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Stockholders' Equity
 6 Months Ended
Jun. 30, 2016
Stockholders' Equity [Abstract]  
Stockholders' Equity
5. Stockholders’ Equity

 

On April 1, 2016, the Company entered into two agreements with two consultants to provide services over a nine month period in exchange for 2,300,000 shares of common stock. The Company valued the shares based on the market price on the agreement dates and for the three and six months ended June 30, 2016, the Company has recognized compensation expense of $230,000 in connection with these agreements.

 

Service-Based Stock Options

 

In May 2016, the Company issued 175,000 service-based options valued at $40,829 to two consultants at exercise prices of $0.20 per share. The options are fully vested and expire in 10 years. Accordingly, stock based compensation for the three and six months ended June 30, 2016 included $40,829 related to such options.

 

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

 

      Number of
Options		  
  Balance at December 31, 2015     11,025,273  
  Cancelled     (250,000 )
  Issued     175,000  
           
  Balance at June 30, 2016     10,950,273  

 

All outstanding options are exercisable and 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 at June 30, 2016 amounted to $747,294.

 

The significant assumptions used to determine the fair values of options issued, using a Black-Scholes option-pricing model are as follows:

 

  Significant assumptions :      
  Risk-free interest rate at grant date     1.88 %
  Expected stock price volatility     248.4 %
  Expected dividend payout     —  
  Expected option life-years     3  
  Weighted average grant date fair value   $ 0.24  
  Forfeiture rate     0 %

 

The following is a summary of outstanding service-based options at June 30, 2016:

 

  Exercise Price   Number of
Options		     Weighted Average Remaining Contractual Life  
                   
  $0.10     1,680,273       2 years  
  $0.20 - $0.25     8,120,000       6 years  
  $0.40     1,150,000       5 years  
  Total     10,950,273          

 

Performance-Based Stock Options

 

The Company had granted performance-based options to purchase 4,530,000 shares of common stock at exercise prices of $0.40 to $0.80. The options expire at various dates between 2021 and 2025 and are exercisable upon the Company achieving annual sales revenue of $5,000,000 and $10,000,000. The fair value of these performance-based options aggregated $135,567 to be expensed over the implicit service period commencing once management believes the performance criteria will be met.

 

Management believes the performance criteria for options exercisable upon the Company achieving annual sales revenue of $5,000,000, with a fair value amounting to $116,600, will be met during the year ended December 31, 2016. Accordingly, stock based compensation expense for the three and six months ended June 30, 2016 includes $38,867 and $77,733, respectively, related to such options. At June 30, 2016, the unearned compensation for all the performance based options is $57,834.

 

Stock based compensation expense amounted to $309,695 and $2,000 for the three month periods ended June 30, 2016 and 2015, respectively. Stock based compensation expense amounted to $348,562 and $4,000 for the six month periods ended June 30, 2016 and 2015, respectively. Such amounts are included in compensation and related expenses in the accompanying statement of operations.

 

Warrants

 

Warrants outstanding and exercisable amounted to 1,750,000 at December 31, 2015 and June 30, 2016. The weighted average exercise price of warrants outstanding at June 30, 2016 is $0.16. The warrants expire during November 2016 and December 2017.