Subsequent Events

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events

From October 1, 2016 to November 14, 2016, the Company issued $300,000 of principal amount of 8% promissory notes and warrants to purchase shares of our common stock to accredited investors. The aggregate gross proceeds from the sale of the notes and warrants were $300,000. The notes have 2-year maturity dates and bear interest at the rate of eight percent (8%) per annum. The notes were issued with warrants to purchase up to 150,000 shares of our common stock at an exercise price of $2.00 per share.

On October 13, 2016, the board approved a non-qualified option grant totaling 35,000 shares with an exercise price of $1.80 to each of the independent directors, messrs Wickersham, Davis, Flemming, and Hirson.

On October 10, 2016, the Board of Directors approved a 20 to 1 reverse split of the Company's outstanding common stock from 95,333,180 shares to 4,766,659 shares, and a proportional decrease in the Company's authorized common stock from 900 million shares to 45 million shares. The record date for the reverse split was October 17, 2016 and the effective date for the reverse split was October 18, 2016. All of the share and per share amounts in these consolidated financial statements and footnotes have been adjusted to reflect the 20 to 1 reverse stock split.

Effective November 4, 2016, the Company entered into an Agreement with Steven Earles, the Company’s President and Chief Executive Officer, pursuant to which Mr. Earles agreed to convert 185 shares of the Company’s Series A Convertible Preferred Stock into 123,333 shares of the Company’s Common Stock and to cancel his warrant to purchase 123,321 shares of the Company’s Common Stock.

Effective November 4, 2016, the Company entered into an Agreement with Steven Shum, the Company’s Chief Financial Officer, pursuant to which Mr. Shum agreed to convert 97 shares of the Company’s Series A Convertible Preferred Stock into 64,667 shares of the Company’s Common Stock and to cancel his warrant to purchase 64,660.2 shares of the Company’s Common Stock.

Effective November 4, 2016, the Company entered into a Second Amendment to Employment Agreement (the “Earles Amendment”) with Steven Earles, the Company’s President and Chief Executive Officer. Under the Earles Amendment, Mr. Earles’s base salary was decreased to $120,000 per annum. In addition, Mr. Earles agreed to waive prior accrued and unpaid salary totaling $182,027. He was also granted a restricted stock unit of shares of Common Stock pursuant to the Company’s 2016 Equity Incentive Plan, equal to the quotient obtained by dividing $30,000 by the closing price of the Common Stock on the effective date of the Earles Amendment, which the Company deemed to be the fair market value of such shares as of the date of the Earles Amendment. The shares of Common Stock subject to the restricted stock unit shall vest in four equal amounts on each of November 4, 2016, January 1, 2017, April 1, 2017 and July 1, 2017. The Company also agreed to indemnify Mr. Earles to the fullest extent allowed by the Company’s Articles of Incorporation, as amended (the “Articles”), the Company’s Amended and Restated Bylaws (the “Bylaws”), and applicable law, and notwithstanding Section 7.14 of the Company’s Bylaws, to the extent permitted by applicable law, the rights granted pursuant to the Earles Amendment shall apply to acts and actions occurring since October 31, 2014.

Effective November 4, 2016, the Company entered into a First Amendment to Employment Agreement (the “Shum Amendment”) with Steven Shum, the Company’s Chief Financial Officer. Under the Shum Amendment, Mr. Shum’s base salary was decreased to $135,000 per annum. In addition, Mr. Shum is entitled to quarterly bonuses based on individual and Company performance at the discretion of the Company’s Board of Directors as well as quarterly bonuses based on the achievement by the Company of certain quarterly EBITDA targets. The Company agreed to pay Mr. Shum $4,250 for accrued and unpaid salary, which shall be paid on the earlier of a qualified equity financing by the Company or six months from the effective date of the Shum Amendment. The Company also agreed to indemnify Mr. Shum to the fullest extent allowed by the Articles, the Bylaws, and applicable law, and notwithstanding Section 7.14 of the Company’s Bylaws, to the extent permitted by applicable law, the rights granted pursuant to the Shum Amendment shall apply to acts and actions occurring since October 31, 2014.

On November 8, 2016, S. Jay Harkins resigned as a director of the Company and as Executive Vice President of Sales of the Company. There are no disagreements as contemplated by Item 5.02(a) of Form 8-K, and thus the Company is disclosing this information pursuant to Item 5.02(b) of Form 8-K.