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11. Stockholder's Equity
 6 Months Ended
Jun. 30, 2013
Equity [Abstract]  
Stockholder's Equity

Issuance of Common Stock for Cash

 

During the second quarter of 2013 the Company sold an aggregate of 725,000 of its unregistered common stock to existing stockholders and other parties for $680,192, net of offering costs. In connection with the sale 362,500 warrants to purchase shares of the Company’s common stock for $1.20 were issued. The warrants expire in one year and contained a provision that require the Company to make a cash payment to holders of the warrants equal to the Black-Scholes value of the remaining unexercised portion of the warrant in the event of a Fundamental Transaction.

 

Generally accepted accounting principles require the Company to account for the warrants as a derivative liability. At June 28, 2013, the closing date of the private placement, the Company recorded a derivative liability associated with the warrants of $108,750.

 

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option pricing model using the following assumptions:

 

Risk-free interest rate 0.15%
Expected dividend Yield None
Expected term 1 year
Expected volatility 75.4%

 

During the six months ended June 30, 2012, the Company sold an aggregate of 2,056,334 shares of unregistered common stock to existing stockholders and other parties for $4,711,842. In connection with the sales of the Company’s common stock, 1,028,167 warrants to purchase shares of the Company’s common stock at $2.50 per share, and 1,425,982 warrants at $3.50 per share, were issued. Expenses of $414,661 connected to the issuance of the unregistered shares were deducted from additional paid in capital.

 

Issuance of Common Stock for Services

 

At December 31, 2011, the Company declared, but did not issue, 95,835 shares of unregistered common stock to be paid to its directors for services, having a fair value of $230,004, based on the current stock price at the date declared. During the first six months of 2012, the company issued 149,500 shares of unregistered common stock with a fair market value of $358,800 to the Directors as compensation for past and future services. During the first six months of 2012, the Company awarded 39,406 of the remaining 53,665 shares of unregistered common stock to its directors for services, having a fair value of $151,191, based on the current stock price at the date awarded. 6,423 new shares with a fair value of $25,000 were issued to directors who were not board members at December 31, 2011. This expense is classified with general and administrative expense in the consolidated statement of operations.

 

Common Stock Warrants

 

The Company's Board of Directors has the authority to issue stock warrants for the purchase of preferred or unregistered common stock to directors and employees of the Company.

 

Transactions in common stock warrants are as follows:

 

   

Number of

Warrants

    

Exercise

Prices

  
                 
Balance, December 31, 2010     725,000     $ .20 - $.75  
Warrants exercised     (125,000 )   $ .30 - $.40  
Balance, December 31, 2011     600,000     $ .30 - $.60  
Warrants issued     1,734,667     $ 2.50 - $4.50  
Warrants exercised     (250,000 )   $ .30 - $2.50  
Warrants expired     (150,000 )   $ .30 - $.40  
Balance, December 31, 2012     1,934,667     $ .25 - $4.50  
Warrants issued     362,500     $ 1.20  
Balance, June 30, 2013     2,297,167     $ .25 - $4.50  

 

The above common stock warrants expire as follows:    
     
Year ended December 31:    
2013     412,500  
2014     1,157,750  
2015     476,917  
Thereafter     250,000  
      2,297,167