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SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2013
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

 

16. SUBSEQUENT EVENTS

 

Capital Stock

 

On February 4, 2014, the holders representing a majority of the then outstanding shares of capital stock of the Company voted and approved and permitted the Company to increase the number of authorized shares of the Company’s common stock from 400,000,000 to 525,000,000, effective upon receiving approval from the Company’s Board of Directors and filing an amended Certificate of Incorporation with the State of Delaware representing the amendment.

 

In January, February and March, 2014, an aggregate of 6,177,537 shares of the Company’s Series A Convertible Preferred Stock was converted to 6,177,537 shares of common stock of the Company.

 

In January, February and March, 2014, an aggregate of 86,233,334 warrants to purchase common stock were exercised in a cashless conversion to an aggregate of 70,580,055 shares of the Company’s common stock.

 

 

Series C Convertible Preferred Stock

 

On February 12, 2014, the Company designated and authorized to issue 26,666,667 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”), par value $0.0001, per share, at a stated value of $0.0001, per share. Each holder of Series C Preferred Stock shall be entitled to vote all matters submitted to shareholder vote and shall be entitled to the number of votes for each shares of Series C owned at the designated record date. Each holder of Series C Preferred Stock may convert any or all of such shares into fully paid and non-assessable shares of the Company’s common stock in an amount equal to one share of the Company’s common stock for each one shares of Series C Preferred Stock.

 

Securities Subscription Agreement

 

On February 14, 2014, the Company sold to certain accredited investors pursuant to a Subscription Agreement, an aggregate of 33,333,332 shares of its common stock, 26,666,667 shares of the Series C Preferred Stock and five year warrants to purchase up to an aggregate of 59,999,999 shares of the Company’s common stock at an exercise price of $0.03, per share, for gross proceeds of $1,800,000. Until the earlier of (i) three years from the closing of the Offering or (ii) such time as no investor holds any shares of common stock underlying warrants or underlying the Series C Preferred Stock, in the event the Company issues or sells common stock at a per share price equal to less than $0.03, per share, as adjusted, the Company has agreed to issue additional securities such that the aggregate purchase price paid by the investor shall equal the lower price issuance, subject to certain exceptions, as defined.

 

The warrants are exercisable for a period of five years from the date of issuance and have an exercise price of $0.03, per share, subject to adjustment upon the occurrence of certain events, as defined. The warrants contain anti-dilution protection for as long as such warrant is outstanding such that if the Company issues securities for consideration less than the exercise price, then the exercise price shall be reduced to such lower price and the number of shares issuable upon exercise of the warrant shall be increased.

 

In connection with the Offering, the Company granted the investors “piggy-back” registration rights and the investors are entitled to a right of participation in future financings conducted by the Company for a period of twenty-four months.

 

The Company paid placement agent fees of $144,000 in cash, issued an aggregate of 599,999 shares of the Company’s common stock and issued a warrant to purchase up to 5,399,998 shares of the Company’s common stock as commission in connection with the sale of the shares and warrants. In addition, the Company permitted the conversion of an aggregate of $13,500 of unpaid fees owed to a consultant into 450,000 shares and warrants at the Offering price.

 

Pursuant to the subscription agreement, certain members of the Company’s management have agreed to invest an aggregate of $250,000 into the Company within 30 days of the closing, on the same terms of the agreement. The investment required by management has been extended to April 15, 2014.