| Stockholders' Equity | NOTE 7 - STOCKHOLDERS EQUITY Preferred Stock The Companys board of directors
(the Board of Directors) has the authority to issue preferred stock in one or more series and to, within the limits
set forth by Nevada law and without shareholder action:
● designate in whole or in part, the powers, preferences, limitations, and relative rights, of any class of shares before the issuance of any shares of that class;
● create one or more series within a class of shares, fix the number of shares of each such series, and designate, in whole or part, the powers, preferences, limitations, and relative rights of the series, all before the issuance of any shares of that series;
● alter or revoke the powers, preferences, limitations, and relative rights granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares; or
● increase or decrease the number of shares constituting any series, the number of shares of which was originally fixed by the Board of Directors, either before or after the issuance of shares of the series; provided that, the number may not be decreased below the number of shares of the series then outstanding, or increased above the total number of authorized shares of the applicable class of shares available for designation as a part of the series. The issuance of preferred stock by the
Board of Directors could adversely affect the rights of holders of the Companys common stock. The potential issuance of
Preferred Stock may:
● have the effect of delaying or preventing a change in control of the Company;
● discourage bids for the common stock at a premium over the market price of the common stock; and
● adversely affect the market price of, and the voting and other rights of the holders of the Companys common stock. As of September 30, 2015, there were
no shares of preferred stock issued or outstanding. Common Stock In January 2014, the Company sold 2,250,000
shares of its common stock at a price of $0.15 per share to a newly appointed member of the Board of Directors and executive officer.
In February 2014, 150,000 shares of common stock were issued as compensation to a service provider. In May 2014, the Company sold
400,000 shares and 100,000 shares of its common stock, respectively, to two of its officers who are also members of its Board of
Directors, at a purchase price of $0.15 per share. In May and June 2014, respectively, 66,667 shares and 76,923 shares of its common
stock were issued to a service provider. In July, August, and September 2014, respectively, 100,000 shares, 111,111 shares, and
165,000 shares were issued to service providers. In October and November 2014, respectively, 222,222 shares and 297,059 shares
were issued to service providers. The shares issued to service providers were measured at their grant date fair value and recognized
as an expense in the accompanying consolidated statement of operations. Restricted Stock Units During 2014, the Company issued 2,000,000
restricted stock units to an officer. At vesting each restricted stock unit will be exchanged for one share of its common stock.
The restricted stock units vest in equal annual installments over the two-year period commencing on the anniversary of the date
of grant. In January 2015, the Company issued 1,000,000 shares of its common stock to an executive officer and board member
pursuant to his employment agreement and recognized $151,875 in related stock compensation expense as of September 30, 2015. The following table summarizes the activity
of the Companys restricted stock units:
Number of RSUs Weighted- Average Grant Date Fair Value
Unvested at December 31, 2014 2,000,000 $ 0.20
Granted
Vested (1,000,000 ) $ 0.20
Forfeited
Unvested at September 30, 2015 1,000,000 $ 0.20 The Company recorded $151,875 of expense
relating to restricted stock units during the period ended September 30, 2015 and such expense is included in stock-based compensation
expense in the Companys Consolidated Statement of Operations. As of September 30, 2015, the pre-tax
compensation expense for all unvested restricted stock units in the amount of approximately $50,625 will be recognized in the Companys
results of operations over a weighted average period of 0.33 years. Stock Options In 2011, the Company established the
2011 Stock Option and Incentive Plan (the Plan) for directors, employees, consultants and other persons acting on
behalf of the Company, under which 8,500,000 shares of common stock are authorized for issuance. Options granted under the Plan
vest on the date of grant, over a fixed period of time, or upon the occurrence of certain events and have a contractual term of
up to ten years. A summary of the status of the options
granted is as follows:
Number of Shares Underlying Options Weighted average exercise price Weighted Average remaining contractual term - years
Outstanding, December 31, 2014 7,440,364 $ 0.13 9.29
Granted 577,500 $ 0.08 7.94
Forfeited/Expired 557,103 $ 0.22 -
Outstanding, September 30, 2015 7,460,761 $ 0.12 8.59
Exercisable, September 30, 2015 2,467,523 $ 0.14 7.98
Expected to vest, September 30, 2015 (*) 2,980,064 $ 0.11 8.89 (*) At September 30, 2015, 7,460,761 shares
of common stock were reserved for issuance under outstanding options under the Plan and 1,039,239 shares of common stock were available
for grant under the Plan. As of September 30, 2015, there was
$321,186 of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the
Plan. The expense is expected to be recognized over a weighted average period of 2.88 years. The aggregate intrinsic value of the
options outstanding at September 30, 2015 was $0 and the aggregate intrinsic value of the options exercisable or expected to vest
in the future was $0. Stock-based compensation expense for
the nine months ended September 30, 2015 and 2014 was $185,061 and $85,645 respectively. The fair value of the options granted
by the Company for the nine months ended September 30, 2015 and 2014 is estimated at $44,532 and $756,561, respectively. The fair value of each stock option
award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model was
developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable.
The determination of the fair value of each stock option is affected by the Companys stock price on the date of grant, as
well as assumptions regarding a number of highly complex and subjective variables. Because the Companys employee stock options
have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options. The assumptions used to value stock options are as follows:
Period Ended
September 30, 2015 December 31, 2014
Dividend yield - -
Risk-free interest rate 1.34 % 1.60% to 1.65 %
Volatility 193 % 193 %
Expected life (in years) 5.9 7.0
Weighted average grant date fair value per share of options granted $ 0.08 $ 0.12 The dividend yield
is zero as the Company has not paid and currently does not anticipate paying dividends. The risk-free interest
rate is based on the U.S. Treasury bond. Volatility is estimated
based on comparable companies in the industry. Warrants A summary of the status of the warrants
granted is as follows:
Shares issuable upon exercising of outstanding warrants Weighted-average exercise price
Outstanding December 31, 2014 210,000 $ 0.26
Granted
Forfeited
Exercised
Outstanding September 30, 2015 210,000 $ 0.26
Exercisable September 30, 2015 210,000 $ 0.26 The following table summarizes information
about warrants outstanding at September 30, 2015:
Outstanding Exercisable
Range of exercise prices Number of shares issuable upon exercise of outstanding warrants Weightedaverage remaining contractual life (in years) Weightedaverage exercise price Number of warrants exercisable Weighted average exercise price
$ 0.25 150,000 0.92 $ 0.25 150,000 $ 0.25
$ 0.275 60,000 0.83 $ 0.275 60,000 $ 0.275
$ 0.25 - 0.275 210,000 0.89 $ 0.257 210,000 $ 0.257 |
