4. STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

Preferred Stock

There are currently 5,000,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock currently issued or outstanding.

Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 7,500 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution.  Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate.  There are currently no Series B Shares issued or outstanding.

On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00.  The Series C Preferred Stock is entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018. The Series C Preferred Stock is senior to the Company’s common stock and any other currently issued series of the Company’s preferred stock upon liquidation, and is entitled to a liquidation preference per share equal to the original issuance price of such shares of Series C Preferred Stock together with the amount of all accrued but unpaid dividends thereon.  Each of the Series C Shares is convertible at the option of the holder into 1,000 shares of common stock as provided in the Certificate.  Additionally, each holder of Series C Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s Series C shares could then be converted. As of March 31, 2016 and December 31, 2015, there were 83,503 and 80,218 shares of Series C Preferred Stock issued and outstanding, respectively.

On November 13, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series D Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 25,000 shares of Series D Preferred Stock.  Shares of Series D Preferred Stock are not entitled to any preference with respect to dividend or upon liquidation, and will automatically convert (at a ratio of 1,000-to-1) into shares of the Company’s common stock, par value $0.001 upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of March 31, 2016 and December 31, 2015, there are no shares of Series D Preferred Stock issued and outstanding.

On May 30, 2014, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series E Convertible Preferred Stock (The “Certificate of Designations”), under which it designated 5,000 shares of Series E Preferred Stock.  Shares of Series E Preferred Stock are not entitled to any preference with respect to dividends or upon liquidation, and will automatically convert (at a ratio of 1,000 shares of Common Stock for every one share of Series E Preferred Stock) into shares of the Company’s common stock, $0.001 par value upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of March 31, 2016 and December 31, 2015, there are no shares of Series E Preferred Stock issued and outstanding.

During the three months ended March 31, 2016, the Company sold an aggregate of 4,285 shares of Series C preferred stock for cash proceeds of $300,000.

On January 29, 2016, the Company issued 1,098,904 common shares in exchange for the conversion of 1,000 Series C preferred stock and dividends earned.

The Series C preferred stock earned dividends of $73,269 and $63,478 for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, no Series C preferred stock dividends have been declared.

Common Stock

During three months ended March 31, 2016, the Company recorded an aggregate of $5,482 of stock-based compensation related to the amortization of previously granted stock awards to employees and nonemployees.

Warrants

A summary of the status of the warrants granted for the three months ended March 31, 2016, and changes during the period then ended is presented below:

For the Three Months Ended March 31, 2016
	Shares		Weighted Average Exercise Price
Outstanding at beginning of period		9,736,844	$	0.19
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at end of period		9,736,844	$	0.19

		As of March 31, 2016						As of March 31, 2016
		Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.06		4,500,000		2.5	$	0.06		4,500,000	$	0.06
	0.075		550,000		1.9		0.08		550,000		0.08
	0.09		625,000		2.0		0.09		625,000		0.09
	0.15		1,571,300		1.4		0.15		1,571,300		0.15
	0.44		1,515,544		0.4		0.44		1,515,544		0.44
	0.60		975,000		0.5		0.60		975,000		0.60
$	0.06-0.60		9,736,844		1.7	$	0.19		9,736,844	$	0.19

The aggregate intrinsic value of the exercisable warrants as of March 31, 2016 was $0.

Stock Options

A summary of the status of the stock options granted for the three month period ended March 31, 2016, and changes during the period then ended is presented below:

For the Three Months Ended March 31, 2016
	Options		Weighted Average Exercise Price
Outstanding at beginning of period		1,093,500	$	0.15
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at end of Period		1,093,500	$	0.15

		As of March 31, 2016						As of March 31, 2016
		Stock Options Outstanding						Stock Options Exercisable
Exercise Price		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	0.15		943,500		1.40		0.15		943,500	$	0.15
(a)			150,000		-		-		-		-
$	0.15		1,093,500		1.40		0.15		943,500	$	0.15

(a)   On January 1, 2015, the company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures agreed upon. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life.

The aggregate intrinsic value of the exercisable options as of March 31, 2016 was $0.