Stockholders' Equity | 9 Months Ended |
Sep. 30, 2014 |
Equity [Abstract] | ' |
STOCKHOLDERS' EQUITY | ' |
NOTE 6 STOCKHOLDERS’ EQUITY |
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(A) Common Stock |
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During the nine months ended September 30, 2014, the Company issued the following common stock: |
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Transaction Type | | Quantity | | Valuation | | Range of Value per share | | |
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Conversion of convertible debt and accrued interest1 | | | 36,120,574 | | | $ | 2,756,852 | | | | $0.02715 - $0.14175 | | | |
Services - rendered2 | | | 3,150,000 | | | | 678,030 | | | | $0.093 - $0.365 | | | |
Acquisition of intangbiles3 | | | 15,000,000 | | | | 1,514,000 | | | | $0.0985 - $0.12 | | | |
Return of shares4 | | | (4,250,000 | ) | | | — | | | | $0.00 - $0.00 | | | |
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Total shares issued | | | 50,020,574 | | | $ | 4,948,882 | | | | | | | |
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The following is a detailed description of transactions noted above: |
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1. Conversion of convertible debt and accrued interest |
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During the nine months ended September 30, 2014, the Company converted debt and accrued interest, totaling $2,756,852 into 36,120,574 shares of common stock. Conversions of debt to equity occurring after the maturity date and penalties incurred resulted in a loss on settlement of $151,357. |
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2. Services Rendered |
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During the nine months ended September 30, 2014, the Company issued 1,250,000 shares of common stock valued at $386,250 in connection with employment agreements entered into (See Note 9 (A). |
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On January 15, 2013, the Company entered into an agreement for legal services, pursuant to which the Company will pay $2,000 and issue 50,000 shares of fully vested common stock for the preparation, filing costs and fees of each provisional and regular patent application. Through September 30, 2014, a total of 44 applications have been filed. In connection with this agreement: |
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During the nine months ended September 30, 2014, the Company issued 800,000 shares of fully vested common stock for services having a fair value of $131,500 ($0.11 - $0.168/share). |
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On March 17, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services, during the nine months ended September 30, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $9,300 ($0.09/share). (See note 7(B)). |
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On April 4, 2014, the Company entered into consulting services agreement. In consideration for these services, during the nine months ended September 30, 2014, the Consultant was granted 200,000 shares of fully vested common stock valued at $21,980 ($0.11/share). (See note 7(B)). |
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During the nine months ended September 30, 2014, the Company entered into a consulting services agreement related to marketing and the creation of Company awareness. In connection with this agreement, the consultant shall be paid $20,000 and was issued 200,000 fully vested shares of common stock valued at $31,000 ($0.16/share). (See note 7(B)). |
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On August 6, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services, during the nine months ended September 30, 2014, the Consultant was granted 100,000 fully vested shares of common stock valued at $16,500 ($0.17/share). (See note 7(B)). |
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On September 23, 2014, the Company entered into service agreement for a period of two years with the Company’s transfer agent. In consideration for these services, during the nine months ended September 30, 2014, 300,000 shares of fully vested common stock valued at $49,500 ($0.17/share) were granted and expensed. |
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On September 10, 2014, the Company entered into an advisory board agreement. In consideration for these services, during the nine months ended September 30, 2014, the Consultant was granted 100,000 shares of fully vested common |
stock valued at $16,000 ($0.16/share). (See note 7(B)). |
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On July 29, 2014, the Company entered into an investor relations agreement. In connection with this agreement, the Company is to issue 100,000 shares of common stock monthly and $5,500 in monthly fees. As of September 30, 2014, the agreement was terminated. The consultant was issued 100,000 shares of fully vested common stock valued at $16,000 ($0.16/share) and was paid $5,500. (See note 7(B)). |
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3. Acquisition of intangibles |
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During the nine months ended September 30, 2014, the Company issued 15,000,000 common shares in connection with license agreements entered into and intangibles acquired. See Note 1(I) |
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4. Return of Shares |
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On August 3, 2012, the Company entered into an endorsement agreement with an unrelated third party for a period from August 3, 2012 through August 3, 2015. In exchange for the services provided, the Company issued 3,000,000 shares of common stock having a fair value of $960,000 ($0.30/share) based upon fair value on the date of grant. As of January 2014, the August 3, 2012 agreement has been terminated and 3,000,000 shares have been returned to the Company (See note 7(B)). |
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In July of 2013, the Company entered into a financial advisor agreement for a period of six months with the advisor providing various assistance including introductions to potential investors. The Agreement calls for a fee of $25,000 with an additional $7,500 due and payable on the 1st day of the subsequent five months. On July 8, 2013, the Company issued 1,500,000 common shares as consideration for these services valued at $315,000. On April 15, 2014, the parties entered into a mutual termination agreement, as a result, 1,250,000 shares were returned to the Company. |
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During the year ended December 31, 2013, the Company issued the following common stock: |
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Transaction Type | | Quantity | | Valuation | | Range of Value per share | | |
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Conversion of convertible debt and accrued interest 1 | | | 19,146,156 | | | $ | 2,736,376 | | | | $0.1215 - $0.1783 | | | |
Services - rendered 2 | | | 6,145,029 | | | | 1,453,313 | | | | $0.19 - $0.438 | | | |
Cash and warrants 3 | | | 540,901 | | | | 43,080 | | | | $0 - $0.10 | | | |
Return of shares 4 | | | (750,000 | ) | | | — | | | | 0 | | | |
Shares issued as finders fees 5 | | | 94,964 | | | | 20,554 | | | | $0.19 - $0.23 | | | |
Repurchased shares 6 | | | (3,000,000 | ) | | | 520,000 | | | $ | 0.17 | | | |
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Total shares issued | | | 22,177,050 | | | $ | 4,773,323 | | | | | | | |
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The following is a more detailed description of select transactions noted above: |
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1. Conversion of convertible debt and accrued interest |
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During the year ended December 31, 2013, the Company converted debt and accrued interest, totaling $ 2,736,376 into 19,146,156 shares of common stock. |
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2. Services Rendered |
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During the year ended December 31, 2013, the Company issued 2,350,000 shares of common stock valued at $623,500 in connection with employment agreements entered into (See Note 7 (A). |
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In July of 2013, the Company entered into a financial advisor agreement for a period of six months with the advisor providing various assistance including introductions to potential investors. The Agreement calls for a fee of $25,000 with an additional $7,500 due and payable on the 1st day of the subsequent five months. On July 8, 2013, the Company issued 1,500,000 common shares as consideration for these services valued at $315,000. |
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On February 1, 2013, the Company entered into a professional services agreement related to research and outreach media. In connection with this agreement, the Company issued 500,000 shares of common stock valued at $120,000 during the year ended December 31, 2013. |
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On January 15, 2013, the Company entered into an agreement for legal services, pursuant to which the Company will pay |
$2,000 and issue 50,000 shares of common stock for the preparation, filing costs and fees of each provisional and regular patent application. Through June 30, 2014, a total of 44 applications have been filed. In connection with this agreement: |
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| · | During the year ended December 31, 2013, the Company issued 1,400,000 shares of common stock for legal services having a fair value of $355,600 ($0.25 - $0.26/share). | | | | | | | | | | | | |
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On January 21, 2013, the Company entered into a professional services agreement related conference presentations. In connection with this agreement, the Company issued 120,000 shares of common stock valued at $32,400 during the year ended December 31, 2013. |
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During the year ended December 31, 2013, the Company entered into a professional services agreements. In connection with these agreements, the Company issued 275,029 shares of common stock valued at $66,813 during the year ended December 31, 2013. |
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3. Cash and warrants |
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On January 31, 2013 an individual exercised 430,800 of stock warrants at an exercise price of $0.10 per share for proceeds of $43,080. |
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On December 26, 2013, the Company issued 110,101 shares of common stock in connection with a cashless exercise of warrants. The number of warrants received was based on 190,000 warrants exercised using an average of five previous closing prices. |
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4. Return of shares |
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On February 6, 2012, the Company filed a suit for declaratory judgment and rescission of contract associated with a former consultant for failure to perform contractual requirements. It seeks clarification that the former consultant is not owed 750,000 shares of restricted common stock. The defendants have been served. This case will be vigorously prosecuted and has a good likelihood of a favorable outcome. The case seeks in excess of the jurisdictional amount, which is $50,000 dollars. On March 5, 2013, the suit was settled in favor of Max Sound Corporation and 750,000 shares issued to the former consultant were returned to the treasury. |
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5. Finders Fees |
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During the year ended December 31, 2013, in connection with debt raised of $833,333, the Company issued 94,964 common shares of the Company’s common stock valued at $20,555 issued to the finder. |
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6. Repurchased shares |
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During the year ended December 31, 2013, the Company entered into a settlement agreement with the seller of the software to reverse the original transaction which included the issuance of 3,000,000 shares of common stock in exchange for the software. The Company received back 3,000,000 shares of common stock which was recorded as treasury stock in exchange of returning the software to the seller. Upon the return of the shares, the Company recognized a gain of $220,000 based on the quoted trading price of the Company’s common stock, which was the best evidence of fair value. |
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(B) Stock Warrants |
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On January 1, 2013, the Company issued 500,000 warrants under consulting agreements. The Company recognized an expense of $84,028 for the year ended December 31, 2013. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2013, dividend yield of zero, expected volatility of 140.30%; risk-free interest rates of 0.37%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.45 per share (See Note 7(B)). |
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On August 7, 2013, the Company issued 100,000 warrants for services rendered. The Company recognized compensation expense of $43,809 on the date of issuance with the offset being recorded to derivative liabilities since the Company applied the provisions of ASC No. 815, pertaining to the potential settlement in a variable amount of shares given the company’s shares are tainted. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the |
Black-Scholes option pricing model with the following assumptions, dividend yield of zero, expected volatility of 297%; risk-free interest rates of 0.61%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.40 per share (See Note 9(B)). |
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During the year ended December 31, 2013, the Company issued 2,000,000 warrants in connection with the entry into certain convertible debenture agreements. Each warrant vests immediately and expire April 26, 2016 – December 29, 2016 with an exercise price of $0.40. |
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During the nine months ended September 30, 2014, the Company issued 750,000 warrants in connection with the entry into certain convertible debenture agreements. Each warrant vests immediately and expire February 26, 2017 – August 12, 2017 with an exercise price of $0.40. |
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The following tables summarize all warrant grants as of September 30, 2014, and the related changes during these periods are presented below: |
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| | Number of Warrants | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (in Years) | | |
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Balance, December 31, 2012 | | | 2,415,800 | | | | 0.28 | | | | 0.8 | | | |
Granted | | | 2,600,000 | | | $ | 0.41 | | | | | | | |
Exercised | | | (620,800 | ) | | $ | 0.07 | | | | | | | |
Cancelled/Forfeited | | | (1,260,000 | ) | | $ | 0.5 | | | | | | | |
Balance, December 31, 2013 | | | 3,135,000 | | | $ | 0.4 | | | | 2.2 | | | |
Granted | | | 750,000 | | | $ | 0.4 | | | | | | | |
Exercised | | | — | | | $ | — | | | | | | | |
Cancelled/Forfeited | | | (335,000 | ) | | $ | 0.1 | | | | | | | |
Balance, September 30, 2014 | | | 3,550,000 | | | $ | 0.4 | | | | 1.9 | | | |
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A summary of all outstanding and exercisable warrants as of September 30, 2014 is as follows: |
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Exercise | | Warrants | | Warrants | | Remaining |
Price | | Outstanding | | Exercisable | | Contractual Life |
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$ | 0.25 | | | | 200,000 | | | | 200,000 | | | | 0.7 | |
$ | 0.4 | | | | 2,850,000 | | | | 2,850,000 | | | | 1.99 | |
$ | 0.45 | | | | 500,000 | | | | 500,000 | | | | 1.25 | |
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| | | | | 3,550,000 | | | | 3,550,000 | | | | 1.9 years | |
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(C) Stock Options |
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On January 1, 2013, the Company issued 700,000 options to buy common shares of the Company's stock at $0.50 per share, good for three years, to the Chief Technical Officer pursuant to an amended employment agreement dated December 31, 2012. The Company recognized an expense of $115,288 for the year ended December 31, 2013. The Company recorded the fair value of the options based on the fair value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2013: |
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Expected dividends | | | 0 | % | | | | | | | | | | |
Expected volatility | | | 140.3 | % | | | | | | | | | | |
Exptected term | | | 3 Years | | | | | | | | | | | |
Risk free interest rate | | | 0.37 | % | | | | | | | | | | |
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On July 7, 2014, as a benefit for the unsecured loans granted to the Company by the Company's Chief Financial Officer ("CFO"), the Company issued 2,866,520 options to buy common shares of the Company's stock at $0.10 per share, good for three years to the CFO. |
The Company recognized an expense of $190,656 for the nine months ended September 30, 2014. The Company recorded the fair value of the options based on the fair value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: |
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Expected dividends | | | 0 | % | | | | | | | | | | |
Expected volatility | | | 137.82 | % | | | | | | | | | | |
Exptected term | | | 3 Years | | | | | | | | | | | |
Risk free interest rate | | | 1 | % | | | | | | | | | | |
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The following tables summarize all option grants as of September 30, 2014, and the related changes during these periods are presented below: |
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| | Number of Options | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life | | |
(in Years) | | |
Outstanding - December 31, 2012 | | | 12,000,000 | | | | 0.12 | | | | 1.04 | | | |
Granted | | | 700,000 | | | $ | 0.5 | | | | 3 | | | |
Exercised | | | — | | | | — | | | | — | | | |
Forfeited or Canceled | | | — | | | | — | | | | — | | | |
Outstanding - December 31, 2013 | | | 12,700,000 | | | | 0 | | | | 2 | | | |
Granted | | | 2,866,652 | | | $ | 0.1 | | | | 3 | | | |
Exercised | | | — | | | | — | | | | — | | | |
Forfeited or Canceled | | | — | | | | — | | | | — | | | |
Outstanding - September 30, 2014 | | | 15,566,652 | | | | 0.13 | | | | 1.57 | | | |
Exercisable - September 30, 2014 | | | 15,566,652 | | | | | | | | | | | |
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(D) Share Exchange |
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On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value of $7,500,000 based upon recent market value ($0.25/share) (See Note 8(B)). |
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On January 17, 2011, the Company acquired the rights to software technology known as Blog Software, Social Media Vault, Social Media Bar and Trending Topix (BSST) through a share exchange, whereby the Company issued 3,000,000 shares of common stock to two individuals in exchange for their rights to BSST having a value of $300,000 based upon recent market value ($0.10/share). |
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On November 15, 2012, the Company acquired the rights to an audio technology known as Liquid Spins, Inc. through a share exchange, whereby the Company issued 24,752,475 shares of common stock for their rights in Liquid Spins technology and other assets having a value of $10,000,000 based upon recent market value ($0.404/share). The following assets were acquired in the transaction: |
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| | 9 Months Ended | | Year Ended | | | | | | |
| | 30-Sep-14 | | 31-Dec-13 | | | | | | |
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Goodwill at fair value, Opening Balance | | $ | 9,303,679 | | | $ | 9,655,588 | | | | | | | |
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Consideration transferred at fair value: | | | | | | | | | | | | | | |
Common stock - 24,752,475 Shares | | | — | | | | — | | | | | | | |
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Net assets acquired: | | | | | | | | | | | | | | |
Current assets | | | — | | | | — | | | | | | | |
Cash | | | — | | | | 8,011 | | | | | | | |
Total net assets acquired | | | — | | | | 8,011 | | | | | | | |
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Amortization | | | (724,169 | ) | | | (343,898 | ) | | | | | | |
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Goodwill at fair value, Ending Balance | | $ | 8,579,510 | | | $ | 9,303,679 | | | | | | | |
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During the year ended December 31, 2013, the Company received an additional $8,011 related to the acquisition which reduced the carrying value of the goodwill as of December 31, 2013. For the year ended December 31, 2013, the Company recorded $343,898 of amortization expense. |
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For the nine months ended September 30, 2014 and 2013, the Company recorded $724,169 and $0, respectively, of amortization expense. |