| Shareholders’ Equity | NOTE 12 – SHAREHOLDERS’
EQUITY Common Stock On February 2, 2015,
the Company cancelled 910,000 shares of common stock previously issued to Michael Stanford pursuant to a court order issued in
connection with the Company’s lawsuit against Mr. Stanford. These shares were valued at par value $0.001. See Note 11 –
Legal Matters. On March 1, 2015,
the Company issued 50,000 shares of common stock pursuant to the employment agreement with Mark Osterberg, the CompanyÂ’s
President and COO. These shares were valued at $1.20 per share. On March 17, 2015,
the Company issued 114,000 shares of its common stock in exchange for payment of $21 and a mutual release of a claim by an investor.
The investor claimed to have purchased and paid for 32,000 shares of the CompanyÂ’s unregistered common stock in November
2013, but did not receive the shares purchased. On May 15, 2015,
the Company issued 1,550,000 shares of its common stock to related parties for services rendered and to be rendered during the
six months ended June 30, 2015. These shares were valued at $1.10 per share. See Note 8 – Related Party Transactions. On June 30, 2015,
the Company issued 310,000 shares of its common stock in exchange for equity investments totaling $105. On June 30, 2015,
the Company issued 2,280,000 shares of its common stock as part of the June 30, 2015 Unit Offering, described in further detail
below. On July 28, 2015,
the Company issued 110,000 shares of its common stock to a related party as part of the June 30, 2015 Unit Offering, described
in further detail below. See Note 8 – Related Party Transactions. On September 30,
2015, the Company issued 2,150,000 shares of its common stock to related parties for services rendered and to be rendered during
the year ended December 31, 2015. The shares were valued at $1.10 per share. See Note 8 – Related Party Transactions. On September 30,
2015, the Company issued 100,000 shares of its common stock to unrelated parties for services rendered and to be rendered during
the year ended December 31, 2015. The shares were valued at $1.10 per share. On September 30,
2015, the Company issued 500,000 shares of its common stock to an unrelated party as a good-faith, partial payment for the Balmat
Acquisition. The shares were valued at $0.29 per share. See Note 3. On October 28, 2015,
the Company issued the remaining 50,000 shares of its common stock to an unrelated party as payment for the Balmat Acquisition.
The shares were valued at $0.29 per share. See Note 3. On October 31, 2015,
the Company issued 3,130,000 shares of its common stock as part of the Series C Preferred Offering discussed below for total funds
received of $1,315 and $250 of related party note payable cancellation. See Note 8 – Related Party Transactions. On November 2, 2015,
the Company issued 10,000,000 shares of its common stock as partial consideration of the Balmat Acquisition. The shares were issued
at $0.29 per share. On November 10,
2015, the Company issued 437,500 shares of its common stock as part of a convertible note offering with two related parties. See
Note 7 for related party details and Note 9 – Notes Payable – Related Party. On December 22,
2015, the Company issued 110,000 shares of its common stock for payment received of $55 that was part of the June 30, 2015 Unit
Offering, described in further detail below. Series B Preferred Stock On September 30,
2015, the Company filed with the Secretary of State of Nevada a certificate of designation of preferences, rights and limitations
creating the CompanyÂ’s Series B preferred stock and designating the rights and preferences of the Series B preferred stock
(the “Series B Certificate of Designation”). The Series B Certificate of Designation authorized the issuance of up
to 100,000 shares of Series B preferred stock with a par value of $0.001 per share. Holders of the Series B preferred stock are
entitled to one hundred votes per share on matters submitted to a vote of the CompanyÂ’s stockholders. Upon any liquidation,
dissolution or winding-up of the Company, whether voluntary of involuntary, the holders of the Series B preferred stock will be
entitled to receive out of the assets of the Company an amount equal to the par value of the Series B Preferred and any other fees
or liquidated damages then due and owing, for each share of Series B preferred stock before any distribution or payment is made
to the holders of any junior securities, and if the assets of the Company are insufficient to pay in full such amounts, then the
entire assets to be distributed to the holders of the Series B preferred stock will be ratably distributed among the holders in
accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The
preference rights of the Series B Preferred Stock precedes the rights of the Series C Preferred Stock. Subject to the terms
of the Series B Certificate of Designation, the Series B preferred stock is convertible, at any time after six months after the
date of issuance into that number of shares of common stock determined by multiplying the number of shares of Series B preferred
stock by one hundred, subject to adjustment as provided in the Series B Certificate of Designation. The Company will not affect
any conversion of Series B preferred stock, and the holder of Series B preferred stock will not have the right to convert any portion
of the Series B preferred stock, to the extent that, after giving effect to the conversion, the holder and its affiliates and any
person acting as a group with the holder or any of its affiliates would beneficially own in excess of 4.99% of the CompanyÂ’s
outstanding common stock. On September 30,
2015, the Company issued 5,000 shares of its Series B preferred stock to an unrelated party for services rendered and to be rendered
during the year ended December 31, 2015, for a value of $550. Each share of the Series B preferred stock was valued at $1.10 per
share to reflect the value of the 500,000 shares of common stock issuable upon conversion of the Series B preferred stock. Series C Preferred Stock On September 30,
2015, the Company filed with the Secretary of State of Nevada a certificate of designation of preferences, rights and limitations
creating the CompanyÂ’s Series C preferred stock and designating the rights and preferences of the Series C preferred stock
(the “Series C Certificate of Designation”). The Series C Certificate of Designation authorized the issuance of up
to 5,000,000 shares of Series C preferred stock with par value of $0.001 per share, with a stated value equal to $.50 per share,
subject to increase as set forth in the Series C Certificate of Designation. Holders of the Series
C preferred stock are entitled to ten votes per share on matters submitted to a vote of the CompanyÂ’s stockholders. Upon any liquidation,
dissolution or winding-up of the Company, whether voluntary of involuntary, the holders of the Series C preferred stock will be
entitled to receive out of the assets of the Company an amount equal to the par value of the Series C Preferred and any other fees
or liquidated damages then due and owing, for each share of Series C preferred stock before any distribution or payment is made
to the holders of any junior securities, and if the assets of the Company are insufficient to pay in full such amounts, then the
entire assets to be distributed to the holders of the Series C preferred stock will be ratably distributed among the holders in
accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The
preference rights of the Series C Preferred Stock are secondary to those of the Series B Preferred Stock. Subject to the terms
of the Series C Certificate of Designation, the Series C preferred stock is convertible, at any time after six months after the
date of issuance into that number of shares of common stock determined by multiplying the number of shares of Series C preferred
stock by one-half, subject to adjustment as provided in the Series C Certificate of Designation. The Company will not affect any
conversion of Series C preferred stock, and the holder of Series C preferred stock will not have the right to convert any portion
of the Series C preferred stock, to the extent that, after giving effect to the conversion, the holder and its affiliates and any
person acting as a group with the holder or any of its affiliates would beneficially own in excess of 4.99% of the CompanyÂ’s
outstanding common stock. October 31, 2015 Series C Preferred
Offering On October 31, 2015,
the Company issued 3,130,000 shares of Series C Preferred Stock as part of its Series C Preferred Offering for total funds of $1,315
and $250 of related party note payable cancellation. See Note 8 – Related Party Transactions. Unit Offerings June 30, 2015 Offering On June 30, 2015,
the Company completed its offering of 1,000 units (the “Units”) of its common stock and warrants at a price of $1 per
Unit for an aggregate offering amount of $1,000. To cover an over-allotment in this offering, we sold an additional 250 Units for
an additional aggregate offering amount of $250 bringing the total amount sold in this offering to $1,250. The Units were sold
to thirteen accredited investors, one of whom included our CEO and Executive Chairman, who purchased 141 Units by converting $141
previously loaned to the Company. Each Unit consisted of 2,000 shares of common stock together with callable common stock purchase
warrants entitling the holder thereof to purchase 2,000 shares of common stock at an exercise price of $1.00 per share for a period
of three years from the date of acquisition, unless earlier called by the Company in the event the common stock trades at or above
three dollars ($3.00) per share for a period exceeding ten (10) consecutive trading days (the “Warrant”). The Company
elected to sell to an unrelated party 110 Units in this offering for a promissory note in the principal amount of $110 due July
10, 2015. The note accrued interest at the rate of 5% per annum. At the closing of this offering, the Company issued an aggregate
of 2,280,000 shares of common stock and warrants to purchase 2,280,000 shares of common stock. Including the receipt of the $110
from the promissory note, the offering totaled $1,250. On July 28, 2015,
the Company agreed to issue 55 Units to an unrelated party and to extend the payment terms of the remaining $55 for an additional
55 units as part of the $110 promissory note it received from that party in connection with the CompanyÂ’s offering of its
Units discussed above. By December 31, 2015, the promissory note was paid and 110,000 shares were issued for the $55 received.
In addition, on July 28, 2015, the Company agreed to sell the remaining 55 Units from this offering to its CEO and Executive Chairman
who converted $55 of principal amount of his previous loan to the Company. The 110,000 shares and warrants associated with the
purchase of these 55 units were issued in July, 2015. October 31, 2015 Offering On October 31, 2015,
the Company completed its offering of 3,130 units (the “October Units”) of its common stock, Series C Preferred stock
and Series A and Series B warrants at a price of $0.50 per Unit. The proceeds from the offering totaled $1,565, which included
$250 from our CEO and Executive Chairman who purchased 500 Units by converting amounts previously loaned to the Company. The October
Units were sold to nine accredited investors. Each October Unit consisted of one share of the CompanyÂ’s Series C Preferred
Stock, one share of the CompanyÂ’s common stock, one Series A common stock warrant entitling the holder to purchase an additional
share of the CompanyÂ’s common stock at an exercise price of $0.75 per share for a period of two years, and one Series B common
stock warrant entitling the holder to purchase one share of the CompanyÂ’s common stock at an exercise price of $1.50 per
share for a period of three years. In total, the Company issued 3,130,000 shares of common stock and 3,130,000 shares of the CompanyÂ’s
Series C Preferred Stock. The Series A warrants were valued at $123 and the Series B warrants were valued at $93. See further details
on the warrantsÂ’ fair value calculations below. November 10, 2015 Offering On November 10,
2015, the Company completed an offering totaling $875 to two related parties. See details of the offering at Note 9 – Debt. Stock Options On March 1, 2015,
as part of an employment agreement, the Company granted an option to purchase 250,000 shares of the CompanyÂ’s common stock
with an exercise price of $0.50 per share. The option vested as follows: 50,000 shares upon execution of the employment agreement;
50,000 shares each on March 31, 2015; June 30, 2015; September 30, 2015; and December 31, 2015. On the grant date, the Company
estimated the fair value of the grant using the Black Scholes option pricing model using the closing price of our common shares
on the grant date as quoted on the stock exchange where the majority of our trading volume and value of the shares occurs, assuming
a maturity of 2.7 years, 0.896% risk free rate and an 88.83% volatility. The stock-based
compensation cost recognized in our consolidated statements of operations for the years ended December 31, 2015 and 2014 was $213
and $0, respectively, and is included within Compensation in the consolidated statements of operations. As of December 31, 2015,
there was no unrecognized compensation cost related to unvested stock options, as all outstanding options were fully vested. No
options were exercised during the years ended December 31, 2015 and 2014. At December 31, 2015, there was $40 in aggregate intrinsic
value of outstanding and exercisable stock options, using an assumed value $0.66 per share of our common stock. The following is
a summary of the status of the CompanyÂ’s stock options as of the year ended December 31, 2015 and 2014 and changes through
the periods ended on those dates:
For the years ended December 31,
2015 2014
Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price
Outstanding, beginning of period - $ - - $ -
Granted 250,000 0.50 - -
Exercised - - - -
Cancelled/Expired - - - -
Outstanding, end of period 250,000 $ 0.50 - $ -
Exercisable, end of period 250,000 $ 0.50 - $ -
Weighted-average fair value per share of options granted during period $ 0.85 $ - Warrants The Company issued
warrants, each exercisable for one of the CompanyÂ’s common shares, to investors in connection with offerings of the Company
that closed on June 30, 2015; October 31, 2015; and November 2, 2015. The exercise price and exercise period are outlined below:
Total Warrants Exercise Price Expiration Date
June 30, 2015 Offering 2,500,000 $ 1.00 6/30/2018
October 31, 2015 Offering - Series A Warrants 3,130,000 $ 0.75 10/31/2017
October 31, 2015 Offering - Series B Warrants 3,130,000 $ 1.50 10/31/2018
November 10, 2015 Offering 437,500 $ 2.00 11/10/2018
9,197,500 The fair value of
the warrants issued during the year ended December 31, 2015 was estimated using a Black-Scholes model with significant inputs including:
Risk-free interest rate 0.75%-0.896 %
Expected volatility 70.0%-88.83 %
Expected dividend yield 0
Expected term in years 2.0 – 3.0
Estimated forfeiture rate 0 Based on the above
inputs, the value of these warrants was estimated at $234 See Note 9 – Notes Payable – Related Party for details related
to valuation and accounting for the warrants issued as part of the November 10, 2015 Offering. The following table
summarizes our warrant activity for the years ended December 31, 2015 and 2014:
For the year ended December 31, 2015 For the year ended December 31, 2014
Number of Warrants Weighted- Average Exercise Price (USD$) Number of Warrants Weighted- Average Exercise Price (USD$)
Outstanding, beginning of period - $ - - $ -
Granted 9,197,500 1.13 - -
Exercised - - - -
Expired - - - -
Outstanding, end of period 9,197,500 $ 1.13 - $ - |
