STOCKHOLDERS' DEFICIT

3 Months Ended

Mar. 31, 2016

Equity Abstract

STOCKHOLDERS' DEFICIT

Note 6. STOCKHOLDERS’ DEFICIT

Reverse Splits

On July 7, 2015, the Company filed an amendment to its Certificate of Incorporation to effectuate a one-for-five reverse stock split to its Common Stock. On February 1, 2016, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to (i) effect a reverse stock split of the Common Stock at a ratio between 1-for-10 and 1-for-70, such ratio to be determined by the Board, (ii) reduce the par value of the Common Stock from $0.001 to $0.0001 and (iii) increase the number of authorized shares of the Common Stock from 500,000,000 shares to 5,000,000,000 shares. Each share entitles the holder to one vote. On March 8, 2016, the Board effected a reverse stock split of the Common Stock at a ratio of 1-for-70.

On March 21, 2016, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Common Stock at a ratio between 1-for-10,000 and 1-for-20,000, such ratio to be determined by the Company’s Board. The Board approved the reverse split on February 2, 2016 with ratio to be determined by the Company’s management. The Company is seeking to effect a 1-for-20,000 reverse split and the action is pending approval by Financial Industry Regulatory Authority (“FINRA”).

Series A Preferred Stock Conversions

On January 25, 2016, each Unit sold pursuant to the Company’s July 2015 registered offering automatically separated into shares of Series A Preferred Stock and Series A Warrants. From January 25, 2016 through March 31, 2016, 12,596 shares of Series A Preferred Stock have been converted and the Company issued 512,100 shares of Common Stock to settle these conversions.

Compensatory Common Stock Summary

During the three months ended March 31, 2016 and 2015, the Company recognized stock-based compensation expense related to compensatory Common Stock in the amount of $52,000 and $322,067, respectively, which is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. As of March 31, 2016, there was no unamortized expense remaining related to stock awards because the remaining non-vested shares vested on April 1, 2016.

A summary of compensatory Common Stock activity for the three months ended March 31, 2016 is presented below:

				Weighted
				Average
				Issuance Date		Total
	Number of			Fair Value		Issuance Date
	Shares			Per Share		Fair Value
Non-vested, January 1, 2016		357		$	364.00	$	130,000
Granted		-			-		-
Vested		(213	)		364.00		(78,000	)
Forfeited		-			-
Non-vested, March 31, 2016		144		$	364.00	$	52,000

Warrants

During the three months ended March 31, 2016, 41,548 Series A Warrants were exercised through the cashless exercise provision in the Series A Warrant resulting in the issuance of 44.5 million shares of Common Stock.

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

	Number of  Warrants			Weighted Average  Exercise Price		Weighted  Average  Remaining Term (Yrs.)		Aggregate  Intrinsic  Value
Outstanding at January 1, 2016		1,096,299		$	88.20
Warrants granted		-			-
Warrants exercised		(41,548	)		86.80
Impact of reverse split rounding		37			-
Warrants forfeited or expired		-			-
Outstanding at March 31, 2016		1,054,788		$	87.94		4.5	$	-
Exercisable at March 31, 2016		1,054,788		$	87.94		4.5	$	-

The following table presents additional information related to warrants as of March 31, 2016:

	Warrants Outstanding				Warrants Exercisable
	Weighted				Weighted		Weighted Average
Range of	Average		Outstanding		Average		Remaining		Exercisable
Exercise	Exercise		Number of		Exercise		Life		Number of
Price	Price		Warrants		Price		In Years		Warrants
$77.00 - $149.99	$	86.61		1,054,111	$	86.61		4.5		1,054,111
$150.00 - $699.99		205.83		205		205.83		2.7		205
$700.00 - $1799.99		761.88		187		761.88		3.6		187
$1800.00 - $4,633.68		4,495.43		285		4,495.43		1.6		285
				1,054,788				4.5		1,054,788

Stock-Based Compensation

Stock Options

During the three months ended March 31, 2016 and 2015, the Company recognized stock-based compensation expense of $58,786 and $364,576, respectively, in connection with the amortization of stock option expense. Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. At March 31, 2016, the amount of unamortized stock-based compensation expense associated with unvested stock options granted to employees, directors and consultants was $28,000 which will be amortized over 1.2 years. 

Loss per Share

Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. Diluted loss per share is computed using the weighted average number of shares of Common Stock outstanding and, if dilutive, potential shares of Common Stock outstanding during the period. Potential common shares consist of the incremental shares of Common Stock issuable upon (a) the exercise of stock options (using the treasury stock method); (b) the vesting of restricted stock units; (c) the conversion of Series A Preferred Stock; (d) the exercise of warrants (using the if-converted method), and (e) convertible notes payable. For the three months ended March 31, 2016 and 2015, diluted loss per share excludes the potential shares of Common Stock, as their effect is antidilutive. The following table summarizes the Company’s securities that have been excluded from the calculation of basic and dilutive loss per share as their effect would be anti-dilutive:

	March 31, 2016		March 31, 2015
Restricted stock units		144		-
Stock options		558		3,495
Series A Preferred Stock		33,480		-
Senior convertible notes payable		-		5,125
Warrants		1,054,788		12,029
Total		1,088,970		20,649