EQUITY | 12 Months Ended |
Dec. 31, 2013 |
Equity [Abstract] | ' |
EQUITY | ' |
NOTE 9. | EQUITY | | | | | | | | | | | |
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Common Stock |
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In March 2012, the Company sold 606,610 shares of common stock in a private placement for aggregate gross proceeds of $297,240. Of the shares sold, 337,428 were sold to members of the Company’s management or board of directors and other Company affiliates, representing gross proceeds of $165,340. In July 2012, the Company sold 1,580,613 shares of common stock in a private placement for aggregate gross proceeds of $774,500. In August 2012, the Company sold 444,693 shares of common stock in a private placement for aggregate gross proceeds of $217,899. In September 2012, the Company sold 266,225 shares of common stock in a private placement for aggregate gross proceeds of $130,450. In October 2012, the Company sold 597,960 shares of common stock in a private placement for aggregate gross proceeds of $293,001 and issued 87,930 shares of common stock in exchange for services. |
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In January 2013, the Company issued 35,700 shares of common stock to an employee pursuant to the exercise of a non-qualified stock option. The Company received gross proceeds of approximately $17,500 in connection with the option exercise. In March 2013, the Company sold 136,365 shares of common stock in a private placement for aggregate gross proceeds of approximately $75,000 and issued 423,061 shares of common stock valued at $.49 per share in exchange for services provided to the Company including an aggregate of 270,000 shares of common stock issued to the Company’s three independent directors as compensation for serving in such capacity and 153,061 shares issued to a consultant in connection with brand development. |
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In April 2013, the Company sold 90,910 shares of common stock in a private placement for aggregate gross proceeds of approximately $50,000. In May 2013, the Company issued 145,455 shares of common stock valued at $.49 per share in exchange for consulting services provided to the Company. |
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In December 2013, the Company issued 13,636 shares of common stock valued at $.49 per share in exchange for consulting services provided to the Company and issued 125,000 shares of common stock to a lender in connection with a line of credit. Also in December 2013, the Company issued 5,300 shares of its common stock to non-executive employees as additional compensation. |
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Stock Options |
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In April 2011, the Company’s board of directors adopted the Dr. Tattoff, Inc. Long-Term Incentive Plan for the purpose of granting incentive awards, including equity awards such as stock options or restricted stock, to certain officers, employees, directors, consultants and other service providers of our Company, to provide such recipients with additional incentives to enhance the value of our Company and encourage stock ownership. Under the Long-Term Incentive Plan, we can grant incentive and nonqualified options to purchase shares of our common stock, stock appreciation rights, other stock-based awards, which are settled in either cash or shares of our common stock and are determined by reference to shares of our stock (such as grants of restricted common stock, grants of rights to receive stock in the future or dividend equivalent rights) and cash performance awards, which are settled in cash and are not determined by reference to shares of our common stock. |
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In March 2012, the Company granted 62,500 non-qualified stock options to an employee of William Kirby, D.O., Inc., vesting over four years with an exercise price of $.49. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock option approximated $18,000 on its issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 1.19%; volatility of 72%; and expected dividend yield of zero. |
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In May 2012, two members of the Board of Directors each exercised an option to purchase 10,714 shares of Company common stock at a purchase price of $.3687 per share. The Company received aggregate proceeds of $7,900. |
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In July 2012, the Company granted 35,700 non-qualified stock options to a consultant, vesting over four months with an exercise price of $.49. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock option approximated $12,200 on its issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.60%; volatility of 73%; and expected dividend yield of zero. |
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In September 2012, the Company granted 25,000 incentive stock options to an employee, vesting over five years with an exercise price of $.49. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock option approximated $7,300 on its issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.67%; volatility of 73%; and expected dividend yield of zero. |
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In November 2012, the Company granted 5,000 non-qualified options to a consultant, vesting over five years with an exercise price of $.49. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock option approximated $1,500 on its issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.63%; volatility of 73%; and expected dividend yield of zero. |
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In November 2012, the Company granted 21,824 incentive options to employees of the Company and 10,337 non-qualified options to employees of William Kirby, D.O., Inc., vesting immediately with an exercise price of $.49. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $9,400 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.63%; volatility of 73%; and expected dividend yield of zero. |
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In January 2013, the Company granted 61,225 incentive stock options to an employee as part of his compensation package, vesting over twelve months with an exercise price of $.49. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock option approximated $17,300 on its issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.67%; volatility of 73%; and expected dividend yield of zero. |
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In March 2013, the Company granted 24,041 incentive options to executive officers, 13,264 incentive options to other employees of the Company and 6,517 non-qualified options to employees of William Kirby, D.O., Inc., vesting immediately with an exercise price of $.49 as consideration for their agreement to defer compensation. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $14,000 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.63%; volatility of 73%; and expected dividend yield of zero. Also in March 2013, the Company granted 20,000 non-qualified options to each of the three independent members of its Board of Directors, vesting immediately and 45,000 options to each of the three independent members of its Board of Directors vesting 50% immediately and 25% on each the first and second anniversary of the grant date, with an exercise price of $.49 per share as compensation for serving on the Company’s Board of Directors. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $52,000 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.63%; volatility of 73%; and expected dividend yield of zero. Also in March 2013, the Company granted 10,000 non-qualified options to each of five members of its medical advisory board, with 25% vesting immediately and 25% vesting on each of the first, second and third anniversary of the grant date with an exercise price of $.49 per share. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $13,400 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.63%; volatility of 73%; and expected dividend yield of zero. Also in March 2013, the Company granted 10,000 non-qualified options to each of five members of its medical advisory board, vesting 25% on each of the first through fourth anniversary of the grant date with an exercise price of $.55 per share. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $13,400 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.49; expected life of five years; risk-free interest rate of 0.63%; volatility of 73%; and expected dividend yield of zero. |
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In June 2013, the Company granted 212,413 incentive stock options to an employee as part of his compensation package, vesting over a four year period with an exercise price of $.55. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock option approximated $53,200 on its issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.55, expected life of five years; risk-free interest rate of 1.07%; volatility of 64%; and expected dividend yield of zero. |
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In June 2013, the Company granted 10,000 non-qualified options to a new member of its medical advisory board, vesting 25% on each of the first through fourth anniversary of the grant date with an exercise price of $.55 per share. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $2,503 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.55, expected life of five years; risk-free interest rate of 1.07%; volatility of 64%; and expected dividend yield of zero. |
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In July 2013, the Company granted 112,727 incentive options to two employees as part of their compensation packages, vesting over a four year period with an exercise price of $.55. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $28,100 on the issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.55, expected life of five years; risk-free interest rate of 1.42%; volatility of 63%; and expected dividend yield of zero. |
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In October 2013, the Company granted 7,327 incentive options to executive officers, 2,513 incentive options to other employees of the Company and 6,088 non-qualified options to William Kirby, D.O., vesting immediately with an exercise price of $.55 as consideration for their agreement to defer compensation. As determined by management using the Black-Scholes option-pricing model, the estimated fair value of the aforementioned stock options approximated $3,900 on their issuance date. Such estimate was based on the following assumptions: value of one common share of $0.49; strike price of $0.55; expected life of five years; risk-free interest rate of 1.41%; volatility of 63%; and expected dividend yield of zero. |
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The Company recognized compensation expense of approximately $136,000 in 2013 and $71,000 in 2012 related to the options and grants, which is included in general and administrative expenses in the accompanying consolidated statements of operations. |
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The following table summarizes stock option activity for the year ended December 31, 2013: |
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| | Number | | | Weighted | | | Weighted | |
of Options | Average Exercise | Average |
| Price per Share | Grant-Date |
| | Fair Value |
| | per Share |
Outstanding at December 31, 2012 | | | 1,048,351 | | | $ | 0.39 | | | $ | 0.39 | |
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Granted | | | 750,845 | | | | 0.52 | | | | 0.44 | |
Exercised | | | (35,700 | ) | | | 0.49 | | | | 0.49 | |
Forfeited or Expired | | | (223,094 | ) | | | 0.38 | | | | 0.38 | |
Outstanding at December 31, 2013 | | | 1,540,402 | | | $ | 0.45 | | | $ | 0.44 | |
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Exercisable at December 31, 2013 | | | 753,609 | | | $ | 0.44 | | | $ | 0.43 | |
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Vested and expected to vest at December 31, 2013 | | | 1,540,402 | | | $ | 0.45 | | | $ | 0.44 | |
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The aggregate intrinsic value of options exercised during the twelve months ended December 31, 2013 was $0. The aggregate intrinsic value of outstanding options was approximately $62,000 at December 31, 2013. |
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Warrants |
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In connection with the sale of common stock in a private placement in March 2012, the Company issued fully vested five-year warrants to purchase 303,305 shares of the Company’s common stock at a purchase price of $.595 per share. The warrants expire on April 2, 2017. Warrants to purchase 168,714 shares were issued to members of management or board of directors and their affiliates in connection with their participation in the private placement. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of 1.03%; volatility of 70% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $79,500 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with issuance of the secured senior subordinated convertible notes in a private placement in May 2012, the Company issued fully vested five-year warrants to purchase 250,000 shares of the Company’s common stock at a purchase price of $.75 per share. The warrants expire on May 31, 2017. Warrants to purchase 250,000 shares were issued to members of management or board of directors and their affiliates in connection with their participation in the private placement. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.75, expected life of five years; risk free interest rate of .72%; volatility of 72% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $60,100 and the convertible notes issues in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with the sale of common stock in a private placement in July 2012, the Company issued fully vested five-year warrants to purchase 790,307 shares of the Company’s common stock at a purchase price of $.595 per share. The warrants expire on July 31, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .60%; volatility of 72% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $210,800 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with the sale of common stock in a private placement in August 2012, the Company issued fully vested five-year warrants to purchase 222,346 shares of the Company’s common stock at a purchase price of $.595 per share. The warrants expire on August 31, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .59%; volatility of 72% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $59,300 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with issuance of the secured senior subordinated convertible notes in a private placement in August 2012, the Company issued fully vested five-year warrants to purchase 318,750 shares of the Company’s common stock at a purchase price of $.75 per share. The warrants expire on August 31, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.75, expected life of five years; risk free interest rate of .51%; volatility of 72% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $58,650 and the convertible notes issues in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In August 2012 the Company issued fully vested five-year warrants to purchase 400,000 shares of the Company’s common stock at a purchase price of $.49 per share in exchange for consulting services to be delivered over a twelve month period. The warrants expire on August 31, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .62%; volatility of 72% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants at issuance of $114,800 was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets and the consulting expense included in general and administrative expense. |
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In connection with the sale of common stock in a private placement in September 2012, the Company issued fully vested five-year warrants to purchase 133,113 shares of the Company’s common stock at a purchase price of $.595 per share. The warrants expire on September 30, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .62%; volatility of 72% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $35,500 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with issuance of the secured senior subordinated convertible notes in a private placement in September 2012, the Company issued fully vested five-year warrants to a member of its board of directors to purchase 62,500 shares of the Company’s common stock at a purchase price of $.75 per share. The warrants expire on September 30, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.75, expected life of five years; risk free interest rate of .62%; volatility of 72% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $9,350 and the convertible notes issues in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with the sale of common stock in a private placement and the issuance of common stock in exchange for services in October 2012, the Company issued fully vested five-year warrants to purchase 340,037 shares of the Company’s common stock at a purchase price of $.595 per share. The warrants expire on October 30, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .59%; volatility of 73% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $92,600 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In connection with issuance of the secured senior subordinated convertible notes in a private placement in October 2012, the Company issued fully vested five-year warrants to purchase 109,275 shares of the Company’s common stock at a purchase price of $.75 per share. The warrants expire on October 30, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.75, expected life of five years; risk free interest rate of .72%; volatility of 72% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $20,125 and the convertible notes issues in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In November 2012, the Company issued fully vested five-year warrants to a third party to purchase 20,000 shares of the Company’s common stock at a purchase price of $.49 per share. The warrants were issued in exchange for services and expire on November 12, 2017. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .63%; volatility of 73% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value at issuance of $5,800 was recognized as “consulting services” and is included within “general and administrative” expenses on the accompanying consolidated statements of operations and “additional paid-in capital” on the accompanying consolidated balance sheets. |
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In January 2013, the Company issued five-year warrants to purchase 30,613 shares of the Company’s common stock at a purchase price of $.595 per share to an employee as part of his compensation package. The warrants vest on a monthly basis through January 1, 2014 at which time the warrant will be fully vested. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .62%; volatility of 72% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly the estimated fair value at issuance of $8,200 was recognized as “compensation expense” and is included within “general and administrative” expenses on the consolidated statements of operations and “additional paid-in capital” on the consolidated balance sheets. |
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In connection with issuance of the secured senior subordinated convertible notes in a private placement in January 2013, the Company issued fully vested five-year warrants to purchase 375,000 shares of the Company’s common stock at a purchase price of $.75 per share as additional consideration to the investors, including 250,000 warrant shares to two members of the Company’s Board of Directors. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.75, expected life of five years; risk free interest rate of .88%; volatility of 72% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $89,500 and the convertible notes issued in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the consolidated balance sheets. |
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In connection with issuance of the tenant improvement secured loan in February 2013, the Company issued fully vested five-year warrants to purchase 218,750 shares of the Company’s common stock at a purchase price of $.60 per share as additional consideration to the investors, including 62,500 warrant shares to members of the Company’s Board of Directors and management. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.75, expected life of five years; risk free interest rate of .88%; volatility of 72% and expected dividend yield of zero. The net proceeds on the issuance of the tenant improvement secured loan were allocated between the estimated fair value of the warrants at issuance of $65,700 and the notes issued in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the consolidated balance sheets. |
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In March 2013, the Company issued fully vested five-year warrants to purchase 76,530 shares of the Company’s common stock at a purchase price of $.595 per share to a service provider as additional consideration for services provided. The warrant expires on January 15, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .62%; volatility of 72% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. The estimated fair value at issuance of $20,500 was recognized as “consulting expense” and is included within “general and administrative” expenses on the consolidated statements of operations and “additional paid-in capital” on the consolidated balance sheets. |
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In connection with the sale of common stock in a private placement in March 2013, the Company issued fully vested five-year warrants to purchase 102,274 shares of the Company’s common stock at a purchase price of $.65 per share as additional consideration to the investors. The warrants expire on March 12, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .88%; volatility of 72% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $26,000 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the consolidated balance sheets. |
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In connection with the sale of common stock in a private placement in April 2013, the Company issued fully vested five-year warrants to purchase 68,183 shares of the Company’s common stock at a purchase price of $.65 per share as additional consideration to the investors. The warrants expire on April 11, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .74%; volatility of 64% and expected dividend yield of zero. The net proceeds on the sale of common stock were allocated between the estimated fair value of the warrants at issuance of $15,600 and the common stock sold in the offering. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the consolidated balance sheets. |
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In May 2013, the Company issued five-year warrants, vesting over one year, to purchase 34,090 shares of the Company’s common stock at a purchase price of $.65 per share to a service provider as additional consideration for services provided. The warrant expires on May 16, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of .79%; volatility of 64% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. The estimated fair value at issuance of $7,811 was recognized as “consulting expense” and is included within “general and administrative” expenses on the consolidated statements of operations and “additional paid-in capital” on the consolidated balance sheets. |
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In connection with issuance of the senior subordinated convertible notes in a private placement in May, June and July 2013, the Company issued fully vested five-year warrants to purchase 186,537 shares of the Company’s common stock at a purchase price of $.78 per share as additional consideration to the investors. In the event that the convertible note is converted, the number of shares issuable under the warrant will be adjusted to 25% of the number of conversion shares and the strike price adjusted to 120% of the conversion price. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.78, expected life of five years; risk free interest rate of 1.07%; volatility of 64% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $36,250 and the convertible notes issued in the offering. The Company has analyzed these warrants and determined them to be debt instruments. Accordingly, the estimated fair value of the warrants was recognized as “warrant liability” on the consolidated balance sheets. The warrants were exchanged in December 2013 and had no value at December 31, 2013. |
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In connection with the issuance of unsecured promissory notes in August 2013, the Company issued five-year warrants to purchase 120,000 shares of the Company’s common stock at a purchase price of $.60 per share as additional consideration to the note holders. The warrants expire on August 13, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.60, expected life of five years; risk free interest rate of 1.48%; volatility of 63% and expected dividend yield of zero. The net proceeds on the unsecured promissory notes were allocated between the estimated fair value of the warrants at issuance of $28,700 and the notes issued. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the consolidated balance sheets. |
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In July 2013, the Company issued five-year warrants to purchase 84,545 shares of the Company’s common stock at a purchase price of $.65 per share to two employees as part of their compensation package. The warrants vest on a monthly basis through July 2014 at which time the warrant will be fully vested. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of 1.41%; volatility of 63% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value at issuance of $19,400 was recognized as “compensation expense” and is included within “general and administrative” expenses on the consolidated statements of operations and “additional paid-in capital” on the consolidated balance sheets. |
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In connection with the issuance of senior subordinated convertible notes in a private placement in September 2013, the Company issued fully vested three-year warrants to purchase 76,923 shares of the Company’s common stock at a purchase price of $.78 per share as additional consideration to the investor. In the event that the convertible note is converted, the number of shares issuable under the warrant will be adjusted to 25% of the number of conversion shares and the strike price adjusted to 120% of the conversion price. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.78, expected life of three years; risk free interest rate of .63%; volatility of 63% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $10,900 and the convertible notes issued in the offering. The Company has analyzed these warrants and determined them to be debt instruments. Accordingly, the estimated fair value of the warrants was recognized as “warrant liability” on the consolidated balance sheets. The Company determined the fair value of the warrant liability to be $10,200 at December 31, 2013. |
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In October 2013 the Company issued fully vested five-year warrants to purchase 450,000 shares of the Company’s common stock at a purchase price of $1.00 per share in exchange for consulting services to be delivered over a twelve month period. The warrants expire on October 1, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of 1.41%; volatility of 63% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants at issuance of $80,300 was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets and the consulting expense included in general and administrative expense. |
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In connection with the issuance of unsecured promissory notes in October 2013, the Company issued fully vested five-year warrants to purchase 200,000 shares of the Company’s common stock at a purchase price of $.60 per share as additional consideration to the note holder. The warrants expire on October 31, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.60, expected life of five years; risk free interest rate of 1.30%; volatility of 63% and expected dividend yield of zero. The net proceeds on the unsecured promissory notes were allocated between the estimated fair value of the warrants at issuance of $38,000 and the notes issued. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants was recognized as “additional paid-in capital” on the consolidated balance sheets. |
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In December 2013 the Company issued fully vested warrants to purchase 39,000 shares of the Company’s common stock at a purchase price of $.78 per share in exchange for services related to the Company’s new revolving loan facility. The warrants expire on December 2, 2016. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of three years; risk free interest rate of .58%; volatility of 63% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be debt instruments. Accordingly, the estimated fair value of the warrants was recognized as “warrant liability” on the consolidated balance sheets and the expense will be amortized over the term of the revolving loan and included in interest expense. The Company determined the fair value of the warrant liability to be $4,300 at issuance and $5,400 at December 31, 2013. |
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In December 2013, the Company exchanged 186,537 warrants that had been issued in connection with the issuance of the senior subordinated convertible notes in a private placement in May, June and July 2013 with new warrants. The number of shares of common stock that can be purchased by the warrant holder was increased to 746,157 and the term of the warrant was decreased from five to three years. In the event that the convertible note is converted, the number of shares issuable under the warrant will be adjusted to 25% of the number of conversion shares and the strike price adjusted to 120% of the conversion price. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.78, expected life of two and one half years; risk free interest rate of .58%; volatility of 63% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $91,400 and the convertible notes issued in the offering. The Company has analyzed these warrants and determined them to be debt instruments. Accordingly, the estimated fair value of the warrants was recognized as “warrant liability” on the consolidated balance sheets. The Company determined the fair value of the warrant liability to be $91,400 at December 31, 2013. |
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In December 2013 the Company issued fully vested five-year warrants to purchase 115,240 shares of the Company’s common stock at a purchase price of $.60 per share in exchange for an extension on the due date of the Company’s tenant improvement secured loan. The warrants expire on December 31, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of 1.73%; volatility of 63% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants at issuance of $27,700 was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets and the expense will be included in interest expense over the term of the loan extension. |
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In December 2013 the Company issued fully vested warrants to purchase 310,893 shares of the Company’s common stock at a purchase price of $.60 per share in exchange for an extension on the due date of the Company’s unsecured promissory notes. The warrants expire on December 31, 2018. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, expected life of five years; risk free interest rate of 1.73%; volatility of 63% and expected dividend yield of zero. The Company has analyzed these warrants and determined them to be equity instruments. Accordingly, the estimated fair value of the warrants at issuance of $74,800 was recognized as “additional paid-in capital” on the accompanying consolidated balance sheets and the expense will be included in interest expense over the term of the note extensions. |
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In connection with the issuance of senior subordinated convertible notes in a private placement in December 2013, the Company issued fully vested three year warrants to purchase 76,923 shares of the Company’s common stock at a purchase price of $.78 per share as additional consideration to the investor. In the event that the convertible note is converted, the number of shares issuable under the warrant will be adjusted to 100% of the number of conversion shares and the strike price adjusted to 120% of the conversion price. The Company estimated the fair value of the warrants issued based upon the application of the Black-Scholes option pricing model using the following assumptions: value of common share of $.49, strike price $.78, expected life of three years; risk free interest rate of .63%; volatility of 63% and expected dividend yield of zero. The net proceeds on the issuance of the convertible notes were allocated between the estimated fair value of the warrants at issuance of $10,900 and the convertible notes issued in the offering. The Company has analyzed these warrants and determined them to be debt instruments. Accordingly, the estimated fair value of the warrants was recognized as “warrant liability” on the consolidated balance sheets. The Company determined the fair value of the warrant liability to be $10,900 at December 31, 2013. |
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The following tables summarize the warrant activity: |
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| | Shares | | Weighted | | | Weighted Average | |
Average | Remaining Contractual |
Exercise | Life (in years) |
Price | |
Outstanding at January 1, 2012 | | | 269,558 | | | $ | 1.28 | | | | 2.9 | |
Granted | | | 2,949,633 | | | | 0.62 | | | | 4.6 | |
Exercised | | | - | | | | - | | | | - | |
Expired or cancelled | | | -68,757 | | | | 2.13 | | | | - | |
Exercisable at December 31, 2012 | | | 3,150,434 | | | $ | 0.64 | | | | 4.5 | |
Granted | | | 3,562,914 | | | | 0.73 | | | | 4 | |
Exercised | | | - | | | | - | | | | - | |
Expired or cancelled | | | -204,933 | | | | 0.93 | | | | - | |
Exercisable at December 31, 2013 | | | 6,508,415 | | | $ | 0.62 | | | | 3.8 | |
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Warrants Outstanding and Exercisable | | | | |
Number of Shares | | Range of | | Expiration | | Weighted | | | | |
Under Warrants | Exercise | Date | Average | | | | |
| Prices | | Exercise | | | | |
| | | Price | | | | |
128,840 | | $ | 0.37 | | 2015 | | $ | 0.37 | | | | |
915,651 | | | .59-.78 | | 2016 | | | 0.77 | | | | |
2,949,633 | | | .49-.75 | | 2017 | | | 0.62 | | | | |
2,514,291 | | | .59-1.00 | | 2018 | | | 0.71 | | | | |
6,508,415 | | $ | .37-1.00 | | | | $ | 0.62 | | | | |