Stockholders' Deficit | 12 Months Ended |
Dec. 31, 2014 |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 8 – STOCKHOLDERS’ DEFICIT |
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The Company has authorized 10,000,000 shares of preferred stock (“Preferred Stock”) and 190,000,000 shares of common stock (“Common Stock”), each having a par value of $0.001. |
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In March 2013, the Company approved the 2012 Long-Term Incentive Equity Plan (the “2012 Plan”), which provides the Company with the ability to issue stock options, stock appreciation rights, restricted stock and/or stock based awards for up to an aggregate of 2,050,000 shares of Common Stock. |
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Stock Splits |
On April 1, 2013, the Company effected a one-for-ten reverse stock split of the issued and outstanding shares of Common Stock (the “Reverse Split”). The number of authorized shares and the par value of the Common Stock were not changed. The accompanying financial statements have been restated to reflect this reverse stock split. |
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Private Placement Offering |
In March 2014, the Company consummated two concurrent private placement offerings (the “2014 Offerings”), receiving an aggregate of $1,819,832, net of expenses, from accredited investors. In one of the offerings, the Company sold an aggregate of 917,582 shares of Common Stock for $0.91 per share for a total of $835,000. For each share purchased in this offering, investors received an immediately exercisable, five year warrant to purchase one share of Common Stock at a price of $0.91 per share. In the concurrent offering, the Company sold 1,098,901 shares of Common Stock for $0.91 per share for a total of $1,000,000. The investor in the concurrent offering did not receive warrants. |
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On May 1, 2013, the Company commenced a private placement offering of up to 1,250,000 shares of its Common Stock (the “Private Placement”) at a price of $0.40 per share pursuant to subscription agreements entered into with each investor. As of June 18, 2013, the last date of the offering, 1,171,705 shares of Common Stock were sold, raising an aggregate of $468,682, which amount included $20,000 of notes then outstanding. |
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Treasury Stock |
In April 2014, the Company approved a repurchase of 12,497 shares of Common Stock for $11,372. The shares were subsequently cancelled. |
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Restricted Stock Compensation |
The Company issued shares of restricted Common Stock to certain of its directors, executive officers and employees. Unvested restricted shares are subject to forfeiture. With the exception of 2,665,251 shares which vest based upon achieving certain milestones, the Company records compensation expense over the vesting period based upon the fair market value on the date of grant for each share, adjusted for forfeitures. |
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In August 2014, the Company issued 1,500,000 shares of Common Stock to an executive officer. The shares are subject to a restricted stock agreement, and the vesting is conditional upon the Company reaching certain performance goals. Should the executive officer’s employment with the Company end, any unvested shares are forfeited. |
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In March 2014, the Company issued 465,000 shares of Common Stock under the 2012 Plan to certain of its directors, executive officers and employees. The shares are subject to a restricted stock agreement, pursuant to which the shares will vest one year from the date of such agreement if the grantee is a director or employee (as applicable) of the Company at the time. |
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A summary of the restricted stock issuances to directors, executive officers and employees is as follows: |
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| | | | | Weighted Average | |
Number of Shares | Grant Date Fair Value |
Unvested share balance, January 1, 2013 | | | 4,453,516 | | | $ | 1.35 | |
Granted | | | 608,441 | | | | 2.15 | |
Vested | | | (88,309 | ) | | | 1.4 | |
Forfeited | | | -183,240 | | | | 1.4 | |
Unvested share balance, December 31, 2013 | | | 4,790,408 | | | $ | 1.45 | |
Granted | | | 1,965,000 | | | | 0.49 | |
Vested | | | (663,416 | ) | | | 2.09 | |
Forfeited | | | - | ) | | | - | |
Unvested share balance, December 31, 2014 | | | 6,091,992 | | | $ | 1.07 | |
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In connection with the issuance of restricted stock, the Company recorded share-based compensation expense of $2,920,667 and $833,139 for the years ended December 31, 2014 and 2013, respectively. As of December 31, 2014, there was $4,366,682 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation. That cost is expected to be recognized during the years 2015 and 2016. |
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Stock Warrants |
In March 2014, the Company issued warrants to purchase shares of Common Stock at a price of $0.91 per share. The warrants are exercisable for five years from the date of issuance. |
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The following table summarizes warrant activity during the period: |
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| | Number of | | | | | |
Warrants | | | | |
Outstanding at January 1, 2014 | | | - | | | | | |
Issued for services | | | 197,194 | | | | | |
Issued in connection with the 2014 Offerings | | | 917,582 | | | | | |
Outstanding at December 31, 2014 | | | 1,114,776 | | | | | |
Exercisable at December 31, 2014 | | | 1,114,776 | | | | | |
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The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of issuance for the warrants for the year ended December 31, 2014: |
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| | 31-Dec-14 | | | | | |
Volatility | | | 174 | % | | | | |
Expected term (years) | | | 5 | | | | | |
Risk-free interest rate | | | 1.53 | % | | | | |
Dividend yield | | | 0 | % | | | | |
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In connection with the issuance of warrants for services rendered, compensation expense of $246,479 and advisory fees of $18,460 were recorded during the year ended December 31, 2014. Since the warrants are fully vested, there is no future cost to the Company in connection with the warrants. Warrants issued to investors as part of the 2014 Placements had no impact, and will have no future impact, on the Company’s statement of operations. |
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Advisory Services |
In March 2014, the Company entered into two agreements pursuant to which the Company will receive advisory services related to strategy, distributorship, sales and sales channels and investor relations. The Company granted to each advisor 100,000 shares of restricted Common Stock, subject to forfeiture if the advisor terminates or materially breaches the agreement before the six-month anniversary thereof. The aggregate value of the advisory fees of $260,000 was calculated based upon the closing price of the Company’s Common Stock on the date of the agreement, and was charged to income in 2014. |
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Also in March 2014, the Company issued 82,418 and 1,234 shares of Common Stock for advisory work and consulting work, respectively. The number of shares issued was calculated based upon the fair market value of the stock. |
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On October 3, 2013, the Company entered into an advisor agreement whereby the Company would receive strategic business advisory services, distributorship advisory services, sales and sales channel advisory services and investor relation advisory services in exchange for the issuance of 50,000 shares of restricted Common Stock. The Common Stock vested on April 3, 2014. In connection with this issuance, the Company recorded $75,000 in consulting fees during the year ended December 31, 2014. |
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On October 3, 2013, the Company entered into an agreement for strategic business advisory services, public relations services and investor relations services with Mr. Ian Thompson. In connection with this agreement, the Company issued 167,204 shares of restricted Common Stock and recorded consulting fees of $501,612 during 2013, which was the fair market value of the stock on the date of issue; there was no cash payment to Mr. Thompson by the Company. The stock is fully vested; however it is restricted from trading. The advisor was also issued an additional 200,000 shares of restricted Common Stock, which was to vest quarterly based upon the Company reaching certain market capitalization and revenue goals, in addition to providing the above services, with the last tranche vesting scheduled to vest on June 30, 2014. Consulting fees amounting to $105,000 and $280,000 were recorded in 2014 and 2013, respectively, related to the additional 200,000 shares of Common Stock issued. Throughout the term of the agreement, the Company requested the advisor to render performance under the agreement and to provide evidence of same. The Company believes, however, that Mr. Thompson failed to perform in all material respects under the terms of the agreement. On June 27, 2014, the Company terminated the agreement. Accordingly, the final tranche of 50,000 shares did not vest. Further, the Company is taking all necessary steps for the cancellation of the other shares totaling 317,204 shares, due to lack of delivery of consideration and breach of the agreement. |