x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2012
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
11-3349762
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
2101 West Commercial Blvd, Suite 3500
|
|
Ft. Lauderdale, FL 33309
|
|
(Address of principal executive offices)
|
|
(954)473-1254
|
|
(Registrant’s telephone number, including area code
)
|
|
Securities registered pursuant to Section 12(b) of the Act:
|
|
None
|
|
Securities registered pursuant to Section 12(g) of the Act:
|
|
Common Stock, $0.001 par value per share
|
|
(Title of class)
|
Date
|
Non-Affiliate Voting Shares Outstanding
|
Aggregate Market Value
|
June 30, 2012
|
77,572,272
|
$4,654,366
|
Date
|
Class
|
Outstanding Shares
|
March 22, 2013
|
Common Stock, $0.001 par value per share
|
87,823,659
|
Table of Contents
|
||
Page
|
||
Part I
|
||
Item 1.
|
Business
|
4
|
Item 1A.
|
Risk Factors
|
18
|
Item 1B.
|
Unresolved Staff Comments
|
24
|
Item 2.
|
Properties
|
24
|
Item 3.
|
Legal Proceedings
|
24
|
Item 4. | Mine Safety Disclosures | 24 |
Part II
|
||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
25
|
Item 6.
|
Selected Financial Data
|
25
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
25
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
38
|
Item 8.
|
Financial Statements and Supplementary Data
|
38
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
38
|
Item 9A.
|
Controls and Procedures
|
38
|
Item 9B.
|
Other Information
|
39
|
Part III
|
||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
39
|
Item 11.
|
Executive Compensation
|
39
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
39
|
Item 13.
|
Certain Relationships and Related Transactions; and Director Independence
|
39
|
Item 14.
|
Principal Accounting Fees and Services
|
40
|
Part IV
|
||
Item 15.
|
Exhibits, Financial Statement Schedules
|
40
|
Signatures
|
43
|
•
|
Real-Time Access to the Data.
Our eClinical products are designed to provide all interested parties with real-time access to study data over the Internet as it is generated. This allows for the monitoring of patient enrollments and study outcome related clinical trial metrics in a time-frame that allows study sponsors the ability to make effective study conduct related decisions.
|
•
|
Faster Study Completion:
We believe our eClinical products and services save time at the back-end of a clinical trial by eliminating most of the time it takes for database "clean-up" when compared with studies completed by paper-based Case Report Forms (“CRF”s). This is done by eliminating most incorrect or incomplete entries at the time of entry. This may be critical if there are any unanticipated future delays in either the commencement or conduct of the study.
|
•
|
Cost Savings:
EDC involves fixed upfront system development costs. The use of EDC can be even more cost effective when applied to multiple studies, which we believe is relatively easy to do in certain therapeutic areas, in which there are a few primary indications and the studies are relatively simple and similar in terms of the type of data captured.
|
•
|
Improved quality and visibility of results.
Our eClinical software applications allow users engaged in clinical trials to enhance the quality and completeness of their data earlier in the clinical trial process by providing real-time data cleansing and eliminating duplicative manual entry of data. We believe decision making is enhanced through consistent access to reliable data, including allowing for adaptive trial design, the early identification and termination of unsuccessful trials and timely access to trial data that may identify significant safety concerns.
|
•
|
Comprehensive clinical development solution.
We have designed our comprehensive solutions to provide support throughout the clinical development process, from providing consulting services in the protocol authoring process to preparing data for regulatory analysis and submission. We provide third-party technology providers with access to our application programming interface, or API, and developer tools, which facilitates integration with complementary business systems. Our eClinical Products can be integrated easily with auxiliary clinical and operational data systems, making it the core of a complete end-to-end solution.
|
•
|
Scope Expansion
– We plan on expanding the scope of services and products offered within the eClinical product spectrum via organic product and service development, through strategic partnerships and relationships or through the selective use of acquisitions;
|
•
|
Customer Base Expansion
– We will seek to expand the customer base for our existing set of eClinical Solutions and we will design complementary solutions that will allow us to expand the universe of clients that we service; and
|
•
|
Diversification
– We will continue to diversify our revenue and customer base in order to avoid over-concentration of our business on any solution/product set or client-base.
|
§
|
Project Management
– We assign a project manager to oversee every project and provide up-to-date communications on the status of the project. We use a methodology called OmniAdvance, to ensure that all deliverables are standard and of high quality.
|
§
|
Clinical Services
– We have expertise in translating a clinical protocol into an electronic Case Report Form format. We ensure that CRF design, Visit Schedule, Site and Patient Definitions, Edit Checks, Derivations, and Code Lists are all optimized to use industry best practices, and, where applicable, CDISC/CDASH standards.
|
§
|
Training.
We provide extensive hands-on and eLearning-based EDC training classes. Training classes can be conducted at a sponsor location, at an investigator meeting or at an investigator site and via Web-cast.
|
§
|
Custom Configuration.
Our EDC and eClinical platforms are flexible and allow for major reconfiguration. Each trial can be designed to suit the specific client workflows and trial design. Our eClinical includes a clinical trial management system (CTMS), Drug Supply, Safety and Randomization options that can simplify the trial management experience.
|
§
|
System Integration.
We help our clients integrate our EDC solutions with existing systems or external systems (Patient Diaries, Medical Devices and Labs, etc.). We analyze the client’s legacy systems and data management needs in order to decide how to most efficiently integrate EDC.
|
§
|
SOPs and implementation assistance.
Our client services and support personnel can be engaged to write an implementation plan designed to effectively integrate with our EDC solutions. We can also write standard operating procedures (“SOP”s) to help client staff clearly understand their roles in using TrialMaster to conduct trial activities. We can also analyze and document business processes to determine where greater operating efficiency may be gained.
|
§
|
Installation.
There are various architectures for deploying a secure EDC solution to remote investigator sites. These services explore different security, performance and system management alternatives and help the client design and install an optimal solution to meet their unique needs.
|
§
|
Validation.
We offer a test kit that includes test cases and documentation to validate the installation of our EDC applications against regulatory requirements.
|
|
·
|
Faster data collection which leads to the ability to get to a quicker database lock allowing for a timelier analysis of study data;
|
|
·
|
An ability for clinical trial sponsors to reduce their total cost throughout the entire Phase I process by streamlining the patient recruitment process, improving error rates through the use of edit queries and through the effective use of integration with medical instrumentation;
|
|
·
|
Access to valid data earlier provides more visibility for “Go/No Go” decisions;
|
|
·
|
Increase trial subject safety-review data (e.g. vital sign trends) in real-time;
|
|
·
|
Trial sponsors can manage or run more studies with less human resources; and
|
|
·
|
The use of bar-coded samples reduces laboratory errors thereby increasing patient safety.
|
·
|
eClinical Portal – the gateway to all functions, data and reports. It provides the means to create an environment specific to any Protocol and User needs.
|
·
|
eClinical Data Management – where protocols are defined using libraries of reusable standard objects (Codelists, Data Items, Data Modules, Pages, Edit Checks, etc.).
|
·
|
eClinical Data Capture – is the (EDC) module used by Investigator Sites and client Personnel such as Data Managers, Statisticians, Safety, etc. In this module data can be entered and reviewed; queries resolved, etc. The interface is highly intuitive and easy to use thereby minimizing end-user training times. High performance is maintained to keep page turn wait times to a minimum.
|
·
|
eClinical Study Conduct – proactively allows the clinical operations organization to manage the timelines, resources, budget, payments, clinical supplies, and key study milestones and metrics.
|
·
|
eClinical Adverse Event Reporting – based on industry standards for safety reporting, this module allows for the capture, review, reporting and global submission of both serious and non-serious adverse event cases.
|
·
|
eClinical Autoencoder – delivers both automated and manual coding of adverse event and drug medication terminology using standard and custom dictionaries and configurable coding algorithms.
|
·
|
Drug companies can lose as much as $35.6 million in potential revenue for each day a trial is delayed on a blockbuster drug such as Lipitor
®
. Source: Pfizer, Inc. website.
|
·
|
In 2009, over 5,000 compounds were in active clinical trials and the FDA approved 83 drugs for sale. Source: 2011 Tufts Center for the Study of Drug Development report.
|
·
|
According to a 2011 Tufts Center for the Study of Drug Development report, the average drug approved for sale by the FDA costs over $1.3 Billion to bring to market.
|
·
|
Deployment options.
Successful EDC vendors provide clinical trial sponsors flexibility in choosing whether to deploy EDC on an ASP, Technology Transfer or Technology Transition basis. The ultimate criteria for the selection of the type of technology delivery methodology is often predicated on the size of the clinical trial sponsor. Since this will often determine first the financial resources available for the deployment of new technologies and second, will help determine the sophistication of the company’s technology infrastructure and therefor their ability to bring in-house their EDC operations.
|
·
|
Interoperability.
Most clinical trial sponsors have invested in other technology platforms to run their trials. These include clinical data management systems, interactive voice response systems and Central Labs. The ability for an eClinical solution to integrate with existing technology platforms is a key decision making factor.
|
·
|
Scalability.
The ability to scale the eClinical solutions to absorb additional projects seamlessly is important to trial sponsors. Scalable solutions will retain their speed and performance metrics as projects and engagements increase in size.
|
·
|
Migration from hosted to technology transfer solutions.
When clinical trial sponsors decide to bring the eClinical services and solutions in-house it is vital that they do not experience a degradation of speed, performance or system reliability.
|
·
|
Flexibility.
The more robust eClinical systems will be designed to provide the ability to increase functionality and guarantee interoperability with other industry technology solutions. As the industry and technology matures clinical trial sponsors will demand new functionality without loss of performance or reliability.
|
·
|
Vendor stability.
eClinical vendors should be able to demonstrate a viable business model and financial structure that can sustain a long-term relationship with clinical trial sponsors.
|
·
|
Systematic adoption of best practices
. eClinical vendors will be expected to assimilate best-practice workflows and process tools.
|
·
|
Professional services.
The adoption and implementation of eClinical solutions into a clinical trial environment requires significant financial, technical and human resource investment on the part of clinical trial sponsors. A robust offering of professional services that fully integrate with the technological eClinical offerings will be considered an integral part of any eClinical purchase.
|
Trial Sponsor
|
Sponsor Type
|
Boston Scientific
|
Medical Device
|
Hoffmann-La Roche
|
Pharmaceutical (Phase I)
|
Gilead Sciences
|
Biopharmaceutical
|
Columbia University (InChoir)
|
Academic
|
INC Research
|
Contract Research Organization
|
Johnson & Johnson
|
Pharmaceutical
|
Pfizer (Wyeth Consumer Healthcare)
|
Pharmaceutical
|
·
|
systems developed internally by existing or prospective customers;
|
·
|
vendors of EDC, eClinical, clinical trial management systems and adverse event reporting product suites, including Oracle Clinical and PhaseForward, Inc., business units of Oracle Corporation and Medidata Solutions;
|
·
|
vendors of stand-alone EDC, data management and adverse event reporting products; and
|
·
|
CROs with internally developed EDC, clinical data management systems or adverse event reporting systems.
|
·
|
product functionality and breadth of integration among the EDC, eClinical, clinical trial management systems and adverse event reporting solutions;
|
·
|
reputation and financial stability of the vendor;
|
·
|
low total cost of ownership and demonstrable benefits for customers;
|
·
|
depth of expertise and quality of consulting and training services;
|
·
|
performance, security, scalability, flexibility and reliability of the solutions;
|
·
|
speed and ease of implementation and integration; and
|
·
|
sales and marketing capabilities and the quality of customer support.
|
·
|
approximately $75,000, at 10% interest, was due June 2004. We are in default in the payment of principal and interest;
|
·
|
approximately $160,000, at 12% interest is due in December 2013;
|
·
|
approximately $217,500 at 12% is due in January 2014;
|
·
|
approximately $2,866,879 at 12% interest is due in April 2014;
|
·
|
approximately $20,000 at 12% interest is due in December 2014;
|
·
|
approximately $581,986 at 10% is due in January 2015;
|
·
|
approximately $1,882,500 at 12% is due in January 2015;
|
·
|
approximately $1,770,000 at 10% is due in January 2016 and,
|
·
|
approximately $7,230,000 at 12% interest is due in January 2016;
|
·
|
fund more rapid expansion;
|
·
|
fund additional capital or marketing expenditures;
|
·
|
develop new or enhanced features, services and products;
|
·
|
enhance our operating infrastructure;
|
·
|
respond to competitive pressures; or
|
·
|
acquire complementary businesses or necessary technologies.
|
·
|
the economic conditions in these various foreign countries and their trading partners, including conditions resulting from disruptions in the world credit and equity markets;
|
·
|
political instability;
|
·
|
greater difficulty in accounts receivable collection and enforcement of agreements and longer payment cycles;
|
·
|
compliance with foreign laws;
|
·
|
changes in regulatory requirements;
|
·
|
fewer legal protections for intellectual property and contract rights;
|
·
|
tariffs or other trade barriers;
|
·
|
staffing and managing foreign operations;
|
·
|
exposure to currency exchange and interest rate fluctuations;
|
·
|
potentially adverse tax consequences; and
|
·
|
recently proposed changes to taxation of offshore earnings.
|
·
|
the introduction or adoption of new technologies or products;
|
·
|
changes in third-party reimbursement practices;
|
·
|
changes in government regulation or governmental price controls;
|
·
|
changes in medical practices;
|
·
|
the assertion of product liability claims; and
|
·
|
changes in general business conditions.
|
Location
|
Use
|
Size
|
Expiration of Lease
|
|||
Fort Lauderdale, Florida
|
Corporate Headquarters
|
11,519 square feet
|
September 2016
|
|||
Monmouth Junction, New Jersey
|
Office Space
|
2,508 square feet
|
February 2016
|
|||
Bonn, Germany
|
European Headquarters
|
3,714 square feet
|
July 2015
|
|||
Southampton, United Kingdom
|
Office Space
|
1,415 square feet
|
September 2017
|
|||
Cincinnati, Ohio
|
Data Center
|
1,000 square feet
|
March 2014
|
|||
Fort Lauderdale, Florida
|
Data Center / Disaster Recovery
Office Space
|
Month to month
|
HIGH
|
LOW
|
|||||||
Fiscal 2012
|
||||||||
1st Quarter
|
$
|
0.12
|
$
|
0.05
|
||||
2nd Quarter
|
$
|
0.09
|
$
|
0.05
|
||||
3rd Quarter
|
$
|
0.30
|
$
|
0.06
|
||||
4th Quarter
|
$
|
0.20
|
$
|
0.14
|
||||
Fiscal 2011
|
||||||||
1st Quarter
|
$
|
0.16
|
$
|
0.08
|
||||
2nd Quarter
|
$
|
0.15
|
$
|
0.09
|
||||
3rd Quarter
|
$
|
0.12
|
$
|
0.05
|
||||
4th Quarter
|
$
|
0.07
|
$
|
0.02
|
·
|
Stimulating demand by providing clinical trial sponsors with high value eClinical applications and services;
|
·
|
Continued emphasis on expanding our business model by offering our software solutions on a licensed basis in addition to our existing hosted-services solutions;
|
·
|
An emphasis on penetrating the Phase I trial market with our dedicated Phase I solution, TrialOne;
|
·
|
Broadening our eClinical suite of services and software applications on an organic R & D basis and on a selective basis via the acquisition or licensing of complementary solutions;
|
·
|
Expanding our business development efforts in Europe to capitalize on our operational and clinical capabilities vis-à-vis our competition in that geographic market;
|
·
|
Providing our services to small and midsize pharmaceutical, biotechnology, medical device companies and CROs; and
|
·
|
Emphasizing low operating costs.
|
Summarized Statement of Operations
For the year ended
December 31,
|
||||||||||||||||||||||||
% of
|
% of
|
$
|
%
|
|||||||||||||||||||||
2012
|
Revenues
|
2011
|
Revenues
|
Change
|
Change
|
|||||||||||||||||||
Total revenues
|
$
|
15,552,263
|
$
|
13,599,341
|
$
|
1,952,922
|
14.4
|
%
|
||||||||||||||||
Cost of sales
|
3,213,657
|
20.7
|
%
|
2,278,527
|
16.8
|
%
|
935,130
|
41.0
|
%
|
|||||||||||||||
Gross margin
|
12,338,606
|
79.3
|
%
|
11,320,814
|
83.2
|
%
|
1,017,792
|
9.0
|
%
|
|||||||||||||||
Salaries, benefits and related taxes
|
8,335,565
|
53.6
|
%
|
7,810,957
|
57.4
|
%
|
524,608
|
6.7
|
%
|
|||||||||||||||
Rent
|
881,503
|
5.7
|
%
|
904,682
|
6.7
|
%
|
(23,179
|
)
|
-2.6
|
%
|
||||||||||||||
Consulting
|
152,297
|
1.0
|
%
|
326,738
|
2.4
|
%
|
(174,441
|
)
|
-53.4
|
%
|
||||||||||||||
Legal and professional fees
|
278,427
|
1.8
|
%
|
355,880
|
2.6
|
%
|
(77,453
|
)
|
-21.8
|
%
|
||||||||||||||
Other expenses
|
1,159,470
|
7.5
|
%
|
1,486,910
|
10.9
|
%
|
(327,440
|
)
|
-22.0
|
%
|
Selling, general and administrative
|
931,269
|
6.0
|
%
|
1,009,359
|
7.4
|
%
|
(78,090
|
)
|
-7.7
|
%
|
||||||||||||||
Total operating expenses
|
11,738,531
|
75.5
|
%
|
11,894,526
|
87.5
|
%
|
(155,995
|
)
|
-1.3
|
%
|
||||||||||||||
Operating income/(loss)
|
600,075
|
3.9
|
%
|
(573,712
|
)
|
-4.2
|
%
|
1,173,787
|
204.6
|
%
|
||||||||||||||
Interest expense
|
(2,225,280
|
)
|
-14.3
|
%
|
(2,281,029
|
)
|
-16.8
|
%
|
55,749
|
-2.4
|
%
|
|||||||||||||
Interest income
|
237
|
0.0
|
%
|
4,625
|
0.0
|
%
|
(4,388
|
)
|
-94.9
|
%
|
||||||||||||||
Other comprehensive income/(loss)
|
1,220
|
0.0
|
%
|
(2,822
|
)
|
0.0
|
%
|
4,042
|
n/a
|
|
||||||||||||||
Loss on sale of property and equipment
|
(22,106
|
)
|
-0.1
|
%
|
-0-
|
0.0
|
%
|
(22,106
|
)
|
n/a
|
||||||||||||||
Change in derivatives
|
(6,123,302
|
)
|
-39.4
|
%
|
(671,405
|
)
|
-4.9
|
%
|
(5,451,897
|
)
|
812.0
|
%
|
||||||||||||
Loss before income taxes
|
(7,769,156
|
)
|
-50.0
|
%
|
(3,524,343
|
)
|
-25.9
|
%
|
(4,244,813
|
)
|
120.4
|
%
|
||||||||||||
Income tax expense
|
(63,814
|
)
|
-0.4
|
%
|
-0-
|
0.0
|
%
|
(63,814
|
)
|
n/a
|
||||||||||||||
Net loss
|
(7,832,970
|
)
|
-50.4
|
%
|
(3,524,343
|
)
|
-25.9
|
%
|
(4,308,627
|
)
|
122.3
|
% | ||||||||||||
Total preferred stock dividends
|
(229,517
|
)
|
-1.5
|
%
|
(204,487
|
)
|
-1.5
|
%
|
(25,030
|
)
|
12.2
|
%
|
||||||||||||
Net loss attributable to common stockholders
|
$
|
(8,062,487
|
)
|
-51.8
|
%
|
$
|
(3,728,830
|
)
|
-27.4
|
%
|
$
|
(4,333,657
|
)
|
116.2
|
%
|
|||||||||
Net loss per share
|
$
|
(0.09
|
)
|
$
|
(0.04
|
)
|
||||||||||||||||||
Weighted average number of shares outstanding
|
86,522,332
|
86,345,605
|
For the year ended
|
||||||||||||||||||||||||
Revenue Activity
|
December 31, 2012
|
December 31, 2011
|
Change $
|
Change %
|
||||||||||||||||||||
Set-up Fees
|
$
|
4,990,378
|
32.1
|
%
|
$
|
3,638,860
|
26.8
|
%
|
$
|
1,351,518
|
37.1
|
%
|
||||||||||||
Change Orders
|
249,673
|
1.6
|
%
|
366,008
|
2.7
|
%
|
(116,335
|
)
|
-31.8
|
%
|
||||||||||||||
Maintenance
|
5,270,913
|
33.9
|
%
|
5,472,318
|
40.2
|
%
|
(201,405
|
)
|
-3.7
|
%
|
||||||||||||||
Software Licenses
|
3,364,324
|
21.6
|
%
|
2,809,629
|
20.7
|
%
|
554,695
|
19.7
|
%
|
|||||||||||||||
Professional Services
|
996,081
|
6.4
|
%
|
717,232
|
5.3
|
%
|
278,849
|
38.9
|
%
|
|||||||||||||||
Hosting
|
680,894
|
4.4
|
%
|
595,294
|
4.4
|
%
|
85,600
|
14.4
|
%
|
|||||||||||||||
Totals
|
$
|
15,552,263
|
100.0
|
%
|
$
|
13,599,341
|
100.0
|
%
|
$
|
1,952,922
|
14.4
|
%
|
For the year ended
|
||||||||||||||||
December 31,
2012
|
December 31,
2011
|
Change
|
% Change
|
|||||||||||||
OmniComm Corporate Operations
|
$
|
6,227,358
|
$
|
5,328,520
|
$
|
898,838
|
16.9
|
%
|
||||||||
New Jersey Operations Office
|
488,270
|
751,924
|
(263,654
|
)
|
-35.1
|
%
|
||||||||||
OmniComm Europe, GmbH
|
999,236
|
964,731
|
34,505
|
3.6
|
%
|
|||||||||||
OmniComm Ltd.
|
512,575
|
636,553
|
(123,978
|
)
|
-19.5
|
%
|
||||||||||
OmniComm Spain
|
38,081
|
-0-
|
38,081
|
n/a
|
||||||||||||
Employee Stock Option Expense
|
70,045
|
129,229
|
(59,184
|
)
|
-45.8
|
%
|
||||||||||
Total Salaries and related expenses
|
$
|
8,335,565
|
$
|
7,810,957
|
$
|
524,608
|
6.7
|
%
|
For the year ended | ||||||||||||||||
December 31,
2012
|
December 31,
2011
|
Change
|
% Change
|
|||||||||||||
Corporate Office
|
$
|
290,732
|
$
|
302,935
|
$
|
(12,203
|
)
|
-4.0
|
%
|
|||||||
Co-location and disaster recovery facilities
|
338,840
|
362,407
|
(23,567
|
)
|
-6.5
|
%
|
||||||||||
New Jersey Operations Office
|
79,666
|
71,111
|
8,555
|
12.0
|
%
|
|||||||||||
OmniComm Europe, GmbH
|
59,170
|
67,063
|
(7,893
|
)
|
-11.8
|
%
|
||||||||||
OmniComm Ltd.
|
91,871
|
91,950
|
(79
|
)
|
-0.1
|
%
|
||||||||||
OmniComm Spain
|
1,306
|
-0-
|
1,306
|
n/a
|
||||||||||||
Straight-line rent expense
|
19,918
|
9,216
|
10,702
|
116.1
|
%
|
|||||||||||
Total
|
$
|
881,503
|
$
|
904,682
|
$
|
(23,179
|
)
|
-2.6
|
%
|
For the year ended | ||||||||||||||||
Expense Category
|
December 31,
2012
|
December 31,
2011
|
Change
|
% Change
|
||||||||||||
Sales & Marketing
|
$ |
27,079
|
$ |
1,394
|
$ |
25,685
|
1,842.5
|
%
|
||||||||
Product Development
|
125,218
|
325,344
|
(200,126
|
)
|
-61.5
|
%
|
||||||||||
$
|
152,297
|
$
|
326,738
|
$
|
(174,441
|
)
|
-53.4
|
%
|
For the year ended | ||||||||||||||||
Expense Category
|
December 31,
2012
|
December 31,
2011
|
Change
|
% Change
|
||||||||||||
Financial Advisory
|
$
|
-0-
|
$
|
(5,000
|
)
|
$
|
5,000
|
|
n/a
|
|||||||
Audit and Related
|
59,256
|
95,704
|
(36,348
|
)
|
-38.0
|
%
|
||||||||||
Accounting Services
|
121,922
|
136,102
|
(14,180
|
)
|
-10.4
|
%
|
||||||||||
Legal- Employment Related
|
60,252
|
72,778
|
(12,526
|
)
|
-17.2
|
%
|
||||||||||
Legal- Financial Related
|
10,397
|
15,370
|
(4,973
|
)
|
-32.4
|
%
|
||||||||||
General Legal
|
26,500
|
40,926
|
(14,426
|
)
|
-35.7
|
%
|
||||||||||
$
|
278,427
|
$
|
355,880
|
$
|
(77,453
|
)
|
-21.8
|
%
|
Interest Expense
|
||||||||||||
For the year ended
|
||||||||||||
Debt Description
|
December 31,
2012
|
December 31,
2011
|
Change $
|
|||||||||
Accretion of Discount from Derivatives
|
$
|
475,620
|
$
|
694,361
|
$
|
(218,741
|
)
|
|||||
August 2008 Convertible Notes
|
192,526
|
192,000
|
526
|
|||||||||
December 2008 Convertible Notes
|
599,237
|
597,600
|
1,637
|
|||||||||
Sept 2009 Secured Convertible Debentures
|
144,394
|
149,852
|
(5,458
|
)
|
||||||||
Dec 2009 Convertible Debentures
|
179,290
|
178,800
|
490
|
|||||||||
General Interest
|
94,312
|
91,360
|
2,952
|
|||||||||
Related Party Notes
|
539,901
|
377,056
|
162,845
|
|||||||||
Total
|
$
|
2,225,280
|
$
|
2,281,029
|
$
|
(55,749
|
)
|
Series of Preferred Stock
|
Cumulative Arrearage
|
|||
Series A
|
$
|
2,174,178
|
||
Series B
|
609,887
|
|||
Series C
|
1,472,093
|
|||
Total Preferred Stock Arrearages
|
$
|
4,256,158
|
Liquidity and Capital Resources
|
||||||||||||
Summarized Balance Sheet Disclosure
|
||||||||||||
December 31,
2012
|
December 31,
2011
|
Change
|
||||||||||
Cash
|
$
|
873,315
|
$
|
1,302,287
|
$
|
(428,972
|
)
|
|||||
Accounts receivable, net of allowance for doubtful accounts
|
1,240,898
|
1,283,944
|
(43,046
|
)
|
||||||||
Prepaids
|
131,942
|
157,363
|
(25,421
|
)
|
||||||||
Current assets
|
2,246,155
|
2,743,594
|
(497,439
|
)
|
||||||||
Accounts payable and accrued expenses
|
2,124,365
|
1,460,835
|
663,530
|
|||||||||
Notes payable, current portion
|
-0-
|
214,300
|
(214,300
|
)
|
||||||||
Notes payable, related parties, current portion
|
-0-
|
-0-
|
-0-
|
|||||||||
Patent litigation settlement liability, current portion
|
962,500
|
925,000
|
37,500
|
|||||||||
Deferred revenue, current portion
|
3,732,240
|
4,293,316
|
(561,076
|
)
|
||||||||
Convertible notes payable, current portion, net of discount
|
75,000
|
75,000
|
-0-
|
|||||||||
Convertible notes payable, related parties, current portion, net of discount
|
160,000
|
-0-
|
160,000
|
|||||||||
Conversion feature liability, related parties, current portion
|
2,240,782
|
740,218
|
1,500,564
|
|||||||||
Conversion feature liability, current portion
|
46,541
|
18,693
|
27,848
|
|||||||||
Warrant liability, related parties
|
6,095,153
|
1,506,287
|
4,588,866
|
|||||||||
Warrant liability
|
192,445
|
186,421
|
6,024
|
|||||||||
Current liabilities
|
15,629,026
|
9,420,070
|
6,208,956
|
|||||||||
Working capital (deficit)
|
$
|
(13,382,871
|
)
|
$
|
(6,676,476
|
)
|
$
|
(6,706,395
|
)
|
Statement of Cash Flows Disclosure
|
||||||||||||
For the year ended
|
||||||||||||
December 31,
2012
|
December 31,
2011
|
|||||||||||
Net cash provided by/(used in) operating activities
|
$
|
(173,912
|
)
|
$
|
(310,964
|
)
|
||||||
Net cash provided by/(used in) investing activities
|
(107,882
|
)
|
(191,230
|
)
|
||||||||
Net cash provided by/(used in) financing activities
|
(131,800
|
)
|
620,500
|
|||||||||
Net increase/(decrease) in cash and cash equivalents
|
(428,972
|
)
|
88,890
|
|||||||||
Changes in working capital accounts
|
362,125
|
862,330
|
||||||||||
Effect of non-cash transactions on cash and cash equivalents
|
$
|
7,296,933
|
$
|
2,351,049
|
Contractual Obligations
|
Payments Due by Period
|
|||||||||||||||||||
Total
|
Less than 1 year
|
1-2 Years
|
2-3 Years
|
3-5 Years
|
||||||||||||||||
Promissory Notes (1)
|
$
|
5,138,865
|
$
|
-0-
|
$
|
2,904,379
|
(2)
|
$
|
2,214,486
|
(3)
|
$
|
20,000
|
(4)
|
|||||||
Convertible Notes
|
9,665,000
|
235,000
|
(5)
|
200,000
|
(6)
|
250,000
|
(7)
|
8,980,000
|
(8)
|
|||||||||||
Operating Lease Obligations (9)
|
1,935,630
|
603,504
|
525,795
|
490,094
|
316,237
|
|||||||||||||||
Patent Licensing Fees (10)
|
2,762,500
|
962,500
|
450,000
|
450,000
|
900,000
|
|||||||||||||||
Total
|
$
|
19,501,995
|
$
|
1,801,004
|
$
|
4,080,174
|
$
|
3,404,580
|
$
|
10,216,237
|
1.
|
Amounts do not include interest to be paid.
|
2.
|
Includes $17,500 of 12% notes payable that mature in January 2014; $2,866,879 of 12% notes payable that mature in April 2014 and $20,000 of notes payable that mature in December 2014.
|
3.
|
Includes $431,986 of 10% notes payable that mature in January 2015 and $1,782,500 of 12% notes payable that mature in January 2015.
|
4.
|
Includes $20,000 of 12% notes payable that mature in January 2016.
|
5.
|
Includes $75,000 of 10% convertible notes currently in default and due that are convertible into shares of common stock at the option of the holder at a conversion rate of $1.25 per share and $160,000 of 12% convertible notes that mature in December 2013.
|
6.
|
Includes $200,000 in 12% convertible notes that mature in January 2014.
|
|
7.
|
Includes $150,000 in 10% convertible notes that mature in January 2015 and $100,000 in 12% convertible notes that mature in January 2015.
|
8.
|
Includes $1,770,000 in 10% convertible notes that mature in January 2016 and $7,210,000 in 12% convertible notes that mature in January 2016.
|
9.
|
Includes office lease obligations for our headquarters in Fort Lauderdale, our regional operating office in New Jersey, our R & D office in England, our European headquarters in Bonn, Germany and lease obligations for co-location and disaster recovery computer service centers in Cincinnati, Ohio and Fort Lauderdale, Florida.
|
10.
|
Relates to guaranteed minimum payments owed in connection with our settlement of a patent infringement lawsuit brought against the Company by DataSci, LLC.
|
EXHIBIT NO.
|
DESCRIPTION
|
2.1
|
Agreement and Plan of Reorganization dated July 22, 1998 (1)
|
2.2
|
Amendment to Agreement and Plan of Reorganization (2)
|
2.3
|
Plan of Merger (3)
|
2.4
|
Agreement and Plan of Acquisition of WebIPA dated January 26, 2000 (4)
|
3.1
|
Certificate of Incorporation (5)
|
3.2
|
Certificate of Designation – Series A Preferred Stock (6)
|
3.3
|
Certificate of Increase – Series A Preferred Stock (7)
|
3.4
|
Certificate of Designation –Series B Preferred Stock (8)
|
3.5
|
Amendment to Certificate of Incorporation (9)
|
3.6
|
By-laws (10)
|
3.7
|
Certificate of Amendment – Certificate of Designation – Series A Preferred Stock (11)
|
3.8
|
Certificate of Amendment – Certificate of Incorporation (12)
|
3.9
|
Certificate of Designation – Series C Preferred Stock (13)
|
3.10
|
Certificate of Designation – Series D Preferred Stock (14)
|
4.3
|
Form of 10% Convertible Note (15)
|
10.1
|
Employment Agreement and Stock Option Agreement between the Company and Randall G. Smith (16)
|
10.2
|
Employment Agreement and Stock Option Agreement between the Company and Ronald T. Linares (17)
|
10.3
|
1998 Stock Incentive Plan (18)
|
10.4
|
Standard Agreement – Proprietary Protection (19)
|
10.6
|
Employment Agreement and Stock Option Agreement between the Company and Cornelis F. Wit (20)
|
10.7
|
Amendment to Employment Agreement between the Company and Cornelis F. Wit (21)
|
10.9
|
Amendment to Employment Agreement between the Company and Randall G. Smith (22)
|
10.10
|
Amendment to Employment Agreement between the Company and Ronald T. Linares (23)
|
10.20
|
Lease Agreement for principal offices dated March 24, 2006 between OmniComm Systems, Inc. and RFP Mainstreet 2101 Commercial, LLC (24)
|
10.21
|
Employment Agreement and Stock Option Agreement between the Company and Stephen E. Johnson dated September 4, 2006 (25)
|
10.23
|
Form of Debenture dated February 29, 2008 (26)
|
10.24
|
Form of Warrant February 29, 2008 (27)
|
10.27
|
Form of Debenture dated August 29, 2008 (28)
|
10.28
|
Form of Warrant dated August 29, 2008 (29)
|
10.29
|
Securities Purchase Agreement dated December 16, 2008 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page thereto (30)
|
10.30
|
Form of Debenture dated December 16, 2008 (31)
|
10.31
|
Form of Warrant December 16, 2008 (32)
|
10.32
|
Asset Purchase Agreement with eResearch Technology, Inc. dated June 23, 2009 (33)
|
10.33
|
Transition Service Agreement with eResearch Technology, Inc. dated June 23, 2009 (34)
|
10.34
|
Lock-up and Registration Rights Agreement with eResearch Technology, Inc. dated June 23, 2009 (35)
|
10.35
|
Agreement by and between OmniComm, Ltd. and Logos Technologies, Ltd dated August 3, 2009 (36)
|
10.36
|
Securities Purchase Agreement dated September 30, 2009 by and between OmniComm Systems, Inc. and each individual or entity named on an executed counterpart of the signature page thereto (37)
|
10.37
|
Form of Debenture dated September 30, 2009 (38)
|
10.38
|
Form of Warrant dated September 30, 2009 (39)
|
10.40
|
Subscription Agreement for the Series D Preferred Stock dated November 30, 2010 by and between OmniComm Systems, Inc. and Cornelis F. Wit (40)
|
10.41
|
Promissory note payable to Cornelis F. Wit dated September 30, 2010 (41)
|
10.42
|
Promissory note payable to Cornelis F. Wit dated December 31, 2010 (42)
|
10.43
|
Promissory note payable to Cornelis F. Wit dated December 31, 2010 (43)
|
10.44
|
Promissory note payable to Cornelis F. Wit dated March 31, 2011 (44)
|
10.45
|
Promissory note payable to Cornelis F. Wit dated December 31, 2011 (45)
|
10.46
|
Promissory note payable to Randall Smith dated December 31, 2011 (46)
|
10.47 | 2009 Equity Incentive Plan (47) |
10.48
|
Promissory note payable to Noesis International Holdings dated January 1, 2013 *
|
10.49
|
Promissory note payable to Ad Klinkenberg dated January 1, 2013 *
|
10.50
|
Promissory note payable to Wim Boegem dated January 1, 2013 *
|
10.51
|
Promissory note payable to Cornelis F. Wit dated January 1, 2013 *
|
10.52
|
Promissory note payable to Randall Smith dated February 1, 2013 *
|
10.53
|
August 2008 convertible note maturity date extension with Guus van Kesteren dated 2/22/2013 *
|
10.54
|
August 2008 convertible note maturity date extension with Cornelis F. Wit dated 2/22/2013 *
|
10.55
|
December 2008 convertible note maturity date extension with Stephen Johnson dated 2/22/2013 *
|
10.56
|
December 2008 convertible note maturity date extension with Randall Smith dated 2/22/2013 *
|
10.57
|
December 2008 convertible note maturity date extension with Cornelis F. Wit dated 2/22/2013 *
|
10.58
|
Ammendment number two to securities purchase agreement between the Company and the Leonard and Janine Epstein 2012 Revocable Trust dated 2/22/2013 *
|
10.59
|
Ammendment number two to securities purchase agreement between the Company and Cornelis F. Wit dated 2/22/2013 *
|
10.60
|
Ammendment number two to securities purchase agreement between the Company and Richard & Carolyn Danzansky dated 2/22/2013 *
|
10.61
|
Ammendment number two to securities purchase agreement between the Company and Paul Spitzberg dated 2/22/2013 *
|
10.62
|
Ammendment number two to securities purchase agreement between the Company and Cornelis F. Wit dated 2/22/2013 *
|
10.63
|
December 2008 convertible note maturity date extension with Matthew Veatch dated 2/27/2013 *
|
10.64
|
Promissory note payable to Noesis International Holdings dated March 5, 2013 *
|
10.65
|
December 2008 convertible note maturity date extension with Fernando Montero Incentive Savings Trust dated 3/6/2013 *
|
10.66
|
December 2008 convertible note maturity date extension with Noesis International Holdings dated 3/12/2013 *
|
14
|
OmniComm Systems, Inc. Code of Ethics (48)
|
21
|
Subsidiaries of the Company*
|
31.1
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.*
|
31.2
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.*
|
32.1
|
Certification 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 Extension Calculation***
|
101.DEF
|
XBRL Taxonomy Extension Definition***
|
101.LAB
|
XBRL Taxonomy Extension Label***
|
101.PRE
|
XBRL Taxonomy Extension Presentation***
|
1
|
Incorporated by reference to Exhibit 2 filed with our Report on Form 8-K dated March 3, 1999.
|
2
|
Incorporated by reference to Exhibit 2(c) filed with our Registration Statement on Form 10-SB dated December 22, 1998.
|
3
|
Incorporated by reference to Exhibit 2(c) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
|
4
|
Incorporated by reference to Exhibit 2 filed with our Report on Form 8-K dated February 9, 2000.
|
5
|
Incorporated by reference to Exhibit 3(a) filed with our Registration Statement on Form SB-2 dated February 6, 1997.
|
6
|
Incorporated by reference to Exhibit 4(b) filed with our amended Registration Statement on Form 10-SB dated August 25, 1999.
|
7
|
Incorporated by reference to Exhibit 4(c) filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
|
8
|
Incorporated by reference to Exhibit 4(D) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
|
9
|
Incorporated by reference to Exhibit 4(E) filed with our Registration Statement on Form SB-2 dated December 27, 2001.
|
10
|
Incorporated by reference to Exhibit 3(b) filed with our Registration Statement on Form SB-2 dated February 6, 1997.
|
11
|
Incorporated by reference to Exhibit 3.7 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|
12
|
Incorporated by reference to Exhibit 3.8 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|
13
|
Incorporated by reference to Exhibit 3.9 filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
|
14
|
Incorporated by reference to Exhibit 3.10 filed with our Form 8-K dated November 30, 2010
|
15
|
Incorporated by reference to Exhibit 4.3 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|
16
|
Incorporated by reference to Exhibit 10(a)(i) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
|
17
|
Incorporated by reference to Exhibit 10(a)(iii) filed with our amended Registration Statement on Form SB-2 dated September 17, 2001.
|
18
|
Incorporated by reference to Exhibit 10(c) filed with our amended Registration Statement on Form 10-SB dated July 27, 1999.
|
19
|
Incorporated by reference to Exhibit 10(f) filed with our amended Registration Statement on Form 10-SB dated August 25, 1999.
|
20
|
Incorporated by reference to Exhibit 10.7 filed with our Form 10-Q for the period ended June 30, 2002.
|
21
|
Incorporated by reference to Exhibit 10.8 filed with our Registration Statement filed on Form SB-2 dated September 29, 2003
|
22
|
Incorporated by reference to Exhibit 10.9 filed with our Form 10-Q for the period ended September 30, 2004.
|
23
|
Incorporated by reference to Exhibit 10.10 filed with our Form 10-Q for the period ended September 30, 2004.
|
24
|
Incorporated by reference to Exhibit 10.1 filed with our Form 10-Q for the period ended June 30, 2006.
|
25
|
Incorporated by reference to Exhibit 10.1 filed with our Form 10-Q for the period ended September 30, 2006.
|
26
|
Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated March 5, 2008.
|
27
|
Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated March 5, 2008.
|
28
|
Incorporated by reference to Exhibit 4.8 filed with our Form 10-K dated December 31, 2009
|
29
|
Incorporated by reference to Exhibit 4.9 filed with our Form 10-K dated December 31, 2009
|
30
|
Incorporated by reference to Exhibit 10.1 filed with our Form 8-K dated December 17, 2008
|
31
|
Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated December 17, 2008
|
32
|
Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated December 17, 2008
|
33
|
Incorporated by reference to Exhibit 10.26 filed with our Form 8-K dated June 26, 2009
|
34
|
Incorporated by reference to Exhibit 10.27 filed with our Form 8-K dated June 26, 2009
|
35
|
Incorporated by reference to Exhibit 10.28 filed with our Form 8-K dated June 26, 2009
|
36
|
Incorporated by reference to Exhibit 10.29 filed with our Form 8-K dated August 4, 2009
|
37
|
Incorporated by reference to Exhibit 10.1 filed with our Form 8-K dated October 5, 2009
|
38
|
Incorporated by reference to Exhibit 10.2 filed with our Form 8-K dated October 5, 2009
|
39
|
Incorporated by reference to Exhibit 10.3 filed with our Form 8-K dated October 5, 2009
|
40
|
Incorporated by reference to Exhibit 10.32 filed with our Form 8-K dated November 30, 2010
|
41
|
Incorporated by reference to Exhibit 10.41 filed with our Form 10-K dated December 31, 2010
|
42
|
Incorporated by reference to Exhibit 10.42 filed with our Form 10-K dated December 31, 2010
|
43
|
Incorporated by reference to Exhibit 10.43 filed with our Form 10-K dated December 31, 2010
|
44
|
Incorporated by reference to Exhibit 10.44 filed with our Form 10-K dated December 31, 2011
|
45
|
Incorporated by reference to Exhibit 10.45 filed with our Form 10-K dated December 31, 2011
|
46
|
Incorporated by reference to Exhibit 10.46 filed with our Form 10-K dated December 31, 2011
|
47 |
Incorporated by reference to Exhibit B filed with our 2009 Proxy Statement on Schedule 14A dated June 16, 2009
|
48
|
Incorporated by reference to our Proxy Statement filed on June 9, 2003
|
OMNICOMM SYSTEMS, INC.
|
|||
By:
|
/s/ Cornelis F. Wit
|
||
Cornelis F Wit, Chief Executive Officer
|
|||
By:
|
/s/ Thomas E. Vickers
|
||
Thomas E. Vickers, Chief Accounting and Financial Officer
|
|||
Signature
|
Title
|
Date
|
||
/s/ Cornelis F. Wit
|
Chief (Principal) Executive Officer and Director
|
March
27
, 2013
|
||
Cornelis F. Wit
|
||||
/s/ Randall G. Smith
|
Chairman, Chief Technology Officer
|
March
27
, 2013
|
||
Randall G. Smith
|
||||
/s/ Thomas E. Vickers
|
Chief (Principal) Accounting and Financial Officer
|
March
27
, 2013
|
||
Thomas E. Vickers
|
||||
/s/ Guus van Kesteren
|
Director
|
March
27
, 2013
|
||
Guus van Kesteren
|
||||
/s/ Jonathan Seltzer
|
Director
|
March
27
, 2013
|
||
Jonathan Seltzer
|
For the year ended
December 31,
|
||||||||
2012
|
2011
|
|||||||
Revenues
|
$
|
14,818,479
|
$
|
13,443,119
|
||||
Reimbursable revenues
|
733,784
|
156,222
|
||||||
Total revenues
|
15,552,263
|
13,599,341
|
||||||
Cost of goods sold
|
2,762,081
|
1,899,501
|
||||||
Reimbursable expenses – cost of goods sold
|
451,576
|
379,026
|
||||||
Total cost of sales
|
3,213,657
|
2,278,527
|
||||||
Gross margin
|
12,338,606
|
11,320,814
|
||||||
Operating expenses
|
||||||||
Salaries, benefits and related taxes
|
8,335,565
|
7,810,957
|
||||||
Rent and occupancy expenses
|
881,503
|
904,682
|
||||||
Consulting services
|
152,297
|
326,738
|
||||||
Legal and professional fees
|
278,427
|
355,880
|
||||||
Travel
|
442,030
|
465,810
|
||||||
Telephone and internet
|
165,877
|
205,046
|
||||||
Selling, general and administrative
|
931,269
|
1,009,359
|
||||||
Bad debt expense
|
(58,234
|
)
|
(119,889
|
)
|
||||
Depreciation expense
|
377,680
|
471,709
|
||||||
Amortization expense
|
232,117
|
464,234
|
||||||
Total operating expenses
|
11,738,531
|
11,894,526
|
||||||
Operating income/(loss)
|
600,075
|
(573,712
|
)
|
|||||
Other income /(expense)
|
||||||||
Interest expense
|
(116,531
|
)
|
(821,573
|
)
|
||||
Interest expense, related parties
|
(2,108,749
|
)
|
(1,459,456
|
)
|
||||
Interest income
|
237
|
4,625
|
||||||
Change in derivative liabilities
|
(6,123,302
|
)
|
(671,405
|
)
|
||||
Loss on sale of property and equipment
|
(22,106
|
)
|
-0-
|
|||||
Transaction gain/(loss)
|
1,220
|
(2,822
|
)
|
|||||
(Loss) before income taxes and preferred dividends
|
(7,769,156
|
)
|
(3,524,343
|
)
|
||||
Income taxes
|
(63,814
|
)
|
-0-
|
|||||
Net (loss)
|
(7,832,970
|
)
|
(3,524,343
|
)
|
||||
Preferred stock dividends
|
||||||||
Preferred stock dividends in arrears
|
||||||||
Series A Preferred
|
(229,517
|
)
|
(204,487
|
)
|
||||
Total preferred stock dividends
|
(229,517
|
)
|
(204,487
|
)
|
||||
Net (loss) attributable to common stockholders
|
$
|
(8,062,487
|
)
|
$
|
(3,728,830
|
)
|
||
Net (loss) per share
|
||||||||
Basic and Diluted
|
$
|
(0.09
|
)
|
$
|
(0.04
|
)
|
||
Weighted average number of shares outstanding
|
||||||||
Basic and Diluted
|
86,522,332
|
86,345,605
|
For the year ended December 31,
|
||||||||
2012
|
2011
|
|||||||
Net (loss) attributable to common shareholders
|
$
|
(8,062,487
|
)
|
$
|
(3,728,830
|
)
|
||
Other comprehensive (loss):
|
||||||||
Change in foreign currency translation adjustment
|
(15,378
|
)
|
(29,416
|
)
|
||||
Other comprehensive (loss)
|
(15,378
|
)
|
(29,416
|
)
|
||||
Comprehensive (loss)
|
$
|
(8,077,865
|
)
|
$
|
(3,758,246
|
)
|
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||||||||||||||||||||
5% Series A Convertible
|
8% Series B Convertible
|
8% Series C Convertible
|
Series D Preferred Stock
|
|||||||||||||||||||||||||||||||||||||||||||||
Number
of Shares
|
$0.001 Par Value
|
Number
of Shares
|
$0.001 Par Value
|
Number
of Shares
|
$0.001 Par Value
|
Number
of Shares
|
$0.001 Par Value
|
Additional Paid In
Capital - Preferred
|
Number
of Shares
|
$0.001 Par Value
|
Additional Paid In
Capital - Common
|
Accum-ulated
Deficit
|
Accumulated
Other Compre-hensive
Income
|
Treasury
Stock
|
Total
Share-holders'
(Deficit)
|
|||||||||||||||||||||||||||||||||
Balances at
December
31, 2010
|
4,125,224
|
$ |
4,125
|
-0-
|
$ |
-0-
|
-0-
|
$ |
-0-
|
250,000
|
$ |
250
|
$ |
4,717,804
|
86,081,495
|
$ |
86,082
|
$ |
36,906,356
|
$ |
(59,001,262
|
)
|
$ |
(24,298
|
)
|
$ |
(503,086
|
)
|
$ |
(17,814,029
|
) | |||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Employee stock option expense
|
129,229
|
129,229
|
||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock retired
|
(503,086
|
)
|
503,086
|
-0-
|
||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
(29,416
|
)
|
(29,416
|
) | ||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock in lieu of pay for services
|
400,000
|
400
|
39,600
|
40,000
|
||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period ended December 31, 2011
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
(3,524,343
|
)
|
-0-
|
-0-
|
(3,524,343
|
) | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2011
|
4,125,224
|
4,125
|
-0-
|
-0-
|
-0-
|
-0-
|
250,000
|
250
|
4,717,804
|
86,481,495
|
86,482
|
36,572,099
|
(62,525,605
|
) |
(53,714
|
)
|
-0-
|
(21,198,559
|
) | |||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Employee stock option expense
|
65,744
|
65,744
|
||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
(15,378
|
)
|
(15,378
|
) | ||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock in lieu of accrued interest
|
42,164
|
42
|
7,821
|
7,863
|
||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Cashless issuance of common stock, employee stock option exercise
|
75,000
|
75
|
(75
|
)
|
-0-
|
|||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period ended December 31, 2012
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
(7,832,970
|
)
|
-0-
|
-0-
|
(7,832,970
|
) | ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2012
|
4,125,224
|
$
|
4,125
|
|
-0-
|
$
|
-0-
|
|
-0-
|
$
|
-0-
|
250,000
|
$
|
250
|
$
|
4,717,804
|
86,598,659
|
$
|
86,599,
|
$
|
36,645,589
|
$
|
(70,358,575
|
)
|
$
|
(69,092
|
)
|
$
|
-0-
|
$ |
(28,973,300
|
) |
For the year ended December 31,
|
||||||||
2012
|
2011
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$
|
(7,832,970
|
)
|
$
|
(3,524,343
|
)
|
||
Adjustment to reconcile net loss to net cash (used in) operating activities
|
||||||||
Change in derivative liabilities
|
6,123,302
|
671,405
|
||||||
Interest expense from derivative instruments
|
475,621
|
694,361
|
||||||
Loss from sale of property and equipment, net
|
14,606
|
-0-
|
||||||
Common stock issued in lieu of pay for services
|
-0-
|
40,000
|
||||||
Common stock issued in lieu of accrued interest
|
7,863
|
-0-
|
||||||
Employee stock option expense
|
65,744
|
129,229
|
||||||
Depreciation and amortization
|
609,797
|
935,943
|
||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable
|
101,280
|
(132,310
|
)
|
|||||
Provision for doubtful accounts
|
(58,234
|
)
|
(119,889
|
)
|
||||
Prepaid expenses
|
25,421
|
(60,026
|
)
|
|||||
Other assets
|
(17,484
|
)
|
549
|
|||||
Accounts payable and accrued expenses
|
663,530
|
901,132
|
||||||
Patent settlement liability
|
(194,032
|
)
|
26,720
|
|||||
Deferred revenue
|
(158,356
|
)
|
126,265
|
|||||
Net cash (used in) operating activities
|
(173,912
|
)
|
(310,964
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds from sale of property and equipment
|
50,000
|
-0-
|
||||||
Purchase of property and equipment
|
(157,882
|
)
|
(191,230
|
)
|
||||
Net cash (used in) investing activities
|
(107,882
|
)
|
(191,230
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from notes payable, related parties
|
-0-
|
1,033,000
|
||||||
Repayments of notes payable
|
(131,800
|
)
|
(212,500
|
)
|
||||
Repayments of notes payable, related parties
|
-0-
|
(200,000
|
)
|
|||||
Net cash provided by/(used in) financing activities
|
(131,800
|
)
|
620,500
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
(15,378
|
)
|
(29,416
|
)
|
||||
Net increase/(decrease) in cash and cash equivalents
|
(428,972
|
)
|
88,890
|
|||||
Cash and cash equivalents at beginning of period
|
1,302,287
|
1,213,397
|
||||||
Cash and cash equivalents at end of period
|
$
|
873,315
|
$
|
1,302,287
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Income taxes
|
$
|
63,814
|
$
|
-0-
|
||||
Interest
|
$
|
1,331,956
|
$
|
584,149
|
||||
Non-cash transactions
|
||||||||
Notes payable issued in exchange for existing notes payable
|
$
|
-0-
|
$
|
4,041,879
|
||||
Common stock issued in lieu of accrued interest
|
7,863
|
-0-
|
||||||
Promissory notes issued for accrued interest
|
-0-
|
767,000
|
||||||
Common stock issued in lieu of pay for services
|
-0-
|
40,000
|
||||||
Notes payable issued for matured notes payable
|
$
|
-0-
|
$
|
45,000
|
For the year ended
|
||||||||
Revenue Activity
|
December 31,
2012
|
December 31,
2011
|
||||||
Set-up Fees
|
$
|
4,990,378
|
$
|
3,638,860
|
||||
Change Orders
|
249,673
|
366,008
|
||||||
Maintenance
|
5,270,913
|
5,472,318
|
||||||
Software Licenses
|
3,364,324
|
2,809,629
|
||||||
Professional Services
|
996,081
|
717,232
|
||||||
Hosting
|
680,894
|
595,294
|
||||||
Total
|
$
|
15,552,263
|
$
|
13,599,341
|
December 31,
2012
|
December 31,
2011
|
|||||||
Beginning of period
|
$
|
142,444
|
$
|
269,869
|
||||
Bad debt expense
|
(58,234
|
)
|
(119,889
|
)
|
||||
Write-offs
|
-0-
|
(7,536
|
)
|
|||||
End of period
|
$
|
84,210
|
$
|
142,444
|
Revenues
|
Accounts Receivable
|
|||||||||||||||
For the years ended
|
# of Customers
|
Percentage of Total Revenues
|
# of Customers
|
Percentage of Accounts Receivable
|
||||||||||||
December 31, 2012
|
2
|
35
|
%
|
3
|
54
|
%
|
||||||||||
December 31, 2011
|
1
|
21
|
%
|
3
|
59
|
%
|
European Revenues | ||||||||||
For the year ended | ||||||||||
December 31, 2012 |
December 31, 2011
|
|||||||||
European Revenues |
% of Total Revenues
|
European Revenues
|
% of Total Revenues
|
|||||||
$ 1,545,730 | 9.9% | $ 2,247,812 | 16.5% |
Anti-Dilutive Security
|
December 31, 2012
|
December 31, 2011
|
||||||
Preferred stock
|
2,750,149
|
2,750,149
|
||||||
Employee stock options
|
10,452,500
|
11,158,000
|
||||||
Warrants
|
43,212,873
|
58,595,758
|
||||||
Convertible notes
|
24,620,000
|
24,620,000
|
||||||
Shares issuable for accrued interest
|
1,033,574
|
545,320
|
||||||
Total
|
82,069,096
|
97,669,227
|
For the year ended | ||||||||||||||||||||||||
December 31, 2012
|
December 31, 2011
|
|||||||||||||||||||||||
Income (loss)
Numerator
|
Shares
Denominator
|
Per-Share
Amount
|
Income (loss)
Numerator
|
Shares
Denominator
|
Per-Share
Amount
|
|||||||||||||||||||
Basic EPS
|
$
|
(8,062,487
|
)
|
86,522,332
|
$
|
(0.09
|
)
|
$
|
(3,728,830
|
)
|
86,345,605
|
$
|
(0.04
|
)
|
||||||||||
Effect of Dilutive Securities
|
||||||||||||||||||||||||
None.
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Diluted EPS
|
$
|
(8,062,487
|
)
|
86,522,332
|
$
|
(0.09
|
)
|
$
|
(3,728,830
|
)
|
86,345,605
|
$
|
(0.04
|
)
|
December 31, 2012
|
December 31, 2011
|
||||||||||||||||||||||||
Cost
|
Accumulated Depreciation
|
Net Book Value
|
Cost
|
Accumulated Depreciation
|
Net Book Value
|
Estimated
Useful Life (years)
|
|||||||||||||||||||
Computer & Office Equipment
|
$
|
1,519,617
|
$
|
1,181,451
|
$
|
338,166
|
$
|
1,550,907
|
$
|
1,094,152
|
$
|
456,755
|
5
|
||||||||||||
Leasehold Improvements
|
92,686
|
68,044
|
24,642
|
75,476
|
60,785
|
14,691
|
5
|
||||||||||||||||||
Computer Software
|
1,502,524
|
1,403,705
|
98,819
|
1,477,539
|
1,207,662
|
269,877
|
3
|
||||||||||||||||||
Office Furniture
|
110,780
|
90,604
|
20,176
|
107,389
|
82,505
|
24,884
|
5
|
||||||||||||||||||
$
|
3,225,607
|
$
|
2,743,804
|
$
|
481,803
|
$
|
3,211,311
|
$
|
2,445,104
|
$
|
766,207
|
December 31, 2012
|
December 31, 2011
|
||||||||||||||||||||||||
Asset
|
Cost
|
Accumulated Amortization
|
Net Book Value
|
Cost
|
Accumulated Amortization
|
Net Book Value
|
Estimated
Useful Lives (years)
|
||||||||||||||||||
Customer lists
|
$
|
1,392,701
|
$
|
1,392,701
|
$
|
-0-
|
$
|
1,392,701
|
$
|
1,160,584
|
$
|
232,117
|
3
|
||||||||||||
$
|
1,392,701
|
$
|
1,392,701
|
$
|
-0-
|
$
|
1,392,701
|
$
|
1,160,584
|
$
|
232,117
|
Account
|
December 31, 2012
|
December 31, 2011
|
||||||
Accounts payable
|
$
|
665,139
|
$
|
672,516
|
||||
Accrued payroll and related costs
|
383,859
|
176,900
|
||||||
Other accrued expenses
|
124,154
|
70,047
|
||||||
Accrued interest
|
951,213
|
541,372
|
||||||
Total Accounts Payable and Accrued Expenses
|
$
|
2,124,365
|
$
|
1,460,835
|
Ending
|
Non-Related Party
|
Related Party
|
||||||||||||||||||||||||
Origination
Date
|
Maturity
Date
|
Interest
Rate
|
Principal
December 31, 2012
|
Current
|
Long
Term
|
Current
|
Long
Term
|
|||||||||||||||||||
12/31/2010
|
1/1/2015
|
10
|
%
|
$ |
308,562
|
$ |
-0-
|
$ |
308,562
|
$ |
-0-
|
$ |
-0-
|
|||||||||||||
12/31/2010
|
1/1/2015
|
10
|
%
|
123,425
|
-0-
|
123,425
|
-0-
|
-0-
|
||||||||||||||||||
2/1/2011
|
1/1/2015
|
12
|
%
|
137,500
|
-0-
|
137,500
|
-0-
|
-0-
|
||||||||||||||||||
3/31/2011
|
4/1/2014
|
12
|
%
|
2,866,879
|
-0-
|
-0-
|
-0-
|
2,866,879
|
||||||||||||||||||
12/31/2011
|
1/1/2015
|
12
|
%
|
1,600,000
|
-0-
|
-0-
|
-0-
|
1,600,000
|
||||||||||||||||||
12/31/2011
|
1/1/2016
|
12
|
%
|
20,000
|
-0-
|
-0-
|
-0-
|
20,000
|
||||||||||||||||||
4/1/2012
|
1/1/2014
|
12
|
%
|
17,500
|
-0-
|
17,500
|
-0-
|
-0-
|
||||||||||||||||||
10/1/2012
|
1/1/2015
|
12
|
%
|
45,000
|
-0-
|
45,000
|
-0-
|
-0-
|
||||||||||||||||||
12/17/2012
|
12/16/2014
|
12
|
%
|
20,000
|
-0-
|
20,000
|
-0-
|
-0-
|
||||||||||||||||||
Discount on note payable
|
-0-
|
-0-
|
-0-
|
(656,524
|
)
|
|||||||||||||||||||||
$
|
5,138,866
|
$
|
-0-
|
$
|
651,987
|
$
|
-0-
|
$
|
3,830,355
|
i.
|
Promissory Note issued on April 13, 2010 for $450,000 with a maturity date of December 31, 2010.
|
ii.
|
Promissory Note issued on June 29, 2010 for $115,000 with a maturity date of December 31, 2010.
|
iii.
|
Promissory Note issued on September 30, 2010 for $695,000 with a maturity date of December 31, 2010.
|
iv.
|
Promissory Note issued on December 31, 2010 for $1,197,500 with a maturity date of December 31, 2011.
|
v.
|
Promissory Note issued on December 31, 2010 for $409,379 with a maturity date of April 01, 2012.
|
i.
|
Promissory Note issued on August 16, 2011 for $80,000 with a maturity date of January 01, 2013.
|
ii.
|
Promissory Note issued on August 19, 2011 for $15,000 with a maturity date of January 01, 2013.
|
iii.
|
Promissory Note issued on August 25, 2011 for $35,000 with a maturity date of January 01, 2013.
|
iv.
|
Promissory Note issued on September 02, 2011 for $32,000 with a maturity date of January 01, 2013.
|
v.
|
Promissory Note issued on September 15, 2011 for $80,000 with a maturity date of January 01, 2013.
|
vi.
|
Promissory Note issued on September 28, 2011 for $100,000 with a maturity date of January 01, 2013.
|
i.
|
Promissory Note issued on May 13, 2011 for $96,000 with a maturity date of January 01, 2013;
|
ii.
|
Promissory Note issued on September 30, 2011 for $342,000 with a maturity date of April 01, 2014;
|
iii.
|
Promissory Note issued on October 05, 2011 for $130,000 with a maturity date of April 01, 2014;
|
iv.
|
Promissory Note issued on October 28, 2011 for $123,000 with a maturity date of April 01, 2014;
|
v.
|
Promissory Note issued on October 31, 2011 for $82,000 with a maturity date of April 01, 2014;
|
vi.
|
Promissory Note issued on November 23, 2011 for $60,000 with a maturity date of January 1, 2013; and
|
vii.
|
Accrued and unpaid interest in the amount of $767,000.
|
Principal
|
Discount
|
Carrying Amount
|
Carrying Amount
|
|||||||||||||||||||||||||||||||||||||||||||
at
|
Total
|
at
|
at
|
Short Term
|
Long Term
|
|||||||||||||||||||||||||||||||||||||||||
Date of
Issuance
|
Maturity
Date
|
Interest
Rate
|
Original
Principal
|
December 31, 2012
|
Allocated
Discount
|
Discount
Amortized
|
December
31, 2012
|
December 31, 2012
|
Related
|
Non
Related
|
Related
|
Non
Related
|
||||||||||||||||||||||||||||||||||
8/1/1999
|
6/30/
2004
|
10
|
%
|
$
|
862,500
|
$
|
75,000
|
$
|
-0-
|
$
|
-0-
|
$
|
-0-
|
$
|
75,000
|
$
|
-0-
|
$
|
75,000
|
$
|
-0-
|
$
|
-0-
|
|||||||||||||||||||||||
8/29/2008
|
1/1/2015
|
10
|
%
|
150,000
|
150,000
|
135,600
|
135,600
|
-0-
|
150,000
|
-0-
|
-0-
|
150,000
|
-0-
|
|||||||||||||||||||||||||||||||||
8/29/2008
|
1/1/2016
|
10
|
%
|
2,120,000
|
1,770,000
|
1,916,480
|
1,916,480
|
-0-
|
1,770,000
|
-0-
|
-0-
|
1,770,000
|
-0-
|
|||||||||||||||||||||||||||||||||
12/16/
2008
|
12/16/
2013
|
12
|
%
|
160,000
|
160,000
|
44,024
|
44,024
|
-0-
|
160,000
|
160,000
|
-0-
|
-0-
|
-0-
|
|||||||||||||||||||||||||||||||||
1216/2008
|
1/1/2014
|
12
|
%
|
200,000
|
200,000
|
55,030
|
55,030
|
-0-
|
200,000
|
-0-
|
-0-
|
-0-
|
200,000
|
|||||||||||||||||||||||||||||||||
12/16/2008
|
1/1/2015
|
12
|
%
|
100,000
|
100,000
|
27,515
|
27,515
|
-0-
|
100,000
|
-0-
|
-0-
|
-0-
|
100,000
|
|||||||||||||||||||||||||||||||||
12/16/2008
|
1/1/2016
|
12
|
%
|
4,615,000
|
4,520,000
|
1,243,681
|
1,243,681
|
-0-
|
4,520,000
|
-0-
|
-0-
|
4,505,000
|
15,000
|
|||||||||||||||||||||||||||||||||
9/30/2009
|
1/1/2016
|
12
|
%
|
1,400,000
|
1,200,000
|
526,400
|
526,400
|
-0-
|
1,200,000
|
-0-
|
-0-
|
1,100,000
|
100,000
|
|||||||||||||||||||||||||||||||||
12/31/2009
|
1/1/2016
|
12
|
%
|
1,490,000
|
1,490,000
|
935,720
|
935,720
|
-0-
|
1,490,000
|
-0-
|
-0-
|
1,440,000
|
50,000
|
|||||||||||||||||||||||||||||||||
Total
|
$
|
11,097,500
|
$
|
9,665,000
|
$
|
4,884,450
|
$
|
4,884,450
|
$
|
-0-
|
$
|
9,665,000
|
$
|
160,000
|
$
|
75,000
|
$
|
8,965,000
|
$
|
465,000
|
Principal
|
Discount
|
Carrying Amount
|
Carrying Amount
|
|||||||||||||||||||||||||||||||||||||||||||
at
|
Total
|
at
|
at
|
Short Term
|
Long Term
|
|||||||||||||||||||||||||||||||||||||||||
Date of
Issuance
|
Maturity
Date
|
Interest
Rate
|
Original
Principal
|
December 31, 2011
|
Allocated
Discount
|
Discount
Amortized
|
December 31, 2011
|
December 31, 2011
|
Related
|
Non
Related
|
Related
|
Non
Related
|
||||||||||||||||||||||||||||||||||
8/1/1999
|
6/30/
2004
|
10
|
%
|
$
|
862,500
|
$
|
75,000
|
$
|
-0-
|
$
|
-0-
|
$
|
-0-
|
$
|
75,000
|
$
|
-0-
|
$
|
75,000
|
$
|
-0-
|
$
|
-0-
|
|||||||||||||||||||||||
8/29/2008
|
8/29/2013
|
10
|
%
|
2,270,000
|
1,920,000
|
2,052,080
|
2,052,080
|
-0-
|
1,920,000
|
-0-
|
-0-
|
1,920,000
|
-0-
|
|||||||||||||||||||||||||||||||||
12/16/2008
|
12/16/2013
|
12
|
%
|
5,075,000
|
4,980,000
|
1,370,250
|
1,370,250
|
-0-
|
4,980,000
|
-0-
|
-0-
|
4,980,000
|
-0-
|
|||||||||||||||||||||||||||||||||
9/30/2009
|
3/31/2013
|
12
|
%
|
1,400,000
|
1,200,000
|
526,400
|
526,400
|
-0-
|
1,200,000
|
-0-
|
-0-
|
1,100,000
|
100,000
|
|||||||||||||||||||||||||||||||||
12/31/
2009
|
10/1/
2013
|
12
|
%
|
1,490,000
|
1,490,000
|
935,720
|
935,720
|
-0-
|
1,490,000
|
-0-
|
-0-
|
1,440,000
|
50,000
|
|||||||||||||||||||||||||||||||||
Total
|
$
|
11,097,500
|
$
|
9,665,000
|
$
|
4,884,450
|
$
|
4,884,450
|
$
|
0
|
$
|
9,665,000
|
$
|
0
|
$
|
75,000
|
$
|
9,440,000
|
$
|
150,000
|
2013
|
$
|
235,000
|
||
2014
|
200,000
|
|||
2015
|
250,000
|
|||
2016
|
8,980,000
|
|||
Total
|
$
|
9,665,000
|
•
|
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;
|
•
|
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly such as quoted prices for similar assets or liabilities or market-corroborated inputs; and
|
•
|
Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities.
|
A.
|
Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities
|
B.
|
Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method
|
C.
|
Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost)
|
Fair Value
at December 31, 2012
|
Quoted prices in active markets for identical assets/ liabilities
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||||||
Derivatives: (1) (2)
|
||||||||||||||||
Conversion feature liability
|
$
|
2,287,323
|
$
|
-0-
|
$
|
-0-
|
$
|
2,287,323
|
||||||||
Warrant liability
|
6,287,598
|
-0-
|
-0-
|
6,287,598
|
||||||||||||
Total of derivative liabilities
|
$
|
8,574,921
|
$
|
-0-
|
$
|
-0-
|
$
|
8,574,921
|
(1)
|
The fair value of the Derivative Instruments was estimated using the Income Approach and using the Black Scholes option pricing model with the following assumptions for the year
ended December 31, 2012
|
(2)
|
The fair value at the measurement date is equal to their carrying value on the balance sheet
|
Fair Value
at December 31, 2011
|
Quoted prices in active markets for identical assets/ liabilities
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
|||||||||||||
Derivatives: (1) (2)
|
||||||||||||||||
Conversion feature liability
|
$
|
758,911
|
$
|
-0-
|
$
|
-0-
|
$
|
758,911
|
||||||||
Warrant liability
|
1,692,708
|
-0-
|
-0-
|
1,692,708
|
||||||||||||
Total of derivative liabilities
|
$
|
2,451,619
|
$
|
-0-
|
$
|
-0-
|
$
|
2,451,619
|
(1)
|
The fair value of the Derivative Instruments was estimated using the Income Approach and using the Black Scholes option pricing model with the following assumptions for the year
ended December 31, 2011
|
(2)
|
The fair value at the measurement date is equal to their carrying value on the balance sheet
|
Other income
for the year ended
|
||||||||
December 31,
2012
|
December 31,
2011
|
|||||||
The net amount of total gains/(losses) for the period included in earnings attributable to the unrealized gain or loss from changes in derivative liabilities at the reporting date
|
$
|
(6,123,302
|
)
|
$
|
(671,405
|
)
|
||
Total unrealized gains/(losses) included in earnings
|
$
|
(6,123,302
|
)
|
$
|
(671,405
|
)
|
Level 3 Financial Assets and Financial Liabilities at Fair Value
|
||||||||||||||||||||||||
Balance,
beginning
of year
|
Net realized
gains/(losses)
|
Net unrealized
(gains)/losses
relating to
instruments still
held at the
reporting date
|
Net
purchases,
issuances
and
settlements
|
Net transfers
in and/or out
of level 3
|
Balance,
end of
year
|
|||||||||||||||||||
Year ended December 31, 2012
|
||||||||||||||||||||||||
Derivatives:
|
||||||||||||||||||||||||
Conversion feature liability
|
$
|
758,911
|
$
|
-0-
|
$
|
1,528,412
|
$
|
-0-
|
$
|
-0-
|
$
|
2,287,323
|
||||||||||||
Warrant liability
|
1,692,708
|
-0-
|
4,594,890
|
-0-
|
-0-
|
6,287,598
|
||||||||||||||||||
Total of derivative liabilities
|
$
|
2,451,619
|
$
|
-0-
|
$
|
6,123,302
|
$
|
-0-
|
$
|
-0-
|
$
|
8,574,921
|
Level 3 Financial Assets and Financial Liabilities at Fair Value
|
||||||||||||||||||||||||
Balance,
beginning
of year
|
Net realized
gains/(losses)
|
Net unrealized
(gains)/losses
relating to
instruments still
held at the
reporting date
|
Net
purchases,
issuances
and
settlements
|
Net transfers
in and/or out
of level 3
|
Balance,
end of
year
|
|||||||||||||||||||
Year ended December 31, 2011
|
||||||||||||||||||||||||
Derivatives:
|
||||||||||||||||||||||||
Conversion feature liability
|
$
|
92,206
|
$
|
-0-
|
$
|
666,705
|
$
|
-0-
|
$
|
-0-
|
$
|
758,911
|
||||||||||||
Warrant liability
|
261,148
|
-0-
|
4,700
|
1,426,860
|
-0-
|
1,692,708
|
||||||||||||||||||
Total of derivative liabilities
|
$
|
353,354
|
$
|
-0-
|
$
|
671,405
|
$
|
1,426,860
|
$
|
-0-
|
$
|
2,451,619
|
2013
|
$
|
603,504
|
||
2014
|
525,795
|
|||
2015
|
490,094
|
|||
2016
|
270,503
|
|||
2017
|
45,734
|
|||
Total
|
$
|
1,935,630
|
2013
|
$
|
450,000
|
||
2014
|
450,000
|
|||
2015
|
450,000
|
|||
2016
|
450,000
|
|||
2017
|
450,000
|
|||
2018
|
450,000
|
|||
Total
|
$
|
2,700,000
|
•
|
On February 14, 2008, $150,000 principal amount promissory note. This note was convertible at the option of the holder into any New Securities (“New Securities”) we issue before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This convertible note carried an interest rate of 10% per annum and was due on December 31, 2009. On December 16, 2008, Mr. Wit agreed to convert this convertible note into a private placement of convertible debentures, which convertible debentures were due on December 16, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. In addition, Mr. Wit agreed to extend the maturity date of the convertible debenture he was issued by three years to December 16, 2013. On February 22, 2013, Mr. Wit agreed to extend the maturity date of the convertible debenture until January 1, 2016. The expiration date of the warrants associated with the convertible debenture has been extended to January 1, 2016.
|
•
|
On June 10, 2008, $210,000 principal amount convertible note and common stock purchase warrants to purchase an aggregate of 264,706 shares of our common stock. We received net proceeds of $210,000. This note was convertible at the option of the holder into any securities we issue (“New Securities”) before maturity of the convertible debenture on the same terms and conditions of the sale of the New Securities. This convertible debenture, which carried an interest rate of 10% per annum, was due on June 10, 2009. On August 29, 2008, Mr. Wit agreed to convert this convertible debenture into a private placement of convertible debentures that originally matured on August 29, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. On February 22, 2013, Mr. Wit agreed to extend the maturity date of the convertible debenture until January 1, 2016. The expiration date of the warrants associated with the convertible debenture has been extended to January 1, 2016.
|
•
|
On June 10, 2008, $300,000 principal amount convertible note. This note was convertible at the option of the holder into any New Securities (“New Securities”) we issue before maturity of this promissory note on the same terms and conditions of the sale of the New Securities. This convertible note carried an interest rate of 10% per annum and was originally due on June 30, 2010. On August 29, 2008, Mr. Wit agreed to convert this convertible note into a private placement of convertible debentures, which convertible debentures that originally matured on August 29, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. On February 22, 2013, Mr. Wit agreed to extend the maturity date of the convertible debenture until January 1, 2016. The expiration date of the warrants associated with the convertible debenture has been extended to January 1, 2016.
|
•
|
During August 2008, $1,260,000 principal amount convertible note that is part of a private placement of Convertible Debentures that originally matured in August 29, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a Secured Convertible Debenture financing the Company completed in September 2009. On February 22, 2013, Mr. Wit agreed to extend the maturity date of the convertible debenture until January 1, 2016. The expiration date of the warrants associated with the convertible debenture has been extended to January 1, 2016.
|
•
|
From September 2008 to December 2008, $4,200,000 principal amount convertible notes. These notes were convertible at the option of the holder into any New Securities (“New Securities”) we issue before maturity of the Convertible Note on the same terms and conditions of the sale of the New Securities. These convertible notes carried an interest rate of 12% per annum and were due on December 31, 2009. On December 16, 2008, Mr. Wit agreed to convert these convertible notes into a private placement of convertible debentures, which convertible debentures originally matured on December 16, 2010. Mr. Wit waived his anti-dilution rights relating to the outstanding debenture and warrants issued in this transaction as part of the terms and conditions of a secured convertible debenture financing the Company completed in September 2009. On February 22, 2013, Mr. Wit agreed to extend the maturity date of the convertible debenture until January 1, 2016. The expiration date of the warrants associated with the convertible debenture has been extended to January 1, 2016.
|
•
|
From July to September 2009, Mr. Wit invested $1,100,000 which amount was aggregated under the terms of one convertible note dated September 30, 2009. This note was convertible at the option of the holder into any new securities we issue before maturity of this promissory note on the same terms and conditions of the sale of any new securities issued. This convertible note carried an interest rate of 12% per annum and was due on December 31, 2009. On September 30, 2009, Mr. Wit agreed to convert this Convertible Note into a private placement of secured convertible debentures bearing interest at a rate of 12% per annum, which Secured Convertible Debentures were due on March 30, 2011 which were convertible into 4,400,000 shares of common stock and received 4,400,000 warrants to purchase common stock of the Company. On March 30, 2011, Mr. Wit extended the maturity date of his convertible note until April 1, 2013 in accordance with the terms of Amendment Number One To Securities Purchase Agreement. The Company also extended the expiration date of the 4,400,000 warrants issued with convertible note by two years to September 30, 2015. On February 22, 2013, Mr. Wit extended the maturity date of his convertible note until January 1, 2016 in accordance with the terms of Amendment Number Two To Securities Purchase Agreement. The Company also extended the expiration date of the 4,400,000 warrants issued with convertible note until January 1, 2016.
|
•
|
From October to December 2009, Mr. Wit invested $1,440,000 which amount was aggregated under the terms of one convertible note dated December 31, 2009. This note was convertible at the option of the holder into any new securities we issued before the maturity of this promissory note on the same terms and conditions of the sale of any new securities issued. This convertible note carried an interest rate of 12% per annum and was due on December 31, 2009. On December 31, 2009, Mr. Wit agreed to convert this Convertible Note into a private placement of unsecured convertible debentures bearing interest at a rate of 12% per annum, which Convertible Debentures were due on June 30, 2011. Mr. Wit extended the maturity date of his convertible note until October 1, 2013 in accordance with the terms of Amendment Number One To Securities Purchase Agreement. The Company also extended the expiration date of the 5,760,000 warrants issued with convertible note by two years to December 31, 2015. On February 22, 2013, Mr. Wit extended the maturity date of his convertible note until January 1, 2016 in accordance with the terms of Amendment Number Two To Securities Purchase Agreement. The Company also extended the expiration date of the 5,760,000 warrants issued with convertible note until January 1, 2016.
|
•
|
On April 13, 2010, $450,000 principal amount promissory note with a maturity date of December 31, 2011. This note carries an interest rate of 12% per annum.
|
•
|
On June 29, 2010, $115,000 principal amount promissory note with a maturity date of December 31, 2011. This note carries an interest rate of 12% per annum.
|
•
|
On September 30, 2010, $1,000,000 principal amount promissory note with a maturity date of December 31, 2011. This note carries an interest rate of 12% per annum. The promissory note was comprised of the following amounts received on the following dates: (i) principal amount of $50,000 received on July 6, 2010, (ii) principal amount of $65,000 received on July 14, 2010, (iii) principal amount of $175,000 received on July 15, 2010, (iv) principal amount of $140,000 received on July 30, 2010, (v) principal amount of $400,000 received on August 12, 2010, (vi) principal amount of $90,000 received on August 27, 2010, and (vii) principal amount of $80,000 received on August 31, 2010. On November 30, 2010, the note was converted by Mr. Wit into 250,000 shares of the Company’s Series D Preferred Stock.
|
•
|
On September 30, 2010, $695,000 principal amount promissory note with a maturity date of December 31, 2011. This note carries an interest rate of 12% per annum. The promissory note was comprised of the following amounts received on the following dates: (i) principal amount of $120,000 received on August 31, 2010, (ii) principal amount of $50,000 received on September 7, 2010, (iii) principal amount of $200,000 received on September 15, 2010, (iv) principal amount of $90,000 received on September 22, 2010, (v) principal amount of $200,000 received on September 29, 2010, and (vi) principal amount of $35,000 received on September 30, 2010.
|
•
|
On December 31, 2010, $1,197,500 principal amount promissory note with a maturity date of December 31, 2011. The note carries an interest rate of 12% per annum. The promissory note is comprised of the following amounts received on the following dates: (i) principal amount of $150,000 received on October 15, 2010, (ii) principal amount of $140,000 received on October 26, 2010, (iii) principal amount of $200,000 received on October 28, 2010, (iv) principal amount of $43,500 received on November 2, 2010, (v) principal amount of $200,000 received on November 10, 2010, (vi) principal amount of $32,000 received on November 22, 2010, (vii) principal amount of $37,000 received on November 29, 2010, (viii) principal amount of $160,000 received on November 30, 2010, (ix) principal amount of $25,000 received on December 2, 2010, (x) principal amount of $50,000 received on December 8, 2010, (xi) principal amount of $10,000 received on December 9, 2010, (xii) principal amount of $40,000 received on December 15, 2010, and (xiii) principal amount of $110,000 received on December 16, 2010.
|
•
|
On December 31, 2010, $409,379 principal amount promissory note with a maturity date of December 31, 2011. The note carries an interest rate of 12% per annum. The note is comprised of accrued and unpaid interest owed as of December 31, 2010 on various notes held by Mr. Wit that were converted into the principal amount owed under this note payable.
|
i.
|
Promissory Note issued on April 13, 2010 for $450,000 with a maturity date of December 31, 2011.
|
ii.
|
Promissory Note issued on June 29, 2010 for $115,000 with a maturity date of December 31, 2011.
|
iii.
|
Promissory Note issued on September 30, 2010 for $695,000 with a maturity date of December 31, 2011.
|
iv.
|
Promissory Note issued on December 31, 2010 for $1,197,500 with a maturity date of December 31, 2011.
|
v.
|
Promissory Note issued on December 31, 2010 for $409,379 with a maturity date of April 01, 2012.
|
i.
|
Promissory Note issued on August 16, 2011 for $80,000 with a maturity date of January 01, 2013.
|
ii.
|
Promissory Note issued on August 19, 2011 for $15,000 with a maturity date of January 01, 2013.
|
iii.
|
Promissory Note issued on August 25, 2011 for $35,000 with a maturity date of January 01, 2013.
|
iv.
|
Promissory Note issued on September 02, 2011 for $32,000 with a maturity date of January 01, 2013.
|
v.
|
Promissory Note issued on September 15, 2011 for $80,000 with a maturity date of January 01, 2013.
|
vi.
|
Promissory Note issued on September 28, 2011 for $100,000 with a maturity date of January 01, 2013.
|
i.
|
Promissory Note issued on May 13, 2011 for $96,000 with a maturity date of January 01, 2013;
|
ii.
|
Promissory Note issued on September 30, 2011 for $342,000 with a maturity date of April 01, 2014;
|
iii.
|
Promissory Note issued on October 05, 2011 for $130,000 with a maturity date of April 01, 2014;
|
iv.
|
Promissory Note issued on October 28, 2011 for $123,000 with a maturity date of April 01, 2014;
|
v.
|
Promissory Note issued on October 31, 2011 for $82,000 with a maturity date of April 01, 2014;
|
vi.
|
Promissory Note issued on November 23, 2011 for $60,000 with a maturity date of January 1, 2013; and
|
vii.
|
Accrued and unpaid interest in the amount of $767,000.
|
o
|
86,598,659 shares of common stock issued and outstanding;
|
o
|
43,212,873 warrants issued and outstanding to purchase shares of our common stock;
|
o
|
4,125,224 shares of our Series A Preferred Stock issued and outstanding,
|
o
|
-0- shares of our Series B Preferred Stock issued and outstanding;
|
o
|
-0- shares of our Series C Preferred Stock issued and outstanding;
|
o
|
250,000 Series D Preferred Stock issued and outstanding; and
|
o
|
$9,665,000 principal amount Convertible Debentures convertible into 24,620,000 shares of common stock.
|
o
|
dividend and liquidation preferences,
|
o
|
voting rights,
|
o
|
conversion privileges, and
|
o
|
redemption terms.
|
Dividends accreted
Year ended December 31,
|
Dividends per share
Year ended December 31,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Preferred stock dividends in arrears Series A
|
$
|
229,517
|
$
|
204,487
|
$
|
0.06
|
$
|
0.05
|
||||||||
Preferred stock dividends in arrears Series B
|
$
|
-0-
|
$
|
-0-
|
$
|
0.00
|
$
|
0.00
|
||||||||
Preferred stock dividends in arrears Series C
|
$
|
-0-
|
$
|
-0-
|
$
|
0.00
|
$
|
0.00
|
December 31, 2012 Warrants Outstanding
|
December 31, 2012 Warrants Exercisable
|
|||||||||||||||||||||||
Range of Exercise Price
|
Number Outstanding at
December 31, 2012
|
Weighted Average Remaining
Contractual Life
|
Weighted Average
Exercise Price
|
Number Exercisable at
December 31, 2012
|
Weighted Average
Exercise Price
|
|||||||||||||||||||
$ | 0.25 | – | 0.60 | 43,212,873 | 2.32 | $ | 0.36 | 43,212,873 | $ | 0.36 |
Warrants
|
||||
Balance at December 31, 2011
|
58,595,758
|
|||
Issued
|
-0-
|
|||
Exercised
|
-0-
|
|||
Expired/Forfeited
|
(15,382,885
|
)
|
||
Balance at December 31, 2012
|
43,212,873
|
|||
Warrants Exercisable at December 31, 2012
|
43,212,873
|
|||
Weighted Average Fair Value of Warrants Granted During 2012
|
$
|
N/A
|
Foreign Currency Translation
|
Accumulated Other Comprehensive
Gain (Loss)
|
|||||||
Balance December 31, 2010
|
$
|
(24,298
|
)
|
$
|
(24,298
|
)
|
||
2011 Activity
|
(29,416
|
)
|
(29,416
|
)
|
||||
Balance December 31, 2011
|
(53,714
|
)
|
(53,714
|
)
|
||||
2012 Activity
|
(15,378
|
)
|
(15,378
|
)
|
||||
Balance at December 31, 2012
|
$
|
(69,092
|
)
|
$
|
(69,092
|
)
|
Number of Shares
|
Weighted Average Exercise Price (per share)
|
Weighted Average Remaining Contractual Term (in Years)
|
Aggregate Intrinsic Value in (000's)
|
|||||||||||||
Outstanding at December 31, 2009
|
12,061,500
|
$
|
0.40
|
3.62
|
-0-
|
|||||||||||
Granted
|
1,865,000
|
0.23
|
||||||||||||||
Exercised
|
-0-
|
-0-
|
||||||||||||||
Forfeited/Cancelled/Expired
|
(2,104,500
|
)
|
(0.32
|
)
|
||||||||||||
Outstanding at December 31, 2010
|
11,822,000
|
0.39
|
3.21
|
$
|
-0-
|
|||||||||||
Granted
|
1,686,000
|
0.12
|
||||||||||||||
Exercised
|
-0-
|
-0-
|
||||||||||||||
Forfeited/Cancelled/Expired
|
(2,350,000
|
)
|
0.30
|
|
||||||||||||
Outstanding at December 31, 2011
|
11,158,000
|
0.37
|
2.52
|
$
|
-0-
|
|||||||||||
Granted
|
425,000
|
0.12
|
||||||||||||||
Exercised
|
(265,000
|
)
|
0.20
|
|||||||||||||
Forfeited/Cancelled/Expired
|
(865,500
|
)
|
0.43
|
|||||||||||||
Outstanding at December 31, 2012
|
10,452,500
|
$
|
0.36
|
1.68
|
$
|
149,598
|
||||||||||
Vested and Exercisable at December 31, 2012
|
9,059,083
|
$
|
0.39
|
1.36
|
$
|
55,057
|
Number of Options
Vested
|
Fair Value of Options
Vested
|
|||||||
Fair value of options vested during the year ended December 31, 2012
|
816,333
|
$
|
75,656
|
|||||
Fair value of options vested during the year ended December 31, 2011
|
1,410,000
|
$
|
319,868
|
Awards Breakdown by Range as at December 31, 2012
|
|||||||||||||||||||||||||
Outstanding
|
Vested
|
||||||||||||||||||||||||
Strike Price Range ($)
|
Outstanding Stock Options
|
Weighted Average Remaining Contractual Life
|
Weighted Average Outstanding Strike Price
|
Vested Stock Options
|
Weighted Average Remaining Vested Contractual Life
|
Weighted Average Vested Strike Price
|
|||||||||||||||||||
0.00
|
to | 0.20 |
3,428,500
|
3.02
|
$
|
0.15
|
2,035,083
|
2.50
|
$
|
0.17
|
|||||||||||||||
0.21
|
to | 0.29 |
2,550,000
|
1.18
|
0.26
|
2,550,000
|
1.18
|
0.26
|
|||||||||||||||||
0.30
|
to | 0.49 |
755,000
|
0.79
|
0.45
|
755,000
|
0.79
|
0.45
|
|||||||||||||||||
0.50
|
to | 0.70 |
3,719,000
|
0.97
|
0.60
|
3,719,000
|
0.97
|
0.60
|
|||||||||||||||||
0.00
|
to | 0.70 |
10,452,500
|
1.68
|
$
|
0.36
|
9,059,083
|
1.36
|
$
|
0.39
|
Awards Breakdown by Range as at December 31, 2011
|
|||||||||||||||||||||||||
Outstanding
|
Vested
|
||||||||||||||||||||||||
Strike Price Range ($) |
Outstanding Stock Options
|
Weighted Average Remaining Contractual Life
|
Weighted Average Outstanding Strike Price
|
Vested Stock Options
|
Weighted Average Remaining Vested Contractual Life
|
Weighted Average Vested Strike Price
|
|||||||||||||||||||
0.00 |
to
|
0.20 |
3,376,000
|
3.75
|
$
|
0.15
|
1,547,500
|
3.02
|
$
|
0.20
|
|||||||||||||||
0.21 |
to
|
0.29 |
2,785,000
|
2.08
|
0.26
|
2,785,000
|
2.08
|
0.26
|
|||||||||||||||||
0.30 |
to
|
0.49 |
875,000
|
1.90
|
0.45
|
875,000
|
1.90
|
0.45
|
|||||||||||||||||
0.50 |
to
|
0.70 |
4,122,000
|
1.94
|
0.60
|
4,122,000
|
1.94
|
0.60
|
|||||||||||||||||
0.00 |
to
|
0.70 |
11,158,000
|
2.52
|
$
|
0.37
|
9,329,500
|
2.16
|
$
|
0.42
|
Stock Option Assumptions for the year ended
|
||||||||
December 31, 2012
|
December 31, 2011
|
|||||||
Stock Option Assumptions
|
||||||||
Risk-free interest rate
|
0.36
|
%
|
0.91
|
%
|
||||
Expected dividend yield
|
0.0
|
%
|
0.0
|
%
|
||||
Expected volatility
|
192.3
|
%
|
166.2
|
%
|
||||
Expected life of options (in years)
|
5.0
|
5.0
|
Weighted Average Grant-Date Fair Value
|
||||||||
2012
|
2011
|
|||||||
Stock options granted during the year ended December 31,
|
$
|
0.11
|
$
|
0.10
|
||||
Stock options vested during the year ended December 31,
|
0.09
|
0.23
|
||||||
Stock options forfeited during the year ended December 31,
|
$
|
0.32
|
$
|
0.15
|
Shares Underlying Stock Options
|
Weighted Average Grant Date Fair Value
|
|||||||
Nonvested Shares at January 1, 2012
|
1,828,500
|
$
|
0.10
|
|||||
Nonvested Shares at December 31, 2012
|
1,393,417
|
$
|
0.10
|
December 31,
2012
|
December 31,
2011
|
|||||||
Statutory rate applied to loss before income taxes
|
$
|
(2,923,533
|
)
|
$
|
(1,326,210
|
)
|
||
Increase (decrease) in income taxes results from: | ||||||||
Current tax expense/(benefit)
|
63,814
|
-0-
|
||||||
Nondeductible expenses
|
2,509,532
|
529,790
|
||||||
Change in deferred assets
|
82,209
|
119,214
|
||||||
Other
|
-0-
|
(4,190
|
)
|
|||||
Change in valuation allowance
|
331,792
|
681,396
|
||||||
Income tax expense (benefit)
|
$
|
63,814
|
$
|
-0-
|
December 31,
2012
|
December 31,
2011
|
|||||||
Current tax expense (benefit):
|
||||||||
Income tax at statutory rates
|
$
|
63,814
|
$
|
-0-
|
||||
Deferred tax expense (benefit):
|
||||||||
Bad debt allowance
|
21,913
|
47,950
|
||||||
Operating loss carry forward
|
(435,914
|
)
|
(848,561
|
)
|
||||
Patent litigation settlement
|
82,209
|
119,215
|
||||||
(331,792
|
)
|
(681,396
|
)
|
|||||
Valuation allowance
|
331,792
|
681,396
|
||||||
Total tax expense (benefit)
|
$
|
63,814
|
$
|
-0-
|
December 31,
2012
|
December 31,
2011
|
|||||||
Amortization of intangibles
|
$
|
283,698
|
$
|
283,698
|
||||
Bad debt allowance
|
30,715
|
52,629
|
||||||
Patent litigation liability accrual
|
386,682
|
468,891
|
||||||
Operating loss carry forwards
|
17,355,970
|
16,920,055
|
||||||
Gross deferred tax assets
|
18,057,065
|
17,725,273
|
||||||
Valuation allowance
|
(18,057,065
|
)
|
(17,725,273
|
)
|
||||
Net deferred tax asset
|
$
|
-0-
|
$
|
-0-
|
OmniCommerce Systems, Inc.
|
(Inactive)
|
OmniComm Europe GmbH.
|
(Active)
|
OmniComm USA, Inc.
|
(Active)
|
OmniComm Ltd.
|
(Active)
|
OmniComm Spain S.L.
|
(Active)
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated 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;
|
(d)
|
Disclosed in this report any changes 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
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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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.
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designated 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;
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(b)
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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;
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(c)
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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;
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(d)
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Disclosed in this report any changes 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
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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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.
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