EQUITY | 12 Months Ended |
Dec. 31, 2013 |
EQUITY [Abstract] | ' |
EQUITY | ' |
NOTE 12–EQUITY |
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COMMON STOCK ISSUED FOR SERVICES IN 2012 |
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On February 6, 2012 the Company issued 238,800 shares of common stock to its four non-executive directors (59,700 each) – Mark Hershhorn, Brian Israel, Morris Garfinkle and Edward Smith III. The Company recognized a total of expense of $160,000 related to these issuances. These shares were valued based on the closing price of the grant date. |
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On July 2, 2012, we entered into a Private Placement of Securities & Advisory Services Agreement with Maxim Group LLC, pursuant to which Maxim agreed to act as the Company’s exclusive placement agent in a proposed private placement of equity, convertible, debt and/or linked securities of the Company up to $10 million. This agreement terminated on December 31, 2012. |
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In exchange for Maxim’s services, we agreed to pay Maxim with 150,000 shares of the Company’s Common Stock valued at $150,000 for purposes of the agreement, as well as $10,000 per month for the duration of this agreement. An additional 350,000 shares of Common Stock would have been issued to Maxim upon the completion of a closing that resulted in the Company receiving a minimum of $10 million. No such transaction occurred prior to the termination of the agreement. |
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We determined that all of the securities issued pursuant to the agreement were exempt from registration under the Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the Act. We based this determination on the non-public manner in which we offered the securities and on the representations of the persons purchasing such securities, which included, in pertinent part, that such persons were "accredited investors" within the meaning of Rule 501 of Regulation D promulgated under the Act, and that such persons were acquiring such securities for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to resale or distribution, and that each such person understood such securities may not be sold or otherwise disposed of without registration under the Act or an applicable exemption therefrom. |
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COMMON STOCK ISSUED FOR SERVICES IN 2013 |
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On January 22, 2013 the Company issued 114,944 shares of common stock to its four non-executive directors, Mark Hershhorn, Morris Garfinkle, Brian Israel and Edward Smith (28,736 shares each). The Company recognized a total of expense of $200,002 related to these issuances. These shares were valued based on the closing price on the grant date. |
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On October 28, 2013, the Company entered into a Consulting Agreement with Steeltown Consulting Group, LLC, pursuant to which Steeltown will assist in evaluating various business and financial matters. The Company issued 220,000 restricted shares of common stock as consideration for the services being rendered in this agreement. This agreement was scheduled to terminate on January 31, 2014. On December 3, 2013, the Company and Steeltown entered into a new Consulting Agreement (which replaces the agreement dated October 28, 2013) in which both the Company and Steeltown substantially agreed to the same services being rendered as the previous agreement. The Company issued 550,000 shares of restricted common stock as consideration for the services being rendered under this new agreement. This agreement will terminate on January 31, 2015. The Common Stock was valued at $569,800 based on the closing prices of the stock on the dates the agreements were executed. |
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COMMON STOCK ISSUED FOR DEBT CONVERSION |
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On January 15, 2012, the Company issued 1,508,000 shares of its Common Stock, $.00005 par value per share, upon conversion to common stock of its 8% Convertible Secured Notes due in 2012 (the "Notes"), representing principal of $1,300,000 and interest of $208,000. The conversion was in accordance with the agreement, and therefore no gain or loss was recorded. |
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On April 19, 2012, the Company issued 150,979 shares of its Common Stock, $.00005 par value per share, upon conversion to common stock of its Notes, representing principal of $120,000 and interest of $30,979. The conversion was in accordance with the agreement, and therefore no gain or loss was recorded. |
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On November 5, 2012, the Company issued 212,056 shares of its Common Stock, $.00005 par value per share, upon conversion to common stock of its Notes, representing principal of $200,000 and interest of $12,056. The conversion was in accordance with the agreement, and therefore no gain or loss was recorded. |
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COMMON STOCK ISSUED ON THE EXERCISE OF WARRANTS FOR CASH |
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During the first quarter of 2013, several investors participated in a warrant exercise program that resulted in the exercise of 1,756,088 warrants into 1,756,088 shares of the Company’s common stock. The warrant program, which was open to all holders of $1.50 warrants, allowed those warrant holders to exercise their warrants for a $1.25 strike price during February 2013; it also required a waiver of the anti-dilution provisions in these warrants until February 28, 2013 so that those provisions would not be triggered by the exercises. The conversion of these warrants raised $2,195,110 of cash for the Company. As a result of this warrant modification the Company recognized $4,789,801 of additional expense for previously issued warrants during the period ended March 31, 2013. The value of the additional expense was based on the fair value of the warrant modification at the date the offer was made to the warrant holders calculated by using the Black-Scholes Model. The key inputs utilized in this model include the Company’s stock price on the date of the modification of $2.30, the computed volatility of the Company’s stock price at 109.96% and the discount rate used based on a U.S. Treasury security for a comparable period to the remaining term of the warrants of .06%. |
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Also during 2013, in addition to the warrant exercise program described above, other investors exercised 531,642 warrants and the Company received proceeds of $294,736. |
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During 2012, 490,424 stock warrants were exercised for cash of $304,225. |
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COMMON STOCK ISSUED ON THE CASHLESS EXERCISE OF WARRANTS |
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Beginning August 20, 2013 and in conjunction with the private placement subscription agreement entered into between the Company and Brightline Ventures I-C, LLC (indicated below and referred to as the “1.25 Raise”), the Company (i) allowed the holders of the Company’s outstanding warrants with a $1.50 per share exercise price (the “$1.50 Warrants”) with certain anti-dilution provisions contained in the related warrant agreements to choose to exercise their $1.50 Warrants on a cashless basis such that for every ten $1.50 Warrants exercised, the holder received 4.5 shares of Common Stock (fractional shares were rounded up) (the “Cashless Exercise Program”), (ii) sought a temporary waiver from the holders of the $1.50 Warrants of the anti-dilution provisions in the warrant agreements with respect to the Cashless Exercise Program and potential capital-raising activities (other than the $1.25 Raise) by the Company by December 31, 2013, and (iii) asked the holders of the $1.50 Warrants to permanently amend the warrant agreements with respect to certain ratchet provisions so as to reduce the derivative liability the Company incurs as a result of those provisions in the agreements. |
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The Cashless Exercise Program resulted in 7,172,751 of the $1.50 Warrants being converted into 3,227,742 shares of the Company’s common stock (including 5,718,750 $1.50 Warrants that were converted by Brightline Ventures I into 2,573,438 shares of common stock). As a result of the Cashless Exercise Program, the Company recognized a loss on equity modification of $990,656—the difference in value between the $1.50 Warrants exercised and the common stock issued— for the three months ended September 30, 2013. |
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As a result of the August 20, 2013 transaction with Brightline Ventures I, pursuant to the anti-dilution provisions in the $1.50 Warrants that were not exercised as part of the Cashless Exercise Program, the Company reduced the exercise price of those warrants to $1.25 per share and adjusted the number of shares issuable upon the exercise of those warrants such that for every five warrants owned, each remaining holder of $1.50 Warrants received one additional warrant with an exercise price of $1.25. There were a total of 11,880,047 warrants that were not exercised as part of the Cashless Exercise Program. In addition, the warrant holders agreed to permanently waive the full reset feature contained in the original warrant. As a result, the Company issued an aggregate of 2,376,009 additional warrants at an exercise price of $1.25 per share (including 2,316,597 additional warrants that were issued to Brightline Ventures I) to the holders of $1.50 Warrants that were not exercised as part of the Cashless Exercise Program and recognized a settlement to additional paid in capital for the related derivative liability of $1,712,356. |
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Also during 2013, in addition to the warrant exercise program described above, other investors exercised 909,784 warrants on a cashless basis and received 378,415 shares of common stock. |
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During 2012, the Company issued 198,663 shares of common stock on the cashless exercise of warrants. |
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COMMON STOCK ISSUED ON THE EXERCISE OF STOCK OPTIONS FOR CASH |
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During 2013, two former employees exercised 91,400 stock options and the Company received proceeds of $77,734. |
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During 2012, 14,600 stock options were exercised for cash of $9,526. |
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COMMON STOCK ISSUED ON THE CASHLESS EXERCISE OF STOCK OPTIONS |
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During 2013, the Company issued 100,528 shares of common stock on the cashless exercise of 202,250 stock options. |
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During 2012, the Company issued 131,161 shares of common stock on the cashless exercise of options. |
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COMMON STOCK ISSUED IN PRIVATE PLACEMENTS |
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On August 20, 2013, the Company raised additional capital by entering into a private placement subscription agreement with Brightline Ventures I-C, LLC, an affiliate of its controlling stockholder, pursuant to which it sold 376,000 shares of common stock, for a price of $1.25 per share (the “1.25 Raise”), and received gross proceeds of $470,000. |
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On September 18, 2013, the Company entered into another private placement subscription agreement with Brightline Ventures I-C, LLC, pursuant to which it sold 468,571 shares of Common Stock for a price of $1.05 per share, along with warrants to purchase 234,286 shares of common stock at an exercise price of $1.50 per share (the “1.05 Raise”), and received gross proceeds of $492,000. The waiver discussed above was effective for the $1.05 Raise; therefore, no additional warrants were issued and no exercise price adjustments were made pursuant to anti-dilution and ratchet provisions as a result of the $1.05 Raise. |
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COMMON STOCK ISSUED IN PUBLIC OFFERING |
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On November 18, 2013, the Company completed the sale of 1,866,667 shares of Common Stock at a price of $0.75 per share along with warrants to purchase 1,400,000 shares of Common Stock at an exercise price of $1.00 per share. The Company received after deducting various transaction expenses, net proceeds of $1,210,165. |
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COMMON STOCK PAYABLE |
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On February 12, 2013, we entered into a settlement agreement with a former provider of investment services over compensation provided in a prior period for services in the raising of equity capital for the Company. As a result of this agreement, the Company issued 875,000 shares of Common Stock to this party. As of December 31, 2012, the Company has recorded a common stock payable in the amount of $1,881,250 which is equal to the value of the shares on the settlement date. |
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CONVERTIBLE PREFERRED STOCK |
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As indicated previously, the Company entered into a modification with Brightline Ventures I pursuant to which Brightline Ventures I agreed to convert preferred stock into common stock on or before the respective maturity. As a result of this modification the Convertible, Redeemable Preferred Stock Series II was reclassified to equity as Convertible Preferred Stock Series II as of December 31, 2012 as the shares are no longer redeemable. On March 18, 2013, Brightline Ventures I converted the Series II Convertible Preferred Stock of $3,326,697 together with $533,000 of accrued dividends thereon into 3,859,697 shares of the Company’s Common Stock. |