STOCKHOLDERSb EQUITY | 9 Months Ended |
Sep. 30, 2013 |
Equity [Abstract] | ' |
STOCKHOLDERSb EQUITY | ' |
NOTE 7 – STOCKHOLDERS’ EQUITY |
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Preferred Stock |
The authorized preferred stock of the Company consists of 10,000,000 shares of preferred stock at a par value of $0.001. As of September 30, 2013, the Company had no outstanding shares of preferred stock. |
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Common Stock |
The authorized common stock of the Company consists of 500,000,000 shares of common stock with a par value of $0.001. |
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On January 2, 2012, the Company issued 41,667 shares of common stock for advisory services at a price per share of $.90 for total expense of $37,500. |
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On February 28, 2012, the Registrant acquired Inedible, a developer of mobile Apps and related mobile App technologies whose principal asset was a customer list, in exchange for 442,542 shares of common stock of the Company. Since the purchase price was not paid in cash, the Company accounted for the value under ASC 805-50-30-2, Business Combinations whereby the measurement of value is based on either (i) the cost which is measured based on the fair value of the consideration given, or (ii) the fair value of the assets (or net assets) acquired, whichever is more clearly evident and thus more reliably measurable. The fair value of the shares issued amounted to $221,272, which was allocated between intangible assets – customer base for $144,000, and $77,272 to prepaid consulting fees. |
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On March 28, 2012, the Company issued to an accredited investor 3,000,000 shares of common stock and a warrant to purchase 1,000,000 shares of common stock for an aggregate purchase price of $1,500,000. The warrant has a three year term and may be exercised at an exercise price of $0.90 per share, subject to adjustment in the case of stock splits, distributions, reorganizations, recapitalizations and the like, and may be exercised on a cashless basis under certain circumstances. The warrant contains full ratchet anti-dilution protection in the case of a share issuance for consideration less than the then exercise price of the warrant, subject to customary exceptions. |
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On May 22, 2012 the Company entered into a consulting agreement for advisory services and agreed to issue up to 200,000 restricted shares of common stock under its 2011 Equity Incentive Plan in two tranches of 100,000 shares each. The issuance of these shares is being made under the Company’s 2011 Equity Incentive Plan. The first tranche of 100,000 shares vested on November 30, 2012; those shares were valued at the market price on the date of the agreement. The expense for the first 100,000 shares was amortized over the six-month period beginning May 22, 2012, with a total expense of $30,000. The Company had the option to terminate the agreement after six months but opted not to. The second tranche of 100,000 shares was issued in December 2012 and vested over a six-month period beginning November 22, 2012. Those 100,000 shares were valued at the market price on November 22, 2012. The expense for second 100,000 shares was amortized over the six-month period beginning November 22, 2012, with a total expense of $15,000. The 200,000 shares were issued on December 28, 2012. |
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On June 28, 2012 the Company granted a 10-year option to purchase 500 shares of common stock to a consultant at an exercise price of $0.30 per share under our 2011 Equity Incentive Plan. |
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On July 6, 2012 options to purchase 7,500 shares of common stock were exercised for a total exercise price of price of $1,875. The options were issued under our 2011 Equity Incentive Plan. |
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On September 25, 2012 the Company issued under its 2011 Equity Incentive Plan 10,000 shares of common stock for advisory services at a price per share of $0.23 for total expense of $2,300. |
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On November 14, 2012, the Company agreed to issue under its 2011 Equity Incentive Plan 250,000 shares of common stock for accounting services to Murray Williams as the Company's new Chief Financial Officer at a price per share of $0.18 for a total amount of $45,000. The shares vest quarterly over eight (8) quarters with the first tranche of 31,250 shares vesting on Feb 2, 2013. The 250,000 shares were issued on December 28, 2012. The $45,000 amount was recorded as prepaid expense and is being amortized monthly over the 24-month vesting period. |
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On February 21, 2013, the Company issued 200,000 shares of common stock at $0.50 per share for $100,000 of certain outstanding legal fees. |
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On March 8, 2013, in connection with a strategic license agreement that granted the Company the right to sell a limited license for United States Patent Number 7,822,816, the Company issued 147,692 shares of common stock, valued at $50,000, to the licensor and the licensor issued to the Company 2,500,000 shares of he licensor’s common stock, valued at $50,000. |
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On June 6, 2013, the Company issued 75,000 shares of common stock at $0.50 per share for $24,000 of certain outstanding marketing fees and $13,500 for a 4-month marketing services agreement from June to September 2013. The $13,500 expense for the shares issued for the 4-month marketing agreement was amortized over the four-month period beginning June 6, 2013. |
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On September 11, 2013, in connection with a strategic license agreement with a famous musician, the Company issued 725,000 shares of common stock, valued at $210,250, to the musician and his agents. |
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On September 30, 2013, the Company issued 33,207 shares of common stock for employee stock option exercises resulting in proceeds of $8,316. |
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Hang With, Inc. Subsidiary Common Stock |
The authorized common stock of Hang With, Inc. consists of 75,000,000 shares of common stock with a par value of $0.001. |
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Between January 10, 2013 and September 30, 2013, our Hang With, Inc. (“Hang With”) subsidiary raised an aggregate of $2,644,502 from for the sale of 3,107,335 shares of Hang With common stock to accredited investors. The sale of the Hang With shares was effected as a private placement intended to be exempt under Rule 506 of Regulation D and Regulation S. As of September 30, 2013, non-controlling shareholders own 23.71% of Hang With. In accordance with GAAP, the financial results of Hang With are consolidated in the Company’s financial statements, and the portion of net loss attributable the 23.71% non-controlling interest is disclosed as a separate line item in the Company’s unaudited financial statements included herein. |
Warrants |
The Company has warrants outstanding to purchase 1,000,000 shares of common stock at $0.90 per share as of September 30, 2013. The warrants are subject to full ratchet anti-dilution protection if the Company sells shares or share equivalents at less than the $0.90 exercise price. Since the warrants do not meet the conditions for equity classification, the warrants are required to be carried as a derivative liability, at fair value. Management estimates the fair value of the warrants on the inception date, and subsequently at each reporting period, using the Lattice option-pricing model, adjusted for dilution, because that technique embodies all assumptions (including volatility, expected terms, dilution and risk free rates) that are necessary to determine the fair value of freestanding warrants. This resulted in a derivative liability value of zero on the balance at September 30, 2013. Significant inputs in calculating this valuation using the Lattice option-pricing model are as follows: |
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| 30-Sep-13 | | | | | | | | | | |
Expected volatility | 43.20% | | | | | | | | | | |
Expected term | 1.5 Years | | | | | | | | | | |
Risk-free interest rate | | | | | | | | | | | |
0.40% | | | | | | | | | | |
Expected dividend yield | | | | | | | | | | | |
0% | | | | | | | | | | |
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2011 Equity Incentive Plan |
The board of directors adopted the 2011 Equity Incentive Plan, as amended, (the “Plan”) of MEDL Mobile Holdings, Inc. (Nevada) that provided for the issuance of a maximum of 10,000,000 shares of common stock. As of September 30, 2013, there were options to purchase 5,549,300 shares outstanding under the Plan and approximately 3,944,393 shares remained available for future grant under the Plan. |
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The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company's stock on the dates of grant. Stock options are typically granted throughout the year and generally vest over four years of service thereafter and expire ten years from the date of the award, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award. |
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Total share-based compensation expense included in the consolidated statements of operations for the nine months ended September 30, 2013 and 2012 was $207,208 and $161,806, respectively. For the nine months ended September 30, 2013, compensation expense included in selling, general and administration is $166,942. Compensation expense included in cost of goods sold is $40,266. |
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Option activity for the three months ended September 30, 2013 was as follows: |
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Assumptions: |
| 2013 | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | |
Risk-free interest rate | 0.40% | | | | | | | | | | |
Expected volatility | 43.20% | | | | | | | | | | |
Expected life (in years) | 10 | | | | | | | | | | |
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| | | Weighted Average | | Weighted | | |
Average |
| | | Exercise | | Remaining | | Aggregate |
| | | Price | | Contractual | | Intrinsic |
| Options | | ($) | | Life (Yrs.) | | Value ($) |
| | | | | | | |
Options outstanding at June 30, 2013 | | 5,367,007 | | | 0.27 | | | 8.34 | | | $330,458 |
Granted | | 215,500 | | | 0.31 | | | 8.82 | | | $ 8,785 |
Exercised | | -33,207 | | | 0.25 | | | - | | | - |
Forfeited or cancelled | | - | | | - | | | - | | | - |
Options outstanding at September 30, 2013 | | 5,549,300 | | | 0.27 | | | 8.24 | | | $280,941 |
Options expected to vest in the future as of September 30, 2013 | | 2,050,165 | | | 0.27 | | | 8.35 | | | $112,713 |
Options exercisable at September 30, 2013 | | 3,499,135 | | | 0.27 | | | 7.98 | | | $168,228 |
Options vested, exercisable and options expected to vest at September 30, 2013 | | 5,549,300 | | | 0.27 | | | 8.12 | | | $280,941 |
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The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock as of September 30, 2013 for those awards that have an exercise price currently below the closing price. |
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Unvested share activity for the three months ended September 30, 2013 was as follows: |
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| | Unvested | | Weighted | | | | | |
| | Number of | | Average Grant | | | | | |
| | Options | | Fair Value | | | | | |
Unvested balance at June 30, 2013 | | | 2,592,583 | | | 0.19 | | | | | |
Granted | | | 215,500 | | | 0.18 | | | | | |
Vested | | | -344,799 | | | 0.15 | | | | | |
Cancelled | | | - | | | - | | | | | |
Forfeited | | | - | | | - | | | | | |
Unvested balance at September 30, 2013 | | | 2,050,165 | | | 0.19 | | | | | |
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At September 30, 2013, there was $416,192 unrecognized share-based compensation expense related to unvested employee share options with a weighted average remaining recognition period of 2.11 years. |