Our significant accounting policies are more fully described in Note 1 to the
financial statements. However, certain accounting policies are particularly
important to the portrayal of our financial position and results of operations
and require the application of significant judgment by our management; as a
result they are subject to an inherent degree of uncertainty. In applying these
policies, our management uses their judgment to determine the appropriate
assumptions to be used in the determination of certain estimates. Those
estimates are based on knowledge of our industry, historical operations, terms
of existing contracts, and our observance of trends in the industry, information
provided by our customers and information available from other outside sources,
Our critical accounting policies include:
? Revenue Recognition. We recognize revenue from licensing our software upon the installation and acceptance of the software by customers in accordance with Statement of Position 97-2, Software Revenue Recognition. When a software sales arrangement includes rights to customer support, the portion of the license fee allocated to such support is recognized ratably over the term of the arrangement, normally one year. Revenue from professional services arrangements will be recognized in the month in which services are rendered over the term of the arrangement. ? Long-Lived Assets - We depreciate property and equipment and amortize intangible assets, including software development costs over the respective assets' estimated useful life and periodically review the remaining useful lives of our assets to ascertain that our estimate is still valid. If we determine a useful life has materially changed, we either change the useful life or write the asset down or if we determine the asset has exhausted its useful life, we write the asset off completely. ? Stock Based Compensation - We account for stock based compensation under the provisions of Statement of Financial Accounting Standards No. 123, (revised 2004) Share-Based Payments. Under the fair value recognition provisions of SFAS 123R, we recognize stock-based compensation expense net of an estimated forfeiture rate and therefore only recognize compensation cost for those shares expected to vest over the service period of the award. Calculating stock-based compensation expense requires the input of subjective assumptions, including the expected term of the option grant, stock price volatility, and the pre-vesting option forfeiture rate. We estimate the expected life of options granted based on historical exercise patterns. We estimate stock price volatility based on historical implied volatility in our stock. In addition, we are required to estimate the expected volatility rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience of our stock-based awards that are granted, exercised or cancelled. ? Income Taxes - We record federal and state income tax liability in accordance with Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes . Deferred income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Recent Accounting Pronouncements:
The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to
PLAN OF OPERATIONS
As more fully described in "LIQUIDITY AND CAPITAL RESOURCES", we had
We have had and have ongoing discussions, arrangements, understandings, commitments or agreements for additional funding with prospective funding partners. We have funded our operations so far through PIPE and debt instruments. We will consider equity funding, either or both of a private sale or a registered public offering of our common stock; however, it seems unlikely that we can obtain an underwriter. We will consider a joint venture in which the joint venture partner provides funding to the enterprise. We will consider debt financing, both unsecured and secured by a pledge of our technology.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended
We had no other contractual obligation or material commercial commitments for capital expenditures.
Off-Balance Sheet Arrangements
We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.