Stockholders' Deficiency

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

6. Stockholders' Deficiency

Preferred Stock

As of March 31, 2016 and December 31, 2015, the Company had accrued contractual dividends of $85,558 and $319,853, respectively, related to the Series B Preferred Stock. On January 1, 2016 and 2015, the Company issued 33,847 and 31,633 shares of Series B convertible preferred stock valued at approximately $320,000 and $299,000, respectively, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding on each date, to the Series B convertible preferred stock holders as payment in kind for dividends.

Stock Options

Valuation

In applying the Black-Scholes option pricing model to stock options, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2016	2015
Risk free interest rate	1.63% to 2.12%	n/a
Dividend yield	0.00%	n/a
Expected volatility	199% to 200.0%	n/a
Expected life in years	5.5 to 10.0	n/a

Grants

The weighted average fair value of the stock options granted during the three months ended 31, 2016 was $0.24 per share. There were no stock options granted during the three months March 31, 2015.

During the three months ended March 31, 2016, the Company granted options to consultants and directors of the Company to purchase an aggregate of 172,254 shares of common stock under a previously approved plan at exercise prices ranging between $0.24 and $0.25 per share for an aggregate grant date value of $41,379.  The options vested on the grant date and have a term of ten years. 

Stock-based compensation expense related to stock options was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $75,138 and $78,789 for the three months ended March 31, 2016 and 2015, respectively.

As of March 31, 2016, stock-based compensation expense related to stock options of $996,064 remains unamortized, including $104,495 which is being amortized over the weighted average remaining period of 2.0 years.  The remaining $891,569 is related to a performance based option where vesting is currently deemed to be improbable and no amount is being amortized.

Summary

A summary of the stock option activity during the three months ended March 31, 2016 is presented below:

				Weighted		Average
				Average		Remaining	Aggregate
	Number of			Exercise		Life	Intrinsic
	Options			Price		In Years	Value
Outstanding, January 1, 2016		5,341,284		$	0.70
Granted		172,254			0.24
Exercised		-			-
Forfeited		(132,333	)		0.49
Outstanding, March 31, 2016		5,381,205		$	0.69	7.6	$	332,554
Exercisable, March 31, 2016		4,169,539		$	0.62	7.6	$	240,254

The following table presents information related to stock options at March 31, 2016:

		Options Outstanding				Options Exercisable
		Weighted				Weighted		Weighted
Range of		Average		Outstanding		Average		Average	Exercisable
Exercise		Exercise		Number of		Exercise		Remaining Life	Number of
Price		Price		Options		Price		In Years	Options
$	0.09 - $2.20	$	0.23		4,701,705	$	0.25	8.0	3,740,039
$	2.21 - $3.80		3.35		492,500		2.88	3.8	242,500
$	3.81 - $6.99		5.17		187,000		5.17	5.4	187,000
		$	0.69		5,381,205	$	0.62	7.6	4,169,539

Warrants

Valuation

In applying the Black-Scholes option pricing model to stock warrants, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2016	2015
Risk free interest rate	1.58%	1.50%
Dividend yield	0.00%	0.00%
Expected volatility	200.0%	196.0%
Contractual term in years	5.00	5.00

Grants

The weighted average fair value of the stock warrants granted during the three months ended March 31, 2016 and 2015, was $0.24 and $0.08 per share, respectively.

Stock-based compensation expense related to warrants for the three months ended March 31, 2016 and 2015 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $0 and $216, respectively.  As of March 31, 2016, stock-based compensation expense related to warrants of $576,840 remains unamortized.  The remaining $576,840 is related to a performance based warrant where vesting is currently deemed to be improbable and no amount is being amortized.

A summary of the stock warrant activity during the three months ended March 31, 2016 is presented below:

			Weighted		Average
			Average		Remaining	Aggregate
	Number of		Exercise		Life	Intrinsic
	Warrants		Price		In Years	Value
Outstanding, January 1, 2016		10,046,198	$	0.41
Granted		75,000		0.25
Exercised		-		-
Forfeited		-		-
Outstanding, March 31, 2016		10,121,198	$	0.40	3.1	$	150,922
Exercisable, March 31, 2016		9,871,198	$	0.34	3.1	$	150,922

The following table presents information related to stock warrants at March 31, 2016:

		Warrants Outstanding			Warrants Exercisable
		Weighted			Weighted		Weighted
Range of		Average		Outstanding	Average		Average	Exercisable
Exercise		Exercise		Number of	Exercise		Remaining Life	Number of
Price		Price		Warrants	Price		In Years	Warrants
$	0.10 - $0.35	$	0.25	9,571,198	$	0.25	3.2	9,571,198
$	0.36 - $3.00		2.90	520,000		2.90	0.5	270,000
$	3.01 - $4.95		4.95	30,000		4.95	1.5	30,000
$	0.10 - $4.95	$	0.40	10,121,198	$	0.33	3.1	9,871,198