Stockholders' Equity | 3 Months Ended |
Mar. 31, 2014 |
Stockholders' Equity [Abstract] | ' |
STOCKHOLDERS' EQUITY | ' |
NOTE 5 – STOCKHOLDERS’ EQUITY |
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Common Stock |
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During the three months ended March 31, 2014, the Company executed the following common stock transactions: |
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● | the issuance of an aggregate 5,704,000 common shares to accredited investors in private placements. Total consideration from the issuance of common stock amounted to $1,426,000 for the period ended March 31, 2014. The common stock issued included warrants with a fair value of $232,673. | | | | | | | |
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● | the issuance of an aggregate 527,026 shares of the Company’s common stock with a fair value of $110,148 for consulting services. | | | | | | | |
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● | the issuance of 71,770 shares of common stock with a fair value of $15,000 for software development services. | | | | | | | |
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The fair value of common stock issued in connection with services rendered by various professionals was determined based upon the evaluation of fair value made by the Company’s management, which considered the values associated with common stock sold for cash during the period. |
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Preferred Stock |
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The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.001 per share. The preferred stock may be issued in one or more series and the first series consisted of 18,000,000 shares and is designated as series A convertible preferred stock (“Series A Preferred Stock”). The holders of Series A Preferred Stock are entitled to receive, if, when and as declared by the Board, dividends at an annual rate of 8% of the original purchase price of Series A Preferred Stock. No dividends were declared for the three months ended March 31, 2014 and 2013, and for the period from inception (July 22, 2010) to March 31, 2014. In the event of any liquidation, dissolution or winding up of the Company, voluntary or involuntary, the holders of the Series A Preferred Stock are entitled to receive the amount of $0.50 per share. Each share of Series A Preferred Stock is convertible at the option of the holder at any time after the date of issuance into equal number of shares of common stock. Each share of Series A Preferred Stock issued and outstanding is entitled to the number of votes equal to the number of shares of common stock into which such share of Series A Preferred Stock could be converted. |
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In connection with the Company’s December 31, 2012 sale of $802,500 in units consisting of an aggregate of 3,210,000 shares of the Company’s Series A Preferred Stock and warrants to purchase an aggregate of 3,210,000 shares of the Company’s common stock, the Company was required to file a registration statement registering the shares of common stock. Such Series A Preferred Stock were convertible into 3,210,000 shares of common stock. Such registration statement was required to be filed within 60 days of the final closing date (the “Filing Date”) and to be declared effective by 150 days from the Filing Date. The Company did not meet the required Filing Date and the required effectiveness date passed. Pursuant to the registration rights agreement, if the registration statement was not filed on a timely basis or was not declared effective by the SEC for any reason on a timely basis, the Company was required to pay each investor monthly liquidated damages equal to 1.0% of the investment amount subscribed for by such investor (capped at 12%) until the registration statement is filed or declared effective, as the case may be. The Company’s registration statement was declared effective by the SEC on February 14, 2014. At March 31, 2014 and December 31, 2013, the Company had accrued $47,000 of estimated liquidated damages that it will owe to the holders of the outstanding Series A Preferred stock. |
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Preferred Stock Conversion to Common Stock |
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In August and October 2013, the Company obtained the consent of approximately 69% of its preferred shareholders to adopt, approve and ratify the Amended and Restated Certificate of Designations of the Company’s Series A Convertible Preferred Stock. The amendment, which was filed with the state of Nevada on October 4, 2013, provides that the Company shall have the right to convert the Series A Convertible Preferred Stock into shares of the Company’s common stock in its sole discretion at any time, at which time, such Series A Convertible Preferred Stock shall automatically and without any required action by any holder, be converted into 103% of fully paid, non-assessable shares of common stock. As of the date when these financial statements were available to be issued, no preferred shares had been converted to common stock. |
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On March 26, 2014, the Company issued to its officers 2,000,000 shares of preferred stock designated as series B preferred stock (“Series B Preferred Stock”). The holders of Series B Preferred Stock are entitled to the equivalent of 100 votes of common stock for each share of Series B Preferred stock held. The holders of the Series B Preferred Stock have no other rights, such as conversion or liquidation. The fair value of the Series B Preferred Stock on the date of issuance was determined to be $2,000 and was recorded as officers’ compensation. |
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Warrants |
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During the three months ended March 31, 2014, the Company issued warrants to purchase common stock to investors in private placements for the right to purchase 5,704,000 shares of the Company’s common stock at $0.50 per share. The warrants vested immediately and have a term of five years from the date the warrants were issued. The warrants were valued at $232,673, using the Black-Scholes option pricing model. |
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On February 1, 2014, the Company entered into a software development agreement pursuant to which it granted a warrant to purchase 125,000 shares of the Company’s common stock at an exercise price of $0.25. The warrant vests over 3 years as follows (a) 20,000 shares after 6 months (b) remaining at the rate of 10,500 shares at the end of every three months, thereafter. The warrant has a term of 5 years. The fair value of the warrant using Black Scholes model was determined to be $12,625. |
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The assumptions used in the Black-Scholes option pricing model are as follows: |
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Risk-free interest rate | | | 0.49% - 1.09 | % | | | | |
Expected dividend yield | | | 0 | % | | | | |
Expected lives | | 2.5-4 years | | | | | |
Expected volatility | | | 70 | % | | | | |
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Warrants to purchase an aggregate of 34,695,500 shares of the Company’s common stock with exercise prices ranging from $0.01 to $0.75 were outstanding as of March 31, 2014. A summary of the Company’s warrant activity and related information for the three months ended March 31, 2014 is as follows: |
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| | Warrants | | | Weighted Average Exercise Price | |
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Outstanding at January 1, 2014 | | | 28,866,500 | | | $ | 0.39 | |
Granted | | | 5,829,000 | | | | 0.49 | |
Exercised | | | - | | | | - | |
Forfeited/Expired | | | - | | | | - | |
Outstanding at March 31, 2014 | | | 34,695,500 | | | | 0.41 | |
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Stock Options |
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During 2010, the Board of Directors approved and adopted the 2010 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) to provide for the issuance of non-qualified and/or incentive stock options to employees, officers, directors and consultants and other service providers. The Plan was subsequently amended on various dates. Generally, all options granted expire five to ten years from the date of grant. It is the policy of the Company to issue new shares for stock options exercised, rather than issue treasury shares. Options generally vest over ten years. Effective July 1, 2012, the total number of shares of common stock reserved for issuance was reduced to 15,000,000 shares, subject to annual increases of up to an amount equal to 15% of the outstanding fully-diluted shares of common stock of the Company, and any such increase cannot be made until the fully diluted shares of common stock outstanding exceeds 100,000,000 shares. The Company did not grant any stock options during the three months ended March 31, 2014. Options to purchase 17,100,000 shares of common stock at an average exercise price of $0.034 per share were outstanding at March 31, 2014. Of that amount, 11,550,000 are exercisable at an average price of $0.032 per share. |
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As of March 31, 2014, there was $407,794 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted average period of 1.3 years. |
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The estimated aggregate pretax intrinsic value (the difference between the Company’s estimated stock price on the last day of the period ended March 31, 2014 and the exercise price, multiplied by the number of in-the-money options) is approximately $2,049,000. This amount changes based on the fair market value of the Company’s common stock. |
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Public Offering |
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On February 14, 2014, the SEC issued a notice of effectiveness of the Registration Statement filed by the Company to sell 10,000,000 shares of common stock at a public offering price of $0.50 per share. |