Stockholders' Equity

9 Months Ended

Sep. 30, 2015

Stockholders' Equity [Abstract]

Stockholders' Equity

6. Stockholders' Equity

Between September 15, 2015 and September 24, 2015, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 4,318,181 shares of common stock at a purchase price of $0.22 per share, for a total purchase price of $950,000. In addition to the common stock, the purchasers received four-year warrants to purchase up to an aggregate of 863,638 additional shares of common stock at an exercise price of $0.40 per share and for a term of four years after the first six months from the warrant's issuance date. The warrants had an estimated aggregate fair value of approximately $105,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 81.4%, a risk free rate of return between of 1.45% and 1.60%, and zero dividend and forfeiture estimates. Between October 5, 2015 and October 21, 2015, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 1,136,363 shares of common stock at a purchase price of $0.22 per share, for a total purchase price of $250,000. In addition to the common stock, the purchasers received four-year warrants to purchase up to an aggregate of 227,273 additional shares of common stock at an exercise price of $0.40 per share and for a term of four years after the first six months from the warrant's issuance date. The warrants had an estimated aggregate fair value of approximately $28,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 81.4%, a risk free rate of return between of 1.35% and 1.36%, and zero dividend and forfeiture estimates.

The securities offered were made pursuant to prospectus supplements to the prospectus dated November 1, 2013, pursuant to the Company's shelf registration statement on Form S-3 that was filed with the Securities and Exchange Commission on October 11, 2013 and became effective on November 1, 2013. The offering, as amended, is ongoing, and is expected to consist of multiple closings on the same terms to occur on or before November 30, 2015. The Company is offering a number of shares of common stock to result in aggregate sales proceeds of up to $2.02 million. The form of securities purchase agreement contains customary representations, warranties, and covenants by us and the investors. The accompanying form of warrant contains customary clauses relating to exercise, adjustments for stock dividends and splits, and transferability. No placement agent or underwriter is involved in the offering.

On February 23, 2015, the Company amended two of its debt obligations that, among other things, extended the maturity dates of the notes, instituted principal payments for the notes, and eliminated a conversion feature on one of the notes. In conjunction with these agreements, the Company issued an aggregate of 100,000 shares of its common stock with a grant date fair value of $41,000.

Restricted Shares – In January 2015, the Company issued an aggregate of 30,000 shares of restricted common stock to certain members of the Company's board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The restricted shares vested on August 15, 2015 and had an aggregate grant date fair value of approximately $11,000.

Stock Options - In January 2015, the Company issued an aggregate of 53,550 options to purchase shares of the Company's common stock with an exercise price of $0.60 per share to certain members of the Company's board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The options vested on August 15, 2015 and had an aggregate grant date fair value of approximately $6,000. The aggregate fair value of these options was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates.

Stock-Based Payments and Compensation - The Company records stock-based payment expense related to options and warrants based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During the nine months ended September 30, 2015, the Company had stock compensation expense of approximately $842,000 or $0.02 basic and diluted earnings per share ($1,105,000; $0.03 basic earnings per share for the corresponding nine months ended September 30, 2014).

As of September 30, 2015, there was approximately $248,000 of total unrecognized compensation costs related to options, warrants and restricted stock granted under the Company's stock option plans that will be recognized over the next 9 months. This amount excludes $536,000 of potential stock based compensation for stock options that vest upon the occurrence of certain events which the Company does not believe are likely.