STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2016

Stockholders' deficiency

STOCKHOLDERS' EQUITY

NOTE 8 - STOCKHOLDERS’ EQUITY

Common Stock

Our Company has Advisory Agreements with members of its Advisory Board. The terms of the individual Advisory Agreements vary and provide for up to 50,000 initial sign-on shares vesting for a maximum of an 18-month period, and up to 50,000 shares of common stock per annum issued on the anniversary of the effective date of the agreement. Expenses for the issuance of common stock for services related to these share issuances is recognized over the service period in which the shares are earned or over the respective vesting period, as applicable, and is calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace. Selling, general and administrative expenses (“SGA”) recognized in connection with the Advisory Agreements totaled approximately $63,000 and $297,000 for the six months ended June 30, 2016 and 2015, respectively, and approximately $26,000 and $256,000 for the three months ended June 30, 2016 and 2015, respectively. 

On April 4, 2016, we issued a $275,000 face value note payable and 50,000 shares of our common stock to Gemini Master Fund, LTD (“Gemini”) pursuant to a Security Purchase Agreement dated March 30, 2016 (the date the funds were received by our Company). Under the terms of the related note payable (the “Gemini Note”), the Company received $245,000, net of costs and original issue discount.

In June 2016, Theodore Schwarz executed an Offer Letter whereby Mr. Schwarz agreed to become a member of our Company’s Board of Directors (the “Board”). Under the Offer Letter the Company has agreed to pay Mr. Schwarz $2,500 for each Board of Directors meeting attended. Additionally, Mr. Schwarz may be issued 500,000 shares of the Company’s common stock in the future that may vest at the rate of 166,666 shares per year, over a three-year period provided Mr. Schwarz continues to serve on the Board. 

Restricted Stock Awards 

On March 17, 2016, we entered into a consulting agreement for services over one year. In connection with the agreement, we granted the consultant 200,000 shares of our fully vested common stock as consideration for the consultant’s services. The Company recorded prepaid consulting of approximately $128,000 in the first quarter of 2016 and recognized stock based compensation totaling approximately $32,000 and $37,000 for the three and six months ended June 30, 2016 in connection with this agreement.

In November 2015, the Company entered into a consulting agreement with a third party for consulting services over six months. The Company agreed to pay the consultant 90,000 in shares of the Company’s restricted stock, which were issued over six months. The Company issued 30,000 shares of restricted stock in February 2016, and the remaining 60,000 shares were issued in June 2016, resulting in $378,000 of stock based compensation expense for the six months ended June 2016. 

In April, 2016, the Company entered into a consulting agreement with a third party for consulting services over a year. The 200,000 shares of restricted stock award vested on April 25, 2016. The grant date fair value of restricted stock award was $118,000 and was immediately recognized as stock based compensation.

A summary of the restricted stock award activity for the six months ended June 30, 2016 is as follows:

	Number of Units			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2015		-		$	-
Granted		290,000			0.60
Vested		(290,000	)		0.60
Nonvested at June 30, 2016		-		$	-

Common Stock Options 

On August 14, 2015, we granted an option to purchase up to 1,000,000 shares of our common stock to each of two employees. On May 2, 2016, we reduced the exercise price from $1.50 per share to $0.54 per share for these options. All other terms of the previous option agreements remained unchanged. We remeasured the options on the modification date using the Black-Scholes Model. The incremental fair value of vested options was approximately $71,000 and was recognized immediately. The sum of the incremental compensation cost and the remaining unrecognized compensation cost for the unvested option shares was approximately $1.7 million on the modification date and will be amortized ratably over the remaining vesting period.   We recognized approximately $382,000 and $677,000 of SGA as stock based compensation in connection with the vesting of the options during the three and six months ended June 30, 2016, respectively.  

As of June 30, 2016, there was 2,000,000 stock options outstanding, with an average exercise price of $0.54 per share and a weighted average remaining life of 4.12 years. As of June 30, 2016, the stock options had an intrinsic value of approximately $105,000 and unrecognized compensation of approximately $1.4 million. 875,000 shares of the stock options are vested. 

Common Stock Warrants

Our Company has issued warrants to purchase shares of our common stock to accredited investors and consultants as compensation for services rendered, as well as, in conjunction with the purchase of our common stock. A summary of the Company’s warrants activity and related information as of June 30, 2016 is as follows.

Exercise		Warrants		Remaining		Warrants
Price		Granted		Life (Years)		Exercisable
$	0.001		1,350,000		1.47		450,000
$	1.50		50,000		2.37		50,000
$	2.00		300,000		4.38		300,000
$	2.50		500,000		4.75		-
			2,200,000				800,000