SHAREHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2014 |
Stockholders' Equity Note [Abstract] | ' |
SHAREHOLDERS' EQUITY | ' |
NOTE 7 - SHAREHOLDERS’ EQUITY |
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Preferred Stock |
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Series A |
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Simultaneous with the Shea Exchange Agreement, Wits Basin exchanged 19,713,544 shares of our common stock it held for 10,000,000 shares ($.001 par value each) of “Series A Preferred Stock” with an original issue price of $1.00 per share. |
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Attributes of Series A Preferred Stock can be found in the Form 10-K for the year ended December 31, 2013 filed with the Commission on April 11, 2014 and in the Company’s filings with the Secretary of State of Colorado. |
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Series B |
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There are no shares of Series B Preferred Stock issued and outstanding. |
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Attributes of Series B Preferred Stock can be found in the Form 10-K for the year ended December 31, 2013 filed with the Commission on April 11, 2014 and in the Company’s filings with the Secretary of State of Nevada. |
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Common Stock Issuances |
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For services |
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On June 18, 2014, the Company issued 1,000,000 restricted common shares to a service provider. These shares were valued at fair value of $1.67 per share and have been charged as stock compensation to general and administrative expense. |
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On June 18, 2014, the Company issued 250,000 restricted common shares to the President of our subsidiary Tonopah Custom Processing, Inc. These shares were valued at fair value of $1.67 per share and have been charged as stock compensation to general and administrative expense. |
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On June 18, 2014, the Company issued 1,500,000 restricted common shares to an officer of the Company. These shares were valued at fair value of $1.67 per share and have been charged as stock compensation to general and administrative expense. |
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Conversion of Unsecured Note |
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A holder of a convertible promissory note dated January 26, 2011 converted the entirety of the note consisting of $100,000 of principal and $18,559 of interest on February 28, 2014 into 237,118 shares of the Company’s common stock. |
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Debt Settlements |
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On January 17, 2014, the Company entered into a Debt Settlement Agreement with a debt holder wherein a $193,910 debt was settled for 387,820 shares of restricted common stock. An additional $80,000 of debt was extinguished. |
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On January 17, 2014, the Company entered into a Debt Settlement Agreement with a debt holder wherein a $125,000 debt was settled for 250,000 shares of restricted common stock. |
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On January 17, 2014, the Company settled a $225,000 debt by converting the entire debt into 800,000 shares of restricted common stock of the Company. Pursuant to a Debt Settlement Agreement previously executed on April 3, 2013 the debt was converted at a per share price of $0.28125. |
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On February 13, 2014, the Company entered into a Agreement with a debt holder wherein a $458,250 of Accrued Expenses was settled for 300,000 shares of restricted common stock and $21,750 was charged as loss on settlement of debt to general and administrative expense. |
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On March 4, 2014, the Company entered into a Debt Settlement Agreement with a debt holder wherein a $100,000 debt was settled for 200,000 shares of restricted common stock. |
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On April 22, 2014, the Company entered into a Debt Settlement Agreement with a debt holder wherein a $100,000 debt was settled for 112,360 shares of restricted common stock. |
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On June 10, 2014, the Company issued 50,000 unregistered shares of common stock to a former consultant for the settlement of consulting fees. |
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The Company recorded $959,020 and $21,033 related to non-cash loss on settlement of debt for the six months ended June 30, 2014 and 2013, respectively. |
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Stock Warrants |
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The following table summarizes information about the Company’s stock warrants outstanding: |
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| | | Number | | Weighted | | Range | | Weighted | |
Average | of | Remaining |
Exercise | Exercise | Contractual |
Price | Price | Life |
Outstanding at December 31, 2013 | | | 13,989,206 | | $ | 0.67 | | $ | 0.20 - 1.00 | | | |
| | | | | | | | | | | | |
Granted | | | — | | $ | — | | $ | — | | | |
Cancelled or expired | | | — | | | — | | | — | | | |
Exercised | | | -3,997,867 | | $ | 0.46 | | $ | 0.25 – 1.00 | | | |
Warrants outstanding at June 30, 2014 | | | 9,991,339 | | $ | 0.76 | | $ | 0.20 – 1.00 | | 3.5 years | |
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Warrants exercisable at June 30, 2014 | | | 9,991,339 | | $ | 0.76 | | $ | 0.20 – 1.00 | | | |
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During the six months ended June 30, 2014, a total of 3,997,867 warrants to purchase common stock were exercised: 1,730,867 warrants were exercised at a price of $0.25 per share; 400,000 warrants exercised at $0.50 per share; 1,667,000 warrants exercised at $0.60 per share and 200,000 at $1.00 per share for an aggregate total of $1,832,917. |
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Stock Option Grants |
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2010 Plan |
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We had one stock option plan: the 2010 Stock Incentive Plan, as amended (the “2010 Plan”). Stock options, stock appreciation rights, restricted stock and other stock and cash awards may be granted under the 2010 Plan. In general, options vest over a period ranging from immediate vesting to five years and expire 10 years from the date of grant. Effective January 21, 2011, the Company’s Board of Directors (the “Board”) authorized an amendment to the 2010 Stock Incentive Plan, to increase the number of options available for granting under the 2010 Plan from 3,000,000 to 13,500,000 and authorized the Company to file an S-8 Registration Statement with the U.S. Securities and Exchange Commission (subsequently filed on January 27, 2011, File No. 333-171906) for the registration of the shares available in the 2010 Plan. On March 15, 2011, with the closing of the Shea Exchange Agreement a “change of control” event was deemed to have occurred and 13,500,000 previously granted stock options vested in full. Effective July 25, 2011, the 2010 Plan was amended to increase the total shares of stock which may be issued under the Plan from 13,500,000 to 14,500,000. As of December 31, 2012, an aggregate of 6,200,000 shares of our common stock are available to be granted under our 2010 Plan. |
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During 2012, we granted the following stock options: |
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| -1 | In February 2012, the Company received from Manfred E. Birnbaum a notice of resignation from the Company’s Board of Directors (the “Board”). Effective with Mr. Birnbaum’s resignation, the Board approved a five-year option to purchase 100,000 shares of the Company’s common stock (valued at $43,000) at an exercise price of $0.47 per share, which was the closing price of the Company’s common stock on February 10, 2012, for his continued service as a consultant. The option is subject to the terms of the 2010 Plan and vested immediately. Furthermore, the Board authorized an additional five years to exercise his currently issued 900,000 stock options. The Company charged $222,000 to expense in 2012, as a result of these modifications. Of these options, 400,000 are available for exercise as of December 31, 2013 and 0 as of the date of this filing. | | | | | | | | | | |
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The Company has been receiving files from former officers and attorneys. Upon review of the files, the original 2010 Plan and Board Resolution were located. The 2010 Plan approved by the Board of Directors on March 22, 2010 authorized 3,000,000 shares of common stock for issuance under the 2010 Plan. The Board of Directors voted to increase the number of shares available under the 2010 Plan on January 21, 2011. Section 9.11 of the 2010 Plan as approved by the Board states: |
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9.11 Amendment of the Plan. The Board of Directors may amend or discontinue the Plan at any time. However, no such amendment or discontinuance shall adversely change or impair, without the consent of the recipient, an Incentive previously granted. Further, no such amendment shall, without approval of the stockholders of the Company, (a) increase the maximum number of shares of Common Stock which may be issued to all participants under the Plan, (b) change or expand the types of Incentives that may be granted under the Plan, (c) change the class of persons eligible to receive Incentives under the Plan, or (d) materially increase the benefits accruing to participants under the Plan. |
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Pursuant to the terms of the 2010 Plan, the stockholders of the Company must approve this increase. As the stockholders of the Company did not approve the increase of shares available under the 2010 Plan, the increase on January 21, 2011 was not effective. |
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As of January 21, 2011 the Company had issued a total of 2,800,000 options to purchase shares under the 2010 Plan and had 200,000 shares remaining authorized and unissued. However, also on January 21, 2011, the Board of Directors authorized the issuance of 10,500,000 options. This issuance far exceeded the number of shares available and the excess issuances were not valid. As a correction measure, the Company has divided the 200,000 shares that were available pro-rata between the persons named in the resolution. |
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As a result of this correction there are a total of 1,631,842 options granted and available for exercise under the 2010 Plan outstanding as of the date of this filing. |
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The Board of Directors terminated the 2010 option plan on August 23, 2013. |
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Options issued in 2013 |
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The following options were issued in 2013 outside of any option plan: |
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The Company executed an Employment Agreement with Sharon Ullman dated effective November 13, 2013. As compensation for her employment as the Chief Executive Officer of the Company, Ms. Ullman was granted a total of 4,500,000 options to purchase common stock of the Company at an exercise price of $0.38 per share, with a grant term of 7 years. A total of 1,500,000 options vest upon each of the following: (i) November 13, 2013; (ii) June 1, 2014; and (iii) June 1, 2015. |
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The Company executed an Employment Agreement with Jim Stieben dated effective October 15, 2013. Pursuant to the agreement, Mr. Stieben was appointed the President and Director of Operations of Tonopah Custom Processing, Inc. As compensation for his services, Mr. Stieben was granted a total of 1,500,000 options to purchase common stock of the Company at an exercise price of $0.60 per share, with a grant term of 7 years. A total of 750,000 options vested on October 15, 2013, and 375,000 options will vest upon each of the following: (i) the completed construction of a permitted processing building on the Miller’s Mill site; and (ii) the Company achieving profitability. |
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2014 Option Plan |
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By Board Resolution effective January 27, 2014, the Company adopted a 2014 Stock Incentive Plan (the “Plan”) to compensate employees and consulting groups in their efforts to enhance the long-term shareholder value of the Company. Pursuant to the Plan, selected persons are offered opportunities to participate in the Company’s growth and success and are encouraged to acquire and maintain stock ownership in the Company. The Plan grants options to purchase shares of our common stock vesting at dates beginning on the date of grant and issuable at chronological or performance increments. The Plan Administrator may also grandfather in existing options granted during 2013. The Company intends to submit the approval of the 2014 Plan to the shareholders for approval at the 2014 annual meeting. |
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Under administration by the Compensation Committee (the “Plan Administrator”), a maximum of 75,000,000 shares of common stock are available for issuance under the Plan, subject to adjustment from time to time. Awards may be granted under the Plan to officers, directors, employees and consultants of the Company and as the Plan Administrator selects. The Plan Administrator is authorized, in its sole discretion, to issue options as incentive stock options, which shall be appropriately designated. The term of each option to purchase common stock of the Company is established by the Plan Administrator or, if not so established, is 10 years from the grant date. |
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The Plan Administrator establishes the time at which each option shall vest and become exercisable. If not established in the instrument evidencing the option, the option shall vest and become exercisable according to the following schedule: (i) after one year of the participant’s continuous employment or service with the company or its related corporations, one quarter of the total options will be vested and exercisable; (ii) after each additional six-month period of continuous service completed thereafter, an additional one eighth of the total options will be vested and exercisable; and (iii) after four years, 100% of the options will be vested and exercisable. Under the terms of the Plan, the exercise price for shares shall be paid in cash or check to the Company unless the Plan Administrator determines otherwise. |
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The Plan Administrator shall determine whether the options will continue to be exercisable, and the terms and conditions of such exercise, if a participant ceases to be employed or provide services to the Company. If not so established in the instrument evidencing such options, any portion of an option that is not vested and exercisable on the date of termination of the participant’s employment or service relationship (the “Employment Termination Date”) shall expire on such date. Any portion of an option that is vested and exercisable on the Employment Termination Date shall expire upon the earliest to occur of: (i) if the participant’s Employment Termination Date occurs by reason of retirement, disability or death, the one-year anniversary of such Employment Termination Date; (ii) if the participant’s Employment Termination Date occurs for reasons other than cause, retirement, disability or death, the three-month anniversary of such Employment Termination Date; or (iii) the last day of the option term. Notwithstanding the foregoing, if the participant dies after the Employment Termination Date while the Option is otherwise exercisable, the portion of the option that is vested and exercisable on such Employment Termination Date shall expire upon the earlier to occur of: (i) the last day of the option term; or (ii) the first anniversary of the date of death, unless the Plan Administrator determines otherwise. |
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If a participant is terminated for cause, the options shall automatically expire at the time the Company first notifies the participant of the termination. If a participant’s employment is suspended pending investigation of whether they will be terminated for cause, the participant’s rights under any option shall be suspended during the period of investigation. Awards granted under the Plan may not be assigned, except, to the extent permitted by Section 422 of the Internal Revenue Code (the “IRC”), and the Plan Administrator may permit such assignment, transfer and exercisability, and may permit a participant to designate a beneficiary who may exercise the award or receive compensation under the award after the participant’s death. Any award permitted to be assigned shall be subject to the terms and conditions contained in the instrument evidencing the award. |
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The Plan may only be amended by the Company’s Board of Directors, as it deems advisable. Shareholder approval shall be required for any amendment to the extent required for compliance with Section 422 of the IRC, as amended or any applicable law or regulation. The Board may suspend or terminate the Plan at any time. Incentive stock options may not be granted more than 10 years after the later of the Plan’s adoption by the Board or the adoption by the Board of any amendment to the Plan that constitutes adoption of a new plan for the purpose of Section 422 of the IRC. Participants who are residents of California shall be subject to additional terms and conditions until the Common Stock becomes a publicly traded security, under the California Securities Code. |
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We grandfathered the following options issued to consultants during the 4th quarter of 2013 in to the 2014 Plan: |
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The Company entered into a Strategic Advisory Services Agreement with P5, LLC (“P5”) dated effective October 15, 2013, to provide strategic advisory services. As consideration for such services, the Company granted P5 an aggregate total of 17,500,000 options to purchase common stock of the Company, with 7,500,000 shares available for purchase at an exercise price of $0.65 per share and 10,000,000 shares available for purchase at an exercise price of $1.25 per share, with a grant term of seven years and subject to a vesting schedule. With respect to the options to purchase up to 7,500,000 shares at $0.65 per share, 2,500,000 options vest upon each of the following: (i) October 15, 2013 (the “P5 Grant Date”); (ii) 90 days after the P5 Grant Date; and (iii) 180 days after the P5 Grant Date. With respect to the options to purchase up to 10,000,000 shares at an exercise price of $1.25 per share, 2,500,000 options vest upon each of the following: April 1, 2014, July 1, 2014, October 1, 2014 and January 1, 2015. |
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The Company entered into a Strategic Advisory Services Agreement with a consultant dated effective October 15, 2013. As consideration for the consultant’s assistance in expanding the Company’s operations and securing new business arrangements, the Company granted the consultant an aggregate of 3,500,000 options to purchase common stock of the Company, with 1,500,000 shares available for purchase at an exercise price of $0.65 per share and 2,000,000 shares available for purchase at an exercise price of $1.25 per share, with a grant term of seven years and subject to a vesting schedule. With respect to the options to purchase up to 1,500,000 shares at $0.65 per share, 500,000 options vest upon each of the following: (i) October 15, 2013 (the “Consultant Grant Date”); (ii) 90 days after the Consultant Grant Date; and (iii) 180 days after the Consultant Grant Date. With respect to the options to purchase up to 2,000,000 shares at an exercise price of $1.25 per share, 500,000 options vest upon each of the following: April 1, 2014, July 1, 2014, October 1, 2014 and January 1, 2015. |
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On December 26, 2013, the Company entered into a Consulting Services Agreement with LR Advisors, LLC (“LRA”). Pursuant to the terms of the agreement, LRA agreed to provide the Company advisory services in connection with the Company’s investor relations. As compensation for such services, LRA was granted a total of 1,500,000 options to purchase common stock of the Company at an exercise price of $1.25 per share, with a grant term of seven years. The options vested in full upon execution of the agreement. |
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The Company entered into a Consulting Agreement with EAS Advisors, LLC (“EAS”) on January 1, 2014, whereby EAS agreed to provide the Company general corporate advice, guidance and strategic services relating to the Company’s milling assets and the development of mining clients and contacts. As consideration for such services, the Company granted EAS an aggregate of 2,000,000 options to purchase common stock of the Company, with 1,000,000 shares available for purchase at an exercise price of $1.25 per share and 1,000,000 shares available for purchase at an exercise price of $2.25 per share, with a grant term of seven years and subject to a vesting schedule. With respect to the options to purchase up to 1,000,000 shares at $1.25 per share, 250,000 options vest upon each of the following: (i) January 1, 2014 (the “EAS Grant Date”); (ii) 90 days after the EAS Grant Date; (iii) 180 days after the EAS Grant Date; and (iv) 270 days after the EAS Grant Date. With respect to the options to purchase up to 1,000,000 shares at an exercise price of $2.25 per share, 250,000 options vest upon each of the following: July 1, 2014, October 1, 2014, November 1, 2014 and December 1, 2014. The Company estimated the fair value of these options of $1,398,584 using the above Black-Scholes pricing model and will amortize over the vesting term. |
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On June 18, 2014, the Company granted 250,000 options to purchase common stock of the Company at an exercise price of $1.67 per share with a grant term of seven years to a legal advisor. The options vest in full on grant. |
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On June 18, 2014, the Company granted 750,000 options to purchase common stock of the Company at an exercise price of $1.67 per share with a grant term of seven years to the President of our Tonopah Custom Processing, Inc. subsidiary. The options vest in full on grant. |
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On June 18, 2014, the Company granted 1,000,000 options to purchase common stock of the Company at an exercise price of $1.67 per share with a grant term of seven years to an officer of the Company. The options vest in full on grant. |
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The Company uses the Black-Scholes pricing model as a method for determining the estimated fair value for stock awards. Compensation expense for stock awards is recognized on a straight-line basis over the vesting period of service awards and for performance based awards, the Company recognizes the expense when the performance condition is probable of being met. |
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In determining the compensation cost of the stock awards granted during fiscal 2014, the fair value of each grant had been estimated on the date of grant using the Black-Scholes pricing model and the weighted average assumptions used in these calculations are summarized below: |
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| | June 30, | | | | |
| | 2014 | | | 2013 | | | | |
Risk-free interest rate | | | 2.21% to 2.41 | % | | | | — | | | | |
Expected volatility factor | | | 75 | % | | | | — | | | | |
Expected dividend | | | — | | | | | — | | | | |
Expected option term | | | 7 years | | | | | — | | | | |
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The Company reviews its current assumptions on a periodic basis and adjusts them as necessary to ensure an accurate valuation. The risk-free interest rate is based on the Federal Reserve Board’s constant maturities of the U.S. Treasury bond obligations with terms comparable to the expected life of the options at their issuance date. The Company uses historical data to estimate expected forfeitures, expected dividend yield, expected volatility of the Company’s stock and the expected life of the options. |
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The Company recorded $6,267,724 and $0 related to non-cash compensation expense for the six months ended June 30, 2014 and 2013, respectively. All compensation expense is included in general and administrative expense. There was no tax benefit from recording this non-cash expense due to our income tax valuation allowance and due to a portion of the options being incentive stock options. The compensation expense had a $0.07 and $0.00 per share impact on the loss per share for the six-month period ended June 30, 2014 and 2013, respectively. As of June 30, 2014, there was $2,685,555 in unrecognized compensation expense. |
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The following tables summarize information about the Company’s stock options: |
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| | | Number of | | Weighted | | | | | | |
Options | Average | | | | | |
| Exercise | | | | | |
| Price | | | | | |
Options outstanding - December 31, 2012 | | | 10,438,335 | | $ | 0.64 | | | | | | |
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Granted | | | 28,500,000 | | | 0.89 | | | | | | |
Canceled or expired | | | -6,187,493 | | | 0.56 | | | | | | |
Exercised | | | — | | | — | | | | | | |
Options outstanding - December 31, 2013 | | | 32,750,842 | | $ | 0.88 | | | | | | |
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Granted | | | 4,000,000 | | | 1.71 | | | | | | |
Canceled or expired | | | — | | | — | | | | | | |
Exercised | | | — | | | — | | | | | | |
Options outstanding – June 30, 2014 | | | 36,750,842 | | $ | 0.97 | | | | | | |
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Weighted average fair value of options granted during the period ended June 30, 2014 | | | | | $ | 1.17 | | | | | | |
Weighted average fair value of options granted during the period ended June 30, 2013 | | | | | $ | 0 | | | | | | |
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A summary of the Company’s non-vested options at June 30, 2014, and changes during the period ended June 30, 2014, is presented below: |
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| | | Options | | Weighted | | | | | | |
Average | | | | | |
Grant Date | | | | | |
Fair Value | | | | | |
Non-vested, beginning of period | | | 21,750,000 | | $ | 0.24 | | | | | | |
Granted | | | 4,000,000 | | $ | 0.94 | | | | | | |
Vested | | | -16,142,859 | | $ | 0.27 | | | | | | |
Forfeited | | | — | | $ | — | | | | | | |
Non-vested, end of period | | | 9,607,141 | | $ | 0.27 | | | | | | |
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The following tables summarize information about stock options outstanding and exercisable at June 30, 2014: |
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| | | Options Outstanding at June 30, 2014 | |
Range of | | | Number | | Weighted | | Weighted | | Aggregate | |
Exercise Prices | Outstanding | Remaining | Average | Intrinsic |
| | Contractual | Exercise | Value(1) |
| | Life | Price | |
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$0.40 to $0.60 | | | 7,361,842 | | 5.6 years | | $ | 0.47 | | $ | 10,917,352 | |
$0.61 to $1.00 | | | 10,600,000 | | 5.8 years | | $ | 0.69 | | $ | 13,380,000 | |
$1.01 to $1.50 | | | 15,789,000 | | 5.9 years | | $ | 1.23 | | $ | 11,374,550 | |
$1.51 to $2.25 | | | 3,000,000 | | 6.8 years | | $ | 1.86 | | $ | 560,000 | |
$0.40 to $2.25 | | | 36,750,842 | | 5.9 years | | $ | 0.97 | | $ | 36,231,902 | |
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| | | Options Exercisable at June 30, 2014 | |
Range of | | | Number | | Weighted | | Weighted | | Aggregate | |
Exercise Prices | Exercisable | Remaining | Average | Intrinsic |
| | Contractual | Exercise | Value(1) |
| | Life | Price | |
| | | | | | | | | | | | |
$0.40 to $0.60 | | | 5,611,843 | | 5.3 years | | $ | 0.47 | | $ | 7,579,852 | |
$0.61 to $1.00 | | | 10,600,000 | | 5.8 years | | $ | 0.69 | | $ | 13,380,000 | |
$1.00 to $1.50 | | | 8,431,859 | | 5.2 years | | $ | 1.2 | | $ | 4,899,550 | |
$1.50 to $2.25 | | | 2,499,999 | | 7.0 years | | $ | 1.67 | | $ | 560,000 | |
$0.40 to $2.25 | | | 27,143,701 | | 5.6 years | | $ | 0.86 | | $ | 26,419,402 | |
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(1) The aggregate intrinsic value in the table represents the difference between the closing stock price on June 30, 2014 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their options on June 30, 2014. No options were exercised during the quarter ended June 30, 2014. |
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