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Common stock and warrants
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Common Stock and Warrants

Common stock

 

During the three months ended March 31, 2016, the company issued 17,895,859 related to the tender offer and 1,669,205 shares of common stock and the Company recognized expense of $132,247 for services rendered. No shares of Series C Stock converted to common shares during the three months ended March 31, 2016.

 

During the three months ended March 31, 2015, the company didn’t issue any common stock for services. 41,500 shares of Series C Stock converted to 166,000 common shares during the three months ended March 31, 2015.

 

Tender Offer and Debt Conversion

 

Between December 11, 2015 and February 3, 2016, the Company entered into agreements with investors, pursuant to which on February 3, 2016, warrant holders exercised 12,270,846 Warrants to purchase an aggregate of 12,270,846 shares of our common stock for gross proceeds of $1.84 million. The Company issued new warrants to purchase an aggregate of 26,479,217 shares of common stock at an exercise price of $0.15 per share, in consideration for the immediate exercise of the warrants.

 

The Warrants have a cash settlement feature; as a result, they were classified as a derivative liability and recorded at fair value. Fair value of the Warrants, in the total amount of $3,918,924 was calculated using the Monte-Carlo model, using the following assumptions: 68.7% expected volatility, a risk-free interest rate of 0.91%, estimated life of 3 years and no dividend yield. The fair value of the common stock was $0.148. The transaction was accounted for as an inducement.  ASC 470-20-40 addresses the accounting for altered conversion privileges, including the issuance of warrants or other securities (not provided for in the original conversion terms) to induce conversion.  As a result of this transaction, the Company recognized an inducement expense of $3,560,958 equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of securities issuable pursuant to the original conversion terms, as of the date of the conversion.

 

In connection with the tender offer, investors converted $843,751 in Convertible Notes at a conversion price of $0.15 per share into 5,625,013 shares of our common stock.