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Stockholders' Equity
 9 Months Ended
Sep. 30, 2014
Stockholders' Equity [Abstract]  
Stockholders' Equity

6.        Stockholders’ Equity

 

In January 2014 the Company entered into an agreement to issue 100,000 shares of restricted common stock valued at $28,000 to a consultant and in September 2014 the Company issued 525,000 shares of restricted stock valued at $52,500 to four additional consultants.

  

Service-Based Stock Options

 

In September 2014 the Company issued 250,000 options, with an exercise price of $.20, to a director. The options are fully vested and expire in 10 years.

 

A summary of the outstanding service-based stock options are as follows:

 

    Number of Options  
       
Balance at December 31, 2013     9,885,000  
Granted     250,000  
         
Balance at September 30, 2014     10,135,000  

 

The following is a summary of outstanding service-based options at September 30, 2014:

 

Exercise Price    

Number of

Options

    

Weighted

Average

Remaining 
Contractual 
Life

  
               
$ 0.10       1,000,000       4 years  
$ 0.20 - $0.25       7,985,000       8 years  
$ 0.40       1,150,000       8 years  
  Total     10,135,000          

 

Performance-Based Stock Options

 

In August 2014, the Company issued 300,000 options with an exercise price of $0.20 to a consultant. The options are contingent upon the completion of a clinical study as defined. Management has valued these options at $8,000 and is amortizing them over the implicit service period of one year.

 

As of September 30, 2014 the Company had granted performance-based options to purchase 8,875,000 shares of common stock at exercise prices ranging from $0.20 to $5.00. The options expire at various dates between 2021 and 2024 and are exercisable upon the Company achieving annual sales revenue ranging from $2,000,000 and $100,000,000. The fair value of these performance-based options aggregated $330,000 and will be expensed over the implicit service period commencing once management believes the performance criteria will be met. Accordingly, at September 30, 2014, the unearned compensation for performance based options is $330,000.

 

Stock based compensation expense amounted to $6,500 and $0 for the three months ended September 30, 2014 and 2013, respectively. Stock based compensation expense amounted to $10,000 and $52,500 for the nine months ended September 30, 2014 and 2013, respectively. Such amounts are included in compensation and related expenses in the accompanying statement of operations

 

Options exercisable at September 30, 2014 amounted to 10,135,000. All outstanding options have a cashless exercise provision. Certain options include accelerated vesting provisions and modifications, as defined, if the Company is sold or acquired. The intrinsic value of options outstanding and exercisable at September 30, 2014 amounted to approximately $30,000.

 

The fair value of options granted during the nine months ended September 30, 2014, was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

Expected volatility     50 %
Risk free interest rate     2 %
Expected dividend yield     -  
Expected option term (in years)     5  
Weighted average grant date fair value   $ 0.01 - $0.03  

 

Warrants

 

The following is a summary of outstanding and exercisable warrants:

 

    Number of Shares     Weighted Average Exercise Price     Year
of 
Expiration		  
                   
Balance at December 31, 2013     3,887,720       0.29       2014 - 2016  
Expired     (15,000 )     0.40       2014  
                         
Balance at September 30, 2014     3,872,720       0.29       2014 - 2016