Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies (Policiies)

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Summary of Significant Accounting Policies (Policiies)
6 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
Liquidity

Liquidity - The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of June 30, 2016, the Company has an accumulated deficit of $14.9 million. In addition, the Company has working capital deficiencies of $4.2 million and $3.6 million as of June 30, 2016 and December 31, 2015, respectively. Management plans to continue to raise additional funds through the sales of debt or equity securities until such time its operations will begin to produce a positive cash flow. However, there is no assurance that additional financing will be available when needed or that management will be able to obtain and close financing transactions on terms acceptable to the Company or whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. As of June 30, 2016, the Company has a backlog of approximately $33,000,000 of future orders to be fulfilled in the next twelve months.

Reclassifications

Reclassifications - Certain prior period balances have been reclassified in order to conform to current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

Use of Estimates

Use of Estimates - The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates. The Company’s most significant estimates relate to its allowances for receivables, taxes and equity issuances.

Revenue and Cost of Goods Sold Recognition

Revenue and Cost of Goods Sold Recognition - Generally, for the staffing business, revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price to the buyer is fixed or determinable, and (4) collectability is reasonably assured.

 

Due to the short term nature of the Company’s construction contracts, revenue is recognized once 100% of a contract segment is completed. A contract may have many segments, of which, once a segment is completed, the revenue for the segment is recognized when no further significant performance obligations exists. The Company’s construction contracts or segments of contracts typically range from several days to two to four months. Contract costs may be billed as incurred. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Selling, general and administrative costs are charged to expense as incurred. The Company begins recognizing revenue on a project as project costs are incurred and revenue recognition criteria are met.

 

Provisions for losses on uncompleted contracts are made in the period such losses are known. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, changes in raw material costs, and final contract settlements may result in revisions to revenue, costs and income and are recognized in the period in which the revisions are determined.

Basic and Diluted Loss Per Share

Basic and Diluted Loss Per Share - The basic net loss per share is computed by dividing the net loss (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants and preferred stock. The number of potential common shares outstanding relating to stock options, warrants and preferred stock is computed using the treasury stock method. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. Comparative data for the previous period has been adjusted to reflect the 1 for 20 reverse split effectuated May 26, 2016.

 

The following securities are excluded from the calculation of weighted average dilutive common shares because they are not currently convertible, or because their inclusion would have been anti-dilutive:

 

    For the Six Months Ended  
    June 30,  
    2016     2015  
Convertible preferred stock, Series A     667,169       667,169  
Convertible preferred stock, Series A-1     393,645       393,645  
Convertible preferred stock, Series D [1]     -       760,959,600  
Convertible preferred stock, Series F [1]     -       -  
Warrants     -       797,358  
Convertible debt     -       200,000  
Total potentially dilutive shares     1,060,814       763,017,722  

 

[1] The Series D and Series F preferred shares are convertible at a rate of 400 pre-split shares of common stock for each share of preferred stock but not until the Company has effected a sufficient increase in the authorized common shares. The Series D and Series F preferred shares were mandatorily converted to common shares at a ratio of 1 to 20 when the reverse split of common shares was effectuated on May 26, 2016.
Concentration of Credit Risk

Concentration of Credit Risk - Financial instruments that potentially expose the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash at one financial institution that management believes is a high-credit, high-quality financial institution and accordingly, subject to minimal credit risk. Deposits held with these financial institutions may be in excess of the amount of insured limits provided on such deposits, if any. The Company is subject to risk of nonpayment of its trade accounts receivable.

 

The Company’s customer base is highly concentrated. As of December 31, 2015, the Company’s three largest customers, Customer E, Customer H and Customer B, represented 47%, 14%, and 10% of accounts receivable, respectively. As of June 30, 2016, the Company’s three largest customers, a provider of large scale fiber optic cables, “Customer E”, and two innovative communications service providers, “Customers J” & “Customer M”, represented 22%, 14% and 12% of accounts receivable, respectively.

  

Revenue may significantly decline if the Company were to lose one or more of its significant customers. For the three and six months ended June 30, 2015, Customer E represented approximately 46% and 44% of revenues respectively, and customer B represented approximately 24% and 31% respectively. During the three and six months ended June 30, 2016 the Company generated revenue by three new customers, Customer J, represented approximately 33% and 27% of revenues respectively, Customer L, represented approximately 11% and 13% of revenues respectively, and Customer M representing 9% and 11% of revenues respectively.

Amortization of Senior Note Debt Discount and Deferred Financing Costs

Amortization of Senior Note Debt Discount and Deferred Financing Costs - The amortization of the senior note debt discount (Note 5. Senior Debt) is calculated monthly using the straight line method, which approximates the interest rate method, over the original term of the note, twenty-four months, using the straight-line method which approximates the interest rate method. The result of this monthly amortization is recognized in amortization of debt discount in the period amortized for the debt discount and interest expense for the deferred finance costs.