Document_And_Entity_Informatio
Document And Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Apr. 15, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'ERF Wireless, Inc. | ' | ' |
Entity Central Index Key | '0001020646 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'Yes | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 1,001,743 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Entity public float | ' | ' | $5,122,852 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $42 | $118 |
Accounts receivable, net | 1,001 | 828 |
Accounts receivable, other | 489 | 346 |
Inventories | 264 | 377 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 0 | 35 |
Prepaid expenses and other current assets | 286 | 221 |
Total current assets | 2,082 | 1,925 |
Property and equipment | ' | ' |
Property and equipment | 12,142 | 11,644 |
Less: accumulated depreciation | -9,365 | -7,511 |
Net property and equipment | 2,777 | 4,133 |
Goodwill | 176 | 176 |
Other assets | 37 | 37 |
Total assets | 5,072 | 6,271 |
Current liabilities: | ' | ' |
Notes payable and current portion of long-term debt | 3,183 | 1,358 |
Current portion of long-term capital leases | 252 | 169 |
Accounts payable | 1,299 | 1,226 |
Accrued expenses | 1,158 | 1,120 |
Derivative liabilities | 677 | 492 |
Deferred revenue | 13 | 20 |
Total current liabilities | 6,582 | 4,385 |
Line of credit (LOC) | 4,281 | 3,168 |
Long-term debt, net of current portion | 1,024 | 1,419 |
Long-term capital leases, net of current portion | 174 | 214 |
Total liabilities | 12,061 | 9,186 |
Commitments | ' | ' |
Shareholders' deficit: | ' | ' |
Preferred stock - $0.001 par value, 25,000,000 authorized Series A designated 10,000,000 shares Issued and outstanding at December 31, 2013 and December 31, 2012, 9,930,982 and 8,426,982 shares, respectively | 10 | 8 |
Common stock - $0.001 par value Authorized 975,000,000 shares Issued and outstanding at December 31, 2013 and December 31, 2012, 111,633 and 13,718 shares, respectively | 0 | 0 |
Additional paid in capital | 56,177 | 52,993 |
Accumulated deficit | -63,276 | -56,012 |
Accumulated other comprehensive loss | -32 | -32 |
Total ERF wireless, Inc. shareholders' deficit | -7,121 | -3,043 |
Noncontrolling interest | 132 | 128 |
Total shareholders' deficit | -6,989 | -2,915 |
Total liabilities and shareholders' deficit | $5,072 | $6,271 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Shareholders' deficit: | ' | ' |
Preferred stock par value (in Dollars per share) | $0.00 | $0.00 |
Preferred stock authorized | 25,000,000 | 25,000,000 |
Preferred stock designated | 10,000,000 | 10,000,000 |
Preferred stock Series A shares issued | 9,930,982 | 8,426,982 |
Preferred stock Series A shares outstanding | 9,930,982 | 8,426,982 |
Common stock par value (in Dollars per share) | $0.00 | $0.00 |
Common stock shares authorized | 975,000,000 | 975,000,000 |
Common stock shares issued | 111,633 | 13,718 |
Common stock shares outstanding | 111,633 | 13,718 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $) | 12 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Sales: | ' | ' |
Products | $90 | $102 |
Services | 7,066 | 7,226 |
Total sales | 7,156 | 7,328 |
Costs of goods sold: | ' | ' |
Products and integration services | 1,571 | 1,846 |
Rent, repairs and maintenance | 853 | 700 |
Depreciation | 1,735 | 1,429 |
Total costs of goods sold | 4,159 | 3,975 |
Gross profit | 2,997 | 3,353 |
Operating expenses: | ' | ' |
Selling, general and administrative | 7,315 | 6,743 |
Depreciation | 200 | 214 |
Total operating expenses | 7,515 | 6,957 |
Loss from operations | -4,518 | -3,604 |
Other income (expenses): | ' | ' |
Interest expense, net | -3,524 | -1,524 |
Derivative income | 715 | 335 |
Gain on sale of assets | 67 | 0 |
Total other (expense) income | -2,742 | -1,189 |
Consolidated net loss | -7,260 | -4,793 |
Net increase attributable to non-controlling interest | -4 | -21 |
Net loss attributable to ERF Wireless Inc. | -7,264 | -4,814 |
Other comprehensive loss: | ' | ' |
Unrealized loss on securities held for resale | 0 | -7 |
Total other comprehensive loss | 0 | -7 |
Total comprehensive loss | ($7,264) | ($4,821) |
Basic and diluted loss per common share: | ' | ' |
Net loss | ($208) | ($535) |
CONSOLIDATED_STATEMENTS_OF_SHA
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIT (USD $) | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Comprehensive Income | Noncontrolling Interest | Total |
In Thousands, except Share data, unless otherwise specified | |||||||
Beginning Balance, Amount at Dec. 31, 2011 | $0 | $9 | $49,123 | ($51,198) | ($25) | ' | ($2,091) |
Beginning Balance, Shares at Dec. 31, 2011 | 5 | 8,579 | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | -4,814 | ' | 21 | -4,793 |
New stock issued to shareholders: | ' | ' | ' | ' | ' | ' | ' |
Conversion of preferred stock to common stock, Amount | ' | -1 | 1 | ' | ' | ' | ' |
Conversion of preferred stock to common stock, Shares | 1 | -270 | ' | ' | ' | ' | ' |
For services, compensation and interest, Amount | ' | ' | 621 | ' | ' | ' | 621 |
For services, compensation and interest, Shares | 1 | ' | ' | ' | ' | ' | ' |
For retirement of debt, Amount | ' | ' | 535 | ' | ' | ' | 535 |
For retirement of debt, Shares | 1 | ' | ' | ' | ' | ' | ' |
Conversion of LOC and interest to preferred stock, Amount | ' | ' | 124 | ' | ' | ' | 124 |
Conversion of LOC and interest to preferred stock, Shares | ' | 118 | ' | ' | ' | ' | ' |
Conversion of LOC and interest to common stock, Amount | ' | ' | 2,589 | ' | ' | ' | 2,589 |
Conversion of LOC and interest to common stock, Shares | 6 | ' | ' | ' | ' | ' | ' |
Transfer of subsidiary equity to non-controlling interest | ' | ' | ' | ' | ' | 107 | 107 |
Unrealized loss on securties held for resale | ' | ' | ' | ' | -7 | ' | -7 |
Ending balance, Amount at Dec. 31, 2012 | 0 | 8 | 52,993 | -56,012 | -32 | 128 | -2,915 |
Ending balance, Shares at Dec. 31, 2012 | 14 | 8,427 | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | -7,264 | ' | 4 | -7,260 |
New stock issued to shareholders: | ' | ' | ' | ' | ' | ' | ' |
Conversion of preferred stock to common stock, Shares | 10 | -259 | ' | ' | ' | ' | ' |
For services, compensation and interest, Amount | ' | ' | 1,314 | ' | ' | ' | 1,314 |
For services, compensation and interest, Shares | 16 | ' | ' | ' | ' | ' | ' |
For retirement of debt, Amount | ' | ' | 1,528 | ' | ' | ' | ' |
For retirement of debt, Shares | 36 | ' | ' | ' | ' | ' | ' |
Conversion of LOC and interest to preferred stock, Amount | ' | 2 | 33 | ' | ' | ' | 35 |
Conversion of LOC and interest to preferred stock, Shares | ' | 1,763 | ' | ' | ' | ' | ' |
Conversion of LOC and interest to common stock, Shares | 36 | ' | ' | ' | ' | ' | ' |
Transfer of subsidiary equity to non-controlling interest | ' | ' | ' | ' | ' | ' | 0 |
Unrealized loss on securties held for resale | ' | ' | ' | ' | ' | ' | 0 |
Derivative liability | ' | ' | 309 | ' | ' | ' | 309 |
Ending balance, Amount at Dec. 31, 2013 | $0 | $10 | $56,177 | ($63,276) | ($32) | $132 | ($6,989) |
Ending balance, Shares at Dec. 31, 2013 | 112 | 9,931 | ' | ' | ' | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Cash flows from operating activities | ' | ' |
Net loss | ($7,260) | ($4,793) |
Adjustments to reconcile net loss to net cash used by operating activities: | ' | ' |
Gain on sale of assets | -67 | 0 |
Amortization of debt discount | 1,958 | 290 |
Depreciation | 1,935 | 1,643 |
Stock issued for services rendered, interest and compensation | 1,314 | 621 |
Derivative income | -715 | -335 |
Bad debt expense | 54 | 13 |
Changes in: | ' | ' |
Accounts receivable, net | -227 | -245 |
Accounts receivable, other | -143 | -36 |
Inventories | 107 | -19 |
Prepaid expenses and other current assets | 2 | 82 |
Costs and profits in excess of billings | 35 | -35 |
Accounts payable | 73 | 532 |
Accrued expenses | 391 | 1,033 |
Deferred revenue | -7 | 190 |
Total adjustment | 4,710 | 3,354 |
Net cash used by operating activities | -2,550 | -1,439 |
Cash flows from investing activities | ' | ' |
Purchase of property and equipment | -346 | -1,453 |
Proceeds from sale of assets | 34 | 0 |
Change in other assets | 0 | 26 |
Net cash used by investing activities | -312 | -1,427 |
Cash flows from financing activities | ' | ' |
Net proceeds from line of credit | 1,148 | 823 |
Proceeds from long-term debt obligations | 3,116 | 2,674 |
Payment of long-term debt obligations | -1,283 | -950 |
Payment on capital lease obligations | -195 | -154 |
Net cash provided by financing activities | 2,786 | 2,393 |
Net change in cash and cash equivalents | -76 | -473 |
Cash and cash equivalents at the beginning of the year | 118 | 591 |
Cash and cash equivalents at the end of the year | 42 | 118 |
Supplemental disclosure of cash flow information: | ' | ' |
Net cash paid during the period for: Interest | 308 | 364 |
Net cash paid during the period for: Income taxes | 0 | 0 |
Supplemental non-cash investing and financing activities: | ' | ' |
Conversion of debt through issuance of common stock | 1,528 | 535 |
Conversion of LOC and interest through issuance of preferred stock | 35 | 124 |
Conversion of LOC and interest through issuance of common stock | 0 | 2,589 |
Unrealized loss on securities held for resale | 0 | 7 |
Transfer of subsidiary equity to non-controlling interest | 0 | 107 |
Property and equipment financed with debt and capital lease | $238 | $260 |
1_BASIS_OF_PRESENTATION
1. BASIS OF PRESENTATION | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
NOTE 1 - BASIS OF PRESENTATION | ' | ||||||||
Nature of the Company | |||||||||
ERF Wireless, Inc. (“Company” or “ERF Wireless”) provides critical infrastructure wireless broadband communications products and services to a broad spectrum of customers in primarily rural oil and gas exploration areas of North America. We also provide high quality broadband services and critical communications services to residential, oil and gas, educational, health care, and regional banks in rural areas utilizing our Company owned and operated wireless networks. As a total comprehensive solutions provider we offer a wide array of critical communications services including high speed broadband, voice over Internet Protocol (VOIP) telephone and facsimile service, and video security. | |||||||||
Historically, our revenues have been generated primarily from wireless Internet and network construction services. Our Internet revenues have resulted from our offering of broadband and basic communications services to residential and enterprise customers. Our construction revenues typically have consisted of revenues generated from the construction of bank , educational , and healthcare networks and other services associated with providing wireless products and services to the regional banking, educational and healthcare industries. | |||||||||
Our Internet revenues are recorded in “ERF Wireless Bundled Services, Inc. (WBS)”, construction of bank, healthcare and educational networks in our “ERF Enterprise Network Services, Inc. (ENS)” and wireless broadband products and services to rural oil and gas locations are recorded in “Energy Broadband, Inc. (EBI)”. Please refer to segment footnote 15 for additional information regarding segment operations. | |||||||||
Basis of Accounting | |||||||||
The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America. The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations have been reflected herein. | |||||||||
Principles of Consolidation | |||||||||
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. | |||||||||
Securities Held for Resale | |||||||||
Investments in public companies are classified as available-for-sale and are adjusted to their fair market value with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income. Upon disposition of these investments, the specific identification method is used to determine the cost basis in computing realized gains or losses, which are reported in other income and expense. Declines in value that are judged to be other than temporary are reported in other comprehensive income and expense. | |||||||||
Reclassification | |||||||||
Certain amounts in the 2012 financial statements have been reclassified to conform to the 2013 financial presentation. These reclassifications have no impact on net loss. | |||||||||
Use of Estimates | |||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. | |||||||||
Cash and Cash Equivalents | |||||||||
Cash and cash equivalents include cash and all highly liquid financial instruments with original purchased maturities of three months or less at the date of purchase. At various times during the year, the Company maintained cash balances in excess of FDIC insurable limits. Management feels this risk is mitigated due to the longstanding reputation of these banks. The Company has not experienced any losses related to these deposits. | |||||||||
Credit Risk | |||||||||
In the normal course of business, the Company extends unsecured credit to the majority of its customers. The Company controls credit risk associated with its receivables through credit checks, approvals, and monitoring procedures. Generally, the Company requires no collateral from its customers. | |||||||||
Operating Leases | |||||||||
We recognize lease expense on a straight-line basis over the minimum lease terms which expire at various dates through 2018. These leases are for office and radio tower facilities and are classified as operating leases. For leases that contain predetermined, fixed escalations of the minimum rentals, we recognize the rent expense on a straight-line basis and record the difference between the rent expense and the rental amount payable in liabilities. | |||||||||
Leasehold improvements made at the inception of the lease are amortized over the shorter of the asset life or the initial lease term as described above. Leasehold improvements made during the lease term are also amortized over the shorter of the asset life or the remaining lease term. | |||||||||
Assets Held under Capital Leases | |||||||||
Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. We utilize various leasing facilities including tower sites, offices sites and the purchase of tower and radio network equipment. When we enter into a lease agreement, we review the terms to determine the appropriate classification of the lease as a capital lease or operating lease based on the factors listed in FASB ASC Topic 840 “Leases”. | |||||||||
Allowance for Doubtful Accounts | |||||||||
The Company uses the allowance method to account for uncollectible accounts receivable. The Company's estimate is based on historical collection experience and a review of the current status of accounts receivable. The Company reviews its accounts receivable balances by customer for accounts greater than 90 days old and makes a determination regarding the collectibility of the accounts based on specific circumstances and the payment history that exists with such customers. The Company also takes into account its prior experience, the customer's ability to pay and an assessment of the current economic conditions in determining the net realizable value of its receivables. The Company also reviews its allowances for doubtful accounts in aggregate for adequacy following this assessment. Accordingly, the Company believes that its allowances for doubtful accounts fairly represent the underlying collectibility risks associated with its accounts receivable. | |||||||||
Deferred Revenues | |||||||||
Revenues that are billed in advance of services being completed are deferred until the conclusion of the period of the service for which the advance billing relates. Deferred revenues are included on the balance sheet in current and long-term liabilities until the service is performed and then recognized in the period in which the service is completed. The Company's deferred revenues consist of billings in advance for services being rendered for its wireless broadband and, accordingly, are deferred and recognized monthly as earned. The Company had deferred revenues in current liabilities of approximately $13,000 and $20,000 as of December 31, 2013 and December 31, 2012, respectively. | |||||||||
Advertising Costs | |||||||||
Advertising costs are expensed when incurred. For the years ended December 31, 2013 and 2012, the Company expensed $52,000 and $66,000, respectively. | |||||||||
Stock-Based Compensation | |||||||||
Stock-based compensation expense is recorded for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest. | |||||||||
Non-controlling Interest | |||||||||
Non-controlling interest in our majority owned subsidiary EBI, is included in the equity section of the consolidated balance sheets. Non-controlling interest represents 3.63% of the equity of EBI and any transfer of value from ERF to non-controlling interest holders. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses of EBI. Any excess losses applicable to the non-controlling interests have been and are borne by the Company as there is no obligation of the non-controlling interests to fund any losses in excess of their original investment. There is also no obligation or commitment on the part of the Company to fund operating losses of any subsidiary whether wholly-owned or majority-owned. | |||||||||
Derivative Instruments | |||||||||
In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability. | |||||||||
The Company's derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. Because of the limited trading history for our common stock, the Company estimates the future volatility of its common stock price based on not only the history of its stock price but also the experience of other entities considered comparable to the Company. | |||||||||
Inventory | |||||||||
Inventory is valued at the lower of cost or market. The cost is determined by using the average cost method. Inventory consists of the following items as of December 31, 2013 and 2012 (in thousands): | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw material | $ | 45 | $ | 46 | |||||
Work in process | 65 | 115 | |||||||
Finished goods | 154 | 216 | |||||||
Total inventory | $ | 264 | $ | 377 | |||||
Property and Equipment | |||||||||
Property and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives which are generally three to seven years. | |||||||||
Goodwill | |||||||||
Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets at the dates of acquisition. Under current accounting pronouncements, the Company is required to annually assess the carrying value of goodwill associated with each of its distinct business units that comprise its business segments of the Company to determine if impairment in value has occurred. | |||||||||
Intangible Assets | |||||||||
Intangible assets are amortized using methods that approximate the benefit provided by the utilization of the assets. The Company continually evaluates the amortization period and carrying basis of intangible assets to determine whether subsequent events and circumstances warrant a revised estimated useful life or impairment in value. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our intangible assets, we may incur charges for impairment in the future. | |||||||||
Long-Lived Assets | |||||||||
We review our long-lived assets, which include intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred to as "the asset") may not be recoverable. Such circumstances include, but are not limited to: | |||||||||
· | a significant decrease in the market price of the asset; | ||||||||
· | a significant change in the extent or manner in which the asset is being used; | ||||||||
· | a significant change in the business climate that could affect the value of the asset; | ||||||||
· | a current period loss combined with projection of continuing loss associated with use of the asset; | ||||||||
· | a current expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated useful life. | ||||||||
We continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our long-lived assets, we may incur charges for impairment in the future. | |||||||||
Revenue Recognition | |||||||||
The Company's revenue is generated primarily from the sale of wireless communications products and services on a nationwide basis, including providing enterprise-class wireless broadband services. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is probable. | |||||||||
The Company records revenues from our fixed-price, long-term contracts using the percentage-of-completion method. Revenues are recorded based on construction costs incurred to date as a percentage of estimated total cost at completion. The percentage-of-completion, determined by using total costs incurred to date as a percentage of estimated total costs at completion, reflects the actual physical completion of the project. If the current projected costs on a fixed fee contract exceed projected revenue, the entire amount of the loss is recognized in the period such loss is identified. | |||||||||
The Company recognizes product sales generally at the time the product is shipped. Concurrent with the recognition of revenue, the Company provides for the estimated cost of product warranties and reduces revenue for estimated product returns. Sales incentives are generally classified as a reduction of revenue and are recognized at the later of when revenue is recognized or when the incentive is offered. Shipping and handling costs are included in cost of goods sold. | |||||||||
Service revenue is principally derived from wireless broadband services, including internet, voice, and data and monitoring service. Subscriber fees are recorded as revenues in the period during which the service is provided. | |||||||||
Warranty | |||||||||
The Company's suppliers generally warrant the products distributed by the Company and allow returns of defective products, including those that have been returned to the Company by its customers. The Company does not independently warrant the products that it distributes, but it does provide warranty services on behalf of the supplier. | |||||||||
Fair Value Estimates | |||||||||
Pursuant to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: | |||||||||
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | |||||||||
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life. | |||||||||
Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. | |||||||||
The carrying values for cash and cash equivalents, accounts receivable, prepaid assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities. | |||||||||
Research and development | |||||||||
Research and development expense consists of costs attributable to employees and or consultants who focus their time on the design, engineering and process development of our CryptoVue technology. During 2013 and 2012, we have not incurred research and development costs. | |||||||||
Income Taxes | |||||||||
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. | |||||||||
Fair Value of Financial Instruments | |||||||||
The Company's financial instruments consist of cash and cash equivalents, inventory, accounts receivable and debt. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements. | |||||||||
Basic and Diluted Loss per Share | |||||||||
The Company is required to provide basic and dilutive earnings (loss) per common share information. | |||||||||
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. | |||||||||
Diluted net loss per common share is computed by dividing the net loss, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the years ended December 31, 2013, and December 31, 2012, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of fully diluted net loss per common share. | |||||||||
Recent Accounting Pronouncements | |||||||||
Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition. |
2_ACCOUNTS_RECEIVABLE
2. ACCOUNTS RECEIVABLE | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Receivables [Abstract] | ' | ||||||||
NOTE 2 - ACCOUNTS RECEIVABLE | ' | ||||||||
Accounts receivable consists of the following (in thousands): | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Accounts receivable | $ | 1,061 | $ | 838 | |||||
Allowance for doubtful accounts | (60 | ) | (10 | ) | |||||
Accounts receivable, net | $ | 1,001 | $ | 828 | |||||
3_PROPERTY_AND_EQUIPMENT_NET
3. PROPERTY AND EQUIPMENT, NET | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property and equipment | ' | ||||||||
3. PROPERTY AND EQUIPMENT, NET | ' | ||||||||
Components of property and equipment consist of the following items (in thousands): | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Vehicles | $ | 776 | $ | 742 | |||||
Operating equipment | 10,183 | 9,636 | |||||||
Office furniture and equipment | 245 | 237 | |||||||
Leasehold improvements | 70 | 70 | |||||||
Computer equipment | 398 | 392 | |||||||
Building | 29 | 29 | |||||||
Land | 37 | 37 | |||||||
Construction in progress | 404 | 501 | |||||||
Total property and equipment | 12,142 | 11,644 | |||||||
Less accumulated depreciation | (9,365 | ) | (7,511 | ) | |||||
Net property and equipment | $ | 2,777 | $ | 4,133 | |||||
Depreciation expense was $1,935,000 and $1,643,000 for the years ended December 31, 2013 and 2012, respectively. | |||||||||
The Company has pledged substantially all the operating equipment and some furniture and vehicles as collateral against outstanding notes and capital leases. |
4_GOODWILL
4. GOODWILL | 12 Months Ended |
Dec. 31, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' |
4. GOODWILL | ' |
At December 31, 2013 and 2012, goodwill totaled $176,000. The goodwill of $176,000 is attributable to the acquisition of the assets of Crosswind, Inc. on January 11, 2008. |
5_DEBT_CONVERSION
5. DEBT CONVERSION | 12 Months Ended |
Dec. 31, 2013 | |
Debt Disclosure [Abstract] | ' |
NOTE 5 - DEBT CONVERSION | ' |
(a) LINE OF CREDIT | |
For the year ended December 31, 2013, the Company issued 36,784 shares of its common stock for the settlement of $1,808,739 of principal and $349,261 of accrued interest for a total principal and interest amount of $2,158,000 owed to Angus Capital Partners. The Company issued common stock at an average price of $58.67 per share calculated based on the closing price the day the debt was settled. At December 31, 2013, Angus Capital Partners and ERF Wireless, Inc. both agreed to reduce the interest rate from the current 12% per annum to 3% per annum retroactive to January 1, 2013 and extend the maturity date of the revolving note to December 31, 2017, while maintaining the maximum Line of Credit of $12 million. The Company in consideration has accepted the return and cancellation of 36,784 common shares (post-split) of Company common stock issued from the Line of Credit conversions during 2013. The Company has accordingly reversed the payment of principal and interest of $2,158,000 in December 2013 and subsequently received the canceled shares in February 2014. See Note 11 for additional information on this facility. | |
Additionally for the year ended December 31, 2013, the Company issued 1,763,000 shares of its Series A Preferred Stock to Angus Capital for the settlement of principal amount of $35,260 of debt. The Company issued Series Preferred A Stock at an average price of $.02 per share or $8.00 (post-split) per share calculated based on the closing price of the common stock the day the debt was settled. | |
Under current accounting standards ASC 470-50-40-2, the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statement of operations. If this was not a related party transaction, a loss of $299,710 would have been recognized for the year ended December 31, 2013. | |
For the year ended December 31, 2012, the Company issued 5,556 shares of its common stock for the settlement of $2,122,385 and $466,615 of accrued interest, for a total of principal amount of $2,589,000 owed to Angus Capital Partners. The Company issued common stock at an average price of $465.98 per share calculated based on the closing price the day the debt was settled. See Note 11 for additional information on this facility. | |
Additionally for the year ended December 31, 2012, the Company issued 118,095 shares of its Series A Preferred to Angus Capital for the settlement of principal amount of $124,000 of debt. The Company issued Series Preferred A Stock at an average price of $1.05 per share calculated based on the closing price of the common stock the day the debt was settled. | |
Under current accounting standards ASC 470-50-40-2, the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statement of operations. If this was not a related party transaction, a gain of $10,850 would have been recognized for the year ended December 31, 2012. | |
(b) OTHER DEBT | |
During the year ended December 31, 2013, the Company issued 44,705 shares of its common stock for the settlement of $1,527,699 principal and $538,574 of interest, respectively, for a total amount of $2,066,272. The Company issued common stock at an average price of $46.22 per share calculated based on the closing price the day the debt was settled. | |
During the year ended December 31, 2012, the Company issued 999 shares of its common stock for the settlement of $535,000 principal and $8,004 of accrued interest, respectively, for a total amount of $543,004. The Company issued common stock at an average price of $543.55 per share calculated based on the closing price the day the debt was settled. |
6_COMMON_STOCK_PREFERRED_STOCK
6. COMMON STOCK, PREFERRED STOCK, AND WARRANTS | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||||||
NOTE 6 - COMMON STOCK , PREFERRED STOCK AND WARRANTS | ' | ||||||||||||||||||||||||
The total number of shares of stock of all classes which the Company shall have the authority to issue is 1,000,000,000, of which 25,000,000 shall be shares of preferred stock with a par value of $0.001 per share ("Preferred Stock"), and 975,000,000 shall be shares of common stock with a par value of $0.001 per share ("Common Stock"). | |||||||||||||||||||||||||
On December 18, 2013 the Company's board of directors and stockholders with a majority of the Company's voting power approved an amendment to the Company's Articles of Incorporation to affect a reverse split of the Company's common stock at a ratio of 1 for 400. The Board of Directors also approved the rounding of fractional shares remaining after the reverse stock split to the nearest whole common share on a per shareholder basis, provided that any shareholder holding over ten (10) shares, but less than ninety-nine (99) shares after the reverse stock split will have their shares automatically rounded up to 100 shares. The ratio of 1 for 400 reverse split affected 35.9 million pre-stock split to .090 million post-split shares (prior to affecting the rounding describe above). The reverse stock split has been applied retroactively to all financial statements and footnotes presented herein. | |||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||
As of December 31, 2013, there were 111,633 shares of its $.001 par value common stock issued and outstanding. | |||||||||||||||||||||||||
During the year ended December 31, 2013, the Company issued 98,000 shares of common stock which was valued at the closing market price on the date of issuance of such shares, which were issued in lieu of cash as payment for the following (in thousands): | |||||||||||||||||||||||||
31-Dec-13 | Supplemental | ||||||||||||||||||||||||
Non-Cash | |||||||||||||||||||||||||
Disclosure | |||||||||||||||||||||||||
Professional fees | $ | 412 | |||||||||||||||||||||||
Services and compensation | 350 | ||||||||||||||||||||||||
Other services rendered and interest | 552 | ||||||||||||||||||||||||
Total for services, compensation and interest | $ | 1,314 | |||||||||||||||||||||||
Notes payable | $ | 1,528 | |||||||||||||||||||||||
Line of credit and interest | $ | – | |||||||||||||||||||||||
As of December 31, 2012, there were 13,718 shares of its $.001 par value common stock issued and outstanding. | |||||||||||||||||||||||||
During the year ended December 31, 2012, the Company issued 7,640 shares of common stock which was valued at the closing market price on the date of issuance of such shares, which were issued in lieu of cash as payment for the following (in thousands): | |||||||||||||||||||||||||
31-Dec-12 | Supplemental | ||||||||||||||||||||||||
Non-Cash | |||||||||||||||||||||||||
Disclosure | |||||||||||||||||||||||||
Professional fees | $ | 198 | |||||||||||||||||||||||
Services and compensation | 309 | ||||||||||||||||||||||||
Other services rendered | 114 | ||||||||||||||||||||||||
Total for services, and compensation | $ | 621 | |||||||||||||||||||||||
Notes payable | $ | 535 | |||||||||||||||||||||||
Line of credit and interest | $ | 2,589 | |||||||||||||||||||||||
Preferred Stock | |||||||||||||||||||||||||
The Company has 25,000,000 shares of Preferred Stock authorized of which 10,000,000 shares had been designated as Series A Preferred Stock (“Series A Preferred Stock”). There were 9,930,982 and 8,426,982 Series A preferred shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively. With respect to the Series A Preferred Stock outstanding at December 31, 2013, the Company would be required to issue 9,930,982 shares of its common stock upon conversion. During the year ended December 31, 2013, 259,000 Series A Preferred Stock were converted into 10,000 shares of common stock. | |||||||||||||||||||||||||
For the year ended December 31, 2013, the Company issued 1,763,000 shares of its Series A Preferred Stock to Angus Capital for the settlement of principal amount of $35,260 of debt. The Company issued Series Preferred A Stock at an average price of $.02 per share or $8.00 (post-split) per share calculated based on the closing price of the common stock the day the debt was settled. | |||||||||||||||||||||||||
Holders of shares of the Series A Preferred Stock are entitled to vote, together with the holders of our common stock, on all matters submitted to a vote of the Company’s stockholders. Each share of Series A Preferred Stock entitles the holder thereof to 100 votes on all matters submitted to a vote of the Company’s stockholders. | |||||||||||||||||||||||||
Holders of the Series A Preferred Stock are also entitled to elect one director at any meeting of the Company’s stockholder at which such directors are to be elected. The right of the holders of the Series A Preferred Stock to elect such additional director shall cease when all outstanding shares of Series A Preferred Stock have been converted or are no longer outstanding. The shares of the Series A Preferred Stock are not redeemable by the Company. | |||||||||||||||||||||||||
In the event of any liquidation, the holders of shares of the Series A Preferred Stock are entitled to receive out of the assets of the Company available for distribution to the Company’s stockholders, before any distribution of assets is made to holders of any other class of capital stock of the Company, an amount equal to the purchase price per share, plus accumulated and unpaid dividends thereon to the date fixed for distribution. | |||||||||||||||||||||||||
ERF Wireless, Inc. Distribution of EBI Equities to Non-controlling Interest | |||||||||||||||||||||||||
For the year ended December 31, 2012, the Company had issued 725,611 shares of EBI as a stock dividend and a three-year warrant expiring December 31, 2014 to purchase 725,611 shares of EBI common stock at an exercise price of $4.00 per share and three year warrant expiring December 31, 2014 to purchase 725,611 shares of EBI common stock at an exercise price of $6.00 per share; such issuances are valued at $107,000. The Company expects to issue the remaining stock dividends in 2014. No stock dividends were issued during the year ended December 31, 2013. | |||||||||||||||||||||||||
EBI Declared Stock Dividend | |||||||||||||||||||||||||
During the year ended December 31, 2011, the Company declared a stock dividend to ERF Wireless shareholders of up to 5% of the existing common stock in Energy Broadband, the Company's then wholly owned oil and gas private subsidiary. ERF Wireless declared for each 200 shares of ERF Wireless common stock, that a shareholder owns as of September 30, 2011, the shareholder will receive one unit of Energy Broadband securities consisting of 100 Energy Broadband common shares, one warrant to purchase 100 shares of Energy Broadband at a fixed price of $4.00 per share and one warrant to purchase an additional 100 shares of Energy Broadband at a fixed price of $6.00 per share. The Company has estimated the stock dividend to be 900,000 shares of EBI stock. The stock dividend was recorded based on our historical cost. The EBI shares were originally acquired by ERF at par of $0.001 for a total historical cost of $900. ERF acquired the warrants from EBI on September 30, 2011 at fair value for a total cost of $132,302. | |||||||||||||||||||||||||
Warrants | |||||||||||||||||||||||||
During the year ended December 31, 2013, the Company entered into a convertible promissory note with Tonaquint, Inc. for $791,500 and issued five-year warrants to purchase 371 shares of common stock at $320.00 per share, expiring March 2018. | |||||||||||||||||||||||||
During the year ended December 31, 2013, 2013, the Company entered into a convertible promissory note with Willow Creek Capital for $244,200 and issued five-year warrants to purchase 122 shares of common stock at $300.00 per share, expiring April 2018. | |||||||||||||||||||||||||
During the year ended December 31, 2013, 2013, the Company entered into a convertible promissory note with Vista Capital for $60,500 and issued five year warrants to purchase 36 shares of common stock at $320.00 per share, expiring April 2018. | |||||||||||||||||||||||||
The following tables set forth summarized warrants that are issued, outstanding and exercisable for the years ended December 31, 2013 and 2012: | |||||||||||||||||||||||||
Warrants Outstanding | |||||||||||||||||||||||||
Weighted Average Exercise | Expiration | December 31, | December 31, | ||||||||||||||||||||||
Price | Date | 2012 | Issued | Exercised | Expired | 2013 | |||||||||||||||||||
$ | 320 | 18-Mar | – | 371 | – | – | 371 | ||||||||||||||||||
$ | 320 | 18-Apr | – | 36 | – | – | 36 | ||||||||||||||||||
$ | 300 | 18-Apr | – | 122 | – | – | 122 | ||||||||||||||||||
Total Warrants | – | 529 | – | – | 529 | ||||||||||||||||||||
7_STOCK_PLAN_AND_EMPLOYEE_STOC
7. STOCK PLAN AND EMPLOYEE STOCK OPTIONS | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||
NOTE 7 - STOCK PLAN AND EMPLOYEE STOCK OPTIONS | ' | ||||
In May 2013, the board of directors adopted a non-qualified stock option plan whereby 2,500 shares were reserved for issuance. As of December 31, 2013, 2,500 shares of common stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc. | |||||
Non-Qualified Stock Option Plan, May 2013 | 2013-A | ||||
Plan | |||||
Shares initially reserved | 2,500 | ||||
Shares issued during 2013 | 2,500 | ||||
Remaining shares available to be issued at December 31, 2013 | – | ||||
Shares issued and outstanding as of December 31, 2013 | 2,500 | ||||
In December 2012, the board of directors adopted a non-qualified stock option plan whereby 1,125 shares were reserved for issuance. As of December 31, 2013, 1,125 shares of common stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc. | |||||
Non-Qualified Stock Option Plan, December 2012 | 2013 | ||||
Plan | |||||
Shares initially reserved | 1,125 | ||||
Shares issued during 2012 and 2013 | 1,125 | ||||
Remaining shares available to be issued at December 31, 2013 | – | ||||
Shares issued and outstanding as of December 31, 2013 | 1,125 | ||||
In April 2012, the board of directors adopted a non-qualified stock option plan whereby 625 shares were reserved for issuance. As of December 31, 2012, 625 shares of common stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc. | |||||
Non-Qualified Stock Option Plan, April 2012 | 2012 | ||||
Plan | |||||
Shares initially reserved | 625 | ||||
Shares issued during 2012 | 625 | ||||
Remaining shares available to be issued at December 31, 2012 | – | ||||
Shares issued and outstanding as of December 31, 2012 | 625 | ||||
8_INCOME_TAXES
8. INCOME TAXES | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||||||
8. INCOME TAXES | ' | ||||||||||||||||
The Company adopted the provisions of ASC Topic 740, "Income Taxes." Implementation of ASC Topic 740 did not have a material cumulative effect on prior periods nor did it result in a change to the current year's provision. | |||||||||||||||||
The effective tax rate for the Company is reconcilable to statutory tax rates as follows: | |||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
U. S. Federal statutory tax rate | % | 34 | % | 34 | |||||||||||||
U.S. valuation difference | (34 | ) | (34 | ) | |||||||||||||
Effective U. S. tax rate | – | – | |||||||||||||||
Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. Federal income tax of 34% to pretax income from continuing operations as a result of the following (in thousands): | |||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
Computed expected tax expense (benefit) | $ | 2,468 | $ | 1,630 | |||||||||||||
Change in valuation allowance | (2,468 | ) | (1,630 | ) | |||||||||||||
Income tax expense | $ | – | $ | – | |||||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013, and 2012, are presented below (in thousands): | |||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Net operating loss carry forwards | $ | 20,751 | $ | 18,283 | |||||||||||||
Less valuation allowance | (20,751 | ) | (18,283 | ) | |||||||||||||
Net deferred tax assets | $ | – | $ | – | |||||||||||||
The Company has determined that a valuation allowance of $20,751,000 at December 31, 2013, is necessary to reduce the deferred tax assets to the amount that will more than likely than not be realized. The change in valuation allowance for 2013 was approximately $2,468,000. As of December 31, 2013, the Company has a net operating loss carry-forward of $58,888,000, which is available to offset future federal taxable income, if any, with expiration beginning 2019 and ending 2033. | |||||||||||||||||
9_EARNINGS_PER_SHARE
9. EARNINGS PER SHARE | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
NOTE 9 - EARNINGS PER SHARE | ' | ||||||||||||
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amount): | |||||||||||||
For the twelve months ended December 31, 2013 | |||||||||||||
Net loss | Shares | Per-Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Basic and diluted EPS: | |||||||||||||
Net loss | $ | (7,264 | ) | 35 | $ | (207.54 | ) | ||||||
For the twelve months ended December 31, 2012 | |||||||||||||
Net loss | Shares | Per-Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Basic and diluted EPS: | |||||||||||||
Net loss | $ | (4,814 | ) | 9 | $ | (534.89 | ) | ||||||
Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities. | |||||||||||||
The calculation of diluted earnings per share for the year ended December 31, 2013 does not include 100,323 shares of common stock underlying the Bonds (as define below); 529 of warrants underlying promissory convertible debt, 471,260 shares of common stock underlying promissory convertible debt and 9,930,982 shares of common stock underlying the Series A Preferred Stock, due to their anti-dilutive effect. |
10_MAJOR_CUSTOMERS
10. MAJOR CUSTOMERS | 12 Months Ended |
Dec. 31, 2013 | |
Risks and Uncertainties [Abstract] | ' |
NOTE 10 - MAJOR CUSTOMERS | ' |
The Company had gross sales of approximately $7,156,000 and $7,328,000 for the years ended December 31, 2013 and 2012, respectively. The Company had two customers that met the required disclosure of 10% that represented 32% and 12% of the gross sales during the year ended December 31, 2013. Additionally the Company had two customers that met the required disclosure of 10% that represented 42% and 13% of the gross sales during the year ended December 31, 2012. |
11_NOTES_PAYABLE_LONGTERM_DEBT
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||||||||||
NOTE 11 - NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES | ' | ||||||||||||||||||||
Notes payable, long-term debts and capital leases consist of the following as of December 31, 2013 (in thousands): | |||||||||||||||||||||
Terms | Maturity Date | Interest Rate | Gross Balance | Debt Discount | Balance | ||||||||||||||||
Banc leasing, Inc. | $10,660 / Month including interest | 15-Jan | 11.62% | $ | 130 | $ | – | $ | 130 | ||||||||||||
Advantage leasing associates | $8,269 / Month including interest | Various | Various | 115 | – | 115 | |||||||||||||||
Legacy laser services Dallas, LLC | $9,947 / Month including interest | 16-May | 42.00% | 181 | – | 181 | |||||||||||||||
MP Nexlevel LLC | $7,043 / Month including interest | 14-May | 10.00% | 34 | – | 34 | |||||||||||||||
Tonaquint | $950,400 / Lump sum payment including interest | Immediately due and payable | 12.00% | 793 | – | 793 | |||||||||||||||
JMJ Financial | $330,000 / Lump sum payment including interest | 14-Mar | 12.00% | 232 | 174 | 58 | |||||||||||||||
Vista capital | $72,600 / Lump sum payment including interest | Immediately due and payable | 12.00% | 51 | – | 51 | |||||||||||||||
Willow creek capital | $293,040 / Lump sum payment including interest | Immediately due and payable | 12.00% | 228 | – | 228 | |||||||||||||||
TCA global line of credit | $139,523 / Month including interest | 14-Jul | 12.00% | 1,019 | 104 | 915 | |||||||||||||||
Group 10 | $157,500 / Month including interest | 14-Jul | 12.00% | 157 | 143 | 14 | |||||||||||||||
Investor financing | $495,000 / Lump sum payment including interest | 14-Apr | 12.00% | 473 | – | 473 | |||||||||||||||
Premium assignment | $2,063 / Month including interest | 14-Sep | 5.68% | 18 | – | 18 | |||||||||||||||
Dakota capital equipment financing | $178,031 / Quarterly including interest | 16-Mar | 12.00% | 1,519 | 25 | 1,494 | |||||||||||||||
E-bond investor notes | 3 years/ Semiannual interest (See below) | Various | 7.50% | 311 | 182 | 129 | |||||||||||||||
Line of credit | 2 years/ Quarterly interest (See below) | 16-Dec | 3.00% | 4,281 | – | 4,281 | |||||||||||||||
Total debt | $ | 9,542 | $ | 628 | 8,914 | ||||||||||||||||
Less current maturities | (3,435 | ) | |||||||||||||||||||
Long-term debt | $ | 5,479 | |||||||||||||||||||
The net maturities of these debts are $3,541,000, $702,000, $390,000 and $4,281,000 for the years ended December 31, 2014, 2015, 2016 and 2017, respectively. | |||||||||||||||||||||
Notes payable, long-term debt and capital leases consist of the following as of December 31, 2012 (in thousands): | |||||||||||||||||||||
Terms | Maturity Date | Interest Rate | Gross Balance | Debt Discount | Balance | ||||||||||||||||
Banc leasing, Inc. | $10,660 / Month including interest | 15-Jan | 11.62% | $ | 227 | $ | – | $ | 227 | ||||||||||||
Advantage leasing associates | $7,186 / Month including interest | Various | Various | 156 | – | 156 | |||||||||||||||
MP Nexlevel LLC | $7,043 / Month including interest | 14-May | 10.00% | 111 | – | 111 | |||||||||||||||
Investor financing | $765,000 / Lump sum payment including interest | 13-Jan | 12.00% | 765 | – | 765 | |||||||||||||||
Premium assignment | $1,495 / Month including interest | 13-Jul | 6.00% | 17 | – | 17 | |||||||||||||||
Dakota capital equipment financing | $178,031 / Quarterly including interest | 16-Mar | 18.00% | 1,820 | 57 | 1,763 | |||||||||||||||
E-bond investor notes | 3 years/ Semiannual interest (See below) | Various | 7.50% | 687 | 566 | 121 | |||||||||||||||
Line of credit | 2 years/ Quarterly interest (See below) | 15-Dec | 12.00% | 3,168 | – | 3,168 | |||||||||||||||
Total debt | $ | 6,951 | $ | 623 | 6,328 | ||||||||||||||||
Less current maturities | (1,527 | ) | |||||||||||||||||||
Long-term debt | $ | 4,801 | |||||||||||||||||||
Line of Credit | |||||||||||||||||||||
In December 2013, the maturity date of the $12.0 million unsecured revolving credit facility with Angus Capital Partners, a related party, was extended from December 31, 2015 to December 31, 2017. The Company also renegotiated the interest rate from 12% per annum to 3% per annum retroactive to January 1, 2013. The Company in consideration has accepted the return and cancellation of 36,784 common shares (post-split) of Company common stock issued for the Line of Credit conversions during 2013. The Company has accordingly reversed the payment of principal and interest of $2,158,000 in December 2013 and subsequently received the canceled shares in February 2014. The terms of the unsecured revolving credit facility allow the Company to draw upon the facility as financing requirements dictate and provide for quarterly interest payments at a 3% rate per annum. The payment of principal may be paid in cash, common shares or preferred shares at the Lender’s election. The payment of interest may only be paid in cash. At December 31, 2013 and 2012, the outstanding balance on the line of credit totaled $4,281,000 and $3,168,000, respectively. The remaining line of credit available at December 31, 2013 and 2012 was $7,719,000 and $8,832,000, respectively. | |||||||||||||||||||||
Additionally for the year ended December 31, 2013, the Company issued 1,763,000 shares of its Series A Preferred Stock to Angus Capital for the settlement of principal amount of $35,260 of debt. The Company issued Series Preferred A Stock at an average price of $.02 per share or $8.00 (post-split) per share calculated based on the closing price of the common stock the day the debt was settled. | |||||||||||||||||||||
Under current accounting standards ASC 470-50-40-2, the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statement of operations. If this was not a related party transaction, a loss of $299,710 would have been recognized for the year ended December 31, 2013. | |||||||||||||||||||||
Certain family related trusts are participants in the Angus Capital revolving credit facility. H. Dean Cubley holds the investment and voting power over certain of these family related trusts while Scott Cubley and Brian Cubley, the sons of H. Dean Cubley, have the investment and voting power over the remaining other family trusts. | |||||||||||||||||||||
E-Series Bond Investor Note | |||||||||||||||||||||
During the year ended December 31, 2013, the Company issued to certain accredited investors a principal amount of $325,000 of E-Series bonds (the "Bonds"). A balance of $687,000 was outstanding at December 31, 2012. At December 31, 2013, the outstanding principal balance of the Bonds totaled $311,000. The Bonds are due and payable upon maturity, a three-year period from the issuance date. Interest on the Bonds is payable at the rate of 7.5% per annum, and is payable semiannually. The Bondholder may require the Company to convert the Bond (including any unpaid interest) into shares of common stock at any time only during the first year. If the Bonds are converted under this option, the Company will issue shares representing 100% of the Bond principal and unpaid interest calculated through maturity. The common stock issued under this option will be valued at the average closing price average of the common shares for the five days prior to the notification. If the Bond is converted within the first year the Company will issue a three-year warrant to purchase one share of EBI common stock at a price of $4.00 for every $2.00 of Bond principal. | |||||||||||||||||||||
At the Company's discretion at any time after the first year, the Bonds, including the interest payments calculated through the date of conversion may be redeemed in cash or in shares of our common stock, valued at the average last sales price over the 20-trading-day period preceding any payment date. If the Company chooses to issue common stock as redemption of the Bond principal, we will issue shares representing a value equal to 125% of the Bond principal and shares representing a value equal to 100% of the Bond interest through redemption date. | |||||||||||||||||||||
The Bonds were determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Bond, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the income statement. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $182,238 for the year ended December 31, 2013. The estimated debt accretion for subsequent years is $92,678, $88,013 and $1,547 for years ending December 31, 2014, 2015 and 2016, respectively. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from January 1, 2013, through December 31, 2013: | |||||||||||||||||||||
Description | Bonds | Compound | Total | ||||||||||||||||||
Derivative | |||||||||||||||||||||
Liability | |||||||||||||||||||||
Fair value at December 31, 2012 | $ | 121,446 | $ | 492,043 | $ | 613,489 | |||||||||||||||
Fair value of issuances during 2013 (principal amount) | 325,000 | – | 325,000 | ||||||||||||||||||
Fair value of issuances during 2013 (debt discount) | (139,216 | ) | 139,216 | – | |||||||||||||||||
Change in fair value | 522,532 | (147,918 | ) | 374,614 | |||||||||||||||||
Conversions | (701,000 | ) | (443,611 | ) | (1,144,611 | ) | |||||||||||||||
Fair value at December 31, 2013 | $ | 128,762 | $ | 39,730 | $ | 168,492 | |||||||||||||||
The Company recorded a net change in fair value of derivatives of $147,918 and a gain on debt redemption of $156,791 for a total net derivative income of $304,709 for the year ended December 31, 2013. | |||||||||||||||||||||
Dakota Capital Fund LLC Equipment Financing | |||||||||||||||||||||
In November 2011, the Company entered into debt financing agreement with Dakota Capital Fund LLC, for financing of up to $3,000,000. During the fourth quarter of 2011, the Company received proceeds of $2,000,000 and had the option of additional funding of $1,000,000 for equipment purchases. This debt facility is secured by certain ERF Wireless assets and there is no prepayment penalty. At December 31, 2013 and 2012, the outstanding balance on the debt financing agreement totaled $1,494,000 and $1,763,000, respectively. Also the Company has elected not to request any additional funds under this credit facility. The payment terms are $178,031 per quarter including interest, at an annual rate of 18% plus 10% of positive operational cash flow as determined on a quarterly basis for repayment of additional principal beginning July 1, 2012. The funding was utilized to purchase equipment to build out networks in oil and gas exploration regions of North America. | |||||||||||||||||||||
The Company issued 30,000 shares of common stock for the consummation of the initial $2,000,000 debt financing agreement from Dakota Capital Fund LLC resulting in a debt discount of $93,600. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $33,014 and $29,205 for the years ended December 31, 2013 and 2012, respectively. The estimated debt accretion is $24,611 for year ending December 31, 2014. | |||||||||||||||||||||
Investor Bridge Loan | |||||||||||||||||||||
On March 20, 2012, the Company entered into a three-month secured bridge financing agreement with certain individuals for $300,000 with and interest rate of 12% per annum. During the second quarter of 2012, the Company was loaned an additional $100,000 increasing the note to $400,000 due July 1, 2012. The note was repaid from a new secured $1,000,000 Investor Financing agreement from these same individuals. | |||||||||||||||||||||
Investor Financing Loan | |||||||||||||||||||||
On July 13, 2012, the Company entered into a three-month secured debt financing agreement with certain individuals for $1,000,000 with an interest rate of 12% per annum. Under a subsequent modified agreement dated January 2014, as amended, the maturity date has been extended to April 15, 2014. Both parties under the amendment agreed to apply the Dakota Capital Fund payment of $181,235 including interest as a subset to the bridge note. The Company has also renegotiated the subset interest rate from .5% interest per day on a 360 day calendar year to 12% rate per annum retroactive to March 23, 2013. The Company in consideration has accepted the return and cancellation of 796 common shares (post-split) of Company common stock issued during the third quarter of 2013 for interest. The Company also agreed to additional consideration of 5,000 of preferred A shares to be issued as long as the note remains unpaid and a $50,000 penalty to be added to principal in January 2014 for the consideration of the extension of the note. The Company has accordingly reversed the payment of interest of $159,259 in December 2013. At December 31, 2013 and 2012, the outstanding principal balance totaled $473,000 and $765,000, respectively. | |||||||||||||||||||||
MP Nexlevel | |||||||||||||||||||||
On July 1, 2012, the Company issued a note to MP Nexlevel LLC., totaling $152,613 bearing interest at 10% per annum and is payable in twenty-four monthly payments of $7,043, including interest. At December 31, 2013 and 2012, the outstanding balance totaled $34,000 and $111,000, respectively. | |||||||||||||||||||||
Tonaquint Convertible Promissory Note | |||||||||||||||||||||
On March 5, 2013, the Company entered into a six-month secured convertible promissory note secured debt financing agreement with Tonaquint, Inc. (“holder”), for $791,500, bearing interest at a rate of 12% per annum and maturing September 5, 2013. At December 31, 2013, the outstanding principal balance of the Tonaquint convertible promissory note totaled $793,000. The note includes an original issue discount (“OID”) of $65,000 based on the consideration funded, prepaid interest of $71,500 and $5,000 in legal and other expense. The Company also paid holder an origination fee in the amount of $227,500 in 144 Stock (711 post-split shares) at the closing bid price on March 5, 2013, plus 125 post-split shares (valued at $40,000) of the Company’s common stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of restricted common stock at any time after the six-month term of the note. The common stock issued will be valued using a conversion factor of 80% of the average of the lowest two (2) trading prices for common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder received the option to purchase five-year warrants expiring March 5, 2018 to purchase 371 shares of ERF common stock at an exercise price of $320.00 or the per-share price at which the common stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this warrant. The Company is not in compliance with all the provisions of the note causing an automatic acceleration of the outstanding balance of $791,500 to $949,800. The note will accrue interest at a rate of 12% from September 5, 2013 until the March 4, 2014 and thereafter at a rate of 18% per annum. The note is recorded as a current liability. | |||||||||||||||||||||
The Tonaquint promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature; conversion price reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Tonaquint note, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount, which totaled $588,724 for the year ended December 31, 2013. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from March 5, 2013 through December 31, 2013: | |||||||||||||||||||||
Description | Tonaquint | Warrant | Compound | Total | |||||||||||||||||
Compound | Derivative | ||||||||||||||||||||
Derivative | Liability | ||||||||||||||||||||
Liability | |||||||||||||||||||||
Fair value of issuances at inception | $ | 950,400 | $ | – | $ | – | $ | 950,400 | |||||||||||||
Fair value of issuances during 2013 (debt discount) | (588,724 | ) | 16,400 | 256,224 | (316,100 | ) | |||||||||||||||
Change in fair value | 588,724 | (16,304 | ) | (175,655 | ) | 396,765 | |||||||||||||||
Conversions | (157,032 | ) | – | (157,032 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 793,368 | $ | 96 | $ | 80,569 | $ | 874,033 | |||||||||||||
The Company recorded a net change in fair value of derivative income of $26,426 for the year ended December 31, 2013. | |||||||||||||||||||||
JMJ Financial Convertible Promissory Note | |||||||||||||||||||||
On March 20, 2013, the Company entered into a one year unsecured promissory note debt financing agreement with JMJ Financial for (“JMJ”) up to $500,000 at the sole discretion of additional consideration with the Lender. The note includes a 10% original issue discount that is prorated based on the consideration funded. The Company also paid holder an origination fee in the amount of $40,500 in 144 Stock (125 post-split shares) at the closing bid price of the Company’s common stock. As of December 31, 2013 the Company has received funding of $300,000, bearing interest at a rate of 12% per annum and maturing in one year from the effective date of each payment. At December 31, 2013, the outstanding principal balance of the JMJ Financial convertible promissory note totaled $232,000 including OID. The conversion price is the lesser of $0.59 or 60% of the lowest trade price in the 25 trading days previous to the conversion. The note is recorded as a current liability. | |||||||||||||||||||||
The JMJ promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature; conversion price reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the JMJ note, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and from the accretion of unamortized discount upon conversion which totaled $156,683 for the year ended December 31, 2013. The estimated debt accretion for the subsequent year is $209,581 for year ending December 31, 2014. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from March 20, 2013 through December 31, 2013: | |||||||||||||||||||||
Description | JMJ | Compound | Total | ||||||||||||||||||
Derivative | |||||||||||||||||||||
Liability | |||||||||||||||||||||
Fair value of issuances at inception | $ | 330,000 | $ | – | $ | 330,000 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (330,000 | ) | 382,260 | 52,260 | |||||||||||||||||
Change in fair value | 156,683 | (248,147 | ) | (91,464 | ) | ||||||||||||||||
Conversions | (98,320 | ) | – | (98,320 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 58,363 | $ | 134,113 | $ | 192,476 | |||||||||||||||
The Company recorded a net change in fair value of derivative income of $162,865 and a loss on debt redemption of $13,819 for a total net derivative income of $149,046 for the year ended December 31, 2013. | |||||||||||||||||||||
Willow Creek Capital Convertible Promissory Note | |||||||||||||||||||||
On April 2, 2013, the Company entered into a nine-month secured convertible promissory note debt financing agreement with Willow Creek Capital, LLC, for $244,200, bearing interest at a rate of 12% per annum and maturing October 1, 2013. The note also includes a 10% OID of $20,000 based on the consideration funded, prepaid interest of $22,200 and $2,000 in legal and other expense. The Company also paid holder an origination fee in the amount of $109,890 in 144 Stock (366 post-split shares) at the closing bid price of the Company’s common stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of restricted common stock at any time after the six months term of the note. The common stock issued will be valued using a conversion factor of 80% the average of the lowest two (2) trading prices common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder will be entitled to purchase from the Company five year warrants expiring April 2, 2018 to purchase 122 post-split shares of ERF common stock at an exercise price of $300.00 or the per-share price at which the common stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this Warrant. | |||||||||||||||||||||
The Willow Creek promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature; conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Willow Creek note, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and from the accretion of unamortized discount upon conversion which totaled $244,200 for the year ended December 31, 2013. The Company is not in compliance with all the provisions of the note causing an automatic acceleration of the outstanding balance of $244,200 to $293,040. The note will accrue interest at a rate of 12% from October 1, 2013 until April 1, 2014 and thereafter at a rate of 18% per annum. The note is recorded as a current liability. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from April 2, 2013 through December 31, 2013: | |||||||||||||||||||||
Description | Willowcreek | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 293,040 | $ | – | $ | 293,040 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (244,200 | ) | 255,000 | 10,800 | |||||||||||||||||
Change in fair value | 244,200 | (203,724 | ) | 40,476 | |||||||||||||||||
Conversions | (65,240 | ) | – | (65,240 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 227,800 | $ | 51,276 | $ | 279,076 | |||||||||||||||
The Company recorded a net change in fair value of derivative income of $133,589 for the year ended December 31, 2013. | |||||||||||||||||||||
Vista Capital Convertible Promissory Note | |||||||||||||||||||||
On April 4, 2013, the Company entered into a six-month secured convertible promissory note debt financing agreement with Vista Capital Investments, LLC, for $60,500, bearing interest at a rate of 12% per annum and maturing October 4, 2013. The note also includes a 10% OID of $5,000 based on the consideration funded and prepaid interest of $5,500. The Company also paid holder an origination fee in the amount of $21,175 in 144 Stock (84 post-split shares) at the closing bid price of the Company’s common stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of restricted common stock at any time after the six months term of the note. The common stock issued will be valued using a conversion factor of 80% the average of the lowest two (2) trading prices common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder will be entitled to purchase from the Company five year warrants expiring April 4, 2018 to purchase 36 post-split shares of ERF common stock at an exercise price of $320.00 or the per-share price at which the common stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this Warrant. | |||||||||||||||||||||
The Vista promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature; conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Vista note, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and from the accretion of unamortized discount upon conversion which totaled $60,500 for the year ended December 31, 2013. The Company is not in compliance with all the provisions of the note causing an automatic acceleration of the outstanding balance of $60,500 to $72,600. The note will accrue interest at a rate of 12% from October 4, 2013 until April 3, 2014 and thereafter at a rate of 18% per annum. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from April 4, 2013 through December 31, 2013: | |||||||||||||||||||||
Description | Vista | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 72,600 | $ | – | $ | 72,600 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (60,500 | ) | 70,967 | 10,467 | |||||||||||||||||
Change in fair value | 60,500 | (33,451 | ) | 27,049 | |||||||||||||||||
Conversions | (22,042 | ) | – | (22,042 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 50,558 | $ | 37,516 | $ | 88,074 | |||||||||||||||
The Company recorded a net change in fair value of derivatives income of $8,731 for the year ended December 31, 2013. | |||||||||||||||||||||
TCA Global Convertible Promissory Note | |||||||||||||||||||||
On June 28, 2013, the Company entered into a twelve-month secured convertible promissory note debt financing agreement with TCA Global Credit Master Fund for $1,500,000, bearing interest at a rate of 12% per annum and maturing July 28, 2014. Under a subsequent modified agreement dated March 25, 2014, TCA has agreed to restructure the agreement and extend the maturity date to November 15th, 2014. The Company in consideration has agreed to a $75,000 restructuring fee to be added to the sum of the principal balance including a $40,791 interest charge to be paid in March and nominal legal fees. The monthly principal and interest payments will be $149,609 per month. At December 31, 2013, the outstanding principal balance of the TCA Global convertible promissory note totaled $1,019,000. The note also includes $153,300 in commitment fees; due diligence fees; document review fees; service fees; legal; and other expense. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of restricted common stock at any time during the twelve months term of the note or thereafter. The common stock issued will be valued using a conversion factor of 85% the average VWAP trading price during the five (5) trading day period ending on the latest complete trading day prior to the conversion date. | |||||||||||||||||||||
The TCA Global promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature and the redemption option (compound embedded derivative liability). At the date of issuance of the TCA Global note, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and from the accretion of unamortized discount upon conversion which totaled $33,989 for the year ended December 31, 2013. The estimated debt accretion for subsequent years is $69,168 and $35,155 for years ending December 31, 2014 and 2015, respectively. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from June 28, 2013 through December 31, 2013: | |||||||||||||||||||||
Description | TCA Global | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 1,500,000 | $ | – | $ | 1,500,000 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (138,312 | ) | 138,312 | – | |||||||||||||||||
Change in fair value | 33,989 | (109,596 | ) | (75,607 | ) | ||||||||||||||||
Conversions | (480,237 | ) | – | (480,237 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 915,440 | $ | 28,716 | $ | 944,156 | |||||||||||||||
The Company recorded a net change in fair value of derivatives income of $109,596 for the year ended December 31, 2013. | |||||||||||||||||||||
Group 10 Holdings Convertible Promissory Note | |||||||||||||||||||||
On October 3, 2013, the Company entered into a twelve-month unsecured convertible promissory note debt financing agreement with Group 10 Holdings, LLC, for $157,500, bearing interest at a rate of 12% per annum and maturing October 2, 2014. The note also includes a 5% OID of $7,500 based on the consideration funded. The Company also paid holder a commitment fee in the amount of $45,000 in 144 Stock (1,125 post-split shares) at the closing bid price of the Company’s common stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of restricted common stock at any time after the twelve months term of the note. The common stock issued will be valued using a conversion factor of 55% multiplied by the lowest closing bid price of the (20) trading days prior to the conversions, which represents a discount rate of 45%. | |||||||||||||||||||||
The Group 10 Holdings promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature; conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Group 10 note, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and from the accretion of unamortized discount upon conversion which totaled $14,155 for the year ended December 31, 2013. The note will accrue interest at a rate of 12% from October 3, 2013 until October 2, 2014 and thereafter at a rate of 18% per annum. | |||||||||||||||||||||
The following table summarizes the convertible debt activity for the period from October 3, 2013 through December 31, 2013: | |||||||||||||||||||||
Description | Group 10 | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 157,500 | $ | – | $ | 157,500 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (157,500 | ) | 304,519 | 147,019 | |||||||||||||||||
Change in fair value | 14,155 | – | 14,155 | ||||||||||||||||||
Conversions | – | – | – | ||||||||||||||||||
Fair value at December 31, 2013 | $ | 14,155 | $ | 304,519 | $ | 318,674 | |||||||||||||||
The Company recorded a net change in fair value of derivatives expense of $51,996 for the year ended December 31, 2013. | |||||||||||||||||||||
Capital Leases | |||||||||||||||||||||
Agility Lease Fund, LLC Included in property and equipment at December 31, 2012, the capitalized equipment is fully amortized. The equipment and one of the Company's bank accounts were the primary collateral securing the financing along with a guarantee by the Company. This lease was repaid in January 2012. | |||||||||||||||||||||
Banc Leasing Inc. Included in property and equipment at December 31, 2013, the cost of the equipment was $610,900 and the accumulated amortization was $493,811. Amortization of assets under capital leases is included in depreciation expense. The equipment is the primary collateral securing the financing. | |||||||||||||||||||||
Advantage Leasing Inc. Included in vehicles at December 31, 2013, the cost of the vehicles was $273,443 and the accumulated amortization was $157,082. Amortization of assets under capital leases is included in depreciation expense. The vehicles are the primary collateral securing the financing. | |||||||||||||||||||||
Legacy Laser Services Dallas, LLC Included in property and equipment at December 31, 2013, the cost of the equipment was $155,348 and the accumulated amortization was $32,364. Amortization of assets under capital leases is included in depreciation expense. The equipment is the primary collateral securing the financing. | |||||||||||||||||||||
The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2013 (in thousands): | |||||||||||||||||||||
Year Ending December 31, | |||||||||||||||||||||
2014 | $ | 335 | |||||||||||||||||||
2015 | 159 | ||||||||||||||||||||
2016 | 63 | ||||||||||||||||||||
Thereafter | – | ||||||||||||||||||||
Total minimum lease payments | 557 | ||||||||||||||||||||
Less amount representing interest | (131 | ) | |||||||||||||||||||
Present value of net minimum lease payments | 426 | ||||||||||||||||||||
Current maturities of capital lease obligations | (252 | ) | |||||||||||||||||||
Long-term portion of capital lease obligations | $ | 174 | |||||||||||||||||||
12_COMMITMENTS
12. COMMITMENTS | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
NOTE 12 - COMMITMENTS | ' | ||||
Leases and License Agreements | |||||
For the years ended December 31, 2013 and 2012, rental expenses of approximately $1,253,000 and $1,058,000, respectively, were incurred. The Company accounts for rent expense under leases that provide for escalating rentals over the related lease term on a straight-line method. The Company occupies office and tower facilities under several non-cancelable operating lease agreements expiring at various dates through December 2018, and requiring payment of property taxes, insurance, maintenance and utilities. | |||||
Future minimum lease payments under non-cancelable operating leases at December 31, 2013 were as follows: | |||||
Year Ending December 31, | Amount | ||||
2014 | 779 | ||||
2015 | 707 | ||||
2016 | 610 | ||||
2017 | 116 | ||||
Thereafter | 9 | ||||
Total | $ | 2,221 | |||
Banc Leasing Inc. | |||||
During August 2007, the Company entered into a contract with Banc Leasing Inc. to fund the Company’s US-Banknet System. Each funding is collateralize by the equipment and normally is repaid over a seven year period with interest established at the date of the inception of the lease. Each lease has a $1 buyout provision. The details of the capital lease are included in Note 11. |
13_COSTS_AND_ESTIMATED_EARNING
13. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts | ' | ||||||||
13. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS | ' | ||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts for the years ended December 31, 2013 and 2012 are summarized as follows (in thousands): | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Costs incurred on uncompleted contracts | $ | 51 | $ | 21 | |||||
Estimated profit | 57 | 14 | |||||||
Gross revenue | 108 | 35 | |||||||
Less: billings to date | 108 | – | |||||||
Costs and profit in excess of billings | $ | – | $ | 35 | |||||
Such amounts are included in the accompanying balance sheets at December 31, 2013 and 2012, are summarized as follows (in thousands): | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Cost and estimated earnings in excess of billings on uncompleted contracts | $ | – | $ | 35 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | – | – | |||||||
$ | – | $ | 35 | ||||||
14_RELATED_PARTY_TRANSACTIONS
14. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
14. RELATED PARTY TRANSACTIONS | ' |
In January 2011, the Company entered into an agreement for annual professional services with Synchton Incorporated (“Synchton”), an affiliate of Scott Cubley, the adult son of Dr. Cubley, for consulting services. The agreement requires Synchton to provide a minimum commitment of 50 hours per month and we are obligated to pay Synchton $3,000 per month plus an additional $120 per hour for excess hours greater than the required 50 hours per month in cash or shares of common stock. This agreement is automatically renewable on each anniversary date and can be terminated by us by providing a notice of termination at least ninety days prior to the anniversary date. For the years ended December 31, 2013 and 2012, total fees incurred by the Company under the agreement were $66,000 and $36,000, respectively. | |
In January 2012, the Company and Brian Cubley, the adult son of Dr. Cubley, entered into an employment agreement pursuant to which he would serve as the director of administration through December 31, 2015, during which time he will be paid an annual salary of $150,000, $24,000 of which will be paid through the issuance of Company common stock. During the year ended December 31, 2013, Mr. Cubley was paid $131,000 cash, $19,000 of which was paid through the issuance of 67 post-split shares of Company common stock. During the year ended December 31, 2012, Mr. Cubley was paid $150,000 cash and $24,000 of equity through issuance of 28 post-split shares of common stock. Mr. Cubley will also be eligible to earn up to 525 shares of common stock and a warrant to purchase up to 938 shares of common stock upon us achieving certain financial milestones. If Mr. Cubley’ agreement is terminated by us without cause, Mr. Cubley will be entitled to receive the remainder of the salary due under the agreement for the remainder of the term, automatic vesting of all equity awards, and three-year options to purchase up to 150,000 shares of our common stock. At December 31, 2013, Mr. Cubley was paid a $7,000 bonus for achieving certain financial milestones. | |
In May 2013, the Company entered into a capital lease agreement with Legacy Laser Services Dallas, LLC and (Affiliate). Manny M. Carter is a Managing Member of Legacy Laser Services and a current Board Member of ERF Wireless Inc. At December 31, 2013, the outstanding balance on the capital leases totaled $181,000. The payment terms are $9,947 per month including interest, at a rate of 42% per annum. The capital leased equipment is to be utilized in our networks in oil and gas exploration regions. The equipment is the primary collateral securing the financing. | |
For the year ended December 31, 2013, the Company issued 36,784 post-split shares of its common stock for the settlement of $1,808,739 of principal and $349,261 of accrued interest for a total principal and interest amount of $2,158,000 owed to Angus Capital Partners. The Company issued common stock at an average price of $58.67 per share calculated based on the closing price the day the debt was settled. At December 31, 2013, Angus Capital Partners and ERF Wireless, Inc. both agreed to reduce the interest rate from the current 12% per annum to 3% per annum retroactive to January 1, 2013 and extend the maturity date of the revolving note to December 31, 2017, while maintaining the maximum Line of Credit of $12 million. The Company in consideration has accepted the return and cancellation of 36,784 common shares (post-split) of Company common stock issued for the Line of Credit conversions during 2013. The Company has accordingly reversed the payment of principal and interest of $2,158,000 in December 2013 and subsequently received the canceled shares in February 2014. See Note 11 for additional information on this facility. | |
Additionally for the year ended December 31, 2013, the Company issued 1,763,000 shares of its Series A Preferred Stock to Angus Capital for the settlement of principal amount of $35,260 of debt. The Company issued Series Preferred A Stock at an average price of $.02 per share or $8.00 (post-split) per share calculated based on the closing price of the common stock the day the debt was settled. | |
Under current accounting standards ASC 470-50-40-2, the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statement of operations. If this was not a related party transaction, a loss of $299,710 would have been recognized for the year ended December 31, 2013. | |
For the year ended December 31, 2012, the Company issued 5,556 post-split shares of its common stock for the settlement of $2,122,385 of principal amount of $2,589,000 owed to Angus Capital Partners. The Company issued common stock at an average price of $465.98 per share calculated based on the closing price the day the debt was settled. | |
Additionally for the year ended December 31, 2012, the Company issued 118,095 shares of its Series A Preferred Stock to Angus Capital for the settlement of principal amount of $124,000 of debt. The Company issued Series Preferred A Stock at an average price of $1.05 per share calculated based on the closing price of the common stock the day the debt was settled. | |
Under current accounting standards ASC 470-50-40-2 the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statement of operations. If this was not a related party transaction, a gain of $10,850 would have been recognized for the year ended December 31, 2012. | |
Certain family related trusts are participants in the Angus Capital revolving credit facility. H. Dean Cubley holds the investment and voting power over certain of these family related trusts while Scott Cubley and Brian Cubley, the sons of H. Dean Cubley, have the investment and voting power over the remaining other family trusts. |
15_INDUSTRY_SEGMENTS
15. INDUSTRY SEGMENTS | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||||||||||
NOTE 15 - INDUSTRY SEGMENTS | ' | ||||||||||||||||||||||||
This summary reflects the Company's current segments, as described below. | |||||||||||||||||||||||||
Energy Broadband, Inc. (EBI) | |||||||||||||||||||||||||
EBI provides wireless connectivity to rural oil and gas locations primarily via MBT’s. EBI provides wireless broadband products and services focusing primarily on commercial customers providing high speed bandwidth to rural North America to serve the oil and gas sector. All sales from external customers are located within the United States and Canada. | |||||||||||||||||||||||||
Wireless Bundled Services Division (WBS) | |||||||||||||||||||||||||
WBS provides wireless broadband products and services to commercial and individual customers throughout the wireless industry. The Company is in the early stages of building and acquiring a seamless wireless broadband network in certain regions of North America to serve private entities, cities, municipalities and the general public. All sales from external customers are located within the United States. | |||||||||||||||||||||||||
Enterprise Network Services (ENS) | |||||||||||||||||||||||||
ENS provides product and service to operate an enterprise-class encrypted wireless banking network business. Also, ENS provides the CryptoVue System consisting of software, site-based hardware devices and servers to perform network encryption; contracts for the construction, operation, monitoring and maintenance of fixed wireless networks for banking, healthcare and educational customers; trade names, equipment and software, including the software architecture and design. | |||||||||||||||||||||||||
For the year ended December 31, 2013 (in thousands) | |||||||||||||||||||||||||
Year Ended December 31, 2013 | EBI | WBS | ENS | Total Segment | ERF Corporate | Total Consolidated | |||||||||||||||||||
Revenue | $ | 4,311 | $ | 2,441 | $ | 404 | $ | 7,156 | $ | – | $ | 7,156 | |||||||||||||
Segment income (loss) from operations | 124 | (1,316 | ) | (42 | ) | (1,234 | ) | (3,284 | ) | (4,518 | ) | ||||||||||||||
Total assets | 3,002 | 1,352 | 385 | 4,739 | 333 | 5,072 | |||||||||||||||||||
Capital expenditures | 361 | 211 | – | 572 | 12 | 584 | |||||||||||||||||||
Depreciation | 855 | 814 | 234 | 1,903 | 32 | 1,935 | |||||||||||||||||||
For the year ended December 31, 2012 (in thousands) | |||||||||||||||||||||||||
Year Ended December 31, 2012 | EBI | WBS | ENS | Total Segment | ERF Corporate | Total Consolidated | |||||||||||||||||||
Revenue | $ | 4,642 | $ | 2,306 | $ | 380 | $ | 7,328 | $ | – | $ | 7,328 | |||||||||||||
Segment income (loss) from operations | 609 | (534 | ) | (238 | ) | (163 | ) | (3,441 | ) | (3,604 | ) | ||||||||||||||
Total assets | 3,284 | 2,030 | 675 | 5,989 | 282 | 6,271 | |||||||||||||||||||
Capital expenditures | 789 | 905 | 5 | 1,699 | 13 | 1,712 | |||||||||||||||||||
Depreciation | 707 | 654 | 234 | 1,595 | 48 | 1,643 | |||||||||||||||||||
Reconciliation of Segment Assets to Total Assets | 31-Dec-13 | 31-Dec-12 | |||||||||||||||||||||||
Total segment assets | $ | 4,739 | $ | 5,989 | |||||||||||||||||||||
Total corporate assets | 333 | 282 | |||||||||||||||||||||||
Total assets | $ | 5,072 | $ | 6,271 | |||||||||||||||||||||
The accounting policies of the reportable segments are the same as those described in Footnote 1. The Company evaluates the performance of its operating segments based on income before net interest expense, income taxes, depreciation and amortization expense, accounting changes and non-recurring items. | |||||||||||||||||||||||||
For the year ended December 31, 2013 one customer accounted for $165,000 of ENS revenues and two customers accounted for $3,084,000 of EBI Division revenues. One customer accounted for $104,000 of ENS revenues and two customers accounted for $4,086,000 of EBI revenues for the year ended December 31, 2012. |
16_SUBSEQUENT_EVENTS
16. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2013 | |
Subsequent Events [Abstract] | ' |
NOTE 16 - SUBSEQUENT EVENTS | ' |
During the first fiscal quarter of 2014, the Company issued 698,788 shares of common stock valued at approximately $40,500 for services rendered, debt, and conversion of preferred stock. | |
Subsequent to December 31, 2013, the investor financing agreement was modified January 2014, extending the maturity date to April 15, 2014. Both parties have renegotiated the subset interest rate from .5% interest per day on a 360 day calendar year to 12% rate per annum retroactive to March 23, 2013. The Company also agreed to additional consideration of 5,000 of Preferred A shares to be issued as long as the note remains unpaid and a $50,000 penalty to be added to principal in January 2014. | |
Subsequent to December 31, 2013, TCA Global Credit Master Fund, effective March 25, 2014, has agreed to restructure the loan agreement and extend the maturity date to November 15th, 2014. The Company in consideration has agreed to a $75,000 restructuring fee to be added to the sum of the principal balance including a $40,791 interest charge to be paid in March and nominal legal fees. | |
Subsequent to December 31, 2013, the Company, received conversion notices from the various debt holders and made conversions toward the Tonaquint, JMJ, and Willow Creek convertible promissory notes of $49,000, $51,000, and $31,000, respectively and issued stock of 45,674, 108,500 and 37,148, respectively. | |
1_BASIS_OF_PRESENTATION_Polici
1. BASIS OF PRESENTATION (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
Nature of the Company | ' | ||||||||
ERF Wireless, Inc. (“Company” or “ERF Wireless”) provides critical infrastructure wireless broadband communications products and services to a broad spectrum of customers in primarily rural oil and gas exploration areas of North America. We also provide high quality broadband services and critical communications services to residential, oil and gas, educational, health care, and regional banks in rural areas utilizing our Company owned and operated wireless networks. As a total comprehensive solutions provider we offer a wide array of critical communications services including high speed broadband, voice over Internet Protocol (VOIP) telephone and facsimile service, and video security. | |||||||||
Historically, our revenues have been generated primarily from wireless Internet and network construction services. Our Internet revenues have resulted from our offering of broadband and basic communications services to residential and enterprise customers. Our construction revenues typically have consisted of revenues generated from the construction of bank, educational, and healthcare networks and other services associated with providing wireless products and services to the regional banking, educational and healthcare industries. | |||||||||
Our Internet revenues are recorded in “ERF Wireless Bundled Services, Inc. (WBS)”, construction of bank, healthcare and educational networks in our “ERF Enterprise Network Services, Inc. (ENS)” and wireless broadband products and services to rural oil and gas locations are recorded in “Energy Broadband, Inc. (EBI)”. Please refer to segment footnote 15 for additional information regarding segment operations. | |||||||||
Basis of Accounting | ' | ||||||||
The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America. The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations have been reflected herein. | |||||||||
Principles of Consolidation | ' | ||||||||
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. | |||||||||
Securities Held for Resale | ' | ||||||||
Investments in public companies are classified as available-for-sale and are adjusted to their fair market value with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income. Upon disposition of these investments, the specific identification method is used to determine the cost basis in computing realized gains or losses, which are reported in other income and expense. Declines in value that are judged to be other than temporary are reported in other comprehensive income and expense. | |||||||||
Reclassification | ' | ||||||||
Certain amounts in the 2012 financial statements have been reclassified to conform to the 2013 financial presentation. These reclassifications have no impact on net loss. | |||||||||
Use of Estimates | ' | ||||||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. | |||||||||
Cash and Cash Equivalents | ' | ||||||||
Cash and cash equivalents include cash and all highly liquid financial instruments with original purchased maturities of three months or less at the date of purchase. At various times during the year, the Company maintained cash balances in excess of FDIC insurable limits. Management feels this risk is mitigated due to the longstanding reputation of these banks. The Company has not experienced any losses related to these deposits. | |||||||||
Credit Risk | ' | ||||||||
In the normal course of business, the Company extends unsecured credit to the majority of its customers. The Company controls credit risk associated with its receivables through credit checks, approvals, and monitoring procedures. Generally, the Company requires no collateral from its customers. | |||||||||
Operating Leases | ' | ||||||||
We recognize lease expense on a straight-line basis over the minimum lease terms which expire at various dates through 2018. These leases are for office and radio tower facilities and are classified as operating leases. For leases that contain predetermined, fixed escalations of the minimum rentals, we recognize the rent expense on a straight-line basis and record the difference between the rent expense and the rental amount payable in liabilities. | |||||||||
Leasehold improvements made at the inception of the lease are amortized over the shorter of the asset life or the initial lease term as described above. Leasehold improvements made during the lease term are also amortized over the shorter of the asset life or the remaining lease term. | |||||||||
Assets Held under Capital Leases | ' | ||||||||
Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. We utilize various leasing facilities including tower sites, offices sites and the purchase of tower and radio network equipment. When we enter into a lease agreement, we review the terms to determine the appropriate classification of the lease as a capital lease or operating lease based on the factors listed in FASB ASC Topic 840 “Leases”. | |||||||||
Allowance for Doubtful Accounts | ' | ||||||||
The Company uses the allowance method to account for uncollectible accounts receivable. The Company's estimate is based on historical collection experience and a review of the current status of accounts receivable. The Company reviews its accounts receivable balances by customer for accounts greater than 90 days old and makes a determination regarding the collectibility of the accounts based on specific circumstances and the payment history that exists with such customers. The Company also takes into account its prior experience, the customer's ability to pay and an assessment of the current economic conditions in determining the net realizable value of its receivables. The Company also reviews its allowances for doubtful accounts in aggregate for adequacy following this assessment. Accordingly, the Company believes that its allowances for doubtful accounts fairly represent the underlying collectibility risks associated with its accounts receivable. | |||||||||
Deferred Revenues | ' | ||||||||
Revenues that are billed in advance of services being completed are deferred until the conclusion of the period of the service for which the advance billing relates. Deferred revenues are included on the balance sheet in current and long-term liabilities until the service is performed and then recognized in the period in which the service is completed. The Company's deferred revenues consist of billings in advance for services being rendered for its wireless broadband and, accordingly, are deferred and recognized monthly as earned. The Company had deferred revenues in current liabilities of approximately $13,000 and $20,000 as of December 31, 2013 and December 31, 2012, respectively. | |||||||||
Advertising Costs | ' | ||||||||
Advertising costs are expensed when incurred. For the years ended December 31, 2013 and 2012, the Company expensed $52,000 and $66,000, respectively. | |||||||||
Stock-Based Compensation | ' | ||||||||
Stock-based compensation expense is recorded for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest. | |||||||||
Noncontrolling Interest | ' | ||||||||
Non-controlling interest in our majority owned subsidiary EBI, is included in the equity section of the consolidated balance sheets. Non-controlling interest represents 3.63% of the equity of EBI and any transfer of value from ERF to non-controlling interest holders. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses of EBI. Any excess losses applicable to the non-controlling interests have been and are borne by the Company as there is no obligation of the non-controlling interests to fund any losses in excess of their original investment. There is also no obligation or commitment on the part of the Company to fund operating losses of any subsidiary whether wholly-owned or majority-owned. | |||||||||
Derivative Instruments | ' | ||||||||
In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability. | |||||||||
The Company's derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. Because of the limited trading history for our common stock, the Company estimates the future volatility of its common stock price based on not only the history of its stock price but also the experience of other entities considered comparable to the Company. | |||||||||
Inventory | ' | ||||||||
Inventory is valued at the lower of cost or market. The cost is determined by using the average cost method. Inventory consists of the following items as of December 31, 2013 and 2012 (in thousands): | |||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw material | $ | 45 | $ | 46 | |||||
Work in process | 65 | 115 | |||||||
Finished goods | 154 | 216 | |||||||
Total inventory | $ | 264 | $ | 377 | |||||
Property and Equipment | ' | ||||||||
Property and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives which are generally three to seven years. | |||||||||
Goodwill | ' | ||||||||
Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets at the dates of acquisition. Under current accounting pronouncements, the Company is required to annually assess the carrying value of goodwill associated with each of its distinct business units that comprise its business segments of the Company to determine if impairment in value has occurred. | |||||||||
Intangible Assets | ' | ||||||||
Intangible assets are amortized using methods that approximate the benefit provided by the utilization of the assets. The Company continually evaluates the amortization period and carrying basis of intangible assets to determine whether subsequent events and circumstances warrant a revised estimated useful life or impairment in value. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our intangible assets, we may incur charges for impairment in the future. | |||||||||
Long-Lived Assets | ' | ||||||||
We review our long-lived assets, which include intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred to as "the asset") may not be recoverable. Such circumstances include, but are not limited to: | |||||||||
· | a significant decrease in the market price of the asset; | ||||||||
· | a significant change in the extent or manner in which the asset is being used; | ||||||||
· | a significant change in the business climate that could affect the value of the asset; | ||||||||
· | a current period loss combined with projection of continuing loss associated with use of the asset; | ||||||||
· | a current expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated useful life. | ||||||||
We continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our long-lived assets, we may incur charges for impairment in the future. | |||||||||
Revenue Recognition | ' | ||||||||
The Company's revenue is generated primarily from the sale of wireless communications products and services on a nationwide basis, including providing enterprise-class wireless broadband services. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is probable. | |||||||||
The Company records revenues from our fixed-price, long-term contracts using the percentage-of-completion method. Revenues are recorded based on construction costs incurred to date as a percentage of estimated total cost at completion. The percentage-of-completion, determined by using total costs incurred to date as a percentage of estimated total costs at completion, reflects the actual physical completion of the project. If the current projected costs on a fixed fee contract exceed projected revenue, the entire amount of the loss is recognized in the period such loss is identified. | |||||||||
The Company recognizes product sales generally at the time the product is shipped. Concurrent with the recognition of revenue, the Company provides for the estimated cost of product warranties and reduces revenue for estimated product returns. Sales incentives are generally classified as a reduction of revenue and are recognized at the later of when revenue is recognized or when the incentive is offered. Shipping and handling costs are included in cost of goods sold. | |||||||||
Service revenue is principally derived from wireless broadband services, including internet, voice, and data and monitoring service. Subscriber fees are recorded as revenues in the period during which the service is provided. | |||||||||
Warranty | ' | ||||||||
The Company's suppliers generally warrant the products distributed by the Company and allow returns of defective products, including those that have been returned to the Company by its customers. The Company does not independently warrant the products that it distributes, but it does provide warranty services on behalf of the supplier. | |||||||||
Fair Value Estimates | ' | ||||||||
Pursuant to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: | |||||||||
Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | |||||||||
Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life. | |||||||||
Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. | |||||||||
The carrying values for cash and cash equivalents, accounts receivable, prepaid assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities. | |||||||||
Research and Development | ' | ||||||||
Research and development expense consists of costs attributable to employees and or consultants who focus their time on the design, engineering and process development of our CryptoVue technology. During 2013 and 2012, we have not incurred research and development costs. | |||||||||
Income Taxes | ' | ||||||||
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. | |||||||||
Fair Value of Financial Instruments | ' | ||||||||
The Company's financial instruments consist of cash and cash equivalents, inventory, accounts receivable and debt. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements. | |||||||||
Basic and Diluted Loss per Share | ' | ||||||||
The Company is required to provide basic and dilutive earnings (loss) per common share information. | |||||||||
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. | |||||||||
Diluted net loss per common share is computed by dividing the net loss, adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the years ended December 31, 2013, and December 31, 2012, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of fully diluted net loss per common share. | |||||||||
Recent Accounting Pronouncements | ' | ||||||||
Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition. |
1_BASIS_OF_PRESENTATION_Tables
1. BASIS OF PRESENTATION (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
Schedule of inventory | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Raw material | $ | 45 | $ | 46 | |||||
Work in process | 65 | 115 | |||||||
Finished goods | 154 | 216 | |||||||
Total inventory | $ | 264 | $ | 377 |
2_ACCOUNTS_RECEIVABLE_Tables
2. ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Receivables [Abstract] | ' | ||||||||
Accounts Receivable | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Accounts receivable | $ | 1,061 | $ | 838 | |||||
Allowance for doubtful accounts | (60 | ) | (10 | ) | |||||
Accounts receivable, net | $ | 1,001 | $ | 828 |
3_PROPERTY_AND_EQUIPMENT_NET_T
3. PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property and equipment | ' | ||||||||
Schedule of property and equipment | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Vehicles | $ | 776 | $ | 742 | |||||
Operating equipment | 10,183 | 9,636 | |||||||
Office furniture and equipment | 245 | 237 | |||||||
Leasehold improvements | 70 | 70 | |||||||
Computer equipment | 398 | 392 | |||||||
Building | 29 | 29 | |||||||
Land | 37 | 37 | |||||||
Construction in progress | 404 | 501 | |||||||
Total property and equipment | 12,142 | 11,644 | |||||||
Less accumulated depreciation | (9,365 | ) | (7,511 | ) | |||||
Net property and equipment | $ | 2,777 | $ | 4,133 |
6_COMMON_STOCK_AND_PREFERRED_S
6. COMMON STOCK AND PREFERRED STOCK (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||||||
Shares issued for services | ' | ||||||||||||||||||||||||
31-Dec-13 | Supplemental | ||||||||||||||||||||||||
Non-Cash | |||||||||||||||||||||||||
Disclosure | |||||||||||||||||||||||||
Professional fees | $ | 412 | |||||||||||||||||||||||
Services and compensation | 350 | ||||||||||||||||||||||||
Other services rendered and interest | 552 | ||||||||||||||||||||||||
Total for services, compensation and interest | $ | 1,314 | |||||||||||||||||||||||
Notes payable | $ | 1,528 | |||||||||||||||||||||||
Line of credit and interest | $ | – | |||||||||||||||||||||||
31-Dec-12 | Supplemental | ||||||||||||||||||||||||
Non-Cash | |||||||||||||||||||||||||
Disclosure | |||||||||||||||||||||||||
Professional fees | $ | 198 | |||||||||||||||||||||||
Services and compensation | 309 | ||||||||||||||||||||||||
Other services rendered | 114 | ||||||||||||||||||||||||
Total for services, and compensation | $ | 621 | |||||||||||||||||||||||
Notes payable | $ | 535 | |||||||||||||||||||||||
Line of credit and interest | $ | 2,589 | |||||||||||||||||||||||
Warrant activity | ' | ||||||||||||||||||||||||
Warrants Outstanding | |||||||||||||||||||||||||
Weighted Average Exercise | Expiration | December 31, | December 31, | ||||||||||||||||||||||
Price | Date | 2012 | Issued | Exercised | Expired | 2013 | |||||||||||||||||||
$ | 320 | 18-Mar | – | 371 | – | – | 371 | ||||||||||||||||||
$ | 320 | 18-Apr | – | 36 | – | – | 36 | ||||||||||||||||||
$ | 300 | 18-Apr | – | 122 | – | – | 122 | ||||||||||||||||||
Total Warrants | – | 529 | – | – | 529 |
7_STOCK_PLAN_AND_EMPLOYEE_STOC1
7. STOCK PLAN AND EMPLOYEE STOCK OPTIONS (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||
Option activity | ' | ||||
This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc. | |||||
Non-Qualified Stock Option Plan, May 2013 | 2013-A | ||||
Plan | |||||
Shares initially reserved | 2,500 | ||||
Shares issued during 2013 | 2,500 | ||||
Remaining shares available to be issued at December 31, 2013 | – | ||||
Shares issued and outstanding as of December 31, 2013 | 2,500 | ||||
This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc. | |||||
Non-Qualified Stock Option Plan, December 2012 | 2013 | ||||
Plan | |||||
Shares initially reserved | 1,125 | ||||
Shares issued during 2012 and 2013 | 1,125 | ||||
Remaining shares available to be issued at December 31, 2013 | – | ||||
Shares issued and outstanding as of December 31, 2013 | 1,125 | ||||
This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc. | |||||
Non-Qualified Stock Option Plan, April 2012 | 2012 | ||||
Plan | |||||
Shares initially reserved | 625 | ||||
Shares issued during 2012 | 625 | ||||
Remaining shares available to be issued at December 31, 2012 | – | ||||
Shares issued and outstanding as of December 31, 2012 | 625 | ||||
8_INCOME_TAXES_Tables
8. INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||||||
Reconciliation of tax rates | ' | ||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
U. S. Federal statutory tax rate | % | 34 | % | 34 | |||||||||||||
U.S. valuation difference | (34 | ) | (34 | ) | |||||||||||||
Effective U. S. tax rate | – | – | |||||||||||||||
Income tax expense (benefit) | ' | ||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
Computed expected tax expense (benefit) | $ | 2,468 | $ | 1,630 | |||||||||||||
Change in valuation allowance | (2,468 | ) | (1,630 | ) | |||||||||||||
Income tax expense | $ | – | $ | – | |||||||||||||
Deferred tax assets | ' | ||||||||||||||||
31-Dec-13 | 31-Dec-12 | ||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Net operating loss carry forwards | $ | 20,751 | $ | 18,283 | |||||||||||||
Less valuation allowance | (20,751 | ) | (18,283 | ) | |||||||||||||
Net deferred tax assets | $ | – | $ | – |
9_EARNINGS_PER_SHARE_Tables
9. EARNINGS PER SHARE (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
Computation of basic and diluted earnings per share | ' | ||||||||||||
For the twelve months ended December 31, 2013 | |||||||||||||
Net loss | Shares | Per-Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Basic and diluted EPS: | |||||||||||||
Net loss | $ | (7,264 | ) | 35 | $ | (207.54 | ) | ||||||
For the twelve months ended December 31, 2012 | |||||||||||||
Net loss | Shares | Per-Share | |||||||||||
(Numerator) | (Denominator) | Amount | |||||||||||
Basic and diluted EPS: | |||||||||||||
Net loss | $ | (4,814 | ) | 9 | $ | (534.89 | ) | ||||||
11_NOTES_PAYABLE_LONGTERM_DEBT1
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Tables) | 12 Months Ended | ||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||
Notes payable, long-term debts and capital leases | ' | ||||||||||||||||||||
Notes payable, long-term debts and capital leases consist of the following as of December 31, 2013 (in thousands): | |||||||||||||||||||||
Terms | Maturity Date | Interest Rate | Gross Balance | Debt Discount | Balance | ||||||||||||||||
Banc leasing, Inc. | $10,660 / Month including interest | 15-Jan | 11.62% | $ | 130 | $ | – | $ | 130 | ||||||||||||
Advantage leasing associates | $8,269 / Month including interest | Various | Various | 115 | – | 115 | |||||||||||||||
Legacy laser services Dallas, LLC | $9,947 / Month including interest | 16-May | 42.00% | 181 | – | 181 | |||||||||||||||
MP Nexlevel LLC | $7,043 / Month including interest | 14-May | 10.00% | 34 | – | 34 | |||||||||||||||
Tonaquint | $950,400 / Lump sum payment including interest | Immediately due and payable | 12.00% | 793 | – | 793 | |||||||||||||||
JMJ Financial | $330,000 / Lump sum payment including interest | 14-Mar | 12.00% | 232 | 174 | 58 | |||||||||||||||
Vista capital | $72,600 / Lump sum payment including interest | Immediately due and payable | 12.00% | 51 | – | 51 | |||||||||||||||
Willow creek capital | $293,040 / Lump sum payment including interest | Immediately due and payable | 12.00% | 228 | – | 228 | |||||||||||||||
TCA global line of credit | $139,523 / Month including interest | 14-Jul | 12.00% | 1,019 | 104 | 915 | |||||||||||||||
Group 10 | $157,500 / Month including interest | 14-Jul | 12.00% | 157 | 143 | 14 | |||||||||||||||
Investor financing | $495,000 / Lump sum payment including interest | 14-Apr | 12.00% | 473 | – | 473 | |||||||||||||||
Premium assignment | $2,063 / Month including interest | 14-Sep | 5.68% | 18 | – | 18 | |||||||||||||||
Dakota capital equipment financing | $178,031 / Quarterly including interest | 16-Mar | 12.00% | 1,519 | 25 | 1,494 | |||||||||||||||
E-bond investor notes | 3 years/ Semiannual interest (See below) | Various | 7.50% | 311 | 182 | 129 | |||||||||||||||
Line of credit | 2 years/ Quarterly interest (See below) | 16-Dec | 3.00% | 4,281 | – | 4,281 | |||||||||||||||
Total debt | $ | 9,542 | $ | 628 | 8,914 | ||||||||||||||||
Less current maturities | (3,435 | ) | |||||||||||||||||||
Long-term debt | $ | 5,479 | |||||||||||||||||||
Notes payable, long-term debt and capital leases consist of the following as of December 31, 2012 (in thousands): | |||||||||||||||||||||
Terms | Maturity Date | Interest Rate | Gross Balance | Debt Discount | Balance | ||||||||||||||||
Banc leasing, Inc. | $10,660 / Month including interest | 15-Jan | 11.62% | $ | 227 | $ | – | $ | 227 | ||||||||||||
Advantage leasing associates | $7,186 / Month including interest | Various | Various | 156 | – | 156 | |||||||||||||||
MP Nexlevel LLC | $7,043 / Month including interest | 14-May | 10.00% | 111 | – | 111 | |||||||||||||||
Investor financing | $765,000 / Lump sum payment including interest | 13-Jan | 12.00% | 765 | – | 765 | |||||||||||||||
Premium assignment | $1,495 / Month including interest | 13-Jul | 6.00% | 17 | – | 17 | |||||||||||||||
Dakota capital equipment financing | $178,031 / Quarterly including interest | 16-Mar | 18.00% | 1,820 | 57 | 1,763 | |||||||||||||||
E-bond investor notes | 3 years/ Semiannual interest (See below) | Various | 7.50% | 687 | 566 | 121 | |||||||||||||||
Line of credit | 2 years/ Quarterly interest (See below) | 15-Dec | 12.00% | 3,168 | – | 3,168 | |||||||||||||||
Total debt | $ | 6,951 | $ | 623 | 6,328 | ||||||||||||||||
Less current maturities | (1,527 | ) | |||||||||||||||||||
Long-term debt | $ | 4,801 | |||||||||||||||||||
Future minimum lease payments under capital leases | ' | ||||||||||||||||||||
Year Ending December 31, | |||||||||||||||||||||
2014 | $ | 335 | |||||||||||||||||||
2015 | 159 | ||||||||||||||||||||
2016 | 63 | ||||||||||||||||||||
Thereafter | – | ||||||||||||||||||||
Total minimum lease payments | 557 | ||||||||||||||||||||
Less amount representing interest | (131 | ) | |||||||||||||||||||
Present value of net minimum lease payments | 426 | ||||||||||||||||||||
Current maturities of capital lease obligations | (252 | ) | |||||||||||||||||||
Long-term portion of capital lease obligations | $ | 174 | |||||||||||||||||||
Group 10 Holdings | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | Group 10 | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 157,500 | $ | – | $ | 157,500 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (157,500 | ) | 304,519 | 147,019 | |||||||||||||||||
Change in fair value | 14,155 | – | 14,155 | ||||||||||||||||||
Conversions | – | – | – | ||||||||||||||||||
Fair value at December 31, 2013 | $ | 14,155 | $ | 304,519 | $ | 318,674 | |||||||||||||||
E Series Bond Investor Note | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | Bonds | Compound | Total | ||||||||||||||||||
Derivative | |||||||||||||||||||||
Liability | |||||||||||||||||||||
Fair value at December 31, 2012 | $ | 121,446 | $ | 492,043 | $ | 613,489 | |||||||||||||||
Fair value of issuances during 2013 (principal amount) | 325,000 | – | 325,000 | ||||||||||||||||||
Fair value of issuances during 2013 (debt discount) | (139,216 | ) | 139,216 | – | |||||||||||||||||
Change in fair value | 522,532 | (147,918 | ) | 374,614 | |||||||||||||||||
Conversions | (701,000 | ) | (443,611 | ) | (1,144,611 | ) | |||||||||||||||
Fair value at December 31, 2013 | $ | 128,762 | $ | 39,730 | $ | 168,492 | |||||||||||||||
Tonaquint | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | Tonaquint | Warrant | Compound | Total | |||||||||||||||||
Compound | Derivative | ||||||||||||||||||||
Derivative | Liability | ||||||||||||||||||||
Liability | |||||||||||||||||||||
Fair value of issuances at inception | $ | 950,400 | $ | – | $ | – | $ | 950,400 | |||||||||||||
Fair value of issuances during 2013 (debt discount) | (588,724 | ) | 16,400 | 256,224 | (316,100 | ) | |||||||||||||||
Change in fair value | 588,724 | (16,304 | ) | (175,655 | ) | 396,765 | |||||||||||||||
Conversions | (157,032 | ) | – | (157,032 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 793,368 | $ | 96 | $ | 80,569 | $ | 874,033 | |||||||||||||
JMJ | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | JMJ | Compound | Total | ||||||||||||||||||
Derivative | |||||||||||||||||||||
Liability | |||||||||||||||||||||
Fair value of issuances at inception | $ | 330,000 | $ | – | $ | 330,000 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (330,000 | ) | 382,260 | 52,260 | |||||||||||||||||
Change in fair value | 156,683 | (248,147 | ) | (91,464 | ) | ||||||||||||||||
Conversions | (98,320 | ) | – | (98,320 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 58,363 | $ | 134,113 | $ | 192,476 | |||||||||||||||
Willowcreek | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | Willowcreek | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 293,040 | $ | – | $ | 293,040 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (244,200 | ) | 255,000 | 10,800 | |||||||||||||||||
Change in fair value | 244,200 | (203,724 | ) | 40,476 | |||||||||||||||||
Conversions | (65,240 | ) | – | (65,240 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 227,800 | $ | 51,276 | $ | 279,076 | |||||||||||||||
Vista Capital | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | Vista | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 72,600 | $ | – | $ | 72,600 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (60,500 | ) | 70,967 | 10,467 | |||||||||||||||||
Change in fair value | 60,500 | (33,451 | ) | 27,049 | |||||||||||||||||
Conversions | (22,042 | ) | – | (22,042 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 50,558 | $ | 37,516 | $ | 88,074 | |||||||||||||||
TCA Global | ' | ||||||||||||||||||||
Convertible debt activity | ' | ||||||||||||||||||||
Description | TCA Global | Compound Derivative Liability | Total | ||||||||||||||||||
Fair value of issuances at inception | $ | 1,500,000 | $ | – | $ | 1,500,000 | |||||||||||||||
Fair value of issuances during 2013 (debt discount) | (138,312 | ) | 138,312 | – | |||||||||||||||||
Change in fair value | 33,989 | (109,596 | ) | (75,607 | ) | ||||||||||||||||
Conversions | (480,237 | ) | – | (480,237 | ) | ||||||||||||||||
Fair value at December 31, 2013 | $ | 915,440 | $ | 28,716 | $ | 944,156 |
12_COMMITMENTS_Tables
12. COMMITMENTS (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Future minimum lease payments under non-cancelable operating leases | ' | ||||
Year Ending December 31, | Amount | ||||
2014 | 779 | ||||
2015 | 707 | ||||
2016 | 610 | ||||
2017 | 116 | ||||
Thereafter | 9 | ||||
Total | $ | 2,221 |
13_COSTS_AND_ESTIMATED_EARNING1
13. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts | ' | ||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Costs incurred on uncompleted contracts | $ | 51 | $ | 21 | |||||
Estimated profit | 57 | 14 | |||||||
Gross revenue | 108 | 35 | |||||||
Less: billings to date | 108 | – | |||||||
Costs and profit in excess of billings | $ | – | $ | 35 | |||||
Costs and billings summary | ' | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Cost and estimated earnings in excess of billings on uncompleted contracts | $ | – | $ | 35 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | – | – | |||||||
$ | – | $ | 35 |
15_INDUSTRY_SEGMENTS_Tables
15. INDUSTRY SEGMENTS (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||||||||||
Segment Information | ' | ||||||||||||||||||||||||
Year Ended December 31, 2013 | EBI | WBS | ENS | Total Segment | ERF Corporate | Total Consolidated | |||||||||||||||||||
Revenue | $ | 4,311 | $ | 2,441 | $ | 404 | $ | 7,156 | $ | – | $ | 7,156 | |||||||||||||
Segment income (loss) from operations | 124 | (1,316 | ) | (42 | ) | (1,234 | ) | (3,284 | ) | (4,518 | ) | ||||||||||||||
Total assets | 3,002 | 1,352 | 385 | 4,739 | 333 | 5,072 | |||||||||||||||||||
Capital expenditures | 361 | 211 | – | 572 | 12 | 584 | |||||||||||||||||||
Depreciation | 855 | 814 | 234 | 1,903 | 32 | 1,935 | |||||||||||||||||||
For the year ended December 31, 2012 (in thousands) | |||||||||||||||||||||||||
Year Ended December 31, 2012 | EBI | WBS | ENS | Total Segment | ERF Corporate | Total Consolidated | |||||||||||||||||||
Revenue | $ | 4,642 | $ | 2,306 | $ | 380 | $ | 7,328 | $ | – | $ | 7,328 | |||||||||||||
Segment income (loss) from operations | 609 | (534 | ) | (238 | ) | (163 | ) | (3,441 | ) | (3,604 | ) | ||||||||||||||
Total assets | 3,284 | 2,030 | 675 | 5,989 | 282 | 6,271 | |||||||||||||||||||
Capital expenditures | 789 | 905 | 5 | 1,699 | 13 | 1,712 | |||||||||||||||||||
Depreciation | 707 | 654 | 234 | 1,595 | 48 | 1,643 | |||||||||||||||||||
Reconciliation of Segment Assets to Total Assets | ' | ||||||||||||||||||||||||
Reconciliation of Segment Assets to Total Assets | 31-Dec-13 | 31-Dec-12 | |||||||||||||||||||||||
Total segment assets | $ | 4,739 | $ | 5,989 | |||||||||||||||||||||
Total corporate assets | 333 | 282 | |||||||||||||||||||||||
Total assets | $ | 5,072 | $ | 6,271 |
1_BASIS_OF_PRESENTATION_Detail
1. BASIS OF PRESENTATION (Details-Inventory) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Raw material | $45 | $46 |
Work in process | 65 | 115 |
Finished goods | 154 | 216 |
Total inventory | $264 | $377 |
1_BASIS_OF_PRESENTATION_Detail1
1. BASIS OF PRESENTATION (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Basis Of Presentation Details Narrative | ' | ' |
Deferred revenues | $13,000 | $20,000 |
Advertising costs | $52,000 | $66,000 |
2_ACCOUNTS_RECEIVABLE_Details
2. ACCOUNTS RECEIVABLE (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Receivables [Abstract] | ' | ' |
Accounts receivable | $1,061 | $838 |
Allowance for doubtful accounts | -60 | -10 |
Accounts receivable, net | $1,001 | $828 |
3_PROPERTY_AND_EQUIPMENT_NET_D
3. PROPERTY AND EQUIPMENT, NET (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Property and equipment | ' | ' |
Vehicles | $776 | $742 |
Operating equipment | 10,183 | 9,636 |
Office furniture and equipment | 245 | 237 |
Leasehold improvements | 70 | 70 |
Computer equipment | 398 | 392 |
Building | 29 | 29 |
Land | 37 | 37 |
Construction in progress | 404 | 501 |
Total property and equipment | 12,142 | 11,644 |
Less accumulated depreciation | -9,365 | -7,511 |
Net property and equipment | $2,777 | $4,133 |
3_PROPERTY_AND_EQUIPMENT_NET_D1
3. PROPERTY AND EQUIPMENT, NET (Details Narrative) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Property and equipment | ' | ' |
Depreciation expense | $1,935 | $1,643 |
4_GOODWILL_Details_Narrative
4. GOODWILL (Details Narrative) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Property and equipment | ' | ' |
Goodwill | $176 | $176 |
4_DEBT_CONVERSION_Details_Narr
4. DEBT CONVERSION (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Line Of Credit [Member] | ' |
Shares issued in settlement of debt | 4,523,000 |
Value of shares issued in settlement of debt | $1,733,000 |
Other Debt [Member] | ' |
Shares issued in settlement of debt | 2,264,000 |
Value of shares issued in settlement of debt | $1,754,000 |
6_COMMON_STOCK_PREFERRED_STOCK1
6. COMMON STOCK , PREFERRED STOCK AND WARRANTS (Details) (USD $) | 12 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Common stock issued for services, shares | 98,000 | 7,640 |
Common stock issued for services, value | $1,314 | $621 |
Common stock issued for notes payable, value | 1,528 | 535 |
Common stock issued for line of credit and interest, value | 0 | 2,589 |
Services and Compensation | ' | ' |
Common stock issued for services, value | 350 | ' |
Other services | ' | ' |
Common stock issued for services, value | 552 | ' |
Professional Fees | ' | ' |
Common stock issued for services, value | 412 | 198 |
Services and Compensation | ' | ' |
Common stock issued for services, value | ' | 309 |
Other services | ' | ' |
Common stock issued for services, value | ' | $114 |
6_COMMON_STOCK_PREFERRED_STOCK2
6. COMMON STOCK , PREFERRED STOCK AND WARRANTS (Details-Warrants outstanding) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Warrants 1 | ' |
Weighted average exericse price | $320 |
Expiration date | 'Mar-18 |
Warrants outstanding, beginning balance | 0 |
Warrants issued | 371,000 |
Warrants outstanding, ending balance | 371,000 |
Warrants 2 | ' |
Weighted average exericse price | $320 |
Expiration date | 'Apr-18 |
Warrants outstanding, beginning balance | 0 |
Warrants issued | 36,000 |
Warrants outstanding, ending balance | 36,000 |
Warrants 3 | ' |
Weighted average exericse price | $300 |
Expiration date | 'Apr-18 |
Warrants outstanding, beginning balance | 0 |
Warrants issued | 122,000 |
Warrants outstanding, ending balance | 122,000 |
Warrants | ' |
Warrants outstanding, beginning balance | 0 |
Warrants issued | 529,000 |
Warrants outstanding, ending balance | 529,000 |
7_STOCK_PLAN_AND_EMPLOYEE_STOC2
7. STOCK PLAN AND EMPLOYEE STOCK OPTIONS (Details) | 12 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
2013-A Plan Non-Qualified Stock Option Plan | 2013 Plan Non-Qualified Stock Option Plan | 2012 Plan | |
Shares initially reserved | 2,500,000 | 1,125,000 | 625,000 |
Shares issued | 2,500,000 | 1,125,000 | 625,000 |
Remaining shares available to be issued | 0 | 0 | 0 |
Shares issued and outstanding - ending balance | 2,500,000 | 1,125,000 | 625,000 |
8_INCOME_TAXES_DetailsReconcil
8. INCOME TAXES (Details-Reconcilation tax rate) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
US Federal statutory rate rate | 34.00% | 34.00% |
US valuation difference | -34.00% | -34.00% |
Effective US tax rate | 0.00% | 0.00% |
8_INCOME_TAXES_DetailsIncome_t
8. INCOME TAXES (Details-Income tax expense) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax Disclosure [Abstract] | ' | ' |
Computed expected tax expense (benefit) | $2,468 | $1,630 |
Change in valuation allowance | -2,468 | -1,630 |
Income tax expense | $0 | $0 |
8_INCOME_TAXES_DetailsDeferred
8. INCOME TAXES (Details-Deferred tax assets) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Income Taxes Details-Deferred Tax Assets | ' | ' |
Net operating loss carryforwards | $20,751 | $18,283 |
Less valuation allowance | -20,751 | -18,283 |
Net deferred tax assets | $0 | $0 |
8_INCOME_TAXES_Details_Narrati
8. INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2013 |
Income Tax Disclosure [Abstract] | ' |
Change in valuation allowance | $2,468 |
Operating loss carryforward | $58,888 |
Operating loss expiration date | 31-Dec-33 |
9_EARNINGS_PER_SHARE_Details
9. EARNINGS PER SHARE (Details) (USD $) | 12 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Net loss (Numerator) | ' | ' |
Net loss | ($7,264) | ($4,814) |
Shares (Denominator) | ' | ' |
Net loss | 35,000 | 9,000 |
Per Share Amount | ' | ' |
Net loss | ($208) | ($535) |
9_EARNINGS_PER_SHARE_Details_N
9. EARNINGS PER SHARE (Details Narrative) | 12 Months Ended |
Dec. 31, 2013 | |
Bond | ' |
Common Stock shares excluded from computation of Earning Per Share | 100,323 |
Warrants | ' |
Common Stock shares excluded from computation of Earning Per Share | 529 |
Convertible Debt | ' |
Common Stock shares excluded from computation of Earning Per Share | 471,260 |
Series A Preferred Stock | ' |
Common Stock shares excluded from computation of Earning Per Share | 9,930,982 |
10_MAJOR_CUSTOMERS_Details_Nar
10. MAJOR CUSTOMERS (Details Narrative) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Gross sales | $7,156 | $7,328 |
Revenues | Customer A | ' | ' |
Percentage concentration | 32.00% | 42.00% |
Revenues | Customer B | ' | ' |
Percentage concentration | 12.00% | 13.00% |
11_NOTES_PAYABLE_LONGTERM_DEBT2
11. NOTES PAYABLE, LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASES (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Gross Balance | $9,542 | $6,951 |
Debt Discount | 628 | 623 |
Total debt balance | 8,914 | 6,328 |
Less current maturities | -3,435 | -1,527 |
Long-term debt | 5,479 | 4,801 |
Banc leasing Inc [Member] | ' | ' |
Terms | '$10,660 / Month including interest | '$10,660 / Month including interest |
Maturity Date | '15-Jan | '15-Jan |
Interest Rate | 11.62% | 11.62% |
Gross Balance | 130 | 227 |
Debt Discount | 0 | 0 |
Total debt balance | 130 | 227 |
Advantage leasing associates [Member] | ' | ' |
Terms | '$8,269 / Month including interest | '$7,186 / Month including interest |
Maturity Date | 'Various | 'Various |
Gross Balance | 115 | 156 |
Debt Discount | 0 | 0 |
Total debt balance | 115 | 156 |
Legacy laser services Dallas, LLC [Member] | ' | ' |
Terms | '$9,947 / Month including interest | ' |
Maturity Date | '16-May | ' |
Interest Rate | 42.00% | ' |
Gross Balance | 181 | ' |
Debt Discount | 0 | ' |
Total debt balance | 181 | ' |
MP Nexlevel LLC | ' | ' |
Terms | '$7,043 / Month including interest | '$7,043 / Month including interest |
Maturity Date | '14-May | '14-May |
Interest Rate | 10.00% | 10.00% |
Gross Balance | 34 | 111 |
Debt Discount | 0 | 0 |
Total debt balance | 34 | 111 |
Tonaquint | ' | ' |
Terms | '$950,400 / Lump sum payment including interest | ' |
Maturity Date | '13-Sep | ' |
Interest Rate | 12.00% | ' |
Gross Balance | 793 | ' |
Debt Discount | 0 | ' |
Total debt balance | 793 | ' |
JMJ | ' | ' |
Terms | '$330,000 / Lump sum payment including interest | ' |
Maturity Date | '14-Mar | ' |
Interest Rate | 12.00% | ' |
Gross Balance | 232 | ' |
Debt Discount | 174 | ' |
Total debt balance | 58 | ' |
Vista captial [Member] | ' | ' |
Terms | '$72,600 / Lump sum payment including interest | ' |
Maturity Date | '13-Oct | ' |
Interest Rate | 12.00% | ' |
Gross Balance | 51 | ' |
Debt Discount | 0 | ' |
Total debt balance | 51 | ' |
Willow creek capital [Member] | ' | ' |
Terms | '$293,040 / Lump sum payment including interest | ' |
Maturity Date | '13-Oct | ' |
Interest Rate | 12.00% | ' |
Gross Balance | 228 | ' |
Debt Discount | 0 | ' |
Total debt balance | 228 | ' |
TCA global line of credit [Member] | ' | ' |
Terms | '$139,523 / Month including interest | ' |
Maturity Date | '14-Jul | ' |
Interest Rate | 12.00% | ' |
Gross Balance | 1,019 | ' |
Debt Discount | 104 | ' |
Total debt balance | 915 | ' |
Group 10 Holdings | ' | ' |
Terms | '$157,500 / Month including interest | ' |
Maturity Date | '14-Jul | ' |
Interest Rate | 12.00% | ' |
Gross Balance | 157 | ' |
Debt Discount | 143 | ' |
Total debt balance | 14 | ' |
Investor Financing Member | ' | ' |
Terms | '$495,000 / Lump sum payment including interest | '$765,000 / Lump sum payment including interest |
Maturity Date | '14-Apr | '13-Jan |
Interest Rate | 12.00% | 12.00% |
Gross Balance | 473 | 765 |
Debt Discount | 0 | 0 |
Total debt balance | 473 | 765 |
Premium assignment [Member] | ' | ' |
Terms | '$2,063 / Month including interest | '$1,495 / Month including interest |
Maturity Date | '14-Sep | '13-Jul |
Interest Rate | 5.68% | 6.00% |
Gross Balance | 18 | 17 |
Debt Discount | 0 | 0 |
Total debt balance | 18 | 17 |
Dakota capital line of credit [Member] | ' | ' |
Terms | '$178,031 / Quarterly including interest | '$178,031 / Quarterly including interest |
Maturity Date | '16-Mar | '16-Mar |
Interest Rate | 12.00% | 18.00% |
Gross Balance | 1,519 | 1,820 |
Debt Discount | 25 | 57 |
Total debt balance | 1,494 | 1,763 |
E-bond investor notes [Member] | ' | ' |
Terms | '3 years/ Semiannual interest (See below) | '3 years/ Semiannual interest (See below) |
Maturity Date | 'Various | 'Various |
Interest Rate | 7.50% | 7.50% |
Gross Balance | 311 | 687 |
Debt Discount | 182 | 566 |
Total debt balance | 129 | 121 |
Line Of Credit [Member] | ' | ' |
Terms | '2 years/ Quarterly interest (See below) | '2 years/ Quarterly interest (See below) |
Maturity Date | '16-Dec | '15-Dec |
Interest Rate | 3.00% | 12.00% |
Gross Balance | 4,281 | 3,168 |
Debt Discount | 0 | 0 |
Total debt balance | $4,281 | $3,168 |
11_NOTES_PAYABLE_LONGTERM_DEBT3
11. NOTES PAYABLE, LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASES (Details-E-Series Bond) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
E-Series Bond Investor Note | ' |
Fair value, beginning balance | $121,446 |
Fair value of issuances during 2013 (principal amount) | 325,000 |
Fair value of issuances during 2013 (debt discount) | -139,216 |
Change in fair value | 522,532 |
Conversions | -701,000 |
Fair value, ending balance | 128,762 |
Bond Compound Derivative Liability | ' |
Fair value, beginning balance | 492,043 |
Fair value of issuances during 2013 (principal amount) | 0 |
Fair value of issuances during 2013 (debt discount) | 139,216 |
Change in fair value | -147,918 |
Conversions | -443,611 |
Fair value, ending balance | 39,730 |
Bonds Total | ' |
Fair value, beginning balance | 613,489 |
Fair value of issuances during 2013 (principal amount) | 325,000 |
Fair value of issuances during 2013 (debt discount) | 0 |
Change in fair value | 374,614 |
Conversions | -1,144,611 |
Fair value, ending balance | 168,492 |
Change in fair value of derivative | 147,918 |
Gain on debt redemption | 156,791 |
Net derivative income | $304,709 |
11_NOTES_PAYABLE_LONGTERM_DEBT4
11. NOTES PAYABLE, LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASES (Details-Tonaquint note) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Tonaquint | ' |
Fair value, beginning balance | $950,400 |
Fair value of issuances during 2013 (debt discount) | -588,724 |
Change in fair value | 588,724 |
Conversions | -157,032 |
Fair value, ending balance | 793,368 |
Tonaquint Warrant Compound Derivative Liability | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 16,400 |
Change in fair value | -16,304 |
Conversions | 0 |
Fair value, ending balance | 96 |
Tonaquint Compound Derivative Liability | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 256,224 |
Change in fair value | -175,655 |
Conversions | 0 |
Fair value, ending balance | 80,569 |
Total Tonaquint | ' |
Fair value, beginning balance | 950,400 |
Fair value of issuances during 2013 (debt discount) | -316,100 |
Change in fair value | 396,765 |
Conversions | -157,032 |
Fair value, ending balance | 874,033 |
Change in fair value of derivatives | $26,426 |
11_NOTES_PAYABLE_LONGTERM_DEBT5
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details-JMJ note) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
JMJ Financial Promissory Note | ' |
Fair value, beginning balance | $330,000 |
Fair value of issuances during 2013 (debt discount) | -330,000 |
Change in fair value | 156,683 |
Conversions | -98,320 |
Fair value, ending balance | 58,363 |
JMJ Compound Derivative Liability | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 382,260 |
Change in fair value | -248,147 |
Conversions | 0 |
Fair value, ending balance | 134,113 |
JMJ Total | ' |
Fair value, beginning balance | 330,000 |
Fair value of issuances during 2013 (debt discount) | 52,260 |
Change in fair value | -91,464 |
Conversions | -98,320 |
Fair value, ending balance | 192,476 |
Change in fair value of derivative | 162,865 |
Gain/(loss) on debt redemption | -13,819 |
Net derivative income | $149,046 |
11_NOTES_PAYABLE_LONGTERM_DEBT6
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details-Willowcreek) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Willowcreek | ' |
Fair value, beginning balance | $293,040 |
Fair value of issuances during 2013 (debt discount) | -244,200 |
Change in fair value | 244,200 |
Conversions | -65,240 |
Fair value, ending balance | 227,800 |
Willowcreek Compound Derivative Liability | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 255,000 |
Change in fair value | -203,724 |
Conversions | 0 |
Fair value, ending balance | 51,276 |
Willowcreek Total | ' |
Fair value, beginning balance | 293,040 |
Fair value of issuances during 2013 (debt discount) | 10,800 |
Change in fair value | 40,476 |
Conversions | -65,240 |
Fair value, ending balance | 279,076 |
Change in fair value of derivative | $133,589 |
11_NOTES_PAYABLE_LONGTERM_DEBT7
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details-Vista Capital) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Vista Capital | ' |
Fair value, beginning balance | $72,600 |
Fair value of issuances during 2013 (debt discount) | -60,500 |
Change in fair value | 60,500 |
Conversions | -22,042 |
Fair value, ending balance | 50,558 |
Vista Compound Derivative Liability | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 70,967 |
Change in fair value | -33,451 |
Conversions | 0 |
Fair value, ending balance | 37,516 |
Vista Total | ' |
Fair value, beginning balance | 72,600 |
Fair value of issuances during 2013 (debt discount) | 10,467 |
Change in fair value | 27,049 |
Conversions | -22,042 |
Fair value, ending balance | 88,074 |
Change in fair value of derivative | $8,731 |
11_NOTES_PAYABLE_LONGTERM_DEBT8
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details-TCA Global) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
TCA Global | ' |
Fair value, beginning balance | $1,500,000 |
Fair value of issuances during 2013 (debt discount) | -138,312 |
Change in fair value | 33,989 |
Conversions | -480,237 |
Fair value, ending balance | 915,440 |
TCA Compound Derivative Liability | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 138,312 |
Change in fair value | -109,596 |
Conversions | 0 |
Fair value, ending balance | 28,716 |
TCA Total | ' |
Fair value, beginning balance | 1,500,000 |
Fair value of issuances during 2013 (debt discount) | 0 |
Change in fair value | -75,607 |
Conversions | -480,237 |
Fair value, ending balance | 944,156 |
Change in fair value of derivative | $109,596 |
11_NOTES_PAYABLE_LONGTERM_DEBT9
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details-Group 10) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Group 10 Holdings | ' |
Fair value, beginning balance | $157,500 |
Fair value of issuances during 2013 (debt discount) | -157,500 |
Change in fair value | 14,155 |
Conversions | 0 |
Fair value, ending balance | 14,155 |
Compound Derivative Liability Group 10 | ' |
Fair value, beginning balance | 0 |
Fair value of issuances during 2013 (debt discount) | 304,519 |
Change in fair value | 0 |
Conversions | 0 |
Fair value, ending balance | 304,519 |
Group 10 HoldingsTotal | ' |
Fair value, beginning balance | 157,500 |
Fair value of issuances during 2013 (debt discount) | 147,019 |
Change in fair value | 14,155 |
Conversions | 0 |
Fair value, ending balance | 318,674 |
Change in fair value of derivative | $51,996 |
Recovered_Sheet1
11. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details 7) (USD $) | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |
Debt Disclosure [Abstract] | ' |
2014 | $335 |
2015 | 159 |
2016 | 63 |
Thereafter | 0 |
Total minimum lease payments | 557 |
Less amount representing interest | -131 |
Present value of net minimum lease payments | 426 |
Current maturities of capital lease obligations | -252 |
Long-term portion of capital lease obligations | $174 |
11_NOTES_PAYABLE_Details_Narra
11. NOTES PAYABLE (Details Narrative) (USD $) | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |
Notes Payable Details Narrative | ' |
Long term debt maturity 2014 | $3,541 |
Long term debt maturity 2015 | 702 |
Long term debt maturity 2016 | 390 |
Long term debt maturity 2017 | $4,281 |
12_COMMITMENTS_Details
12. COMMITMENTS (Details) (USD $) | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $779 |
2015 | 707 |
2016 | 610 |
2017 | 116 |
Thereafter | 9 |
Total | $2,221 |
12_COMMITMENTS_Details_Narrati
12. COMMITMENTS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Commitments and Contingencies Disclosure [Abstract] | ' | ' |
Rental expenses | $1,253,000 | $1,058,000 |
13_COSTS_AND_ESTIMATED_EARINGS
13. COSTS AND ESTIMATED EARINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (Details) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts | ' | ' |
Costs incurred on uncompleted contracts | $51 | $21 |
Estimated profit | 57 | 14 |
Gross revenue | 108 | 35 |
Less: billings to date | 108 | 0 |
Costs and profit in excess of billings | $0 | $35 |
13_COSTS_AND_ESTIMATED_EARINGS1
13. COSTS AND ESTIMATED EARINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts | ' | ' |
Cost and estimated earnings in excess of billings on uncompleted contracts | $0 | $35 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 0 | 0 |
Total | $0 | $35 |
15_INDUSTRY_SEGMENTS_DetailsRe
15. INDUSTRY SEGMENTS (Details-Revenue) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2012 |
Revenue | $7,156 | $7,328 |
Segment income (loss) from operations | -4,518 | -3,604 |
Total assets | 5,072 | 6,271 |
Capital expenditures | 584 | 1,712 |
Depreciation | 1,935 | 1,643 |
EBI | ' | ' |
Revenue | 4,311 | 4,642 |
Segment income (loss) from operations | 124 | 609 |
Total assets | 3,002 | 3,284 |
Capital expenditures | 361 | 789 |
Depreciation | 855 | 707 |
WBS | ' | ' |
Revenue | 2,441 | 2,306 |
Segment income (loss) from operations | -1,316 | -534 |
Total assets | 1,352 | 2,030 |
Capital expenditures | 211 | 905 |
Depreciation | 814 | 654 |
ENS | ' | ' |
Revenue | 404 | 380 |
Segment income (loss) from operations | -42 | -238 |
Total assets | 385 | 675 |
Capital expenditures | 0 | 5 |
Depreciation | 234 | 234 |
Total Segment | ' | ' |
Revenue | 7,156 | 7,328 |
Segment income (loss) from operations | -1,234 | -163 |
Total assets | 4,739 | 5,989 |
Capital expenditures | 572 | 1,699 |
Depreciation | 1,903 | 1,595 |
ERF Corporate | ' | ' |
Revenue | 0 | 0 |
Segment income (loss) from operations | -3,284 | -3,441 |
Total assets | 333 | 282 |
Capital expenditures | 12 | 13 |
Depreciation | $32 | $48 |
15_INDUSTRY_SEGMENTS_DetailsAs
15. INDUSTRY SEGMENTS (Details-Assets) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Total assets | $5,072 | $6,271 |
Total Segment | ' | ' |
Total assets | 4,739 | 5,989 |
ERF Corporate | ' | ' |
Total assets | $333 | $282 |