STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2014 |
Stockholders' Equity Note [Abstract] | ' |
Stockholders' Equity Note Disclosure [Text Block] | ' |
NOTE 4 – STOCKHOLDERS’ EQUITY |
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On January 9, 2014, the Company entered into agreements with the holder of certain of its outstanding warrants originally issued in private placement transactions in September 2011 and April 2012. Pursuant to such agreements, which are more fully described below, the Company agreed to extend the period during which the warrants were exercisable at a reduced exercise price. |
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On January 9, 2014, the Company entered into Amendment No. 4 to the warrants that were originally issued in September 2011. Pursuant to Amendment No. 4, the exercise price of the warrants was reduced to $0.05 per share until March 10, 2014. |
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On January 9, 2014, the Company entered into Amendment No. 3 to the warrant that was originally issued in April 19, 2012. Pursuant to Amendment No. 3, the exercise price of the warrants was reduced to $0.05 per share until March 10, 2014. |
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On January 10, 2014, holders of such warrants exercised an aggregate of 11,200,000 warrants to purchase common stock at the reduced exercise price per share of $0.05 resulting in $560,000 in cash proceeds. In connection with the warrant exercise, the Company incurred a non-cash interest expense due to warrant modification of $241,176 when the inducement offer was accepted during the six months ended June 30, 2014. |
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On March 10, 2014, the holder of such warrants exercised an aggregate of 9,291,175 warrants to purchase common stock at the reduced exercise price per share of $0.05 resulting in $464,558 in cash proceeds. The Company issued such shares to the holder in April 2014. In connection with the warrant exercise, the Company incurred a non-cash interest expense due to warrant modification of $219,773 when the inducement offer was accepted during the six months ended June 30, 2014. |
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On April 1, 2014, the Company issued 200,364 shares of its common stock for investor relations services valued at $30,000. |
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On April 3, 2014, the Company issued 297,618 shares of its common stock for legal services valued at $50,000. |
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Options |
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Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options. The fair value of stock-based payment awards during the six months ended June 30, 2014 was estimated using the Black-Scholes pricing model. |
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In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. |
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The Company estimated forfeitures related to option grants at a weighted average annual rate of 0% per year, as the Company does not yet have adequate historical data, for options granted during the three and six months ended June 30, 2014 and 2013. |
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The following assumptions were used in determining the fair value of employee and vesting non-employee options during the three and six months ended June 30, 2014 and 2013: |
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| | June 30, | | June 30, | | | | | | |
2014 | 2013 | | | | | | |
Risk-free interest rate | | 2.13%-2.73% | | 0.25%-0.86% | | | | | | |
Dividend yield | | 0% | | 0% | | | | | | |
Stock price volatility | | 77.6%-79.2% | | 35.3%-117.8% | | | | | | |
Expected life | | 8-10 years | | 2 -5.75 years | | | | | | |
Weighted average grant date fair value | | $0.11 | | $0.21 | | | | | | |
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On March 14, 2014, the Compensation Committee of the Board of Directors approved an equity bonus for the Company’s Chief Executive Officer consisting of stock options with a fair value of $800,000. The total bonus awarded was $1,140,000 of which $85,000 was paid in cash and $1,055,000 was granted in stock options valued using the Black Scholes model (see Note 6). Accordingly, the Company granted options to purchase 9,232,745 shares of common stock to the Chief Executive Officer effective March 14, 2014 exercisable at $0.14 per share for ten years, vesting over a term of three years. |
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In April 2014, the Company awarded an aggregate of 1,730,000 of stock options to certain employees and one contractor. The stock options have exercise prices from $0.12 to $0.13 per share, will vest over a three year period, and have an approximate fair value of $170,000 using the Black Scholes model. |
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In May 2014, the Company awarded an aggregate of 1,250,000 of stock options to the Company’s Board of Directors. The stock options have exercise price of $0.10 per share, will vest over a three year period, and have an approximate fair value of $101,000 using the Black Scholes model. |
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In June 2014, the Company awarded an aggregate of 100,000 of stock options to certain employees. The stock options have exercise price of $0.11 per share, will vest over a three-year period, and have an approximate fair value of $9,000 using the Black Scholes model. |
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The following table summarizes the stock option activity for the six months ended June 30, 2014: |
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| Shares | | Weighted-Average | | Weighted-Average | | Aggregate |
Exercise Price | Remaining | Intrinsic |
| Contractual Term | Value |
Outstanding at January 1, 2014 | 13,877,573 | | $ | 0.19 | | | 8.4 | | | |
Grants | 12,312,745 | | $ | 0. 13 | | | 10 | | | |
Exercised | -320,000 | | $ | 0.07 | | | | | | |
Outstanding at June 30, 2014 | 25,870,318 | | $ | 0.17 | | | 8.9 | | $ | 38,372 |
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Vested and expected to vest at June 30, 2014 | 25,870,318 | | $ | 0.17 | | | 8.9 | | $ | 38,372 |
Exercisable at June 30, 2014 | 10,052,723 | | $ | 0.16 | | | 8.1 | | $ | 38,028 |
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The following table presents information related to employee stock options at June 30, 2014: |
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Options Outstanding | | Options Exercisable | | | |
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| | | | Average | | Exercisable | | | |
Exercise | | Number of | | Remaining Life | | Number of | | | |
Price | | Options | | In Years | | Options | | | |
$ | 0.00-0.10 | | 7,979,043 | | 8.2 | | 6,833,210 | | | |
| 0.11-0.25 | | 16,621,275 | | 9.4 | | 2,196,179 | | | |
| 0.26-0.50 | | 750,000 | | 7.9 | | 750,000 | | | |
| 0.51 – 0.90 | | 520,000 | | 8.1 | | 273,334 | | | |
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As of June 30, 2014, stock-based compensation of $1,522,916 remains unamortized and is expected to be amortized over the weighted average remaining period of 2 to 3 years. |
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On April 9, 2014, 320,000 options were exercised at $0.0679 per share for cash proceeds of $21,728 |
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The stock-based compensation expense related to option grants was $157,828 and $233,545 during the three and six months ended June 30, 2014, respectively, and $41,506 and $78,228 during the three and six months ended June 30, 2013, respectively. |
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Restricted Stock |
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The following table summarizes the restricted stock activity for the six months ended June 30, 2014: |
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Restricted shares issued as of January 1, 2014 | 13,456,667 | | | | | | | | |
| Granted | - | | | | | | | | |
| Forfeited | - | | | | | | | | |
| Total Restricted Shares Issued at June 30, 2014 | 13,456,667 | | | | | | | | |
| Vested at June 30, 2014 | -9,014,514 | | | | | | | | |
| Unvested restricted shares as of June 30, 2014 | 4,442,153 | | | | | | | | |
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Stock based compensation expense related to restricted stock grants was $438,010 and $876,020 for the three and six months ended June 30, 2014, respectively; and $436,194 and $929,888 during the three and six months ended June 30, 2013, respectively. As of June 30, 2014, the stock-based compensation relating to restricted stock of $1,599,381 remains unamortized and is expected to be amortized over the remaining period of approximately 1 year. |
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Warrants |
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The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at June 30, 2014: |
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Exercise | | Number | | | | | | | |
Price | | Outstanding | | Expiration Date | | | | | |
$ | 0.05 | | 11,045,654 | | March 2017 to Aril 2018 | | | | | |
$ | 0.5 | | 487,235 | | November 2014 to December 2014 | | | | | |
$ | 0.75 | | 471,700 | | Jul-14 | | | | | |
| | | 12,004,589 | | | | | | | |
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| Shares | | Weighted-Average | | Weighted-Average | | Aggregate |
Exercise Price | Remaining | Intrinsic |
| Contractual Term | Value |
Outstanding at January 1, 2014 | 32,495,753 | | $ | 0.08 | | | 3.4 | | $ | - |
Issued | - | | | | | | | | $ | - |
Exercised | -20,491,164 | | $ | 0.05 | | | | | | |
Forfeitures or expirations | - | | | | | | | | | |
Outstanding at June 30, 2014 | 12,004,589 | | $ | 0.1 | | | 2.5 | | $ | 555,596 |
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Outstanding at June 30, 2014 | 12,004,589 | | $ | 0.1 | | | 2.5 | | $ | 555,596 |
Exercisable at June 30, 2014 | 12,004,589 | | $ | 0.1 | | | 2.5 | | $ | 555,596 |
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