Stockholders' Equity (Deficiency) | 12 Months Ended |
Dec. 31, 2013 |
Stockholders' Deficiency [Abstract] | ' |
Stockholders' Deficiency | ' |
13. | Stockholders’ Equity (Deficiency) | | | | | | | | | | | | | | | | | | | | | | | | | |
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Common Stock and Common Stock Units |
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On January 24, 2012, the Company sold, to an institutional investor, common stock units that in aggregate consisted of 8,750,000 shares of the Company’s common stock and a warrant to purchase 8,750,000 shares of the Company’s common stock, for an aggregate purchase price of $700,000, or $0.08 per share. The warrant has a three-year term, is exercisable at $0.10 per share and was fully vested at the date of issuance. The Company incurred offering costs of $70,000 in connection with this transaction. |
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On February 2, 2012, the Company sold, to an institutional investor, common stock units that in aggregate consisted of 3,125,000 shares of the Company’s common stock and a warrant to purchase 1,562,500 shares of the Company’s common stock, for an aggregate purchase price of $250,000, or $0.08 per share. The warrant has a three-year term, is exercisable at $0.20 per share and was fully vested at the date of issuance. The Company incurred offering costs of $17,500 in connection with this transaction. |
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On February 28, 2012, the Company sold, to an individual accredited investor, common stock units that in aggregate consisted of 375,000 shares of the Company’s common stock and a warrant to purchase 187,500 shares of the Company’s common stock, for an aggregate purchase price of $30,000, or $0.08 per share. The warrant has a three-year term, is exercisable at $0.20 per share and was fully vested at the date of issuance. The Company incurred offering costs of $2,100 in connection with this transaction. |
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On March 27, 2012, the Company issued 10,000 shares of the Company’s common stock as payment for services rendered to the Company by an unaffiliated third party. The total expense associated with the issuance of these shares was $800, representing the fair market value of the shares based on the quoted market price of the Company’s common stock on the date the issuance was authorized ($0.08 per share on March 2, 2012). |
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On March 27, 2012, the Company issued an aggregate of 360,000 shares of the Company’s common stock to certain of its directors as payment of $36,000 of director fees due for services rendered in fiscal 2011. The aggregate fair market value of these shares, based on the quoted market price of the Company’s common stock on the date of issuance ($0.05 per share), was $18,000. The Company recorded the difference between the total payment owed ($36,000) and the fair market value of the common stock issued ($18,000) as additional paid-in capital. |
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On June 19, 2012, the Company sold, to an institutional investor, common stock units that in aggregate consisted of 1,875,000 shares of the Company’s common stock and a warrant to purchase 937,500 shares of the Company’s common stock, for an aggregate purchase price of $150,000, or $0.08 per share. The warrant has a three-year term, is exercisable at $0.20 per share and was fully vested at the date of issuance. The Company incurred offering costs of $10,500 in connection with this transaction. |
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On August 17, 2012, the Company sold to E. Wayne Kinsey, III, a member of the Company’s board of directors, common stock units that in aggregate consisted of 6,250,000 shares of the Company’s common stock and a warrant to purchase 3,125,000 shares of the Company’s common stock, for an aggregate purchase price of $500,000, or $0.08 per share. The warrant has a three-year term, is exercisable at $0.20 per share and was fully vested at the date of issuance. The quoted market price of the Company’s common stock on the date of closing this transaction was $0.05 per share. |
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On December 7, 2012, the Company issued 100,000 shares of the Company’s common stock as payment for services rendered to the Company by an unaffiliated third party. The total expense associated with the issuance of these shares was $5,000, representing the fair market value of the shares based on the quoted market price of the Company’s common stock on the date the issuance was authorized ($0.05 per share on December 7, 2012). |
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On February 4, 2013, the Company issued an aggregate of 1,485,714 shares of the Company’s common stock, at a per share price of $0.035, as settlement of $52,000 of fees due to certain members of the Company’s board of directors for services rendered during the year ended December 31, 2012. The quoted market price of the Company’s common stock on the date the issuance was approved by the Company’s board of directors was $0.035 per share. |
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On February 12, 2013, the Company sold to E. Wayne Kinsey III, a member of the Company’s board of directors, 4,166,667 shares of the Company’s common stock for an aggregate purchase price of $125,000, or $0.03 per share. The $0.03 per share price was the same price offered to other non-affiliated investors in a private placement of the Company’s common stock. In addition, the Company sold 3,333,333 shares of its common stock to an institutional investor for an aggregate purchase price of $100,000, or $0.03 per share, and incurred offering costs of $7,000 in connection with this sale of common stock. |
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On February 28, 2013, the Company issued 250,000 shares of its common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The total expense associated with the issuance of these shares was $9,125, representing the fair market value of the shares of common stock on the date of issuance ($0.0365 per share). |
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On March 1, 2013, the Company sold 2,500,000 shares of its common stock to an institutional investor for an aggregate purchase price of $75,000, or $0.03 per share. The Company incurred offering costs of $5,250 in connection with this sale of common stock. |
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On March 22, 2013, the Company sold 800,000 shares of its common stock to an individual investor for an aggregate purchase price of $24,000, or $0.03 per share. |
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On March 31, 2013, the Company issued 250,000 shares of its common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The total expense associated with the issuance of these shares was $10,050, representing the fair market value of the shares of common stock on the date of issuance ($0.042 per share). |
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On April 30, 2013, the Company sold to E. Wayne Kinsey III, a member of the Company’s board of directors, 4,166,667 shares of the Company’s common stock for an aggregate purchase price of $125,000, or $0.03 per share. The $0.03 per share price was the same price offered to other non-affiliated investors in a private placement of the Company’s common stock. In addition, the Company sold 3,000,000 shares of its common stock to an individual investor for an aggregate purchase price of $90,000, or $0.03 per share. |
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On April 30, 2013, the Company issued 250,000 shares of its common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The total expense associated with the issuance of these shares was $11,875, representing the fair market value of the shares of common stock on the date of issuance to the consultant ($0.0475 per share). |
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On May 16, 2013, the Company sold an aggregate of 2,666,666 shares of its common stock to four individual investors for an aggregate purchase price of $80,000, or $0.03 per share. |
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On May 22, 2013, the Company sold 3,333,333 shares of its common stock to an individual investor for an aggregate purchase price of $100,000, or $0.03 per share. |
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On May 31, 2013, the Company issued 250,000 shares of its common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The total expense associated with the issuance of these shares was $12,500, representing the fair market value of the shares of common stock on the date of issuance to the consultant ($0.05 per share). |
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On June 20, 2013, the Company sold 800,000 shares of its common stock to an individual investor for an aggregate purchase price of $24,000, or $0.03 per share. |
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On June 26, 2013, the Company issued 450,000 shares of its common stock to Crystal Enterprises, Inc. (“Crystal”) in order to resolve certain disputes and to avoid further litigation costs associated with defending litigation brought by Crystal (see Note 15). The total expense associated with the issuance of these shares was $26,550, representing the fair market value of the shares of common stock on the date of issuance to Crystal ($0.059 per share). |
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On June 28, 2013, the Company sold 850,000 shares of its common stock to an individual investor for an aggregate purchase price of $25,500, or $0.03 per share. |
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On July 11, 2013, the Company sold an aggregate of 2,400,000 shares of its common stock to two individual investors for an aggregate purchase price of $72,000, or $0.03 per share. |
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On July 31, 2013, the Company sold an aggregate of 7,366,665 shares of its common stock to eleven individual investors for an aggregate purchase price of $221,000, or $0.03 per share. The Company incurred offering costs of $11,740 in connection with these transactions. |
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On August 2, 2013, the Company sold an aggregate of 2,803,366 shares of its common stock to six individual investors for an aggregate purchase price of $84,101, or $0.03 per share. The Company incurred offering costs of $5,808 in connection with these transactions. |
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On August 5, 2013, the Company sold 3,333,333 shares of its common stock to an institutional investor and 500,000 shares of its common stock to an individual investor for an aggregate purchase price of $115,000, or $0.03 per share. The Company incurred offering costs of $8,050 in connection with these transactions. |
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On August 9, 2013, the Company sold an aggregate of 4,833,333 shares of its common stock to nine individual investors for an aggregate purchase price of $145,000, or $0.03 per share. The Company incurred offering costs of $9,100 in connection with these transactions. |
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On August 16, 2013, the Company sold an aggregate of 6,803,333 shares of its common stock to nine individual investors for an aggregate purchase price of $204,100, or $0.03 per share. The Company incurred offering costs of $9,587 in connection with these transactions. |
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On August 23, 2013, the Company sold 1,700,000 shares of its common stock to an institutional investor and 1,533,333 shares of its common stock to four individual investors for an aggregate purchase price of $97,000, or $0.03 per share. The Company incurred offering costs of $5,460 in connection with these transactions. |
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On August 30, 2013, the Company sold 1,000,000 shares of its common stock to an individual investor for an aggregate purchase price of $30,000, or $0.03 per share. The Company incurred offering costs of $2,100 in connection with this transaction. |
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On September 13, 2013, the Company issued an aggregate of 228,125 shares of the Company’s common stock, at a per share price of $0.08, as settlement of $18,250 of fees due certain members of the Company’s board of directors for services rendered for the period commencing January 1, 2013 through August 31, 2013. The quoted market price of the Company’s common stock on the date the issuance was approved by the Company’s board of directors was $0.08 per share. |
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On November 5, 2013, the Company sold 1,000,000 shares of its common stock to an individual investor for an aggregate purchase price of $66,000, or $0.066 per share. The Company issued 100,000 shares of its common stock to an unaffiliated third party as payment of $6,600 of offering costs related to this transaction. |
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On November 7, 2013, the Company sold 15,151,515 shares of its common stock to an individual investor for an aggregate purchase price of $1,000,000, or $0.066 per share. The Company issued 1,515,152 shares of its common stock to an unaffiliated third party as payment of $100,000 of offering costs related to this transaction. |
On November 13, 2013, the Company sold 347,222 shares of its common stock to an individual investor for an aggregate purchase price of $25,000, or $0.072 per share. The Company issued 34,722 shares of its common stock to an unaffiliated third party as payment of $2,500 of offering costs related to this transaction. |
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Stock Options |
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Stock Option Plans |
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The Company currently has two stock option/stock compensation plans in place: the 2010 Stock Incentive Plan and the 2012 Equity Incentive Plan (collectively, the “Equity Incentive Plans”). |
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The 2010 Stock Incentive Plan was approved by the stockholders in September 2010. The Company had reserved for issuance an aggregate of 10,000,000 shares of common stock under the 2010 Stock Incentive Plan. As of December 31, 2013, stock options to purchase 4,980,254 shares of the Company’s common stock were outstanding under the 2010 Stock Incentive Plan and 90,500 shares of the Company’s common stock had been issued under the 2010 Stock Incentive Plan. As a result of the adoption of the Company’s 2012 Equity Incentive Plan, no further awards are permitted under the 2010 Stock Incentive Plan. |
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The 2012 Equity Incentive Plan was approved by the stockholders in May 2012. The Company has reserved for issuance an aggregate of 14,000,000 shares of common stock under the 2012 Stock Incentive Plan. The 2012 Equity Incentive Plan is designed to encourage and enable employees and directors of the Company to acquire or increase their holdings of common stock and other proprietary interests in the Company. It is intended to promote these individuals’ interests in the Company, thereby enhancing the efficiency, soundness, profitability, growth and stockholder value of the Company. The 2012 Equity Incentive Plan provides for grants and/or awards in the form of incentive and non-qualified stock option grants, stock appreciation rights, restricted stock awards, performance share awards, phantom stock awards and dividend equivalent awards. As of December 31, 2013, no grants or awards had been made under the 2012 Equity Incentive Plan. |
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Common stock grants and stock option awards under the Equity Incentive Plans were granted or issued at prices as determined by the Company’s compensation committee, but such prices were not less than the fair market value of the Company's common stock on the date of grant or issuance. Stock options granted and outstanding to date consist of both incentive stock options and non-qualified stock options. |
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Stock Option Transactions |
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Stock Options Issued to Executive Officers – March 2012 |
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On March 27, 2012, the Company granted incentive stock options to purchase an aggregate of 5,000,000 shares of the Company’s common stock under the 2010 Stock Incentive Plan to the Company’s executive officers as follows: David R. LaVance, President and Chief Executive Officer – 3,000,000 shares, and Thomas S. Gifford, Executive Vice President and Chief Financial Officer – 2,000,000 shares. On December 31, 2012, an aggregate of 833,333 shares of common stock underlying the incentive stock options (500,000 shares for Mr. LaVance and 333,333 shares for Mr. Gifford), with an exercise price of $0.10 per share, were terminated as a result of the Company’s failure to attain breakeven operating results, as defined in the incentive stock option agreements, for a period of four consecutive months or two consecutive quarters during the year ended December 31, 2012. On December 31, 2013, an aggregate of 833,333 shares of common stock underlying the incentive stock options (500,000 shares for Mr. LaVance and 333,333 shares for Mr. Gifford), with an exercise price of $0.20 per share, were terminated as a result of the Company’s failure to attain at least $5,000,000 of revenues for the twelve month period ended December 31, 2013. The remaining 3,333,334 shares of common stock underlying the incentive stock options vest or vested, in aggregate, as follows: 833,333 shares vested on December 31, 2012, 833,333 shares vested on December 31, 2013 and 833,334 vest on December 31, 2014 and may be purchased at a per share exercise price of $0.10, $0.20 and $0.30, respectively; and 833,334 shares vest upon the Company achieving at least $10,000,000 of revenues for the twelve-month period ending December 31, 2014 and may be purchased at a per share exercise price of $0.30 per share. |
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Each of the incentive stock options has a ten-year term, and in the event of a change in control of the Company, as defined in the 2010 Stock Incentive Plan, the incentive stock options become fully vested. The aggregate fair value of the incentive stock options on the date of grant not subject to performance measures that will be earned over the requisite service period, as calculated using the Black-Scholes model, was $80,812, using the following weighted average assumptions: exercise price of $0.20 per share; common stock price of $0.05 per share; volatility of 187%; term of ten years; dividend yield of 0%; interest rate of 2.29%; and risk of forfeiture of 35%. This amount is being expensed on a pro-rata basis over the requisite service period. |
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Stock Options Issued to Non-Executive Directors |
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On March 27, 2012, the Company granted non-qualified stock options to purchase an aggregate of 1,346,920 shares of the Company’s common stock under the 2010 Stock Incentive Plan to the non-executive members of the Company’s board of directors as follows: Raymond C. Kubacki – 541,860 shares; David N. Harry – 309,640 shares; Valgene L. Dunham – 340,600 shares; and E. Wayne Kinsey, III – 154,820 shares. The options were granted as partial consideration for each person’s continuing service in 2012 as a member of the Company’s board of directors and related committees. Each of the options has a five-year term and is exercisable at $0.10 per share. The shares of common stock underlying the options, in aggregate, vested as follows: 673,460 shares vested on December 31, 2012 and 673,460 shares vested on December 31, 2013. |
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The aggregate fair value of the options on the date of grant as calculated using the Black-Scholes model was $37,530, using the following weighted average assumptions: exercise price of $0.10 per share; common stock price of $0.05 per share; volatility of 145%; term of five years; dividend yield of 0%; interest rate of 1.13%; and risk of forfeiture of 35%. The fair value of the option grants is being expensed on a pro-rata basis over the requisite service period. |
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A summary of stock option transactions under the Equity Incentive Plans during the years ended December 31, 2013 and 2012 is set forth below: |
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| | Stock | | | Weighted | | | Aggregate | | | | | | | | | | | | | | | |
Option | Average | Intrinsic | | | | | | | | | | | | | | |
Shares | Exercise | Value | | | | | | | | | | | | | | |
| Price Per | | | | | | | | | | | | | | | |
| Common | | | | | | | | | | | | | | | |
| Share | | | | | | | | | | | | | | | |
Outstanding at December 31, 2011 | | | 300,000 | | | $ | 0.08 | | | $ | -- | | | | | | | | | | | | | | | |
Granted during the period | | | 6,346,920 | | | | 0.18 | | | | | | | | | | | | | | | | | | | |
Exercised during the period | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (833,333 | ) | | $ | 0.1 | | | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2012 | | | 5,813,587 | | | $ | 0.18 | | | $ | -- | | | | | | | | | | | | | | | |
Granted during the period | | | -- | | | | 0.18 | | | | | | | | | | | | | | | | | | | |
Exercised during the period | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (833,333 | ) | | $ | 0.2 | | | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 4,980,254 | | | $ | 0.18 | | | $ | 55,605 | | | | | | | | | | | | | | | |
Exercisable at December 31, 2013 | | | 3,313,586 | | | $ | 0.12 | | | $ | 42,136 | | | | | | | | | | | | | | | |
Exercisable at December 31, 2012 | | | 1,806,793 | | | $ | 0.1 | | | $ | -- | | | | | | | | | | | | | | | |
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Information with respect to outstanding stock options and stock options exercisable as of December 31, 2013 that were granted to employees, directors and service providers is as follows: |
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| | | Stock Options Outstanding | | | Stock Options Exercisable | |
Exercise | | | Number of | | | Weighted | | | Weighted | | | Number of | | | Weighted | | | Weighted | |
Price | Shares | Average | Average | Shares | Average | Average |
| Available | Exercise | Remaining | Available for | Exercise | Remaining |
| Under | Price Per | Contractual | Purchase | Price Per | Contractual |
| Outstanding | Common | Life (Years) | Under | Common Share | Life (Years) |
| Stock | Share | | Outstanding | | |
| Options | | | Stock | | |
| | | | Options | | |
$ | 0.08 | | | | 300,000 | | | $ | 0.08 | | | | 0.3 | | | | 300,000 | | | $ | 0.08 | | | | 0.3 | |
$ | 0.1 | | | | 2,180,253 | | | $ | 0.1 | | | | 5.2 | | | | 2,180,253 | | | $ | 0.1 | | | | 5.2 | |
$ | 0.2 | | | | 833,333 | | | $ | 0.2 | | | | 8.3 | | | | 833,333 | | | $ | 0.2 | | | | 8.3 | |
$ | 0.3 | | | | 1,666,668 | | | $ | 0.3 | | | | 8.3 | | | | -- | | | | -- | | | | -- | |
| | | | | 4,980,254 | | | $ | 0.18 | | | | 6.4 | | | | 3,313,586 | | | $ | 0.12 | | | | 5.5 | |
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A summary of the non-vested shares subject to options granted under the Equity Incentive Plans as of December 31, 2013 and 2012 is as follows: |
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| | Stock | | | Weighted | | | | | | | | | | | | | | | | | | | |
Option Shares | Average | | | | | | | | | | | | | | | | | | |
| Grant Date | | | | | | | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | | | | | | | |
| Per Share | | | | | | | | | | | | | | | | | | |
Non-vested at December 31, 2011 | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Granted during the period | | | 6,346,920 | | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
Vested during the period | | | (1,506,793 | ) | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (833,333 | ) | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
Non-vested at December 31, 2012 | | | 4,006,794 | | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
Granted during the period | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Vested during the period | | | (1,506,793 | ) | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (833,333 | ) | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
Non-vested at December 31, 2013 | | | 1,666,668 | | | $ | 0.05 | | | | | | | | | | | | | | | | | | | |
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As of December 31, 2013, there was $32,451 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Equity Incentive Plans. That cost is expected to be recognized over a weighted average period of eleven months. |
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Warrants to Purchase Common Stock |
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On May 23, 2011, the Company issued warrants to purchase a total of 6,200,000 shares of the Company’s common stock to its executive officers. David R. LaVance, the Company’s Chairman, President and Chief Executive Officer, was issued a warrant to purchase 3,100,000 shares of the Company’s common stock and Thomas S. Gifford, the Company’s Executive Vice President, Chief Financial Officer and Secretary, also was issued a warrant to purchase 3,100,000 shares of the Company’s common stock. These warrants are exercisable at $0.09 per share for a term of ten years and are fully vested. The fair value of the warrants on the date of issuance as calculated using the Black-Scholes model was $349,520, using the following weighted average assumptions: exercise price of $0.09 per share; common stock price of $0.09 per share; volatility of 130%; term of ten years; dividend yield of 0%; interest rate of 1.83%; and risk of forfeiture of 35%. This amount was recognized as an expense over the eighteen-month vesting period of the warrants. |
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On December 6, 2011, the Company issued warrants to purchase an aggregate of 2,000,000 shares of the Company’s common stock to TrueLogix, LLC, Colby J. Sanders, Patrick T. Lewis and Howard B. Gee pursuant to a Sales Management Services Agreement (the “Sales Management Agreement”) entered into by the parties on December 6, 2011 (see Note 15 – Commitments and Contingencies: TrueLogix Sales Management Agreement). The warrants have a three-year term and are exercisable at $0.20 per share. On September 21, 2012, as a result of the termination of the Sales Management Agreement, 1,600,000 shares of the Company’s common stock under the warrants expired. The fair value of the warrants on the date of issuance as calculated using the Black-Scholes model was $51,390, using the following weighted average assumptions: exercise price of $0.20 per share; common stock price of $0.08 per share; volatility of 110%; term of three years; dividend yield of 0%; interest rate of 0.41%; and risk of forfeiture of 35%. |
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On March 2, 2012, the Company issued a warrant to purchase 175,000 shares of the Company’s common stock to a third-party service provider as partial consideration for services rendered to the Company in connection with a financing. The warrant is exercisable at $0.20 per share and has a term of three years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $5,600, using the following weighted average assumptions: exercise price of $0.20 per share; common stock price of $0.08 per share; volatility of 131%; term of three years; dividend yield of 0%; interest rate of 0.41%; and risk of forfeiture of 35%. |
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On June 19, 2012, the Company issued a warrant to purchase 93,750 shares of the Company’s common stock to a third-party service provider as partial consideration for services rendered to the Company in connection with a financing. The warrant is exercisable at $0.20 per share and has a term of three years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $2,609, using the following weighted average assumptions: exercise price of $0.20 per share; common stock price of $0.07 per share; volatility of 134%; term of three years; dividend yield of 0%; interest rate of 0.39%; and risk of forfeiture of 35%. |
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On February 4, 2013, the Company issued a warrant to purchase 250,000 shares of the Company’s common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The warrant is exercisable at $0.035 per share and has a term of three years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $4,072, using the following weighted average assumptions: exercise price of $0.035 per share; common stock price of $0.035 per share; volatility of 123%; term of three years; dividend yield of 0%; interest rate of 0.38%; and risk of forfeiture of 35%. |
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On March 4, 2013, the Company issued a warrant to purchase 250,000 shares of the Company’s common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The warrant is exercisable at $0.04 per share and has a term of three years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $4,644, using the following weighted average assumptions: exercise price of $0.04 per share; common stock price of $0.04 per share; volatility of 123%; term of three years; dividend yield of 0%; interest rate of 0.35%; and risk of forfeiture of 35%. |
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On April 1, 2013, the Company issued a warrant to purchase 250,000 shares of the Company’s common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The warrant is exercisable at $0.04 per share and has a term of three years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $4,696, using the following weighted average assumptions: exercise price of $0.04 per share; common stock price of $0.04 per share; volatility of 125%; term of three years; dividend yield of 0%; interest rate of 0.36%; and risk of forfeiture of 35%. |
On August 2, 2013, the Company issued a warrant to purchase 401,567 shares of the Company’s common stock in connection with a placement agent and advisory services agreement. The warrant is exercisable at $0.0345 per share and has a term of five years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $23,188. This fair value calculation used the following weighted average assumptions: exercise price of $0.0345 per share; common stock price of $0.095 per share; volatility of 141%; term of five years; dividend yield of 0%; interest rate of 1.36%; and risk of forfeiture of 35%. |
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A summary of warrant transactions during the years ended December 31, 2013 and 2012 is as follows: |
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| | Warrant | | | Weighted | | | Aggregate | | | | | | | | | | | | | | | |
Shares | Average | Intrinsic | | | | | | | | | | | | | | |
| Exercise | Value | | | | | | | | | | | | | | |
| Price Per | | | | | | | | | | | | | | | |
| Common Share | | | | | | | | | | | | | | | |
Outstanding at December 31, 2011 | | | 33,381,748 | | | $ | 0.19 | | | $ | -- | | | | | | | | | | | | | | | |
Issued during the period | | | 14,831,250 | | | $ | 0.14 | | | | | | | | | | | | | | | | | | | |
Exercised during the period | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (2,360,000 | ) | | $ | 0.17 | | | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2012 | | | 45,852,998 | | | $ | 0.17 | | | $ | -- | | | | | | | | | | | | | | | |
Issued during the period | | | 1,151,567 | | | $ | 0.04 | | | | | | | | | | | | | | | | | | | |
Exercised during the period | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (10,160,000 | ) | | $ | 0.33 | | | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 36,844,565 | | | $ | 0.12 | | | $ | 95,584 | | | | | | | | | | | | | | | |
Exercisable at December 31, 2013 | | | 36,844,565 | | | $ | 0.12 | | | $ | 95,584 | | | | | | | | | | | | | | | |
Exercisable at December 31, 2012 | | | 45,852,998 | | | $ | 0.17 | | | $ | -- | | | | | | | | | | | | | | | |
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Warrants issued by the Company contain exercise prices as determined by the Company’s board of directors, but such exercise prices were not less than the fair market value of the Company's common stock on the date of issuance. Warrants issued may vest over a period of up to three years and have a maximum term of ten years from the date of issuance. |
Information with respect to outstanding warrants and warrants exercisable at December 31, 2013 is as follows: |
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| | | Warrants Outstanding | | | Warrants Exercisable | |
Range of | | | Number of | | | Weighted | | | Weighted | | | Number of | | | Weighted | | | Weighted | |
Exercise | Shares | Average | Average | Shares | Average | Average |
Prices | Available | Remaining | Exercise | Available for | Exercise | Remaining |
| Under | Contractual | Price Per | Purchase | Price Per | Contractual |
| Outstanding | Life (Years) | Common | Under | Common | Life (Years) |
| Warrants | | Share | Outstanding | Share | |
| | | | Warrants | | |
$ | 0.03 - 0.04 | | | | 1,151,567 | | | | 3 | | | $ | 0.04 | | | | 1,151,567 | | | $ | 0.04 | | | | 3 | |
$ | 0.07 - 0.10 | | | | 23,056,061 | | | | 4 | | | $ | 0.09 | | | | 23,056,061 | | | $ | 0.09 | | | | 4 | |
$ | 0.2 | | | | 12,636,937 | | | | 1.2 | | | $ | 0.2 | | | | 12,636,937 | | | $ | 0.2 | | | | 1.2 | |
| | | | | 36,844,565 | | | | 3 | | | $ | 0.13 | | | | 36,844,565 | | | $ | 0.13 | | | | 3 | |
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A summary of the non-vested shares subject to warrants as of December 31, 2013 and 2012 is as follows: |
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| | Warrant | | | Weighted | | | | | | | | | | | | | | | | | | | |
Shares | Average | | | | | | | | | | | | | | | | | | |
| Grant Date | | | | | | | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | | | | | | | |
| Per Share | | | | | | | | | | | | | | | | | | |
Non-vested at December 31, 2011 | | | 3,894,446 | | | $ | 0.08 | | | | | | | | | | | | | | | | | | | |
Issued during the period | | | 14,831,250 | | | $ | 0.07 | | | | | | | | | | | | | | | | | | | |
Vested during the period | | | (17,125,696 | ) | | $ | 0.07 | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | (1,600,000 | ) | | $ | 0.08 | | | | | | | | | | | | | | | | | | | |
Non-vested at December 31, 2012 | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Issued during the period | | | 1,151,567 | | | $ | 0.04 | | | | | | | | | | | | | | | | | | | |
Vested during the period | | | (1,151,567 | ) | | $ | 0.04 | | | | | | | | | | | | | | | | | | | |
Terminated during the period | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
Non-vested at December 31, 2013 | | | -- | | | | -- | | | | | | | | | | | | | | | | | | | |
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As of December 31, 2013, there was no unrecognized compensation cost related to non-vested stock-based compensation arrangements involving warrants. |
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