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Common and Preferred Stock Transactions
6 Months Ended
Jun. 30, 2017
Equity [Abstract]  
Common and Preferred Stock Transactions

Note 5. Common and Preferred Stock Transactions

 

In May 2017, the Company granted 300,000 unregistered shares of its common stock with the Rule 144 restrictive legend and 50,000 shares of Ploinks, Inc. common stock to a consultant of the Company and its subsidiaries pursuant to a consulting agreement with the Company. The aggregate fair market value of the VCSY common stock grant was determined to be $4,200 based on the quoted market price of VCSY stock at date of grant and Ploinks, Inc. common stock grant was determined to be $5,400 based on a third party valuation of Ploinks stock. In addition, the Company agreed to issue up to 2,000,000 common shares of the Company and 200,000 shares of Ploinks, Inc. common stock pursuant to restricted performance stock agreements with the consultant. These shares may vest over a term of 3 years and are based upon the Consultant achieving certain performance criteria.

 

During the six months ended June 30, 2017, the Company issued a convertible debenture in the principal amount of $60,000 to a third party lender for a loan made to the Company in the same amount. The debt accrues interest at 10% per annum and is due one year from the date of issuance. Beginning six months after issuance of the debenture and provided that the lowest closing price of the common stock for each of the 5 trading days immediately preceding the conversion date has been $0.03 or higher, the holder of the respective debenture may convert the debenture into shares of common stock at a price per share of 80% of the average per share price of the Company’s common stock for the 5 trading days preceding the notice of conversion date using the 3 lowest closing prices. In connection with the loan, the Company also issued a total of 600,000 shares of common stock of the Company to the lender with the Rule 144 restrictive legend and 3-year warrants under which each lender may purchase in aggregate a total of 600,000 unregistered shares of common stock of the Company at a purchase price of $0.10 per share. In connection with the issuance of shares of common stock and warrants, the Company recorded a discount of $9,916 against the face value of the loan based on the relative fair market value of the common stock and full fair market value of the warrants. The warrants are accounted for as a derivative liability. The discount is being amortized over twelve months and $54 of amortization expense was recognized for the six months ended June 30, 2017.

 

During the six months ended June 30, 2017, the Company entered into a subscription agreement under which a third party subscriber purchased 1,000 shares of VCSY Series A Preferred Stock for $200,000. In connection with the purchase of the VCSY Series A Preferred Stock, the subscribers also received a total of 2,000,000 shares of common stock of the Company with the Rule 144 restrictive legend, 100,000 shares of common stock of Ploinks, Inc., 2-year warrants under which the subscribers may purchase an aggregate total of 150,000 unregistered shares of common stock of the Company at a purchase price of $0.10 per share and 2-year warrants under which the subscribers may purchase an aggregate total of 150,000 unregistered shares of common stock of the Company at a purchase price of $0.20 per share. The allocated fair market value of the VCSY Series A Preferred Stock issued to the subscribers was $36,670. Each share of VCSY Series A Preferred Stock is convertible into 500 shares of the Company’s common stock. The allocated fair market value of all common shares of the Company issued to the subscribers was $22,800. The allocated fair market value of all common shares of Ploinks, Inc. issued to the subscribers was $1,196. The fair market value of all warrants issued to the subscribers was $451 (which was calculated using the Black-Sholes model). The warrants were accounted for as derivative liabilities (see Note 4).

 

During the six months ended June 30, 2017, the Company granted 295,500 shares of the common stock of Ploinks, Inc. to third party lenders in connection with 3 to 6-month extensions of convertible debentures in the principal amount of $1,035,000 issued in 2015 and 2016. The aggregate fair market value of the awards was determined to be $31,914 and was recorded as debt discount, and is being amortized through the term of the convertible debenture.

  

During the six months ended June 30, 2017, the Company granted 3,000,000 VCSY common shares pursuant to a stock award to an employee of the Company and its subsidiaries (at a fair market value of $72,000).

 

During the six months ended June 30, 2017, $22,421 of principal, interest and legal fees under a convertible note issued in the principal amount of $90,000 was converted into 1,688,762 common shares. In May 2017, the Company had amended this convertible note originally issued to a third party lender in the principal amount of $80,000 to $90,000 and cancelled a $10,000 note payable issued to the third party lender. This convertible note has been paid in full.

 

During the six months ended June 30, 2017, the Company entered into a restricted stock agreement to grant 120,000 shares of the Company’s common stock with the Rule 144 restrictive legend with an employee of the Company under which the shares vest in equal installments over a 30-month period. The fair value of the shares was $2,208 based on the quoted market price of VCSY stock on the grant date and $368 was amortized to expense during the six months ended June 30, 2017.

 

During the six months ended June 30, 2017, 550,000 VCSY common shares vested under restricted stock agreements to employees and a consultant of the Company.

 

During the six months ended June 30, 2017, Ploinks, Inc. entered into a restricted stock agreement to grant 60,000 unregistered shares of the common stock of Ploinks, Inc. to an employee of the Company pursuant to a restricted stock agreement with Ploinks, Inc. These shares typically vest over a 30-month period in equal installments and the fair value of the awards is being expensed over this vesting period. The fair value of the shares was $6,480 based on a third party valuation of Ploinks stock and $1,082 was amortized to expense during the six months ended June 30, 2017.

 

During the six months ended June 30, 2017, the Company granted 300,000 unregistered shares of the common stock of Ploinks, Inc. to an employee of a subsidiary of the Company’s pursuant to a restricted stock agreement with the Company. 150,000 shares vested immediately upon grant of the shares (as noted below) and 150,000 shares will vest in 4 months from the date of grant. The fair value of the shares was $32,400 based on a third party valuation of Ploinks stock and $22,127 was amortized to expense during the six months ended June 30, 2017.

 

During the six months ended June 30, 2017, 350,001 shares of the common stock of Ploinks, Inc. issued under restricted stock agreements to consultants and employees of the Company and a subsidiary of the Company vested.

 

Stock compensation expense for the amortization of restricted stock awards was $67,494 for the six months ended June 30, 2017. As of June 30, 2017, there were 11,695,000 shares of unvested stock compensation awards to employees and 16,000,000 shares of unvested stock compensation awards to non-employees.

 

We have evaluated our convertible cumulative preferred stock under the guidance set out in FASB ASC 470-20 and accordingly classified these shares as temporary equity in the consolidated balance sheets.

 

For additional transactions after June 30, 2017 concerning stock transactions, please see “Subsequent Events” in Note 9.