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Stockholders' Equity
 12 Months Ended
Dec. 31, 2014
Stockholders' Equity [Abstract]  
Stockholders' Equity
7. Stockholders’ Equity

 

In January 2014 the Company issued 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.

 

During 2014, the Company extended the expiration date of 500,000 options and 1,500,000 warrants one year from 2014 to 2015 and issued an additional 450,000 service-based and 300,000 performance-based options as discussed below. As a result of these transactions, and the amortization of options granted in 2012 through 2014, the Company recorded a charge to stock-based compensation expense of $45,000 during the year ended December 31, 2014.

During 2013, the Company raised $125,000 in a common stock offering at $0.25 per share. Each two shares of common stock issued included a three-year warrant for one share exercisable at $0.40. The Company raised an additional $50,000 through the exercise of 500,000 options. The Company issued 195,000 common shares for services valued at $48,750.

 

During 2013, the Company extended the expiration date of 500,000 options and 1,500,000 warrants one year from 2013 to 2014 and issued an additional 575,000 options as discussed below. As a result of these transactions, and the amortization of options granted in 2012, the Company recorded a charge to stock-based compensation expense of $102,000 and interest expense of $3,000 during the year ended December 31, 2013.

 

Service-Based Stock Options

 

In September 2014 the Company issued 450,000 service-based options to a director and a consultant at exercise prices of $.20 per share. The options are fully vested and expire in 10 years.

 

During 2013 the Company issued 525,000 service-based options to three consultants at exercise prices between $0.20 and $0.40 per share. All of these options vested fully during 2013 and expire in 10 years. Additionally, during October 2013 the Company issued 50,000 options with an exercise price of $0.25 in conjunction with short term financing. These options are fully vested and expire in 3 years.

 

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

 

      Number of Options  
           
  Balance at December 31, 2012     9,955,000  
  Granted     575,000  
  Exercised     (500,000 )
  Expired     (145,000 )
           
  Balance at December 31, 2013     9,885,000  
  Granted     450,000  
           
  Balance at December 31, 2014     10,335,000  

 

Options exercisable at December 31, 2014 and 2013 amounted to 10,335,000 and 9,835,000, respectively.

 

All outstanding options have a cashless exercise provision, and certain options provide for accelerated vesting provisions and modifications, as defined, if the Company is sold or acquired.

 

The intrinsic value of options outstanding and exercisable amounted to $0 and $448,350 at December 31, 2014 and December 31, 2013, respectively. The intrinsic value of options exercised in 2013 amounted to $100,000

 

The following is a summary of outstanding service-based options at December 31, 2014:

 

  Exercise Price   Number of
Options		     Weighted
Average
Remaining
Contractual
Life
               
  $0.10   1,000,000     3 years
  $0.20 - $0.25     8,185,000     7 years
  $0.40     1,150,000     7 years
  Total   10,335,000      

 

The fair value of the 450,000 service-based options granted in 2014 amounted to $17,500 which has been expensed during the year. All options granted during 2014 are fully vested. The fair value of the 575,000 service-based options granted in 2013 amounted to $44,000 which has been expensed during the year. All the other service-based options issued through December 31, 2014 are fully vested.

 

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. At December 31, 2014, $2,000 had been amortized and the balance of $6,000 remained to be amortized during the year ending December 31, 2015.

 

As of December 31, 2014 in addition to the 300,000 above, the Company had granted performance-based options to purchase 9,375,000 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 $340,000 and will be expensed over the implicit service period commencing once management believes the performance criteria will be met. Accordingly, at December 31, 2014, the unearned compensation for performance based options is $340,000.

 

Stock based compensation expense amounted to $125,500 and $153,750 for the years ended December 31, 2014 and 2013, respectively. Such amounts are included in compensation and related expenses ($125,500 in 2014 and $150,750 in 2013) and interest expense ($3,000 in 2013) in the accompanying statement of operations.

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, 2012     3,637,720       0.28       2013 - 2015  
  Granted     250,000       0.40       2016  
                           
  Balance at December 31, 2013     3,887,720       0.29       2014 - 2016  
  Expired     (115,000 )     0.40       2014  
                           
  Balance at December 31, 2014     3,772,720       0.29       2015 - 2016  

 

In connection with the issuance of common stock in 2013 the Company granted warrants to acquire 250,000 shares of common stock at $0.40 per share. Theses warrants are immediately exercisable and expire in 2016

 

The fair value of options and warrants granted (or extended) during the years ended December 31, 2014 and 2013, was estimated on the date of grant (or extension) using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

      2014     2013  
               
  Expected volatility     50 %     50 %
  Risk free interest rate     2 %     2 %
  Expected dividend yield     -       -  
  Expected option term (in years)     1 - 5       1 - 5  
  Weighted average grant date fair value   $ 0.02     $ 0.08