As a smaller reporting entity under SEC Regulations, we are not required to furnish selected financial data.
Revenues for the fiscal year ended December 31, 2017, were $564,117 compared to revenues of $209,519 for the comparable period ending December 31, 2016 as follows:
A quantitative summary of our revenues by source category for 2017 and 2016 follows:
The Company eliminated its ASO operations in its entirety during 2016. There was no revenue from these services in 2017.
Cost of revenues rose from $47,017 to $286,332. Gross margin percentage rose from 34% to 49% due to the establishment of more profitable contract terms.
Executive compensation and payroll related expenses decreased $32,561. These expenses include contracted services which had often been done by managers of the company. The slight decrease was due to the mix of contractors and employees in the two periods
Travel expense was flat between the two periods as travel was minimized due to the phasing-out and ultimate elimination of ASO contracts.
Board of Directors Fees remained at $150,000 for the two periods.
Payroll related expenses increased $388,068. As the Company began to expand operations, they hired four sales professionals and four supporting back office staff, whose expense was not outstanding for the entire period in 2016.
The impact of two legal settlements in 2017 was ($17,031). In 2016, there was a gain of $339,900 in 2016 due to a legal settlement. See Note 13 to the financial statement for explanations of this gain
A quantitative summary of our revenues by source category for 2016 and 2015 follows:
The Company phased out and ultimately eliminated its ASO operations in its entirety during 2016. The operation was intact for all of 2015.
Professional Fees increased $212,768 mostly due to enhanced legal fees as a result of increased litigation.
During 2015, the Company had a gain of $773,402 on forgiveness of outstanding indebtedness. There was no comparable gain in 2016.
Stock-based compensation. We issue various stock-based compensation awards to our employees and members of our Board of Directors. We account for the awards in accordance with ASC 718 “Compensation - Stock Compensation” and measure compensation cost for stock options at fair value on the grant date and recognize compensation cost on a straight-line basis over the service period for those options expected to vest. We use the Black-Scholes option pricing model, which requires us to use certain variable assumptions for input, to calculate the fair value of a stock award on the grant date. These assumptions, which are set forth in Note 2 to our consolidated financial statements variables include the expected volatility of our stock price, award exercise behaviors, the risk free interest rate, and expected dividends. We use significant judgment in estimating expected volatility of the stock, exercise behavior and forfeiture rates developing our assumptions as follows:
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity that either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of nonfinancial assets, except for insurance contracts and lease contracts, to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers” to defer the effective date of ASU 2014-09. Public entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period or as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance. Management has determined that the adoption of this guidance will have an impact on the financial statements and notes thereto and is determining the impact it will have/
ASU 2016-12 - Clarifies the guidance on assessing collectability, presentation of sales tax, noncash consideration, and completed contracts and contract modifications at transition.
The effective date of the ASU is the same as ASU 2014-09, which was deferred in August 2015. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the effective date is for reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The effective date for all other entities is for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Management has determined that the adoption of this guidance will have an impact on the financial statements and notes thereto and is determining the impact it will have.
Our audited financial statements may be found beginning on Page 89, appearing elsewhere in this report.