SHAREHOLDERS’ (DEFICIT) EQUITY

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

SHAREHOLDERS’ (DEFICIT) EQUITY

Common Stock

In October 2015, the board of directors agreed to effectuate a reverse split of the Company’s common stock.  As a result of the split every fifty shares of common stock outstanding were consolidated into one share, reducing the number of common shares outstanding on the effective date from 446,623,300 to 8,932,466.  All share and per share information on this Form 10-K has been retroactively adjusted to reflect the reverse stock split.

In October 2014, the shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the Company’s authorized shares of common stock from 7,000,000 to 11,000,000 and to make effective, a reverse stock split at a range of 1 for 10 through 1 for 50 to reduce the number of authorized shares of the Company’s common stock, subject to the Board of Directors’ discretion.

From January 2015 through March 2015, the Company sold 78,000 shares of common stock for proceeds of $195,000.

From October 2015 through November 2015, the Company sold 2,057,143 shares of common stock and warrants for proceeds of $180,000. W. Austin Lewis IV (our President, CEO and CFO) purchased 900,000 shares of common stock in the equity raise for proceeds of $78,750.

From January 1, 2016 through the filing date of this Annual Report, the Company issued a total of 2,057,143 shares of common stock for gross proceeds of $180,000 from the exercise of warrants.

Subscribed and Issued Shares

During the year ended December 31, 2014, the Company sold 10,000 shares of common stock that had not been issued to a shareholder and accordingly, the unissued shares had been reflected as common stock subscribed but not issued in the amount of $25,000 in the accompanying consolidated balance sheet as of December 31, 2014. In February 2015, the Company issued the 10,000 shares to the shareholder.

Share-based Incentive Plans

During the years ended December 31, 2015 and 2014, the Company had three stock option plans that include both incentive and non-qualified options to be granted to certain eligible employees, non-employee directors, or consultants of the Company. There were no stock options granted, exercised, canceled or expired during 2015.

Active Plans:

2012 Plan

On October 15, 2012, the Company adopted the 2012 Non-Qualified Stock Option Plan (the "2012 Plan").  The purpose of the 2012 Plan, is to provide long-term incentives and rewards to those employees of the Company, and any other individuals, whether directors, consultants or advisors who are in a position to contribute to the long-term success and growth of the Company.  The options granted have a 10 year contractual term and vest one hundred percent on the date of grant. There are no shares reserved for future issuance under this plan.  Information with respect to stock options granted under this plan during the years ended December 31, 2015 and 2014 is as follows:

	Number of shares	Weighted average exercise price per share
Options outstanding at January 1, 2014	180,000	$	2.70
Granted	120,000	$	2.70
Cancelled	—	$	—
Exercised	—	$	—
Options outstanding at December 31, 2014	300,000	$	5.10
Granted	---	$	—
Cancelled	—	$	—
Exercised	—	$	—
Options outstanding at December 31, 2015	300,000	$	0.28

2011 Plan

On February 1, 2011, the Company adopted the 2011 Non-Qualified Stock Option Plan (the "2011 Plan"), to replace the 2001 Plan discussed below, and has filed Registration Statements on Form S-8 to register 600,000 shares of its common stock. Under the 2011 Plan, employees and consultants may elect to receive their gross compensation in the form of options, exercisable at $0.05 per share, to acquire the number of shares of the Company's common stock equal to their gross compensation divided by the fair value of the stock on the date of grant. The options granted have a 10 year contractual term and have vesting periods that range from one hundred percent on the date of grant to one third immediately, one third vesting in 18 months and the final on third vesting in 36 months from the date of the grant.  Information with respect to stock options granted under this plan during the years ended December 31, 2015 and 2014 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at January 1, 2014		45,000	$	5.75
Granted		15,000	$	2.70
Cancelled			$	-
Exercised		-	$	-
Options outstanding at December 31, 2014		60,000	$	6.05
Granted		-	$	-
Cancelled		-	$	-
Exercised		-	$	-
Options outstanding at December 31, 2015		60,000	$	3.58

At December 31, 2015 there are no shares reserved for issuance under this plan.

2002 Plan

The 2002 Stock Option Plan (“2002 Plan”) provides for the award of qualified and non-qualified options for up to 600,000 shares.  The options granted have a ten-year contractual term and have a vesting schedule of either immediately, two years, or four years from the date of grant.  Information with respect to stock options granted under this plan during the years ended December 31, 2015, and 2014 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at January 1, 2014		160,000	$	4.75
Granted		-	$	-
Cancelled or Expired		-	$	-
Exercised		-	$	-
Options outstanding at December 31, 2014		160,000	$	4.75
Granted		-	$	-
Cancelled or Expired		-	$	-
Exercised		-	$	-
Options outstanding at December 31, 2015		160,000	$	2.37

There are currently no shares reserved for issuance under this plan.

Fair value of issuances

The fair value of the Company's option grants under the 2012, 2011, and 2002 Plans was estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	2014
Expected term (based upon historical experience)	5-6 years
Expected volatility	130.50	%
Expected dividends	None

Risk free interest rate 1.0%-2.0%

For the years ended December 31, 2015 and 2014, the Company recorded share-based compensation expense related to stock options of $181,365 and $247,807 and are included in operating expenses in the accompanying consolidated statements of operations, respectively.

On November 2, 2015 the Board of Directors approved to vote to reprice 435,000 stock options for one employee and three board members. The grant price was lowered to $0.15 which reflects the market value of the stock.  The repriced options continue to vest according to the original grant dates. The incremental expense for the repricing of the options was approximately $17,000.

The Company had an aggregate of $50,743 of unrecognized share-based compensation expense for options outstanding as of December 31, 2015, which is expected to be recognized over a weighted average period of 1.10 years.

Information pertaining to options outstanding and exercisable at December 31, 2015 is as follows:

		Options Outstanding				Options Exercisable
Exercise Prices		Number of Shares		Weighted Average Remaining Contractual Life (In Years)		Number of Shares		Weighted Average Remaining Contractual Life (In Years)
$	0.15		435,000		6.22		425,017		6.37
$	2.70		10,000		0.17		3,333		0.06
$	4.60		15,000		0.21		10,000		0.15
$	7.25		50,000		0.56		50,000		0.59
$	8.00		10,000		0.15		6,700		0.11
			520,000		7.31		495,050		7.28

Summary of all stock option plans during the years ended December 31, 2015 and 2014 is as follows:

	Number of Shares		Weighted Average Price		Weighted Average Remaining Contractual Life (In Years)		Aggregate Intrinsic Value
Options outstanding at January 1, 2014		385,000	$	3.90
Granted		135,000	$	2.70
Options exercisable at December 31, 2014		520,000	$	3.60
Granted		-	$	-
Options outstanding and expected to vest at December 31, 2015		520,000	$	1.16	$	7.31	$	-
Options exercisable at December 31, 2015		495,050	$	1.08	$	7.28	$	-

Warrants

From time to time, the Company issues warrants to purchase share of the Company’s common stock to investors, note holders and to non-employees for service rendered or to be rendered in the future.

In November 2015, the Company issued warrants to purchase 2,057,143 shares of the Company’s common stock to investors at the price of $0.09 per share.  The warrants expire five years following the warrant issuance date, and vest immediately.

A summary of the warrant activity during the year ended December 31, 2015 is as follows:

	Number of Shares Subject to Warrants Outstanding		Weighted Average Exercise Price Price
Warrants outstanding - January 1, 2015		-	$	-
Granted		2,057,143		0.09
Exercised		-
Expired		-	$	-
Warrants outstanding and exercisable - December 31, 2015		2,057,143		0.09
Weighted average remaining contractual life of the outstanding warrants in years		4.85