Stockholders' Equity (Deficit) | 9 Months Ended |
Sep. 30, 2014 |
Equity [Abstract] | ' |
Stockholders' Equity (Deficit) | ' |
NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIT) |
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Preferred Stock - The Company is authorized to issue up to 100,000,000 shares of preferred stock with a par value of $0.00001. At September 30, 2014 and December 31, 2013 there were no shares issued and outstanding. |
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Common Stock - The Company is authorized to issue up to 500,000,000 shares of common stock with a par value of $0.00001. At September 30, 2014 there were 38,875,805 shares issued and outstanding and at December 31, 2013 there were 17,750,001 shares issued and 12,750,001 shares outstanding. (See escrow shares below). |
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Escrow shares - In connection with the Debenture issuance, the Company issued 5,000,000 shares of its common stock to the principal shareholders of the Company in escrow. The shares may be released from escrow to the principal shareholders (or their designees) in accordance with a release schedule. The schedule provides that 3,300,000 shares will be released upon the Company reaching $1,000,000 in audited revenues over any consecutive 12 month period with the remaining shares released when the Company reaches $3,000,000 in audited revenues over any consecutive 12 month period. If either of the revenue goals has not been reached by June 30, 2016, the remaining shares will be cancelled. The escrow shares were issued solely in connection with the Debenture issuance, and accordingly, while disclosed as issued they are not considered outstanding and no accounting has yet been made. The escrow shares were cancelled as a part of the Debenture conversion discussed in Note 4. |
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Private Offering - In March 2014, the Company commenced a private offering of restricted securities (“Offering”) to sell up to 50,000 units (the “Units”) at a purchase price of $10 per Unit. Each Unit consists of (i) 100 shares of common stock of the Company, par value $0.00001 per share (the “Common Stock”), (ii) a half warrant (the “B Warrant”) to purchase 100 shares of Common Stock at an exercise price of $0.10 per share and (iii) a half warrant (the “C Warrant”) to purchase 100 shares of Common Stock at an exercise price of $0.15 per share. For example, 100 units entitle each holder thereof to 10,000 shares of common stock, B Warrants to purchase 5,000 shares of common stock and C Warrants to purchase 5,000 shares of common stock. Each warrant is exercisable for a term of three years and shall contain standard anti-dilution protection and a cashless exercise provision that will be effective following a one-year holding period. |
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All 50,000 Units were sold raising $500,000 from the Offering. |
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At September 30, 2014, the Company had recorded a warrant liability expense of $629,544 ($459,567 in the first quarter and $169,977 in the second quarter), allocated $200,000 of the proceeds from the sale of common stock and warrants to the warrant liability and recorded the resulting warrant liability of $829,544. The warrant liability was calculated using the Black Scholes valuation method using 75% annual volatility, no dividends and a risk-free interest rate of 0.88%. The valuation of the warrant liability is recalculated quarterly when financial statements are issued. The trading price of our common stock was the same at September 30, 2014, June 30, 2014 and March 31, 2014, accordingly there was no change in the valuation of the warrant liability from March 31, 2014 to September 30, 2014. |
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Freeline Notes - On June 6, 2014, the Company entered into a Promissory Note Assignment Agreement with a stockholder of the Company, whereby the stockholder sold, assigned and transferred to the Company the stockholder’s rights under a series of promissory notes issued to the stockholder by Freeline with a face value of $1,269,500. Specifically, the Company purchased: (i) one 5% Senior Promissory Note, due August 4, 2011, in the principal amount of $200,000, (ii) one 5% Senior Promissory Note, due November 17, 2011, in the principal amount of $200,000, (iii) one 5% Senior Promissory Note, due January 10, 2012, in the principal amount of $119,500 and (iv) one 5% Senior Promissory Note, due August 4, 2011, in the principal amount of $750,000 (together, the “Freeline Notes”). The Freeline Notes were issued in connection with a Bridge Loan financing to Freeline and are all currently in default. The Freeline Notes were acquired to allow the Company to complete the Freeline Acquisition discussed in Note 3. The Company issued 5,000,000 shares of its $0.00001 par value common stock in exchange for the notes which were valued at $1,350,000, based on the trading price of the Company’s common stock on the date of the transaction. |
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Common Stock Options - The Company granted the following options during September 2014. The options were valued using the Black Scholes valuation method using an annual volatility of 75%, no dividends and a risk-free interest rate of 0.88%. The options were vested when issued, accordingly, the calculated value of the options is included in general and administrative expense in September 2014. |
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On September 4, 2014, the members of the board of directors were granted seven-year vested options to acquire 4,800,000 shares of the Company’s common stock at an exercise price of $0.20 per share. The options were valued at $461,982. |
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On September 19, 2014, pursuant to a General Release and Settlement Agreement, Steve Berger, the Company’s former chief financial officer and principal accounting officer was granted a two-year vested option to purchase 420,000 shares of the Company’s common stock at an exercise price of $0.15 per share. The option was valued at $55,354. |
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On September 21, 2014, Steven Chaussy was appointed as the Company’s new chief financial officer and principal accounting officer. Mr. Chaussy was granted a seven-year vested option to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.20 per share. The option was valued at $23,139. |