SHAREHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2013 |
SHAREHOLDERS' EQUITY [Abstract] | ' |
SHAREHOLDERS' EQUITY | ' |
NOTE 10- SHAREHOLDERS' EQUITY |
Preferred Stock |
The Company authorized 20,000,000 shares of preferred stock with a par value of $0.01; none have been issued as of September 30, 2013 and December 31, 2012. |
Common Stock |
The Company has authorized 324,000,000 shares of common stock and issued 18,000,000 to the Company's related party founder in July 2010 for $100,000 in cash at $.0056 per share, of which, 3,034,800 common shares were gifted by the related party founder to family members and others. Subsequently, in 2010 and 2011, the Company raised additional capital through the issuance of common stock pursuant to a Private Placement Memorandum Dated September 1, 2010, whereby $790,000 and $200,000 in capital was raised through the issuance of 5,688,000 and 1,440,000 shares of common stock at $.1389 per share in 2010 and 2011, respectively. In 2012, the Company raised additional capital through the issuance of common stock pursuant to an Access Letter Dated December 1, 2011, whereby $615,000 in capital was raised through the issuance of 2,214,000 shares of common stock at $.2778 per share. |
Additionally, during 2012, the Company issued 72,000 shares of its common stock to three individuals for services rendered. The Company valued these common shares based on the price recent investors paid for common shares pursuant to an Access Letter Dated December 1, 2011, or $.2778 per share. The total value for these shares is $20,000. |
During the nine months ended September 30, 2013, the Company raised additional capital through the issuance of common stock pursuant to an Access Letter Dated December 1, 2011, whereby $165,000 in capital was raised through the issuance of 594,000 shares of common stock at $.2778 per share. |
During the nine months ended September 30, 2013, the Company raised additional capital through issuance of common stock pursuant to a Private Placement whereby $676,500 in capital was raised through the issuance of 2,435,400 shares of common stock at $.2778 per share. |
During the nine months ended September 30, 2013, the Company issued 387,000 shares of its common stock in connection with consulting agreements. The Company valued these common shares at $107,500 based on the price recent investors paid for common shares pursuant to an Access Letter Dated December 1, 2011, or $.2778 per share, which was all recognized since services were completed as of June 30, 2013. |
Additionally, during the nine months ended September 30, 2013, the Company converted principal related party debt balance of $286,000 to equity by issuing 1,029,600 shares of common stock. The Company valued these common shares based on the price recent investors paid for common shares pursuant to a Private Placement, or $.2778 per share. |
On June 10, 2013, the Company entered into an agreement with an attorney to issue 108,000 shares of Company common stock at $.2778 per share, or $30,000, for services rendered. The Company valued these common shares based on the price recent investors paid for common shares pursuant to a Private Placement and recognized as expense immediately. |
On June 21, 2013, the Company entered into an agreement with an employee, wherein the employee elected to receive 9,000 shares of Company common stock at $.2778 per share, or $2,500, in lieu of semi-annual bonus. The Company valued these common shares based on the price recent investors paid for common shares pursuant to a Private Placement and therefore there was no gain or loss. |
On August 7, 2013 and August 12, 2013, the Company entered into common stock repurchase agreements wherein the Company acquired an aggregate of 360,000 shares of treasury stock. The Company repurchased the shares for $2,501. |
On August 15, 2013, the Company issued 10,000 shares of its common stock in connection with a consulting agreement with Island Stock Transfer for transfer agent services. The Company valued these common shares at $2,778 based on the price recent investors paid for common shares of $0.2778 per share, which was all recognized since services were completed as of September 30, 2013. |
Stock Incentive Plan and Stock Option Grants to Employees and Directors |
On April 20, 2011, the Company's board of directors and majority stockholder adopted the 2011 Stock Option Plan (the "2011 Plan"), to be effective on January 3, 2011. The purpose of the 2011 Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2011 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Company has reserved for issuance an aggregate of 900,000 shares of common stock under the 2011 Plan. The maximum aggregate number of shares of Company stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 180,000 shares. The Company's board of directors will administer the 2011 Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option granted pursuant to the 2011 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument. |
On January 3, 2011, the Company granted, pursuant to the 2011 Plan, ten-year stock options to purchase 720,000 common shares of the Company, of which (i) 180,000 are exercisable on January 3, 2012 at $0.1389 per share, (ii) 180,000 are exercisable on January 3, 2013 at $0.1389 per share, (iii) 180,000 are exercisable on January 3, 2014 at $0.1389 per share and (iv) 180,000 are exercisable on January 3, 2015 at $0.1389 per share. |
The total fair value of stock option awards granted to employees during the year ended December 31, 2011 was $68,880, which is being recognized over the respective vesting periods. The Company recorded compensation expense of $35,560 for the year ended December 31, 2011. |
On February 17, 2012, the Company granted 54,000 ten-year stock options, which have an exercise price of $0.2778 per share and cliff vest annually over three years starting February 17, 2013, to an employee. The fair value was computed at $10,302 or $0.1908 per option. |
On April 16, 2012, the Company granted 18,000 ten-year stock options, which have an exercise price of $0.2778 and cliff vest annually over three years starting on April 16, 2013, to a non-employee. The fair value was computed at $3,432 or $0.1908 per option. |
The total fair value of stock option awards granted to employees during the year ended December 31, 2012 was $13,728, which is being recognized over the respective vesting periods. The Company recorded compensation expense of $25,884 for the year ended December 31, 2012. |
On April 1, 2013, the Company's board of directors and majority stockholder adopted the 2013 Stock Option Plan (the "2013 Plan"), to be effective on April 1, 2013. The purpose of the 2013 Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons into our development and financial success. Under the 2013 Plan, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Code, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and long-term incentive awards. The Company has reserved for issuance an aggregate of 900,000 shares of common stock under the 2013 Plan. The maximum aggregate number of shares of Company stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 180,000 shares. The Company's board of directors will administer the 2013 Plan until such time as such authority has been delegated to a committee of the board of directors. The material terms of each option granted pursuant to the 2013 Plan by the Company shall contain the following terms: (i) that the purchase price of each share purchasable under an incentive option shall be determined by the Committee at the time of grant, (ii) the term of each option shall be fixed by the Committee, but no option shall be exercisable more than 10 years after the date such option is granted and (iii) in the absence of any option vesting periods designated by the Committee at the time of grant, options shall vest and become exercisable in terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument. |
Between April 9, 2013 and June 24, 2013, the Company granted 468,000 ten-year stock options, which have an exercise price of $0.2778 and cliff vest annually over four years starting in April to June 2013, to two employees and one director. The aggregate fair value of these options was computed at $89,236 or $0.1907 per option, which is being recognized over the requisite service period, which is the vesting period. |
On August 12, 2013 the Company granted 100,000 ten-year stock options, which have an exercise price of $0.50 per share and cliff vest annually over four years starting in August 2014 to an employee. The aggregate fair value of these options was computed at $16,334 or $0.1633 per option. |
On July 1, 2013 the Company's prior CFO retired and the Board authorized his options to continue vesting and expire on the original expiration date. In accordance with ASC 718, the remaining cost relating to his stock options was expensed since the requisite services were completed. |
The Company recorded $30,616 and $19,041 compensation expense for the nine months ended September 30, 2013 and 2012, respectively, in connection with all the option grants in all periods. |
As of September 30, 2013, 440,000 shares were remaining under the 2013 Plan for future issuance. |
The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors, which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period for each award. |
The expected life is computed using the simplified method, which is the average of the vesting term and the contractual term. The expected volatility is based on an average of similar public companies historical volatility, as the Company does not currently trade on the open market. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. |
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A summary of the Company's stock option activity during the nine months ended September 30, 2013, 2013 is presented below: |
| | | | | | | | | | | | | |
| | Number | | Weighted | | Weighted | | Aggregate | |
of Options | Average | Average | Intrinsic |
| Exercise | Remaining | Value |
| Price | Contractual | |
| | Term | |
| | | | | | | | | | | | | |
Balance Outstanding, December 31, 2012 | | | 792,000 | | $ | 0.15 | | | 7.6 | | $ | 99,992 | |
Granted | | | 568,000 | | | 0.32 | | | - | | | - | |
Exercised | | | - | | | - | | | - | | | - | |
Forfeited | | | - | | | - | | | - | | | - | |
Expired | | | - | | | - | | | - | | | - | |
Balance Outstanding, September 30, 2013 | | | 1,360,000 | | $ | 0.22 | | | 8.3 | | $ | 78,600 | |
Exercisable at September 30, 2013 | | | 385,200 | | $ | 0.15 | | | 7.3 | | $ | 49,200 | |
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As of September 30, 2013 there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $96,119 to be recognized through September 2017. |
The grant date weighted average for fair values of options granted in 2013 is $ 0.19 per option. |