Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2021 | May 13, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | nDivision Inc. | |
Entity Central Index Key | 0001659183 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | true | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Mar. 31, 2021 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 | |
Entity Ex Transition Period | true | |
Entity Common Stock Shares Outstanding | 42,648,225 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLDIATED BALANCE
CONDENSED CONSOLDIATED BALANCE SHEETS - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash | $ 1,721,369 | $ 1,806,606 |
Accounts receivable, net (allowance for doubtful accounts was $10,000 at March 31, 2021 and $26,000 at December 31, 2020) | 498,220 | 531,244 |
Prepaid expenses | 229,783 | 121,339 |
Total current assets | 2,449,372 | 2,459,189 |
Equipment and software licenses - at cost, less accumulated depreciation and amortization | 517,304 | 540,918 |
Other assets | ||
Intangible asset, less accumulated amortization | 404,682 | 455,320 |
Right-of-use asset | 416,344 | 441,940 |
Total other assets | 821,026 | 897,260 |
Total assets | 3,787,702 | 3,897,367 |
Current liabilities | ||
Accounts payable | 257,530 | 153,427 |
Accrued liabilities | 514,618 | 373,487 |
Deferred revenue | 702,803 | 870,184 |
Current portion of note payable | 634,244 | 514,678 |
Current portion of acquisition note payable | 3,800 | 18,102 |
Current portion of operating lease payable | 87,887 | 105,615 |
Current portion of finance lease obligations | 170,199 | 125,449 |
Total current liabilities | 2,371,081 | 2,160,942 |
Note payable | 76,256 | 195,822 |
Convertible notes payable, net of discount | 923,241 | 734,282 |
Operating lease payable, net of current portion | 328,154 | 336,520 |
Finance lease obligations, net of current portion | 329,774 | 380,209 |
Total long-term liabilities | 1,657,425 | 1,646,833 |
Stockholders' (deficit) equity | ||
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, 180,000,000 shares authorized, and 42,584,886 and 42,499,783 shares issued and outstanding, respectively | 42,585 | 42,500 |
Additional paid in capital | 8,077,882 | 7,160,175 |
Accumulated deficit | (8,361,271) | (7,113,083) |
Total stockholders' (deficit) equity | (240,804) | 89,592 |
Total liabilities and stockholders' (deficit) equity | $ 3,787,702 | $ 3,897,367 |
CONDENSED CONSOLDIATED BALANC_2
CONDENSED CONSOLDIATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Current assets | ||
Allowance for doubtful debts | $ 10,000 | $ 26,000 |
Stockholder's equity | ||
Preferred stock, shares par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock, shares issued | 42,584,886 | 42,499,783 |
Common stock, shares outstanding | 42,584,886 | 42,499,783 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||
Service revenue | $ 1,377,454 | $ 1,666,890 |
Service costs | 1,142,023 | 1,020,152 |
Gross profit | 235,431 | 646,738 |
Selling, general and administrative expenses | 1,370,594 | 735,953 |
Operating expenses | 1,370,594 | 735,953 |
Loss from operations | (1,135,163) | (89,215) |
Other (expense) income | ||
Interest expense | (113,236) | (30,047) |
Other income | 211 | 0 |
Other (expense) income | (113,025) | (30,047) |
Net loss before income tax | (1,248,188) | (119,262) |
Income tax expense | 0 | 0 |
Net loss | $ (1,248,188) | $ (119,262) |
Basic and diluted loss per share | $ (0.03) | $ 0 |
Weighted average shares outstanding | 42,519,640 | 41,249,783 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Unaudited) - USD ($) | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Balance, shares at Dec. 31, 2019 | 41,249,783 | |||
Balance, amount at Dec. 31, 2019 | $ 464,860 | $ 41,250 | $ 6,037,767 | $ (5,614,157) |
Amortization of stock option and warrant expense | 145,797 | 0 | 145,797 | 0 |
Net loss | (119,262) | $ 0 | 0 | (119,262) |
Balance, shares at Mar. 31, 2020 | 41,249,783 | |||
Balance, amount at Mar. 31, 2020 | 491,395 | $ 41,250 | 6,183,564 | (5,733,419) |
Balance, shares at Dec. 31, 2020 | 42,499,783 | |||
Balance, amount at Dec. 31, 2020 | 89,592 | $ 42,500 | 7,160,175 | (7,113,083) |
Amortization of stock option and warrant expense | 297,417 | 0 | 297,417 | 0 |
Net loss | (1,248,188) | 0 | 0 | (1,248,188) |
Beneficial conversion feature | 620,375 | $ 0 | 620,375 | 0 |
Exercise of stock options, shares | 85,103 | |||
Exercise of stock options, amount | 0 | $ 85 | (85) | 0 |
Balance, shares at Mar. 31, 2021 | 42,584,886 | |||
Balance, amount at Mar. 31, 2021 | $ (240,804) | $ 42,585 | $ 8,077,882 | $ (8,361,271) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash flows from operating activities | ||
Net loss | $ (1,248,188) | $ (119,262) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation and amortization | 100,463 | 113,239 |
Provision for doubtful accounts | (16,000) | (8,190) |
Amortization of beneficial conversion feature | 70,567 | 0 |
Non-cash lease expense | 25,596 | 22,092 |
Stock based compensation | 297,417 | 145,797 |
Changes in assets and liabilities | ||
Accounts receivable | 49,024 | 74,973 |
Prepaid expenses | (154,677) | (22,303) |
Accounts payable and accrued liabilities | 245,234 | 1,186 |
Deferred revenue | (167,381) | (396,361) |
Operating lease payable | (26,094) | (10,064) |
Net cash used in operating activities | (824,039) | (198,893) |
Cash flows from investing activities | ||
Repayment of debt related to acquisition | (14,302) | (12,413) |
Acquisition of equipment and software licenses | 0 | (2,741) |
Net cash used in investing activities | (14,302) | (15,154) |
Cash flows from financing activities | ||
Proceeds from issuance of notes payable | 785,000 | 0 |
Repayment of finance lease obligations | (31,896) | (64,714) |
Net cash provided by (used in) financing activities | 753,104 | (64,714) |
Net decrease in cash | (85,237) | (278,761) |
Cash, beginning of period | 1,806,606 | 1,757,695 |
Cash, end of period | 1,721,369 | 1,478,934 |
Supplemental cash flow disclosures | ||
Interest paid | 10,332 | 6,278 |
Non-cash financing activities | ||
Cashless exercise of options | 85 | 0 |
Purchase of equipment under capital lease | 26,211 | 115,968 |
Beneficial conversion feature | $ 620,375 | $ 0 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2021 | |
DESCRIPTION OF BUSINESS | |
1. DESCRIPTION OF BUSINESS | nDivision Inc. (“nDivision” or the “Company”) was incorporated under the laws of the state of Nevada. nDivision’s registered office is located at 7301 N. State Highway 161, Suite 100, Irving, TX, 75039. The Company provides managed IT services and project-based professional services in the information technology industry, selling its services directly to customers and through global service providers (GSP). The Company operates in most states of the United States of America. |
LIQUIDITY
LIQUIDITY | 3 Months Ended |
Mar. 31, 2021 | |
LIQUIDITY | |
2. LIQUIDITY | The Company has experienced significant losses and negative cash flows from operations in the past. Management has secured new managed services contracts, implemented a strategy which includes cost reduction efforts, as well as identifying strategic acquisitions to improve the overall profitability and cash flows of the Company. During the three months ended March 31, 2021, the Company received proceeds from the issuance of convertible notes payable of approximately $785,000. The Company also has working capital of $78,291 at March 31, 2021. Management intends to finance operating costs over the next twelve months from the date of the issuance of these consolidated financial statements with existing cash on hand and expected cash flow from operations. Management believes the expected cash flow from operations, and cash on hand will be sufficient to finance operations over the next twelve months from the date of this report. In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company has transitioned its operations to 100% work from home and there has been minimal impact to our internal operations from the transition. The Company is unable to determine if there will be a material future impact to its customers’ operations and ultimately an impact to the Company’s overall revenues. |
SUMMMARY OF SIGNIFICANT ACCOUNT
SUMMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
SUMMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
3. SUMMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K filed on March 30, 2021 from which the accompanying December 31, 2020 numbers are derived. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts and transactions of the Company and its wholly owned subsidiary, nDivision Services Inc. (incorporated in the state of Texas). All significant inter-company accounts and transactions are eliminated in consolidation. Use of Estimates Management uses estimates and assumptions in preparing these unaudited condensed consolidated financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Revenue Recognition For revenue recognition arrangements that we determine are within the scope of Topic ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we evaluate the goods or services promised within each contract related performance obligation and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company recognizes revenue upon completion of our performance obligations or expiration of the contractual time to use services such as managed services and professional service hours purchased in bulk for a given time period. Any early termination fees are recognized in the period the contract is terminated and the termination invoice is paid. The Company has elected the following practical expedients in applying ASC 606: Unsatisfied Performance Obligations - all performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. Contract Costs - all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration. Sales Tax Exclusion from the Transaction Price - the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer. Cash and Cash Equivalents For purposes of the unaudited condensed consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash balances are maintained at one bank. Balances are insured by the Federal Deposit Insurance Corporation subject to certain limitations. Accounts Receivable Accounts receivable are stated at the amount management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is considered to be doubtful due to credit issues. These allowances together reflect the Company’s estimate of potential losses inherent in accounts receivable balances, based on historical loss and known factors impacting its customers. The Company recorded an allowance for doubtful accounts of $10,000 and $26,000 as of March 31, 2021 and December 31, 2020, respectively. The Company does not accrue interest on past due receivables. Intangible Assets Customer contracts acquired were recorded at their estimated fair value at the date of acquisition and are being amortized over their estimated useful life of five years using the straight-line method. Impairment of Long-lived Assets The Company records an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not record any impairment during the three months ended March 31, 2021 and 2020. Paycheck Protection Note Payable The Company received a loan from the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the amount of $710,500. The loan is subject to a note dated May 2, 2020 and may be forgiven to the extent proceeds of the loan are used for eligible expenditures such as payroll and other expenses described in the CARES Act. Certain portions of the loan and accrued interest may qualify for loan forgiveness based on the terms of the program. The Company has applied for full forgiveness of this loan, however at the date of this report there has been no determination for forgiveness amount. The loan bears interest at a rate of 1% and is payable in monthly installments of principal and interest over 24 months beginning 10 months from the end of the “covered period” as defined in the CARES Act. The loan may be repaid at any time with no prepayment penalty. The Company has not been required to make installment payments as of the date of this report. Concentration of Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, are cash and accounts receivable. See Note 14 for significant customer concentration disclosure. Cash is maintained with one major financial institution in the United States and may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and, therefore, bear minimal risk. Equipment and Software Licenses Equipment and software licenses are stated at cost. Depreciation is calculated using the straight-line method over an estimated useful life of one to ten years. Convertible Debt and Securities The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the expense must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence. Earnings and Loss per Share Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. There were approximately 15,387,000 of common stock equivalents excluded for the three months ended March 31, 2021 and 6,949,000 of common stock equivalents excluded for the three months ended March 31, 2020, respectively because their effect is anti-dilutive. Marketing Costs Marketing costs, which are expensed as incurred, totaled approximately $158,859 for the three months ended March 31, 2021 and $5,091 for the three months ended March 31, 2020, respectively and is included in selling, general and administrative expenses. Stock-Based Compensation Compensation expense related to share-based transactions, including employee stock options, is measured in the financial statements based on a determination of the fair value. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all stock options, the Company recognizes expense over the requisite service period on a straight-line basis (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. See Note 12 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation. Leases The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in right-of-use assets on the unaudited condensed consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, net of current portion, respectively on the unaudited condensed consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases of assets where the Company has assumed substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are recognized at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The interest element of the finance leases are accounted for as finance costs and expensed over the lease term using the effective interest rate method. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company has determined the deferred tax assets and liabilities on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize our deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statement of operations. As of March 31, 2021, no accrued interest or penalties are included on the related tax liability line in the balance sheet. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2021 | |
RECENT ACCOUNTING PRONOUNCEMENTS | |
4. RECENT ACCOUNTING PRONOUNCEMENTS | Recently Adopted Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. The new rules were effective for the Company in the first quarter of 2021. The Company determined that the adoption of this ASU had no impact on its consolidated financial statements. New Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASC 326”), authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU 2020-06- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity No other recent accounting pronouncements were issued by FASB and the SEC that are believed by management to have a material impact on the Company’s present or future unaudited condensed consolidated financial statements. |
EQUIPMENT AND SOFTWARE LICENSES
EQUIPMENT AND SOFTWARE LICENSES | 3 Months Ended |
Mar. 31, 2021 | |
EQUIPMENT AND SOFTWARE LICENSES | |
5. EQUIPMENT AND SOFTWARE LICENSES | Equipment and software licenses consist of the following: March 31, December 31, 2021 2020 Equipment and software $ 626,111 $ 599,900 Software licenses 1,302,141 1,302,141 1,928,252 1,902,041 Less - Accumulated depreciation and amortization (1,410,948 ) (1,361,123 ) $ 517,304 $ 540,918 Depreciation and amortization expense related to assets for the three months ended March 31, 2021 and 2020 was approximately $49,825 and $62,601, respectively. Included in the above paragraph is depreciation and amortization expense related to leased assets for the three months ended March 31, 2021 and 2020 of approximately $40,622 and $43,562, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2021 | |
INTANGIBLE ASSETS | |
6. INTANGIBLE ASSETS | Intangible Assets As of March 31, 2021 Useful Life Cost Accumulated Amortization Net Book Value Service Contracts 5 $ 1,012,335 $ 607,653 $ 404,682 There was approximately $50,638 of amortization expense for each of the three month periods ended March 31, 2021 and 2020. Service contracts are amortized based on the future undiscounted cash flows or straight – line basis over estimated remaining useful lives of five years. Over the next three fiscal years annual amortization expense for these finite life intangible assets will total approximately $404,682 as follows: remainder of fiscal 2021 - $151,914, fiscal 2022 - $202,551, fiscal 2023 - $50,217. Long-lived assets, including purchased intangibles subject to amortization, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company regularly evaluates whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows. The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. As of March 31, 2021, the Company has not recorded any impairments. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended |
Mar. 31, 2021 | |
ACCRUED LIABILITIES | |
7. ACCRUED LIABILITIES | March 31, December 31, 2021 2020 Accrued compensation $ 258,929 $ 138,707 Accrued interest 50,638 23,185 Accrued sales tax 7,368 23,525 Accrued franchise tax 16,010 11,832 Accrued professional fees and other payables 181,673 176,238 Total accrued liabilities $ 514,618 $ 373,487 |
FACTORING CREDIT FACILITY
FACTORING CREDIT FACILITY | 3 Months Ended |
Mar. 31, 2021 | |
FACTORING CREDIT FACILITY | |
8. FACTORING CREDIT FACILITY | The Company has agreements with an unrelated third party for factoring of specific accounts receivable. Under this arrangement, the Company has transferred the relevant receivables to the factor in exchange for cash and is prevented from selling or pledging the receivables. The agreement provides for an advanced rate of 90% with a fee of 1.9% to be charged on the gross face amount of the invoices purchased for 30 days, and an additional 0.06% charge for each additional day until the invoice(s) are paid. The Company has retained late payment and credit risk related to the factored receivables and therefore continues to recognize the factored receivables in their entirety on its balance sheet. The Company has not factored any receivables under this agreement for the three months ended March 31, 2021 and 2020. |
NOTE PAYABLE
NOTE PAYABLE | 3 Months Ended |
Mar. 31, 2021 | |
NOTE PAYABLE | |
9. NOTE PAYABLE | On May 2, 2020, the Company entered into a Paycheck Protection Program loan for $710,500 in connection with the CARES Act related to COVID-19. $634,244 of the Paycheck Protection Program loan is classified as current as the Company has not been required to make the installment payments. The promissory note has a fixed payment schedule, with a deferral period for loan payments of either (1) the date that SBA remits the borrower's loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower's loan forgiveness covered period. Therefore estimated commencing payment date is ten months after the 24-week covered period. A final payment for the unpaid principal and accrued interest will be payable no later than May 2, 2022. The note will bear interest at a rate of 1.00% per annum and is deferred for the first six months of the loan. Certain portions of the loan and accrued interest may qualify for loan forgiveness based on the terms of the program. The Company has applied for full forgiveness of this loan, however at the date of this report there has been no determination for forgiveness amount, if any. |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2021 | |
CONVERTIBLE NOTES PAYABLE | |
10. CONVERTIBLE NOTES PAYABLE | The Company entered several promissory notes with various investors of the Company with a face value of $1,835,000 of which $200,000 is from a related party (“the Notes”) with $785,000 raised during the three months ended March 31, 2021 and $1,050,000 raised during the year ended December 31, 2020. The Notes had an initial beneficial conversion feature valued at $956,675, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the Notes and recorded as interest expense. For the three month’s ended March 31, 2021, the Company amortized $24,334 of the discount to interest expense. The notes have an interest rate of 8%. The principle and interest of the notes are due in full beginning September 2022 through March 2023 or can be converted into the Company’s common stock at a purchase price of the lesser of $0.40 per common share at any time after issuance or a 25% discount of the common stock price of a debt or equity offering that occurs subsequent to the date of the closing of the offering that results in gross offering proceeds of at least Five Million Dollars. |
LEASE OBLIGATIONS
LEASE OBLIGATIONS | 3 Months Ended |
Mar. 31, 2021 | |
LEASE OBLIGATIONS | |
11. LEASE OBLIGATIONS | The Company finances certain property and equipment using finance leases. The finance lease obligations represent the present value of the minimum lease payments, net of imputed interest. The finance lease obligations are secured by the underlying leased assets. Leases are payable in monthly installments ranging from $354 to $4,397 including interest, ranging from 3.6% to 12% per annum. Future minimum lease payments, including principle and interest, under the finance leases for subsequent years are as follows: Year ended Remainder of 2021 $ 127,749 2022 155,642 2023 136,058 2024 117,774 2025 43,970 Total 581,193 Less: interest (81,220 ) Present value of net minimum lease payments 499,973 Short term 170,199 Long term total $ 329,774 Lease payments for the three months ended March 31, 2021 and 2020 aggregated approximately $43,057 and $69,745, respectively. The finance lease obligations are secured by underlying leased assets with a net book value of approximately $494,638 and $509,050 as of March 31, 2021 and December 31, 2020, respectively. Operating Lease The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option will result in an economic penalty. All of the Company’s real estate leases are classified as operating leases. Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term for an additional four to five years. The exercise of lease renewal options is at the Company’s discretion. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants. The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of March 31, 2021 are: Weighted average remaining lease term 44 Months Weighted average incremental borrowing rate 5.0 % The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized in the unaudited condensed consolidated balance sheet as of March 31, 2021: Remainder of 2021 $ 73,998 2022 129,392 2023 131,859 2024 120,871 Total undiscounted future minimum lease payments 456,120 Less: Imputed interest (40,079 ) Present value of operating lease obligation $ 416,041 The Company has one leased facility which is office, manufacturing, and warehouse space. The Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Therefore, all lease and non-lease components are combined and accounted for as single lease component. For the three months ended March 31, 2021, the components of lease expense, included in cost of services and general and administrative expenses and the related interest expense in the consolidated statements of operations income, are as follows: Three months ended March 31, 2021 Three months ended March 31, 2020 Operating lease cost: Operating lease cost $ 31,617 $ 31,119 Financing lease cost: Amortization of financed lease assets $ 26,200 $ 43,562 Interest expense 5,417 3,997 Total lease cost $ 31,617 $ 47,559 |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2021 | |
STOCK BASED COMPENSATION | |
12. STOCK BASED COMPENSATION | Number of options outstanding: 2018 Equity Incentive Plan 7,726,677 Options granted not part of a shareholder approved plan 2,200,000 March 31, 2021 9,926,677 The Board of Directors approved the Company’s 2018 Equity Incentive Plan (the “2018 Plan”). The purpose of the 2018 Plan is to provide additional incentives to select persons who can make, are making, and continue to make substantial contributions to the growth and success of the Company, to attract and retain the employment and services of such persons, and to encourage and reward such contributions, by providing these individuals with an opportunity to acquire or increase stock ownership in the Company through either the grant of options or restricted stock. The 2018 Plan is administered by the Compensation Committee or such other committee as is appointed by the Board of Directors pursuant to the 2018 Plan (the “Committee”). The Committee has full authority to administer and interpret the provisions of the 2018 Plan including, but not limited to, the authority to make all determinations with regard to the terms and conditions of an award made under the 2018 Plan. The maximum number of shares that may be granted under the 2018 Plan is 8,000,000. This number is subject to adjustment to reflect changes in the capital structure or organization of the Company. The following table reflects the stock options for the three months ended March 31, 2021: A summary of stock option activity is as follows: Number of options outstanding: Beginning of year 9,601,677 Granted 500,000 Exercised (175,000 ) Forfeited - March 31, 2021 9,926,677 Number of options exercisable at end of period 6,953,076 Number of options available for grant at end of period 273,323 Weighted average option prices per share: $ 0.40 Granted during the period 0.56 Exercised during the period 0.375 Forfeited during the period - Outstanding at end of the period 0.39 Exercisable at end of period $ 0.40 Stock-based compensation expense attributable to stock options was $180,000 for the three month period ended March 31, 2021 and $145,797 for the three month period ended March 31, 2020. As of March 31, 2021, there was approximately $1,170,000 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was 5 years. During the three month period ended March 31, 2021, the Company granted options to purchase 500,000 shares of common stock with an average vesting period of 3 years, an average expected life of 6.5 years and an average exercise price of $0.56 per common share. Total value was $243,964. The Company did not issue any options or warrants during the three month period ended March 31, 2020. 2021 Expected option life (years) 6.5 Expected stock price volatility 117 % Expected dividend yield — % Risk-free interest rate 1.15 % During the year ended December 31, 2020, the Company issued a warrant to a related party consultant to purchase up to 750,000 shares of common stock at a per common share price of $0.625. The consulting contract is for eighteen months and the warrant term is eighteen months. The warrant vests immediately and the total value was approximately $174,000. The Gamwell contract acquisition warrants remain outstanding. The warrant can be exercised for 122,752 of the Company’s common stock at an exercise price of $0.375 per share and expire April 23, 2028. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |
13. RELATED PARTY TRANSACTIONS | The Company contracted with Norco Professional Services, LLC. (“Norco”) to provide consulting services. The Company spent approximately $22,500 for the three-month period ended March 31, 2021. Norco is owned by Andrew J. Norstrud, who joined the Company in January of 2019, as the Company’s Chief Financial Officer. The Company continues to contract Andrew Norstrud’s services through Norco. During the year ended December 31, 2020, the Company obtained $200,000 in debt and granted a warrant to a related party for consulting services over the following 18 months, see note 10 and 12 for additional related party transaction details. The above related party transactions are not necessarily indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent parties. |
SIGNIFICANT CUSTOMER
SIGNIFICANT CUSTOMER | 3 Months Ended |
Mar. 31, 2021 | |
SIGNIFICANT CUSTOMER | |
14. SIGNIFICANT CUSTOMERS | The Company had significant customers in each of the quarters presented. A significant customer is defined as one that makes up ten percent or more of total revenues in a particular quarter or ten percent of outstanding accounts receivable balance as of end of the period. Net revenues for the three months ended March 31, 2021 and 2020 include revenues from significant customers as follows: Three Month Ended March 31, 2021 2020 Customer A 54 % 40 % Customer B 11 % 32 % Accounts receivable balances as of March 31, 2021 and December 31, 2020 from significant customers are as follows: March 31, December 31, 2021 2020 Customer A 93 % 79 % Customer C 0 % 14 % |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
SUBSEQUENT EVENTS | |
15. SUBSEQUENT EVENTS | Subsequent to March 31, 2021, the Company entered into several promissory notes with various investors of the Company with a face value of $405,000 (“the Notes”). The Notes have a beneficial conversion feature valued at $405,000, which is recorded as a discount. The total discount on the Notes will be amortized over the life of the Notes and recorded as interest expense. The notes have an interest rate of 8% and are payable quarterly and twelve months after issuance, 1/12 of the principle will repaid monthly. The principal and interest of the note is convertible into the Company’s common stock at a purchase price of the lesser of $0.40 per common share at any time after issuance or a 25% discount of the common stock price of a Qualified Offering. Effective on May 5, 2021 the board approved an amended and restated stock option plan that increases the available options from 8,000,000 shares to 18,000,000 shares, which was approved by majority written consent of the shareholders. On May 6, 2021, the Company issued 300,000 common stock options to a new board member at an exercised price of $0.78 per share. The option vests monthly over 36 months. On May 11, 2021, the Company issued 63,339 shares of common stock to an investor that converted $25,000 of principal and $336 of interest in to shares per the Notes agreement. |
SUMMMARY OF SIGNIFICANT ACCOU_2
SUMMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
SUMMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K filed on March 30, 2021 from which the accompanying December 31, 2020 numbers are derived. |
Principles of Consolidation | The unaudited condensed consolidated financial statements include the accounts and transactions of the Company and its wholly owned subsidiary, nDivision Services Inc. (incorporated in the state of Texas). All significant inter-company accounts and transactions are eliminated in consolidation. |
Use of Estimates | Management uses estimates and assumptions in preparing these unaudited condensed consolidated financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. |
Revenue Recognition | For revenue recognition arrangements that we determine are within the scope of Topic ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we evaluate the goods or services promised within each contract related performance obligation and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company recognizes revenue upon completion of our performance obligations or expiration of the contractual time to use services such as managed services and professional service hours purchased in bulk for a given time period. Any early termination fees are recognized in the period the contract is terminated and the termination invoice is paid. The Company has elected the following practical expedients in applying ASC 606: Unsatisfied Performance Obligations - all performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. Contract Costs - all incremental customer contract acquisition costs are expensed as they are incurred as the amortization period of the asset that the Company otherwise would have recognized is one year or less in duration. Sales Tax Exclusion from the Transaction Price - the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from the customer. |
Cash and Cash Equivalents | For purposes of the unaudited condensed consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash balances are maintained at one bank. Balances are insured by the Federal Deposit Insurance Corporation subject to certain limitations. |
Accounts Receivable | Accounts receivable are stated at the amount management expects to collect. An allowance for doubtful accounts is recorded, as a charge to bad debt expense, where collection is considered to be doubtful due to credit issues. These allowances together reflect the Company’s estimate of potential losses inherent in accounts receivable balances, based on historical loss and known factors impacting its customers. The Company recorded an allowance for doubtful accounts of $10,000 and $26,000 as of March 31, 2021 and December 31, 2020, respectively. The Company does not accrue interest on past due receivables. |
Intangible Assets | Customer contracts acquired were recorded at their estimated fair value at the date of acquisition and are being amortized over their estimated useful life of five years using the straight-line method. |
Impairment of Long-lived Assets | The Company records an impairment of long-lived assets used in operations, other than goodwill, when events or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced to fair value, which is typically calculated using the discounted cash flow method. The Company did not record any impairment during the three months ended March 31, 2021 and 2020. |
Paycheck Protection Note Payable | The Company received a loan from the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the amount of $710,500. The loan is subject to a note dated May 2, 2020 and may be forgiven to the extent proceeds of the loan are used for eligible expenditures such as payroll and other expenses described in the CARES Act. Certain portions of the loan and accrued interest may qualify for loan forgiveness based on the terms of the program. The Company has applied for full forgiveness of this loan, however at the date of this report there has been no determination for forgiveness amount. The loan bears interest at a rate of 1% and is payable in monthly installments of principal and interest over 24 months beginning 10 months from the end of the “covered period” as defined in the CARES Act. The loan may be repaid at any time with no prepayment penalty. The Company has not been required to make installment payments as of the date of this report. |
Concentration of Risk | Financial instruments, which potentially subject the Company to concentrations of credit risk, are cash and accounts receivable. See Note 14 for significant customer concentration disclosure. Cash is maintained with one major financial institution in the United States and may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and, therefore, bear minimal risk. |
Equipment and Software Licenses | Equipment and software licenses are stated at cost. Depreciation is calculated using the straight-line method over an estimated useful life of one to ten years. |
Convertible Debt and Securities | The Company follows beneficial conversion feature guidance in ASC 470-20, which applies to convertible stock as well as convertible debt. A beneficial conversion feature is defined as a nondetachable conversion feature that is in the money at the commitment date. The beneficial conversion feature guidance requires recognition of the conversion option’s in-the-money portion, the intrinsic value of the option, in equity, with an offsetting reduction to the carrying amount of the instrument. The resulting discount is amortized as interest over the life of the instrument, if a stated maturity date exists, or to the earliest conversion date, if there is no stated maturity date. If the earliest conversion date is immediately upon issuance, the expense must be recognized at inception. When there is a subsequent change to the conversion ratio based on a future occurrence, the new conversion price may trigger the recognition of an additional beneficial conversion feature on occurrence. |
Earnings and Loss per Share | Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. There were approximately 15,387,000 of common stock equivalents excluded for the three months ended March 31, 2021 and 6,949,000 of common stock equivalents excluded for the three months ended March 31, 2020, respectively because their effect is anti-dilutive. |
Marketing Costs | Marketing costs, which are expensed as incurred, totaled approximately $158,859 for the three months ended March 31, 2021 and $5,091 for the three months ended March 31, 2020, respectively and is included in selling, general and administrative expenses. |
Stock-Based Compensation | Compensation expense related to share-based transactions, including employee stock options, is measured in the financial statements based on a determination of the fair value. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all stock options, the Company recognizes expense over the requisite service period on a straight-line basis (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. See Note 12 for the assumptions used to calculate the fair value of stock-based employee and non-employee compensation. |
Leases | The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in right-of-use assets on the unaudited condensed consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities, net of current portion, respectively on the unaudited condensed consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases of assets where the Company has assumed substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are recognized at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The interest element of the finance leases are accounted for as finance costs and expensed over the lease term using the effective interest rate method. |
Income Taxes | The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company has determined the deferred tax assets and liabilities on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize our deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statement of operations. As of March 31, 2021, no accrued interest or penalties are included on the related tax liability line in the balance sheet. |
EQUIPMENT AND SOFTWARE LICENS_2
EQUIPMENT AND SOFTWARE LICENSES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
EQUIPMENT AND SOFTWARE LICENSES | |
Schedule of equipment and software licenses | March 31, December 31, 2021 2020 Equipment and software $ 626,111 $ 599,900 Software licenses 1,302,141 1,302,141 1,928,252 1,902,041 Less - Accumulated depreciation and amortization (1,410,948 ) (1,361,123 ) $ 517,304 $ 540,918 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
INTANGIBLE ASSETS | |
Intangible Assets | Useful Life Cost Accumulated Amortization Net Book Value Service Contracts 5 $ 1,012,335 $ 607,653 $ 404,682 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
ACCRUED LIABILITIES | |
Schedule of accrued liabilities | March 31, December 31, 2021 2020 Accrued compensation $ 258,929 $ 138,707 Accrued interest 50,638 23,185 Accrued sales tax 7,368 23,525 Accrued franchise tax 16,010 11,832 Accrued professional fees and other payables 181,673 176,238 Total accrued liabilities $ 514,618 $ 373,487 |
LEASE OBLIGATIONS (Tables)
LEASE OBLIGATIONS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
LEASE OBLIGATIONS (Tables) | |
Schedule of future minimum lease payments | Year ended Remainder of 2021 $ 127,749 2022 155,642 2023 136,058 2024 117,774 2025 43,970 Total 581,193 Less: interest (81,220 ) Present value of net minimum lease payments 499,973 Short term 170,199 Long term total $ 329,774 |
Schedule of weighted average remaining lease term and discount rate for operating leases | Weighted average remaining lease term 44 Months Weighted average incremental borrowing rate 5.0 % |
Schedule of minimum lease commitments | Remainder of 2021 $ 73,998 2022 129,392 2023 131,859 2024 120,871 Total undiscounted future minimum lease payments 456,120 Less: Imputed interest (40,079 ) Present value of operating lease obligation $ 416,041 |
Schedule of consolidated statements of operations income | Three months ended March 31, 2021 Three months ended March 31, 2020 Operating lease cost: Operating lease cost $ 31,617 $ 31,119 Financing lease cost: Amortization of financed lease assets $ 26,200 $ 43,562 Interest expense 5,417 3,997 Total lease cost $ 31,617 $ 47,559 |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
STOCK BASED COMPENSATION | |
Schedule of stock based compensation | Number of options outstanding: 2018 Equity Incentive Plan 7,726,677 Options granted not part of a shareholder approved plan 2,200,000 March 31, 2021 9,926,677 |
Summary of Stock option activity | Number of options outstanding: Beginning of year 9,601,677 Granted 500,000 Exercised (175,000 ) Forfeited - March 31, 2021 9,926,677 Number of options exercisable at end of period 6,953,076 Number of options available for grant at end of period 273,323 Weighted average option prices per share: $ 0.40 Granted during the period 0.56 Exercised during the period 0.375 Forfeited during the period - Outstanding at end of the period 0.39 Exercisable at end of period $ 0.40 |
Schedule of granted options | 2021 Expected option life (years) 6.5 Expected stock price volatility 117 % Expected dividend yield — % Risk-free interest rate 1.15 % |
SIGNIFICANT CUSTOMERS (Tables)
SIGNIFICANT CUSTOMERS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Schedules of Concentration | Three Month Ended March 31, 2021 2020 Customer A 54 % 40 % Customer B 11 % 32 % |
Schedules of customer accounts receivable,concenteration | March 31, December 31, 2021 2020 Customer A 93 % 79 % Customer C 0 % 14 % |
LIQUIDITY (Details Narrative)
LIQUIDITY (Details Narrative) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
LIQUIDITY | |
Proceeds from the issuance of notes payable | $ 785,000 |
Working capital | $ 78,291 |
SUMMMARY OF SIGNIFICANT ACCOU_3
SUMMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | |||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | May 02, 2020 | |
Allowance for doubtful accounts | $ 10,000 | $ 26,000 | ||
Marketing costs | $ 158,859 | $ 5,091 | ||
Paycheck Protection Program [Member] | ||||
Interest rate | 1.00% | |||
Loan amount | $ 710,500 | |||
Interest rate description | The loan bears interest at a rate of 1% and is payable in monthly installments of principal and interest over 24 months beginning 10 months from the end of the “covered period” as defined in the CARES Act | |||
Common Stock [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | 15,387,000 | 6,949,000 |
EQUIPMENT AND SOFTWARE LICENS_3
EQUIPMENT AND SOFTWARE LICENSES (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment, Gross | $ 1,928,252 | $ 1,902,041 |
Less - accumulated depreciation and amortization | (1,410,948) | (1,361,123) |
Property, Plant and Equipment, Net | 517,304 | 540,918 |
Equipment and software [Member] | ||
Property, Plant and Equipment, Gross | 626,111 | 599,900 |
Software License [Member] | ||
Property, Plant and Equipment, Gross | $ 1,302,141 | $ 1,302,141 |
EQUIPMENT AND SOFTWARE LICENS_4
EQUIPMENT AND SOFTWARE LICENSES (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
EQUIPMENT AND SOFTWARE LICENSES | ||
Depreciation and amortization related to assets | $ 49,825 | $ 62,601 |
Depreciation and amortization expenses related to leased assets | $ 40,622 | $ 43,562 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) | 3 Months Ended |
Mar. 31, 2021USD ($) | |
Intangible assets net | $ 404,682 |
Service Contracts [Member] | |
Intangible assets gross | 1,012,335 |
Accumulated amortization | 607,653 |
Intangible assets net | $ 404,682 |
Useful life of intangible assets | 5 years |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
INTANGIBLE ASSETS | ||
Amortization expense | $ 50,638 | $ 50,638 |
2021 | 151,914 | |
2022 | 202,551 | |
2023 | 50,217 | |
Intangible assets net | $ 404,682 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
NOTE PAYABLE | ||
Accrued compensation | $ 258,929 | $ 138,707 |
Accrued interest | 50,638 | 23,185 |
Accrued sales tax | 7,368 | 23,525 |
Accrued franchise tax | 16,010 | 11,832 |
Accrued professional fees and other payables | 181,673 | 176,238 |
Total accrued liabilities | $ 514,618 | $ 373,487 |
FACTORING CREDIT FACILITY (Deta
FACTORING CREDIT FACILITY (Details Narrative) | 3 Months Ended |
Mar. 31, 2021 | |
Factoring Credit Facility [Member] | |
Agreement description | The agreement provides for an advanced rate of 90% with a fee of 1.9% to be charged on the gross face amount of the invoices purchased for 30 days, and an additional 0.06% charge for each additional day until the invoice(s) are paid |
NOTE PAYABLE (Details Narrative
NOTE PAYABLE (Details Narrative) - Investor [Member] | 1 Months Ended |
May 02, 2020USD ($) | |
Proceeds from loan | $ 634,244 |
Interest rate | 1.00% |
Loan amount | $ 710,500 |
CONVERTIBLE NOTES PAYABLE (Deta
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Beneficial conversion feature | $ 620,375 | $ 0 | |
Interest expense | 113,236 | $ 30,047 | |
Several Investors [Member] | |||
Convertible promissory note | 785,000 | $ 1,050,000 | |
Beneficial conversion feature | 956,675 | ||
Interest expense | $ 24,334 | ||
Rate of interest | 8.00% | ||
Price per share | $ 0.40 | ||
Due to related party | $ 1,835,000 | ||
Discount rate | 25.00% | ||
A Related Party [Member] | |||
Convertible promissory note | $ 200,000 | $ 200,000 |
LEASE OBLIGATIONS (Details)
LEASE OBLIGATIONS (Details) | Mar. 31, 2021USD ($) |
LEASE OBLIGATIONS (Tables) | |
2021 | $ 127,749 |
2022 | 155,642 |
2023 | 136,058 |
2024 | 117,774 |
2025 | 43,970 |
Total | 581,193 |
Less: interest | (81,220) |
Present value of net minimum lease payments | 499,973 |
Short term | 170,199 |
Long term total | $ 329,774 |
LEASE OBLIGATIONS (Details 1)
LEASE OBLIGATIONS (Details 1) | 3 Months Ended |
Mar. 31, 2021 | |
LEASE OBLIGATIONS (Tables) | |
Weighted average remaining lease term | 44 months |
Weighted average incremental borrowing rate | 5.00% |
LEASE OBLIGATIONS (Details 2)
LEASE OBLIGATIONS (Details 2) | Mar. 31, 2021USD ($) |
LEASE OBLIGATIONS (Tables) | |
2021 | $ 73,998 |
2022 | 129,392 |
2023 | 131,859 |
2024 | 120,871 |
Total undiscounted future minimum lease payments | 456,120 |
Less: Imputed interest | (40,079) |
Present value of operating lease obligation | $ 416,041 |
LEASE OBLIGATIONS (Details 3)
LEASE OBLIGATIONS (Details 3) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Operating lease cost | ||
Operating lease cost | $ 31,617 | $ 31,119 |
Finance lease cost | ||
Amortization of leased assets | 26,200 | 43,562 |
Interest expense | 5,417 | 3,997 |
Total lease cost | $ 31,617 | $ 47,559 |
LEASE OBLIGATIONS (Details Narr
LEASE OBLIGATIONS (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Lease payments | $ 43,057 | $ 69,745 | |
Leased assets, net book value | 494,638 | $ 509,050 | |
Minimum [Member] | |||
Leases Periodic payments | $ 354 | ||
Interest rate | 3.60% | ||
Maximum [Member] | |||
Leases Periodic payments | $ 4,397 | ||
Interest rate | 12.00% |
STOCK BASED COMPENSATION (Detai
STOCK BASED COMPENSATION (Details) | 3 Months Ended |
Mar. 31, 2021shares | |
Number of options outstanding | |
2018 Equity incentive plan | 7,726,677 |
Options granted not part of a shareholder approved plan | 2,200,000 |
March 31, 2021 | 9,926,677 |
STOCK BASED COMPENSATION (Det_2
STOCK BASED COMPENSATION (Details 1) | 3 Months Ended |
Mar. 31, 2021USD ($)$ / sharesshares | |
Number of options outstanding | |
Number of options outstanding, begining balance | $ | $ 9,601,677 |
Granted | shares | 500,000 |
Exercised, converted | shares | (175,000) |
Forfeited / exchanged / modification | shares | 0 |
Number of options outstanding, ending balance | shares | 9,926,677 |
Number of options exercisable at end of period | shares | 6,953,076 |
Number of options available for grant at end of period | shares | 273,323 |
Weighted average option prices per share | |
Weighted average option prices per share | $ / shares | $ 0.40 |
Granted during the period | $ / shares | 0.56 |
Exercised during the period | $ / shares | 0.375 |
Forfeited during the period | $ / shares | 0 |
Outstanding at end of the period | $ / shares | 0.39 |
Exercisable at end of period | $ / shares | $ 0.40 |
STOCK BASED COMPENSATION (Det_3
STOCK BASED COMPENSATION (Details 2) | 3 Months Ended |
Mar. 31, 2021 | |
STOCK BASED COMPENSATION | |
Expected option life (years) | 6 years 5 months 30 days |
Expected stock price volatility | 117.00% |
Expected dividend yield | 0.00% |
Risk-free interest rate | 1.15% |
STOCK BASED COMPENSATION (Det_4
STOCK BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | |
Stock-based compensation expense | $ 180,000 | $ 145,797 | ||
Unrecognized compensation expense | $ 1,170,000 | $ 1,170,000 | ||
Average expected life | 5 years | 6 years 5 months 30 days | ||
Stock option granted during the period | 500,000 | |||
Total value of options/rights granted | $ 243,964 | |||
Exercise price | $ 0.56 | |||
Weighted average vesting period of options | 3 years | |||
Warrants [Member] | Consultant [Member] | ||||
Total value of options/rights granted | $ 174,000 | |||
Exercise price | $ 0.625 | |||
Common stock shares issuable upon exercise of options/rights | 750,000 | |||
Term of options/rights | 18 months | |||
The Gamwell Contract [Member] | Warrants [Member] | ||||
Exercise price | $ 0.375 | |||
Common stock shares issuable upon exercise of options/rights | 122,752 | 122,752 | ||
Expiration date | Apr. 23, 2028 | |||
2018 Equity Incentive Plan | ||||
Maximum number of shares granted under plan | 8,000,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Norco Professional Services, LLC [Member] | ||
Related party expenses | $ 22,500 | |
A Related Party [Member] | ||
Convertible promissory note | $ 200,000 | $ 200,000 |
SIGNIFICANT CUSTOMERS (Details)
SIGNIFICANT CUSTOMERS (Details) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net Revenue [Member] | Customer B [Member] | ||
Concentration percentage | 11.00% | 32.00% |
Net Revenue [Member] | Customer A [Member] | ||
Concentration percentage | 54.00% | 40.00% |
Accounts receivable [Member] | Customer A [Member] | ||
Concentration percentage | 93.00% | 79.00% |
Accounts receivable [Member] | Customer C | ||
Concentration percentage | 0.00% | 14.00% |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | May 11, 2021 | May 06, 2021 | May 05, 2021 | Mar. 31, 2021 | Dec. 31, 2020 |
Common stock, shares issued | 42,584,886 | 42,499,783 | |||
Term of option | 3 years | ||||
Subsequent Event [Member] | Investor [Member] | |||||
Debt instrument payment description | The notes have an interest rate of 8% and are payable quarterly and twelve months after issuance, 1/12 of the principle will repaid monthly | ||||
Price per share | $ 0.40 | ||||
Promissory note | $ 405,000 | ||||
Beneficial conversion feature | $ 405,000 | ||||
Rate of interest | 8.00% | ||||
Restated stock option plan descripton | The board approved an amended and restated stock option plan that increases the available options from 8,000,000 shares to 18,000,000 shares, which was approved by majority written consent of the shareholders | ||||
Common stock, shares issued | 63,339 | ||||
Debt Conversion, Converted Instrument, Principal Amount | $ 25,000 | ||||
Debt Conversion, Converted Instrument, Interest | $ 336 | ||||
Subsequent Event [Member] | New Board Member [Member] | |||||
Price per share | $ 0.78 | ||||
Common stock, shares issued | 300,000 | ||||
Term of option | 36 months |