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Stockholders' Deficiency
 12 Months Ended
Dec. 31, 2016
Equity:  
Stockholders' Deficiency

Note 6 – Stockholders’ Deficiency

 

Warrants

 

The Company issued warrants on June 3, 2011 to various persons, including affiliates of the Company, for services provided to the Company. These warrants covered the purchase of 1,855,000 unregistered shares of the Company’s stock at an exercise price of $1.05 per share with a five-year term. These share-based payments have been accounted for in accordance with ASC 815-40 using the Black Scholes pricing model to determine the fair value of each warrant. As of December 31, 2016, 800,000 of these warrants were outstanding and 1,055,000 had expired.

 

In connection with the acquisition of Cornerstone (See Note 5), on March 30, 2012, the Company issued warrants to purchase 300,000 unregistered shares of common stock at exercise prices ranging from $2.00 to $4.00 per share. These warrants expire at various dates through December 2017. As of December 31, 2016, 100,000 of these warrants had expired and 200,000 were outstanding.

 

In December 2012, the Company issued three-year warrants to purchase 325,000 unregistered shares of the Company’s common stock at an exercise price of $.41 per share in association with the Secured Promissory Note (See Note 8). In December 2014, the expiration date of these warrants was extended to December 31, 2017.

 

During January 2013, the Company issued three-year warrants to purchase 75,000 unregistered shares of the Company’s common stock at an exercise price of $0.41 per share in association with the Secured Promissory Note (See Note 8). In December 2014, the expiration date of these warrants was extended to December 31, 2017.

 

During March 2013, the Company issued its Chief Executive Officer and Chief Financial Officer five –year warrants to purchase common stock at an exercise price of $0.30 per share (market price on date of grant) in the amounts of 1,000,000 and 500,000 shares, respectively. The Company recognized $210,000 in compensation expense. As of December 31, 2015, all of these warrants were outstanding. In October 2015, these warrants were repriced and extended with an exercise price of $0.15 and a new expiration date of October 26, 2022 in connection with a general repricing and extension of the Company options and warrants as set forth below in this Note 6.

 

On December 1, 2013, the Company issued additional three-year warrants to purchase 400,000 unregistered shares of the Company’s common stock at an exercise price equal to $0.21 per share (the average closing price of the common stock during the 10 trading days prior to December 1, 2013). This was in association with the Secured Promissory Note (See Note 8). In December 2015, the expiration date of these warrants was extended to December 31, 2018. As of December 31, 2016, all of these warrants were outstanding.

 

During the fourth quarter of 2014, the Company revised the terms of the 400,000 original warrants issued December 2012 and January 2013, extending the maturity dates to December 31, 2017 and the exercise price was reduced from $0.41 per share to $0.39 per share. The Company also revised the terms of the additional 400,000 warrants issued December 1, 2013, to extend the maturity date to December 31, 2018 and the exercise price was reduced from $0.21 per share to $0.17 per share.

 

During September 2015, the Company issued five-year warrants to a stockholder for the purchase 25,000 shares of common stock as additional consideration for a $25,000 loan. These warrants expire in September 2020.

 

During June 2016, the Company issued warrants to a stockholder for the purchase of 900,000 shares of common stock at an exercise price of $0.11 per share in consideration for the Company utilizing his facility space from January 2013 to December 2015. These warrants expire in June 2021. As of December 31, 2016, all of these warrants were outstanding.

 

In July 2016, a warrant for the purchase of 25,000 shares of common stock was issued to a stockholder as additional consideration for a $25,000 loan. These warrants expire in July 2021. As of December 31, 2016, all of these warrants were outstanding.

 

In October 2016, another warrant for the purchase of 25,000 shares of common stock was issued to the same stockholder as additional consideration for extending the maturity of the $25,000 loan for an additional 90 days. These warrants expire in October 2021. As of December 31, 2016, all of these warrants were outstanding.

 

A summary of warrants issued, exercised and expired during the year ending December 31, 2016 is as follows:

 

    Shares   Weighted Average
Exercise Price		   Aggregate
Intrinsic
Value
Balance at December 31, 2015       4,480,000     $ 0.58     $ 45,000  
Issued       950,000       0.11       —  
Expired       (1,155,000 )     (1.13 )     —  
Balance at December 31, 2016       4,275,000     $ 0.33     $ 45,000  

 

A warrant for the purchase of 900,000 shares of common stock was issued in June 2016 to a stockholder at an exercise price of $0.11 per share in consideration for the Company utilizing his facility space from January 2013 to December 2015. The fair market value of the warrant was determined to be $0.08 per share, or $72,000, which is included in the general and administrative expenses as stock compensation expense.

 

In July 2016, a warrant for the purchase of 25,000 shares of common stock was issued to a stockholder as additional consideration for a $25,000 loan. See Note 8. The fair market value of the warrant was determined to be $0.13 per share, or $3,250, which was recorded as interest expense.

 

In October 2016, an additional warrant for the purchase of 25,000 shares of common stock was issued to the stockholder as additional consideration for extending the maturity of the $25,000 loan an additional 90 days. The fair market value of the warrant was determined to be $0.10 per share, or $2,500, which was recorded as interest expense.

 

The weighted average grant date fair value of warrants issued during the year ended December 31, 2016 amounted to $0.13 per warrant. The fair value of each warrant granted was determined using the Black-Scholes option pricing model and the following assumptions:

 

    December 31, 2016
Risk free interest rate     1.00 %
Expected term     5 years  
Annualized volatility     90 %
Expected dividends     —  

 

The warrant shares referred to above are unregistered shares of the Company’s stock and are restricted from trading as defined under Rule 144 of the United States Securities Act of 1933.