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4. STOCKHOLDERS' EQUITY
 3 Months Ended
Mar. 31, 2014
Equity [Abstract]  
STOCKHOLDERS' EQUITY

NOTE 4 - STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

There are currently 5,000,000 shares of Preferred Stock authorized, with no shares of Series A Preferred Stock currently issued or outstanding.

 

Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 75,000 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution.  Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate.  There are currently no Series B Shares issued or outstanding.

 

On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00.  The Series C Preferred Stock is entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018. The Series C Preferred Stock is senior to the Company’s common stock and any other currently issued series of the Company’s preferred stock upon liquidation, and is entitled to a liquidation preference per share equal to the original issuance price of such shares of Series C Preferred Stock together with the amount of all accrued but unpaid dividends thereon.  Each of the Series C Shares is convertible at the option of the holder into 1,000 shares of common stock as provided in the Certificate.  Additionally, each holder of Series C Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s Series C shares could then be converted. As of March 31, 2014 there are 67,833 shares of Series C Preferred Stock issued and outstanding.

 

On November 13, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series D Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 25,000 shares of Series D Preferred Stock.  Shares of Series D Preferred Stock are not entitled to any preference with respect to dividend or upon liquidation, and will automatically convert (at a ratio of 1,000-to-1) into shares of the Company’s common stock, par value $0.001 upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of March 31, 2014 there are 15,350 shares of Series D Preferred Stock issued and outstanding.

 

In February of 2014, the Company issued 350 shares of Series D preferred stock to a nonemployee for services rendered. The shares vest immediately and were recorded at their fair value of $42,000 during the three months ended March 31, 2014. In addition, during the three months ended March 31, 2014, the Company recognized additional expense of $32,234 related to the amortization of Series D preferred stock awards to an employee and a nonemployee granted in 2013.

 

During the three months ended March 31, 2014, the Company issued an aggregate of 29,601 shares of Series C preferred stock for cash proceeds of $2,072,010.

 

The Series C preferred stock earned dividends of $50,117 during the three months ended March 31, 2014. As of March 31, 2014, no Series C preferred stock dividends have been declared or paid.

 

Common Stock

 

In January of 2014, the Company issued 1,087,762 common shares for the conversion of notes payable and accrued interest in the amounts of $90,000 and $3,729, respectively.

 

During the three months ended March 31, 2014, the Company issued 500,000 shares of common stock valued at $84,000 to company directors and 300,000 shares of common stock for services valued at $35,500.

 

During the three months ended March 31, 2014, the company granted an aggregate of 1,000,000 shares of stock to two employees according to the terms of their employment agreements.  The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $120,000. During the three months ended March 31, 2014, $9,943 was expensed and $110,057 remains to be expensed over the remaining vesting period. The common shares were not yet issued as of March 31, 2014.

 

Warrants

 

A summary of the status of the warrants granted for the three months ended March 31, 2014, and changes during the period then ended is presented below:

 

For the Three Months Ended March 31, 2014  
    Shares     Weighted Average Exercise Price  
Outstanding at beginning of period     15,670,143     $ 0.37  
  Granted     -       -  
  Exercised     -       -  
  Forfeited     -       -  
  Expired     3,473,300       0.75  
Outstanding at end of period     12,196,843     $ 0.26  

 

      As of March 31, 2014     As of March 31, 2014  
      Warrants Outstanding     Warrants Exercisable  
Range of Exercise Prices     Number Outstanding     Weighted-Average Remaining Contract Life     Weighted- Average Exercise Price     Number Exercisable     Weighted-Average Exercise Price  
$ 0.06       4,500,000       4.5     $ 0.06       4,500,000     $ 0.06  
  0.08       550,000       3.9       0.08       550,000       0.08  
  0.09       625,000       4.0       0.09       625,000       0.09  
  0.15       1,571,300       3.4       0.15       1,571,300       0.15  
  0.25       120,000       1.6       0.25       120,000       0.25  
  0.40       1,299,999       0.5       0.40       1,299,999       0.40  
  0.44       1,515,544       2.4       0.44       1,515,544       0.44  
  0.50       500,000       1.5       0.50       500,000       0.50  
  0.60       975,000       2.5       0.60       975,000       0.60  
  0.75       120,000       1.6       0.75       120,000       0.75  
  1.00       420,000       1.5       1.00       420,000       1.00  
$ 0.06-1.00       12,196,843       3.2     $ 0.26       12,196,843     $ 0.26  

 

The aggregate intrinsic value of the exercisable warrants as of March 31, 2014 was $285,125.

 

Stock Options

 

A summary of the status of the stock options granted for the nine months ended March 31, 2014, and changes during the period then ended is presented below:

 

For the Nine Months Ended March 31, 2014  
    Options     Weighted Average Exercise Price  
Outstanding at beginning of period     3,943,500     $ 0.15  
  Granted     -       -  
  Exercised     -       -  
  Forfeited     -       -  
  Expired     -       -  
Outstanding at end of period     3,943,500     $ 0.15  

 

      As of March 31, 2014     As of March 31, 2014  
      Stock Options Outstanding     Stock Options Exercisable  
Exercise Price     Number Outstanding     Weighted-Average Remaining Contract Life     Weighted- Average Exercise Price     Number Exercisable     Weighted-Average Exercise Price  
$ 0.15       3,943,500       3.39       0.15       3,826,833     $ 0.15  
                                             

 

The aggregate intrinsic value of the exercisable options as of March 31, 2014 was $0.