CAPITAL STOCK

3 Months Ended

Mar. 31, 2016

Capital [Abstract]

CAPITAL STOCK

2014 Financing

On February 14, 2014, the Company sold to certain accredited investors pursuant to a Subscription Agreement, an aggregate of 33,333 shares of its common stock, 26,667 shares of the Series C Preferred Stock and five year warrants to purchase up to an aggregate of 59,999 shares of the Company’s common stock at an exercise price of $30, 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 $30.00 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 Company recorded a derivative liability related to the reset feature on the exercise price of the warrants to purchase common stock issued by the Company.

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.

In 2014 the Company paid placement agent fees of $144,000 in cash, issued an aggregate of 600, shares of the Company’s common stock and issued a five year warrant to purchase up to 5,399 shares of the Company’s common stock at a price of $30 per share, 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 shares and warrants at the Offering price. In conjunction with the Offering, $100,000 was placed in an escrow account to be used for auditing and legal fees.  As of December 31, 2015, the balance of the escrow account was $0 and $12,500 in 2014.

On February 14, 2014, as a component of the Subscription Agreement, the Company issued an aggregate of 66,333 warrants with a fair value of $11,361,278 determined using the Black-Scholes Pricing Model.

Pursuant to the subscription agreement in 2014, certain members of the Company’s management agreed to invest an aggregate of $250,000 in exchange for 8,333 shares of the Company’s common stock within 30 days of the closing, on the same terms of the agreement.

Series B Convertible Preferred Stock

In April 2013, the Company’s Board of Directors authorized four (4) shares of preferred stock, par value $0.0001 per share as Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and issued one share of Series B Preferred Stock to each of the Company’s three senior members of management.  Each share of Series B Preferred Stock is entitled such number of votes on all matters submitted to stockholders that is equal to (i) the product of (a) the number of shares of Series B Preferred Stock held by such holder, (b) the number of issued and outstanding shares of the Company’s Common Stock (taking into account the effective outstanding voting rights of the Series B Preferred Stock), as of the record date for the vote and (c) 0.13334 less (ii) the number of shares of Common Stock beneficially held by such holder on such date.  Additionally, on the six month anniversary date of issuance of the Series B Preferred Stock, each outstanding share of Series B Preferred Stock was to automatically, and without further action on the part of the holder, convert into such number of fully paid and non-assessable shares of Common Stock as would cause the holder to own, along with any other securities of the Company’s beneficially owned on the conversion date by them 13.334% of the issued and outstanding Common Stock, calculated on the conversion date. On October 25, 2013, the Company amended and restated the Certificate of Designation for Series B Convertible Preferred Stock to extend the date on which the Series B Shares would automatically convert into such number of fully paid and non-assessable shares of common stock, from the date six months from the date of issuance (October 26, 2013) to the twelfth month anniversary of the date of issuance of the shares of Series B Preferred Stock (April 26, 2014) which on April 22, 2014, was further extended to an indefinite date.  The Company previously recorded the three shares of Series B Convertible Preferred Stock as stock-based compensation using the then current estimate of the number of shares that would convert to shares of common stock of the Company based on the shares outstanding and current price per share at each balance sheet date.  As of December 31, 2014, the Company recalculated the estimated shares issuable to be 216,670 and recorded stock-based compensation of $2,166,707 for the year then ended.   The estimate is based on the current common shares outstanding at December 31, 2014, a stock price of $10.00 per share, and is subject to adjustment based on any additional common shares issued.

On March 2, 2015, the Series B Convertible Preferred Stock which was then outstanding was cancelled and as a result, the Company’s obligation to issue any common shares in connection therewith ended.  The Company has accounted for the cancellation of the Series B and issuance of the Series D Preferred Stock as an extinguishment.  Accordingly, for the year ended December 31, 2015, the Company recorded an aggregate gain of $3,420,804 within stockholders’ deficit equal to the difference between the $667,664 fair value of the Series D preferred stock and the $4,088,468 carrying amount of the Series B preferred stock extinguished.  The gain on extinguishment is reflected in the calculation of net income attributable to common stockholders in 2015.

Series C Convertible Preferred Stock

On February 12, 2014, the Company designated and authorized to issue 26,667 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”), par value $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.

On September 21, 2015, in connection with the terms of a ratched provision for certain warrants issued in 2014, the Company revised the conversion right so that holders of Series C Preferred Stock may, from time to time, convert any or all of such holder's shares of Series C Preferred Stock into fully paid and non-assessable shares of common stock in an amount equal 100 shares of the Company's common stock (the "Common Stock") for each one (1) share of Series C Preferred stock surrendered.

As a result of this modification, the Company recorded a deemed dividend on Series C preferred stock in the amount of $1,089,000 at December 31, 2015.

Series D Convertible Preferred Stock

On, March 2, 2015, the Board of Directors of the Company designated and authorized to issue 3,000 shares of the Company’s authorized Preferred Stock, par value $0.0001 per share, as Series D Convertible Preferred Stock.  Each holder of the Series D Preferred Stock (“Series D”) shall have the number of votes on all matters submitted to the stockholders that is equal to the greater of one hundred votes for each one share of Series D and such number of votes per share of Series D that when added to the votes per shares of all other shares of Series D shall equal 50.1% of the outstanding voting record.  The Series D are convertible into common stock in an amount equal to one share of the Company’s common stock for each one share of Series D.  On March 9, 2015, the Company issued 1,000 shares of the Series D to each of three officers of the Company.

Common 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.  On March 12, 2015, 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 525,000,000 to 750,000,000.

On September 21, 2015, 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 750,000,000 to 3,000,000,000, which was effective upon filing an amended Certificate of Incorporation with the State of Delaware representing the amendment.

On April 10, 2014, the Company issued 500 shares of its common stock as a charitable donation to a not-for-profit organization valued at $65,000, ($130.00 per share), the price of the Company’s common stock on the day of grant.

In August 2014, 6,667 shares of the Company’s Series C Convertible Preferred Stock were converted to 6,667 shares of common stock of the Company.

Through December 31, 2014, an aggregate of 91,333 warrants to purchase common stock were exercised in a cashless conversions to an aggregate of 74,131 shares of the Company’s common stock.

Through December 31, 2014, an aggregate of 27,778 shares of the Company’s Series A Convertible Preferred Stock was converted to 27,778 shares of common stock of the Company.

As discussed in Note 8, the warrants issued related to these capital raises were deemed to be derivative liabilities and required additional measurement at fair value.  Accordingly, the proceeds from these equity financings were first allocated to such fair value instruments (the warrants), with the residual proceeds, if any, being allocated to the instruments not subsequently marked to fair value.

On November 25, 2015 the Board and the majority stockholders authorized a reverse split of the issued and outstanding shares of common and preferred stock on the basis of 1 post consolidation share for each 1,000 pre-consolidation shares (the "Reverse Split") to be effective on December 24, 2015.

Treasury Stock

In March 2, 2013, concurrent with the resignation of the Company’s then chief executive officer, the Company agreed to purchase from the former executive 4 shares of the Company’s common stock for $0.10 per share.  These shares are reported at cost as treasury shares.

Warrants

As of March 31, 2016, the Company had warrants to purchase common shares outstanding as follows: 

Date of Grant	Number of Warrants		Expiration Date	Exercise Price
April 26, 2013		22,981	April 26, 2016	$	30.00
February 14, 2014		3,333	February 14, 2019	$	0.30	*
December 31, 2014		13,333	December 31, 2019	$	0.30
Total		39,647

*Cashless exercise permitted.

As of March 31, 2015, the Company had warrants to purchase common shares outstanding as follows:

Date of Grant	Number of Warrants		Expiration Date	Exercise Price
January 9, 2013		3,903	January 9, 2016	$	30.00
April 26, 2013		22,981	April 26,2016	$	30.00
February 14, 2014		3,333	February 14, 2019	$	6.00	*
December 31, 2014		13,333	December 31, 2019	$	6.00
Total		43,550

*Cashless exercise permitted.