Note 12 - Stockholders' Equity | 12 Months Ended |
Dec. 31, 2013 |
Stockholders' Equity Note [Abstract] | ' |
Stockholders' Equity Note Disclosure [Text Block] | ' |
Note 12 – Stockholders’ Equity |
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Sale of restricted shares |
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On June 19, 2012 the Company’s initiated a sale of units of restricted common stock and common stock purchase warrants in a private placement (the “Private Placement”). Each unit was sold for $50,000 and consisted of: (i) 625,000 shares of stock at $0.08 per share; and (ii) and warrants to purchase up to 937,500 shares of common stock at an exercise price of $0.15 for three years; and (iii) warrants to purchase up to 937,500 shares of common stock at $0.25 for three years. The securities sold in the Private Placement were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. The Private Placement did not involve any public offering and the Company obtained representations from each investor that it was an “accredited investor” as that term is defined under Rule 501 of Regulation D. As of the closing on September 30, 2012, the Company sold an aggregate $1,068,000 in the Private Placement, consisting of 13,350,000 shares of restricted common stock at a per share price of $0.08, common stock purchase warrants for the purchase of 20,025,000 shares of the Company’s common stock exercisable at a per share price of $0.15 and common stock purchase warrants for the purchase of 20,025,000 shares of the Company’s common stock exercisable at a per share price of $0.25. The common stock purchase warrants may be exercised for a period of 3 years. The Company granted warrants for the purchase of 539,000 shares of the Company’s common stock exercisable at a per share price of $0.08 for services related to this Private Placement, each warrant maybe exercised for a period of 3 years. The Company has a piggy-back registration obligation with respect to the common stock in the Private Placement. |
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Common stock | | $ | 236,441 | | | | | | | | | |
$0.15 warrant | | | 428,797 | | | | | | | | | |
$0.25 warrant | | | 402,762 | | | | | | | | | |
Total Proceeds | | $ | 1,068,000 | | | | | | | | | |
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During the year ended December 31, 2012, we received proceeds of $765,440, net of $66,560 in cash finder’s fees, from the sale of 11,885,713 units in a private placement. Each unit consisted of one share of common stock, one warrant for the purchase of a share of common stock at an exercise price of $0.25 for a period of eighteen months, and one warrant for the purchase of a share of common stock at an exercise price of $0.75 for a period of one year beginning on the first anniversary of the issuance of the warrant. The warrants were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.05-$0.17; warrant term of 1-2 years; expected volatility of 156%-158% and discount rate of .33%-2.61%. We issued a finder fee warrant of 905,578 with a fair value of $126,140. This warrant has an exercise price of $0.0735 and a term of 3 years. The warrant was valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.12; warrant term of 3 years; expected volatility of 158%; and discount rate of 0.22%. The proceeds were allocated as follows: |
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Common stock | | $ | 391,981 | | | | | | | | | |
$0.0735 warrant | | | 126,140 | | | | | | | | | |
$0.25 warrant | | | 212,266 | | | | | | | | | |
$0.75 warrant | | | 101,613 | | | | | | | | | |
Total Proceeds | | $ | 832,000 | | | | | | | | | |
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Common stock issued for services |
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On August 12, 2013, the Company issued 5,000,000 shares of its common stock to a vendor for settlement of related to services rendered. The shares were valued at $50,000 and recorded as stock based compensation. |
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On April 8, 2013, the Company executed a demand note for $150,000 with an annual interest rate of 8%. As part of the agreement the Company granted the holder 150,000 shares of common stock and warrants to purchase 150,000 shares of common stock at an exercise price of $0.15 through April 8, 2014. The Company determined the fair value of the common stock and warrants to be $10,500 and $2,458, respectively. The aggregate fair value of $12,958 was recognized as a debt discount which is being amortized to interest expense over the life of the debt. During the year ended December 31, 2013, the entire discount of $12,958 was amortized to interest expense. |
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On January 13, 2013, the Company issued 250,000 shares of its common stock to a vendor for settlement services rendered. The shares were valued at $20,000 was recorded as stock based compensation. |
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For the year ended December 31, 2013 the Company amortized an aggregate of $1,107,697 of stock based compensation resulting from stock and warrants. |
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On January 13, 2012, the Company issued 166,434 shares of its common stock to a vendor for settlement of accrued expenses related to services rendered. The shares were valued at $26,296, with $12,296 recorded as stock based compensation and $14,000 as a reduction in accrued expenses. |
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On April 3, 2012, the Company issued 218,182 shares of its common stock to a vendor for settlement of accrued expenses related to services rendered. The shares were valued at $19,636 and recorded as stock based compensation. |
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On July 6, 2012 the Company granted 5,000,000 shares of restricted stock to a service provider. The shares were value at $435,000 on the date of the grant, 20% of the restricted stock vest per year on the anniversary date of the grant and $43,500 was recorded as stock based compensation for the period from grant date to December 31, 2013. |
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On July 10, 2012 the Company granted 6,500,000 shares of restricted stock to the Company’s Chief Executive Officer. The shares were valued at $650,000 on the date of the grant. The restricted stock vests at a rate of 20% per year on the anniversary date of the grant and $65,000 was recorded as stock based compensation for the period from the grant date to December 31, 2013. |
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On July 10, 2012 the Company granted 550,000 shares of restricted stock to two employees. The shares were value at $55,000. 300,000 shares vested immediately and 250,000 vested on January 1, 2013. $55,000 was recorded as stock based compensation for the period from the grant date to December 31, 2013. |
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On September 30, 2012, the Company issued 600,000 shares of its common stock to a vendor for settlement of accrued expenses related to services rendered. The shares were valued at $62,400 and recorded as stock based compensation. |
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On October 19, 2012, the Company issued 600,000 shares of its common stock to a vendor for settlement of accrued expenses related to services rendered. The shares were valued at $60,000 and recorded as stock based compensation. |
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On October 24, 2012 the Company granted 3,050,000 shares of restricted stock to an employee. The shares vested immediately were valued at $274,500 and was recorded as stock based compensation for the period. |
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On November 14, 2012, the Company issued 4,000,000 shares of its common stock as part of the inducement for the 16% Convertible debenture. The shares were valued at $299,600 and recorded as Debt Discount and will be amortized over the 18 month term of the debenture. |
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On November 20, 2012, the Company issued 150,000 shares of its common stock to a vendor for settlement of accrued expenses related to services rendered. The shares vest immediately and were valued at $12,000 and recorded as stock based compensation. |
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On November 23, 2012 the Company granted 5,000,000 shares of restricted stock to an officer. The shares vest immediately and were value at $400,000 and was recorded as stock based compensation for the period. |
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On November 23, 2012 the Company granted 250,000 shares of restricted stock to an employee. The shares vest immediately and were value at $20,000 and was recorded as stock based compensation for the period. |
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On December 6, 2012, the Company issued 200,000 shares of its common stock to a vendor for settlement of accrued expenses related to services rendered. The shares vest immediately and were valued at $20,000 and recorded as stock based compensation. |
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Warrants issued |
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The following table reflects a summary of common stock warrants outstanding and warrant activity during 2013 and 2012: |
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| | Number of | | | Weighted | | | Weighted | |
warrants | Average | Average |
| Exercise | Term |
| Price | (Years) |
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Warrants outstanding at December 31, 2011 | | | 75,317,618 | | | $ | 0.51 | | | | 0.6 | |
Granted during the period | | | 54,220,373 | | | | 0.17 | | | | 2.33 | |
Exercised during period | | | - | | | | - | | | | - | |
Forfeited during the period | | | (71,595,713 | ) | | | 0.52 | | | | - | |
Warrants outstanding at December 31, 2012 | | | 57,942,278 | | | $ | 0.17 | | | | 1.2 | |
Granted during the period | | | 5,150,000 | | | | 0.08 | | | | 4.84 | |
Exercised during period | | | - | | | | - | | | | - | |
Forfeited during the period | | | - | | | | - | | | | - | |
Warrants outstanding at December 31, 2013 | | | 63,092,278 | | | $ | 0.16 | | | | 2.21 | |
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The Common Stock warrants expire in years ended December 31 as follows: |
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Year | | Amount | | | | | | | | | |
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2014 | | | 2,205,238 | | | | | | | | | |
2015 | | | 43,122,334 | | | | | | | | | |
2016 | | | 1,000,000 | | | | | | | | | |
2017 | | | 11,764,706 | | | | | | | | | |
2018 | | | 5,000,000 | | | | | | | | | |
Total | | | 63,092,278 | | | | | | | | | |
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On December 20, 2013 the Company agreed to issue one of the November 14, 2012 convertible debenture holders 5,000,000 warrants with an exercise price per share of the Common Stock $0.075, with a term of 5 years. |
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On April 8, 2013, the Company executed a demand note for $150,000 with an annual interest rate of 8%. As part of the agreement the Company granted the holder 150,000 shares of common stock and warrants to purchase 150,000 shares of common stock at an exercise price of $0.15 through April 8, 2014. |
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On January 27, 2012, the Company granted 866,667 warrants in conjunction with the issuance of 16% Convertible Subordinated Debentures. |
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On January 31, 2012 the Company granted 1,000,000 warrants for consulting services at an exercise price of $0.15. The Company valued the warrants at a fair value of $78,604 using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $0.10; warrant term of 3 years; expected volatility of 180%; and discount rate of 0.31%. The Company is amortizing the warrants over the one-year term of the agreement and recognized $78,604 of expense during the nine months ended September 30, 2012. |
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On June 19, 2012 the Company’s initiated a sale of units of restricted common stock and common stock purchase warrants in a private placement (the “Private Placement”). Each unit was sold for $50,000 and consisted of: (i) 625,000 shares of stock at $0.08 per share; and (ii) and warrants to purchase up to 937,500 shares of common stock at an exercise price of $0.15 for three years; and (iii) warrants to purchase up to 937,500 shares of common stock at $0.25 for three years. The securities sold in the Private Placement were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. The Private Placement did not involve any public offering and the Company obtained representations from each investor that it was an “accredited investor” as that term is defined under Rule 501 of Regulation D. As of the closing on September 30, 2012, the Company sold an aggregate $1,068,000 in the Private Placement, consisting of 13,350,000 shares of restricted common stock at a per share price of $0.08, common stock purchase warrants for the purchase of 20,025,000 shares of the Company’s common stock exercisable at a per share price of $0.15 and common stock purchase warrants for the purchase of 20,025,000 shares of the Company’s common stock exercisable at a per share price of $0.25. The common stock purchase warrants may be exercised for a period of 3 years. The Company granted warrants for the purchase of 539,000 shares of the Company’s common stock exercisable at a per share price of $0.08 for services related to this Private Placement, each warrant maybe exercised for a period of 3 years. The Company has a piggy-back registration obligation with respect to the common stock in the Private Placement. |
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On November 14, 2012, as discussed in Note 5, the Company granted 11,764,706 warrants in conjunction with the issuance of 16% Convertible Subordinated Debentures. |
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Stock Option Awards |
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During the year ended December 31, 2013 the Company did not grant any stock options. |
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On November 23, 2012, the Company granted a total of 13,000,000 options to members of the Board of Directors. The options have a term of 10 years, an exercise price of $0.09 per share and vest at 20% every six months. On November 23, 2012, the Company granted an additional 1,000,000 option to a member of the Board of Directors. The option has an exercise price of $0.09 per share and vests immediately. The options have a fair value of $1,055,381.The Company used the Black-Scholes method to determine fair value with the following assumptions: stock price on the measurement date of $0.08; warrant term of 2 years using the SEC safe harbor rules; expected volatility of 183% and discount rate of 0.27%. |
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On July 10, 2012 the Company granted a total of 14,000,000 options to members of the Board of Directors, the options have a term of 10 years, an exercise price of $0.10 per share and vest at 20% per year and an additional 250,000 options to a member of the Board of Directors, the option has an exercise price of $0.10 per share and vest immediately. The options have a fair value of $1,360,823. The Company used the Black-Scholes method to determine fair value with the following assumptions: stock price on the measurement date of $0.10; warrant term of 7 years using the SEC safe harbor rules; expected volatility of 183% and discount rate of 0.63%. |
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On July 29, 2011 shareholders approved the 2011 STOCK OPTION AND INCENTIVE PLAN which authorized up to 5,000,000 options shares. Under the plan the exercise price per share for the Stock covered by a Stock Option granted pursuant shall not be less than 100% of the Fair Market Value on the date of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the option price of such Incentive Stock Option shall be not less than 110% of the Fair Market Value on the grant date. The term of each Stock Option shall be fixed but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the date of grant. |
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Stock option activity summary covering options is presented in the table below: |
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| | Number of | | | Weighted- | | | Weighted- | |
Shares | average | average |
| Exercise | Remaining |
| Price | Contractual |
| | Term (years) |
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Outstanding at December 31, 2011 | | | 25,600,000 | | | $ | 0.14 | | | | 9.02 | |
Granted | | | 28,250,000 | | | $ | 0.1 | | | | 9.72 | |
Exercised | | | - | | | | - | | | | - | |
Expired/Forfeited | | | (875,000 | ) | | | 0.14 | | | | 8.58 | |
Outstanding at December 31, 2012 | | | 52,975,000 | | | | 0.12 | | | | 8.92 | |
Granted | | | - | | | | - | | | | - | |
Exercised | | | - | | | | - | | | | - | |
Expired/Forfeited | | | (45,000 | ) | | | 0.14 | | | | 7.58 | |
Outstanding at December 31, 2013 | | | 52,930,000 | | | $ | 0.12 | | | | 7.92 | |
Exercisable at December 31, 2013 | | | 34,530,000 | | | $ | 0.13 | | | | 7.62 | |
Exercisable at December 31, 2012 | | | 24,907,000 | | | $ | 0.13 | | | | 8.43 | |
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The 28,250,000 options that were granted during 2012 had a weighted average grant-date fair value of $0.10 per share. |
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During the year ended December 31, 2013, the Company recognized stock-based compensation expense of $783,815 related to stock options. As of December 31, 2013, there was approximately $1,390,003 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over the remaining vesting period. The aggregate intrinsic value of these options was $0 at December 31, 2013. |
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During the year ended December 31, 2012, the Company recognized stock-based compensation expense of $1,018,708 related to stock options. As of December 31, 2012, there was approximately $2,143,271 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over the remaining vesting period. The aggregate intrinsic value of these options was $123,200 at December 31, 2012. |
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The fair value of the options granted during the year ended December 31, 2012 was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: |
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| | 2012 | | | | | | | | |
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Market value of stock on grant date | | $0.08 | - | 0.1 | | | | | | | | |
Risk-free interest rate (1) | | 0.27% | - | 0.63% | | | | | | | | |
Dividend yield | | | 0.00% | | | | | | | | | |
Volatility factor | | 183% | - | 188% | | | | | | | | |
Weighted average expected life (years) (2) | | | 5 | | | | | | | | | |
Expected forfeiture rate | | | 0.00% | | | | | | | | | |
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-1 | The risk-free interest rate was determined by management using the U.S. Treasury zero-coupon yield over the contractual term of the option on date of grant. | | | | | | | | | | | |
-2 | Due to a lack of stock option exercise history, the Company uses the simplified method under SAB 107 to estimate expected term. | | | | | | | | | | | |
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