STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 8 – STOCKHOLDERS’ EQUITY

A restricted stock unit (“RSU”) is an award of common shares that is subject to certain restrictions during a specified period. RSU awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares of nonvested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding. The Company’s restricted stock awards vest over a period of one year. The Company expenses the cost of the RSUs, which is determined to be the fair market value of the shares at the date of grant, straight-line over the

period, during which the restrictions lapse. For these purposes, the fair market value of the restricted stock is determined based on the closing price of the Company’s common stock on the grant date.

On June 11, 2015, the Company issued 525,000 RSUs (44,625,000 units pre-reverse stock split) to two officers of the Company. The RSUs were valued at the closing stock price of $0.01 on June 11, 2015, at $446,250, fair value. These RSUs are being expensed over the vesting terms.  The former Chief Executive Officer (“CEO”) resigned on April 27, 2016 and holds 300,000 of the issued 525,000 RSUs above.  As part of his severance package the RSUs will continue to vest and will not expire, therefore since there is no further obligation on the part of the former CEO, the Company expensed immediately the remaining unamortized portion of the RSUs in the amount of $187,708.

On July 9, 2015, the Company hired a Chief Operating Officer (“COO”). The COO received 225,000 RSUs (19,125,000 units pre-reverse stock split), vesting over a three-year period, with one-third vesting the first year and one-twelfth vesting ratably on a quarterly basis thereafter. The RSUs were valued at fair value of $918,000 based on the closing stock price of $4.08 on July 9, 2015.  The COO resigned on May 31, 2016 and as a result the Company reversed the expense related to the RSUs during the six months ended June 30, 2016 in the amount of $280,500.  In addition, the value of the RSUs included in deferred compensation in the amount of $637,500 was reclassified to additional paid in capital.

On August 10, 2015, the Company agreed to issue the Chief Financial Officer (“CFO”) 20,000 RSUs vesting over six months and 100,000 RSUs vesting annually over three years. The RSUs were valued at a fair value of $692,400 based on the closing stock price of $5.77 per share on August 10, 2015.

For the three and six months ended June 30, 2016 the Company expensed $106,730 and $309,421 and for the three and six months ended June 30, 2015, the Company expensed $6,198 related to the RSUs.

On October 1, 2015, the Company agreed to issue 100,000 RSUs to a consultant for services. Of the 100,000 RSUs, 60,000 were issued upon execution of the agreement, 20,000 shares were to be issued on January 1, 2016 and 20,000 shares were to be issued on April 1, 2016. The RSUs were originally valued at $195,000.  The Company issued the remaining 40,000 shares in April 2016 and expensed $90,000 and $124,750 for the three and six months ended June 30, 2016 relative to these RSUs.

On October 7, 2015, the Company agreed to pay $15,000 to a consultant/stockholder as well as an additional $35,000 based on certain milestones being met. Additionally, as of August 1, 2015 the Company agreed to issue the individual 30,000 RSUs originally valued at $165,000 in quarterly installments on November 1, 2015, February 1, 2016, May 1, 2016 and August 1, 2016, which began vesting on August 1, 2015.  The agreement was terminated on April 29, 2016.  The Company expensed $5,500 and $18,563 for the three and six months ended June 30, 2016 relative to these RSUs. Further the individual was to receive a 2% to 5% commission on company sales while this agreement is in effect; however no commissions were earned during April 2016 or the three months ended March 31, 2016.  In addition, the remaining value of the RSUs included in deferred compensation in the amount of $2,750 was reclassified to additional paid in capital as a result of the termination of the agreement.

On February 8, 2016, the Company issued 23,500 shares of Common Stock to a consultant for assistance in raising capital.  The shares were valued at 15,275 based on the closing stock price of the Company’s stock price on February 8, 2016 of $0.65 per share.

On May 24, 2016, the Company issued 9,483 shares of Common Stock to a consultant as a finder’s fee for an employee.  The shares were value at $5,500 based on the closing stock price of the Company’s common stock on March 11, 2016 per the agreement.

On May 1, 2016, the Company issued warrants to purchase 100,000 shares of common stock at an exercise price of $0.01 per share, with a term of five years, to the Chief Executive Officer, which vest immediately. The fair value of warrants issued was $49,885. These warrants were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 204.0%, risk-free interest rate of 1.28% and expected life of five years. The options were expensed immediately.

In accordance with FASB ASC 505-50, “Equity – Equity-Based Payments to Non-Employees,” restricted stock with performance conditions should be revalued based on the modification accounting methodology described in FASB ASC 718-20, “Compensation—Stock Compensation—Awards Classified as Equity.”  There were no outstanding equity-based payments to non-employees as of June 30, 2016.