|
|
James C. McGill
|
|||
Chief Executive Officer (Principal Executive Officer)
|
|||
Date: March 28, 2014
|
By:
|
/s/ KENDALL CARPENTER
|
|
Kendall Carpenter
|
|||
Chief Financial Officer (Principal Accounting Officer)
|
Name
|
Position
|
Date
|
||
/s/ JAMES C. MCGILL
|
Director
|
March 28, 2014
|
||
James C. McGill
|
||||
/s/ JOHN CLERICO
|
Director
|
March 28, 2014
|
||
John Clerico
|
||||
/s/ DAVID HUMPRHEY
|
Director
|
March 28, 2014
|
||
David Humphrey
|
||||
Report of Independent Registered Public Accounting Firm
|
F-2
|
Balance Sheets as of December 31, 2013 and 2012
|
F-3
|
Statements of Operation for the Years Ended December 31, 2013 and 2012
|
F-4
|
Statements of Stockholders’ Equity for the Years Ended December 31, 2013 and 2012
|
F-5
|
Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
|
F-6
|
Notes to Financial Statements
|
F-7
|
12/31/2013
|
12/31/2012
|
|||||||
(Restated)
|
||||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash
|
$ | 706,211 | $ | 659,204 | ||||
Accounts receivable - trade
|
38,791 | 74,056 | ||||||
Prepaid expenses and notes receivable
|
32,594 | 19,330 | ||||||
Total current assets
|
777,596 | 752,590 | ||||||
PROPERTY AND EQUIPMENT, at cost:
|
4,237 | 21,651 | ||||||
Less - accumulated depreciation
|
(1,586 | ) | (19,462 | ) | ||||
Net property and equipment
|
2,651 | 2,189 | ||||||
OTHER ASSETS:
|
||||||||
Available-for-sale investment - DecisionPoint Systems, Inc.
|
324,190 | 493,827 | ||||||
Available-for-sale investment - MEDL Mobile Holdings, Inc.
|
39,537 | - | ||||||
Available-for-sale Investment - Endexx Corporation
|
7,675 | - | ||||||
Intangible assets, net of amortization
|
70,223 | 64,227 | ||||||
Total other assets
|
441,625 | 558,054 | ||||||
TOTAL ASSETS
|
$ | 1,221,872 | $ | 1,312,833 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Note Payable - Oklahoma Technology Commercialization Center- Current
|
$ | 112,500 | $ | 90,000 | ||||
Accounts payable - trade and accrued liabilities
|
181,172 | 82,226 | ||||||
Note payable - Related party
|
22,500 | - | ||||||
Total current liabilities
|
316,172 | 172,226 | ||||||
LONG-TERM DEBT, less current maturities
|
||||||||
Note Payable - Shareholders
|
533,681 | 533,681 | ||||||
Note Payable - Oklahoma Technology Commercialization Center
|
20,000 | 125,000 | ||||||
Convertible debentures, net of discount of $54,545 and $72,727 respectively
|
95,455 | 77,273 | ||||||
Total long-term debt, less current maturities
|
649,136 | 735,954 | ||||||
TOTAL LIABILITIES
|
$ | 965,308 | $ | 908,180 | ||||
COMMITMENTS AND CONTINGENCIES
|
- | - | ||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Preferred stock, $.01 par value; authorized 10,000,000 shares;
|
||||||||
0 shares issued and outstanding, at
|
||||||||
December 31, 2013 and 2012, respectively
|
- | - | ||||||
Common stock, $.01 par value; authorized 500,000,000 shares;
|
||||||||
issued and outstanding 190,764,586 and 182,163,896 shares, at
|
||||||||
December 31, 2013 and 2012, respectively
|
1,907,645 | 1,821,638 | ||||||
Additional paid-in capital
|
19,922,670 | 19,720,319 | ||||||
Accumulated other comprehensive income
|
(399,936 | ) | (204,173 | ) | ||||
Accumulated deficit
|
(21,173,815 | ) | (20,933,131 | ) | ||||
Total stockholders' equity
|
256,564 | 404,653 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 1,221,872 | $ | 1,312,833 | ||||
For the Years Ended December 31,
|
2013
|
2012
|
||||||
(Restated)
|
||||||||
Revenues
|
$ | 1,454,337 | $ | 2,433,745 | ||||
Cost of revenues
|
854,471 | 1,029,985 | ||||||
Gross profit
|
599,866 | 1,403,760 | ||||||
General and administrative expense
|
777,920 | 1,431,869 | ||||||
Loss from operations
|
(178,054 | ) | (28,109 | ) | ||||
Other income (expense)
|
||||||||
Interest income
|
6,681 | 164 | ||||||
Interest expense
|
(69,311 | ) | (1,998,429 | ) | ||||
Loss on Derivatives
|
- | (4,028,085 | ) | |||||
Total other expense
|
(62,630 | ) | (6,026,350 | ) | ||||
Net loss from continuing operations
|
$ | (240,684 | ) | $ | (6,054,459 | ) | ||
DISCONTINUED OPERATIONS
|
||||||||
Loss from operations of discontinued
|
||||||||
Illume Mobile Operations
|
- | (2,097,940 | ) | |||||
Loss on sales of discontinued operations
|
- | (106,538 | ) | |||||
Net loss from discontinued operations
|
- | (2,204,478 | ) | |||||
NET LOSS
|
$ | (240,684 | ) | $ | (8,258,937 | ) | ||
OTHER COMPREHENSIVE INCOME, net of tax
|
||||||||
Unrealized holding loss arising during the period
|
(195,763 | ) | (204,173 | ) | ||||
COMPREHENSIVE LOSS
|
$ | (436,447 | ) | $ | (8,463,110 | ) | ||
LOSS ALLOCABLE TO COMMON STOCKHOLDERS:
|
||||||||
Net loss
|
$ | (240,684 | ) | $ | (8,258,937 | ) | ||
Loss allocable to common stockholders
|
$ | (240,684 | ) | $ | (8,258,937 | ) | ||
Weighted average number of common shares outstanding
|
185,938,398 | 163,405,338 | ||||||
Basic and diluted net income (loss) from continuing operations per share
|
$ | (0.00 | ) | $ | (0.04 | ) | ||
Basic and diluted net loss from discontinued operations per share
|
$ | - | $ | (0.01 | ) | |||
Basic and diluted net income (loss) per share
|
$ | (0.00 | ) | $ | (0.05 | ) | ||
For the Years Ended December 31, 2013 and 2012
|
||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||
Common Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
|||||||||||||||||||||
Number of Shares
|
Amount
|
Capital
|
Loss
|
Deficit
|
Total
|
|||||||||||||||||||
BALANCE, at December 31, 2011
|
122,386,894 | $ | 1,223,869 | $ | 10,059,029 | $ | - | $ | (12,674,194 | ) | $ | (1,391,296 | ) | |||||||||||
Net Loss
|
- | - | - | (8,258,937 | ) | (8,258,937 | ) | |||||||||||||||||
Comprehensive Loss
|
- | - | (204,173 | ) | - | (204,173 | ) | |||||||||||||||||
Derivative liabiilties written off to additional paid-in capital
|
- | 4,473,289 | - | - | 4,473,289 | |||||||||||||||||||
Debt discount recorded for beneficial conversion feature
|
1,475,000 | 1,475,000 | ||||||||||||||||||||||
Common Stock issued for Services
|
2,800,000 | 28,000 | 250,450 | - | - | 278,450 | ||||||||||||||||||
Common Stock issued for cash
|
2,500,000 | 25,000 | 225,000 | - | - | 250,000 | ||||||||||||||||||
Common Stock issued for conversion of debt and accrued interest
|
41,815,921 | 418,159 | 2,769,332 | 3,187,491 | ||||||||||||||||||||
Compensation expense related to
|
||||||||||||||||||||||||
stock awards
|
12,723,747 | 127,237 | 373,481 | - | - | 500,718 | ||||||||||||||||||
Option expense
|
94,738 | - | 94,738 | |||||||||||||||||||||
Cancellation of shares
|
(62,666 | ) | (627 | ) | (627 | ) | ||||||||||||||||||
BALANCE, at December 31, 2012 (Restated)
|
182,163,896 | $ | 1,821,638 | $ | 19,720,319 | $ | (204,173 | ) | $ | (20,933,131 | ) | $ | 404,653 | |||||||||||
Net Loss
|
- | - | - | (240,684 | ) | (240,684 | ) | |||||||||||||||||
Comprehensive Loss
|
- | - | (195,763 | ) | - | (195,763 | ) | |||||||||||||||||
Stock issued in exchange for available-for-sale securities
|
2,500,000 | 25,000 | 33,338 | - | - | 58,338 | ||||||||||||||||||
Compensation expense related to
|
||||||||||||||||||||||||
stock awards
|
6,100,690 | 61,007 | 78,993 | - | 140,000 | |||||||||||||||||||
Option expense
|
90,020 | 90,020 | ||||||||||||||||||||||
BALANCE, at December 31, 2013
|
190,764,586 | $ | 1,907,645 | $ | 19,922,670 | $ | (399,936 | ) | $ | (21,173,815 | ) | $ | 256,564 | |||||||||||
For the Years Ended December 31,
|
2013
|
2012
|
||||||
OPERATING ACTIVITIES:
|
(Restated)
|
|||||||
Net loss
|
$ | (240,684 | ) | $ | (8,258,937 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
3,384 | 517,509 | ||||||
Loss on disposal of fixed assets
|
435 | 4,245 | ||||||
Loss on sales of assets to DecisionPoint
|
- | 106,538 | ||||||
Bad debt expense
|
- | 141,277 | ||||||
Amortization of debt discount
|
18,182 | 1,847,477 | ||||||
Loss on derivative liability
|
- | 4,028,085 | ||||||
Equity based compensation
|
140,000 | 779,168 | ||||||
Option expense
|
90,020 | 94,738 | ||||||
Cancellation of shares
|
- | (627 | ) | |||||
Stock received from Endexx Corporation for revenue
|
(15,000 | ) | - | |||||
Changes in current assets and liabilities:
|
||||||||
Decrease in accounts receivable - trade
|
9,998 | 195,969 | ||||||
Decrease (Increase) in prepaid expenses and other
|
(543 | ) | 223,747 | |||||
Increase (decrease) in accounts payable - trade and
|
||||||||
accrued liabilities
|
121,446 | (272,950 | ) | |||||
(Decrease) increase in unearned income
|
- | 5,571 | ||||||
Net cash provided by (used in) operating activities
|
127,238 | (588,190 | ) | |||||
INVESTING ACTIVITIES:
|
||||||||
Cash received from notes receivable
|
12,546 | - | ||||||
Purchase of equipment
|
(1,467 | ) | (8,580 | ) | ||||
Cash received from sale of Illume Mobile
|
- | 250,000 | ||||||
Software development costs
|
- | (233,390 | ) | |||||
Patent application fees
|
(8,810 | ) | (4,568 | ) | ||||
Net cash provided by investing activities
|
2,269 | 3,462 | ||||||
FINANCING ACTIVITIES:
|
||||||||
Proceeds from convertible debt
|
- | 180,000 | ||||||
Proceeds from shareholder loan
|
- | 778,300 | ||||||
Proceeds from sale of common stock
|
- | 250,000 | ||||||
Repayments of shareholder loan
|
- | (115,000 | ) | |||||
Repayments of notes payable
|
(82,500 | ) | (22,500 | ) | ||||
Repayment of bank line of credit
|
(100,000 | ) | ||||||
Net cash (used in) provided by financing activities
|
(82,500 | ) | 970,800 | |||||
NET INCREASE IN CASH
|
47,007 | 386,072 | ||||||
CASH, beginning of period
|
659,204 | 273,132 | ||||||
CASH, end of period
|
$ | 706,211 | $ | 659,204 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the years ended December 31:
|
||||||||
Interest
|
$ | 1,059 | $ | 27,071 | ||||
Income taxes
|
$ | - | $ | - | ||||
Noncash investing and financing activities for the year ended December 31:
|
||||||||
Stock issued for conversion of debt and accrued interest
|
$ | $ | 3,187,491 | |||||
Stock issued in exchange for available-for-sale securities
|
$ | 58,338 | $ | - | ||||
Stock received from DecisionPoint Systems for sale of
|
||||||||
Illume Mobile assets
|
$ | - | $ | 698,000 | ||||
Change in fair value for available-for-sale securities
|
$ | (195,763 | ) | $ | (204,173 | ) | ||
Re-classification of accounts receivable to note receivable
|
$ | 25,267 | $ | - | ||||
Re-classification of accrued salary to noted payable to related party
|
$ | 22,500 | $ | - | ||||
Re-classification of shareholders loan from Short term to Long term
|
$ | $ | 169,306 | |||||
Re-classification of shareholders loan from long term to convertible debt
|
$ | $ | 320,000 | |||||
Re-classification of accrued interest to note payable - shareholders
|
$ | $ | 21,075 | |||||
Debt discount recorded for derivative liability
|
$ | $ | 100,000 | |||||
Debt discount recorded for beneficial conversion feature
|
$ | $ | 1,475,000 | |||||
Derivative liabilities written off to Additional paid in capital
|
$ | $ | 4,473,289 | |||||
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2013
|
2012
|
|||||||
Computer hardware
|
$ | 3,639 | $ | 16,197 | ||||
Furniture and fixtures
|
598 | 5,454 | ||||||
4,237 | 21,651 | |||||||
Less - accumulated depreciation
|
1,586 | 19,462 | ||||||
$ | 2,651 | $ | 2,189 |
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
December 31, 2013
|
||||||||||||||||
Derivative liability | - | - | $ | 0 | $ | 0 | ||||||||||
Available-for-sale securities
|
$ | 371,402 | - | - | $ | 371,402 | ||||||||||
December 31, 2012
|
||||||||||||||||
Derivative liability
|
- | - | $ | 0 | $ | 0 | ||||||||||
Available-for-sale securities
|
$ | 493,827 | - | - | $ | 493,827 |
2.
|
INVESTMENT IN DECISIONPOINT SYSTEMS, INC.
|
3.
|
INVESTMENT IN MEDL MOBILE HOLDINGS, INC.
|
4.
|
INVESTMENT IN ENDEXX CORPORATION
|
5.
|
LINE OF CREDIT
|
6.
|
OKLAHOMA TECHNOLOGY COMMERCIALIZATION CENTER NOTE PAYABLE
|
2014
|
$ | 112,500 | ||
2015
|
$ | 20,000 | ||
Total
|
$ | 132,500 |
7.
|
NOTE PAYABLE – RELATED PARTY
|
8.
|
NOTE PAYABLE - SHAREHOLDERS
|
9.
|
CONVERTIBLE DEBENTURES
|
10.
|
STOCK OPTIONS
|
Stock Options | ||||||||
Options
|
Weighted
Average
Exercise Price
|
|||||||
Outstanding – December 31, 2011
|
11,829,507 | $ | 0.52 | |||||
Granted
|
27,700,000 | $ | 0.26 | |||||
Forfeited or Expired
|
(26,595,804 | ) | $ | 0.32 | ||||
Outstanding – December 31, 2012
|
12,933,703 | $ | 0.36 | |||||
Exercisable – December 31, 2012
|
5,394,503 | $ | 0.51 | |||||
Granted
|
- | $ | 0.00 | |||||
Forfeited or Expired
|
(63,120 | ) | $ | 0.60 | ||||
Outstanding – December 31, 2013
|
12,870,584 | $ | 0.37 | |||||
Exercisable – December 31, 2013
|
5,370,584 | $ | 0.52 |
Stock Options | ||||
Nonvested Shares
|
Options
|
|||
Nonvested - Beginning of Year 2012
|
6,028,450 | |||
2012 Granted
|
27,700,000 | |||
2012 Vested
|
(211,600 | ) | ||
2012 Forfeited
|
(25,977,650 | ) | ||
Nonvested – End of Year 2012
|
7,539,200 | |||
2013 Granted
|
- | |||
2013 Vested
|
(39,200 | ) | ||
2013 Forfeited
|
( - | ) | ||
Nonvested- End of Year 2013
|
7,500,000 |
11.
|
COMMON STOCK WARRANTS
|
|
|
|
|
|
The following table summarizes information about outstanding warrants at December 31, 2013:
|
Year Issued
|
Number
Outstanding
|
Remaining Contractual Life in Years
|
Number Currently Exercisable
|
Weighted Average
Exercise
Price
|
||||||||||||
2009
|
21,682,372
|
.6
|
21,682,372
|
$
|
0.10
|
|||||||||||
2010
|
10,236,227
|
0.9
|
10,236,227
|
$
|
0.10
|
|||||||||||
2011
|
29,680,086
|
3.0
|
29,680,086
|
$
|
0.10
|
|||||||||||
2012
|
2,500,000
|
4.0
|
2,500,000
|
$
|
0.15
|
|||||||||||
Total
|
64,098,685
|
1.9
|
64,098,685
|
$
|
0.10
|
12.
|
SHAREHOLDERS’ EQUITY
|
|
Shares issued for services:
|
|
Shares issued in exchange for available-for-sale securities
|
13.
|
DERIVATIVE LIABILITIES
|
|
As discussed in Note 9, the Company determined that the instruments embedded in the convertible note should be classified as liabilities and recorded at fair value due to there being no explicit limit to the number of shares to be delivered upon settlement of the above convertible debentures. The fair value of the instruments was determined by using Black-Scholes option-pricing model, assuming maximum value.
|
|
As discussed in note 9 on February 17, 2012, the Company issued $500,000 in 2012 Convertible Debenture Series C which had a reset to its conversion price. Under ASC 815-40-15 “Determining whether an Instrument (or Embedded feature) is Indexed to an Entity's Own Stock”, on the date the convertible debenture issued, the derivative liability was measured at fair value. The fair value of the conversion feature was determined to be $445,204 and was recognized as debt discount.
|
|
As a result of full conversion on April 23, 2012, the derivative treatment on these convertible debentures ended, the instruments are re-measured at fair value at the date of termination with the change in fair value recorded to earning. The fair value of the instrument was $536,528 and was re-classified out of liabilities to equity. The change in fair value of $91,324 was recognized as loss on derivative. Also the debt discount of $445,204 was fully amortized. The fair value of the instruments was determined by using Black-Scholes option-pricing model, assuming maximum value.
|
|
The Company had 67,765,365 warrants outstanding on December 31, 2011. On March 1, 2012, as a result of full conversion of the 2010 convertible debentures, under ASC 815- 15 “Derivatives and Hedging”, the instruments are measured at fair value at the date of termination with the change in fair value recorded to earnings. The fair value of the instruments related to the warrants was $2,507,317 and was recognized as loss on derivative and reclassified out of liabilities to equity. The fair value of the instruments was determined by using Black-Scholes option-pricing model, assuming maximum value.
|
|
The Company issued 2,500,000 in warrants on February 17, 2012 which was during the period the 2010 Debenture created derivative accounting. Therefore, the Company recorded $195,000 as derivative liability on the issuance date and was reclassified out of equity to liabilities. On March 1, 2012, as a result of full conversion of the 2010 convertible debentures, under ASC 815- 15 “Derivatives and Hedging”, the instruments are measured at fair value at the date of termination with the change in fair value recorded to earnings. The fair value of the instruments related to the warrants was $237,500 and was reclassified out of liabilities to equity. The change in fair value of $42,500 was recognized as loss on derivative. The fair value of the instruments was determined by using Black-Scholes option-pricing model, assuming maximum value.
|
|
The following table summarizes the derivative liabilities included in the balance sheet:
|
Balance at December 31, 2011
|
$ | 0 | ||
Record derivative liability as debt discount
|
445,204 | |||
Change in fair value of derivative liability
|
4,028,085 | |||
Settlement of derivative liability due to conversion of related notes
|
(4,473,289 | ) | ||
Balance at December 31, 2012
|
$ | 0 |
14.
|
INCOME TAXES
|
|
The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
|
|
During the years ended December 31, 2013 and 2012, the Company incurred net losses, and, therefore, had no tax liability. The net deferred asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $13,576,705 and $13,586,303 for 2013 and 2012, respectively and will begin expiring in 2023.
|
|
Deferred tax assets consist of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. Deferred tax assets consist of the following:
|
December 31, 2013
|
December 31, 2012
|
|||||||
Net operating loss carry-forwards
|
$ | 4,616,080 | $ | 4,619,343 | ||||
Valuation allowance
|
(4,616,080 | ) | (4,616,343 | ) | ||||
$ | -0- | $ | -0- |
15
|
.COMMITMENTS AND CONTINGENCIES
|
|
At December 31, 2013, the Company has no obligation under any operating leases.
|
|
As of March 28, 2014, the Company is not a party to any lawsuits.
|
16
|
.CONCENTRATIONS
|
|
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade receivables. The Company performs ongoing credit evaluations of its customers and generally does not require collateral related to its receivables. At December 31, 2013, accounts receivable from one patent licensee comprised approximately 50% of the company’s total accounts receivable-trade. Revenues from twenty-six customers approximated 97% of total revenues for 2013. At December 31, 2012, accounts receivable from three patent licensees comprised approximately 74% of the Company’s total accounts receivable-trade. Revenues from twenty-eight customers approximated 77% of total revenues for 2012.
|
17.
|
DISCONTINUED OPERATIONS PURSUANT TO THE SALE OF ILLUME MOBILE ASSETS
|
Cash received
|
$ | 250,000 | ||
Stock received
|
$ | 698,000 | ||
Liabilities assumed by DecisionPoint Systems, Inc.
|
||||
Accrued liabilities
|
$ | 25,000 | ||
Accounts payable
|
$ | 13,838 | ||
Deferred revenue
|
$ | 36,971 | ||
Assets sold to DecisionPoint Systems, Inc.
|
||||
Prepaid expenses
|
$ | (14,885 | ) | |
Property and Equipment, net
|
$ | (83,507 | ) | |
Software development costs
|
$ | (1,019,480 | ) | |
Accounts receivable
|
$ | (12,475 | ) | |
Loss on sales of discontinued operations
|
$ | (106,538 | ) |
Year Ended
|
||||
December 31, 2012
|
||||
Revenue
|
$ | 637,507 | ||
Cost of revenues
|
$ | 351,654 | ||
Gross profit
|
$ | 285,853 | ||
General and administrative expense
|
$ | 2,383,793 | ||
Loss from discontinued operations
|
$ | (2,097,940 | ) |
18.
|
Restatement
|
a.
|
In July 2012, the Company recorded $500,000 in unearned income related to the potential earn-out after twelve months associated with the sale of Illume Mobile. The earn-out was not achieved during 2013, so the original balance sheet entry was reversed effective July 31, 2012.
|
b.
|
As part of the sale of Illume Mobile on July 31, 2012, the Company received $750,000 in common stock of DecisionPoint Systems, Inc. with the number of shares determined by a twenty day value-weighted average computation (VWAP). The actual fair market value of the shares on July 31, 2012 was less than the twenty-day VWAP, resulting in a $52,000 reduction in the originally-recorded value of the investment in DecisionPoint Systems, Inc. common stock.
|
c.
|
On December 31, 2012, the Company valued its investment in DecisionPoint based on the VWAP for the fourth quarter. The actual fair market value of the shares on December 31, 2012 was less than the fourth quarter VWAP, resulting in a $34,048 reduction in the originally-reported investment on that date offset by the Other Comprehensive Income account.
|
d.
|
The Company previously recorded $9,909 on December 31, 2012 in liability related to fourth quarter 2012 stock based compensation for shares that were issued in January 2013 and recorded as expense at the recipients’ taxable basis. These shares were restated as issued in 2012, the offsetting liability of $9,909 was reversed, and $23,318 was recognized as an increase in common stock and $23,319 was recognized as additional paid in capital. Also $8,073 of accrued interest was re-classified from long term debt to accrued liabilities.
|
e.
|
The outstanding 2011 Convertible Debenture Series A was determined to have been issued at a discount, resulting in a $72,727 contra liability to the debenture liability. Also additional $1,475,000 was recorded as additional paid-in capital for debt discount recorded for beneficial conversion feature and $1,402,273 was recorded as interest expense for amortization of debt discount.
|
f.
|
In 2012, the Company issued 1,850,000 shares of stock to a financial advisory service firm in exchange for services valued at $168,000. The actual fair market value of the shares on the date issued was $30,950 greater resulting in an increase in additional paid-in capital and G&A expense.
|
g.
|
The Company issued 750,000 shares to another financial advisory service firm in 2012 in exchange for services valued at $45,000. The actual fair market value of the shares on the date issued was $24,000 greater resulting in an increase in additional paid in capital and G&A.
|
h.
|
The Company discovered $12,574 in legal and travel expenses that had been charged to additional paid-in capital as financing expenses which should have been charged to G&A expense and reclassified that amount to expense.
|
i.
|
The Company previously recorded first, second and third quarter 2012 stock based compensation as expense at the recipients’ taxable basis. As a result, an additional $356,369 was recorded as additional paid-in capital and G&A expense.
|
j.
|
The Company issued 7,500,000 options in 2012 which only vest under certain market conditions which have not been met but did not record an expense for the options. Under ASC 718, these unvested options have been recorded with a $94,738 increase in additional paid-in capital and G&A expense.
|
k.
|
Under ASC 815-15, the 2010 Debenture which didn’t convert until March 2012 had a conversion feature which caused the 2011 Debenture Series A, 2011 Debenture Series B instruments to be deemed derivative instruments as well as warrants outstanding at that date. Under ASC 815, the 2012 Debenture Series C is deemed to be derivative instrument due to a reset provision in the conversion price. As a result, the Company recorded $4,028,085 as loss on derivative liability, $4,473,289 as derivative liabilities written off to additional paid-in capital and $445,204 to interest expense for amortization of debt discount.
|
l.
|
The Company previously reported the operations of Illume Mobile as continuing operations from January 1, 2012 through June 30, 2012. Illume Mobile’s 2012 $2,204,478 loss from operations has been restated resulting in a reclassifications of net revenues, cost of revenues, operating expenses and G&A expenses to discontinued operations.
|
As of December 31, 2012
|
||||||||||||||||
As Reported
|
Adjustments
|
Restated
|
||||||||||||||
Cash
|
$ | 659,204 | $ | - | $ | 659,204 | ||||||||||
Accounts receivable - trade
|
74,056 | - | 74,056 | |||||||||||||
Prepaid expenses and other
|
519,330 | a | (500,000 | ) | 19,330 | |||||||||||
Net property and equipment
|
2,189 | - | 2,189 | |||||||||||||
Available-for-sale investment - DecisionPoint Systems, Inc.
|
579,875 | b, c | (86,048 | ) | 493,827 | |||||||||||
Intangible assets, net of amortization
|
64,227 | 64,227 | ||||||||||||||
TOTAL ASSETS
|
$ | 1,898,881 | $ | (586,048 | ) | $ | 1,312,833 | |||||||||
|
||||||||||||||||
Note Payable - Oklahoma Technology Commercialization Center- Current
|
$ | 90,000 | $ | - | $ | 90,000 | ||||||||||
Accounts payable - trade and accrued liabilities
|
84,062 | d | (1,836 | ) | 82,226 | |||||||||||
Unearned income
|
500,000 | a | (500,000 | ) | - | |||||||||||
TOTAL LONG-TERM DEBT, less current maturities
|
816,752 | d, e, k | (80,798 | ) | 735,954 | |||||||||||
TOTAL LIABILITIES
|
1,490,814 | (582,634 | ) | 908,180 | ||||||||||||
Common stock
|
1,798,320 | d | 23,318 | 1,821,638 | ||||||||||||
Additional paid-in capital
|
13,230,111 |
d, e, f, g, h, i, j, k
|
6,490,208 | 19,720,319 | ||||||||||||
Accumulated other comprehensive income
|
(170,125 | ) | c | (34,048 | ) | (204,173 | ) | |||||||||
Accumulated deficit
|
(14,450,239 | ) | (6,482,892 | ) | (20,933,131 | ) | ||||||||||
TOTAL STOCKHOLDER'S EQUITY
|
408,067 | (3,414 | ) | 404,653 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 1,898,881 | $ | (586,048 | ) | $ | 1,312,833 | |||||||||
As of December 31, 2012
|
||||||||||||||||
As Reported
|
Adjustments
|
Restated
|
||||||||||||||
Net revenues
|
$ | 2,988,393 | l | $ | (554,648 | ) | $ | 2,433,745 | ||||||||
Cost of revenues
|
1,305,853 | l | (275,868 | ) | 1,029,985 | |||||||||||
Gross profit
|
1,682,540 | (278,780 | ) | 1,403,760 | ||||||||||||
General and administrative expense
|
3,025,071 |
d, f, g, h, i, j, l
|
(1,593,202 | ) | 1,431,869 | |||||||||||
Loss from operations
|
(1,342,531 | ) | 1,314,422 | (28,109 | ) | |||||||||||
Total other expense
|
(238,906 | ) | e, k | (5,787,444 | ) | (6,026,350 | ) | |||||||||
Net loss from continuing operations
|
(1,581,437 | ) | (4,473,022 | ) | (6,054,459 | ) | ||||||||||
DISCONTINUED OPERATIONS
|
(194,608 | ) | b, l | (2,009,870 | ) | (2,204,478 | ) | |||||||||
NET LOSS
|
(1,776,045 | ) | (6,482,892 | ) | (8,258,937 | ) | ||||||||||
OTHER COMPREHENSIVE INCOME
|
(170,125 | ) | c | (34,048 | ) | (204,173 | ) | |||||||||
COMPREHENSIVE LOSS
|
$ | (1,946,170 | ) | $ | (6,516,940 | ) | $ | (8,463,110 | ) | |||||||
19.
|
Subsequent Event
|
1.
|
I have reviewed this annual report on Form 10-K of MacroSolve, 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 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 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 reasonable 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 controls over financial reporting.
|
1.
|
I have reviewed this annual report on Form 10-K of MacroSolve, 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 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 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 reasonable 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 controls over financial reporting.
|
By:
|
/s/ JAMES C. McGILL |
|
|||
Date: March 28, 2014
|
Name:
|
James C. McGill
|
|||
Title:
|
Chief Executive Officer
|
By:
|
/s/ KENDALL CARPENTER |
|
|||
Date: March 28, 2014
|
Name:
|
Kendall Carpenter
|
|||
Title:
|
Chief Financial Officer
|
Line of Credit (Details) (USD $)
|
0 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2012
|
Dec. 31, 2013
|
|
Interest Rate Calculation Greater Of [Abstract] | ||
Strike price of warrants | 0.10 | |
Line of credit
|
||
Interest Rate Calculation Greater Of [Abstract] | ||
Advancing term loan | $ 100,000 | |
Description of variable rate basis | $100,000 | |
Basis spread on variable rate | 1.00% | |
Interest payable on loan interest percentage | 4.25% | 5.75% |
Commitment fee amount | 3,000 | |
Term period of warrant | 5 years | |
Purchase of stock | $ 100,000 | |
Strike price of warrants | 0.10 |
Commitments and Contingencies (Detail Textuals) (USD $)
|
12 Months Ended | 1 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2013
|
Dec. 31, 2012
|
Dec. 31, 2013
Kendall Carpenter [Member]
|
Sep. 30, 2013
Kendall Carpenter [Member]
|
Oct. 23, 2012
Kendall Carpenter [Member]
|
|
Commitments And Contingencies [Line Items] | |||||
Rent expense | $ 110,462 | ||||
Deferred compensation | 9,000 | 13,500 | 150,000 | ||
Interest rate, notes payable | 6.00% | 6.00% | 6.00% | ||
Accrued interest on notes payable | 489 | ||||
Debentures Meturity Date | May 31, 2014 | Dec. 31, 2014 | Sep. 30, 2014 | ||
Basic salary | $ 96,000 |
Common Stock Warrants (Detail Textuals) (USD $)
|
1 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Apr. 30, 2012
|
Dec. 31, 2012
|
Dec. 31, 2013
|
Apr. 30, 2011
|
Dec. 31, 2013
Line of Credit [Member]
|
Mar. 31, 2012
Debenture Series 2012 Plus Series C Warrants
|
Feb. 29, 2012
Debenture Series 2012 Plus Series C Warrants
|
|
Class of Warrant or Right [Line Items] | |||||||
Number of warrants issued | 5,000,000 | ||||||
Class of warrant or right expired | 8,666,680 | ||||||
Fair value of warrant cancelled | $ 237,500 | ||||||
Number of common stock called by warrants | 1,575,000 | 2,500,000 | 2,500,000 | ||||
Strike price of warrants | 0.10 | 0.10 | 0.15 | 0.10 |
)4U/SNYHTP%_)MB)`X-<7<=-0[[=T@Z:
M;60YDU`'&W%@L*OOWQ28\H5^AM+R8D#;WL@X$1P,B!:U!&N[L+:3ETYA0#@0
M'(-?30=V\WUHJ(,(.@;+S5MZ0X(F2*!CHJP-*"^(>%A0M>G(E-,5\,?1=$R2
M=9WS("YWD@)T)CAE'`/D_6'A<-0XAD/'L*TJM(/7!#EV#(Z;)^?Q`0#<<7#<
MT*)6]F:=/89L!3H33@&"J='\XRA^!0`\>78[#\FSEN]L004:9%+:96'8;^
M8&\-#92U#0%&(FT3&TE/L:?9-<26H$7-'TWGF-I]P7-4P888&B"7E?KMT0NC
MHN=*.+4.#9+UP]>A2D<"T:%^#V?7T$"Y_32&LV>(,-.BEJ!V(4K+.=-(X="@
MN5V(&OPLA"@.#9SA@'CL4336N#$X;C!F>`(887UH4*]J(-6N;C5"_HQG?;ZPG284`:P`.Y$:H`6&2T.=$M/IU))\@]V6VW"::4K[6[27V?L$DXJ=\@2;A.'Y3Z[>;]3[NA+
MYY[.5E_"-0GH:%T#<%%^B0_TC[@XI.=2.=$]A#:=V-"[@E^U\R]5?JFO6]_R
M"J[(ZS^/\"\1"M>8TPG`^SROVB^L@>Z?+)O_`0``__\#`%!+`P04``8`"```
M`"$`O4]$Z%D#``#;"@``&0```'AL+W=O
1F05M%8TZ',U#>?:9$]>V21(\D^B3AD,2`)(8D,2*)
M,4E,2&)*$C.2F)/$@B26)+$BB35);$AB^XP0[`TOI"_8F]%M!9X+[M:U531=
M=CCSS-XDT2.)/DDX)#'@A)F^U1DJ_(D3VS!_7C,MAHC$B"QC+&BP,I#$A)28
MDL0L7P@LETF%S$F)15[";IJ:^9A5T[?1)2FQRDNDZ41-79,2&Y+8/B,$8\,:
MR0O&9K1H;$M%HW*',U9J%UCFP#W9Y><;Z7G4])YPK:K;JHW>1?K9U8];"Y7O
MD,1`+$6ST$E__]9G]HP`[]CY.-G,S'#P=#N?F
M%U;QZ/+/#'S]/P```/__`P!02P,$%``&``@````A`$O>9D6=`P``P@P``!D`
M``!X;"]W;W)K
V*>V_W[$=$AS:-.T%$'C]ZO%[_'&ZN'DN
F_W4`BA;JI)6@8,[F3\N>]I!HT"W>04\\VI9/G>:W/@G^Y\;#*#4FX=-@U-
M9O]
2!=(
M.SB"QLD.VF#2I*QIT]9)6RW;K"^XT\WYGC"VENPL_CZGL?/FS&7GY.)%&CNU
ML&-K.[;2U.#9DRD*0Y/L(&,<8[Z4%3]F\=%]0.?#:8,25-,,&G*H&AAQZ8
M/(#DMQS-TJV_````__\#`%!+`P04``8`"````"$`5_C[MC$.``!;B```#0``
M`'AL+W-T>6QE
#GIT'@)[X%R3?/L)8_9OU[I
M=6-%`DW'A-Q$WW^\!"5D;\:3#]U)OY%T?'ZQA9WU0&TP5*"6?2`>FN4C;-)-
MAJ)T/QDX'A%0N#%4A$(&83PA.YL1X&<$,L9-'!."'M+2V4VNZ*L!)
_Z@
MG]II$TP#CKMRB/B5C>W6QLY>E(9`)YQ65MN\BQ&59*>TN/$'5A*D*+R'/UEL
M#GSK%&>6V4,:#NY=$X=*?D0-/7*[&ZSIPP`[9X:,ST?96UQ2Z*;;LCT*5A/E
M0WXQ2L->Z#(&RXB)`"GZ)5*`AV'F,S6$
-
MQ8JP!%(AJ`M<>I\_^D(.Z:V:<=GA9,)VD;4RJ">[R5$)I=)LXP^/SRT^-_82
MO=OVFLQ#E2SYS"NOR*"5HZ"43Q3WP,^W7""L\2T0H?&%Z:UK_(F.NF6O"`P0
M2!&BD^HOZI'=H=MG29JE*L3RR+E(9HD9<3/$B_+M'?Q9V;@H
T?>.#J(A