Issuance of the Option and Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Issuance of the Option and Stock-Based Compensation [Abstract]

Issuance of the Option and Stock-Based Compensation

Note 4. Issuance of the Option, Stock-Based Compensation and Exercise of Warrants

Option Formerly Issued to Financial Partners Funding, LLC

On March 3, 2011 (the “Effective Date”), GEM entered into a Commitment Letter (the “Commitment Letter”) with Financial Partners Funding, LLC, a Florida limited liability company (“FPF”). Pursuant to the Commitment Letter, FPF agreed to commit up to $200,000,000 in equipment leases to finance third-party purchases of GEM’s lighting and Airlock products, subject to certain funding conditions, including FPF’s due diligence and approval of the third party lessees. FPF had an exclusive right to finance such third-party purchases of GEM’s products, however, GEM has the right to hold discussions with third-party financing entities. In the event that GEM was offered financing on better terms than those offered by FPF, FPF had the right of first refusal to offer financing on similar terms. FPF has no obligation to finance any particular transaction or proposed lease.

As required under the Commitment Letter, on June 27, 2011, the Company issued to FPF an option, dated as of March 3, 2011, which upon exercise, entitles FPF to purchase up to 15% of our then outstanding common stock (the “Option”) at an aggregate exercise price of $10,949,490 (the “Option Price”).  As of September 30, 2013, FPF had the right to exercise the Option to purchase approximately 7,800,000 shares of our common stock, assuming 100% of the Option was exercised.  Because the Option was fully vested and non-forfeitable at the time of grant, the fair value of the Option was measured and expensed on the date of grant pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 505, subtopic 50, Equity-Based Payments to Non-Employees (formerly Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services).

As disclosed in Note 3 under “Commitments and Contingencies — Other Commitments and Agreements”, FPF agreed to terminate the Commitment Letter and the Option and any other agreement among the Company and the Ennis Affiliates in consideration for the Company issuing to FPF 1,000,000 shares of the Company’s common stock with piggy back registration rights. The Company anticipates issuing the shares to FPF during the fourth quarter of 2013.

Issuance of Shares to Directors

In February 2012, GEM adopted a board resolution that it would issue $2,000 worth of shares of our common stock to each board member in order to compensate such board members for attending the board meetings.  Pursuant to the Board’s action, during the first quarter of 2013 we granted a total of 40,000 shares to our directors with a fair value of $4,000; however these shares have not yet been issued by our transfer agent.  The fair value of these shares has been recorded as stock-based compensation expense in the six months ended September 30, 2013.

Appointment of New Chief Financial Officer

Effective as of October 11, 2013, the Board of Directors (the “Board”) of the Company appointed David Selig as the new Chief Financial Officer (and Principal Account Officer) of the Company.  In connection with Mr. Selig’s appointment, the Company entered into an agreement with S&A pursuant to which S&A will receive compensation for the services provided by Mr. Selig to the Company.  Selig & Associates (“S&A”) is a New York tax representation and advocacy firm, representing businesses before the Internal Revenue Service, founded by Mr. Selig.  Under the agreement S&A will receive cash compensation of $15,000 per calendar quarter (or pro-rata thereof for such shorter period), commencing September 1, 2013, and a grant of 600,000 restricted shares of the Company’s common stock with a fair value of $60,000 which was recorded to expense during the third quarter of 2013.  The shares will vest quarterly at a rate of 25% (or pro-rata thereof for such shorter period) in arrears.