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4. STOCKHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2015
Equity [Abstract]  
STOCKHOLDERS' EQUITY

Preferred Stock

 

There are currently 5,000,000 shares of Series A 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 7,500 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 September 30, 2015 and December 31, 2014, there were 77,192 and 70,411 shares of Series C Preferred Stock issued and outstanding, respectively.

 

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 September 30, 2015 and December 31, 2014, there are no shares of Series D Preferred Stock issued and outstanding.

 

On May 30, 2014, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series E Convertible Preferred Stock (The “Certificate of Designations”), under which it designated 5,000 shares of Series E Preferred Stock.  Shares of Series E Preferred Stock are not entitled to any preference with respect to dividends or upon liquidation, and will automatically convert (at a ratio of 1,000 shares of Common Stock for every one share of Series E Preferred Stock) into shares of the Company’s common stock, $0.001 par value 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 September 30, 2015 and December 31, 2014, there are no shares of Series E Preferred Stock issued and outstanding.

 

During the nine months ended September 30, 2015, the company issued 7,738 shares of Series C preferred stock for cash proceeds of $500,000.

 

The Series C preferred stock earned dividends of $71,181 and $198,843 for the three and nine months ended September 30, 2015, respectively. As of September 30, 2015, no Series C preferred stock dividends have been declared.

 

Common Stock

 

On September 3, 2014, the Company held its annual meeting of stockholders.  The stockholders approved an amendment to the Company’s Articles of Incorporation to increase the authorized shares of common stock of the Company from 100,000,000 to 250,000,000.

 

On March 5, 2015, the Company granted 100,000 shares of common stock which vested immediately valued at $5,970 according to the terms of a service agreement. Under the award, the nonemployee was also granted an aggregate of 800,000 additional shares which vest in tranches of 300,000, 250,000 and 250,000 upon the achievement of certain revenue targets. No expense was recognized for these additional shares during the nine months ended September 30, 2015.

 

On March 10, 2015, the Company issued 374,264 shares of common stock in conversion of 357 shares of Series C Preferred stock and $1,036 of related dividends.

 

On May 19, 2015, the Company granted 100,000 shares of common stock which vested immediately valued at $10,000 according to the terms of a service agreement.

 

On May 19, 2015, the Company awarded 250,000 shares of common stock which vested immediately valued at $23,000 according to the terms of an employment agreement.

 

On June 19, 2015, the Company issued 642,330 shares of common stock in conversion of 600 shares of Series C Preferred stock and $2,963 of related Series C dividends.

 

On July 15, 2015, the Company issued 100,000 shares of common stock which vested 60 days after their grant date of May 15, 2015 valued at $9,800 according to the terms of a service agreement.

 

During nine months ended September 30, 2015, the Company recorded an aggregate reversal of $10,456 of stock-based compensation related to the amortization of stock awards to employees and nonemployees net of reversal of the unvested portion of forfeited awards. During the nine months ended September 30, 2015, the Company issued an aggregate of 333,334 shares of fully vested common stock under previously granted stock awards.

 

Warrants

 

A summary of the status of the warrants granted for the nine months ended September 30, 2015, and changes during the period then ended is presented below:

 

For the Nine Months Ended September 30, 2015  
    Shares     Weighted Average Exercise Price  
Outstanding at beginning of period     10,936,844     $ 0.23  
  Granted     -       -  
  Exercised     -       -  
  Forfeited     500,000       0.75  
  Expired     300,000       0.40  
Outstanding at end of period     10,136,844     $ 0.20  

 

      As of September 30, 2015     As of September 30, 2015  
      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       3.0     $ 0.06       4,500,000     $ 0.06  
  0.08       550,000       2.4       0.08       550,000       0.08  
  0.09       625,000       2.5       0.09       625,000       0.09  
  0.15       1,571,300       1.9       0.15       1,571,300       0.15  
  0.25       120,000       0.1       0.25       120,000       0.25  
  0.44       1,515,544       0.9       0.44       1,515,544       0.44  
  0.50       120,000       0.1       0.50       120,000       0.50  
  0.60       975,000       1.0       0.60       975,000       0.60  
  0.75       120,000       0.1       0.75       120,000       0.75  
  1.00       40,000       0.1       1.00       40,000       1.00  
$ 0.06-1.00       10,136,844       2.1     $ 0.20       10,136,844     $ 0.20  

 

The aggregate intrinsic value of the exercisable warrants as of September 30, 2015 was $55,800.

 

 

Stock Options

 

A summary of the status of the stock options granted for the nine month period ended September 30, 2015, and changes during the period then ended is presented below:

 

For the Nine Months Ended September 30, 2015  
    Options     Weighted Average Exercise Price  
Outstanding at beginning of period     3,943,500     $ 0.15  
  Granted     150,000     (a)  
  Exercised     -       -  
  Forfeited     -       -  
  Expired     -       -  
Outstanding at end of Period     4,093,500     $ 0.15  

 

      As of September 30, 2015     As of September 30, 2015  
      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       1.89       0.15       3,943,500     $ 0.15  
(a)       150,000       -       -       -       -  
$ 0.15       4,093,500       1.89       0.15       3,943,500     $ 0.15  

 

(a)   On January 1, 2015, the company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures agreed upon. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life.

 

The aggregate intrinsic value of the exercisable options as of September 30, 2015 was $0.